2016 (2) TMI 237 - AT - Income Tax

Penalty u/s 271(1)(c) - CIT(A) deleted the penalty - Held that - Revenue has not made out any strong case for levy of concealment. In fact, as stated by the learned CIT(A), there was no evidence of investment in respect of assessment years, which could have been brought to tax as income of the year. The assessee has admitted income on his own and filed the returns in the course of proceedings under S.153A. That alone cannot be a basis for levy of penalty, unless there is evidence or nexus with the concealed income as stated by the CIT(A). The amount of ₹ 45 lakhs considered for penalty in assessment year 2007-08 was not invested in that year, but represents the investments made in assessment years 2002-03 to 2005-06. Likewise, the evidence in the form of scribblings on rough sheets cannot be considered as pertaining to assessment year 2008-09. In fact, any such undated evidence, at the most, can be considered as pertaining to the year of search, which could have been brought to tax in assessment year 2010-11, as the search took place on 20th August, 2009, but the Assessing Officer chose to bring to tax in the assessment year 2008-09, which is on the basis of the admission by the assessee under S.1342(4). In view of these facts of the case, we do not see any reason to disturb the findings of the learned CIT(A) for both the years. - Decided against revenue

Summary

Issues Involved:
1. Legitimacy of penalties levied under Section 271(1)(c) of the Income Tax Act for the assessment years 2007-08 and 2008-09.
2. Validity of the CIT(A)'s decision to delete the penalties imposed by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Legitimacy of Penalties Levied under Section 271(1)(c):

The common issue in these appeals pertains to penalties levied by the Assessing Officer under Section 271(1)(c) of the Income Tax Act for the assessment years 2007-08 and 2008-09, which were subsequently deleted by the CIT(A). The Revenue contended that the penalties were justified based on loose papers seized during the search and survey operations, and the assessee's admission of income during the survey.

For the assessment year 2007-08, the Assessing Officer quantified an amount of Rs. 45 lakhs based on certain sale deeds impounded, considering them as unexplained investments in property. For the assessment year 2008-09, penalties were based on undated scribblings, which the Assessing Officer interpreted as amounts advanced by the assessee, quantified at Rs. 25 lakhs.

2. Validity of the CIT(A)'s Decision to Delete the Penalties:

Assessment Year 2007-08:

The CIT(A) noted that the Assessing Officer made additions on account of differences in the cost of construction, unexplained investment in property, and unexplained advances received. However, the penalty was considered only for the amount of Rs. 45 lakhs. The CIT(A) found that the investments were made in earlier years (2002-03 to 2005-06) and not in the relevant financial year 2006-07. The registration of the property took place in the financial year 2006-07, but no part of the investment was made during that year. The CIT(A) emphasized that penalty should be imposed only in the year in which the assessee concealed the particulars of income or furnished inaccurate particulars. The CIT(A) referred to judicial precedents, highlighting that assessment and penalty proceedings are separate and distinct, and findings in assessment proceedings cannot be regarded as conclusive for penalty proceedings.

The CIT(A) cited the case of Sri P.V. Ramana Reddy Vs ITO, emphasizing that the Assessing Officer has discretionary power to levy or not to levy penalty, and it should be exercised judiciously. The CIT(A) concluded that mere admission of income does not justify penalty, especially when the alleged investment was made in earlier years. Therefore, the penalty levied of Rs. 14,13,720 under Section 271(1)(c) was not justified and was canceled.

Assessment Year 2008-09:

The CIT(A) observed that the appellant filed a return of income in response to notice under Section 153A, declaring additional income of Rs. 25 lakhs. The Assessing Officer's contention that the appellant would not have offered the amount but for the search was noted, but the CIT(A) emphasized that penalty cannot be levied on surmises or conjectures. The CIT(A) found that the scribblings on loose papers did not indicate any dates or details, and the transactions did not reflect any money given or received back. The appellant admitted the amount to buy peace, but such admission alone is insufficient for levying penalty for concealment. The CIT(A) concluded that the penalty levied by the Assessing Officer was not justified and ordered its deletion.

Conclusion:

The Tribunal, after considering the rival contentions and examining the details, agreed with the CIT(A)'s findings. It noted that there was no evidence of investment in the relevant assessment years, and the assessee's admission of income during the proceedings under Section 153A alone could not be the basis for levying penalty. The Tribunal upheld the CIT(A)'s orders, rejecting the Revenue's grounds and dismissing both appeals.

Final Judgment:

Both appeals of the Revenue were dismissed, and the orders of the CIT(A) deleting the penalties for the assessment years 2007-08 and 2008-09 were upheld. The judgment was pronounced in court on 06/01/2016.