2015 (10) TMI 2470 - AT - Income Tax

Penalty under S.271(1)(c) - assessment completed u/s 153A - Held that - Considering all the aspects and the fact that the assessee has a good case on merits and that the provisions of Explanation 5A to S.271(1)(c) are not applicable on the date of filing of the original return we are of the opinion that Explanation 5A as it stood on the date of filing the return in response to notice under S.153A by the assessee would not cover the case of the assessee so as to warrant levy penalty under S.271(1)(c). Since the assessee bona-fidely declared the additional income in the course of search and filed return and paid taxes thereon we are of the opinion that penalty levied on such amount cannot be sustained. Accordingly we allow the appeal of the assessee and delete the penalty sustained by the CIT(A). See Dilip Kedia Versus Assistant Commissioner of Income-Tax Central Circle-4 2013 (7) TMI 934 - ITAT HYDERABAD - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Applicability of Explanation 5A to Section 271(1)(c) of the Income Tax Act.
3. Assessment of whether the concealment of income occurred.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:

The case revolves around the imposition of a penalty on the assessee for the assessment year 2005-06. The assessee initially declared an income of Rs. 2,92,384 in the return filed on 10.10.2005. Following a search and seizure operation on 8.9.2010, the assessee filed a revised return on 14.8.2012, admitting an income of Rs. 19,07,254, which included Rs. 16,14,870 as undisclosed income. The Assessing Officer imposed a penalty of Rs. 25,68,354 under Section 271(1)(c), which was later reduced to Rs. 12,84,177 by the Commissioner of Income-tax (Appeals) [CIT(A)].

2. Applicability of Explanation 5A to Section 271(1)(c) of the Income Tax Act:

The main legal question was whether Explanation 5A to Section 271(1)(c) applied to the case. Explanation 5A, introduced by the Finance (No.2) Act, 2009, with retrospective effect from 1.6.2007, deems the income found during a search as concealed if it was not declared in the original return. The assessee argued that the provisions of Explanation 5A should not apply since the original return was filed before the amendment. The Tribunal referred to the case of Dilip Kedia V/s. ACIT, which held that the law prevailing at the time of filing the original return should govern the levy of penalty.

3. Assessment of Whether the Concealment of Income Occurred:

The Tribunal analyzed the facts and found that the assessee had disclosed the additional income during the search and filed the revised return accordingly. The Tribunal noted that the original return was filed before Explanation 5A was introduced. They also referenced the Supreme Court's decision in Addl CIT v Onkar Saran, which held that the law at the time of filing the original return governs the penalty. The Tribunal concluded that since the original return was filed before the amendment, the provisions of Explanation 5A could not be applied retrospectively to impose a penalty.

Conclusion:

The Tribunal allowed the appeal of the assessee and deleted the penalty of Rs. 12,84,177 sustained by the CIT(A). They concluded that the provisions of Explanation 5A to Section 271(1)(c) were not applicable to the assessee's case as the original return was filed before the amendment came into effect. The Tribunal emphasized that the penalty could not be sustained since the assessee bona-fidely declared the additional income during the search and paid taxes accordingly.