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2017 (4) TMI 1425 - AT - Income TaxPenalty u/s 271(1)(c) - search and seizure - notice u/s 153A - additional income declared by the assessee in response to the notice u/s 153A as concealed income - difference between returned filed u/s.153A and assessed income different between original returned income and assessed income - HELD THAT - A perusal of the assessment order would indicate that no reference to the seized material is being made qua income declared by the assessee in the return filed under section 153A. We are of the view that this income should be represented with some assets bullion money jewellery or any entry which has unearthed this income. But no such thing has been emerging out. Hon ble Delhi High Court in the case of Pr.CIT Vs. Neeraj Jindal & Others 2017 (2) TMI 1002 - DELHI HIGH COURT has considered this aspect and observed that Explanation 5 could be invoked if the income declared by the assessee has a nexus with any seized material. Deeming fiction provided in Explanation 5A would trigger if the income declared by the assessee is based on some money bullion jewellery or an entry found during the course of search. If the assessee has declared such income voluntarily without unearthing such income during the course of search then it would not be considered that the assessee has concealed the income. Explanation 5A would not be applicable. In the result all the appeals are allowed and impugned penalties are deleted. - Decided in favour of assessee
Issues Involved:
1. Confirmation of penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment years 2005-06, 2008-09, and 2009-10. Issue-Wise Detailed Analysis: 1. Confirmation of Penalty under Section 271(1)(c): Facts of the Case: - A search and seizure operation was conducted at the assessee's premises on 4.3.2010. - Notice under section 153A was issued and served on the assessee, who filed returns for the relevant assessment years. - The Assessing Officer (AO) passed the assessment order and initiated penalty proceedings under section 271(1)(c) for each assessment year. Penalty Details: - For AY 2005-06: Original returned income: Rs. 90,353; Returned income as per notice u/s 153A: Rs. 10,32,883; Assessed income: Rs. 10,32,883; Penalty: Rs. 2,76,794. - For AY 2008-09: Original returned income: Rs. 1,85,967; Returned income as per notice u/s 153A: Rs. 4,91,347; Assessed income: Rs. 4,91,347; Penalty: Rs. 85,211. - For AY 2009-10: Original returned income: Rs. 5,78,937; Returned income as per notice u/s 153A: Rs. 6,88,003; Assessed income: Rs. 6,88,003; Penalty: Rs. 32,730. Revenue's Argument: - The Revenue authorities considered the additional income declared by the assessee in response to the notice under section 153A as concealed income based on Explanation 5A of section 271(1)(c). - The authorities believed that since the assessee did not disclose the additional income in the original return, it was assumed disclosed only due to incriminating material found during the search. Tribunal's Analysis: - The Tribunal observed that the assumption of concealed income should be supported by incriminating material. - The assessment order did not reference any seized material related to the income declared by the assessee. - The Tribunal noted that the income should be represented by assets, bullion, money, jewelry, or entries unearthed during the search. - The Tribunal referred to the case of Shri Mansukhbhai R. Sorathia and Others Vs. JCIT, where it was held that the deeming provision of Explanation 5A applies only if the income declared is based on assets or entries found during the search. Legal Precedents: - The Tribunal cited the Hon’ble Gujarat High Court's judgment in Kirit Dayabhai Patel Vs. ACIT, which relied on the Supreme Court's decision in ACIT Vs. Gebilal Kanbhaialal (HUF). - The Tribunal emphasized that for Explanation 5A to apply, the income declared must have a nexus with assets or entries found during the search. - The Tribunal also referred to the Hon’ble Delhi High Court's decision in Pr.CIT Vs. Neeraj Jindal & Others, which stated that the Revenue must prove that the assets seized during the search relate to the income of the relevant assessment years. Conclusion: - The Tribunal concluded that the Revenue authorities failed to demonstrate that the additional income declared by the assessee was based on any seized material. - The Tribunal held that the deeming fiction of Explanation 5A did not apply as the income was declared voluntarily without any incriminating material being found. - Therefore, the penalties imposed under section 271(1)(c) were deleted, and the appeals of the assessee were allowed. Order: - All appeals of the assessee were allowed, and the penalties were deleted. - The order was pronounced in the Court on 6th April 2017 at Ahmedabad.
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