2019 (12) TMI 971 - AT - Income Tax

Penalty u/s.271(1)(c) - additional income was offered to tax by the assessee as a result of search proceeding carried out u/s 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 - 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 and addition of other business income cannot be subject to the penalty under explanation 5A to section 271(1)(c) of the Act. Penalty u/s 271AAB - assessee has disclosed additional income in pursuance to the return filed under section 153A - HELD THAT - Penalty shall be imposed under section 271AAB of the Act where there is undisclosed income within the meaning of the explanation C to 271AAB of the Act. However, we note that there was no documentary evidence found by the search team suggesting that there was any undisclosed income of the assessee. As such the voluntary income disclosed by the assessee and the addition made by the AO was without having found any incriminating document in the course of search. We also note that there no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the ld. AR for the assessee. See M/S. MARVEL ASSOCIATES VERSUS ACIT, CENTRAL CIRCLE-2, VISAKHAPATNAM 2018 (3) TMI 946 - ITAT VISAKHAPATNAM - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Imposition of penalty under Section 271AAB of the Income Tax Act.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):

In the case of Dhanwantiben C. Darshiyani, the primary issue was the confirmation of a penalty of ?2,89,300 under Section 271(1)(c) of the Income Tax Act. The assessee argued that the additional income was voluntarily disclosed during the search proceedings and not based on any incriminating material found during the search. The Assessing Officer (AO) disagreed, stating that the additional income was disclosed only due to the search proceedings and would have otherwise gone untaxed. The AO imposed a penalty of ?2,89,300 under Explanation 5A of Section 271(1)(c).

The Tribunal noted that no incriminating material was found during the search to support the additional income disclosed. It was held that the penalty under Explanation 5A to Section 271(1)(c) requires the presence of incriminating documents, which was not the case here. The Tribunal referenced similar cases where penalties were deleted due to the absence of incriminating evidence. Consequently, the penalty was deleted, and the appeal was allowed.

This reasoning was applied consistently across other appeals involving similar facts and circumstances, including those of Vinodkumar A. Chugh, Mukesh B. Manglani, Dhanraj G. Manglani, Chunnilal P. Darshiyani (HUF), and Kamlesh D. Manglani. In each case, the Tribunal found no incriminating evidence to justify the penalties imposed under Section 271(1)(c), leading to the deletion of penalties and allowing of appeals.

2. Imposition of Penalty under Section 271AAB:

In the case of Dhanwantiben C. Darshiyani for AY 2012-13, the issue was the confirmation of a penalty of ?11,28,165 under Section 271AAB. The AO imposed the penalty on the additional income disclosed during the search proceedings. The Tribunal examined Explanation (c) to Section 271AAB, which defines "undisclosed income" and requires the presence of incriminating material found during the search.

The Tribunal found no documentary evidence or incriminating material to support the claim of undisclosed income. Similar to the reasoning in Section 271(1)(c) cases, the Tribunal held that the penalty under Section 271AAB requires incriminating evidence, which was absent. The penalty was deleted, and the appeal was allowed.

This reasoning was also applied to other appeals involving penalties under Section 271AAB, including those of Vinodkumar A. Chugh, Mukesh B. Manglani, Dhanraj G. Manglani, Chunnilal P. Darshiyani (HUF), and Kamlesh D. Manglani. In each case, the Tribunal found no incriminating evidence to justify the penalties imposed under Section 271AAB, leading to the deletion of penalties and allowing of appeals.

Conclusion:

In all the appeals, the Tribunal consistently found that the penalties under Sections 271(1)(c) and 271AAB of the Income Tax Act were not justified due to the absence of incriminating evidence. The penalties were deleted, and all the appeals were allowed.