2012 (9) TMI 956 - AT - Income Tax

Penalty u/s 271(l)(c) - income declared in the returns of income filed in response to notice under s. 153A - Held that - No addition is made by the AO over and above the income declared in the returns of income filed in response to notice under s. 153A as the expression tax sought to be evaded appearing in cl. (c) to s. 271(1) is to be understood as a difference between the income declared by the assessee in the return of income and the income finally assessed. After introduction of s. 153A w.e.f. 1st June 2003 there is no specific penalty provision to deal with the assessments framed in consequence of search and seizure action under s. 132 of the Act. In the present case as the returned income and income assessed are the same otherwise also no penalty can be levied. We therefore hold that in all the appeals before us the AO was not justified in levying the penalty under s. 271(l)(c) of the Act. We accordingly delete the penalties levied by the AO in all the appeals for the abovementioned reasons. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act.
2. Concealment of income and difference between assessed income and returned income.
3. Applicability of Explanation 5 and Explanation 5A to section 271(1)(c).
4. Immunity from penalty under Explanation 5 to section 271(1)(c).

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The appeals concern the confirmation of penalties levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, which were sustained by the learned Commissioner of Income Tax (Appeals) [CIT(A)]. The penalties were imposed for alleged concealment of income or furnishing inaccurate particulars of income. The penalties were specifically related to the additional income declared by the assessees in response to notices issued under section 153A following a search and seizure operation.

2. Concealment of Income and Difference between Assessed Income and Returned Income:
The assessees argued that there was no concealment of income since the income declared in the returns filed in response to section 153A notices was accepted by the AO without any further additions. The income declared in these returns was based on entries in documents rather than any money, bullion, jewellery, or valuable assets detected during the search. The AO, however, initiated penalty proceedings for concealment of particulars of income or furnishing inaccurate particulars of income, focusing on the additional income declared in the section 153A returns.

3. Applicability of Explanation 5 and Explanation 5A to Section 271(1)(c):
The assessees contended that they were entitled to immunity under Explanation 5 to section 271(1)(c) as the income admitted during the search was declared in the returns and the tax was paid. They argued that Explanation 5A, which deems any income based on entries in documents as concealed, was not applicable since the assessment years involved were prior to the assessment year 2007-08. The Tribunal referred to the case of Chandan K. Shewani v. Dy. CIT, which held that Explanation 5A applies only to searches initiated on or after 1st June 2007, and does not apply retrospectively.

4. Immunity from Penalty under Explanation 5 to Section 271(1)(c):
The Tribunal considered the scope of Explanation 5, which provides immunity from penalty if the income admitted during the search is declared in the return and tax is paid. The Tribunal noted that in the present case, the income declared in the section 153A returns was accepted without any additions, and no valuable assets were detected during the search. The Tribunal also referenced the decision in Asstt. CIT v. Kirit Dahyabhai Patel, which discussed the applicability of immunity under Explanation 5 for assessment years where the return filing date had expired at the time of search.

Conclusion:
The Tribunal concluded that the assessees were entitled to immunity under Explanation 5 to section 271(1)(c) as the income declared during the search was included in the returns filed in response to section 153A notices, and no further additions were made by the AO. The Tribunal also held that Explanation 5A was not applicable as it was introduced for searches initiated on or after 1st June 2007. Consequently, the penalties levied under section 271(1)(c) were deleted, and all the appeals were allowed.