2009 (3) TMI 610 - HC - Income Tax

Court upholds assessee's immunity from penalty under section 271(1)(c) based on undisclosed income declaration.

The High Court dismissed the Revenue's appeal challenging the deletion of penalty under section 271(1)(c) by the Income-tax Appellate Tribunal. The ... Penalty - Search and seizure - Undisclosed income - -assessee has declared undisclosed income while making a statement on October 10, 1988 and he has not disclosed the said income in his returns filed on October 5, 1988 - Having regard to clause (2) whatever was required has been complied with by the assessee - The Appellate Tribunal simply referring to the immunity provided under section Explanation 5 of section 271(1)(c) has given immunity to the assessee by deleting the 100 per cent. penalty of tax levied - The appeal is dismissed Issues involved:- Appeal filed by Revenue under section 260A of the Income-tax Act, 1961 challenging deletion of penalty under section 271(1)(c) by the Income-tax Appellate Tribunal.Detailed Analysis:1. Background and Facts:The appeal was filed by the Revenue under section 260A of the Income-tax Act, 1961 against the orders passed by the Income-tax Appellate Tribunal, Panaji. The substantial question of law raised was whether the Tribunal was correct in deleting the penalty levied under section 271(1)(c) without the assessee discharging the burden under the Explanation.2. Assessee's Declaration and Revised Return:The assessee, a partnership firm, came into existence in 1986 and was engaged in the business of selling arrack. A search conducted in 1988 revealed undisclosed income, which the assessee declared during the search and filed a revised return in 1989 to pay the tax on the undisclosed income.3. Penalty Imposition and Tribunal's Decision:The Assessing Officer imposed a penalty under section 271(1)(c), leading the assessee to appeal before the Appellate Tribunal. The Tribunal, considering similar matters, granted immunity to the assessee from the penalty. The Revenue challenged this decision, citing section 271(1)(c) and Explanation 5, specifically clause 2, as applicable provisions.4. Interpretation of Explanation 5:Explanation 5 pertains to cases where a search is initiated before a specified date and assets are declared post-search. In this case, the search was conducted in 1988, falling under the purview of the Explanation. The Tribunal found that the assessee had complied with the requirements of clause 2 of Explanation 5 by declaring the undisclosed income during the search.5. Immunity and Tribunal's Decision Justification:The Tribunal, based on Explanation 5, granted immunity to the assessee by deleting the penalty. It was noted that the assessee had fulfilled the conditions specified in the Explanation, thereby warranting immunity from penalty under section 271(1)(c). The Tribunal's decision was upheld as legally sound and not erroneous.6. Conclusion and Dismissal of Appeal:The High Court, after analyzing the facts and legal provisions, found no grounds to interfere with the Tribunal's orders. Consequently, the appeal filed by the Revenue was dismissed, and the substantial question of law was answered against the Revenue.This comprehensive analysis of the judgment highlights the key legal issues, factual background, interpretation of relevant provisions, and the reasoning behind the Tribunal's decision, ultimately leading to the dismissal of the Revenue's appeal.