2016 (5) TMI 1094 - AT - Income Tax

Penalty under section 271(1)(c) - assesse disclosed the income on the basis of declaration made in the statement under section 132 - Held that - The assessee has demonstrated that the additional income declared in response to the notice received under section 153(A) and 153(c) of the Act are based on the declaration made in the statement under section 132(4) of the Act. Shri Mahendra B. Kataria has disclosed that income was earned for accepting on-money. ₹ 12 lakhs has been accounted for in the individual accounts. Similarly, in the case of Sarikha Jewellers, it was alleged that the income was on account of undisclosed stock of gold. These aspects have been discussed during the course of search, and the incomes have been offered. We allow the appeals of the assessee and deleted the impugned penalty. - Decided in favour of assessee

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Entitlement to immunity under clause (2) of Explanation (5) of Section 271(1)(c) of the Income Tax Act.
3. Validity of the additional income declared in response to notices under Sections 153A and 153C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act:
The appellants challenged the penalties imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, which were confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalties were &8377; 3,91,580/- for Mahendra K. Kataria and &8377; 1,80,380/- for M/s. Sarika Jewellers. The penalties were based on the AO's determination of taxable income following search and seizure operations, which revealed unaccounted income.

2. Entitlement to immunity under clause (2) of Explanation (5) of Section 271(1)(c) of the Income Tax Act:
The core issue was whether the appellants were entitled to immunity from penalty under clause (2) of Explanation (5) of Section 271(1)(c). The appellants argued that they met the conditions for immunity: (i) the unaccounted income was disclosed in a statement under Section 132(4); (ii) the manner of deriving such income was declared; and (iii) taxes and interest were paid on the disclosed income. The Tribunal referenced the Gujarat High Court's judgment in the case of Kirit Dayabhai Patel, which supported the appellants' position. The Tribunal found that the appellants had disclosed their income in response to notices under Sections 153A and 153C, paid the due taxes, and the AO had accepted the returns without making any additional references or additions.

3. Validity of the additional income declared in response to notices under Sections 153A and 153C of the Income Tax Act:
The Tribunal examined whether the additional income declared by the appellants in response to notices under Sections 153A and 153C was valid and whether it provided grounds for penalty immunity. The Tribunal noted that the appellants had disclosed the income based on the declaration made during the search under Section 132(4). For Mahendra B. Kataria, the income was from accepting on-money, and for Sarika Jewellers, it was from undisclosed stock of gold. The Tribunal concluded that the appellants had fulfilled the necessary conditions for immunity as per the cited judgment, leading to the deletion of the penalties.

Conclusion:
The Tribunal upheld the appellants' grievances, finding that the conditions for immunity under clause (2) of Explanation (5) of Section 271(1)(c) were satisfied. Consequently, the penalties imposed by the AO were unsustainable. The appeals of the assessees were allowed, and the impugned penalties were deleted.

Order:
The appeals of the assessees were allowed, and the penalties were deleted. The order was pronounced in the Court on 2nd May, 2016, at Ahmedabad.

← Previous Next →