2019 (8) TMI 235 - AT - Income Tax

Penalty u/s 271(1)(c) - immunity available to the assessees under sub-clause (a) and (b) of Explanation 5A - During the course of search various loose papers, documents electronic data were found and seized - assessments were finalized u/s 153A r.w. section 143(3) vide which the ld.AO has accepted the returned income - disclosure of additional income - HELD THAT - Tribunal in was unanimous in its approach in holding that if during the course of search any incriminating material; money, bullion or jewellery was not unearthed, then additional income declared by the assessee in response to notice under section 153A, the deeming fiction of concealment under Explanation 5A would not be attracted. We do not have any hesitation in concurring with the above construction of Explanation 5A. But basic difference of applying it on the facts would arise as under in the present appeal. A perusal of Note No.3 would indicate that the assessee has admitted discovery of loose papers, documents/electronic data and whose basis he has prepared his return showing additional income. In the face of the above discovery of evidence, it could not be said that Explanation 5A is not applicable. Therefore, the facts in the present appeal are quite distinguishable. Explanation 5A has been invoked on the basis of seized material admitted by the assessee persuading it to disclose additional income. - Decided against assessee.

Summary

Issues Involved:
1. Legitimacy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of Explanation 5A to section 271(1)(c).
3. Validity of additional income declaration under section 153A based on seized materials.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c):
The primary grievance of the assessee was that the CIT(A) erred in confirming the penalties under section 271(1)(c) for the assessment years 2005-06 to 2009-10. The penalties were levied due to the additional income declared in response to a notice under section 153A following a search under section 132. The penalties were confirmed by the CIT(A), leading to the present appeals.

2. Applicability of Explanation 5A to Section 271(1)(c):
The Tribunal considered whether Explanation 5A to section 271(1)(c) was applicable. Explanation 5A deems the concealment of income if, during a search, the assessee is found to own unaccounted assets or income not declared in the original return. The assessee argued that penalties under Explanation 5A should not be imposed if the additional income declared in response to the notice under section 153A was not supported by material unearthed during the search, but only based on the statement given under section 132(4). The Tribunal referenced previous cases, including Arvindbhai V. Bhansusali and Mansukhbhai R. Sorathai, where it was held that penalties under Explanation 5A would not apply if no incriminating material was found during the search.

3. Validity of Additional Income Declaration under Section 153A Based on Seized Materials:
The Tribunal examined the facts and found that the assessee had admitted in the return that the additional income was based on seized materials, including loose papers and electronic data, discovered during the search. The Tribunal noted that the assessee's counsel could not refute the Revenue's submission that the additional income was quantified based on these seized materials. The Tribunal emphasized that the presence of incriminating materials during the search justified the application of Explanation 5A and the imposition of penalties under section 271(1)(c).

Conclusion:
The Tribunal concluded that the penalties under section 271(1)(c) were justified as the additional income declared by the assessee was based on incriminating materials found during the search. The appeals were dismissed, and the penalties confirmed. The Tribunal distinguished the present case from previous cases where no incriminating materials were found, thereby justifying the penalties under Explanation 5A. The judgment underscores the importance of seized materials in determining the applicability of penalties under section 271(1)(c).