2018 (8) TMI 648 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessee did not file returns of income prior to search and the large income admitted in the returns filed u/s. 153A - CIT(A) deleted the penalty - Held that - the income offered by the assessee in the income filed pursuant to issue of notice under section 153A of the Act, is the income detected during the course of search and seizure operation. The case of the assessee is squarely covered by the provisions of Explanation 5A to section 271(l)(c) of the Act and the assessee is exigible to levy of penalty on such income which was detected during the course of search and seizure operation, which in turn has been offered by the assessee in return of income filed pursuant to notice issued under section 153A of the Act. In the returns filed subsequent to the search, the assessee disclosed income to cover the source of various unaccounted money and other assets unearthed by search action. The amounts shown by the assessee were not part of his regular income and it is undisclosed income of the assessee. Had it been there is no search, the assessee would not have disclosed the income in respect of the undisclosed income. Hence, such amounts squarely come within the purview of penalty u/s. 271(1)(c) of the Act. Levy of penalty confirmed - Decided against the assessee.

Summary

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) for income voluntarily returned by the assessee.
2. Non-filing of returns before the search and concealment detected during the search.
3. Applicability of Explanation 5A for deemed concealment.
4. Relevance of jurisdictional High Court decision in P.C. Joseph & Bros. vs. CIT.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):
The CIT(A) deleted the penalty imposed under Section 271(1)(c) on the grounds that the income was voluntarily declared in the return filed in response to the notice under Section 153A. The CIT(A) relied on judicial pronouncements, including the Delhi ITAT decision in ITO vs. Ankur Aggarwal, which held that penalty under Section 271(1)(c) is not leviable when income is voluntarily declared in the return filed under Section 153A. The CIT(A) also noted that the Assessing Officer (AO) passed the penalty order in a routine, mechanical manner without specifying what was concealed or what inaccurate particulars were found in the return of income.

2. Non-filing of Returns Before Search and Concealment Detected During Search:
The Revenue argued that the assessee did not file returns of income prior to the search, and the large income admitted in the returns filed under Section 153A was entirely on account of the concealment detected during the search. The Revenue contended that the filing of the return under Section 153A was not voluntary but a result of detection by the department, and thus, penalty under Section 271(1)(c) was rightly levied by the AO.

3. Applicability of Explanation 5A for Deemed Concealment:
The Tribunal noted that Explanation 5A to Section 271(1)(c) is applicable for searches initiated on or after June 1, 2007. According to Explanation 5A, if during a search, the assessee is found to own any money, bullion, jewellery, or other valuable articles, and such assets are not declared in the return of income filed before the date of search, the assessee is deemed to have concealed the particulars of income. The Tribunal held that the income offered by the assessee in the return filed pursuant to the notice under Section 153A was detected during the search and seizure operation, and thus, the assessee is liable for penalty under Section 271(1)(c).

4. Relevance of Jurisdictional High Court Decision in P.C. Joseph & Bros. vs. CIT:
The Revenue relied on the jurisdictional High Court decision in P.C. Joseph & Bros. vs. CIT, where it was held that filing a return of income admitting income after detection by the department does not absolve the assessee from penalty. The Tribunal agreed with this position, emphasizing that the assessee did not file returns of income before the search and only disclosed the income consequent to the search, which does not mitigate the imposition of penalty under Section 271(1)(c).

Conclusion:
The Tribunal concluded that the CIT(A) erred in deleting the penalty under Section 271(1)(c) as the assessee's income was detected during the search and was not voluntarily disclosed before the search. The Tribunal held that the provisions of Explanation 5A to Section 271(1)(c) are applicable, and the assessee is deemed to have concealed the particulars of income. Consequently, the Tribunal allowed the Revenue's appeals, reinstating the penalty imposed by the AO for the assessment years in question.