2012 (6) TMI 480 - AT - Income Tax

Tribunal rules penalty not applicable for disclosed income under section 153A

SHRI PREM ARORA Versus DEPUTY COMMISSIONER OF INCOME TAX

SHRI PREM ARORA Versus DEPUTY COMMISSIONER OF INCOME TAX - TMI Issues Involved:1. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.2. Voluntariness of income disclosure under section 153A.3. Relevance of original returns filed under section 139 in penalty proceedings under section 153A.4. Applicability of Explanation 5 and Explanation 5A to section 271(1)(c) in the context of searches conducted before and after 1st June 2007.Issue-wise Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c):The primary issue for consideration was the imposition of a penalty amounting to Rs. 47,51,579/- under section 271(1)(c). The facts of the case involved a search and seizure action under section 132(1) conducted on 22/11/2006, which led to the discovery of unaccounted cash and incriminating documents. The assessee filed returns under section 153A, admitting undisclosed income. The assessing officer imposed a penalty under section 271(1)(c), arguing that the disclosure was not voluntary and was prompted by the search, thereby attracting the provisions of Explanation 5 to section 271(1)(c).2. Voluntariness of Income Disclosure under Section 153A:The assessee contended that the income declared in response to the notice under section 153A should be treated as duly disclosed, and therefore, not subject to penalty for concealment. The Tribunal examined whether the return filed under section 153A could be considered voluntary. It was concluded that the return filed under section 153A is not voluntary, as it is mandated by a notice issued following a search, and any disclosure made in such a return cannot be considered voluntary.3. Relevance of Original Returns Filed under Section 139:The Tribunal analyzed whether the original returns filed under section 139 could be referenced for determining concealment of income. It was held that the assessment or reassessment under section 153A is independent of the original returns filed under section 139. The concealment of income must be assessed with reference to the return filed in response to the notice under section 153A. Since the income declared in the return under section 153A was accepted, there was no concealment of income, and thus, no penalty could be imposed.4. Applicability of Explanation 5 and Explanation 5A to Section 271(1)(c):The Tribunal examined the applicability of Explanation 5 and Explanation 5A to section 271(1)(c). Explanation 5 applies to searches conducted before 1st June 2007, while Explanation 5A applies to searches conducted on or after this date. The Tribunal noted that Explanation 5 does not cover income based on entries in books or documents, which was the basis of the assessee's undisclosed income. Therefore, Explanation 5 was not applicable to the assessee's case for the assessment year 2004-05. The Tribunal also observed that Explanation 5A, which includes income based on entries in books or documents, was not applicable as it was introduced for searches conducted on or after 1st June 2007.Conclusion:The Tribunal held that the penalty under section 271(1)(c) was not imposable as the income declared in the return filed under section 153A was accepted by the assessing officer, and there was no concealment of income. The Tribunal directed the assessing officer to delete the penalty. The appeal filed by the assessee was allowed.