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2016 (4) TMI 206 - AT - Income TaxPenalty u/s 271(1)(C) - income surrendered during the course of search - Held that - any observation or finding recorded by the Assessing Officer in the assessment orders for all the four years under consideration, from which the satisfaction as required to be arrived at by him to initiate penalty proceedings under section 271(1)(c) is discernable. However, he has not been able to pinpoint any such observation or finding recorded by the Assessing Officer in this context. A perusal of the assessment order also shows that there is no such observation or finding given by the ld. CIT(Appeals) from which the satisfaction as required to be arrived at by the Assessing Officer is discernable. The decision of the Coordinate Bench of this Tribunal in the case of Suvaprasanna Bhattacharya (2015 (12) TMI 43 - ITAT KOLKATA) thus is clearly applicable in the present case and respectfully following the same, we hold that in the absence of the requisite satisfaction recorded by the Assessing Officer in the assessment order, the initiation of penalty proceedings itself was bad in law and the penalties imposed in pursuance of such initiation are not sustainable. It is also observed that the income surrendered during the course of search was declared by the assessee in the returns of income filed for three years under consideration, i.e. A.Y. 2004-05, 2005-06 & 2006-07 in response to the notices issued by the Assessing Officer under section 153A and the income so declared was accepted by the assessee without making any further addition. Thus penalty cancelled - Decided in favour of assessee
Issues Involved:
1. Imposition of penalties under section 271(1)(c) for assessment years 2004-2005, 2005-2006, 2006-2007, and 2007-2008. 2. Validity of penalty proceedings initiated by the Assessing Officer. 3. Applicability of immunity under Clause 2 of Explanation 5 to section 271(1)(c). 4. Consideration of voluntary disclosure of additional income by the assessee. Issue-wise Detailed Analysis: 1. Imposition of Penalties under Section 271(1)(c): The penalties of Rs. 5,16,000/-, Rs. 23,54,000/-, Rs. 42,21,500/- and Rs. 25,800/- were imposed by the Assessing Officer for assessment years 2004-2005, 2005-2006, 2006-2007, and 2007-2008 respectively under section 271(1)(c) of the Income Tax Act. The penalties were based on the additional income disclosed by the assessee during the search and seizure action conducted under section 132 on 27.12.2006. 2. Validity of Penalty Proceedings Initiated by the Assessing Officer: The assessee contended that the satisfaction required for initiating penalty proceedings was neither specifically recorded by the Assessing Officer nor discernible from the assessment orders. The Tribunal referred to the decision in the case of Suvaprasanna Bhattacharya, which emphasized that the satisfaction for initiating penalty proceedings should be clearly discernible from the assessment order. The Tribunal found that the Assessing Officer did not record any observation or finding indicating the satisfaction required for initiating penalty proceedings. Consequently, the initiation of penalty proceedings was deemed bad in law, rendering the penalties imposed unsustainable. 3. Applicability of Immunity under Clause 2 of Explanation 5 to Section 271(1)(c): The assessee claimed immunity under Clause 2 of Explanation 5 to section 271(1)(c), arguing that the income offered during the search was duly declared in the returns of income and tax thereon was paid. The CIT(Appeals) rejected this claim, stating that the income disclosed was on account of undisclosed expenditure and not for acquiring money, bullion, jewelry, or other valuable articles found during the search. The Tribunal, however, did not find the CIT(Appeals)'s reasoning persuasive and held that the conditions stipulated in Clause 2 of Explanation 5 were satisfied by the assessee. 4. Consideration of Voluntary Disclosure of Additional Income: The assessee argued that the additional income was offered voluntarily and accepted in the assessments, implying no concealment or furnishing of inaccurate particulars. The Assessing Officer, however, contended that the disclosure was not voluntary as it resulted from the search. The Tribunal noted that the income declared in response to notices under section 153A was accepted without further additions, and referred to the Gujarat High Court's decision in Kirit Dayabhai Patel, which held that penalty under section 271(1)(c) is leviable only on income assessed over and above the income returned under section 153A. The Tribunal concluded that the penalties were not sustainable on this ground as well. Conclusion: The Tribunal allowed the appeals of the assessee, canceling the penalties imposed by the Assessing Officer under section 271(1)(c) for all four years under consideration. The decision was based on the lack of discernible satisfaction for initiating penalty proceedings, the voluntary nature of the income disclosure, and the applicability of immunity under Clause 2 of Explanation 5 to section 271(1)(c).
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