2019 (12) TMI 908 - AT - Income Tax

Penalty u/s 271(1)(c) - search proceeding carried out under section 132 - whether the assessee can be visited with the penalty with respect to the income disclosed by him in such proceedings voluntarily and without finding any incriminating document during the course of search? - HELD THAT - Assessee has already disclosed impugned long term capital gain in the return filed under section 139 of the Act. But the addition in the assessment framed under section 153A r.w.s. 143(3) of the Act was made on account of the difference in the rate adopted by the assessee vis-a-vis adopted by the Revenue as on 1st April 1981. The assessee has taken the rate at ₹ 84.80 per square feet for the acquisition of the land whereas the AO has adopted the rate at ₹ 15 per square feet for the acquisition of such land as on 1-4-1981. Thus the addition was made on account of the difference in the rate and not on the basis of any incriminating document found during the course of search. Additional income in the return filed under section 153A of the Act was voluntarily and without having found any income/documents by the Revenue in the manner provided under explanation 5A to section 271(1)(c) of the Act. As such, there was not found any undisclosed income by the Revenue in the course of such conducted under section 132 of the Act. Thus, it is inferred that such addition was not based on the document found during the course of search. There cannot be any penalty under explanation 5A to section 271(1)(c) of the Act until and unless it supported on the basis of incriminating document. At the time of the hearing, a query was raised to the Ld. DR whether the income disclosed by the assessee in pursuance to the search was based on the incriminating document, but he failed to bring any material on record. Therefore, in the absence of any documentary evidence, we infer that the additional income offered to tax cannot be subject to the penalty under explanation 5A to section 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues Involved:
Appeal against penalty under section 271(1)(c) r.w. Explanation 5A of the Income Tax Act for Assessment Year 2011-12.

Detailed Analysis:

Issue 1: Confirmation of Penalty by CIT(A)
The appeals were filed by different assessees against the orders of the CIT(A) confirming the penalty under section 271(1)(c) r.w. Explanation 5A of the Act. The appeals were heard together due to identical facts and circumstances.

Issue 2: Additional Income Disclosure
The penalty proceedings were initiated based on additional income declared by the assessee in response to a notice under section 153A of the Act. The AO levied the penalty under Explanation 5A, alleging that the income was offered due to search proceedings under section 132 of the Act.

Issue 3: Arguments of the Parties
The assessee contended that the additional income was voluntarily disclosed and not based on seized materials. The Revenue argued that the income disclosure was a result of the search proceedings and supported the penalty.

Issue 4: Interpretation of Explanation 5A
The Tribunal analyzed Explanation 5A of section 271(1)(c) which presumes concealment of income if certain conditions are met during a search. However, it was noted that no incriminating materials were found during the search in this case.

Issue 5: Precedent and Decision
Referring to a previous ITAT order, the Tribunal held that penalty under Explanation 5A cannot be imposed without incriminating documents. As no such evidence was presented by the Revenue, the penalty was deemed inapplicable.

Conclusion:
The Tribunal allowed the appeal of the assessee for AY 2011-12, as the penalty under section 271(1)(c) r.w. Explanation 5A was unjustified. Following the same reasoning, penalties in other appeals for the same assessment year were also deleted. All four appeals were allowed, and the penalties were revoked.

This detailed analysis outlines the key legal issues, arguments presented by both parties, interpretation of relevant provisions, precedent cited, and the final decision of the Tribunal in overturning the penalties imposed under section 271(1)(c) r.w. Explanation 5A of the Income Tax Act for the mentioned assessment year.