2014 (2) TMI 734 - AT - Income Tax

Penalty u/s 271 (1) (c) of the Act Applicability of Section 271AAA of the Act Held that - The previous year for both the years have ended before the date of search and the due date for filing the return of income u/s 139 (1) has also expired before the date of search - the return of income was filed on 07.07.2008 and both these dates are falling prior to the date of search i.e. 15.10.2008 - none of these two previous years is a specified previous year - the provisions of section 271AAA (1) are not applicable in these two cases - No other argument was advanced by the learned AR of the assessee to contend that there is no concealment except this that penalty is not leviable in terms of sub section (2) & (3) of section 271AAA thus, the order of the CIT(A) set aside and the matter should remit back to the AO for fresh adjudication about the penalty to enable the assessee to make his submissions on applicability of the provisions of section 271 (1) (c) of the I. T. Act Decided in favour of Assessee.

Summary

Issues:
Penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2007-08 and 2008-09.

Analysis:
The appeals were filed against the penalty imposed by the Assessing Officer (AO) and upheld by the CIT (A) for both years. The main contention was the applicability of Section 271AAA in light of a search conducted on 15.10.2008. The AR argued that Section 271AAA should apply, citing exceptions in subsection (2) and (3) of the section. The AR relied on tribunal decisions in similar cases for support. However, the Revenue supported the lower authorities' orders.

Upon review, it was noted that for Section 271AAA to apply, the search must have been conducted between 01.06.2007 and 01.07.2012. The AO confirmed the search date as 15.10.2008. Subsection (1) of Section 271AAA mandates a penalty of 10% of undisclosed income for the specified previous year in such cases. However, for the provisions of Section 271AAA(1) to be in effect, the specified previous year must align with the search year, which was not the case here.

The definition of a specified previous year under Explanation (b) to Section 271AAA(4) was crucial. It was found that neither of the previous years in question matched the criteria to be considered a specified previous year. As the returns for both years were filed before the search date, the provisions of Section 271AAA(1) did not apply. Consequently, subsections (2) and (3) of Section 271AAA were also deemed inapplicable.

The tribunal decisions cited by the AR were deemed irrelevant due to the non-applicability of Section 271AAA in the present cases. The matter was remanded to the AO for a fresh decision on the penalty, providing the assessee with an opportunity to present arguments on the applicability of Section 271(1)(c) of the Income Tax Act, as no other arguments were advanced previously. The appeals were allowed for statistical purposes, and the orders were set aside for reconsideration by the AO.