2016 (9) TMI 395 - AT - Income Tax

Penalty u/s 271AAA - Held that - By way of letters dated 24.12.2010 ad 28.12.2010, the assessee offered additional sum of ₹ 1,05,88,900/- which was accepted by the Assessing Officer without any further addition. The assessee, in fact, telescoped the lease rental received by the assessee against the voluntary contribution received by Sri Vetrivel Educational & Charitable Trust. When the assessee claims that voluntary contribution was received by Sri Vetrivel Educational & Charitable Trust, this Tribunal is of the considered opinion that there was no justification for levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to reappreciate the material available on record and find out whether the income actually relates to the assessee. Moreover, by sec. 271AAA of the Act, the Parliament enacted a separate provision for levy of penalty. Sub-section (3) of sec. 271AAA of the Act in categorical terms declares that no penalty can be levied u/s 271(1)(c) of the Act in respect of the income which falls in subsection( 1) of sec. 271AAA of the Act. In the case before us, admittedly, the search was conducted on 29.9.2008, therefore, penalty, if any, has to be levied only u/s 271AAA of the Act and definitely not u/s 271(1)(c) of the Act. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the penalty levied by the Assessing Officer. Levy of penalty u/s 271(1)(c) - Held that - This Tribunal is of the considered opinion that mere addition in the assessment order cannot be reason for levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to reappreciate the material available on record and find out whether there was any concealment of income. In the case before us, both the lower authorities have not reappreciated the material available on record. Merely because the assessee offered the amount as income, they have levied/confirmed penalty u/s 271(1)(c) of the Act. The fact remains that the search was conducted in the case of Shri A.N. Radhakrishnan on 29.9.2008. Therefore, penalty, if any, has to be levied u/s 271AAA of the Act and definitely not u/s 271(1)(c) of the Act. Sub-section(3) of sec. 271AAA of the Act in categorical terms declares that no penalty can be levied u/s 271(1)(c) of the Act when the income falls u/s 271AAA(1) of the Act. In the case before us, it is not in dispute that the income falls u/s 271AAA(1) of the Act. Therefore, no penalty can be levied u/s 271(1)(c) of the Act. In view of the above, we are unable to uphold the orders of the authorities below. Accordingly, the orders of the lower authorities are set asie and the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act is deleted.

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2003-04, 2006-07, 2007-08, and 2008-09.
2. Application of section 271AAA of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) for Assessment Year 2003-04:
The Assessing Officer (AO) levied a penalty under section 271(1)(c) for the assessment year 2003-04, which was deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Revenue appealed against this deletion. The tribunal noted that the penalty was based on an additional sum of ?9,59,433/- offered by the assessee during assessment proceedings, which included a lease advance received by the assessee's daughter and a gift from the assessee's husband. The tribunal held that these amounts could not be construed as the assessee's income and that the CIT(A) was correct in deleting the penalty since there was no concealment of income.

2. Levy of Penalty under Section 271(1)(c) for Assessment Year 2006-07:
For the assessment year 2006-07, the AO issued a notice under section 153C following a search operation and levied a penalty on an additional sum of ?1,05,88,900/- offered by the assessee. The CIT(A) deleted the penalty, and the Revenue appealed. The tribunal found that the additional sum was accepted by the AO without further addition and included voluntary contributions received by a charitable trust. The tribunal upheld the CIT(A)'s decision, stating that the penalty could not be justified as the income fell under section 271AAA, which precludes penalties under section 271(1)(c) for searches conducted after 1.4.2007.

3. Levy of Penalty under Section 271(1)(c) for Assessment Year 2007-08:
For the assessment year 2007-08, the assessee appealed against the CIT(A)'s confirmation of the penalty levied under section 271(1)(c). The tribunal noted that the penalty was based on a sum of ?40,50,000/- offered by the assessee, which was an advance lease rental received. The tribunal held that the mere addition in the assessment order could not justify the penalty and that the AO needed to reappreciate the material. Since the search was conducted on 29.9.2008, the penalty should have been levied under section 271AAA, not 271(1)(c). The tribunal set aside the lower authorities' orders and deleted the penalty.

4. Levy of Penalty under Section 271(1)(c) for Assessment Year 2008-09:
For the assessment year 2008-09, both the assessee and the Revenue filed appeals. The AO levied a penalty on sums of ?86 lakhs and ?80 lakhs offered by the assessee, which were related to lease advances and unexplained investments. The CIT(A) confirmed the penalty for the investments but deleted it for the lease advance. The tribunal found that the penalty should not have been levied under section 271(1)(c) due to the applicability of section 271AAA, as the search was conducted on 29.9.2008. The tribunal concluded that the CIT(A) should have deleted the entire penalty and set aside the lower authorities' orders, deleting the penalty.

Application of Section 271AAA:
The tribunal consistently noted that section 271AAA, enacted with effect from 1.4.2007, prohibits the levy of penalties under section 271(1)(c) for searches conducted after 1.4.2007. Since all penalties in question were related to searches conducted on 29.9.2008, they fell under section 271AAA. The tribunal emphasized that sub-section (3) of section 271AAA explicitly precludes penalties under section 271(1)(c) for such cases.

Conclusion:
The tribunal dismissed all appeals of the Revenue and allowed all appeals of the assessee, deleting the penalties levied under section 271(1)(c) for all assessment years in question. The tribunal's decisions were based on the applicability of section 271AAA and the lack of concealment of income by the assessee.

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