Revenue's Appeal Dismissed: Penalty Cancelled for Undisclosed Income

The appeal by the revenue challenging the cancellation of penalty u/s 271(1)(c) for undisclosed income of Rs. 9,25,000 voluntarily declared post search operation was dismissed. The assessee's voluntary disclosure in response to a notice u/s 153A led to abatement of proceedings, with income computed based on the return filed. As the income was voluntarily disclosed, no concealment was deemed, justifying the deletion of the penalty. The CIT(A)'s decision to cancel the penalty was upheld, confirming no concealment and dismissing the revenue's appeal.

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Issues involved: Confirmation of penalty u/s 271(1)(c) of the Income-tax Act, 1961 for assessment year 2001-02 based on undisclosed income of Rs. 9,25,000 voluntarily declared by the assessee post search operation.

Summary:

Issue 1: Confirmation of penalty u/s 271(1)(c) by the assessing officer
The ld.DR argued that the undisclosed income of Rs. 9,25,000 was only disclosed after the search operation, leading to penalty proceedings u/s 271(1)(c). It was contended that there was concealment of income due to the search operation, justifying the penalty. The CIT(A) was criticized for canceling the penalty.

Issue 2: Entitlement for immunity under Explanation 5 to section 271(1)(c)
The ld representative for the assessee argued that the voluntary disclosure of Rs. 9,25,000 entitled the assessee to immunity under Explanation 5 to section 271(1)(c) of the I.T. Act. Legal precedents from Madras High Court, Calcutta High Court, and Rajasthan High Court were cited to support the argument that since the income was voluntarily disclosed, there was no concealment.

Judgment:
Upon review, it was noted that the undisclosed income of Rs. 9,25,000 was declared by the assessee in response to a notice u/s 153A of the Act. As per the law, once income is disclosed in response to such a notice, pending proceedings stand abated, and income is computed based on the return filed. Since the assessee voluntarily disclosed the income, it was deemed that there was no concealment. The CIT(A) was found to have rightly deleted the addition, and the order was confirmed. Consequently, the appeal by the revenue was dismissed.

Note: The judgment was pronounced on 27-05-2011 by N.R.S. Ganesan, JM.

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