2018 (1) TMI 280 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - income surrendered pursuant to search operation carried out on the assessee - Held that - In all the cases referred to by the assessee, it was held that for the purpose of imposition of penalty u/s 271(1)(c) of the Act, no reference could be made to the returned income u/s 139 of the Act and it was only the income returned u/s 153A, as per the scheme of search assessment, which could be taken cognizance of since the scheme of search assessment as designed by the Legislature did not prescribe to take into account the earlier assessment proceedings whether abated or not. Further in all those cases, that the assessee could not be deemed to have concealed the particulars of his income as per Explanation-5 also since the additional income declared in the return of income filed u/s 153A did not pertain to any asset i.e money, bullion, jewellery or other valuable article or thing found in the possession of the assessee. In this context, it was held that no penalty u/s 271(1)(c) of the Act could not be imposed. In the present case, the assessee is clearly deemed to have concealed particulars of his income as per the applicable Explanation 5A to section 271(1)(c) of the Act as held above by us.Therefore the fact of having disclosed the entire income in the return filed u/s153A will be of no assistance to the assessee.Such an interpretation, in our considered opinion, would render Explanation 5A to section 271(1)(c) otiose. - Decided against assessee

Summary

Issues:
Imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order confirming the levy of penalty u/s 271(1)(c) of the Act for the assessment year 2005-06. The assessee raised grounds of appeal challenging the dismissal of the appeal by the CIT(Appeals) and sought deletion of the penalty. The key issue revolved around the imposition of penalty on additional income not included in the original return filed under section 139(1) of the Act.

The facts revealed that the assessee filed the original return declaring income of &8377; 1,52,180, but after a search, a revised return was filed declaring income of &8377; 19,52,180, including a sum of &8377; 18 lacs as miscellaneous income surrendered. The Assessing Officer imposed a penalty of &8377; 6,09,370 based on Explanation-5A to section 271(1)(c) as the surrendered income was not disclosed in the original return.

The CIT(Appeals) upheld the penalty, stating that the surrendered income was not declared in the original return, thus falling under Explanation-5A. The assessee contended that since the surrendered income was disclosed in the return filed under section 153A, no penalty should be levied. However, the Tribunal noted that Explanation-5A deems concealment of income even if disclosed later, as long as it was not in the original return.

The Tribunal analyzed the relevant provisions of section 271(1)(c) and Explanation-5A, emphasizing that the assessee's actions aligned with the conditions for penalty imposition. The assessee's reliance on case laws was dismissed as those cases were based on Explanation-5, applicable to searches before June 1, 2007, while Explanation-5A applied in this case. The Tribunal concluded that the assessee concealed income as per Explanation-5A, rejecting the argument that disclosing income later should negate penalty imposition.

In light of the above, the Tribunal upheld the CIT(Appeals) order confirming the penalty of &8377; 6,09,370. Consequently, the appeal of the assessee was dismissed.