2018 (6) TMI 827 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - additions made on the basis of evidence in the seized material - Held that - Once the AO accepts the revised return filed u/s 153A, the original return under Section 139 abates and becomes non-est - thus, for the purpose of levying penalty u/s 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee u/s 153A, and not vis-a-vis the original return u/s 139 - here assessee has voluntarily admitted the unexplained expenditure of ₹ 3.4 lakhs and declared the same in the revised return of income filed in response to the notice u/s 153A, which was accepted by the AO and made the assessment accordingly - hence concealment of income or furnishing of inaccurate particulars of income does not arise in this case and hence, penalty levied u/s 271(1)(c) is hereby cancelled - Decided in favor of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 2004-05.

Analysis:

1. Background: The appeal was filed against the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2004-05. The assessee originally filed the return of income for the said year, but during a search operation, certain unexplained expenditures were admitted by the assessee.

2. Assessment Proceedings: The AO initiated penalty proceedings under section 271(1)(c) based on the unexplained expenditure admitted by the assessee during the search. The AO observed that the assessee failed to account for the expenditure in the regular books of account, leading to the penalty imposition. The AO considered this as a deliberate attempt to conceal income.

3. CIT(A) Decision: The CIT(A) upheld the penalty, citing various case laws and discussions. The CIT(A) found no merit in the contentions of the assessee and confirmed the penalty imposed by the AO.

4. Appellate Tribunal's Decision: The assessee appealed before the ITAT, Hyderabad, arguing that the penalty was unjustified as the unexplained expenditure was voluntarily disclosed during the search operations. The ITAT considered the arguments presented by both parties and referred to a similar case decision from the ITAT, Mumbai.

5. Legal Interpretation: The ITAT analyzed the legal provisions and held that once a revised return is filed under section 153A, it is treated as the original return. Therefore, for the purpose of levying penalty under section 271(1)(c), concealment or inaccurate particulars need to be assessed based on the return filed under section 153A, not the original return under section 139.

6. Judgment: The ITAT, Hyderabad, following the legal interpretation and precedent, ruled in favor of the assessee. Since the unexplained expenditure was voluntarily disclosed in the revised return filed under section 153A and accepted by the AO, the concealment or inaccurate particulars were not present. Consequently, the penalty imposed under section 271(1)(c) was canceled, and the appeal of the assessee was allowed.

In conclusion, the ITAT's judgment highlighted the importance of assessing concealment or inaccurate particulars based on the revised return filed under section 153A, emphasizing the legal interpretation and precedent in similar cases.