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2018 (5) TMI 1254 - AT - Income TaxLevy of penalty u/s 271(1)(c) - unexplained income on account of corpus fund - Held that - Return for the assessment year 2007-08 was filed on 31.10.2007 declaring loss of 5, 31, 945/-. Search was conducted on 23.7.2009 i.e. after the first day of June 2007. The assessee accepted the unexplained income on account of corpus fund relating to its source. The alleged undisclosed income was not offered to tax in the regular return of income and was finally admitted for paying tax in the course of assessment proceedings. The assessee is directly hit by the provisions of Explanation 5A to section 271(1)(c) of the Act(1)(c) of the Act. Therefore in our considered view the learned Commissioner of Income Tax (Appeals) has rightly confirmed the penalty - Decided against assessee Levy of penalty u/s 271AAA - whether the assessee has admitted the undisclosed income during the course of search with specific manner in which it has been derived - Held that - The search was conducted on 23.7.2009. The assessee did not make any disclosure during the course of search. It was two months thereafter on 23.11.2209 that the assessee submitted a letter before the ITO Investigation Bhopal. In our view the statement given on 23.11.2009 cannot be considered as a statement given during the course of search because it was an afterthought and given two months after the date of search. The assessee has duly substantiated the manner in which the undisclosed income was taxed. As far as the third condition as to whether the assessee has paid the taxes together with interest we find that the assessee has not offered the undisclosed income voluntarily in the return of income filed in compliance with the notice u/s 153A of the Act and it was only during the course of assessment proceedings that when it was confronted with the seized material as well as the disclosure made on 23.11.2009 then it accepted to pay taxes. Therefore the assessee has not paid the taxes voluntarily on the income surrendered. The assessee has been unable to fulfill two out of the three conditions provided in section 271AAA of the Act for getting immunity from paying penalty @ 10% of the undisclosed amount. We therefore find no reason to interfere with the findings of the learned Commissioner of Income Tax (Appeals) and confirm the penalty imposed u/s 271AAA of the Act. - Decided against assessee.
Issues Involved:
1. Penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2007-08. 2. Penalty under section 271AAA of the Income Tax Act for Assessment Years 2009-10 and 2010-11. Issue-wise Detailed Analysis: 1. Penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2007-08: The assessee, a registered society, faced a search and seizure operation on 23.07.2009, leading to the seizure of incriminating documents. Subsequently, the society made a voluntary disclosure of ?74,83,000/- via a letter dated 23.11.2009. However, this undisclosed income was not declared in the returns filed post-search. The Assessing Officer (AO) levied a penalty of ?4,77,000/- under section 271(1)(c) for concealment of income, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal noted that the addition was based on the corpus fund, which the assessee could not explain. The CIT(A) referenced the Supreme Court judgment in MAK Data P. Ltd. vs. CIT, emphasizing that voluntary disclosure does not absolve the assessee from penalty if the income was not declared in the return. The Tribunal observed that the assessee did not disclose the surrendered income in the return filed under section 153A and thus, was deemed to have concealed particulars of income under Explanation 5A to section 271(1)(c). The Tribunal confirmed the penalty, stating that the assessee's explanation was not satisfactory and the surrender of income was not voluntary but a result of the search operation. 2. Penalty under section 271AAA of the Income Tax Act for Assessment Years 2009-10 and 2010-11: For the Assessment Years 2009-10 and 2010-11, the AO levied penalties of ?5,58,840/- and ?5,79,465/- respectively under section 271AAA. The CIT(A) upheld these penalties, noting that the assessee failed to prove it had not concealed income or furnished inaccurate particulars. The Tribunal examined section 271AAA, which provides immunity from penalty if three conditions are met: (i) admission of undisclosed income during the search, specifying the manner of derivation, (ii) substantiation of the manner in which the income was derived, and (iii) payment of tax and interest on the undisclosed income. The Tribunal found that the assessee did not admit the undisclosed income during the search but only two months later, which cannot be considered as a statement made during the search. Although the assessee substantiated the manner in which the income was derived, it did not voluntarily pay taxes on the undisclosed income in the return filed under section 153A. Thus, the assessee failed to meet two out of the three conditions required for immunity under section 271AAA. The Tribunal upheld the penalties imposed by the CIT(A) for both assessment years. Conclusion: The Tribunal dismissed all the appeals, confirming the penalties under sections 271(1)(c) and 271AAA of the Income Tax Act for the respective assessment years. The penalties were upheld due to the assessee's failure to declare the undisclosed income in the returns and the lack of voluntary payment of taxes on the surrendered income.
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