2005 (4) TMI 320 - AT - Income Tax

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the IT Act for additional income declared during search.
2. Eligibility for immunity under Explanation 5 of section 271(1)(c) based on conditions fulfilled by the assessee.
3. Levy of penalty for undisclosed income relating to excess jewellery found during search.

Issue 1: Penalty under section 271(1)(c) for additional income declared during search:
The Revenue appealed against the CIT(A)'s decision to allow relief regarding the penalty imposed under section 271(1)(c) of the IT Act. The case involved a search conducted under section 132(4) of the IT Act, resulting in the assessee declaring additional income of Rs. 2,70,000. The AO levied a penalty based on the surrendered amount, contending that the conditions under Explanation 5 to section 271(1)(c) were not met. The CIT(A) deleted the penalty, stating that the assessee fulfilled the conditions under Explanation 5, and the benefit of immunity should not be denied due to a late return filing. The ITAT upheld the CIT(A)'s decision, emphasizing that the AO did not inquire about the manner of income earned, and the return filing delay should not affect the immunity eligibility.

Issue 2: Eligibility for immunity under Explanation 5 of section 271(1)(c) based on conditions fulfilled by the assessee:
The ITAT analyzed the conditions under Explanation 5 to section 271(1)(c) related to the declaration of additional income during a search. It was noted that the assessee met all requisite conditions, including making a statement under section 132(4) specifying the source of income. The ITAT agreed with the CIT(A) that the delay in filing the return should not disqualify the assessee from immunity under Explanation 5. The ITAT highlighted that the clause does not mandate filing the return within the time limit specified in section 139(1) and covers cases of belated returns, provided the conditions are fulfilled.

Issue 3: Levy of penalty for undisclosed income relating to excess jewellery found during search:
In the assessee's appeal, the dispute revolved around the levy of a penalty under section 271(1)(c) for Rs. 35,100 related to excess jewellery found during the search. The AO imposed the penalty for not disclosing the value of excess jewellery in the original return, even though it was later declared in a revised return. The CIT(A) upheld the penalty, stating that concealing income in the original return warrants a penalty, irrespective of subsequent revisions. The ITAT concurred with the CIT(A)'s decision, emphasizing that non-disclosure in the original return justifies the penalty, even if rectified in a revised return before assessment completion.

In conclusion, the ITAT dismissed both the Revenue's and the assessee's appeals, maintaining the decisions regarding penalty imposition under section 271(1)(c) for additional income declared during search and undisclosed income related to excess jewellery found during the search.