2019 (7) TMI 1549 - AT - Income Tax

Tribunal cancels penalties under Income Tax Act citing lack of incriminating evidence

M/s. Guruprasad Infrastructure Pvt. Ltd. Versus D.C.I.T, Central Circle-1, Baroda.

The Tribunal allowed the assessee's appeals for both assessment years, deleting the penalties imposed under Section 271(1)(c) of the Income Tax Act. The ... Penalty u/s 271(1)(c) - income returned & accepted by AO in order passed u/s 153 A r w s 143 (3) - HELD THAT:- There was no reference made to any incriminating document found during the search. Therefore, we are of the view that the addition of undisclosed income was based on the statement furnished under section 132(4) of the Act. At the time of the hearing, a query was raised to the Ld. DR whether the assessee disclosed the income in pursuance to the search based on the incriminating document, but he failed to bring any material on record. Therefore, in the absence of any documentary evidence, we infer that the income disclosed by the assessee was not based on the incriminating materials. Penalty under Explanation 5A to section 271 (1)(c), the of the Act can be attracted if the assessee was found to be the owner of any money, bullion, jewellery or other valuable article or thing or any income based on any entry in any books of account or other documents or transactions. But, in the case on hand, there was no such allegation against the assessee either in the assessment or penalty or the CIT (A) order referring to any specific incriminating documents. As relying on Ajay Traders Vs. DCIT [2016 (6) TMI 422 - ITAT JAIPUR] there cannot be any penalty under explanation 5A to section 271(1)(C) of the Act until and unless the quantum addition is based on some incriminating document. Accordingly, we hold that there cannot be any penalty under section 271(1)(C) of the Act in the given facts and circumstances. - Decided in favour of assessee. Issues Involved:1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.2. Consideration of incriminating documents or assets for penalty under Explanation 5A to Section 271(1)(c).3. Applicability of judicial precedents and binding judgments.Detailed Analysis:Issue 1: Confirmation of Penalty Levied Under Section 271(1)(c)The primary issue raised by the assessee was that the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] erred in confirming the penalty imposed by the Assessing Officer (AO) on the income declared in the return filed under Section 153A of the Income Tax Act, 1961. The AO had levied a penalty amounting to Rs. 67,98,000/- for AY 2010-11 and Rs. 25,55,330/- for AY 2011-12, which was 100% of the tax sought to be evaded. The assessee argued that the income was voluntarily disclosed in the return filed under Section 153A and that there was no additional income over and above what was declared, thus no concealment of income took place.Issue 2: Consideration of Incriminating Documents or Assets for Penalty Under Explanation 5A to Section 271(1)(c)The AO and Ld. CIT(A) based their decision on the premise that the penalty was justified under Explanation 5A to Section 271(1)(c), which deals with concealment of income found during search operations. The Ld. CIT(A) upheld the penalty, arguing that the additional income disclosed was based on documents or assets found during the search, thus falling within the purview of 'deemed to have been concealed' income under Explanation 5A. However, the assessee contended that there was no incriminating documentary evidence found during the search to justify the penalty.Issue 3: Applicability of Judicial Precedents and Binding JudgmentsThe Ld. CIT(A) relied on the judgment of the Calcutta High Court in the case of CIT Vs. Prasanna Dugar, which was subsequently confirmed by the Supreme Court, to uphold the penalty. The assessee, on the other hand, cited the Gujarat High Court judgment in Kirit Dahyabhai Patel Vs. ACIT, arguing that no penalty should be levied if the income is disclosed in the return filed under Section 153A.Judgment Summary:1. Absence of Incriminating Evidence: The Tribunal noted that there was no reference to any incriminating document found during the search in the orders of the AO and Ld. CIT(A). The income disclosed by the assessee was not based on any incriminating materials but was voluntarily declared in the return filed under Section 153A.2. Explanation 5A to Section 271(1)(c): The Tribunal observed that for Explanation 5A to apply, there must be incriminating documents or assets found during the search. Since no such documents were found, the penalty under Explanation 5A could not be justified.3. Judicial Precedents: The Tribunal distinguished the case of CIT Vs. Prasanna Dugar, noting that the facts were different as there was no discussion on whether the addition was based on incriminating materials. The Tribunal found the judgment in Ajay Traders Vs. DCIT more applicable, where it was held that penalty under Explanation 5A cannot be imposed without incriminating documents.4. Conclusion: The Tribunal deleted the penalty imposed by the AO and confirmed by the Ld. CIT(A), allowing the appeals for both AY 2010-11 and AY 2011-12. The Tribunal emphasized that without incriminating evidence, the penalty under Section 271(1)(c) read with Explanation 5A could not be sustained.Final Order:The appeals filed by the assessee for both assessment years were allowed, and the penalties imposed were deleted. The judgment was pronounced on 19/07/2019 at Ahmedabad.This comprehensive analysis covers all relevant issues and preserves the legal terminology and significant phrases from the original text, ensuring a thorough and detailed summary.