2019 (3) TMI 329 - AT - Income Tax

Assessment u/s 153A - penalty u/s 271(1)(c) - Disclosure made u/s 132(4) in the search proceedings - difference between the income declared in the return originally filed prior to search qua the return filed subsequently in compliance of notice u/s 153A in pursuance of search action - Explanation 5/ Explanation 5A to Section 271(1)(c) reference - HELD THAT - The identical issue has been squarely considered by the co-ordinate bench in the case of same combination in Vijay K. Shah vs. ITO 2017 (4) TMI 1426 - ITAT AHMEDABAD Explanation 5A to Section 271(1)(c) of the Act deems act of concealment even before the return is filed. Thus, having regard to the statutory presumption of concealment in search cases under Explanation 5A, we do not subscribe to the fundamental plea on behalf of the assessee that penalty under s. 271(1)(c)can be invoked only with reference to return of income filed after search and where there was no addition over and above the income declared by the assessee in the return filed under s.153A of the Act (notwithstanding the fact that such return filed after search includes additional nature based on incriminating material and oral evidence under s.132(4). Pertinently, the plea raised on behalf of the assessee, if admitted, would render provisions of Section 271AAA/271AAB of the Act otiose and infructuous as noted in the case of Vijay K. Shah (supra). Plea raised on behalf of the assessee that Section 153A of the Act opens with a non obstante clause as noted earlier, Section 271AAA and Explanation 5A to Section 271(1)(c) of the Act deems culpability in appropriate cases even before the return is filed in search cases. Therefore, substitution of return originally filed under s.139 of the Act by subsequent return under s.153A of the Act has no impact on the legal fiction towards concealment enjoined by Explanation 5A of the Act. Therefore, the non obstante provision in Section 153A of the Act does not come in the way of penalty proceedings in search cases at all. Thus, the plea of the assessee for applicability of penalty provisions qua the return of income which may hold good under the normal provisions will not apply to special provisions enacted in search cases. In view of the special provisions enacted for imposition of penalty in search cases, the default under s.271(1)(c) of the Act gets triggered towards undisclosed income immediately on search action pending filing of return under s.139/s.153A of the Act albeit subject to escape roots as provided in Section 271AAA/271AAB/Explanation 5A to Section 271(1)(c) of the Act etc. See PRASANNA DUGAR VERSUS COMMISIONER OF INCOME TAX, CENTRAL-III, KOLKATA 2015 (8) TMI 477 - SUPREME COURT - Decided against assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of penalty provisions to the income declared in the return filed under Section 153A post-search.
3. Interpretation of Explanation 5A to Section 271(1)(c) and its impact on penalty proceedings.
4. Relevance of judicial precedents in the context of penalty imposition.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue revolves around the imposition of a penalty under Section 271(1)(c) for concealment of income. The assessee originally filed a return under Section 139(1) and later filed a revised return under Section 153A post-search, declaring additional income. The Assessing Officer (AO) imposed a penalty of ?2,18,740 on the additional income declared, invoking Section 271(1)(c) read with Explanation 5A.

2. Applicability of Penalty Provisions to the Income Declared in the Return Filed under Section 153A Post-Search:
The assessee argued that once a return is filed under Section 153A, the earlier return filed under Section 139 becomes non est (non-existent). The penalty should be considered only with reference to the subsequent return filed under Section 153A. The assessee cited the judgment of the Hon'ble Jurisdictional High Court in Kirit Dahyabhai Patel to support the claim that penalty can only be levied on income assessed over and above the income returned under Section 153A.

3. Interpretation of Explanation 5A to Section 271(1)(c) and Its Impact on Penalty Proceedings:
The Tribunal examined the applicability of Explanation 5A, which deems concealment of income even before the return is filed in search cases. The Tribunal noted that Explanation 5A addresses situations where undisclosed income is found during a search and subsequently declared in the return filed under Section 153A. The Tribunal emphasized that the legislative intent behind Explanation 5A is to impose a penalty on undisclosed income discovered during a search, regardless of its subsequent inclusion in the return filed under Section 153A.

4. Relevance of Judicial Precedents in the Context of Penalty Imposition:
The Tribunal referred to several judicial precedents, including the decision in Vijay K. Shah vs. ITO, which supported the imposition of a penalty on additional income declared post-search. The Tribunal also considered the decision of the Hon'ble Gujarat High Court in Kirit Dahyabhai Patel, which was extensively relied upon by the assessee. The Tribunal clarified that the decision in Kirit Dahyabhai Patel should be read in the context of the specific question of law it addressed and not as a general proposition against penalty imposition on income declared under Section 153A.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) is applicable to the additional income declared in the return filed under Section 153A post-search. The Tribunal dismissed the appeals of the assessee, upholding the imposition of penalties by the Revenue authorities. The Tribunal emphasized that the statutory presumption of concealment under Explanation 5A applies in search cases, and the revised return under Section 153A does not absolve the assessee from penalty liability.

Final Judgment:
All the appeals of the assessee were dismissed, and the penalties imposed by the Revenue authorities were upheld. The Tribunal's order was pronounced in open court on 28/02/2019.