2015 (5) TMI 783 - AT - Income Tax

Penalty levied u/s 271(1)(c) - CIT(A) deleted penalty levy - short term capital gain treated as income from other sources - Held that - There is no dispute that after the search, additional income was offered at ₹ 1,50,000/- and long term capital gain has been shown as short term capital gain. It is also not in dispute that the entire sale consideration has been treated as income from other sources. The offer of additional income was made u/s 132(4) of the Act. The share transactions, purchase and sale of shares were duly reflected in the books of account of the assessee. The assessee has suo moto offered capital gain in its return of income. The assessment has been completed merely by changing the head of income i.e capital gain was treated as income from other sources. The facts relating to the share transactions were very much there in the return of income, therefore, it cannot be said that the assessee has filed any in-accurate particulars or has concealed the particulars of income. The decision of the Hon ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) squarely apply in this case. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). - Decided against revenue. Penalty u/s 271(1)(c) - addition made on account of jewellery found at the time of search - Held that - There is no dispute that in this group case, substantial additional income has been offered for taxation, therefore, possession of diamond jewellery at ₹ 7,41,320/- cannot be ruled out. However, we are not in appeal against the quantum addition but against the levy of penalty. Since the assessee group has already offered substantial amount, the benefit of telescoping cannot be denied. The diamond jewellery can be considered as having purchased out of the additional income, therefore, it cannot be said that it is a fit case for levy of penalty for concealment of particulars of income - Decided in favour of assesse. Penalty u/s 271(1)(c) - unaccounted cash found - Held that - It is not a case where the assessee has not offered any explanation during the course of assessment proceedings. Not only the assessee offered the explanation but had also substantiated by cogent material evidence. Merely because of the addition of ₹ 5 lacs was accepted in the assessment proceedings would not ipso facto lead to levy of penalty u/s 271(1)(c) of the Act. Considering the facts that the cash in hand was duly reflected in the books of M/s Courtyard Bar & Restaurant and we do not find any reason for levy of penalty u/s 271(1)(c) of the Act - Decided in favour of assesse. Penalty u/s 271AAA - assessee has not explained the manner in which such income has been derived - Held that - In the case of Pramod Kumar Jain (2012 (12) TMI 629 - ITAT CUTTACK) held that no definition could be given to the specified manner insofar as the very statement on oath u/s 132(4) certifies the manner on which the assessee is preferred to pay tax thereon. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance of notice u/s 153A accounting the assets. Therefore the penalty is not automatic if one of the purported conditions is not fulfilled although all the conditions have been agreed to of having fulfilled by the A.O. insofar as the tax and interest have been recovered, thus to delete the penalty so levied. - Decided in favour of assesse. Penalty u/s 271(1)(c) - disclosure of income in survey treated as the amount of income sought to be evaded - Held that - The survey operation was conducted at the premises of the assessee on 26th July,2007. The return for the assessment year 2007-08 was not due on this date. The assessee offered the income for A.Y. 2007-08 and included the same in its return. The returned income was ₹ 52,60,033/-. The assessed income was ₹ 52,60,033/-. Thus the assessed income and the returned income are the same. No addition has been made in the assessment proceedings. We therefore do not find any reason for the levy of penalty u/s 271(1)(c) of the Act when no concealment of income has been detected as per the return of income of the assessee. - Decided

Summary

Issues Involved:
1. Deletion of penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
2. Delay in filing appeals and their maintainability based on CBDT instructions.
3. Levy of penalty under section 271AAA of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of penalty levied under section 271(1)(c) of the Income Tax Act, 1961:

In ITA No. 1358/Mum/2012 for A.Y. 2003-04 (Revenue's appeal), the Revenue challenged the deletion of penalty levied under section 271(1)(c). The facts revealed that a search operation resulted in the assessee admitting undisclosed income. The original return filed declared long-term capital gain, which was later revised to short-term capital gain post-search. The Assessing Officer (A.O.) assessed the entire sale consideration as income from other sources and levied a penalty for filing inaccurate particulars and concealing income. The CIT(A) deleted the penalty, observing no concealment of income beyond the return filed post-search. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in CIT vs. Reliance Petroproducts Pvt. Ltd., concluding that the mere change in the head of income did not justify the penalty.

