2016 (6) TMI 422 - AT - Income Tax

Penalty under section 271(1)(c) - Assessee surrendered the additional income under section 132(4) - Held that - It is undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at ₹ 15 lacs and requested not to impose penalty u/s 271(1)(c) of the IT Act. The ld. AO imposed the penalty by invoking the Explanation 5A to section 271(1)(c) of the Act, which has been confirmed by ld. CIT (A) by considering the judgment of Hon ble Supreme Court in the case of MAK Data Pvt. Ltd. (2013 (11) TMI 14 - SUPREME COURT ). But for imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A of the Act. The issue has been considered by various High Courts as well as by ITAT as relied upon by the assessee, which are squarely applicable to the case of the assessee. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT (A). - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) for additional income declaration during search.

Analysis:
The appeal pertains to penalty imposition under section 271(1)(c) for additional income declared during a search. The AO initiated penalty proceedings after the assessee declared an additional income of ?15 lacs during a search, enhancing the income declared in the original return. The AO considered various decisions cited by the assessee but held that the facts were not identical. The AO relied on Explanation 5A of section 271(1) to impose the penalty, despite the assessee's payment and acceptance of tax on the declared income. The AO concluded that the penalty was justified due to deemed concealment of income under Explanation 5A.

The CIT (A) upheld the penalty, citing the necessity for details in the return to be inaccurate or erroneous for penalty imposition under section 271(1)(c). The CIT (A) referenced the Hon'ble Supreme Court's decision in MAK Data Pvt. Ltd. case and explained the applicability of Explanation 5A to the case. The CIT (A) confirmed the penalty based on the disclosure of additional income and the provisions of Explanation 5A.

In the appeal before the ITAT, the assessee argued that no incriminating documents were found during the search, and the additional income disclosure was voluntary. The assessee highlighted precedents where penalties were deleted in similar cases where no incriminating documents were found. The ITAT agreed with the assessee, noting that Explanation 5A requires the presence of incriminating documents during the search, which was absent in this case. Therefore, the ITAT deleted the penalty imposed by the CIT (A).

In conclusion, the ITAT allowed the assessee's appeal, emphasizing the absence of incriminating documents during the search as a crucial factor in determining the applicability of Explanation 5A and the consequent penalty under section 271(1)(c). The ITAT's decision was based on the lack of such documents, leading to the deletion of the penalty confirmed by the CIT (A).