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2014 (1) TMI 1027 - AT - Income TaxPenalty u/s 271(1)(c) - Held that - As per section 271(1)(B) - When any amount is added or disallowed then only a direction would suffice for the levy of penalty u/s. 271(1)(c) of the Act - But in the instant case, in respect of the additional income neither any amount is added nor disallowed by the AO , whatever has been returned by the assessee is assessed to tax except an addition of Rs. 90,000/- which was subsequently deleted by the Ld. CIT(A) - Decided in favour of assessee. Penalty u/s 271(1)(c) for A.Y. 2000-01 to 2005-06 - Held that - Following Prem Arora Vs DCIT 2012 (6) TMI 480 - ITAT DELHI - The concealment of income has to be seen with reference to additional income brought to tax over and above income returned by the assessee in response to notice issued u/s. 153A - For the purpose of imposition of penalty u/s. 271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered - in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A - The penalty u/s. 271(1)(c) is imposable when there is variation in assessed and return income. If there is no variation, there will be no concealment. When there is no concealment, question of levy of penalty u/s. 271(1)(c) will not arise. This is settled position of law - Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) for Assessment Year 1999-2000. 2. Levy of penalty under Section 271(1)(c) for Assessment Years 2000-01 to 2005-06. Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) for Assessment Year 1999-2000: The assessee appealed against the penalty levied under Section 271(1)(c) for the assessment year 1999-2000. The penalty was initiated due to a discrepancy between the returned income and assessed income of Rs. 90,000. The search and seizure operation under Section 132(1) revealed documents indicating unreported business and interest income. The assessee declared additional income of Rs. 13,93,000 in response to the notice under Section 148, which was accepted by the Assessing Officer (AO). During penalty proceedings, the assessee argued that the addition of Rs. 90,000 was deleted by the Commissioner of Income Tax (Appeals) [CIT(A)], leaving no difference between the returned and assessed income, thus negating the basis for penalty. The AO, however, maintained that the additional income was disclosed only after the search revealed concealed income, justifying the penalty on Rs. 13,93,000. The CIT(A) upheld the penalty, stating the return under Section 148 was not voluntary and the income was unaccounted. The assessee contended that the additional income was estimated and not linked to any seized material, arguing that penalty cannot be levied on estimated income. The Tribunal observed that the AO recorded satisfaction for initiating penalty proceedings only for the Rs. 90,000 addition, which was later deleted by the CIT(A). The Tribunal concluded that no satisfaction was recorded for the additional income of Rs. 13,93,000, thus no penalty under Section 271(1)(c) was warranted. The Tribunal directed the AO to cancel the penalty, allowing the appeal of the assessee. 2. Levy of Penalty under Section 271(1)(c) for Assessment Years 2000-01 to 2005-06: The assessee's grievance for these years pertained to penalties levied on income declared in returns filed under Section 153C, which were not declared in the original returns under Section 139. The assessee argued that since the income declared in response to Section 153A notices was accepted, no penalty should be levied, citing several Tribunal decisions supporting this view. The Department contended that accepting this argument would render Explanation 5 or 5A to Section 271(1)(c) redundant, emphasizing that penalties should apply to income not declared in original returns but disclosed in Section 153A returns. The Tribunal reviewed the judicial precedents, noting that penalties under Section 271(1)(c) should be based on the difference between assessed and returned income in Section 153A proceedings. The Tribunal cited several decisions, including Prem Arora Vs DCIT and M/s. Unimark Remedies Ltd. Vs ACIT, which held that penalties cannot be imposed if the returned income under Section 153A is accepted without variation. The Tribunal concluded that since the additional income was declared in response to Section 153A notices and accepted by the AO, no penalties under Section 271(1)(c) were warranted. The Tribunal directed the AO to delete the penalties for all the assessment years under consideration, allowing the appeals filed by the assessee. The Tribunal also addressed the Department's request to refer the matter to a Special Bench, denying it on the grounds of consistent Tribunal views. Conclusion: The appeals filed by the assessee for all the assessment years were allowed, and the penalties under Section 271(1)(c) were directed to be canceled. The Tribunal pronounced the order in the open court on January 8, 2014.
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