2019 (10) TMI 79 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income declared by the assessee in the return of income filed in response to notice u/s 153A on account of interest on FDR - HELD THAT - The assessee has been regularly filing return of income u/s 139(1) of the Act and declaring income from house property and income from other sources. Though, there was a search in case of Moti Sons group on 31/10/2012, however, there was no incriminating material either found or seized disclosing any undisclosed income of the assessee as a result of search and seizure action. The assessee was covered by the search carried out u/s 132(1) and consequently the A.O. was bound to issue notice u/s 153A for all the six assessment years immediately preceding assessment year relevant to the previous year in which search is conducted. In response to the notice u/s 153A, the assessee filed return and declared additional income on account of interest on FDR. When there was no incriminating material found or seized during the course of search disclosing any undisclosed income on account of interest on FDR then the suo moto declaration of such income in the return of income filed U/s 153A of the Act would not attract the penal provision U/s 271(1)(c) of the Act. Assessee not declared the said interest income in the return of income filed U/s 153A of the Act then even if the A.O. in the course of assessment proceedings, detected such interest income on FDR and made addition on account of the interest on FDR, the addition so made by the A.O. would not sustain or survive due to the reason that the assessment for five assessment years out of the six under consideration were not pending as on the date of search and consequently the A.O. would have no jurisdiction to make the addition in absence of any incriminating material found or seized during the course of search revealing such income. Hence, when the addition on account of interest on FDR is not sustainable in law then the suo moto declaration of the income by the assessee would not amount to furnishing of inaccurate particulars of income or concealment of particulars of income rather it would be a bonafide explanation/cause for not furnishing income in the return of income filed U/s 139(1) - Penalty levied U/s 271(1)(c) of the Act for all the six years is deleted. - Decided in favour of assessee.

Summary

Issues:
Appeals against penalty order U/s 271(1)(c) of the Income Tax Act, 1961 for A.Ys. 2007-08 to 2012-13.

Analysis:
1. The assessee challenged the penalty imposed by the Assessing Officer (A.O.) under Section 271(1)(c) of the Act for declaring additional income on interest accrued on Fixed Deposit Receipts (FDRs) in response to a notice U/s 153A. The assessee argued that the penalty was unjustified as no incriminating material was found during the search and the income was declared voluntarily. The assessee contended that the belief that interest on FDR is taxable only upon receipt was bonafide. The Tribunal noted that no additions were made by the A.O. in the assessment order U/s 143(3) r.w.s. 153A for any of the assessment years. However, Explanation 5A to Section 271(1)(c) deems additional income declared post-search as concealment, but this provision requires incriminating material, which was absent in this case. The Tribunal accepted the assessee's explanation as reasonable, invoking Section 273B, and deleted the penalties for all six years.

2. The Revenue argued that despite no additions in assessments, the additional income declared post-search is liable for penalty under Explanation 5A to Section 271(1)(c). The Tribunal noted that the absence of incriminating material meant the deeming fiction under Explanation 5A did not apply. Additionally, as the interest on FDR was not received but accumulated, the belief that it's taxable upon maturity was bonafide. The Tribunal held that the suo moto declaration by the assessee did not amount to concealment or furnishing inaccurate particulars of income. It emphasized that if the A.O. had made additions post-search, they would not have been sustainable due to lack of jurisdiction. Hence, the penalties for all six years were deleted.

3. The Tribunal's analysis focused on the absence of incriminating material during the search, the bonafide belief of the assessee regarding taxation of interest on FDR, and the legal provisions under Section 271(1)(c) and Explanation 5A. The decision highlighted the importance of reasonable explanations and causes under Section 273B, ultimately leading to the deletion of penalties for all six assessment years. The judgment provided a detailed examination of the facts, legal provisions, and the assessee's actions, resulting in a favorable outcome for the assessee in all appeals.