2017 (3) TMI 104 - AT - Income Tax

Penalty u/sec. 271(1)(c) - incidence of taxation on account of unaccounted receipts - assessee contended that the income additionally offered by the assessee did not accrue during the two years under consideration - Held that - There is no dispute with regard to the fact that the assessee is following project completion method for offering income from the building projects. There is also no dispute with regard to the fact that both the building projects, viz., Sai Radha Paradise and Achu Nandana Apartments have not been completed during the years under consideration, i.e., they have been completed in the year relevant to AY 2008-09. Hence there is merit in the contentions of the Ld A.R, the incidence of taxation on account of unaccounted receipts, if any, shall arise only in AY 2008-09 and not during the years under consideration. It is well established proposition of law that the income pertaining to one year cannot be assessed in another year. We notice that the assessing officer has accepted the additional income offered by the assessee only on the basis of offer made in the statement taken from the partner of the firm u/s 132(4) of the Act, i.e., the assessing officer did not examine the aspect whether the alleged unaccounted receipts are taxable in the two years under consideration. Further he did not also examine the question as to whether the entire amount can be taken as the income of the assessee. It is noticed that the assessee also declared additional income on the strength of the offer made u/s 132(4). Thus we are of the view that the additional income offered by the assessee can be considered as a voluntary offer only and it cannot be considered as an offer made after detection by the revenue. In any case, we notice that the explanation of the assessee was not found to be false in terms of Explanation 1 to sec. 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues:
Penalty levied under section 271(1)(c) of the Income Tax Act for assessment years 2006-07 and 2007-08.

Analysis:
- The appeals were against the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act for the relevant assessment years.
- The search and seizure operation revealed discrepancies in cash receipts by the assessee for various projects, leading to additional income admissions.
- The Assessing Officer reopened assessments for both years, and the penalty was levied based on the additional income declared by the assessee.
- The assessee argued that discrepancies should be considered in the year of project completion (2008-09) and not in the assessment years in question.
- The penalty proceedings should specify the charge under section 271(1)(c) of the Act, which was contested by the assessee.
- The Revenue contended that the additional income admission was not voluntary but made after detection, justifying the penalty upheld by the CIT(A).

- The Tribunal noted that the projects were completed in 2008-09, and any discrepancies should be addressed in that year.
- The voluntary nature of the additional income offer and the lack of legal obligation to disclose it in the assessment years were emphasized.
- The penalty proceedings are independent of assessments, and the assessing officer must re-examine the applicability of penalty provisions.
- The Tribunal found that the additional income was voluntarily offered and not detected by the Revenue, warranting the deletion of penalties.
- As the penalty was deleted on merits, the issue of the assessing officer's application of mind was not addressed specifically.

- Ultimately, the Tribunal allowed the appeals, setting aside the penalties imposed for both assessment years.
- The orders were pronounced on 1.3.2017, directing the Assessing Officer to delete the penalties under section 271(1)(c) of the Act for both years.