In ITA No. 1359/Mum/2012 for A.Y. 2004-05, the Revenue's appeal against the deletion of penalty of Rs. 1,96,393/- was dismissed as it was covered by CBDT Circular No. 3 of 2011, which restricted appeals where the tax effect was below a specified threshold.

In ITA No. 217/Mum/2012 for A.Y. 2008-09 (Shri Ravindra Shetty), the penalty was levied due to the addition of diamond jewellery found during the search. The Tribunal noted that substantial additional income had already been offered for taxation, and the diamond jewellery could be considered purchased out of this income. The penalty was deleted, recognizing the benefit of telescoping.

In ITA No. 1360/Mum/2012 for A.Y. 2003-04 and ITA No. 1361/Mum/2012 for A.Y. 2004-05, the Revenue's appeals were dismissed based on CBDT instructions, which rendered the appeals non-maintainable due to the low tax effect involved.

In ITA No. 220/Mum/2012 for A.Y. 2008-09 (Shri Uday Shetty), the penalty was levied on cash found during the search. The Tribunal found that the cash was duly reflected in the books of the assessee's businesses. The penalty was deleted, as the acceptance of the addition during assessment did not automatically justify the penalty.

In ITA Nos. 222/Mum/12 and 223/Mum/2012 for A.Ys 2003-04 & 2004-05 (Shri Gunapal Shetty), penalties were levied for treating long-term capital gain as short-term post-search. The Tribunal, following the reasoning in ITA No. 1358/Mum/2012, directed the deletion of penalties.

In ITA No. 219/Mum/2012 for A.Y. 2007-08 (Sai Leela Hotel Pvt. Ltd.), the penalty was levied on income declared during a survey. The Tribunal noted that the income was included in the return filed before the due date, with no concealment detected. The penalty was deleted.

2. Delay in filing appeals and their maintainability based on CBDT instructions:

In ITA No. 1359/Mum/2012 for A.Y. 2004-05 and ITA No. 1360/Mum/2012 for A.Y. 2003-04, the appeals were delayed by 10 days. The Tribunal condoned the delay but dismissed the appeals based on CBDT Circular No. 3 of 2011 and Instruction No. 5/2014, which restricted appeals with low tax effects.

In ITA No. 1361/Mum/2012 for A.Y. 2004-05, the appeal was dismissed as the amount involved was less than Rs. 3 lakhs, making it non-maintainable under CBDT Circular No. 3 of 2011.

3. Levy of penalty under section 271AAA of the Income Tax Act, 1961:

In ITA No. 221/Mum/2012 for A.Y. 2008-09 (Shri Gunapal Shetty), the penalty under section 271AAA was levied on undisclosed income admitted during the search. The Tribunal noted that the assessee fulfilled the conditions of section 271AAA, including paying taxes and substantiating the income's derivation. The penalty was deleted, following the Cuttack Bench's decision in Pramod Kumar Jain vs. DCIT.

In ITA No. 218/Mum/2012 for A.Y. 2008-09 (S.R. Enterprises), the penalty under section 271AAA was levied on similar grounds. The Tribunal, applying the same reasoning as in ITA No. 221/Mum/2012, deleted the penalty.

Conclusion:

In conclusion, the Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals, directing the deletion of penalties levied under sections 271(1)(c) and 271AAA of the Income Tax Act, 1961. The Tribunal emphasized that mere changes in the head of income, acceptance of additions during assessment, and fulfillment of conditions under section 271AAA did not justify the imposition of penalties.

Order pronounced in the open court on 6th May, 2015.