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2017 (8) TMI 365 - AT - Income TaxLevy of penalty under section 271(1)(c) - advance from allottees received - no return of income had been filed prior to the date of search, and had been only after the issue of notice under section 153A - Held that - The assessee having returned the additional income of ₹ 153.99 lakhs in pursuance to notice under section 153A, which it admits as having done voluntarily, how, we wonder, is it not a case squarely governed by the said Explanation 5A. The assessee in fact admits to the sum credited to the account advance from allottees as representing its income. The same, it needs to be appreciated, does not explain, much less satisfactorily, the nature and source of the said credit, so that section 68, deeming the same as the assessee s income for the current year, shall apply with full force. Who are the allottees ? What is their creditworthiness? Have they confirmed paying the same, representing the money paid to the sellers of land ? Why, again, if they have, is the amount not reflected as the sale proceeds of the relevant real estate/property, having been recovered from the allottees by the assessee as a part of the cost, or otherwise charged to them ? This is all the more so as the assessee has claimed and been allowed deduction (in computing its regular profit) in respect of expenditure of its business by way of on money paid to the sellers of land, as development charges . How does it, in any case, represent a liability of the assessee? In fact, to the extent the assessee has received money, duly entered in its books of account, the same is also covered under clause (i), i.e., besides clause (ii), of Explanation 5A. The facts and circumstances of the case are squarely covered by the said provision, even as observed by the Bench during hearing, to no satisfactory answer by the learned authorised representative. The learned Commissioner of Income-tax (Appeals) has in our view completely misled himself in the matter by not considering a direct provision of law, clearly applicable in the facts and circumstances of the case. In fact, that the Assessing Officer has not referred to it is not relevant inasmuch as the provision of law (section), is to be read along with Explanation appended thereto, with there being no estoppel against law (also refer CIT v. Durga Prasad More 1971 (8) TMI 17 - SUPREME COURT ). The scope for the non-application of the said Explanation is only where the assessee does not admit the same as its income, which then becomes a subject-matter of dispute between the assessee and the Revenue. Considered either way, irrespective of whether the assessee has filed, or not filed, the return of income on November 30, 2006. Both Explanation 5A, as well as Explanation 1 to section 271(1)(c) are, accordingly, attracted in the facts and circumstances of the case for the said sum. Disallowance under section 40(a)(ia) - Commissioner of Income-tax (Appeals) has directed deletion on the basis of the corresponding amount being not payable as at the year-end following Merilyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ). The plea is valid. However, we observe no explanation by the assessee to that effect ; rather, whatsoever. And, consequently, absence of any finding by any authority. The matter would accordingly have to go back to the file of the Assessing Officer to determine as a matter of fact whether the amount disallowed outstands, in whole or in part, as at the year end, so that to the extent it outstands, no penalty would be exigible. Where, and to the extent not, an absence of any explanation would justify the levy of penalty under section 271(1)(c).
Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961. 2. Filing of return of income prior to the date of search. 3. Additional income offered in response to notice under section 153A. 4. Disallowance under section 40(a)(ia). Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961: The Revenue appealed against the CIT(A)'s order, which allowed the assessee's appeal contesting the levy of penalty under section 271(1)(c). The Assessing Officer (AO) had levied the penalty on the assessed income, arguing that the assessee disclosed its income only in response to the search proceedings. The CIT(A) found that the AO did not provide a definite finding of concealed income and held that the penalty could not be levied on the additional income offered by the assessee. The Tribunal upheld the CIT(A)'s decision, stating that penalty is not leviable if the assessee files a revised return offering additional income voluntarily. 2. Filing of Return of Income Prior to the Date of Search: The AO claimed that the assessee had not filed its return of income by the due date under section 139(1) and even up to the date of search. However, the CIT(A) found that the assessee had filed the return of income on November 30, 2006, declaring an income of ?1,01,14,668. The Tribunal noted that there was ambiguity regarding whether the return was filed on November 30, 2006, and decided that if the return was not filed by that date, the assessee would be liable for penalty on the income of ?1,01,15,000 as per Explanation 3 to section 271(1)(c). 3. Additional Income Offered in Response to Notice under Section 153A: The additional income of ?153.99 lakhs was offered by the assessee in response to the notice under section 153A. The CIT(A) held that the penalty could not be levied on this amount as the AO did not provide a definite finding of concealed income. The Tribunal, however, noted that the assessee admitted the additional income voluntarily, and Explanation 5A to section 271(1)(c) applies, deeming the assessee to have concealed the particulars of its income. The Tribunal held that the CIT(A) misled himself by not considering this provision and decided that the penalty was applicable on the additional income. 4. Disallowance under Section 40(a)(ia): The AO disallowed ?13,000 under section 40(a)(ia) and levied a penalty on this amount. The CIT(A) deleted the penalty, stating that the provisions of section 40(a)(ia) apply only to amounts payable as of March 31 of the previous year, as held by the Tribunal in Merilyn Shipping and Transports v. Addl. CIT. The Tribunal observed that the assessee did not provide any explanation for the disallowance and remanded the matter to the AO to determine if the amount was payable as of the year-end. If it was not payable, no penalty would be exigible. Conclusion: The Tribunal upheld the CIT(A)'s decision on the regular business profit but reversed the decision regarding the additional income, applying Explanation 5A to section 271(1)(c). The Tribunal also remanded the disallowance under section 40(a)(ia) to the AO for further verification. The Revenue's appeal was disposed of on these terms.
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