2017 (3) TMI 1043 - AT - Income Tax

Penalty u/s 271(1)(c) - concealed income being the difference between the returned loss declared in the return under section 139 (1) and section 153A - Held that - Assessee filed original return of income by declaring capital loss of ₹ 1,45,77,465/-and a carry forward the business loss amounting to ₹ 1,25,527/-. Subsequently as a result of search, the business loss was reduced to ₹ 20,450/-by reducing the deferred revenue expenditure amounting to ₹ 1,05,077/- and assessee chose not to carry forward such business loss. Explanation 5A to section 271 (1) (c) is now very clear, that if there is a difference in the original return filed under section 139 (1) of the Act and the return filed in response to section 153A of the Act, the assessee is deemed to have concealed the income. We do not find any scope of any explanation to be given by the assessee when explanation 5A of the Act has been invoked. Thus in our considered opinion the Ld.AO was correct in levying the penalty under section 271 (1) (c) by invoking Explanation 5A of the Act. However he cannot include such income/loss that was already declared in the original return of Income. The capital loss of ₹ 1,45,77,465/- that was declared by assessee should be excluded while calculating the penalty. Accordingly we set aside the issue back to the files of AO for re-computing the as per law. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
Penalty appeal against deletion of penalty imposed under section 271(1)(c) of the Act for assessment year 2005-06.

Analysis:

Issue 1: Penalty under section 271(1)(c) for concealment of income
The appellant, engaged in investments and trading, filed original return showing a loss. Subsequently, a search operation was conducted under section 132, leading to issuance of notice under section 153A. The returned loss under section 153A was less than the original return, prompting the Assessing Officer (AO) to allege income suppression and levy a penalty under section 271(1)(c). The appellant argued that the difference was due to an inadvertent mistake rectified voluntarily. The CIT (A) held that as the return under section 153A was accepted, penalty under section 271(1)(c) could not be imposed, citing the overriding effect of section 153A. The Revenue contended that Explanation 5A applied, as the search was post-2007 and unaccounted income was disclosed under section 153A. The Tribunal found the penalty justified but directed exclusion of the already declared income while recalculating the penalty, remanding the issue to the AO.

Issue 2: Interpretation of Explanation 5A to section 271(1)(c)
The Revenue argued that Explanation 5A deemed concealment of income, fulfilling its conditions in this case. The appellant, citing the Supreme Court decision in a different context, emphasized the accepted return under section 153A. The Tribunal noted the insertion of Explanation 5A post-2007 and its application to the search date, supporting the penalty imposition. However, it clarified that the penalty should exclude the income already declared, directing the AO to recompute the penalty accordingly.

Conclusion
The Tribunal upheld the penalty imposition under section 271(1)(c) but instructed the exclusion of the already declared income while recalculating the penalty, sending the matter back to the AO for appropriate computation. The appeal by the Revenue was allowed, emphasizing the application of Explanation 5A post-2007 and the need for accurate penalty calculation excluding the previously declared income.