2019 (10) TMI 1240 - AT - Income Tax

Tribunal overturns penalties for voluntary income disclosure

Parag V. Chugh Versus The DCIT, Ci rcle – 1, Baroda.

The Tribunal allowed all appeals filed by the assessee, leading to the deletion of penalties imposed under Sections 271(1)(c) and 271AAB for the ... Penalty levied under explanation 5A of section 271(1)(c) - whether the assessee can be visited with the penalty with respect to the income disclosed by him in such proceedings voluntarily? - HELD THAT:- Penalty shall be levied if the assessee in the course of such initiated under section 132 of the Act was found to be the owner of any money, bullion, jewellery or other valuable article or there is some income based on the entry in the books of accounts/documents. Then, it shall be presumed that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. However in the case on hand, we note that there is no such allegation made by the authorities below as discussed above. Thus, it is transpired that the assessee has disclosed additional income in the return issued under section 153A of the Act voluntarily and without having found any income by the Revenue in the manner provided under explanation 5A to section 271(1)(c) of the Act. As such, there was not found any undisclosed income by the Revenue in the course of such conducted under section 132 of the Act. There cannot be any penalty under explanation 5A to section 271(1)(C) of the Act until and unless it supported on the basis of incriminating document. It is also pertinent to note that the additional was also not disclosed in the statement furnished under section 132(4) of the Act, A query was raised to the Ld. DR whether the income disclosed by the assessee in pursuance to the search was 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 assessee additional income offered to tax even without admitting the same in the statement furnished under section 132(4) of the Act cannot be subject to the penalty under explanation 5A to section 271(1)(C) of the Act. Accordingly, we hold that there cannot be any penalty under section 271(1)(C) - Decided in favour of assessee Penalty u/s 271 AAB - HELD THAT:- There was no documentary evidence found by the search team suggesting that there was any undisclosed income of the assessee. As such the income disclosed by the assessee was voluntarily without having found any document in the course of search. We also note that there no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the ld. AR for the assessee. See M/S. MARVEL ASSOCIATES VERSUS ACIT, CENTRAL CIRCLE-2, VISAKHAPATNAM [2018 (3) TMI 946 - ITAT VISAKHAPATNAM] - we reverse the order of the authorities below and direct the AO to delete the penalty levied by him under section 271 AAB - Decided in favour of assessee. Issues Involved:1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act for Assessment Years 2007-08 to 2011-12.2. Imposition of penalty under Section 271AAB of the Income Tax Act for Assessment Year 2012-13.Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act for Assessment Years 2007-08 to 2011-12:The primary issue in these appeals was the imposition of penalty under Section 271(1)(c) of the Income Tax Act, specifically under Explanation 5A, which deals with penalty for concealment of income or furnishing inaccurate particulars of income.Facts:The assessee, an individual and proprietor of M/s Rishi Anand Sales, was subject to a search and seizure operation under Section 132 of the Act on 3rd July 2012. In response to the notice under Section 153A, the assessee filed a return declaring additional income. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) read with Section 274 for the additional income disclosed.Contentions:- The assessee argued that the additional income was voluntarily offered and not based on any seized materials with incriminating value.- The AO contended that the additional income was disclosed only because of the search proceedings, and thus, it should be considered as concealed income.Tribunal's Findings:- The Tribunal noted that Explanation 5A to Section 271(1)(c) presumes concealment if the assessee is found with undisclosed assets or income during a search. However, in this case, no such incriminating evidence was found.- Relying on the precedent set in Ajay Traders Vs. DCIT, the Tribunal held that penalty under Explanation 5A cannot be imposed without incriminating documents.- The Tribunal concluded that the additional income disclosed by the assessee was voluntary and not based on any documents found during the search, thus not warranting a penalty under Section 271(1)(c).Conclusion:The Tribunal allowed the appeals for Assessment Years 2007-08 to 2011-12, deleting the penalties imposed under Section 271(1)(c).2. Imposition of Penalty under Section 271AAB of the Income Tax Act for Assessment Year 2012-13:The issue here was the imposition of penalty under Section 271AAB, which pertains to penalty in cases where search has been initiated.Facts:For AY 2012-13, the assessee disclosed additional income in the return filed under Section 153A. The AO imposed a penalty at the rate of 10% of the additional income disclosed, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].Contentions:- The assessee argued that the additional income disclosed did not constitute 'undisclosed income' as defined under Section 271AAB.- The AO and CIT(A) maintained that the penalty was justified as the additional income was disclosed due to the search proceedings.Tribunal's Findings:- The Tribunal referred to Explanation (c) to Section 271AAB, which defines 'undisclosed income' and requires incriminating evidence found during the search.- It was noted that no documentary evidence or incriminating material was found during the search to suggest undisclosed income.- Citing the case of ACIT Vs. Marvel Associates, the Tribunal emphasized that penalty under Section 271AAB requires evidence of undisclosed income, which was absent in this case.Conclusion:The Tribunal allowed the appeal for AY 2012-13, directing the AO to delete the penalty imposed under Section 271AAB.Final Outcome:All six appeals filed by the assessee were allowed, and the penalties imposed under Sections 271(1)(c) and 271AAB were deleted.