2024 (5) TMI 864 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) r.w.s. 274 - additional income declared in the return filed in response to notice u/s 153A as compared to original returned filed u/s 139(1) - CIT(A) rejected the contention of the assessee only on the basis that additional income has been offered in the return of income filed u/s 153A, and the extra income declared in the return represent concealment income HELD THAT - As per the provision of the Act, the penalty shall be levied if the assessee has been found to be the owner of any money, bullion, jewellery or other valuable article or thing or there is some income based on the entry in the books of accounts/ documents during the course of search u/s 132 or requisition u/s 132A of the Act, and then only it shall be presumed that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. However, in the instant case there is no such allegation made either by the Ld. AO or by the Ld. CIT(A). From the record, it is apparently clear that the assessee has disclosed additional income in the return filed u/s 153A of the Act voluntarily and without having found any income by the revenue in the manner provided under explanation (5A) to section 271(1)(c) of the Act. As there were no incriminating material either found or seized or referred by the AO, in the assessment order as well as penalty order while imposing penalty u/s 271(1)(c) read with explanation (5A) of the Act. Thus, we hold that the decision of the Ld. CIT(A) is infirm and perverse to the facts on record. Assessee appeal allowed.

Summary

Issues Involved:
The issues involved in this judgment include the imposition of penalty u/s 271(1)(c) read with Explanation 5A on the declared income in response to notice u/s 153A of the Income Tax Act, 1961, the absence of incriminating material during a search and seizure operation, and the applicability of Explanation-5A to section 271(1)(c) in penalty proceedings.

Imposition of Penalty u/s 271(1)(c) read with Explanation 5A:
The appellant filed appeals against the orders of the ld. Commissioner of Income Tax (Appeals) challenging the penalty amounting to Rs. 25,29,160/- u/s 271(1)(c) read with Explanation 5A on the declared income in response to notice u/s 153A of the Act. The appellant contended that the penalties were imposed solely based on the higher income declared in response to the notice u/s 153A without any incriminating material found during the search. The Ld. AR argued that the penalties were not justified as there was no concealment or inaccurate particulars of income recorded by the Ld. AO in the assessment order.

Absence of Incriminating Material:
During the search and seizure operation u/s 132 of the Income Tax Act, no incriminating material or documents were found. The Ld. AO accepted the returned income without any additions for both assessment years. The penalties were initiated based on the additional income declared in response to notice u/s 153A, leading to the imposition of penalties u/s 271(1)(c) read with section 274 invoking Explanation 5A. The appellant argued that since no incriminating documents were found, the penalties should not have been automatically imposed.

Applicability of Explanation-5A to section 271(1)(c) in Penalty Proceedings:
The Explanation-5A to section 271(1)(c) was a crucial point of contention in this case. The provision states that penalties shall be levied if the assessee is found to be the owner of certain assets or income during a search or requisition under the Act. However, in this instance, there was no allegation of concealment or inaccurate particulars of income made by the Ld. AO or Ld. CIT(A) as the additional income was voluntarily disclosed in the return filed u/s 153A without any incriminating material found. The judgment of the Hon'ble ITAT Chandigarh Bench, which was relied upon by the Ld. CIT(A), was deemed inapplicable to the present case due to the absence of incriminating material.

This judgment ultimately ruled in favor of the appellant, deleting both penalties levied u/s 271(1)(c) read with Explanation 5A for the Assessment Years 2009-10 and 2010-11. The decision was based on the absence of incriminating material, voluntary disclosure of additional income, and the inapplicability of Explanation-5A in the absence of any concealment or inaccurate particulars of income.