2016 (9) TMI 710 - AT - Income Tax

Penalty proceedings u/s. 271(1)(c) - unexplained investment in a property - Held that - There is no dispute that the sole surviving issue in the instant appeal is qua correctness of section 271(1)(c) penalty in question arising from unexplained addition amount of ₹ 17 lacs. It has already come on record that this tribunal in quantum proceedings has already held the assessee to have included impugned assessment years unaccounted income in his disclosure of ₹ 31 lacs made during survey and assessed in assessment year 2007-08. We accordingly are of the opinion that the assessee deserves to be given telescoping effect as he has declared the impugned assessment year income remaining unaccounted in assessment year 2007-08. Learned co-ordinate bench in quantum proceedings has already adjudicated the relevant issue. The same has become final. We conclude in these peculiar facts that the above stated telescoping effect of the income declared in survey can be reasonably treated as source of assessee s unexplained investments in question. We reiterate that quantum and penalty are separate proceedings and each and every disallowance/addition made in former does not lead to automatic application of the latter penal provision as held by hon ble apex court in CIT vs. RELIANCE PETROPRODUCTS PVT. LTD. (2010 (3) TMI 80 - SUPREME COURT ). We accept assessee s arguments accordingly. The impugned penalty stands deleted - Decided in favour of assessee Suppressed receipts from un-recorded tuition classes - Held that - There is no dispute that merits of the issue forming backbone of the impugned penalty are the same in the impugned assessment year as well as those in the preceding assessment year 2004-05. The assessee has already succeeded in the said assessment year. He has not preferred any quantum appeal in the impugned assessment year. We conclude that quantum and penalty are separate proceedings (supra). We accordingly observe that once the assessee has succeeded on quantum issue in preceding assessment year, the mere fact that he has not preferred any separate appeal in the impugned assessment year is not to be taken as the sole reason for confirming the penalty in question - The impugned penalty stands deleted - Decided in favour of assessee

Summary

Issues:
- Assessment year-wise penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 for A.Ys. 2003-04, 2005-06, and 2006-07.

Analysis:

Assessment Year 2003-04 (IT(SS)A 151/Ahd/2013):
- The assessee, engaged in tuition classes, faced penalty proceedings for unexplained investments and suppressed receipts from unrecorded activities.
- The Assessing Officer imposed a penalty under section 271(1)(c) based on quantum additions.
- The CIT(A) reduced the unexplained investment addition and suppressed receipts, considering the assessee's share in the property.
- The tribunal affirmed the quantum additions but deleted the suppressed receipts addition, as the disclosed income had already been taxed in a previous assessment year.
- The tribunal held that the disclosed income in the survey could not be taxed again in the same assessment year, providing a telescoping effect.
- The penalty was deleted as the quantum and penalty proceedings are separate, and the disclosed income was considered the source of unexplained investments.

Assessment Year 2005-06 (ITA 834/Ahd/2013):
- Penalty was imposed for suppressed receipts and unexplained investments.
- The CIT(A) passed a common order for penalties in this and the preceding assessment year.
- The assessee succeeded in the quantum appeal of the preceding year but did not challenge the quantum in the current year.
- The tribunal held that success in the quantum appeal of the preceding year could not be the sole reason for confirming the penalty in the current year.
- The penalty was deleted based on the quantum success of the preceding year, emphasizing the separation of quantum and penalty proceedings.

Assessment Year 2006-07 (IT(SS)A 152/Ahd/2013):
- Penalty was imposed for unexplained investments, which were deleted in the quantum appeal.
- The penalty was deemed baseless as the main addition was deleted in the quantum appeal.
- The penalty for unexplained investments was deleted, and the assessee succeeded in all three appeals.

In conclusion, the tribunal emphasized the separation of quantum and penalty proceedings, ensuring that success in quantum appeals influenced penalty decisions. The penalties were deleted based on the quantum outcomes of the respective assessment years, maintaining fairness and consistency in tax assessments.