2019 (1) TMI 656 - HC - Income Tax

Penalty u/s 271(1)(c) - assessment under Section 153C - proof of addition to the declared income - Held that - Assessee had filed returns of income for three assessment years even before the notice under Section 153C of the Act was issued. For remaining two years the Assessee contended that no such return was required to be filed since his income did not exceed the taxable limit. This later assertion of the Assessee also was found to be true and correct since the Assessing Officer accepted the Assessee s declaration of meager income of 18, 957/- and 43, 857/- respectively for the said two assessment years 2005-06 and 2006-07. We find no error in the Tribunal holding that the penalty could not have been imposed. There was no question of the Assessee not declaring the income of the particulars of the income so as to invite penalty under Section 271C. The three returns had been filed even before issuance of notice under Section 153C of the Act and in other two cases as accepted by the AO the Assessee had no taxable income. When there was no addition to the declared income in any of the years penalty was correctly deleted by the Tribunal. Explanation 5A below Section 271 of the Act would apply only in case of searched person. This Section is confined to searched person and cannot be extended to the person other than the searched person. - decided against revenue.

Summary

Issues:
- Whether the Tribunal was justified in deleting the penalty under Section 271(1)(c) of the Income-Tax Act, 1961?
- Whether the Tribunal was justified in allowing relief to the Assessee despite not filing a return of income voluntarily?

Analysis:

1. The appeals before the Bombay High Court involved a common background and the same assessee challenging the judgment of the Income-Tax Appellate Tribunal. The primary issues presented for consideration were whether the Tribunal was correct in deleting the penalty imposed under Section 271(1)(c) of the Income-Tax Act, 1961, and whether the relief granted to the Assessee was justified despite not voluntarily filing a return of income.

2. The case revolved around a search and seizure action conducted by Revenue Authorities on the Suyojit Group, where incriminating material related to the assessee was found and seized. The assessee filed returns of income for certain assessment years before the Department issued a notice under Section 153C of the Income Tax Act, declaring their total income. However, for other assessment years, the assessee did not file returns initially, claiming income below the taxable limit, but later filed returns upon receiving notice under Section 153C.

3. The Assessing Officer completed assessments for all the relevant years without making any additions to the declared income, leading to the question of imposing a penalty under Section 271(1)(c) of the Act.

4. The Tribunal, in its judgment, ruled that since no additions were made to the returned income, the penalty could not be imposed, citing Explanation 5A to Section 271(1)(c) of the Act as a basis for its decision.

5. Upon examining the facts and submissions, the High Court found that the assessee had filed returns for most assessment years before the notice under Section 153C was issued, and for the remaining years, the assessee's claim of income below the taxable limit was accepted by the Assessing Officer.

6. Consequently, the High Court upheld the Tribunal's decision, stating that since there were no additions to the declared income and the returns were filed before the notice under Section 153C, the penalty was rightly deleted. The application of Explanation 5A under Section 271 of the Act was clarified to be limited to searched persons only.

7. The High Court emphasized that the provision allowing penalties under Section 271C applied specifically to searched persons and could not be extended to individuals other than the searched person.

8. Ultimately, the High Court dismissed all appeals, concluding that no legal questions arose, as the facts were consistent across all cases, and the penalty deletion by the Tribunal was deemed appropriate based on the circumstances presented in the case.