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2016 (9) TMI 850 - AT - Income TaxPenalty levied u/s. 271(1)(c) - voluntary surrender of income by assessee - Held that - A.O. has failed to make out the case of concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee, rather, it was a case of voluntary surrender of income for tax purpose in order to buy peace of mind and to avoid vexed litigation and Ld. CIT(A) has legally and rightly passed the impugned order. Finding no illegality or perversity in the impugned order, we hereby dismiss the present appeal filed by the Revenue - Decided in favour of the assessee
Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Applicability of Explanation 5A to Section 271(1)(c) in the context of the case. Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The Revenue appealed against the order of the CIT(A) cancelling the penalty of ?11,78,100/- levied under Section 271(1)(c). The primary contention was that the assessee deliberately concealed its income by not disclosing it voluntarily prior to the date of search. The assessee, engaged in real estate, had filed a return declaring nil income. During a search and seizure operation, documents revealed that the assessee group received ?1,15,00,000/- in cash as an advance for land sale. The Director admitted that the cash was unaccounted for and surrendered it as undisclosed income. The AO added ?35,00,000/- to the assessee's income and imposed a penalty under Section 271(1)(c). However, the CIT(A) deleted the penalty, leading to this appeal by the Revenue. During the hearing, the Revenue argued that the surrender was not voluntary but made under compulsion, justifying the penalty. The assessee countered by citing a similar case (M/s. Crazy Developers Pvt. Ltd.) where the ITAT had deleted the penalty, arguing that the facts and circumstances were identical. 2. Applicability of Explanation 5A to Section 271(1)(c): The Tribunal examined whether the CIT(A) erred in cancelling the penalty by ignoring Explanation 5A to Section 271(1)(c), which deems income declared post-search as concealed. The Tribunal found that the issue was covered by a previous ITAT decision in a similar case. The CIT(A) had concluded that the surrendered amount was received as an advance for land sale, which did not culminate in a sale, and thus did not constitute taxable income. The disclosure was deemed an act of good faith, not concealment. The Tribunal referenced the Supreme Court judgment in CIT Vs. Suresh Chandra Mittal, where it was held that penalty could not be levied if the Department failed to prove concealment and the disclosure was made to avoid litigation. The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings and must independently establish concealment or inaccurate particulars. The Tribunal agreed with the CIT(A) that the advance received did not constitute taxable income for the relevant year. The surrender was voluntary, intended to avoid litigation, and did not imply concealment. The Tribunal found no illegality in the CIT(A)'s order and dismissed the Revenue's appeal, affirming the deletion of the penalty. Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the penalty under Section 271(1)(c), concluding that the surrender of income was voluntary and did not constitute concealment. The appeal by the Revenue was dismissed, affirming that the facts and circumstances did not warrant the imposition of a penalty. The judgment emphasized the need for independent assessment of penalty proceedings and the importance of proving actual concealment or furnishing of inaccurate particulars.
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