2019 (3) TMI 575 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - search and seizure operation conducted u/s 132 - short term capital gains shown in return filed u/s 153A as not shown in the original return of income u/s 139(1) - HELD THAT - AO in the assessment order has mentioned that assessee was subjected to search and that assessment order was passed under section 153A - AO did not mention anything in the assessment order, if any, incriminating material was found against the assessee during the course of search, so as to make the impugned addition account of short term capital gain. AO on the basis of the return of income filed by the assessee under section 153A, found that assessee has declared short term capital gains - AO on further enquiry found that there is a difference in the purchase cost and the sale price as per circle rate, therefore, Section 50C was applied against the assessee. The assessing officer, however, accepted the return of income. It would, therefore, show that assessing officer accepted the return of income under section 153A and has not pointed-out, if any, material was recovered during the course of search in connection with income declared on account of short term capital gains. Therefore, there is no question of considering it to be a case of concealment of income or furnishing inaccurate particulars of income because the addition was made by applying deeming provision of Section 50C and that return of income have been accepted under section 153A. Defective notice - Also the assessment order has been passed on 30th March, 2016 under section 153A of the Income Tax Act, 1961. Assessee referred to the show cause notice issued before levy of the penalty Dated 30th March, 2016 i.e., on the same day on which assessment order have been passed. The said notice is reproduced above, in which, the assessing officer has not mentioned as to under which limb of Section 271(1)(c) whether for concealment of income or filing inaccurate particulars of income, such notice have been issued. AO in the assessment order has initiated penalty proceedings under both the limbs of Section 271(1)(c). The assessing officer in the penalty order has also mentioned that he has issued show cause notice dated 25th February, 2015 for compliance on 14th March, 2016. This show cause notice is prior to passing of the assessment order under section 153A on Dated 30th March, 2016 and as such, it would show that assessing officer, without any justification has issued show cause notice for levy of the penalty - Decided in favour of assessee.

Summary

Issues:
Challenging the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-2011.

Analysis:
The appeal was against the order of Learned CIT(A)-IV, Kanpur, for the assessment year 2010-2011, contesting the penalty under section 271(1)(c) of the Income Tax Act, 1961. The original return declared a total income of ?5,44,730, but after a search operation under section 132, the assessee declared a total income of ?14,19,729. The assessing officer initiated penalty proceedings under section 271(1)(c) for concealment of income or filing inaccurate particulars. The penalty was confirmed by the Learned CIT(A).

The Assessee's Counsel argued that the penalty notices were illegal and did not specify the grounds under section 271(1)(c). They contended that no incriminating material was found during the search, and the addition was due to the deeming provision under Section 50C, not concealment of income. The Departmental Representative argued that declaring income under section 153A does not absolve from penalty.

The Tribunal held that the penalty was not justified. The assessing officer accepted the return under section 153A without mentioning any incriminating material. The addition was made under Section 50C, and the return was accepted, indicating no concealment. The Tribunal cited a Delhi High Court case supporting this view. The assessing officer's actions regarding the penalty notices were deemed unjustified, following a Karnataka High Court decision. Consequently, the Tribunal set aside the penalty orders.

In conclusion, the Tribunal allowed the assessee's appeal, canceling the penalty under section 271(1)(c) for the assessment year 2010-2011.