2013 (7) TMI 934 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - additional income offered pursuant to search and seizure conducted under Section 132 on the Kedia Group of case along with the assessee on 01.02.2008 - Held that - Assessee had declared the amount he will be offering, in the course of statement recorded u/s 132(4), the AO has not brought on record any other materials or evidence for coming to the conclusion that the Assessee had concealed any income except for the statement recorder u/s 132(4), even the CBDT has cautioned the Assessing officers to make additions based purely on the sworn statements recorded u/s 132(4), the explanation 5 as it stood on the date of filing of return/ revised return by the Assessee, we are opinion that levy of penalty of Rs. On the additional income included in the return based only on the sworn statement of the Assessee cannot be sustained. Accordingly we allow the Assessee s appeal and delete the penalty levied u/s 271(1)(c).

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of immunity under Section 271AAA.
3. Interpretation and applicability of Explanation 5A to Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The case revolves around the imposition of a penalty under section 271(1)(c) for concealment of income. The assessee offered additional income post a search and seizure operation. The Assessing Officer (AO) levied a penalty of Rs. 16,28,258/- on the additional income of Rs. 50,00,000/- declared by the assessee in the revised return filed pursuant to the notice under section 153A. The assessee contended that the penalty should not apply as the additional income was declared voluntarily during the search proceedings.

2. Applicability of Immunity under Section 271AAA:
The assessee argued that they should be granted immunity under Section 271AAA, which provides relief from penalty if the undisclosed income is admitted during the search, the manner of deriving the income is specified, and taxes are paid. However, the CIT(A) rejected this argument, stating that the provisions of Section 271AAA do not apply as the due date for filing the return had expired without any return being filed by the assessee. The CIT(A) concluded that the case falls under Explanation 5A to Section 271(1)(c), which deems the income added based on search as concealed income.

3. Interpretation and Applicability of Explanation 5A to Section 271(1)(c):
Explanation 5A to Section 271(1)(c) was introduced to cover searches initiated after 1st June 2007. It deems the income found during the search as concealed income if the assessee has not declared it in the original return. The assessee argued that the penalty should not be imposed as the additional income was declared in the revised return filed in response to the notice under section 153A. The Tribunal noted that the amendment to Explanation 5A by Finance Act (No.2), 2009, which received presidential assent on 13th August 2009, applies retrospectively from 1st June 2007. However, since the assessee filed the revised return before the amendment became part of the statute, the penalty could not be sustained.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) could not be sustained as the assessee had declared the additional income in the revised return filed before the amendment to Explanation 5A. The AO did not bring any additional evidence to prove concealment of income apart from the statement recorded under section 132(4). Consequently, the penalty of Rs. 16,28,258/- levied under Section 271(1)(c) was deleted, and the appeal of the assessee was allowed.