2017 (9) TMI 954 - AT - Income Tax

Penalty u/s 271(1)(c) - Survey operations u/s.133A(1) conducted simultaneously in the premises of some of the members of the group and Assessment u/s.153A(1)(b) completed - undisclosed income was declared by the appellant in the statement recorded during search and the same was also disclosed in the return filed pursuant to notice issued under section 153A, - Held that - There cannot be any dispute to the fact that once a return is filed pursuant to notice under section 153A, the same is treated as return filed under section 139 of the Act refer clause (a) of section 153A(l) . Further, concealment/ furnishing of inaccurate particulars of income/undisclosed income, has to be necessarily seen vis-a-vis return filed by the appellant Once, income it is declared which is accepted as such under section 139 r.w.s. 153A of Act, then, the question of there being concealment/ furnishing of inaccurate particulars of income/undisclosed income, does not arise at all. In the present case, the entire undisclosed income has been offered for tax by the appellant-company in the return income, which was subject matter of assessment before assessing officer. The return filed by the appellant has been accepted as such by your assessing officer, without any variation. Therefore, in the absence of any undisclosed income being found in the assessment vis-a-vis the return filed, the issue of imposition of penalty does not, arise. Levy of penalty has to be as per law applicable on the date of filing of the return and admittedly on 03.03.2009 when the return of income for assessment year 2006- 07 was filed by the appellant, the unamended provisions of Explanation 5A to section 271(1)(c) of the Act were on the statute. The question whether there was concealment of income and/or furnishing inaccurate particulars thereof by the appellant in the return of income filed on the said date has to be seen vis-a-vis, law as applicable on that date. In that view of the matter, the amended provision of Explanation 5A made applicable w.r.e.f from 1.6.2007 cannot be pressed into service. In view of the aforesaid, the pre-substituted provisions of Explanation 5A to Section 271 would, therefore, apply in the present case of the appellant-company for the year under consideration, even though the said Explanation stands substituted retrospectively by the subsequent Finance Act.- Decided in favour of assessee.

Summary

Issues involved:
Appeal against penalty imposed under section 271(1)(c) for assessment years 2006-07.

Analysis:
1. Identical Grounds of Appeal: Two assessees, Mr. Alok Bhandari and Mr. Rajendra Bhandari, appealed against penalties imposed under section 271(1)(c) for the assessment years 2006-07. The issue in both appeals was identical, leading to a consolidated order.

2. Legal Arguments: The assessees argued that penalties under section 271(1)(c) could not be levied, citing legal grounds. They contended that once income is declared and accepted under section 139 r.w.s. 153A of the Act, there is no concealment or furnishing of inaccurate particulars. Therefore, the penalties imposed were deemed illegal and bad in law.

3. Judicial Precedents: Several judicial decisions were cited to support the argument that penalties cannot be imposed if the returned income is accepted by the assessing officer. These cases emphasized that penalties should be based on the IT return filed by the assessee and that strict conditions must be met for penalty imposition.

4. Applicable Law: The law prevailing at the time of filing the return is crucial for penalty imposition. The provisions of Explanation 5A to section 271(1)(c) in force when the return was filed should apply. The amended provision of Explanation 5A from 1.6.2007 could not be retroactively applied in this case.

5. Bona Fide Disclosure: The assessees' voluntary disclosure of previously undisclosed income during search operations and in the subsequent return filing demonstrated their bona fides. This genuine disclosure, along with the absence of undisclosed income in the assessment, negated the need for penalty imposition.

6. Decision: The tribunal ruled in favor of the assessees, quashing the penalties imposed under section 271(1)(c) for both Mr. Alok Bhandari and Mr. Rajendra Bhandari. The orders of the learned CIT(A) confirming the penalties were reversed, and all grounds of the assessees were allowed.

7. Final Verdict: Both appeals of the assessees were allowed, and the penalties were set aside in the judgment delivered on 21st April 2017 by the Appellate Tribunal ITAT Delhi, with detailed legal reasoning and reliance on relevant legal provisions and judicial precedents.