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2019 (4) TMI 615 - AT - Income TaxPenalty u/s 271(1)(c) r.w. Explanation 5A - search u/s 132 - undisclosed income declared in response to the notice u/s 153A - Whether assets found in the possession of the assessee, such as money, bullion, jewellery during the search representing undisclosed income - HELD THAT - AO has not made reference to any material found during the course of search which can suggest that additional incomes declared by the assessee are representing any money, bullion, jewellery or impounded any diary. It cannot be construed that some assets were found during the course of search representing that income which has been declared by the appellants. Revenue cannot assume existence of seized material by holding that had the search not carried out, assessee would have not disclosed this income in response to section 153A notice. In respect of this assumption, there should be recovery of some assets, such money, bullion, jewellery or diary. No such things have been referred in these cases. Therefore, we allow all these appeals and deleted all the penalties impugned in these appeals. - Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under section 271(1)(c) read with Explanation 5A of the Income Tax Act, 1961. 2. Interpretation and application of Explanation 5A and section 271AAA. 3. Assessment of whether assets found during search represent undisclosed income. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271(1)(c) read with Explanation 5A: The core issue in all appeals is whether the appellants should be subjected to penalties under section 271(1)(c) read with Explanation 5A. The penalties were imposed by the Assessing Officer (AO) on the grounds that the undisclosed income was only declared in response to the notice under section 153A following a search operation. The appellants contended that the penalties were unjustified as there was no incriminating material found during the search that directly linked to the undisclosed income. 2. Interpretation and Application of Explanation 5A and Section 271AAA: The Tribunal examined the provisions of Explanation 5A and section 271AAA of the Income Tax Act. Explanation 5A deems an assessee to have concealed income if, during a search, they are found in possession of money, bullion, jewellery, or other valuable articles, and such assets are not declared in the returns filed before the search. Section 271AAA provides immunity from penalty if the assessee admits the undisclosed income during the search, substantiates its manner, and pays the due tax and interest. The Tribunal noted that for the assessment years in question (2007-08 to 2012-13), the due dates for filing returns had expired before the search, thus not falling within the "specified previous year" as defined in section 271AAA. Therefore, the conditions for immunity under section 271AAA were not applicable. 3. Assessment of Whether Assets Found During Search Represent Undisclosed Income: The Tribunal emphasized that for Explanation 5A to apply, there must be tangible evidence such as money, bullion, or jewellery found during the search that represents undisclosed income. The AO's assessment did not reference any specific material found during the search to substantiate the additional income declared by the appellants. The Tribunal cited the Delhi High Court's decision in Pr.CIT Vs. Neeraj Jindal, which clarified that the assets found during the search must relate to the income of the relevant assessment year to invoke Explanation 5A. The Tribunal also referred to the ITAT Rajkot Bench's decision in Shri Mansukhbhai R. Sorathia and Others Vs. JCIT, which held that the Revenue cannot assume the existence of seized material without concrete evidence. The Tribunal concluded that since no such assets were found during the search in these cases, the penalties under section 271(1)(c) were not justified. Conclusion: The Tribunal allowed all the appeals and deleted the penalties imposed under section 271(1)(c). The decision underscored the necessity for the Revenue to provide concrete evidence of undisclosed income linked to assets found during the search to justify the imposition of penalties under Explanation 5A. The judgment emphasized that assumptions and presumptions cannot replace tangible evidence in penalty proceedings. Result: All appeals of the assessees were allowed, and the penalties were deleted. The judgment was pronounced in the Open Court on 8th April 2019.
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