2017 (5) TMI 1542 - AT - Income Tax

Penalty leviable u/s 271(1)(c) - assessee furnished the return of income declaring total income after notice under section 153A - addition of cash investments in purchase of lands - Held that - Additions made in the case of assessee i.e. on account of cash investments in purchase of lands in different years over and above the registered sale document and the professional receipts which were worked out on the basis of incriminating evidence found during the course of search. The additions have not been made on account of any money, bullion, jewellery or valuable article or thing found from the possession of assessee. Hence, exception clauses provided in Explanation 5 to section 271(1)(c) of the Act are not attracted in the present case. Various arguments raised by the learned Authorized Representative for the assessee are thus, dismissed. In the case of assessee during the course of search, incriminating evidence was found as to the assessee having made cash investment for purchase of plot of land over and above declared value of investment and also undisclosed professional receipts which have not been declared by the assessee, which were admitted by the assessee as his additional income in his statement recorded under section 132(4) - The additions on account of unexplained payments for purchase of plots, which were over and above the investments declared by the assessee in his books of account has been confirmed in the hands of assessee and penalty for concealment under section 271(1)(c) of the Act is squarely leviable. he second plea of the assessee that the suppressed professional income was estimated for the period for which no incriminating document was found does not stand where admittedly, the assessee himself had declared the additional income while filing the return of income under section 153A of the Act. Accordingly, the assessee is exigible to levy of penalty under secton 271(1)(c) of the Act. We hold so. The only question which remains is the determination of penalty leviable which shall be calculated by the Assessing Officer in the respective years on the basis of final income added in the hands of assessee in each of the years. The original grounds of appeal raised by the assessee are thus, dismissed. We find no merit in the plea of assessee where the additional income has been confirmed in the hands of assessee even though part of it was declared by the assessee in the return of income filed under section 153A of the Act but that does not exonerate the assessee from levy of penalty, wherein the assessee has failed to explain the manner in which the income was earned for such investments. Accordingly, we hold so. - Decided against assessee

Issues Involved
1. Jurisdiction of the Assessing Officer in levying penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of penalty proceedings initiated based on a general printed form of show cause notice.
3. Determination of whether the assessee was guilty of concealment or furnishing inaccurate particulars.
4. Justification of penalty levy when additions were made on an estimated basis.
5. Re-computation of penalty by the CIT(A) and the subsequent appeal by the Revenue.

Detailed Analysis

Jurisdiction of the Assessing Officer
The preliminary issue raised is the jurisdiction exercised by the Assessing Officer in levying the penalty for concealment under section 271(1)(c) of the Income Tax Act. The facts of the case involve a search and seizure action under section 132 of the Act at the assessee's premises, leading to the discovery of two sets of books of account and unaccounted cash investments in land transactions. The Assessing Officer initiated penalty proceedings based on these findings, estimating professional income and making additions for each year under review.

Validity of Penalty Proceedings
The assessee contended that the show cause notice issued was a general printed form without specifying the exact nature of the offence for which the penalty was initiated. The Tribunal referred to the decision in Kanhaiyalal D. Jain Vs. ACIT, which emphasized that the notice must clearly specify whether the penalty is for concealment of income or furnishing inaccurate particulars. The Tribunal held that the failure to strike off the non-applicable portion of the notice invalidates the penalty proceedings.

Determination of Guilt
The assessee argued that the Assessing Officer was not clear whether the penalty was for concealment or furnishing inaccurate particulars. The Tribunal admitted this issue, noting that the Assessing Officer must be specific about the charge. The Tribunal cited the decision in CIT Vs. SSA's Emerald Meadows, which held that non-applicable portions of the penalty notice must be struck off to avoid ambiguity.

Justification of Penalty on Estimated Additions
The assessee argued that penalty could not be levied on estimated additions, especially when the Tribunal had substantially reduced the estimate. The Tribunal admitted this ground, noting that penalty on estimated income requires careful consideration. The Tribunal referred to several decisions where penalties were upheld even on estimated income if based on seized evidence.

Re-computation of Penalty by CIT(A)
The CIT(A) directed the Assessing Officer to re-compute the penalty based on the additions confirmed by the Tribunal. The Revenue appealed, arguing that the penalty should be levied on the total amount of concealed income. The Tribunal upheld the CIT(A)'s direction, stating that penalty should be levied on the final additions confirmed by the Tribunal.

Conclusion
The Tribunal concluded that the penalty proceedings were invalid due to the failure to specify the exact charge in the show cause notice. The Tribunal also held that the penalty for concealment should be computed based on the final additions confirmed by the Tribunal. Consequently, the appeals of both the assessee and the Revenue were dismissed.

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