2012 (10) TMI 1040 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee filed return of income, in response to the said notice u/s 153A - Held that - In the present case, the normal return of income, for the assessment year 2007-08 was filed by the assessee, on 31.3.2007 i.e. the date of search itself. The assessee filed his return of income in response to notice dated 27.1.2009 issued u/s 153A of the Act, on 23.7.2009, declaring income of ₹ 3,27,01,440/-, including the additional amount of ₹ 2,00,60,000/-, declared by the assessee, in the statement recorded u/s 132(4) of the Act. The assessee filed return of income, in response to the said notice u/s 153A of the Act, on 23.7.2009 and on the date of filing the return, the Explanation 5A inserted by the Finance (No.2) Act of 2009, with retrospective effect from 1.6.2007, was on the Statute. In the present case, return of income was filed in response to notice u/s 153A of the Act, which is covered by Explanation 5A to Section 271(1)(c) of the Act, inserted by Finance (No.2) Act of 2009 The assessee has declared undisclosed income, in the return filed, in response to notice u/s 153A of the Act and the CIT(Appeals), having regard to the facts of the case, invoked the currently applicable Explanation 5A Section 271(1)(c) of the Act and upheld the penalty, levied by the AO. In such a fact-situation, the CIT(Appeals) has acted in accordance with the currently operative and relevant penal provisions, with reference to the return of income, filed in response to Section 153A of the Act. In view of the above legal and factual discussions, and having regard to the express statutory provisions of Section 271(1)(c) of the Act read with Explanation 5A thereunder, as inserted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.06.2007, we do not find any infirmity, in the findings of ld CIT(Appeals) - Decided against assessee

Issues Involved:
1. Validity of penalty under Section 271(1)(c) read with Explanation 5A.
2. Difference between assessed income and returned income.
3. Recording of satisfaction for initiation of penalty.
4. Applicability of Explanation 5A to Section 271(1)(c).
5. Conditional surrender and agreement with the Department.
6. Timing and nature of return filed.

Issue-wise Detailed Analysis:

1. Validity of Penalty under Section 271(1)(c) Read with Explanation 5A:
The Tribunal upheld the penalty under Section 271(1)(c) read with Explanation 5A, which was levied on the assessee for the assessment year 2007-08. The assessee had surrendered an additional income of Rs. 2,00,60,000 during the search operation, which was included in the return filed in response to the notice under Section 153A. The Tribunal found that the penalty was justified as the provisions of Explanation 5A, which were inserted by the Finance Act, 2009 with retrospective effect from 1.6.2007, were applicable. The Explanation 5A deems the assessee to have concealed income if the income declared in the return filed after the search was not disclosed in the original return.

2. Difference Between Assessed Income and Returned Income:
The assessee argued that there was no difference between the returned income and the assessed income, and hence, the penalty should not apply. However, the Tribunal found that the additional income declared in the return filed in response to the notice under Section 153A was not disclosed in the original return. Therefore, the penalty under Section 271(1)(c) was applicable.

3. Recording of Satisfaction for Initiation of Penalty:
The Tribunal noted that the Assessing Officer (AO) had recorded satisfaction for the initiation of penalty proceedings at the end of each addition made in the assessment order and in the concluding paragraph. The Tribunal found that this satisfied the requirement of recording satisfaction as per the amended provisions of Section 271(1B).

4. Applicability of Explanation 5A to Section 271(1)(c):
The Tribunal upheld the applicability of Explanation 5A to Section 271(1)(c) in this case. The Explanation 5A applies to cases where the search is conducted after 1.6.2007, and the income declared in the return filed after the search was not disclosed in the original return. The Tribunal found that the assessee's case fell within the purview of Explanation 5A, as the search was conducted on 31.10.2007, and the additional income declared in the return filed in response to the notice under Section 153A was not disclosed in the original return.

5. Conditional Surrender and Agreement with the Department:
The assessee contended that the additional income was surrendered during the search operation on the assurance that no penalty would be levied. However, the Tribunal found no evidence of any such agreement between the assessee and the Department. The Tribunal noted that the income was declared in the return filed in response to the notice under Section 153A, and there was no indication that the tax liabilities arising from the surrendered income were paid within the stipulated due dates. Therefore, the Tribunal upheld the penalty.

6. Timing and Nature of Return Filed:
The Tribunal examined the timing and nature of the return filed by the assessee. The original return was filed on 31.10.2007, the date of the search, and the return in response to the notice under Section 153A was filed on 23.7.2009. The Tribunal found that the provisions of Explanation 5A, as inserted by the Finance (No.2) Act, 2009, were applicable to the return filed in response to the notice under Section 153A. The Tribunal noted that the Explanation 5A applies to cases where the return of income for the previous year has been furnished before the date of search, but the income was not declared therein, or where the due date for filing the return has expired, and the assessee has not filed the return.

Conclusion:
The Tribunal dismissed the appeal of the assessee and upheld the penalty levied under Section 271(1)(c) read with Explanation 5A. The Tribunal found that the penalty was justified as the additional income declared in the return filed in response to the notice under Section 153A was not disclosed in the original return, and the provisions of Explanation 5A were applicable. The Tribunal also found that the AO had recorded satisfaction for the initiation of penalty proceedings, and there was no evidence of any agreement between the assessee and the Department for non-levy of penalty.

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