2018 (6) TMI 355 - AT - Income Tax

Penalty u/s. 271(1)(c) - difference in the return of income filed before the search and the one filed on or after the search - deemed concealment - Additional income was offered voluntarily by the assessee, consequent to the notice issued u/s. 153A - Held that - As the additional income offered by the assessee is not relating to the various items referred in Explanation 5A, there cannot be a levy of penalty u/s. 271(1)(c) of the Act. The CIT(A) confirmed the levy of penalty by placing reliance on Explanation 5A of section 271(1)(c) of the Act. Without resulting in unearthing of any unaccounted income or without making any addition in the assessment order u/s. 153A of the Act, the Assessing Officer accepted the return of income by itself. In our opinion, there cannot be levy of penalty u/s. 271(1)(c) of the Act by invoking the provisions of Explanation 5A - See SARAT CHANDRA SAHOO VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2 (2) , BHUBANESWAR 2014 (10) TMI 905 - ITAT CUTTACK - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for the assessment years 2010-11 and 2011-12 based on search u/s. 132 and subsequent additional income declaration by the assessee.

Analysis:
1. Identical Issues in Appeals: The two appeals by the assessee challenged the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment years 2010-11 and 2011-12. The CIT(A) confirmed the penalty based on Explanation 5A of section 271, deeming concealment of income if there is a difference in the income declared before and after a search.

2. Search and Additional Income Declaration: A search u/s. 132 revealed investments in the name of the assessee and family members, leading to re-opening of assessments. The assessee voluntarily declared additional income for both years after the search, based on notices u/s. 153A. The Assessing Officer levied penalties of 100% of the evaded tax.

3. Explanation 5A and Penalty Imposition: The CIT(A) upheld the penalties, citing Explanation 5A which deems concealment if there is a difference in pre and post-search income declarations. However, the ITAT found that the additional income voluntarily declared by the assessee did not relate to unaccounted assets as specified in Explanation 5A.

4. ITAT's Interpretation and Precedent: The ITAT emphasized that for Explanation 5A to apply, the search must uncover undisclosed income, which was not the case here. Citing a precedent, the ITAT ruled that penalties cannot be imposed solely based on post-search income declarations if no unaccounted income was unearthed during the search.

5. Decision and Conclusion: Consequently, the ITAT allowed the appeals and deleted the penalties imposed under section 271(1)(c) for both assessment years, as the voluntary additional income declarations did not warrant penalty under Explanation 5A. The judgment was pronounced on 30th May 2018.