2017 (2) TMI 678 - HC - Income Tax

Penalty u/s 271(1)(c) - disclosures made by the offering incomes in the returns under Section 153A - Held that - We do not find any application of Smt. Meera Devi (2012 (8) TMI 812 - DELHI HIGH COURT ) to the present case. The requirement of clause (2) in Explanation 5 under Section 271 (1) was not fulfilled in the facts of that case. The assessees did not make any disclosure or statement or surrender income during the course of search. They filed a return which for the first time disclosed the hitherto concealed income. In those facts the Delhi High Court held that their explanations were not the kind which fell within the exception to Explanation 5. So far as Prasanna Dugar (2015 (5) TMI 317 - CALCUTTA HIGH COURT ) is concerned we find with dismay that the said judgment relates to application of Explanation 5A under Section 271 (1) while application of exception clause(2)in Explanation 5 is the case before us. The contention of the Revenue sought to be raised by the questions suggested stand already answered by Brijendra Gupta (2015 (7) TMI 451 - CALCUTTA HIGH COURT ) as held he expression unless appears after Clauses (a) and (b) of Explanation which provides for imposition of penalty. Therefore unless has to apply to the provision for imposition of penalty. Therefore the aforesaid expression to be furnished has to be interpreted as required to be furnished . Only in that case the Section will make a meaning otherwise the Section does not make any meaning. - Decided against revenue.

Summary

Issues:
1. Justification of confirming the order of the CIT (Appeal) in deleting the penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Tribunal's decision on whether disclosures made under Section 153A amount to an extension of disclosures under Section 132(4).

Issue 1:
The High Court of Calcutta dealt with the Revenue's appeal against the ITAT's order regarding penalty deletion under Section 271(1)(c) of the Income Tax Act, 1961. The case involved three appeals of the Revenue related to assessment years between 2002-03 to 2006-07, following search and seizure operations under Section 132 of the Act. The Revenue appealed only in respect of ITA nos. 378 to 382/Kol/2011 for the assessment years 2002-03 to 2006-07. The CIT(A) had deleted the penalty, stating that the assessee fulfilled conditions under Explanation 5 to Section 271(1) by making disclosure statements under Section 132(4) and disclosing income in response to notice under Section 153C. The Revenue contended that the assessee couldn't explain the source of undisclosed incomes and was not eligible for immunity under Explanation 5. The court considered precedents like CIT Vs. Smt. Meera Devi and CIT Vs. Prasanna Dugar, where the latter case was decided in favor of the Revenue. However, the court upheld the CIT(A)'s order, emphasizing that the assessee had met the conditions for immunity under Explanation 5.

Issue 2:
Regarding the second issue, the Tribunal had to decide whether disclosures under Section 153A were an extension of disclosures under Section 132(4). The Senior Advocate for the assessee relied on a finding in the CIT(A) order, stating that the disclosed income under Section 143(3)/153C/153A was covered by the Section 132(4) disclosure. The Tribunal did not provide a contrary finding. The Senior Advocate further referenced a Division Bench judgment in CIT V. Brijendra Gupta, which clarified the interpretation of the provision for imposition of penalty under Section 271(1). The court found that the questions raised by the Revenue were already addressed in the Brijendra Gupta case, and hence, no substantial question of law was involved. Consequently, the application and appeal were dismissed based on the existing legal precedents and interpretations.

In conclusion, the High Court of Calcutta upheld the CIT(A)'s decision to delete the penalty under Section 271(1)(c) based on the assessee's compliance with Explanation 5 conditions. The court also affirmed that disclosures made under Section 153A were considered an extension of disclosures under Section 132(4) as per legal interpretations provided in relevant judgments.