2018 (9) TMI 1238 - AT - Income Tax

Levy of penalty u/s 271(1)(c) or u/s 271AAB - assessee did not file any return of income under section 139 - due date for furnishing return of income - Held that - In the instant case considering the facts Explanation 5A to Section 271(1)(c) is not applicable in the case of the assessee as the due date of filing of the return in the case of the assessee was extended up to 30.11.2014 which has not expired on the date of search on 16.10.2014. The assessee has filed the return of income on 31.08.2016 under section 153A of the I.T. Act on receiving the notice under section 153A issued on 22.08.2016. The assessee is admittedly a partner in the firm M/s. Brijvasi Jewellers and accounts are to be audited under section 44AB of the I.T. Act which is admitted by the A.O. in the assessment order. At the time of search on 16.10.2014 the due date of filing of the return for assessment year under appeal i.e. 2014-2015 had not expired because the due date of filing of the return was extended upto 30.11.2014. As evident that on the date of the search on 16.10.2014 neither the due date of filing of the return has expired which was 30.11.2014 nor assessee has filed the return of income which was filed on 31.08.2016 due to the fact that assessment for assessment year under appeal has abated on the date of the search because the assessee was governed by the provisions of Section 153A. Therefore the assessee has correctly filed return of income after the issue of notice under section 153A of the I.T. Act within the time allowed under that Section. Thus in the present case the deeming provisions of Explanation 5A cannot be applied because at the time of search for the relevant previous year under appeal the due date of filing of the return of income had not expired. Learned Counsel for the Assessee rightly contended that since due date of filing of the return under section 139 has not expired on the date of the search therefore assessee could not have filed the return of income under section 139 and as per law assessee was required to file return of income under section 153A of the I.T. Act only. Thus we are of the view that Explanation 5A to Section 271(1)(c) of the I.T. Act is not applicable to the facts. Therefore no penalty could have been levied by the Ld. CIT(A). The order of the Ld. CIT(A) is thus liable to be set aside and quashed. Since in the case of the assessee penalty proceedings initiated by the A.O. under section 271AAB of the Act was attracted therefore no penalty under section 271(1)(c) of the I.T. Act could have been levied by the Ld. CIT(A). On this count also the Order of the Ld. CIT(A) cannot be sustained in law. CIT(A) failed to note that the A.O. has initiated the penalty proceedings under section 271AAB of the I.T. Act as per Law and did not initiate the penalty under section 271(1)(c) of the I.T. Act. Since in this case the provisions of Section 271AAB are prima facie attracted therefore Ld. CIT(A) on misinterpretation of provisions of Section 271AAB of the I.T. Act wrongly initiated the penalty proceedings under section 271(1)(c) of the I.T. Act in the appellate order. Once the penalty proceedings are rightly initiated by the A.O. under section 271AAB of the I.T. Act therefore there is no question of levy of penalty under section 271(1)(c) of the I.T. Act against the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of Explanation 5A to Section 271(1)(c).
3. Applicability of Section 271AAB.
4. Jurisdiction and satisfaction for initiating penalty proceedings.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue addressed in the judgment is whether the penalty under section 271(1)(c) was correctly levied. The assessee challenged the penalty order, arguing that since the return of income was filed in response to a notice under section 153A and was accepted by the Assessing Officer (A.O.), no penalty could be initiated. The assessee contended that the penalty proceedings are independent of assessment proceedings and that the A.O. did not record satisfaction for initiating penalty proceedings under section 271(1)(c).

2. Applicability of Explanation 5A to Section 271(1)(c):
The judgment discusses the applicability of Explanation 5A to Section 271(1)(c). Explanation 5A deems an assessee to have concealed income if certain conditions are met during a search. However, the Tribunal noted that the due date for filing the return under section 139 had not expired on the date of the search (16.10.2014), as it was extended to 30.11.2014. Therefore, Explanation 5A was not applicable since the assessee filed the return under section 153A within the allowed time, and the return was accepted by the A.O.

3. Applicability of Section 271AAB:
The A.O. initially initiated penalty proceedings under section 271AAB, which deals with penalties in cases where a search has been initiated. The Tribunal observed that Section 271AAB is applicable because the due date for filing the return under section 139(1) had not expired before the date of the search. The A.O. correctly initiated penalty proceedings under section 271AAB, and thus, no penalty under section 271(1)(c) could be imposed as per subsection (2) of Section 271AAB.

4. Jurisdiction and Satisfaction for Initiating Penalty Proceedings:
The Tribunal noted that the Ld. CIT(A) (Commissioner of Income Tax (Appeals)) does not have the jurisdiction to initiate penalty proceedings under section 271(1)(c) when the A.O. has already initiated penalty proceedings under section 271AAB. The Ld. CIT(A) quashed the penalty under section 271AAB and initiated penalty proceedings under section 271(1)(c), which was found to be incorrect. The Tribunal emphasized that the authority who recorded the satisfaction should levy the penalty, and in this case, the A.O. had correctly initiated proceedings under section 271AAB.

Conclusion:
The Tribunal concluded that the Ld. CIT(A) was not justified in initiating and levying the penalty under section 271(1)(c) of the Income Tax Act. The penalty under section 271(1)(c) was quashed, and the appeal of the assessee was allowed. The judgment underscores the importance of adhering to the correct procedural requirements and statutory provisions while initiating penalty proceedings.