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Issues involved: Dispute regarding levy of penalty u/s 271(1)(c) of the Income Tax Act for Assessment Year 2005-06 based on income declared by the assessee during a search u/s 132.
Facts: The assessee initially declared total income of Rs. 4,33,073/- in the original return for the Assessment Year 2005-06. Subsequently, during a search u/s 132, it was found that additional income had not been declared. The Managing Partner later declared Rs. 59.56 lacs as income for the same year. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) based on this undisclosed income. Arguments before CIT(A): The assessee contended that the income offered was subject to a difference of opinion regarding the method of income computation, based on the timing of offering income from completed projects. The CIT(A) accepted the explanation, noting that the non-declaration was due to a genuine difference of opinion and past acceptance of the method by the department. Decision of CIT(A): The CIT(A) held that penalty u/s 271(1)(c) was not justified as the income declared was based on existing book entries and the method followed by the assessee. The CIT(A) emphasized that the non-disclosure was not deliberate and set aside the penalty imposed by the Assessing Officer. Arguments before ITAT: The Revenue challenged the CIT(A) order, arguing that the additional income was declared only after the search, indicating lack of voluntary disclosure. The assessee maintained that the non-disclosure was due to a genuine difference of opinion and consistent past practice accepted by the department. ITAT's Decision: The ITAT analyzed the case and found that the explanation provided by the assessee for not declaring the income earlier was bonafide, given the consistent method followed and past acceptance by the department. Therefore, the ITAT upheld the CIT(A) decision, confirming that penalty u/s 271(1)(c) was not applicable in this scenario. Conclusion: The ITAT dismissed the appeal filed by the Revenue, affirming the decision that penalty u/s 271(1)(c) was not leviable in this case.
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