2016 (8) TMI 357 - AT - Income Tax

Penalty u/s.271(1)(c) - assessment u/s 153A - income surrendered during the course of search - Held that - Categorical finding has been recorded by CIT(A) to the effect that assessee has fulfilled all the conditions stipulated in Explanation 5 to Section 271(1)(c) for availing immunity for levy of penalty. The assessee has also paid taxes on this income before filing of return. The detailed finding recorded by CIT(A) and the conclusion drawn by him is supported by the decision of Hon ble Madras High Court in the case of SDV Chandru 2003 (12) TMI 40 - MADRAS High Court .Accordingly we do not find any reason to interfere in the order of CIT(A) deleting the penalty levied with respect to income surrendered during the course of search With respect to the penalty levied with reference to lose papers 1 to 65 Annexure-A/4, we found that it was explained by the assessee before the AO that certain portion of the seized material could not be copied out as it should be on the photocopies obtained due to the fact that the impugned figures were written in pencil on which transparent cello tape was fixed so that the figures written in pencil cannot be tampered in the original documents those were seized. This fact of poor photocopying of the pencil written portion of the documents and therefore poor and illegible copied matter was not properly appreciated by the Ld. Assessing Officer and he levied penalty on the difference of ₹ 73,96,500/-. We also found that assessee otherwise arrived at unaccounted income of ₹ 51,54,000/- from the same seized material which was clearly legible after copying it and accordingly offered the same for taxation. The contention of assessee that this amount was unintentional and it had no intention to conceal the income before the Revenue. This contention of the assessee was not properly appreciated by the lower authorities. Similar addition of ₹ 25,93,263/- was made on the ground of unaccounted cash payment which was recorded to the tune of ₹ 41,43,263/- out of which assessee has surrendered only ₹ 15,50,000/-. The assessee has explained that it was due to mistake of Accountant as the entry was not properly appreciated by the lower authorities and they have also levied penalty with respect to these difference. In the interest of justice and fairplay we restore the penalty levied with reference to addition of ₹ 73,96,500/- and ₹ 25,93,263/- back to the file of AO for deciding afresh after giving due opportunity to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
Cross appeals by assessee and revenue against CIT(A) order regarding penalty u/s.271(1)(c) for assessment year 2004-2005.

Analysis:
1. Imposition of Penalty on Surrendered Amounts:
The penalty was imposed by the AO on amounts surrendered during search and additions made during assessment. Assessee disclosed &8377; 67,04,500 during search, but actual unrecorded payment was &8377; 1,25,50,500. Penalty was imposed on the difference of &8377; 73,96,500. CIT(A) deleted penalty citing that the income was disclosed in response to notice u/s. 153A and taxes were paid before filing the return. The decision was supported by case laws and conditions stipulated in Explanation 5 to Section 271(1)(c).

2. Penalty on Unaccounted Income from Seized Documents:
During search, income of &8377; 15,50,000 was declared from seized documents, but actual undisclosed income was &8377; 41,43,263. Penalty was imposed on the difference of &8377; 25,93,263. Assessee explained that certain portions of seized material were poorly copied, leading to discrepancies. Assessee offered &8377; 51,54,000 from legible material for taxation, claiming unintentional errors. Penalty was imposed without proper appreciation of explanations. The penalty was restored back to AO for reevaluation after providing a fair opportunity to the assessee.

3. Conclusion:
CIT(A) deleted penalty on income surrendered during search, citing compliance with Explanation 5 conditions. However, penalty on unaccounted income from seized documents was restored for reassessment. The appeal of the revenue was dismissed, while the appeal of the assessee was allowed for statistical purposes.