2019 (6) TMI 424 - AT - Income Tax

Penalty u/s 271(1)(c) - Voluntary disclosure of income or not - whether no incriminating materials by the AO during the course of assessment? - HELD THAT - AO in the penalty order and the assessment order has clearly given a finding that assessee had agreed for the impugned additions only when assessee was confronted with the incriminating materials by the AO during the course of assessment. Furthermore as regards the assessee's claim of aforesaid income under a statement u/s 132(4) is concerned we note that nothing is on the records as to when pursuant to the said admission taxes were paid by the assessee or in which return filed the said disclosure was made. We find that provisions of law u/s 271(1)(c) for search conducted is contained in Explanation 5 Explanation 5A to that section. CIT(A) in his appellate order has not dealt with the concerned section. He has also not dealt with the AO s observation that the offer of income was not voluntarily. We also note that Ld. CIT(A) has not dealt with as to when assessee paid the taxes in accordance with his offered u/s 132(4) of the Act or when pursuant to the said disclosure return of income was filed. We note that in his appellate order, Ld. CIT(A) has referred several case laws and without showing as to how these are comparables or applicable on the facts of the case decided the issue in favour of the assessee. We further note that Hon ble Apex Court has an occasion to consider the issue of levy of penalty u/s 271(1)(c) of the Act with respect to claim of voluntary disclosure in the case of MAK Data Pvt. Ltd. vs CIT 2013 (11) TMI 14 - SUPREME COURT . In our considered opinion on the facts and circumstances of the case, the issue needs to be remitted to the Ld. CIT(A) to consider the issue in light of observation as above. Ld. CIT(A) shall also consider the case laws and other submissions been made by the Ld. Counsel of the assessee. - Appeal filed by the Revenue stands allowed for statistical purpose.

Summary

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Payments to bogus sub-contractors.
3. Unaccounted cash payments.
4. Unaccounted investments.
5. Voluntary disclosure under Section 132(4).

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c) of the IT Act, 1961:
The Revenue appealed against the deletion of a penalty of ?73 lakhs levied on concealed income, arguing that Explanation 5A(ii)(a) to Section 271(1)(c) was applicable. The Assessing Officer (AO) initiated penalty proceedings based on concealed income detected during search and seizure operations, which led to the assessee filing revised returns. The AO argued that the disclosure was not voluntary but made only after being confronted with incriminating evidence. The CIT(A) deleted the penalty, citing that the assessee had disclosed the income under Section 132(4) and offered the same in the return filed under Section 153A. The ITAT noted that the CIT(A) did not adequately address the AO's findings and remitted the issue back to the CIT(A) for reconsideration in light of the observations and relevant case laws.

2. Payments to Bogus Sub-contractors:
During the search and assessment proceedings, it was found that the assessee had claimed expenditures in its Profit & Loss account for payments made to Siva Construction and Krat Engineering, which were found to be bogus. The assessee admitted that these payments were not genuine and revised its return to include ?1,20,74,454 as income. The AO initiated penalty proceedings for concealment of this income. The CIT(A) deleted the penalty, but the ITAT remitted the issue back to the CIT(A) for a detailed examination.

3. Unaccounted Cash Payments:
The AO discovered unaccounted cash payments of ?13,50,000 for the purchase of property at Anna Nagar, Chennai, which were not recorded in the assessee's books. The assessee admitted the unaccounted payments and revised its return accordingly. Penalty proceedings were initiated for concealment of this income. The CIT(A) deleted the penalty, but the ITAT remitted the issue back to the CIT(A) for further consideration, noting that the CIT(A) did not address the AO's findings adequately.

4. Unaccounted Investments:
The AO found that the assessee had made unaccounted investments totaling ?1,07,89,165, including ?4,80,240 for land at Gangakhed and other investments recorded in seized documents. The assessee admitted these unaccounted investments and revised its return. Penalty proceedings were initiated for concealment of this income. The CIT(A) deleted the penalty, but the ITAT remitted the issue back to the CIT(A) for detailed examination and consideration of relevant case laws.

5. Voluntary Disclosure under Section 132(4):
The assessee argued that it had made a voluntary disclosure of ?50 crores during the search proceedings under Section 132(4) to cover various irregularities and avoid litigation. The AO contended that the disclosure was not voluntary as it was made only after being confronted with incriminating evidence. The CIT(A) accepted the assessee's argument and deleted the penalty. However, the ITAT noted that the CIT(A) did not adequately address the AO's findings and remitted the issue back for reconsideration, emphasizing the need to examine when the taxes were paid and the returns filed following the disclosure.

Conclusion:
The ITAT remitted the issues back to the CIT(A) for reconsideration, emphasizing the need for detailed examination of the AO's findings, the timing of tax payments and return filings, and the applicability of relevant case laws. The cross-objection filed by the assessee was dismissed due to a delay in filing.