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2020 (4) TMI 682 - AT - Income TaxLevy of penalty u/s 271(l)(c) - additional income disclosed due to search and survey at the premises - additional income disclosed in returns filed u/s 153A - contention is that no search and survey has taken place at the premises of the assessee and assessee has voluntarily disclosed the income of the department - HELD THAT - In a recent decision of Supreme Court in the case of Rajkumar Gulab Badgujar 2019 (9) TMI 360 - SC ORDER wherein it is held that wherein the returned income has been accepted u/s 153C and therefore, it is held that in such case, penalty cannot be imposed. Also decided in PARAG V. CHUGH VERSUS THE DCIT, CI RCLE 1, BARODA. 2019 (10) TMI 1240 - ITAT AHMEDABAD - Decided in favour of assessee.
Issues Involved:
1. Legality of the penalty proceedings under Section 271(1)(c). 2. Imposition of penalty on undisclosed income disclosed during search proceedings. Issue-wise Detailed Analysis: 1. Legality of the Penalty Proceedings Under Section 271(1)(c): The assessee contended that the penalty proceedings were bad in law because the notice did not specify whether the charge was for concealment of income or furnishing inaccurate particulars of income, citing the decision in Sorathia Engineering Co. 282 ITR 642 (Guj). The assessee argued that both charges cannot exist simultaneously. The Tribunal noted that the initiation of penalty proceedings must be clear and specific about the nature of the charge. The Tribunal found merit in the assessee's argument and held that the penalty proceedings were not legally sustainable due to the ambiguity in the notice. 2. Imposition of Penalty on Undisclosed Income Disclosed During Search Proceedings: The assessee disclosed additional income during the search proceedings under Section 132, which was not recorded in the regular books of accounts. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c), observing that the additional income disclosed was not included in the original returns filed under Section 139. The AO levied a penalty of ?7,54,231/- based on the provisions of Explanation 5A to Section 271(1)(c), which deals with undisclosed income found during search operations. The assessee argued that since the income disclosed under Section 153A was accepted by the AO without any further addition, the penalty should not be imposed. The Tribunal considered the Supreme Court's decision in Rajkumar Gulab Badgujar and the ITAT's decision in Parag V. Chugh vs. DCIT, which held that penalty under Section 271AAB is not justified if the income disclosed is voluntary and not based on any incriminating material found during the search. The Tribunal noted that the AO did not rely on any seized documents or assets to justify the penalty and that the income was disclosed voluntarily. The Tribunal referred to the case of Marvel Associates, where it was held that penalty under Section 271AAB is not applicable if there is no documentary evidence of undisclosed income found during the search. Based on these precedents, the Tribunal concluded that the penalty imposed by the AO was not justified. The Tribunal allowed the appeal of the assessee and directed the AO to delete the penalty. Judgment: The Tribunal allowed both appeals filed by the assessee, holding that the penalty proceedings under Section 271(1)(c) were bad in law due to the ambiguity in the notice and that the penalty on undisclosed income disclosed during the search was not justified as it was voluntarily disclosed without any incriminating material found during the search. The Tribunal directed the AO to delete the penalties imposed.
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