2013 (11) TMI 475 - AT - Income Tax

Penalty u/s 271(1)(c) of the Income Tax Act Concealment penalty levied though the assessee had disclosed the income in the return filed in response to notice under section 153A Applicability of Explanation-5 of section 271(1)(c) of Income Tax Act Held that - penalty has been levied by the revenue on the ground that assessee having not disclosed the impugned income in return of income filed under section 139(1) of the Act is guilty of concealing income as such action of the assessee declaring the impugned income in the return filed in response to notice under section 153A is but for the detection of such income during the course of search. Therefore, the assessee has concealed the particulars of his income or he has furnished inaccurate particulars of his income. In other words, the default of concealment of income by the assessee is viz-a-viz returned originally filed by him under section 139 of the Act and declaration of the income in return filed under section 153A is irrelevant for the purpose of levy of concealment of penalty. The provisions of Explanation-5 to section 271(1)(c) contemplates a situation where in the cases of search concealment penalty can be levied with reference to a return furnished before the date of search. In the present case, relying upon the discussion made in the case of Prem Arora Vs. DCIT 2012 (6) TMI 480 - ITAT DELHI , penalty levied u/s 271(1)(c) of the Income Tax Act is deleted as the entire income has been properly disclosed in the return filed by the assesse in response to notice u/s 153A - Decided in favor of Assessee.

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Lack of recorded satisfaction by the Assessing Officer (AO) before initiating penalty proceedings.

Issue-Wise Detailed Analysis:

1. Confirmation of Penalty Levied under Section 271(1)(c):

The primary issue in this case revolves around the confirmation of a penalty amounting to Rs. 18,66,600/- levied under Section 271(1)(c) of the Income Tax Act. The assessee had received gifts from two individuals, which were prematurely encashed Resurgent India Bonds. These gifts were initially not included in the assessee's return filed under Section 139 but were later declared in response to a notice under Section 153C following a search operation.

The AO initiated penalty proceedings on the grounds that the assessee had failed to prove the genuineness of the gifts and had furnished inaccurate particulars of income. The AO noted that the assessee did not provide sufficient documentation to substantiate the genuineness of the gifts, such as gift deeds or bank statements, and only provided copies of the donors' passports.

The assessee argued that the gifts were genuine and that the proceeds from the premature encashment of the bonds were exempt from tax according to the terms of the bond offer. The assessee claimed that the income was declared during the search proceedings to avoid prolonged litigation and to buy peace of mind, not because it was genuinely taxable.

The CIT(A) upheld the penalty, stating that the assessee's disclosure was not voluntary or bona fide but was made because the assessee was caught during the search. The CIT(A) also noted that the premature encashment of the bonds was not taxable, but the core issue was the unexplained source of the gifts.

2. Lack of Recorded Satisfaction by the AO Before Initiating Penalty Proceedings:

The second issue was raised by the assessee, arguing that the AO did not record satisfaction before initiating the penalty proceedings. However, this ground was not pressed by the assessee's representative and was subsequently dismissed.

Tribunal's Analysis and Conclusion:

The Tribunal carefully examined the facts and submissions. It noted that the penalty was levied despite the assessee declaring the income in the return filed in response to the notice under Section 153A. The Tribunal emphasized that if income is declared in the return filed under Section 153A, penalty under Section 271(1)(c) is generally not leviable, as it cannot be said that the assessee concealed income or furnished inaccurate particulars.

The Tribunal referred to various judicial precedents, including the Delhi High Court's decision in CIT vs. SAS Pharmaceuticals, which held that concealment or furnishing of inaccurate particulars must be traced to the income tax return filed by the assessee. The Tribunal also considered the provisions of Explanation-5 to Section 271(1)(c), which deals with concealment in the context of search operations, and concluded that the assessee's case did not fall within its ambit.

The Tribunal found that the assessee had provided prima facie evidence to support the genuineness of the gifts and that the disclosure was made to avoid litigation. It held that the penalty could not be sustained as the income was declared in the return filed under Section 153A, and there was no concealment or furnishing of inaccurate particulars in the return.

Conclusion:

The Tribunal allowed the assessee's appeal on Ground No.1, directing the deletion of the penalty. Ground No.2 was dismissed as it was not pressed. The appeal was thus partly allowed.

← Previous Next →