2013 (12) TMI 1603 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income declared and assessed in the returns filed u/s 153A(1)(a) of the Act over and above the income declared earlier in the returns filed u/s 139 - Held that - The only point raised by the assessee is that the ground canvassed before the CIT(A) to the effect that the quantum of concealed income for the purposes of section 271(1)(c) of the Act could not be equated to the additional income has not been addressed by the CIT(A). This is primarily for the reason that the CIT(A) has allowed relief to the assessee by setting-aside the penalty levied on a point of law canvassed before him which we have already discussed in earlier paragraphs wherein the stand of the CIT(A) has been disapproved. Therefore under these circumstances it would be in fitness of things that the instant plea of the assessee which was raised before the CIT(A) but not considered by him be remanded back for consideration and adjudication as per law. The point raised by the learned Departmental Representative against the plea of the assessee on this aspect in our view touches upon the merits of the plea with which we are not presently concerned with. Therefore we uphold the plea of the assessee for remanding the matter back to the file of the CIT(A) to address the grounds raised by the assessee with regard to the quantification of 15 concealed income liable for penalty of section 271(1)(c) of the Act. - Appeals of the Revenue are allowed for statistical purposes.

Summary

Issues Involved:
1. Applicability of Explanation 5A to Section 271(1)(c) of the Income Tax Act, 1961.
2. Legitimacy of the penalty levied under Section 271(1)(c) for concealment of income.
3. Quantification of concealed income for the purpose of penalty.

Issue-Wise Detailed Analysis:

1. Applicability of Explanation 5A to Section 271(1)(c) of the Income Tax Act, 1961:

The primary issue was whether Explanation 5A to Section 271(1)(c) of the Income Tax Act, 1961, was applicable in this case. The background involved a search and seizure operation under Section 132 at the premises of the Chhoriya-Jain group, revealing unrecorded income and expenditures. The Assessing Officer levied penalties based on the additional income declared post-search, which was higher than what was originally declared in the returns filed under Section 139.

The CIT(A) disagreed with the Assessing Officer, stating that Explanation 5A was not applicable as the additional income could not be linked to specific seized materials like money, bullion, or jewelry. However, the Tribunal found this conclusion misplaced, emphasizing that clause (ii) of Explanation 5A, which covers income based on entries in books or documents found during the search, was applicable. The Tribunal noted that the additional income was based on incriminating documents found during the search, thus falling under clause (ii) of Explanation 5A.

2. Legitimacy of the Penalty Levied Under Section 271(1)(c) for Concealment of Income:

The Tribunal examined whether the penalty for concealment of income was justified. The CIT(A) had deleted the penalty, arguing that the additional income declared in the return filed under Section 153A could not be deemed concealed income. However, the Tribunal disagreed, stating that the provisions of Explanation 5A clearly applied to cases where the search was initiated after June 1, 2007. The Tribunal emphasized that the additional income declared post-search, which was not declared in the original returns filed under Section 139, constituted concealed income.

The Tribunal also addressed the argument that the penalty should be considered under Explanation 5, which was applicable before June 1, 2007. The Tribunal rejected this argument, stating that Explanation 5A applies to all cases where a search was initiated on or after June 1, 2007, regardless of when the original returns were filed.

3. Quantification of Concealed Income for the Purpose of Penalty:

The Tribunal acknowledged that the CIT(A) had not addressed the assessee's argument regarding the quantification of concealed income. The assessee contended that the additional income declared post-search did not represent the actual income and that the penalty should only apply to the actual concealed income. The Tribunal found merit in this argument and remanded the matter back to the CIT(A) for consideration of the quantification of concealed income.

The Tribunal directed the CIT(A) to allow the assessee a reasonable opportunity to present material and submissions in support of its stand and to adjudicate the matter as per law.

Conclusion:

The Tribunal concluded that the provisions of Explanation 5A to Section 271(1)(c) were applicable in this case, and the penalty for concealment of income was justified. However, the Tribunal remanded the matter back to the CIT(A) to address the issue of quantification of concealed income for the purpose of penalty. All the captioned appeals of the Revenue were allowed for statistical purposes.