Key Facts:
The assessee, Ramchandra Udaysingh Jadhavrao, is a proprietor of M/s. JKG Developers, engaged in construction and land development. He filed his return of income for AY 2016-17 on 31.01.2017, declaring a total income of ₹12.37 crores.
A survey under Section 133A was conducted at his business premises on 14.09.2016. During the survey, he admitted to long-term capital gains (LTCG) of ₹10.74 crores and business income of ₹79 lakhs.The land in question was inherited and converted into stock-in-trade in FY 2010-11, with LTCG to be taxed proportionately under Section 45(2).

The assessee’s return included the survey disclosures, and the assessment was completed without further additions.
However, the Assessing Officer (AO) levied a penalty of ₹2.70 crores (100% of tax sought to be evaded) under Section 271(1)(c), citing concealment of income.

Proceedings Before the CIT(A):
The CIT(A) upheld the penalty on LTCG of ₹10.74 crores, reasoning that the assessee had not disclosed the conversion of capital assets into stock-in-trade for five years.
The CIT(A) relied on Supreme Court and High Court precedents to justify the penalty.
However, the penalty on ₹79 lakhs of business income was deleted.

Findings of the ITAT:

No Concealment of Income:

The assessee had paid advance tax and TDS before the survey.
The due date for filing the return had not expired at the time of the survey.
The income disclosed in the survey was included in the return, which was accepted by the AO without additions.

Legal Precedents Considered:

CIT vs. SAS Pharmaceuticals (2011) 335 ITR 259 (Del) – Penalty is not applicable if the income is declared in the return.
Prakash Mithalal Oswal vs. ITO (ITA No.327/PUN/2019) – No penalty if there is no addition to returned income.

Tribunal’s Ruling:

Since the income was voluntarily disclosed in the return and there was no material suppression, penalty under Section 271(1)(c) was unjustified.
The ITAT set aside the CIT(A)’s order and deleted the penalty.

The case was represented by CA Kishor Phadke (Assisted by CA Saurabh Jadhav)