2017 (5) TMI 1679 - AT - Income Tax

Penalty levied u/s 271AAA - revenue has carried out survey operations only u/s 133A of the Act in the hands of the partnership firms and not individual partners - HELD THAT - It is an admitted fact that the assessee Shri Kumar Satur Nathani was only subjected to search operations u/s 132. The revenue has carried out survey operations in the hands of business firms u/s 133A of the Act and the assessee Shri Roop Kishanchand Khemani has given statement u/s 131 of the Act. There should not be any dispute that the provisions of sec. 271AAA shall apply to the assessee in whose hand the search was conducted during the period commencing from 01-06-2007. Even though the D.R contends that the search conducted in the hands of Shri Kumar Satur Nathani should be extended yet we are unable to agree with the said contentions since the provisions of sec. 132 of the Act shall apply only in respect of persons in whose case the search warrant was issued. Under the Act a partnership firm and its partners are treated as separate taxable persons. In any case the revenue has carried out survey operations only u/s 133A of the Act in the hands of the partnership firms. Hence in the absence of search operation u/s 132 of the Act in the hands of Shri Roop Kishanchand Khemani we are of the view that the assessing officer has misdirected himself in levying penalty u/s 271AAA Penalty levied u/s 271(1)(c) - contentions of the assessee are that the revenue was having only incomplete information in its hand - HELD THAT - The assessees have voluntarily furnished all the details that were available with them. Further they have given authorization to the AO to collect necessary details from the HSBC bank. Thus they have furnished all the materials available with them and they have also offered explanations as to why this income was not declared by them. Even though the income does not belong to the AY 2007-08 still they have agreed to offer the same in that year and also paid taxes. None of the explanations of the assessee was found to be false. Under these set of facts the Ld A.R contended that the immunity given under Explanation 1 shall be available to the assessee. We also find merit in the said submissions and accordingly accept the same. The penalty levied in the hands of both the assessee u/s 271(1)(c) in AY 2007-08 is not sustainable on account of legal issues discussed above as well as on merits. Appeals of the assessee are allowed.

Summary

Issues Involved:
1. Penalty levied under section 271(1)(c) of the Income Tax Act for assessment year 2007-08.
2. Penalty levied under section 271AAA of the Income Tax Act for assessment year 2012-13.
3. Legal contentions regarding the initiation and imposition of penalties under different charges.
4. Voluntary disclosure of income and its implications on penalty proceedings.

Detailed Analysis:

1. Penalty under Section 271(1)(c) for AY 2007-08:
The appeals filed by the assessees challenge the penalties levied under section 271(1)(c) of the Act for AY 2007-08. The penalties were confirmed by the CIT(A) based on the income assessed from undisclosed foreign bank accounts. The income was offered by the assessees after being confronted with information obtained from Swiss authorities. The assessees argued that the income was earned prior to 2003 and was voluntarily offered in AY 2007-08 to avoid litigation. The Tribunal noted that the income did not belong to AY 2007-08, and the voluntary offer should not attract penalties as per the decision in Dr. Kaushal Goel Vs. ACIT.

2. Penalty under Section 271AAA for AY 2012-13:
The appeal by one assessee challenged the penalty levied under section 271AAA for AY 2012-13. The Tribunal observed that the penalty under section 271AAA could only be levied on a person subjected to search under section 132. Since the search was conducted only in the hands of another individual, the penalty under section 271AAA was deemed beyond the scope of the provisions. The Tribunal directed the deletion of the penalty.

3. Legal Contentions on Penalty Charges:
The assessees contended that the AO initiated penalty proceedings for "concealing the particulars of income" but levied penalties for "furnishing inaccurate particulars of income." The Tribunal referred to the Bombay High Court's decision in The CIT Vs. Shri Samson Perinchery, which held that penalties must be imposed on the same grounds as initiated. The Tribunal found non-application of mind by the AO in initiating penalties under one charge and levying under another, thus vitiating the penalty proceedings.

4. Voluntary Disclosure and Penalty Proceedings:
The assessees argued that the additional income was disclosed voluntarily based on incomplete information from Swiss authorities. They provided no objection for the AO to collect complete details from HSBC Bank, Geneva. The Tribunal noted that the income was earned prior to 2003 and was voluntarily offered in AY 2007-08. The Tribunal found that the explanations provided by the assessees were not proven false and accepted their contention that the voluntary disclosure should not attract penalties under section 271(1)(c).

Conclusion:
The Tribunal quashed the penalties levied under section 271AAA for AY 2012-13 and under section 271(1)(c) for AY 2007-08, citing non-application of mind by the AO and the voluntary nature of the income disclosure. The appeals of the assessees were allowed, and the AO was directed to delete the penalties.