2020 (2) TMI 784 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - suo moto disclosure of income - income offered in the revised computation has been accepted - HELD THAT - In the absence of any incriminating document found during the search proceedings at M/s DhanjiMama Group suggesting undisclosed income, it is transpired that the assessee has admitted the impugned income in his hands voluntarily in the statement furnished under section 131 of the Act. There was no communication by the Investigation office of the Income Tax Baroda who recorded the statement under section 131 of the Act of the assessee in connection with the search proceedings at M/s DhanjiMama Group about the fact that the assessee has disclosed such income which was not offered in the income tax return. We are holding so based on the order of the authorities below as this fact/information was not emanating from the respective orders There was questionnaire issued by the AO having jurisdiction over the assessee under section 142(1) of the Act which were filed before us. But, in none of the questionnaire the question regarding the undisclosed income admitted by the assessee in the statement furnished under section 131 of the Act was made. Accordingly, we are not impressed with the argument of the learned DR that there was a question raised about the reasons which has affected the income of the assessee. In our view, such question raised by the AO is a general question and has nothing to do with the income of the assessee admitted by him in the statement furnished under section 131 of the Act. Accordingly we can safely assume that the assessee has disclosed the impugned income voluntarily prior to the detection by the Income Tax Office. Assessee filed his original return of income dated 30- 03-2012 which is belated income tax return under section 139(4) of the Act. It is the settled law that the belated return cannot be revised under the provisions of section 139(5) of the Act. In view of the above we hold that there was no possibility for the assessee to revise the return of income under the provisions of the Act. Accordingly, the assessee had no option except to revise the computation of income. Accordingly, we conclude that the assessee has made suo moto disclosure of income as discussed above. Hence, the penalty in the instant case cannot be attracted under the provisions of section 271(1)(c) - Decided in favour of assessee.

Issues Involved:
1. Confirmation of the protective order passed under section 143(3) read with section 147.
2. Addition of ?56,00,000 as unexplained investment under section 69.
3. Interest charged under sections 234B and 234C.
4. Levy of penalty under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Confirmation of the Protective Order under Section 143(3) read with Section 147:
The assessee contended that the learned CIT (A) erred in confirming the protective order passed by the AO, which computed the income at ?56,01,610 as against the declared income of ?1,610. The Tribunal noted that the assessee, a property dealer/broker, had initially declared an income of ?12,12,400 for the year. During the assessment, the assessee voluntarily filed a revised computation of income, offering an additional ?76,46,699, citing a search operation at a third party’s premises (Dhanjimama Group) where incriminating materials related to the assessee were found. The AO accepted this additional income and initiated penalty proceedings under section 271(1)(c) for filing inaccurate particulars of income and concealment of income.

2. Addition of ?56,00,000 as Unexplained Investment under Section 69:
The assessee argued that the learned CIT (A) erred in confirming the addition of ?56,00,000 by treating investments in shares of Pradip Overseas Ltd and Pradip Enterprise Ltd as unexplained. The Tribunal observed that the AO held the additional income was offered only after the search and summons under section 131(1). The AO imposed a penalty of ?22,94,009, being 100% of the tax sought to be evaded, reasoning that the income would have escaped assessment if not for the search.

3. Interest Charged under Sections 234B and 234C:
The assessee also contested the interest charged under sections 234B and 234C. The Tribunal did not delve deeply into this issue, as the primary focus was on the penalty under section 271(1)(c).

4. Levy of Penalty under Section 271(1)(c):
The Tribunal examined whether the assessee had concealed particulars of income amounting to ?76,46,698, which was disclosed during assessment proceedings. The assessee admitted an undisclosed income of approximately ?1 crore for his family in a statement under section 131 in connection with the search at Dhanjimama Group. The Tribunal noted that there was no incriminating document found during the search that directly implicated the assessee, and no specific query was raised by the AO regarding the undisclosed income.

The Tribunal highlighted that the assessee filed a belated return under section 139(4), which cannot be revised under section 139(5). Therefore, the assessee had no option but to revise the computation of income. The Tribunal distinguished the present case from the MAK Data (P) Ltd vs. CIT case, where incriminating documents were found during a survey, leading to a specific query by the AO. In contrast, the assessee in this case made a voluntary disclosure without any specific query or incriminating documents.

The Tribunal concluded that the penalty under section 271(1)(c) was not warranted, as the assessee made a suo moto disclosure of income. Consequently, the appeal of the assessee was allowed, and the penalty was set aside.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the penalty under section 271(1)(c) on the grounds that the additional income was voluntarily disclosed and not based on any specific query or incriminating documents found during the search.

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