2015 (2) TMI 112 - AT - Income Tax

Penalty u/s.271(1)(c) - CIT(A) deleted the levy holding hat penalty cannot be levied in respect of the additions made on estimate basis by applying the gross profit rate - Held that - Penalty levied u/s.271(1)(c) of the Act on the income admitted during the course of survey proceedings is to be deleted. The contention of the assessee is not controverted by the Revenue by placing any material on record, therefore respectfully following ratio laid down by the Hon'ble Gujarat High Court rendered in the case of Kirit Dahyabhai Patel vs. Asst. CIT 2015 (1) TMI 201 - GUJARAT HIGH COURT we do not find any merit in the Revenue's appeal. Hence penalty deleted. Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act.
2. Justification for the admission of income and the burden of proof regarding concealment.
3. Applicability of immunity under Explanation 5 to Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Penalty Levied by the AO under Section 271(1)(c):
The primary issue in these appeals was the deletion of penalties levied by the AO under Section 271(1)(c) of the Income Tax Act. The penalties were imposed on the additional income disclosed by the assessee in response to a notice issued under Section 153A of the Act, following a search operation. The AO contended that the penalty was justified as the additional income was not disclosed in the original return filed under Section 139 of the Act. However, the CIT(A) deleted the penalty, holding that it could not be levied on additions made on an estimated basis by applying the gross profit rate.

2. Justification for the Admission of Income and the Burden of Proof Regarding Concealment:
The Revenue argued that the CIT(A) failed to appreciate that the burden of proof was on the assessee to demonstrate that there was no concealment of income. The Revenue contended that since the assessee admitted additional income during the post-search inquiries to avoid litigation and buy mental peace, and this income was not disclosed in the original return, the penalty was justified. The AO had initiated penalty proceedings for furnishing inaccurate particulars of income on the additional income disclosed and the addition made on account of suppressed sales. However, the CIT(A) and subsequently the Tribunal found that the penalty could not be sustained as the additions were made on an estimated basis and the assessee had disclosed the additional income voluntarily.

3. Applicability of Immunity under Explanation 5 to Section 271(1)(c):
The assessee argued that immunity from penalty under Explanation 5 to Section 271(1)(c) was applicable in their case. The Tribunal considered various judgments, including those from the ITAT Rajkot Bench and the Hon'ble Gujarat High Court, which supported the view that penalty under Section 271(1)(c) could not be levied when the additional income was disclosed voluntarily during the search proceedings and accepted by the AO without further inquiry. The Tribunal noted that similar cases had been decided in favor of the assessee, where penalties were deleted based on voluntary disclosure and the applicability of Explanation 5.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalties levied under Section 271(1)(c) for all the assessment years involved (2000-01 to 2005-06). The Tribunal relied on the consistent view taken in similar cases by the Coordinate Bench and the Hon'ble Gujarat High Court, which supported the deletion of penalties on the grounds of voluntary disclosure and the estimated nature of the additions. Consequently, all six appeals by the Revenue were dismissed.