2019 (4) TMI 1287 - AT - Income Tax

Penalty u/s 271(1)(c) - Income Surrendered during search included in return - returned income and the assessed income are same - legal plea in department appeal - HELD THAT - Since the legal plea taken by the counsel for the assesses in relation to the appeals relating up to assessment years 2010-11 wherein the original assessment proceedings already stood completed and not abated as on the date of search action and that no incriminating material found during the search action go to the root of the case and is crucial to determine the very validity of the initiation of penalty proceedings in an assessment framed u/s 153A, hence the same is taken first for adjudication. Hon'ble Courts in 2010 (10) TMI 1052 - BOMBAY HIGH COURT ; 2015 (9) TMI 80 - DELHI HIGH COURT ; 2017 (5) TMI 1224 - DELHI HIGH COURT have been unanimous to hold that if no incriminating material is found during the search action, the addition in the case of already concluded that in the absence of any incriminating material found during the search action, no addition can be made into the income of the assessee by way of revisiting the issue in the case in which the original assessment stood completed. Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) in case of already concluded assessment in the absence of any incriminating material found during the search action. Even it is not the case of the Assessing officer that there was any attempt or overt act on the part of the assessee to evade payment of due taxes. Under the circumstances, we hold that the action of the Assessing officer in initiating the penalty in the assessment proceedings carried out u/s 153A was not justified and the consequential levy of penalty being illegal is not sustainable in the eyes of law for the cases relating up to AY 2010-11. We order accordingly. Another legal ground taken by the assessee which goes to the root of the case is that so far as the assessment year 2012-13 is concerned, the Assessing officer was not justified initiating or levying penalty u/s 271(1)(c). That for the year under consideration, the penalty proceeding , if any, that could be initiated was to be under the provisions of section 271AAA of the Act as the assessment year 2012-13, falls in the definition of specified previous year as defined under the provisions of section 271AAA. Admittedly, in this case, no incriminating material was found during the search action and, hence, no undisclosed income of the assessee was found during the course of search. In view of this, the provisions of section 271AAA are not attracted in this case. In view of this, though, we are of the view that the legal plea taken by the assessee that the provisions of section 271(1)(c) are not attracted because the relevant provisions of section 271AAA were applicable, is not tenable, yet we are of the view that otherwise, the provisions of section 271(1)(c) are not attracted in this case in view of our discussion made in the subsequent paras to this order. A collective reading of the entire provisions of section 271(1)(c) reveal beyond doubt that what is material is the resultant addition to the taxable income of an assessee which may invite penalty under the relevant provisions of section 271(1)(c). Though the words used in the first part, i.e. charging provision are Particulars of income, however, for levy of penalty it is not the Particulars of income but rather the quantum of income itself,that is added to the taxable income of the assessee is relevant for the purpose of calculation of the amount of penalty leviable as per the aforesaid provision. The assesses, themselves, declared income in question and paid the due taxes.There was no difference between the offered income and the taxed income.The Hon'ble Calcutta High Court in the case of Commissioner of Income Tax Kolkata-II Vs. Palani Investment Industries Corporation Ltd. 2016 (3) TMI 323 - CALCUTTA HIGH COURT has held that the disclosure and concealment cannot coexist. That when a finding is recorded that the assessee has indeed disclosed, then the conclusion as regards concealment is bad. Even it cannot be said that the assessee furnished inaccurate particulars of income. There was no material on record to indicate that the particulars furnished by the assessee were factually incorrect. Under the circumstances, even otherwise, on merits, the penalty u/s 271(1)(c) is not attracted in this case. - Revenue appeal dismissed

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Applicability of Explanation 1 to Section 271(1)(c).
3. Validity of penalty proceedings initiated under Section 153A.
4. Applicability of Section 271AAA for the assessment year 2012-13.
5. Interpretation of "tax sought to be evaded" under Explanation 4 to Section 271(1)(c).
6. Relevance of voluntary disclosure of income.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue revolves around the levy of penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income. The assessees had disclosed certain incomes under "Income from other sources" with the remark "subject to no explanation" and paid the due taxes. The Assessing Officer (AO) initiated penalty proceedings due to the inability of the assessees to satisfactorily explain the sources of income, invoking Explanation 1 to Section 271(1)(c).

2. Applicability of Explanation 1 to Section 271(1)(c):
Explanation 1 to Section 271(1)(c) deals with the deeming fiction regarding the concealment of particulars of income. If a person fails to offer an explanation or the explanation is found false or unsubstantiated, the amount added or disallowed in computing the total income shall be deemed to represent the income in respect of which particulars have been concealed. The AO argued that the assessees failed to disclose fully and truly all material facts, thus attracting the penalty provisions.

3. Validity of Penalty Proceedings Initiated under Section 153A:
The Tribunal noted that the original assessment proceedings for the assessment years up to 2010-11 were completed before the date of the search, and no incriminating material was found during the search. Citing various judicial decisions, including those from the Bombay and Delhi High Courts, the Tribunal held that in the absence of any incriminating material, the AO was precluded from initiating penalty proceedings under Section 153A for already concluded assessments.

4. Applicability of Section 271AAA for the Assessment Year 2012-13:
For the assessment year 2012-13, the Tribunal discussed the applicability of Section 271AAA, which deals with penalties where a search has been initiated. The Tribunal noted that no incriminating material was found during the search, and the income was voluntarily disclosed by the assessees. Therefore, the provisions of Section 271AAA were not attracted, and the penalty under Section 271(1)(c) was not justified.

5. Interpretation of "Tax Sought to be Evaded" under Explanation 4 to Section 271(1)(c):
The Tribunal emphasized that the quantum of penalty is linked to the "tax sought to be evaded," which is the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. Since the returned income and assessed income were the same, there was no tax sought to be evaded, making the penalty provisions inapplicable.

6. Relevance of Voluntary Disclosure of Income:
The Tribunal acknowledged that the assessees had voluntarily disclosed the income in their returns and paid the due taxes. The income was declared under the head "Income from other sources" and was accepted by the AO without any additions. The Tribunal held that voluntary disclosure and payment of taxes negated the applicability of penalty provisions under Section 271(1)(c), as there was no concealment or furnishing of inaccurate particulars of income.

Conclusion:
The Tribunal dismissed the appeals of the Revenue and upheld the deletion of penalties by the CIT(A). The cross objections filed by the assessees were also dismissed due to delay, but this did not affect the Tribunal's decision on the legal issues. The Tribunal concluded that the penalty under Section 271(1)(c) was not warranted as the assessees had voluntarily disclosed the income, paid the due taxes, and no incriminating material was found during the search.

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