2014 (10) TMI 905 - AT - Income Tax

Penalty under section 271(1)(c) - return filed in response to the notice under section 153A - Held that - True the search resulted in the notice under section 153A being issued to the assessee and the return being filed but that is only procedural and in any case the quantum assessment on the validity thereon is not in appeal. Once a notice under section 153A is issued, then the return filed in response to the notice under section 153A would be deemed to be a return furnished under section 139 of the Act. The assessee has hitherto not filed the return of income and the return filed in response to the notice under section 153A would become the first return. This is as per the provisions of section 153A itself. Once this is a situation then no penalty can be levied in respect of the returned income which has been disclosed in the return filed in response to the notice under section 153A. Consequently we are of the view that for the assessment years 2003-04 to 2008-09 the penalty levied is liable to be cancelled to the extent that the penalty has been levied in respect of the returned income as there is no concealment proved, and we do so. Clubbing of interest income of the minor children in the hands of the assessee in view of the deeming provisions of section 64 - Held that - Admittedly the assessee has not been able to substantiate his claim for the cancellation of penalty in respect of the interest income as also the interest income in respect of the minor children added in the hands of the assessee on account of the deeming provisions of section 64 of the Act. In these circumstances, though we may mention here that statutory deduction in respect of the interest income added has not been granted to the assessee in the quantum assessment. Still addition having been made and the assessee being unable to justify the reason for cancellation of the penalty in respect of the interest income as also the income arising from the minor children added in the hands of the assessee in view of the provisions of section 64 of the Act, the Assessing Officer is directed to restrict the levy of penalty to the interest income not declared, income arising from the minor children as also the interest on Fixed Deposits. The penalty levied in respect of the returned income stands deleted Penalty under section 271AAA - statement under section 132(4) admitting the undisclosed income - Held that - A perusal of the order of the ld. CIT (Appeals) shows that he has recognized that the statement has been recorded under section 132(4) and the assessee has admitted undisclosed income and has explained the manner in which the said income has been derived and substantiated the same in para 3. He has also specifically recorded that the taxes have been paid for all the assessment years. There is no dispute in respect of all these recordings by the ld. CIT (Appeals) and the revenue has not dislodged these finding also. Consequently we are of the view that the provisions of section 271AAA(2) of the Act apply to the assessee s case and on account of the same the provisions of section 271AAA(4) would not apply in the assessee s case. Consequently the penalty as levied by the Assessing Officer and as partly confirmed by the ld. CIT (Appeals) stands cancelled.

Summary

Issues involved:
1. Appeal against confirmation of penalty under section 271AAA of the Act for the assessment year 2009-10.
2. Appeals against partial confirmation of penalties under section 271(1)(c) and penalty under section 271AAA of the Act for assessment years 2003-04 to 2009-10.

Analysis:

Issue 1: Appeal against confirmation of penalty under section 271AAA of the Act for the assessment year 2009-10:
The appeal in ITA No. 137/CTK/2013 was filed by the assessee challenging the penalty under section 271AAA. The Assessing Officer invoked section 271AAA(4), Explanation (i)(B), but did not dispute the applicability of section 271AAA(2). The tribunal noted that the Assessing Officer failed to specify the sub-clause violated by the assessee under section 271AAA(2). The statement under section 132(4) by the assessee admitting undisclosed income and paying taxes was acknowledged. The tribunal held that the provisions of section 271AAA(2) applied, rendering section 271AAA(4) inapplicable. As a result, the penalty imposed by the Assessing Officer and partly confirmed by the CIT (Appeals) was canceled, allowing the appeal for the assessment year 2009-10.

Issue 2: Appeals against partial confirmation of penalties under section 271(1)(c) and penalty under section 271AAA of the Act for assessment years 2003-04 to 2009-10:
The appeals in ITA Nos. 131 to 136/CTK/2013 involved penalties under section 271(1)(c) and section 271AAA for various assessment years. The tribunal observed that the penalties levied by the Assessing Officer were reduced by the CIT (Appeals) based on the disclosure made by the assessee during a survey converted into a search. The tribunal found that the penalties in respect of estimated turnover and profit were rightly deleted by the CIT (Appeals). However, penalties related to interest income and income from minor children were upheld due to the lack of substantiation by the assessee. The tribunal directed the Assessing Officer to restrict the penalty to specific undisclosed income components. The appeals were partly allowed, canceling penalties related to returned income but upholding penalties on specific undisclosed income components.

Issue 3: Appeal against confirmation of penalty under section 271AAA for the assessment year 2009-10 for an employee of another individual:
In ITA No. 130/CTK/2013, the appeal challenged the penalty under section 271AAA for the assessment year 2009-10. The tribunal noted that no search was initiated for the employee, and the search was conducted for the employer. As the primary condition for penalty under section 271AAA is the initiation of a search for the assessee, the penalty was deemed inapplicable. Therefore, the penalty imposed by the Assessing Officer and reduced by the CIT (Appeals) was canceled, allowing the appeal.

Overall, the tribunal allowed the appeals in ITA Nos. 130, 131 to 136, and 137/CTK/2013 based on the specific findings and legal provisions discussed in each case.