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2015 (7) TMI 323 - AT - Income TaxLevy of penalty u/s. 271(1)(c) - unexplained jewellery found - whether the saving of Explanation 5 to section 271(1)(c) is attracted in the facts and circumstances of the case, which would prima facie apply inasmuch as the impugned jewellery was found during the course of search? - Held that - The assessee has not been able to; rather, has not even attempted to substantiate her explanation of the jewlery having been gifted on the occasion of weddings in the family, which would in the very least require the names of the donors, besides confirmations from the donors. Rather, how could gift to another form part of her income, i.e., going by her explanation. The same is no more than a bald plea, contradicted by the assessee s own stand of returning the same as her income, albeit consequent to search. The same, however, cannot be regarded as voluntary by any stretch of imagination, being in consequence of a search and findings thereat, i.e., detection and, in fact, seizure of the relevant assets. Both Explanation (1A) and (1B) to section 271(1)(c) shall, resultantly, apply in the facts of the case. It may be argued that the Revenue has not invoked the said Explanation. The same is not required to be separately invoked when the assessee is show-caused on section 271(1)(c) (CIT v. Prabhu Dayal Lallu Ram 2005 (1) TMI 39 - PUNJAB AND HARYANA High Court ; CIT v. K.P. Madhusudanan 2000 (1) TMI 15 - KERALA High Court . The law, through Explanation 1, shifts the onus of the explanation for not returning/disclosing the impugned income on the assessee, so that the penalty follows the non-discharge of that onus. In the present case, the assessee seeks shelter of Explanation 5 to the provision, which we have, for the reasons afore-stated, found as not applicable. No further burden lies on the Revenue; it restricting itself to the assessee s case as advanced before it, i.e., entitlement to the benefit of Explanation 5 to the provision.There is, further, no plea of the disclosure per the return as made to purchase peace of mind and/or avoid litigation. The plea would even otherwise be inconsistent with the facts of the case; wholly unsubstantiated and, accordingly, not maintainable either on facts or in law. We confirm the levy of penalty imposed at the minimum sum thereof, i.e., at 100% of the tax sought to be evaded. In this regard, the assessee states of the correct amount of income disclosed and assessed being at ₹ 29,13,895/-, and not ₹ 29,31,895/-, i.e., on which amount the penalty stands levied. We find the assessee s claim as correct, so that a consequential relief is directed. - Decided partly in favour of assessee.
Issues Involved:
1. Legitimacy of the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. 2. Applicability of Explanation 5 to section 271(1)(c) in the context of the assessee's case. 3. Whether the assessee's explanation for the unexplained jewellery was satisfactory. Detailed Analysis: 1. Legitimacy of the Penalty Levied under Section 271(1)(c): The appeal concerns the penalty imposed under section 271(1)(c) for Assessment Year (AY) 2007-08. The assessee's premises were searched under section 132, revealing jewellery worth Rs. 53 lacs. The assessee filed a return including Rs. 29,13,895/- as unexplained jewellery. The Assessing Officer (AO) did not accept the assessee's invocation of immunity under Explanation 5 to section 271(1)(c), leading to the penalty's confirmation by the Commissioner of Income Tax (Appeals) [CIT(A)]. 2. Applicability of Explanation 5 to Section 271(1)(c): Explanation 5 to section 271(1)(c) deals with the concealment of income discovered during a search. It provides immunity if the assessee discloses the income and the manner of its acquisition during the search under section 132(4). The assessee argued that the non-disclosure under section 132(4) should not exclude her from immunity since no specific question about the income source was posed during the search. However, the Tribunal found that the assessee did not claim the jewellery as acquired from her income for any previous year, which is a prerequisite for Explanation 5's application. The jewellery was explained as gifts received during family weddings, not as income, thus failing to meet Explanation 5's criteria. Consequently, the Tribunal held that Explanation 5 was not applicable. 3. Satisfactory Explanation for the Unexplained Jewellery: The Tribunal assessed whether the assessee provided a satisfactory explanation for the unexplained jewellery. The assessee's claim of the jewellery being gifts was unsubstantiated, lacking donor details or confirmations. The Tribunal noted that the assessee's return of the jewellery's value as income was not voluntary but a consequence of the search. The Tribunal referenced several case laws, emphasizing that penalty under section 271(1)(c) follows if the assessee fails to provide a satisfactory explanation. The Tribunal concluded that the assessee did not discharge her onus of proof, making the penalty justified. Conclusion: The Tribunal confirmed the levy of penalty, finding no basis for the assessee's claim under Explanation 5 to section 271(1)(c). The penalty was imposed at 100% of the tax sought to be evaded, with a minor correction in the assessed income amount. The assessee's appeal was partly allowed, providing consequential relief for the corrected income amount. Final Order: The assessee's appeal was partly allowed, with the order pronounced in the open court on 22/06/2015.
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