2019 (2) TMI 1597 - HC - Income Tax

Penalty u/s 271(1) (c) - search and seizure operation - issuance of notice u/s 153A - Advances for booking of flats as income - disclosure of additional income to buy peace - HELD THAT - As perused the appeal memo of the appeal before the Commissioner which nowhere explains the assessee s stand that the amount in question did not represent the income or the reasons for the same. As noted, the assessee confined the appeal to a single ground namely that the Assessing Officer had committed an error in leaving the penalty. The main thrust of the assessee s contention in the appeal was that the disclosures were made to buy peace and on condition that the penalty proceedings would not be instituted. Both grounds not found favour with the Supreme Court in case of MAK DATA P Ltd Vs. CIT 2013 (11) TMI 14 - SUPREME COURT . The assessee has not built up any case for arguing that the receipt in question was not in the nature of income. Merely by stating so and relying on the judgment of this Court in the case of CIT, Nagpur Vs. Karda Constructions Pvt Ltd. 2013 (2) TMI 740 - BOMBAY HIGH COURT the assessee cannot hope to establish the same. The assessee had made disclosure of additional income. To dislodge his own declaration that the disclosures did not relate to income the assessee had to lay down a foundation which in the present case is totally missing. Section 271(1) as is well known refers to a penalty that may be imposed on an assessee under specified circumstances. Explanation 5A added to the said sub-section by Finance Act 2009 w.e.f. 1.6.2007 covers a situation where the assessee post search files a return of income disclosing additional income claiming immunity from penalty. The explanation provides that notwithstanding declaration of such income in the return filed after the date of search, the same would be deemed to be a case of concealing particulars of income or the case of furnishing of inaccurate particulars of income. The case of the assessee would squarely fall within this explanation and the Tribunal correctly reinstated the order of the Assessing Officer.

Summary

Issues:
1. Whether advances for booking of flats constitute income for the purpose of Explanation 5A of Section 271(1)(c) of the Income Tax Act, 1961, and if penalty can be levied for the same.

Analysis:
The appeals involved in this judgment pertain to the challenge against the judgment of the Income Tax Appellate Tribunal regarding the treatment of advances for booking of flats as income for penalty purposes under Explanation 5A of Section 271(1)(c) of the Income Tax Act, 1961. The appellant, engaged in real estate development, disclosed additional income related to advances received from prospective buyers during a search and seizure operation. The Assessing Officer imposed a penalty under Section 271(1)(c) of the Act, which was challenged by the appellant before the Commissioner (Appeals).

The Commissioner (Appeals) allowed the appeal, emphasizing that the disclosed additional income did not constitute the appellant's income, leading to the Revenue's appeal. The Tribunal overturned the Commissioner's order, prompting the appellant to file the present appeal. The High Court, after hearing arguments, upheld the Tribunal's decision. It noted that the assessment order under Section 153A of the Act had become final, and the appellant had not contested the additions made. The Court highlighted that penalty proceedings are distinct from assessment proceedings, and the appellant's argument that the advance receipts were not income lacked elaboration during the appeal before the Commissioner.

Upon reviewing the appeal memo before the Commissioner and the grounds raised by the appellant, the Court found that the appellant failed to substantiate the claim that the amount in question was not income. The Court referenced the Supreme Court's ruling in MAK DATA P Ltd Vs. CIT (2013) to emphasize that mere disclosure of additional income does not absolve the appellant from penalty liability. The Court further explained that Explanation 5A of Section 271(1)(c) covers cases where additional income is disclosed post-search to claim immunity from penalty, deeming such cases as concealing or furnishing inaccurate particulars of income.

Consequently, the Court concluded that the appellant's case fell within Explanation 5A, and the Tribunal correctly upheld the penalty imposed by the Assessing Officer. The Court dismissed all Income Tax appeals, affirming the penalty imposition under Section 271(1)(c) of the Act.