2015 (5) TMI 317 - HC - Income Tax

Penalty u/s 271(1)(c) - search under section 132 wherein the assessee made voluntary disclosure under section 132(4) disclosing a sum of ₹ 6 crores even though no incriminating document suggesting any such undisclosed income was found - ITAT deleted penalty levy - Held that - The Tribunal, as such, fell into an error in proceeding on the basis that the assessee is entitled to get the benefit/immunity under clause (b) quoted above. In the case before us there was, in fact, a search and seizure on February 3, 2009. During the search and seizure, the disclosure was made on February 3, 2009. During the search and seizure, the assessee made a statement which was recorded by the officers of the Revenue. Stress was laid by the Tribunal on the expression voluntary but the Tribunal failed to understand that the meaning of the expression voluntary in the context is that the statement made by him was not extorted from him by applying force. It is in that sense a voluntary disclosure which has been clarified by the assessee by stating in answer to question No. 23 that he had not given any statement under pressure and he did not want to rectify or modify the statement made by him. Thus the order of the Tribunal is unsustainable in law and, therefore, is set aside - Decided in favour of revenue.

Summary

Issues:
1. Appeal against order of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Interpretation of clauses (a) and (b) of Explanation 5A to section 271(1).
3. Application of voluntary disclosure in the context of search and seizure.

Analysis:

1. The judgment deals with an appeal challenging a penalty order under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal allowed the assessee's appeal against the penalty order, leading to the Revenue filing an appeal against the Tribunal's decision.

2. The case involved the interpretation of clauses (a) and (b) of Explanation 5A to section 271(1). The Tribunal erred in applying clause (b) to the assessee's case, as the assessee had filed a return but did not disclose the income, falling under clause (a) instead. The judgment clarified that clause (b) is not applicable when the return has been filed but income has not been declared.

3. The judgment also addressed the application of voluntary disclosure in the context of search and seizure. The Tribunal's reliance on the term "voluntary" in the disclosure made by the assessee was deemed incorrect. The disclosure being voluntary meant it was not obtained by force, as clarified by the assessee's statement. The judgment emphasized that the voluntary nature of disclosure did not imply immunity from penalty under section 271(1)(c).

In conclusion, the High Court set aside the Tribunal's order, restoring the appellate authority's decision. The judgment highlighted the incorrect application of clauses (a) and (b) of Explanation 5A to section 271(1) and clarified the voluntary nature of disclosure in the context of search and seizure.