2012 (5) TMI 363 - AT - Income Tax

Penalty u/s 271(1)(c) - delay in service of notice - period of limitation for initiating penalty proceedings - CIT(A) observed that delays in service of notices and orders are routine and natural, even if they are sent by speed post or courier, and much cannot be inferred based just on such delay in service. - CIT(A) has extracted order sheet entries from the record and took note of the sequence of events and concluded that it is almost impossible for the Assessing Officer to back date the order, since the Assessing Officer would have to change too many records, which is again impossible to do. - Decided against the assessee. Regarding penalty - Held that the words return of income to be furnished before the expiry of time specified in clauses (a) and (b) of sub section (1) of s. 139 , cannot be read without the words income which has not been disclosed so far in his return of income preceding the aforesaid words and if we read the complete sentence which is comprising out of words has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in clause (a) or (b) of sub section (1) of section 139 - So far as assessee s case is concerned it is an admitted fact that the assessee has disclosed an additional income and, therefore, the assessee is entitled to the immunity available under clause (2) of Explanation 5 of S.271(1)(c) of the Act for all these assessment years - Appeals are partly allowed

Summary

Issues Involved:
1. Legality and validity of penalties imposed under S.271(1)(c) of the Income Tax Act.
2. Limitation period for passing penalty orders.
3. Legality and validity of initiation of penalty proceedings.
4. Entitlement to immunity under clause (2) of Explanation 5 to S.271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legality and Validity of Penalties Imposed under S.271(1)(c) of the Act:
The main issue in these appeals pertains to the legality and validity of penalties imposed under S.271(1)(c) of the Income Tax Act. The assessee contested the penalties on the grounds that the additional incomes were voluntarily disclosed and hence did not constitute concealment. However, the CIT(A) found that the additional incomes were disclosed only after a search operation, indicating that the disclosure was not voluntary. The Tribunal upheld the CIT(A)'s view that the penalties were validly imposed.

2. Limitation Period for Passing Penalty Orders:
The assessee argued that the penalty orders, though dated 12.5.2009, were received only on 26.6.2009, suggesting they were back-dated to avoid being time-barred. The Tribunal, agreeing with the CIT(A), found no merit in this contention, noting that delays in service of orders are routine and do not necessarily indicate back-dating. The Tribunal upheld the CIT(A)'s decision that the orders were passed within the limitation period, rejecting the assessee's argument.

3. Legality and Validity of Initiation of Penalty Proceedings:
The assessee contended that the penalty proceedings were initiated after the assessment was completed, which is not permissible by law. The Tribunal found that the initial penalty proceedings were dropped but were later revived by the Commissioner under S.263 of the Act. The Tribunal upheld the legality and validity of the penalty proceedings initiated by the Assessing Officer in pursuance of the Commissioner's directions, rejecting the assessee's contentions.

4. Entitlement to Immunity under Clause (2) of Explanation 5 to S.271(1)(c) of the Act:
The assessee claimed immunity under clause (2) of Explanation 5 to S.271(1)(c) of the Act, arguing that the additional incomes were disclosed in the returns filed after the search. The Tribunal analyzed the provisions of Explanation 5 and concluded that the immunity under clause (2) was applicable to the assessee's case. The Tribunal held that the assessee was entitled to immunity for the assessment years in question, leading to the cancellation of the penalties imposed by the Assessing Officer and confirmed by the CIT(A).

Conclusion:
The Tribunal concluded that the penalties imposed under S.271(1)(c) were not justified as the assessee was entitled to immunity under clause (2) of Explanation 5. Consequently, the penalties for all three years were canceled. The appeals were partly allowed in favor of the assessee.