2021 (7) TMI 368 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessment was completed under section 143(3) read with section 153A by making addition on account of Short Term Capital Gain (STCG), addition as Long Term Capital Gain (LTCG) and addition on account of Income from Other Sources - HELD THAT - There is no dispute that a search action was carried out on the assessee group on 05.03.2013. The assessee disclosed additional income during the search. The assessee while filing return of income in response to the notice under section 153A disclosed the capital gain on 31.03.2014. The last date for filing return of income under section 139(4). The additional income declared by the assessee was offered and accepted by the assessing officer without any variation. The assessing officer levied penalty by invoking the Explaination-5 of section 271(1)(c) and levied penalty @ of 100% of tax sought to be evaded. The ld. CIT(A) deleted the entire penalty by taking view that the assessee the impugned income has been declared in the return of income filed in response to the notice under section 153A or under section 139(4). We affirm the order passed by ld CIT(A) - Appeal filed by the revenue is dismissed.

Summary

Issues:
1. Whether the penalty under section 271(1)(c) of the Income Tax Act was rightly deleted by the ld. CIT(A)?
2. Whether the case falls under Explanation 5A of section 271(1)(c) of the Act?
3. Whether the AO's initiation of penalty proceedings was valid and sustainable?

Analysis:

Issue 1:
The appeal by Revenue challenged the deletion of the penalty of ?64,49,270 under section 271(1)(c) of the Act by the ld. CIT(A). The Revenue contended that the ld. CIT(A) erred in deleting the penalty and should have upheld the penalty order of the Assessing Officer. The Revenue argued that Explanation 5A of section 271 of the Act applied as the return of income was not filed till the date of search, and the due date for filing had expired.

Issue 2:
The brief facts revealed that the assessee had not filed the return of income for AY 2012-13 under section 139 of the Act. Following a search action, the assessee declared additional income on account of 'on money received' on the sale of Sultanabad land. The AO initiated penalty proceedings under section 271(1)(c) based on this additional income. The AO held that the penalty was justified under Explanation-5A, as the assessee had not disclosed the income in the original return.

Issue 3:
The assessee contended before the ld. CIT(A) that the penalty should be deleted as the return of income was filed in response to the notice under section 153A within the due date. The ld. CIT(A) agreed with the assessee, emphasizing that penalty cannot be imposed if the income has been declared in the return filed in response to the notice under section 153A. The Tribunal affirmed the ld. CIT(A)'s decision, citing relevant case laws and holding that the penalty was not sustainable.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the deletion of the penalty under section 271(1)(c) by the ld. CIT(A). The Tribunal found that the income had been declared in the return filed in response to the notice under section 153A, and the case did not fall under Explanation 5A. The Tribunal's decision was supported by legal precedents and factual considerations, leading to the dismissal of the appeal filed by the Revenue.