2019 (8) TMI 189 - AT - Income Tax

Penalty u/s 271(1)(c) - difference of income disclosed in the return filed u/s.139(1) and return filed u/s.153A - addition of undisclosed income was based on the statement furnished under section 132(4) - HELD THAT - Penalty under Explanation 5A to section 271 (1)(c), the of the Act can be attracted if the assessee was found to be the owner of any money, bullion, jewellery or other valuable article or thing or any income based on any entry in any books of account or other documents or transactions. But, in the case on hand, there was no such allegation made against the assessee either in the assessment or penalty or the CIT (A) order. Thus the issue arises whether the penalty can be levied under section 271 (1) (c) r.w. the explanation 5A of the Act merely on the basis of the statement furnished under section 132(4) of the Act. There cannot be any penalty under explanation 5 A to section 271(1)C of the Act merely on the basis of the statement furnished under section 132(4) of the Act, until and unless it supported with the incriminating document. Accordingly, we hold that there cannot be any penalty under section 271(1)C of the Act in the given facts and circumstances. Hence the ground of appeal of the assessee is allowed.

Summary

Issues involved:
1. Penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 on the difference in income declared in returns filed under sections 139 and 153A for Assessment Years 2005-06 to 2009-10.

Detailed Analysis:

1. Background and Common Ground of Appeal:
The appeals were filed against the Commissioner of Income Tax (Appeals) confirming penalties imposed under section 271(1)(c) of the Act for discrepancies in income declared in returns filed under sections 139 and 153A. The appeals were consolidated due to common issues.

2. Assessee's Contentions:
The assessee disclosed additional income in response to a search conducted under section 132 of the Act. The Assessing Officer (AO) initiated penalty proceedings based on this undisclosed income declared in the return filed under section 153A. The assessee argued that penalty should not apply as the disclosure was voluntary and based on incriminating material found during the search.

3. AO and CIT(A) Findings:
The AO imposed penalties citing concealment of income under section 271(1)(c) of the Act, which was upheld by the CIT(A). They held that the disclosure was not voluntary and the undisclosed income was based on the search proceedings, justifying the penalty.

4. Tribunal's Analysis and Decision:
The Tribunal examined whether penalty under section 271(1)(c) could be imposed solely based on the statement furnished under section 132(4) without incriminating documents. Referring to relevant case law, the Tribunal concluded that penalty under Explanation 5A to section 271(1)(c) requires incriminating documents to support the undisclosed income. As no such documents were found, the penalty was deemed unjustified and was deleted.

5. Final Decision and Outcome:
The Tribunal allowed the appeals, deleting the penalties imposed by the AO and confirmed by the CIT(A) for all the years in question. The decision was based on the lack of incriminating documents supporting the undisclosed income, rendering the penalties invalid.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the necessity of incriminating documents to support penalties under section 271(1)(c) of the Income Tax Act, 1961.