2017 (9) TMI 1029 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income included in the return filed under section 153A - disclosure made in the statement of Sh. Dharmendra Bhandari, Director of the assessee company recorded under section 132(4) - effect of amendment in Explanation 5A to Sec 271(1)(c) - Held that - There cannot be any dispute to the fact that once a return is filed pursuant to notice under section 153A, the same is treated as return filed under section 139 of the Act refer clause (a) of section 153A(1) . Further, concealment/ furnishing of inaccurate particulars of income/undisclosed income, has to be necessarily seen vis-a-vis return filed by the appellant Once, income it is declared which is accepted as such under section 139 r.w.s. 153A of Act, then, the question of there being concealment/ furnishing of inaccurate particulars of income/undisclosed income, does not arise at all. In the present case the entire undisclosed income was declared by the appellant in the statement recorded during search and the same was also disclosed in the return filed pursuant to notice issued under section 153A, clearly goes to show the bona fides of the appellant, not warranting imposition of penalty under section 271 (l)(c) of the Act. See Alok Bhandari case 2017 (9) TMI 954 - ITAT DELHI Also the amendment in Explanation 5A to Sec 271(1)(c) made effective by Finance Act, 2009 with retrospective effect from 01.06.2007 cannot be made applicable to assessee s case because both original return and the revised return u/s 153A of the Act have been filed before the amended provisions were brought into the statute (which received assent of President on 13.8.2009). - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of the law for imposing penalty under Section 271(1)(c) at the time of filing the original return.
3. Interpretation and applicability of Explanation 5A of Section 271(1)(c) inserted by the Finance Act 2009 with retrospective effect from 01.06.2007.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The core issue in the appeal was the imposition of a penalty amounting to ?34,000 under Section 271(1)(c) of the Income Tax Act for the assessment year 2007-08. The assessee argued that the penalty was unwarranted as the additional income of ?1,00,000 had already been declared in the return filed under Section 153A, based on the disclosure made by the Director of the assessee company during the search proceedings. The Assessing Officer, however, was not convinced and imposed the penalty, which was upheld by the CIT-(A).

2. Applicability of Law at the Time of Filing Original Return:
The assessee contended that the law applicable for imposing the penalty should be the one in force at the time of filing the original return, which was on 11.11.2008. They argued that the Finance Act (No. 2) of 2009, which came into effect on 01.04.2009 and was passed in Lok Sabha and Rajya Sabha in July 2009, should not apply retrospectively to their case. The Tribunal found merit in this argument, noting that the penalty provisions applicable at the time of filing the original return should be considered.

3. Interpretation and Applicability of Explanation 5A:
The Tribunal examined the applicability of Explanation 5A of Section 271(1)(c), which was inserted by the Finance Act 2009 with retrospective effect from 01.06.2007. The assessee argued that this explanation should not apply to their case as it was inserted after the assessment year in question. The Tribunal agreed, referencing a similar case (Alok Bhandari) where it was held that once a return is filed under Section 153A, it is treated as a return filed under Section 139, and if the income declared is accepted without variation, the question of concealment does not arise. The Tribunal emphasized that the law prevailing on the date of filing the return is applicable for imposing penalty, and since the return for the assessment year 2007-08 was filed before the amendment, the amended Explanation 5A could not be applied.

Conclusion:
The Tribunal quashed the penalty imposed under Section 271(1)(c) of the Act, following the precedent set in the case of Alok Bhandari, and allowed the appeal of the assessee. The decision was pronounced on 15th September 2017, and the appeal was allowed in favor of the assessee, canceling the penalty under Section 271(1)(c).