2014 (5) TMI 698 - AT - Income Tax

Deletion of penalty u/s 271(1)(c) of the Act Applicability of section 271AAA of the Act Due date of filing already expired Held that - The search took place on 05.10.2007 - The immediate previous year ended on 31.03.2007 for which the due date of filing the return of income was 31.10.2007 - The assessee had filed its original return of income on 31.10.2007 - the provisions of section 271AAA squarely apply, which relates to the search initiated u/s. 132 on or after the first day of June 2007 but before the first day of July 2012 - Clause 3 of section 271AAA clearly suggests that it excludes levy of penalty u/s 271(1)(c) of the Act - the AO has levied penalty u/s. 271(1)(c) of the Act which is against the facts and also against the provisions of the law thus, there is no reason to interfere in the order of the CIT(A) Decided against Revenue.

Summary

Issues:
1. Deletion of penalty u/s. 271(1)(c) without appreciating the facts.
2. Applicability of penalty u/s. 271AAA instead of u/s. 271(1)(c).

Analysis:
1. The appeal concerned the deletion of a penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The appellant argued that the penalty was wrongly deleted as the case did not fall under section 271AAA, and the income was not declared in the regular return. The total additional income for the year was determined after a search and seizure action, resulting in a net additional income to be taxed. The Assessing Officer (AO) levied a penalty of Rs.24,39,409 under section 271(1)(c) based on deemed concealment of income.

2. The assessee contended before the CIT(A) that penalty under section 271AAA should apply instead of section 271(1)(c). The CIT(A) noted that the assessment was completed under section 153A, taking into account the returned income and additional income declared. The CIT(A) held that penalty under section 271(1)(c) was not leviable, and the correct provision would be section 271AAA. Even if the penalty under section 271(1)(c) was applicable, it should be computed based on the difference between assessed and returned income under section 153A.

3. The Revenue appealed the CIT(A)'s decision. The Tribunal observed that the search was initiated before July 2012, making section 271AAA applicable. Section 271AAA(3) explicitly states that no penalty under section 271(1)(c) shall be imposed for undisclosed income. As the AO had levied a penalty under section 271(1)(c) against the provisions of the law, the Tribunal upheld the CIT(A)'s decision to delete the penalty.

4. The Tribunal dismissed the Revenue's appeal, affirming the application of section 271AAA over section 271(1)(c) for the penalty. The judgment highlighted the importance of correctly applying penalty provisions based on the circumstances of the case and the relevant legal provisions.

Conclusion:
The Tribunal upheld the deletion of the penalty under section 271(1)(c) and affirmed the applicability of section 271AAA instead. The judgment emphasized the need for accurate interpretation and application of penalty provisions in income tax cases based on the specific facts and legal requirements.