2018 (2) TMI 1203 - AT - Income Tax

Penalty u/s 271(1)(c) - undisclosed investment - return of income furnished after the date of search - Held that - The undisclosed income was detected/discovered in the form of investment in he property and therefore the assessee was found to be owner of assets value of which was not disclosed and consequently it falls in clause (i) to explanation 5A to section 271 (1)(c). There is no dispute that assessee admitted the acquisition of property by utilizing his income from the previous year ended before the date of search and accordingly the assessee surrendered the said amount for the assessment year under consideration. Since assessee did not file return of income before the date of search notwithstanding the said income declared in the return of income furnished after the date of search for purpose of levy penalty u/s 271(1)(c) the assessee shall be deemed to have concealed the particulars of income to the extent of such amount which was surrendered and offered to tax in the return of income filed post search. Therefore when all the conditions as stipulated under explanation 5A are fulfilled in the case of the assessee then the penalty levied u/s 271(1)(c) was proper and sustainable. - Decided against assessee.

Summary

Issues Involved:
1. Validity of the order passed under section 271(1)(c) of the Income Tax Act, 1961.
2. Confirmation of the penalty of ?3,25,595/- under section 271(1)(c) of the Income Tax Act, 1961.
3. Admission and adjudication of additional grounds raised by the assessee.

Detailed Analysis:

1. Validity of the Order Passed Under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee challenged the validity of the show cause notice issued under section 274 read with section 271(1)(c) on the ground that the Assessing Officer (AO) did not specify whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. The Tribunal noted that the AO must specify the grounds for the penalty in the show cause notice. However, in this case, since the assessee surrendered the income during the search and did not file any return before the search, the default was clear and fell under the category of concealment of particulars of income. The Tribunal concluded that the requirement to specify the default did not arise in this case as the default was evident.

2. Confirmation of the Penalty of ?3,25,595/- Under Section 271(1)(c) of the Income Tax Act, 1961:
The Tribunal analyzed whether the penalty was justified under Explanation 5A to section 271(1)(c). During the search, undisclosed income was detected, and the assessee surrendered ?10,000,00/- as undisclosed income. The Tribunal noted that the surrender was not voluntary but due to the detection of undisclosed income during the search. Explanation 5A deems such income as concealed, and the penalty is justified. The Tribunal referenced the case of Grass Field Farms & Resorts Pvt. Ltd. vs. DCIT, where it was held that the penalty under section 271(1)(c) is applicable when the income is detected during a search and subsequently surrendered.

3. Admission and Adjudication of Additional Grounds Raised by the Assessee:
The assessee raised additional grounds for the first time before the Tribunal, arguing that the order passed by the AO was bad in law as the show cause notice did not strike off the irrelevant portion. The Tribunal admitted the additional grounds, noting that they involved pure questions of law and did not require fresh evidence. However, on the merits, the Tribunal dismissed the additional grounds, stating that the default was evident as concealment of income since the assessee did not file any return before the search and the surrendered income was undisclosed.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the penalty levied under section 271(1)(c) of the Income Tax Act, 1961, as the conditions stipulated under Explanation 5A were fulfilled. The Tribunal also dismissed the additional grounds raised by the assessee, concluding that the requirement to specify the default in the show cause notice did not arise in this case. The order was pronounced in the open court on 02/01/2018.