2003 (2) TMI 9 - HC - Income Tax

Whether, Tribunal was right in law in confirming the order of the CIT (Appeals) cancelling the penalty of Rs. 17,22,818 levied u/s 271(1)(c) by the AO on account of concealment of income and furnishing of inaccurate particulars of its income by the assessee, which has come to the notice of the Revenue on account of a search under section 132 and pursuant whereto the assessee had filed a revised return declaring total income of Rs. 15,52,660 as against Rs. 6,17,370 offered in the original return? - the undisclosed income disclosed in the revised return filed by the assessee was not noticed during the search operations and is not the subject matter of the seizure. Hence, as per the Board circular No. 423 the assessee is entitled to the benefit of the amnesty scheme. In that view of the matter, we are of the opinion that the Tribunal was justified in confirming the order or the Commissioner of Income-tax (Appeals) and holding that no penalty was leviable upon the assessee.

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal regarding cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The case involved a challenge to the order of the Income-tax Appellate Tribunal regarding the cancellation of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The Revenue filed a tax appeal raising the substantial question of law whether the Tribunal was correct in confirming the cancellation of the penalty imposed by the Assessing Officer. The dispute arose from a search action conducted under section 132 of the Income-tax Act on the business premises of the assessee. Subsequently, the assessee filed a revised return under an amnesty scheme, disclosing additional income. The Assessing Officer imposed a penalty under section 271(1)(c) on the grounds that the revised return was filed after the search action and detection of concealed income. However, the Commissioner of Income-tax (Appeals) deleted the penalty, citing that the undisclosed income detected during the search did not relate to the transactions disclosed in the revised return. The Commissioner also referred to a Board Circular supporting the assessee's eligibility for the amnesty scheme. The Tribunal upheld the Commissioner's decision, leading to the Revenue's appeal.

In the appeal, the Revenue argued that the revised return filed after the search action rendered the assessee ineligible for the amnesty scheme, justifying the penalty imposition. The Revenue contended that the undisclosed income disclosed in the revised return was not detected during the search and was not subject to seizure, aligning with the Board Circular's provisions. The Tribunal agreed with the Commissioner's findings, emphasizing that the undisclosed income was not noticed during the search and thus fell within the scope of the amnesty scheme. Consequently, the Tribunal upheld the deletion of the penalty under section 271(1)(c) of the Income-tax Act, ruling in favor of the assessee.

Ultimately, the High Court dismissed the Revenue's appeal, affirming the Tribunal's decision. The Court found that the undisclosed income disclosed in the revised return was not part of the search operation's findings and, therefore, qualified for the amnesty scheme as per the relevant Board Circular. Consequently, the Court held that no penalty under section 271(1)(c) was applicable to the assessee, concluding the matter with no order as to costs.