2015 (6) TMI 1199 - AT - Income Tax

Levy of penalty u/s.271(1)(c) OR 271AAA - search conducted u/s. 132 - in statement made u/s.132(4) assessee offered total additional undisclosed income - HELD THAT - The entire penalty order refers to levy of penalty for the concealment of income because the income was offered only after the search and since income was not offered in the original return of income, penalty was leviable. In the anxiety of levying the penalty u/s. 271(1)(c) of the Act, the Officer simply ignored the provisions of sec. 271AAA of the Act which have been introduced for the searches conducted on or after 01/06/2007. The Officer failed to appreciate that the assessee has fulfilled all the conditions mandatory to get immunity from the levy of penalty. AO did not consider the fact that in his statement made u/s. 132(4) of the Act, the assessee has offered additional income for tax. The assessee has paid taxes on the said undisclosed income offered and the assessee has explained the source from which the said income has been earned. We, therefore, do not find any merit in the grievance of the Revenue. We, therefore decline to interfere with the findings of the Ld. CIT(A). - Decided against revenue

Summary

Issues:
Appeals by Revenue against deletion of penalty under section 271(1)(c) of the Income Tax Act by CIT(A).

Analysis:
The appeals were filed by the Revenue against three assessees belonging to the same group, challenging the deletion of penalty under section 271(1)(c) by the CIT(A) for the assessment years 2005-06 to 2007-08. The appeals were consolidated and heard together due to common grounds. The primary issue in all appeals was the alleged error by the CIT(A) in deleting the penalty levied by the Assessing Officer.

During a search conducted under section 132, the assessee offered additional undisclosed income, out of which a portion was declared for the assessment year 2008-09. The Assessing Officer initiated penalty proceedings under section 271(1)(c) on the belief that the income was disclosed only after the search, indicating deliberate concealment. The CIT(A) considered various judicial decisions and concluded that the penalty was not justified, as the assessee fulfilled all conditions by disclosing the income, paying taxes, and explaining its source.

The assessee argued before the CIT(A) that the Assessing Officer did not record satisfaction before initiating penalty proceedings, as required by law. Additionally, it was contended that the notice for penalty initiation lacked clarity on the grounds of concealment or inaccurate particulars of income. The CIT(A) also noted the insertion of section 271AAA and held that the penalty under section 271(1)(c) was not applicable in this case.

The Revenue, in its appeal, referred to Explanation 5A to section 271(1)(c) but failed to establish its applicability. The ITAT held that the Assessing Officer overlooked section 271AAA, which provides immunity under specific conditions, and that the assessee had met all requirements for penalty immunity. The ITAT upheld the CIT(A)'s decision to delete the penalty, dismissing the Revenue's appeals.

In conclusion, the ITAT dismissed all appeals by the Revenue, emphasizing that the penalty under section 271(1)(c) was not justified given the circumstances and legal provisions.