2012 (12) TMI 488 - AT - Income Tax

Penalty u/s 271(1)(c) Whether voluntary income returned by the assessee u/s 153A, which is otherwise cannot be added on the basis of seized material, would amount to concealed particulars or furnished inaccurate particulars of income - During search a calculation of interest found from residence of assessee - Held that - As per the seized document only amount was shown as interest and nothing else has been mentioned in the said document. The explanation 5 to sec. 271(1)( c) is applicable only in the cases when the additional income has been admitted by the assessee because of some incriminating material showing material showing undisclosed income found and seized during the search and seizure action. Therefore, it cannot be presumed in the absence of any material or information that the additional income offered by the assessee is otherwise liable to be added to the income of the assessee on the basis of seized material. Issue decides in favour of assessee Bogus gift Whether gift has been offered by assessee, to avoid the harassment of bringing donor from abroad and to produce before the AO treat as bogus Held that - As the amount of gift was duly recorded in books of accounts. The AO himself has recorded the fact that in the e-mail correspondence, the uncle of the assessee has accepted the said amount. Even the source of the gift was also explained as the sale proceed of flat and therefore, though the assessee offered the said amount to tax, the same was not held as a bogus. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Whether penalty u/s 271(1)(c) can be levied, for gift which has been offered by assessee through revised return, to avoid the harassment of bringing donor from abroad and to produce before the AO Assessee revise ROI filed u/s 153A Held that - As the revised return filed by the assessee within the period of limitation as prescribed u/s 139 (5), cannot be held invalid. When the assessee has already recorded the gift amount in the books of account and only to avoid the inconvenience and harassment to his uncle, the assessee offered the same to tax, would not automatically lead to the conclusion that the assessee had furnished inaccurate particulars of income or concealed particulars of income in the absence of any conclusive finding that the claim of the assessee was a bogus. Penalty deleted. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Whether penalty u/s 271(1)(c) can be levied, whereas income offered by assessee on voluntarily basis, and no addition was made on the basis of seized material Held that -As the income offered by the assessee in the return filed in response to Sec. 153A does not borne out from the seized material. When there is no co-relation and nexus of the additional income offered by the assessee and the figures return in the seized documents, then it cannot be said that the additional income admitted in the return of income filed u/s 153A is based on some incriminating material or information found during the course of search and seizure action. Following the decision in case of SHRI PREM ARORA (2012 (6) TMI 480 - ITAT DELHI) hence penalty deleted. Appeal decides in favour of assessee

Issues Involved:
1. Validity of Penalty under Section 271(1)(c) of the Income Tax Act.
2. Validity of Revised Return under Section 153A.
3. Application of Explanation 5 to Section 271(1)(c).
4. Use of Seized Documents as Evidence.
5. Voluntariness of Income Disclosure.

Issue-wise Detailed Analysis:

1. Validity of Penalty under Section 271(1)(c) of the Income Tax Act:
The assessee contested the penalty imposed under Section 271(1)(c) for the assessment years 2003-04, 2004-05, and 2005-06. The Assessing Officer (AO) levied penalties for concealment of income or furnishing inaccurate particulars of income. The assessee argued that the penalty notice was vague and did not specify the exact charge. The Tribunal referenced the Gujarat High Court decision in New Sorathia Engineering Co. v. Commissioner of Income-tax, which mandates a clear finding on whether the penalty is for concealment or inaccurate particulars. The Tribunal found that the AO had not provided a clear-cut finding, rendering the penalty order unsustainable.

2. Validity of Revised Return under Section 153A:
For the assessment year 2004-05, the assessee filed a revised return under Section 153A, which the AO rejected as invalid. The Tribunal clarified that under Section 153A, the return filed is treated as if filed under Section 139, allowing for a revised return under Section 139(5). The Tribunal held that the revised return within the permissible period should be accepted, and the AO's rejection was incorrect.

3. Application of Explanation 5 to Section 271(1)(c):
The Tribunal examined whether Explanation 5 to Section 271(1)(c) applied, which pertains to concealment discovered during a search. The assessee argued that no money, bullion, or valuable articles were found during the search, and the additional income was voluntarily declared to avoid litigation. The Tribunal agreed, citing the Supreme Court's decision in Commissioner of Income-tax v. Suresh Chandra Mittal, which held that voluntary disclosure to buy peace does not warrant a penalty.

4. Use of Seized Documents as Evidence:
The AO based the penalty on a seized document showing interest of Rs. 20,000 for the assessment year 2003-04. The Tribunal noted that the document was not confronted with the assessee during the search, and the assessee had disowned it. The Tribunal found that the document alone could not substantiate the penalty, especially when the declared income exceeded the amount indicated in the seized document.

5. Voluntariness of Income Disclosure:
For the assessment year 2004-05, the assessee disclosed a gift of Rs. 9,25,000 from an uncle in the USA, which was initially accepted but later offered to tax to avoid harassment. The Tribunal observed that the gift was recorded in the books and was not found to be bogus. The Tribunal held that voluntary disclosure to avoid inconvenience does not imply concealment or inaccurate particulars, especially when the AO did not conduct further inquiries to prove the gift was bogus.

Conclusion:
The Tribunal concluded that the penalties under Section 271(1)(c) were not sustainable due to the lack of clear findings, the voluntary nature of disclosures, and the improper rejection of the revised return. The Tribunal canceled the penalties for all three assessment years and allowed the appeals filed by the assessee.

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