2016 (5) TMI 330 - AT - Income Tax

Levy of penalty under section 271(1)(c) - additional income offered in response to notice issued under section 153A - Held that - Assessee had offered additional income as its income while filing return of income in response to notice issued under section 153A of the Act. The additional income worked out in the hands of assessee was on the basis of seized documents found / impounded during the course of search and seizure proceedings. Even in the cases where the assessee had declared the said income in its return of income in response to notice issued under section 153A of the Act, it is income detected during the course of search and seizure operation. The case of the assessee is squarely covered under Explanation 5A to section 271(1)(c) of the Act and the assessee is liable to le vy of penalty under section 271(1)(c) of the Act. The second addition made in the hands of assessee is on account of disclosure not made by the assessee, but on the basis of documents found during the course of search. The assessee is also liable for levy of penalty on such addition in his hands. Accordingly, we reverse the order of CIT(A) and confirm the order of Assessing Officer in levying penalty under section 271(1)(c) - Decided against assessee

Issues Involved:
1. Deletion of penalty levied under section 271(1)(c) of the Income-tax Act, 1961.
2. Applicability of Explanation 5A to section 271(1)(c) of the Act.
3. Relevance of additional income offered in return filed under section 153A.
4. Consideration of precedents and jurisdictional Tribunal decisions.
5. Assessment of the assessee's claim of disclosure and peace of mind.

Detailed Analysis:

1. Deletion of Penalty Levied Under Section 271(1)(c):
The primary issue revolves around the deletion of the penalty amounting to ?14,55,140/- levied under section 271(1)(c) of the Income-tax Act, 1961. The Revenue argued that the assessee failed to offer any explanation regarding the significant difference in income returned under sections 139 and 153A. The additional income of ?42,50,054/- was offered only in the return filed under section 153A, which was not explained by the assessee.

2. Applicability of Explanation 5A to Section 271(1)(c) of the Act:
The CIT(A) had deleted the penalty, holding that Explanation 5A to section 271(1)(c) was not applicable. However, the Tribunal noted that the issue is covered against the assessee by the precedent set in Mrs. Sarita Kaur Manjeet Singh Chopra Vs. ITO. Explanation 5A deems an assessee to have concealed particulars of income if the additional income is declared in the return filed after a search operation, irrespective of whether it was disclosed earlier.

3. Relevance of Additional Income Offered in Return Filed Under Section 153A:
The Tribunal emphasized that the additional income declared by the assessee in the return filed under section 153A was based on incriminating documents found during the search. This additional income included professional receipts and deposits in the savings bank account. The Tribunal held that the income detected during the search is deemed to have been concealed, thus attracting penalty under section 271(1)(c).

4. Consideration of Precedents and Jurisdictional Tribunal Decisions:
The Revenue cited the jurisdictional Tribunal's decision in the Thakkar and Kalantri group cases, which directly addressed similar issues. The Tribunal also referred to its decision in Mrs. Sarita Kaur Manjeet Singh Chopra Vs. ITO, where it was held that the assessee is liable for penalty on income declared post-search under section 153A. The Tribunal dismissed the assessee's reliance on other cases, emphasizing the binding precedent of the Pune Bench.

5. Assessment of the Assessee's Claim of Disclosure and Peace of Mind:
The assessee claimed that the additional income was disclosed to buy peace of mind and avoid litigation. However, the Tribunal noted that this claim does not absolve the assessee from the penalty under section 271(1)(c). The Tribunal found the CIT(A)'s decision contradictory, as it acknowledged the additional income disclosure but failed to apply Explanation 5A correctly.

Conclusion:
The Tribunal reversed the CIT(A)'s order and confirmed the Assessing Officer's decision to levy a penalty of ?14,55,140/- under section 271(1)(c) of the Income-tax Act, 1961. The appeal of the Revenue was allowed, reinforcing the applicability of Explanation 5A and the principle that income detected during a search operation, even if subsequently declared, is subject to penalty for concealment.

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