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2014 (4) TMI 819 - AT - Income TaxPenalty u/s 271(1)(c) of the Act Held that - The decision in COMMISSIONER OF INCOME-TAX Versus MAHENDRA C. SHAH 2008 (2) TMI 32 - GUJARAT HIGH COURT followed - There is no payment of tax along with the return of income which was originally filed and payment of last tax has been made only subsequently after disclosing such income in the revised return of income which is not warranted by the language employed in exception No.2 so as to be entitled to immunity from penalty for concealment - there would be sufficient compliance with the provision if tax is shown to have been paid before the assessment was completed - when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in its entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement - even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under exception No.2 in Explanation 5 is commendable Decided against Revenue.
Issues Involved:
1. Granting exemption under Explanation 5 to Section 271(1)(c) of the Act. 2. Conditions stipulated in Explanation 5 below Section 271(1)(c) and the manner of disclosure. 3. Deletion of penalty based on specific case laws. 4. Applicability of amended provision Explanation 5A to Section 271(1)(c). 5. Assessment proceedings and penalty imposition under Section 271(1)(c) of the Act. Analysis: 1. Granting Exemption under Explanation 5: The Revenue challenged the Ld.CIT(A)'s decision to grant exemption under Explanation 5 to Section 271(1)(c) of the Act. The Revenue contended that the disclosed income did not relate to money, bullion, or valuation found during the search. However, the Tribunal found this ground to be false as the statement was recorded under section 132(4) of the Act, not 133A as claimed by the Revenue. The Tribunal upheld the Ld.CIT(A)'s decision based on the fact that the returned income was accepted, and the disclosure was made during the search process. 2. Conditions and Manner of Disclosure: The Revenue argued that the assessee did not explain the manner in which the disclosed income was earned, which, according to them, should disqualify the assessee from availing immunity under Explanation 5. However, the Tribunal cited the decision in the case of CIT vs. Mahendra C.Shah and held that as long as the income is declared, tax is paid, and there is substantial compliance, the benefit under the exception in Explanation 5 should not be denied. The Tribunal emphasized that the authorized officer must explain the provisions fully to the assessee during the statement recording process. 3. Deletion of Penalty and Case Laws: The Ld.CIT(A) deleted the penalty based on specific case laws, including the decision in CIT vs. Mishrimal Soni and CIT vs. Mahendra C.Shah. The Tribunal supported this decision, highlighting that the assessee surrendered the undisclosed income during the search, offered it as income in the return, and paid the taxes. The Tribunal found no infirmity in the Ld.CIT(A)'s order and upheld the decision based on the principles established in the case laws cited. 4. Applicability of Amended Provision: The Revenue raised concerns about the applicability of the amended provision Explanation 5A to Section 271(1)(c) to the case, given the search action date. However, the Tribunal did not find this argument substantial, as the search was carried out before the effective date of the amendment. The Tribunal dismissed the Revenue's appeal, affirming the decision of the Ld.CIT(A) to delete the penalty. 5. Assessment Proceedings and Penalty Imposition: The case involved scrutiny assessment under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2007-08. Penalty proceedings under section 271(1)(c) were initiated for undisclosed income. The assessee's appeal against the penalty imposition led to the deletion of the penalty by the Ld.CIT(A), which was further upheld by the Tribunal. The Tribunal's decision was based on the assessee's compliance with the disclosure requirements and payment of taxes. In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld.CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) of the Act based on the grounds of substantial compliance with the disclosure provisions and relevant case laws.
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