2016 (8) TMI 355 - AT - Income Tax

Penalty u/s 271(1)(c) - assessment u/s 153A r.w.s. 153B/143(3) - surrender of income by assessee - Held that - It is undisputed fact that the assessee in his return of income has declared undisclosed income as was declared during the course of search under section 132(4) of the Act. As per Explanation-5 to section 271(1)(c) of the Act, immunity is provided to the assessee against levying of penalty subject to fulfillment of certain conditions. One of the conditions is that the undisclosed income is required to be incorporated into the return of income to be furnished before expiry of time specified in section 139(1) of the Act and also specify in the statement, manner in which such income has been derived and pay the tax together with interest, if any, in respect of such undisclosed income. We find that ld. CIT (A) has given a finding of fact that while filing the return, an amount of ₹ 78,50,000/- was declared in the year under appeal. Similarly, the amount of ₹ 13,00,000/- out of pocket diary expenses which was part of the total surrender of ₹ 1.40 crores made in the course of statement under section 132(4) was also declared in the year under appeal. Hence the total surrender in the year in hands of the appellant, amounted to ₹ 91,50,000/- which was accepted by the AO in the order passed under section 153A/143(3) of the Act. This fact is not controverted by the revenue by placing any other material on record. - Decided in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for undisclosed income declared during search proceedings.

Detailed Analysis:

Issue 1:
The Revenue appealed against the deletion of penalty of ?30,53,113 under section 271(1)(c) of the Income Tax Act by the ld. CIT (A). The appellant had declared undisclosed income during the search proceedings, and the penalty was imposed by the AO. The CIT (A) deleted the penalty based on legal precedents.

Analysis:
The assessment under sections 153A and 143(3) of the Act was framed, including penalty proceedings under section 271(1)(c) for undisclosed income declared during the search. The CIT (A) deleted the penalty relying on legal judgments, including the Supreme Court's decision in ACIT vs. Gebi Lal Kanhaiya Lal and the Gujarat High Court's decision. The Revenue contested the deletion of penalty, arguing that tax was not deposited on the undisclosed income at the time of search.

Issue 2:
The dispute revolved around whether the penalty under section 271(1)(c) was justified for the undisclosed income declared during the search proceedings.

Analysis:
The CIT (A) examined the facts and found that the appellant had declared the undisclosed income in the return of income filed before the specified time. The CIT (A) referred to Explanation 5 to section 271(1)(c) of the Act, which provides immunity against penalty under certain conditions. The CIT (A) noted that the tax deposit before filing the return was not mandatory for availing immunity under Explanation 5, especially when the search was initiated before a specific date.

Issue 3:
The CIT (A) considered the appellant's compliance with the conditions under Explanation 5 to section 271(1)(c) for immunity against penalty.

Analysis:
The CIT (A) found that the appellant had fulfilled the conditions specified in Explanation 5, including declaring the undisclosed income in the return filed within the specified time. The CIT (A) emphasized that the appellant's case fell within the provisions of Explanation 5, warranting the cancellation of the penalty. The Revenue did not provide any contrary material to challenge the CIT (A)'s findings.

In conclusion, the Appellate Tribunal upheld the CIT (A)'s decision to delete the penalty under section 271(1)(c) for the undisclosed income declared during the search proceedings. The Tribunal rejected the Revenue's appeal, emphasizing the appellant's compliance with the legal provisions and the conditions for immunity against penalty as per Explanation 5 of the Act.