Penalty for disclosed income deleted, but penalty on unaccounted income restored on reassessment.

The penalty imposed on the income surrendered during search was deleted by the CIT(A) as it was disclosed in response to a notice u/s. 153A and taxes were paid before filing the return, meeting conditions under Explanation 5 to Section 271(1)(c). However, the penalty on unaccounted income from seized documents was restored for reassessment due to discrepancies in explanations provided by the assessee. The revenue's appeal was dismissed, and the assessee's appeal was allowed for statistical purposes.

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Issues involved:
Cross appeals by assessee and revenue against CIT(A) order regarding penalty u/s.271(1)(c) for assessment year 2004-2005.

Analysis:
1. Imposition of Penalty on Surrendered Amounts:
The penalty was imposed by the AO on amounts surrendered during search and additions made during assessment. Assessee disclosed &8377; 67,04,500 during search, but actual unrecorded payment was &8377; 1,25,50,500. Penalty was imposed on the difference of &8377; 73,96,500. CIT(A) deleted penalty citing that the income was disclosed in response to notice u/s. 153A and taxes were paid before filing the return. The decision was supported by case laws and conditions stipulated in Explanation 5 to Section 271(1)(c).

2. Penalty on Unaccounted Income from Seized Documents:
During search, income of &8377; 15,50,000 was declared from seized documents, but actual undisclosed income was &8377; 41,43,263. Penalty was imposed on the difference of &8377; 25,93,263. Assessee explained that certain portions of seized material were poorly copied, leading to discrepancies. Assessee offered &8377; 51,54,000 from legible material for taxation, claiming unintentional errors. Penalty was imposed without proper appreciation of explanations. The penalty was restored back to AO for reevaluation after providing a fair opportunity to the assessee.

3. Conclusion:
CIT(A) deleted penalty on income surrendered during search, citing compliance with Explanation 5 conditions. However, penalty on unaccounted income from seized documents was restored for reassessment. The appeal of the revenue was dismissed, while the appeal of the assessee was allowed for statistical purposes.

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