2015 (12) TMI 1118 - AT - Income Tax

Penalty u/s 271(1)(c ) - income offered after the search but in the return filed u/s 153A / 153C - Held that - The assessee has cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to Section 271(1)( c) of the Act and hence entitled for immunity from levy of penalty for all the assessment years under appeal. The assessee had made voluntary disclosure during the course of search assessment proceedings after filing the return u/s 153A of the Act but before any detection by the department and the same is considered only as a revision of the disclosure made u/s 132(4) followed by filing of returns u/s 153A of the Act. The expression to be furnished mentioned in Clause 2 of Explanation 5 to Section 271(1)(c ) has to be construed as required to be furnished u/s 153A of the Act - Decided in favour of assessee

Summary

Issues Involved:
1. Entitlement to immunity from levy of penalty under Explanation 5 to Section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of immunity for years where the due date of return filing had expired before the date of search.
3. Rectification of CIT(A)'s order under Section 154 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Entitlement to Immunity from Levy of Penalty:
The primary issue in all the appeals was whether the assessee is entitled to immunity from the levy of penalty under Explanation 5 to Section 271(1)(c) of the Income Tax Act, 1961, for income offered after a search but included in the return filed under Section 153A/153C. The Appellate Tribunal examined the conditions stipulated in Clause 2 of Explanation 5, which include making a disclosure statement under Section 132(4), specifying the manner in which the undisclosed income was earned, and paying the taxes due thereon. The Tribunal found that in all cases, the assessees had cumulatively satisfied these conditions and were therefore eligible for immunity from penalty. This conclusion was supported by various judicial precedents, including decisions by the Hon'ble Calcutta High Court and other tribunals.

2. Applicability of Immunity for Years with Expired Return Filing Dates:
The revenue argued that immunity under Clause 2 of Explanation 5 is only available for the year of search and the previous year for which the due date of filing the return had not expired. The Tribunal, however, relied on multiple judicial decisions, including those from the Hon'ble Calcutta High Court, which held that the immunity provisions apply to all assessment years prior to the year of search. This interpretation was reinforced by the Tribunal's reliance on the decision in Narendra J Thacker vs DCIT, which clarified that the expression "to be furnished" should be construed as "required to be furnished under Section 153A of the Act."

3. Rectification of CIT(A)'s Order:
In the case of Shri Sheo Kumar Kajaria, the CIT(A) initially upheld the penalty but later rectified this decision under Section 154 after verifying that the assessee had paid the taxes on the income disclosed under Section 153A. The Tribunal upheld this rectification, affirming that the assessee was indeed entitled to immunity from penalty upon satisfying the conditions of Clause 2 of Explanation 5. The Tribunal dismissed the revenue's appeal, finding no error in the CIT(A)'s rectified order.

Conclusion:
The Tribunal dismissed the revenue's appeals in all cases, affirming that the assessees were entitled to immunity from the levy of penalty under Explanation 5 to Section 271(1)(c) of the Income Tax Act, 1961, for the respective assessment years. The Tribunal's decision was based on the satisfaction of conditions stipulated in Clause 2 of Explanation 5 and supported by multiple judicial precedents. The Tribunal also upheld the rectification of the CIT(A)'s order under Section 154, confirming the assessees' entitlement to immunity from penalty.

Order Pronounced:
The appeals of the revenue in the cases of Sheo Kumar Kajaria, Gopal Das Kothari (HUF), and Sajjan Kumar Patwari (HUF) were dismissed. The order was pronounced in the open court on December 16, 2015.