2012 (6) TMI 480 - AT - Income Tax

Penalty under section 271(1)(c) - Search - assessee had filed the return declaring additional income on the basis of the seized papers and documents and not on the basis of cash found - Held that - The return of income filed in response to notice u/s 153A has been accepted by the assessing officer, thus it can neither be a case of concealment of income nor furnishing of inaccurate of particulars of such income - penalty u/s 271(1)(c) is not imposable where there is neither concealment of income nor furnishing of inaccurate particulars of income in return filed u/s 153A as decided in Commissioner of Income-tax Versus SAS Pharmaceuticals 2011 (4) TMI 888 (HC) Provisions of Explanation 5 of section 271(1)(c) are applicable in the cases where during the course of search initiated on or before 1.6.2007 any money, bullion, jewellery or other valuable article or thing is found in the possession or under control of the assessee whereas in the case of the assessee the search was conducted on 22.11.2006 and cash of Rs. 1,11,45,350/- was found from the possession of the assessee - Explanation 5 cannot be invoked in assessment year 2004-05 merely on presumption that the assessee might have been in possession of cash throughout the period covered by search assessments - The income offered to tax u/s 153A for assessment year 2004-05 is based on entries recorded in the seized material, thus Explanation 5 cannot be invoked in assessment year 2004-05 in respect of entries recorded in seized material - in favour of assessee.

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Voluntariness of income disclosure under section 153A.
3. Relevance of original returns filed under section 139 in penalty proceedings under section 153A.
4. Applicability of Explanation 5 and Explanation 5A to section 271(1)(c) in the context of searches conducted before and after 1st June 2007.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue for consideration was the imposition of a penalty amounting to Rs. 47,51,579/- under section 271(1)(c). The facts of the case involved a search and seizure action under section 132(1) conducted on 22/11/2006, which led to the discovery of unaccounted cash and incriminating documents. The assessee filed returns under section 153A, admitting undisclosed income. The assessing officer imposed a penalty under section 271(1)(c), arguing that the disclosure was not voluntary and was prompted by the search, thereby attracting the provisions of Explanation 5 to section 271(1)(c).

2. Voluntariness of Income Disclosure under Section 153A:
The assessee contended that the income declared in response to the notice under section 153A should be treated as duly disclosed, and therefore, not subject to penalty for concealment. The Tribunal examined whether the return filed under section 153A could be considered voluntary. It was concluded that the return filed under section 153A is not voluntary, as it is mandated by a notice issued following a search, and any disclosure made in such a return cannot be considered voluntary.

3. Relevance of Original Returns Filed under Section 139:
The Tribunal analyzed whether the original returns filed under section 139 could be referenced for determining concealment of income. It was held that the assessment or reassessment under section 153A is independent of the original returns filed under section 139. The concealment of income must be assessed with reference to the return filed in response to the notice under section 153A. Since the income declared in the return under section 153A was accepted, there was no concealment of income, and thus, no penalty could be imposed.

4. Applicability of Explanation 5 and Explanation 5A to Section 271(1)(c):
The Tribunal examined the applicability of Explanation 5 and Explanation 5A to section 271(1)(c). Explanation 5 applies to searches conducted before 1st June 2007, while Explanation 5A applies to searches conducted on or after this date. The Tribunal noted that Explanation 5 does not cover income based on entries in books or documents, which was the basis of the assessee's undisclosed income. Therefore, Explanation 5 was not applicable to the assessee's case for the assessment year 2004-05. The Tribunal also observed that Explanation 5A, which includes income based on entries in books or documents, was not applicable as it was introduced for searches conducted on or after 1st June 2007.

Conclusion:
The Tribunal held that the penalty under section 271(1)(c) was not imposable as the income declared in the return filed under section 153A was accepted by the assessing officer, and there was no concealment of income. The Tribunal directed the assessing officer to delete the penalty. The appeal filed by the assessee was allowed.

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