2018 (12) TMI 897 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - investments surrendered after detection of concealment by the Department by way of search u/s 132 - as per AO surrender was covered only in the year of search or the preceding year of which return was due but not filed by the assessee, and the impugned year being neither, the assessee was not entitled to claim immunity of the surrender granted - Held that - Additional ground raised by the assessee that the order passed u/s 271(1)(C) was invalid and bad in law as also the penalty proceedings initiated vide notice u/s 274 r.w.s 271(1)(C) since no submissions were made in this regard,oral or written,by the assessee nor any copy of the notice issued u/s 274 filed before us pointing out any infirmity in the same,the said additional grounds are dismissed. As for the ground raised challenging the levy of penalty on merits ,since admittedly the facts in the present case are identical to that in the case of Munish Jain 2018 (3) TMI 1676 - ITAT CHANDIGARH the decision rendered by the ITAT in the said case squarely applies to the present case following which we uphold the levy of penalty u/s 271(1)(c). - Decided against assessee.

Summary

Issues Involved:
1. Confirmation of levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of penalty proceedings initiated under Section 274 read with Section 271 of the Income Tax Act, 1961.
3. Applicability of Explanation 5A to Section 271(1)(c) in the context of the surrendered income during search operations.

Issue-wise Detailed Analysis:

1. Confirmation of Levy of Penalty Under Section 271(1)(c):
The assessee filed a return declaring an income of ?11,75,959/-. A search under Section 132 was conducted, leading to the surrender of ?41 lacs, which was included in the revised return. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) on the grounds that the surrender was post-detection of concealment. Despite the assessee's contention that the surrender was suo moto and no infirmity was found in the explanation or documents, the AO imposed a penalty of ?11,68,020/-, being 100% of the tax sought to be evaded.

2. Validity of Penalty Proceedings Initiated Under Section 274 Read with Section 271:
The assessee raised an additional ground challenging the validity of the penalty proceedings initiated via notice under Section 274 read with Section 271, arguing that the notice did not specify the charge (concealment or furnishing inaccurate particulars). The Tribunal admitted this additional ground but found no merit in it, as the notice clearly stated the charge against the assessee, and due opportunity was given to defend against the charges.

3. Applicability of Explanation 5A to Section 271(1)(c):
The Tribunal held that Explanation 5A to Section 271(1)(c) was applicable since the search was initiated after 1st June 2007. The Explanation deems the assessee to have concealed income if the income declared post-search was not included in the original return. The Tribunal found no merit in the assessee's contention that no incriminating material was found during the search, as the assessee had surrendered ?28 lacs during the search, which was attributed to undisclosed income invested in properties. The Tribunal upheld the CIT(A)'s interpretation that the surrender of income during search met the requirements of Explanation 5A, thereby justifying the levy of penalty.

Conclusion:
The Tribunal dismissed the appeal, upholding the levy of penalty under Section 271(1)(c) amounting to ?11,68,020/-. The additional grounds challenging the validity of the penalty proceedings were also dismissed due to lack of submissions and evidence pointing out any infirmity in the notice issued under Section 274. The Tribunal's decision was guided by the identical facts and issues in the case of Munish Jain Vs. DCIT, where the levy of penalty was similarly upheld.