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2018 (3) TMI 1583 - AT - Income TaxPenalty levied u/s 271(1)(c)read with Explanation 5A - assessee as stressed that in the notice issued under section 274 of the Act, there is no striking of inappropriate limb - Held that - As satisfaction was recorded by the Assessing Officer that the assessee had concealed its income and penalty was also levied on the same account under Explanation 5A to section 271(1)(c) of the Act. This issue has already been adjudicated at length by us in the case of Kanhaiyalal D. Jain Vs. ACIT 2016 (12) TMI 1238 - ITAT PUNE S we have held that where recording of satisfaction by the Assessing Officer while initiating penalty is clear and not ambiguous, then merely because one of the limbs has not been struck off the notice, does not make the proceedings invalid. In view of the same, we find no merit in the plea of assessee and the same is dismissed. Levy of penalty us 271(1)(c) - claim of deduction under section 54 - Held that - The assessee having made a wrong claim in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. Assessment made u/s 153C or 148 - documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm - Held that - When during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms, in which he was partner, on the basis of such documents found during the course of search, then for making addition in the hands of partners, provisions of section 153C of the Act are attracted. Once the said provisions are so attracted, then there is no question of initiating any proceedings under section 147 / 148 of the Act. Accordingly, we hold that proceedings initiated under section 147 / 148 of the Act are thus, not correctly initiated. Validity of penalty proceedings u/s 271(1)(c) - Held that - As in the given circumstances, proceedings under section 153C of the Act were required to be initiated and not proceedings under section 148 of the Act, though the assessee had participated in assessment proceedings but the same does not preclude the assessee from raising this jurisdictional issue while arguing the appeal relating to levy of penalty for concealment under section 271(1)(c) of the Act. We hold that in such circumstances, the initiation of penalty proceedings under section 271(1)(c) of the Act is invalid and bad in law. Consequently, penalty order passed under section 271(1)(c) of the Act does not survive
Issues Involved:
1. Penalty under section 271(1)(c) of the Income-tax Act, 1961. 2. Application of Explanation 5A to section 271(1)(c). 3. Validity of proceedings initiated under section 148 instead of section 153C. Issue-wise Detailed Analysis: 1. Penalty under section 271(1)(c) of the Income-tax Act, 1961: The appeals concern penalties levied under section 271(1)(c) of the Income-tax Act, 1961, for concealing income. The appellants argued that the additional income declared was based on estimates and there was no concrete evidence found during the search. They contended that the penalty was unjustified as the declaration was made to cooperate and buy peace with the department. The Assessing Officer (AO) initiated penalty proceedings after noting that the additional income was declared post-search and was based on documents indicating unaccounted sales. The AO concluded that the assessee had concealed particulars of income, warranting penalty under section 271(1)(c). 2. Application of Explanation 5A to section 271(1)(c): Explanation 5A to section 271(1)(c) was invoked for levying penalties. This provision deems that if during a search, any money, bullion, jewellery, valuable articles, or documents are found and not declared in the return filed before the search, it is considered as concealed income. The Tribunal upheld the penalty, referencing a similar case (Mrs. Sarita Kaur Manjeet Singh Chopra Vs. ITO) where the penalty was justified under Explanation 5A for income detected during search operations. The Tribunal noted that the additional income was declared only after the search and based on seized documents, validating the penalty under Explanation 5A. 3. Validity of proceedings initiated under section 148 instead of section 153C: The appellants raised an additional ground challenging the jurisdiction of the AO in issuing notices under section 148 instead of section 153C. They argued that since the documents were found during a search on a person other than the assessee, the correct procedure was under section 153C. The Tribunal agreed, stating that section 153C should have been invoked as it specifically deals with assessments based on documents found during a search on another person. The Tribunal held that the initiation of proceedings under section 148 was incorrect, rendering the penalty proceedings invalid. Consequently, the penalties levied under section 271(1)(c) were deleted for the partnership firms, as the assessments should have been under section 153C. Conclusion: The Tribunal dismissed the appeals concerning the individual assessee, upholding the penalties under section 271(1)(c) read with Explanation 5A. However, the appeals for the partnership firms were allowed, as the Tribunal found that the assessments should have been conducted under section 153C, not section 148, invalidating the penalty proceedings.
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