2019 (12) TMI 1209 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - as contended that the instant case of the assessee is covered under the provisions of Section 271AAA - HELD THAT - Since in the present case search was conducted on 30.7.2009, hence section 271AAA is applicable for the assessment year 2010-11 only as the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search. Explanation 5A(b) to section 271(1)(c) was applicable for the assessment years 2005-06, 2006-07 and 2007-08 as the date for filing the returns has already been expired and the assessee has not declared this income in the returns. From the assessment orders, we find that the assessee has not declared the surrendered income in the returns filed in response to the notice issued u/s 153A(1)(a). Thus, the submissions of the ld. AR arguing that the income surrendered has been reflected/assessed is not correct on facts. Rather, it is the addition made by the Assessing Officer based on the material found and seized during the course of search. The assessee has not declared any income in the returns filed in response to the notice issued u/s 153A(1)(a) more than what has been declared in the regular returns.The addition has been made by the revenue based on the seized material. The due date of filing of return has already been expired. AR contention that the presidential assent has been received on 13.08.2009, hence not applicable cannot be accepted as the provisions of the Act clearly says that this provision is applicable with retrospective effect from 01.06.2007. Keeping in view, since no prima facie case can be made on applicability of any legal ground on this issue, we hereby decline to admit the additional grounds taken by the assessee on this issue. Issue of notice u/s 274 read with Section 271(1)(c) dated 23.12.2011, we find that the Assessing Officer has not specified under which limb of the provisions of Section 271(1)(c), the penalty is being initiated and levied. The specific mention whether the penalty is levied whether for concealment of particulars of income or for furnishing inaccurate particulars of income. As relying on M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. 2019 (8) TMI 409 - DELHI HIGH COURT we hereby hold that the penalty levied by the Assessing Officer is liable to be obliterated. - Decided in favour of assessee.

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of Explanation 5A to Section 271(1)(c) for the assessment year 2005-06.
3. Jurisdiction and validity of penalty order due to procedural lapses in the notice issued under Section 274 read with Section 271(1)(c).
4. Admission of additional grounds related to the levy of penalty under Section 271AAA.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The assessee challenged the penalty of ?2,00,828/- imposed by the Assessing Officer (AO) under Section 271(1)(c). The penalty was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO levied the penalty based on the documents seized during a search operation conducted on 30.07.2009, which revealed undisclosed income. The assessee argued that the penalty was not justified as the surrendered income was allocated to the respective years, and no additional income was concealed.

2. Applicability of Explanation 5A to Section 271(1)(c):
The assessee contended that Explanation 5A to Section 271(1)(c) was not applicable for the assessment year 2005-06 because the search was conducted on 30.07.2009, and Explanation 5A received presidential assent on 13.08.2009. However, the Tribunal found that Explanation 5A, introduced by the Finance Act, 2007, and amended by the Finance Act, 2009, is applicable retrospectively from 01.06.2007. Therefore, the penalty under Explanation 5A was applicable for assessment years 2005-06, 2006-07, and 2007-08, as the due date for filing returns had expired, and the income was not declared in the returns filed in response to the notice under Section 153A.

3. Jurisdiction and Validity of Penalty Order:
The assessee argued that the penalty order was without jurisdiction and void because the notice issued under Section 274 read with Section 271(1)(c) did not specify whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of such income." The Tribunal referred to the judgment of the Hon'ble jurisdictional High Court in the case of PCIT Vs Sahara India Life Insurance Co. Ltd., which held that the notice must specify the limb under which the penalty is being initiated. Since the AO did not specify this, the penalty order was deemed invalid.

4. Admission of Additional Grounds:
The assessee raised additional grounds, arguing that the case was covered under Section 271AAA, which provides for a different penalty regime for searches conducted on or after 01.06.2007. The Tribunal referred to the judgment in the case of National Thermal Power Co. Ltd. Vs Commissioner Of Income Tax, which allows raising new grounds if they are based on facts already on record. However, the Tribunal found that Section 271AAA was applicable only for the assessment year 2010-11, as the date for filing the return under Section 139(1) had not expired before the date of the search. Since the search was conducted on 30.07.2009, Section 271AAA did not apply to the earlier years.

Conclusion:
The Tribunal concluded that:
1. The penalty under Section 271(1)(c) was justified based on the seized material and the retrospective applicability of Explanation 5A.
2. The penalty order was invalid due to procedural lapses in the notice issued under Section 274 read with Section 271(1)(c).
3. The additional grounds related to Section 271AAA were not admitted as they were not applicable to the assessment years in question.

Result:
The appeals of the assessee were allowed, and the penalty levied by the Assessing Officer was obliterated. The order was pronounced in the Open Court on 24/12/2019.

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