2012 (2) TMI 402 - AT - Income Tax

Appeal allowed as tax paid with interest before penalty imposition. Tribunal decision on 06-01-2012.

The Tribunal allowed the appeal, holding that the penalty under Section 271(1)(c) could not be imposed as the assessee had paid the tax along with ... Penalty Proceedings - Survey - Incriminating documents found - Surrender of 22,32,000 in statement u/s 132(4) - Tax and Interest not paid while filing return but paid before completion of assessment - Held That:- Penalty cannot be imposed u/s 271(1)(c) of the Act as the assessee has paid tax alongwith interest before imposition of penalty. Reliance placed on CIT Vs. Mahendra C Shah and CIT (2008 - TMI - 3705 - GUJARAT HIGH COURT) Vs. Radha Kishan Goel (2005 - TMI - 10686 - ALLAHABAD High Court) Issues Involved:1. Confirmation of penalty under Section 271(1)(c) for non-payment of tax and interest on disclosed income.2. Voluntariness and bona fides of the income disclosure.3. Application of Explanation 5 to Section 271(1)(c).Issue-wise Detailed Analysis:1. Confirmation of Penalty under Section 271(1)(c):The assessee appealed against the penalty of Rs. 35,07,610/- levied under Section 271(1)(c) by the CIT(A), arguing that the penalty was confirmed only because the assessee did not pay the tax and interest on the disclosed income along with the return. The CIT(A) upheld the penalty, noting that the assessee did not pay the tax due on the surrendered income at the time of filing the return, and thus did not meet the conditions for immunity under Explanation 5 to Section 271(1)(c).2. Voluntariness and Bona Fides of the Income Disclosure:The assessee, a property dealer, disclosed additional income during a search and survey operation. The AO initiated penalty proceedings, arguing that the disclosure was not voluntary or bona fide since it was made only after incriminating documents were found. The CIT(A) agreed, stating that the disclosure of Rs. 69,55,000/- in share capital and Rs. 34,85,650/- in land investments was not voluntary as it was made after the search operations. The assessee contended that the disclosure was voluntary and in good faith, made to avoid litigation and buy peace of mind.3. Application of Explanation 5 to Section 271(1)(c):The assessee argued that the conditions of Explanation 5 to Section 271(1)(c) were met, as the income was disclosed in the statement under Section 132(4), the manner of deriving the income was specified, and the tax along with interest was paid, albeit not at the time of filing the return. The CIT(A) and the AO held that the conditions were not satisfied because the tax was not paid along with the return. The assessee cited case laws indicating that there is no specific time limit for paying the tax under Explanation 5, and as long as the tax is paid before the penalty is imposed, immunity should be granted.Tribunal's Findings:The Tribunal examined the arguments and relevant case laws. It noted that:- Explanation 5 does not specify a time limit for payment of tax.- The Hon'ble Gujarat High Court in CIT Vs. Mahendra C Shah held that the legislature did not stipulate a specific time limit for payment of tax.- The Hon'ble Rajasthan High Court in Gebilal Kanhaialal (HUF) Vs. ACIT held that penalty cannot be imposed if the tax and interest are paid before the imposition of penalty.- The Tribunal concluded that the assessee had paid the tax and interest before the penalty was imposed, and thus, the conditions of Explanation 5 were met.Conclusion:The Tribunal allowed the appeal, holding that the penalty under Section 271(1)(c) could not be imposed as the assessee had paid the tax along with interest before the imposition of the penalty. The order was pronounced on 06-01-2012.