2011 (7) TMI 1338 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of penalties u/s 271(1)(c) for concealment of income.
2. Validity of revised computation versus revised return.
3. Applicability of Explanation 5 to Section 271(1)(c).

Summary:

Issue 1: Legitimacy of penalties u/s 271(1)(c) for concealment of income

The appeals were filed by the assessee against the CIT(A)'s orders confirming penalties u/s 271(1)(c) levied by the A.O. for the respective assessment years. A search and seizure action u/s 132 was carried out on the assessee's residence on 18.01.2007. The A.O. completed assessment proceedings u/s 143(3) r.w.s. 153A, determining total income at Rs. 34,41,447/- for A.Y. 2003-04 and Rs. 19,79,568/- for A.Y. 2005-06. The assessee filed a revised computation offering additional incomes, which the A.O. did not consider as income declared u/s 132(4) and initiated penalty proceedings u/s 271(1)(c). The CIT(A) confirmed the penalty, holding that the disclosure of incomes cannot form part of the disclosure made in the statement u/s 132(4).

Issue 2: Validity of revised computation versus revised return

The assessee argued that the revised computation was filed voluntarily due to a bonafide mistake and there was no provision to file a revised return in 153A proceedings. The A.O. and CIT(A) did not accept this explanation, stating that the income was disclosed only as a consequence of the search and seizure action. The Tribunal noted that the assessee neither admitted these incomes during the search proceedings nor at the time of filing returns in response to notices u/s 153A. The revised computation was filed after the A.O.'s enquiry, indicating that the assessee failed to furnish correct incomes initially.

Issue 3: Applicability of Explanation 5 to Section 271(1)(c)

The assessee contended that Explanation 5 to Section 271(1)(c) provided immunity from penalty. However, the Tribunal referred to the case of ACIT vs. Kirit Dahyabhai Patel 121 ITD 159 (Ahd) (TM), where it was held that immunity under Explanation 5 is not available when returns are filed consequent to search and seizure proceedings. The Tribunal also cited the Hon'ble Bombay High Court's decisions in Indus Engineering Co. vs. ACIT 323 ITR 302 and Sheraton Apparels vs. ACIT 256 ITR 20, which upheld the levy of penalty for concealment of income disclosed during search but not in the original or revised returns.

Conclusion:

The Tribunal concluded that the assessee's failure to disclose correct incomes at the time of filing original returns and in response to notices u/s 153A warranted the penalty u/s 271(1)(c). The orders of the A.O. and the CIT(A) were confirmed, and the appeals of the assessee were dismissed.

Order pronounced in the open court on 15th July 2011.