2012 (8) TMI 1076 - AT - Income Tax

Summary

Issues Involved:
1. Validity of penalties levied u/s 271(1)(c) for A.Y. 2002-03 and A.Y. 2003-04.
2. Application of Explanation-3 and Explanation-5 to Sec. 271(1)(c).
3. Justification of penalty on income declared in response to notice u/s 153A.

Summary:

Issue 1: Validity of Penalties Levied u/s 271(1)(c) for A.Y. 2002-03 and A.Y. 2003-04

The appeals arise from penalty orders passed u/s 271(1)(c) for A.Y. 2002-03 and A.Y. 2003-04. The assessee challenged the penalties levied by the A.O. and partly sustained by Ld. CIT(A). For A.Y. 2002-03, the A.O. levied a penalty of Rs. 4,50,000/- on the basis of additional income declared post-search, which included unexplained credits and fictitious gifts. The Ld. CIT(A) confirmed the penalty on several items of income, including unexplained credit of Rs. 9,80,000/-, undisclosed entry of Rs. 10,676/-, income from share trading of Rs. 4,566/-, capital gains of Rs. 1,36,252/-, and dividend of Rs. 977/-. For A.Y. 2003-04, the A.O. levied a penalty of Rs. 12,00,000/- on additional income of Rs. 32,55,000/- declared by the assessee, which was confirmed by the Ld. CIT(A).

Issue 2: Application of Explanation-3 and Explanation-5 to Sec. 271(1)(c)

The Tribunal noted that Explanation-3 to Sec. 271(1)(c) presumes concealment if the return is filed in response to notice u/s 148 after the specified period. However, this explanation does not apply when the return is filed in response to notice u/s 153A. Explanation-5, which deals with income based on money, bullion, etc., found during the search, was also found inapplicable as no such additions were made for A.Y. 2002-03. Explanation-5A, applicable from 1st June 2007, was not relevant as the search occurred on 15th June 2004.

Issue 3: Justification of Penalty on Income Declared in Response to Notice u/s 153A

For A.Y. 2002-03, the Tribunal observed that the penalty levied on income declared in response to notice u/s 153A was not justified as the income was not based on any money, bullion, or other valuable articles found during the search. The Tribunal deleted the penalty sustained by Ld. CIT(A). For A.Y. 2003-04, the Tribunal noted that the income declared by the assessee in response to notice u/s 153A was accepted by the A.O., except for an adhoc addition of Rs. 50,000/-. The Tribunal held that the penalty on the income declared in response to notice u/s 153A was not sustainable as there was no specific provision for such penalties, and deleted the entire penalty levied by the A.O.

Conclusion:

Both appeals of the assessee were allowed, and the penalties levied for A.Y. 2002-03 and A.Y. 2003-04 were deleted. The order was pronounced in the open Court on 29th August 2012.