2015 (11) TMI 1785 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - difference between the original return and return made u/s 153A - HELD THAT - Returned income filed u/s 153A was accepted by the AO and there was no variation in the assessed income vis- -vis returned income, therefore, following the aforesaid case of the Tribunal 2015 (9) TMI 1660 - ITAT MUMBAI who is the relative of the assessee, as claimed by AR and considering the decision of Devidas Sukhani vs DCIT 2013 (9) TMI 1076 - ITAT JODHPUR and in Smt. Pramila D. Asthekar vs ITO 2012 (9) TMI 956 - ITAT PUNE we find merit in the argument of the assessee and allow the appeal of the assessee on the ground that no addition was made in order u/s 143(3) r.w.s. 153A of the Act for A.Y. 2003-04, 2005-06 and 2006-07. AO is directed to delete the penalty. A.Y. 2007-08 - original return was filed on 31/03/2008, wherein, the total income was declared at ₹ 15,03,615/-. In the return filed u/s 153A of the Act, the income declared was ₹ 17,21,560/- meaning thereby additional income of ₹ 2,17,945/- was made and consequently addition of ₹ 1,40,000/- was made in order u/s 143(3) r.w.s. 153A. The difference of tax payable comes to ₹ 1,20,482/- between the original return and return made u/s 153A - assessee explained that the return of income filed on 24/08/2009 was accepted by the ld. DCIT while passing order u/s 143(3) of the Act dated 23/12/2009 and only addition retained was to the tune of ₹ 1,40,000/- on account of unsecured loans taken from Vidya Sing on the plea that the assessee did not furnish loan confirmation. Fact remains that the loan was taken by account payee demand draft and reflected in the books of accounts. In view of this fact, it may be a case of upholding quantum but automatically does not justify imposition of penalty u/s 271(1)(c) by taking recourse to Explanation-1 below section 271(1)(c) of the Act, therefore, we direct the AO to delete the penalty for this assessment year also. - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty u/s 271(1)(c) of the Income Tax Act for assessment years 2003-04, 2005-06 to 2007-08 based on search action u/s 132 of the Act.

Analysis:
The appeals by the assessee challenged the imposition of penalty u/s 271(1)(c) for assessment years 2003-04, 2005-06 to 2007-08, confirming the penalty against the orders of the Ld. first Appellate Authority, Mumbai. The counsel for the assessee contended that similar issues arose in another case, and the factual matrix was not disputed by the Revenue. The Tribunal reproduced a relevant portion from a previous order for reference and analysis, highlighting the common grievance of confirming the penalty levied u/s. 271(1)(c) of the Act. The search action initiated in the case led to penalty proceedings for not filing the return of income under normal provisions, with the Assessing Officer eventually levying the penalty for both years under consideration.

The assessee argued that since the assessed income was the same as the returned income, with no additions made by the AO justifying the penalty, reliance was placed on decisions by different Tribunal Benches to support their case. The Departmental Representative supported the lower authorities' findings but failed to provide any distinguishing decision. The Tribunal carefully reviewed the orders below and the decisions presented, emphasizing that if no income related to incriminating documents found during the search proceedings was added over the declared income, no penalty under 271(1)(c) could be imposed. The Tribunal cited various decisions to support its conclusion that the penalty order should be set aside due to lack of findings that the amounts were not disclosed in the return filed under section 153A of the Act.

In the detailed analysis, the Tribunal noted that for one of the assessment years, the original return and the return filed under section 153A showed a difference in income, but the penalty was not justified based on the explanation provided by the assessee regarding unsecured loans. The Tribunal directed the Assessing Officer to delete the penalty for this assessment year as well. Ultimately, the appeals of the assessee were allowed based on the lack of justifications for the penalties imposed.

This comprehensive analysis of the judgment highlights the legal intricacies involved in confirming penalties under section 271(1)(c) of the Income Tax Act based on search actions and the importance of justifying penalties with proper findings and legal precedents.