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2016 (6) TMI 975 - AT - Income TaxPenalty u/s.271(1)(c) - declaration of income recorded u/s.132(4) - Held that - It is the settled position of law that penalty proceedings and assessment proceedings are separate and distinct. The assessee can advance new arguments during penalty proceedings. We find although the above documents were filed before the lower authorities as certified in the paper book, however, the lower authorities have not commented upon this issue either in the assessment order or penalty order or in the order of CIT(A). We therefore are of the opinion that levy of penalty u/s.271(1)(c) on the amount of ₹ 14 lakhs is not warranted under the facts and circumstances of the case if the cheques are received in A.Y. 2010-11. However, the same needs verification at the level of the AO. The AO shall verify the TDS Certificate and bank statement of the assessee regarding the receipt of the same in A.Y. 2010-11 and if found correct to delete the penalty on the amount of ₹ 14,00,000/-. Since the assessee in the instant case has declared the amount of ₹ 17,00,000/- and ₹ 10,00,000/- respectively on the basis of various discrepancies found in the seized documents during the course of search and the assessee has declared the same in the statement recorded u/s.132(4), therefore we hold that the assessee is liable to penalty u/s.271(1)(c) of the Act for concealing the particulars of his income to the extent of income arising from land business with Mr. Dilip Phadol ₹ 17 lakhs and profit of unrecorded transaction in Kirana ₹ 10 lakhs. The argument of Ld. Counsel for the assessee that penalty cannot be levied on estimated addition of income on Kirana is not applicable under the facts and circumstances of the case. The AO is directed to recompute the penalty accordingly - Decided partly in favour of revenue
Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Deletion of Penalty Levied under Section 271(1)(c): Background: The assessee, engaged in wholesale trading of food grains and pulses, filed an original return of income declaring ?16,38,890/-. A search and seizure action under Section 132 of the Income Tax Act was conducted, leading to the discovery of additional income. In response to a notice under Section 153A, the assessee declared a total income of ?57,39,630/-, including an additional income of ?41 lakhs from various sources. Assessment and Penalty Proceedings: The Assessing Officer (AO) completed the assessment based on the income declared in response to the notice under Section 153A. Subsequently, the AO initiated penalty proceedings, arguing that the additional income was not voluntarily disclosed and levied a penalty of ?12,30,220/- under Section 271(1)(c), citing concealment of income. CIT(A) Decision: The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, stating that the additional income was offered to buy peace of mind and was not a case of concealment. The CIT(A) held that Explanation 5A to Section 271(1)(c) was not applicable as no money, bullion, jewellery, or other valuable articles were involved. Instead, Explanation 1 was applicable, which provides relief if the explanation is found to be bona fide. Revenue's Argument: The Revenue contested the CIT(A)'s order, arguing that the assessee's declaration was not voluntary and was based on entries found during the search. The Revenue emphasized that the CIT(A) did not provide an opportunity to the AO to address the additional grounds raised by the assessee during the appeal. Assessee's Argument: The assessee argued that the commission income declared for Assessment Year (AY) 2008-09 actually belonged to AY 2010-11. The assessee contended that the penalty should not be levied as the income was declared to buy peace of mind and avoid litigation. The assessee also argued that penalty cannot be levied on estimated additions. Tribunal's Analysis: The Tribunal considered the arguments and evidence presented by both sides. It found that the commission income of ?14 lakhs from Mr. Vardhaman Jain related to AY 2010-11, supported by TDS certificates and bank statements. The Tribunal directed the AO to verify this and delete the penalty if the income indeed belonged to AY 2010-11. For the remaining amounts (?17 lakhs from Mr. Dilip Phadol and ?10 lakhs from unrecorded transactions in Kirana), the Tribunal upheld the penalty, citing that these amounts were declared based on discrepancies found during the search and were not voluntarily disclosed. The Tribunal referenced a similar case where the Pune Bench of the Tribunal upheld the penalty under Explanation 5A to Section 271(1)(c). Conclusion: The Tribunal partly allowed the Revenue's appeal. It directed the AO to verify the income related to Mr. Vardhaman Jain and delete the penalty if it belonged to AY 2010-11. However, it upheld the penalty for the remaining amounts of ?17 lakhs and ?10 lakhs, concluding that the assessee concealed the particulars of income. Order Pronouncement: The order was pronounced in the open court on 09-05-2016.
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