2015 (11) TMI 109 - AT - Income Tax

Penalty under section 271(1)(c) and under section 271AAA - whether no penalty under section 271(1)(c) could be lawfully levied in the appellant s case since it was governed by the provisions of Section 271AAA(3)? - Held that - We have upheld the plea of the assessee on merits that the penalty for undisclosed income on the given facts and in respect of the assessment year before us could only be imposed if at all only under section 271AAA and not under section 271(1)(c). In any case once the penalty is initiated under section 271AAA in the assessment order there cannot be any occasion to impose the penalty under section 271(1)(c). We have perused the copy of the assessment order filed by the assessee which specifically states that the penalty is initiated under section 271AAA and no other document suggesting that penalty was initiated under section 271(1)(c) has been filed before us. Be that as it may as have held that penalty under section 271(1)(c) could not have been imposed on the facts of this case the initiation aspect of the penalty is anyway no more than academic. In view of these discussions the Assessing Officer was clearly in error in invoking the provisions of Section 271(1)(c) on the facts of this case. We therefore delete the impugned penalty. - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09.

Analysis:
1. The appeals involved a common issue arising from a search and seizure operation on a medical professionals' entity. The lead case involved a heart surgeon who contested a penalty of Rs. 23,20,000 imposed under section 271(1)(c) of the Income Tax Act, 1961.

2. The heart surgeon disclosed Rs. 68,00,000 as income from other sources related to a land acquisition project during scrutiny assessment proceedings. The Assessing Officer initiated penalty proceedings under section 271AAA but later imposed the penalty under section 271(1)(c), considering the undisclosed nature of the income.

3. The Tribunal analyzed the provisions of Section 271AAA, which govern penalties for undisclosed income in specified previous years following a search. The Tribunal clarified that penalties under section 271AAA and section 271(1)(c) are mutually exclusive, and in this case, the penalty should have been imposed under section 271AAA.

4. The Tribunal noted the Assessing Officer's error in invoking section 271(1)(c) instead of section 271AAA and subsequently deleted the penalty. The Tribunal acknowledged the taxpayer's willingness to accept the penalty under section 271AAA, even though the time for its imposition had passed.

5. The Tribunal extended its decision to the other two medical professionals' cases involved in the appeals, where similar penalties were imposed. The penalties of Rs. 20,25,000 and Rs. 5,80,000 on the other professionals were also deleted, following the same reasoning applied in the lead case.

6. Ultimately, the Tribunal allowed all three appeals, emphasizing the exclusivity of penalties under different sections based on the nature of undisclosed income in specified previous years following a search operation. The judgments were pronounced on 29th September 2015.