2012 (9) TMI 719 - AT - Income Tax

Penalty u/s 271(1)(c) for concealment of income in relation to unexplained jewellery found at the time of search conducted on 10.11.2006 - assessee filed the return of income for the relevant year after search on 21.4.2008 in which the jewellery was declared as undisclosed income - penalty levied on ground that assessee had not declared undisclosed income on account of jewellery in the statement recorded under section 132(4) - benefit of clause 2 to Explanation 5 of section 271(1)(c) - Held that - The present case is not a case in which the transactions relating to the undisclosed income have been recorded in the books of account on or before the date of search. It is an established fact that at the time of search unexplained jewellery had been found and had also been seized. Thus, the assessee at the time of search and at the time of making statement u/s 132(4) was aware that the jewellery was unexplained and despite this the assessee had not declared it as undisclosed income. Penalty u/s 271(1)(c) is leviable in relation to unexplained jewellery because the same had been declared by the assessee as undisclosed income after it was detected during search and the assessee was not entitled to the benefit of clause-2 of Explanation-5 of section 271(1)(c) - Decided against assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) for concealment of income in relation to unexplained jewellery found during a search operation.

Analysis:
The appeal was against the order of the CIT(A) for the assessment year 2007-08, focusing on the penalty under section 271(1)(c) for concealing income. The appellant argued that no addition was made to the total income returned, hence no concealment occurred. However, the AO initiated penalty proceedings due to unexplained jewellery found during a search. The appellant claimed they were not given a copy of the statement recorded under section 132(4) and thus could not disclose the income. The AO disagreed, observing that the appellant did not request the statement during assessment and did not declare the income as required by law. The penalty was levied at 100% of the tax evaded.

The appellant appealed to the CIT(A), reiterating their stance. The CIT(A) requested the AO to provide the statement, which revealed that the appellant did not disclose the income from the jewellery. The CIT(A) distinguished previous cases where undisclosed assets were declared in the statement. Referring to relevant case law, the CIT(A) upheld the penalty, leading to the current appeal before the Tribunal.

During the Tribunal hearing, the appellant argued that they had declared all unexplained jewellery in the income tax return, hence no penalty should apply. They cited a Tribunal case in support. The Tribunal reviewed the facts and contentions, emphasizing that the appellant did not declare the undisclosed income during the search statement. The Tribunal rejected the appellant's argument that no query was raised by the authorized officer, noting that voluntary disclosure is required. The Tribunal found the penalty justified, as the appellant was aware of the unexplained jewellery but did not declare it as undisclosed income.

The Tribunal differentiated the present case from previous case law cited by the appellant, where income was declared in the statement. As the appellant failed to declare the income during the search statement, the benefit of Explanation 5 to section 271(1)(c) did not apply. Consequently, the Tribunal upheld the CIT(A)'s decision to confirm the penalty, leading to the dismissal of the appellant's appeal.