2013 (8) TMI 1008 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - For levying the penalty in cases of search after 1st June 2007, the deeming provisions of Explanation 5A can only be invoked, which clearly carves out the exception in the cases where due date of filing of the return of income had not expired at the time of search. Thus, for levy of penalty under Explanation 5A, it has to be seen whether any assets or income found on the date of search has been acquired out of the previous year and not afterwards for which penalty can be levied or initiated under other provisions of section 271(1)(c). Thus, in our opinion, once the due date had not expired for filing the return of income for the assessment year 2007 08, at the time of search, penalty cannot be levied under the deeming provisions of Explanation 5A. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that on this preliminary ground, penalty levied by the Assessing Officer and as confirmed by the Commissioner (Appeals) cannot be sustained and same is deleted. - Decided in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) for assessment year 2007-08 based on non-filing of return under section 139(1) and inclusion of income in response to notice under section 153A.

Analysis:
The appellant challenged the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for Rs. 1,00,000, confirmed by the Commissioner (Appeals) for the assessment year 2007-08. The penalty was initiated due to the inclusion of Rs. 3,05,000 in the bank account under section 153A, as the appellant failed to file a return under section 139(1). The Commissioner (Appeals) upheld the penalty citing non-disclosure of income due to the delayed filing of the return. The appellant argued that Explanation 5A, not Explanation 5, should apply as the due date for filing the return had not expired at the time of search. The Departmental Representative contended that Explanation 5A was applicable as the appellant included income based on bank account entries in response to notice under section 153A.

The Tribunal noted that the penalty was imposed under Explanation 5A, a deeming provision for concealment of income post a search and seizure operation after June 1, 2007. The provision states that if the due date for filing the return of income has not expired, the penalty cannot be levied. As the search occurred on June 19, 2007, and the due date for filing the return of income for the assessment year 2007-08 had not passed, Explanation 5A could not be applied. The Tribunal emphasized that the penalty under Explanation 5A can only be invoked if assets or income found during the search were acquired before the due date of filing the return of income. Since the due date had not expired at the time of the search, the penalty under Explanation 5A was deemed inapplicable. Consequently, the Tribunal set aside the penalty imposed by the Assessing Officer and upheld by the Commissioner (Appeals), ruling in favor of the appellant.

In conclusion, the Tribunal allowed the appellant's appeal, holding that the penalty under section 271(1)(c) for the assessment year 2007-08 could not be sustained due to the non-applicability of Explanation 5A based on the timing of the search and the due date for filing the return of income.