2017 (2) TMI 690 - AT - Income Tax

Penalty uls 271(1)(c) - unexplained cash deposits - Held that - It has been examined in detail by the Ld. CIT(A) that from the statements recorded of Shri Rajesh Sharma as well as the assessee it was clear that assessee was operating several business concerns in the name of other persons including assessee s employees and close associates and was maintaining various bogus bank accounts, through which unaccounted income was generated regularly. We find that findings have been recorded by the Ld. CIT(A) on the basis of facts and material held on record. Nothing has been brought before us to controvert or negate these factual findings. Under these circumstances, we find it appropriate to uphold the order of the Ld. CIT(A). Whether no penalty was exigible u/s 271(1)(c) since provisions of sections 271AA(2) & (3) would apply as the search was carried out after 1st day of June, 2007 and statement was made u/s 132(4)? - Held that - The provisions of subsection 2 and 3 of section 27IAAA will not be applicable to the appellant as the assessment year 2005.06 is not the specified previous year. The said provisions are applicable only for the specified previous year. The search in this case was conducted on 20.2.2008. Since the XY.2005-(163 is not the specified previous year, the provisions of sect (2) & 3) of the Act will not be applicable in the case of the Appellant. Reducing the quantum of penalty from 200% to 100% by CIT(A) - Held that - No justification was given before us as to why the penalty should be levied at 200%. Nothing could be shown from the order of the AO wherein any justification was given by AO for levy of penalty at 200%. Under these circumstances, we find that no interference is called for in the order of Ld. CIT(A).

Summary

Issues Involved:
1. Initiation and levy of penalty under Section 271(1)(c) of the Income Tax Act.
2. Validity of penalty based on the concealment of income.
3. Applicability of Section 271AAA (2) & (3).
4. Quantum of penalty levied.

Detailed Analysis:

1. Initiation and Levy of Penalty under Section 271(1)(c):
The appeals pertain to the same assessee involving identical issues and were disposed of by a common order. The case was adjourned multiple times at the request of the assessee's counsel, but the assessee did not appear on the final hearing date. Consequently, the tribunal proceeded ex-parte.

2. Validity of Penalty Based on Concealment of Income:
The assessee challenged the penalty proceedings initiated by the Deputy Commissioner of Income-tax, Central Circle, Mumbai, arguing that the amounts offered did not constitute concealed income and that the penalty was unjustified. The background involves a search and seizure action under Section 132 of the Income Tax Act at the premises of Phoenix Group, leading to the discovery of unexplained cash deposits and unaccounted cash deposits in employee accounts.

Unexplained Cash Deposits:
- The assessee disclosed ?99,28,000 during the search, which was included in the return filed under Section 153A.
- The AO initiated penalty proceedings, arguing that the disclosure was not voluntary but a result of the search.

Unaccounted Cash Deposits:
- Additional unaccounted cash deposits of ?36,42,000 were detected during the assessment proceedings, leading to further penalty proceedings.

3. Applicability of Section 271AAA (2) & (3):
The assessee argued that the provisions of Section 271AAA (2) & (3) should apply, exempting them from penalty since the search occurred after June 1, 2007. However, the tribunal noted that these provisions apply only to the specified previous year, which was not the case here. Therefore, the provisions were deemed inapplicable.

4. Quantum of Penalty Levied:
The AO levied a penalty of ?90,75,316 at 200% of the tax sought to be evaded. The CIT(A) upheld the penalty but reduced it to 100%, noting that the AO did not justify why the penalty should be at the higher rate of 200%. The tribunal found no reason to interfere with the CIT(A)'s decision, as no justification was provided for the higher penalty rate.

Conclusion:
The tribunal upheld the orders of the CIT(A), confirming the penalty but reducing its quantum from 200% to 100% of the tax sought to be evaded. All appeals filed by the assessee and the revenue were dismissed. The order was pronounced in the open court at the conclusion of the hearing.