2015 (5) TMI 988 - AT - Income Tax

Penalty u/s 271(1)(c) - income offered as a consequence to the detection during the course of post search - Held that - Respectfully following the order of the Coordinate Bench of Mumbai Tribunal in the case of Mr. Kiran Shah (2014 (1) TMI 1027 - ITAT MUMBAI ) wherein held for the purpose of imposition of penalty u/s. 271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered. Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - Decided in favour of assessee.

Summary

Issues involved:
Penalty under section 271(1)(c) of the I.T. Act, 1961 for A.Ys. 2003-04 to 2006-2007.

Detailed Analysis:

1. Background and Detection of Undisclosed Income:
The case involves appeals filed against the order of the Ld. CIT(A)-1, Hyderabad for the assessment years 2003-04 to 2006-2007. The appellant and family members were found to have undisclosed income during a search, leading to an offer of income totaling Rs. 266.92 lakhs for the mentioned assessment years. The Assessing Officer treated the appellant as an assessee in default under section 271(1)(c) due to undisclosed income detected post-search.

2. Contentions Before the Ld. CIT(A):
The Authorized Representative argued that the initiation of proceedings after a search under section 132 results in the abatement of all prior proceedings, including filed returns of income. It was contended that the appellant admitted the incomes during the proceedings u/s.153A, and therefore, there was no concealment of income during those proceedings. Additionally, the appellant accepted additional income during the search and seizure operations, which was duly admitted in the returns filed u/s.153A.

3. Decision of the Ld. CIT(A):
The Ld. CIT(A) held that the appellant would be deemed to have concealed income as the income offered in the return filed u/s.153A was not declared in the original return. The Ld. CIT(A) confirmed the penalty under section 271(1)(c) for the assessment years 2003-04 to 2006-07, citing the detection of income post-search and the failure to file returns offering the above income originally.

4. Appeal Before the Tribunal:
The appellant appealed to the Tribunal, contending that the penalty under section 271(1)(c) was erroneously confirmed by the Ld. CIT(A). The Tribunal referred to a decision by the Coordinate Bench of Mumbai Tribunal in a similar case, where it was held that for the purpose of imposing penalty under section 271(1)(c) resulting from search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered.

5. Tribunal's Decision and Conclusion:
The Tribunal, following the precedent, allowed the appeals of the assessee by deleting the penalty levied for all the assessment years under consideration (A.Ys. 2003-04 to 2006-07). The Tribunal emphasized that when the returned income filed under section 153A is accepted by the Assessing Officer, there is no concealment of income, and therefore, penalty under section 271(1)(c) cannot be imposed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty under section 271(1)(c) for the mentioned assessment years based on the legal interpretation that the original return of income filed u/s. 139 cannot be considered for the purpose of imposing such penalties resulting from search assessments made under section 153A.