2016 (1) TMI 463 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - Proceedings u/s. 153A/153C - Held that - There were no incriminating material found. Particularly in the case of Shri Raghuveer Singh, as no search has occurred in his place, Explanation-5A cannot be invoked. In the case of Shri B. Ramdas Goud, even though search has occurred, nothing was found therefore, so Explanation-5A is not applicable. In both the cases, assessees explanation was that incomes were offered on estimation basis which were accepted by the AOs without any addition. Proceedings u/s. 153A/153C are separate proceedings and has no relevance to the earlier assessment proceedings. There is no variation between income returned and income assessed in these cases. Consequently, it cannot be held that there is any concealed income or furnishing of inaccurate particulars of income so as to attract proceedings u/s. 271(1)(c). In view of this, levy of penalty u/s. 271(1)(c) is not warranted and accordingly, the impugned orders of the AO are cancelled. - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act - Applicability of Explanation-5A - Concealment of income - Search and seizure operations - Assessment proceedings under Sections 153A and 153C - Incriminating material found - Estimation basis of income offered - Relevance of Explanation-1.

Analysis:
The case involved two appeals against penalties levied under Section 271(1)(c) of the Income Tax Act by the Commissioner of Income Tax (Appeals). The assessees contended that the provisions of Section 271(1)(c) were not applicable to their cases to justify the penalty.

In both cases, search and seizure operations were conducted, leading to the declaration of various incomes by the assessees for different assessment years. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) as the assessees were not income tax assessees earlier and the declared incomes were considered as concealed incomes.

The assessees did not respond to the notices issued, resulting in the AO levying penalties. The Commissioner of Income Tax (Appeals) upheld the penalties, relying on Explanation-5A of Section 271(1)(c).

The assessees argued before the tribunal that Explanation-5A was not applicable to their cases. They emphasized that no incriminating material was found during the search, and the incomes were offered on an estimation basis, which were accepted by the AOs without any addition. The tribunal noted that Explanation-5A did not apply as the conditions specified were not satisfied, and the penalties under Section 271(1)(c) were not warranted.

The tribunal highlighted that the search in one case did not yield any incriminating material, and in the other case, where a search occurred, nothing was found to invoke Explanation-5A. The tribunal emphasized that the proceedings under Sections 153A and 153C were independent and had no relevance to earlier assessment proceedings. As there was no concealed income or furnishing of inaccurate particulars, the tribunal canceled the penalties imposed by the AO.

Therefore, the tribunal allowed both appeals, concluding that the levy of penalty under Section 271(1)(c) was not justified in the given circumstances.

The judgment was pronounced on 18th November 2015 by the Appellate Tribunal ITAT Hyderabad.