2014 (12) TMI 1365 - AT - Income Tax

Penalty levied u/s 271(1)(c) v/s 271AAA - search and seizure action carried out - As per revenue disclosure of the income was not made voluntarily by the assessee company and such income would not have been disclosed by the assessee in the absence of a search - Whether case comes under the purview of section 271AAA? - HELD THAT - As per the mandate u/s 271AAA of the Act after search initiated u/s 132 on or after 1st June, 2007 but before 1st July, 2012 penalty was leviable u/s 271AAA of the Act. Sub-section (3) of 271AAA clearly provides that in such case no penalty u/s 271(1)(c) of the Act can be imposed. We agree with the ld.counsel of the assessee that no penalty u/s 271(1)(c) of the Act was leviable, in as much as the case comes under the purview of section 271AAA of the Act. There is no ambiguity in this regard, and the view is also supported by the tribunal decision in the case of Cario International 2013 (10) TMI 1543 - ITAT DELHI - Decided in favour of assessee.

Summary

Issues:
- Appeal against deletion of penalty u/s 271(1)(c) of the IT Act by the ld. CIT(A).
- Applicability of penalty provisions under section 271AAA of the IT Act.

Analysis:

Issue 1: Appeal against deletion of penalty u/s 271(1)(c) of the IT Act by the ld. CIT(A)

The case involved a search and seizure action based on information received from the Directorate of Revenue Intelligence, leading to the discovery of undisclosed income. The Assessing Officer (AO) initiated penalty proceedings u/s 271(1)(c) in respect of the undisclosed income, and subsequently levied a penalty of rs.28,55,160/-, being 150% of the amount sought to be evaded. The assessee contended that the disclosed income was voluntarily declared and did not fall under Explanation 5 or Explanation 5A of Section 271(1)(c). The ld. CIT(A) observed that the undisclosed income found during the search was not acquired or represented as income in any previous year before the search, leading to the deletion of the penalty under section 271(1)(c).

Issue 2: Applicability of penalty provisions under section 271AAA of the IT Act

The assessee argued that the penalty levied under section 271(1)(c) was not sustainable as the case fell under section 271AAA of the IT Act. Section 271AAA provides for a penalty of ten per cent of undisclosed income in cases where a search has been initiated. The Tribunal's decision in a similar case supported the assessee's claim that penalties under section 271(1)(c) converted to section 271AAA were not legally justified. The Tribunal upheld that in cases falling under section 271AAA, no penalty under section 271(1)(c) could be imposed. Considering the search date and the provisions of section 271AAA, the Tribunal agreed with the assessee's argument, leading to the dismissal of the revenue's appeal against the deletion of the penalty under section 271(1)(c).

In conclusion, the Tribunal upheld the deletion of the penalty under section 271(1)(c) by the ld. CIT(A) based on the applicability of penalty provisions under section 271AAA of the IT Act. The appeal filed by the revenue was dismissed, emphasizing that no penalty under section 271(1)(c) was leviable as the case fell under the purview of section 271AAA.