Tribunal cancels penalty under Section 271(1)(c) of Income Tax Act - Appeal allowed based on lack of justification

The Tribunal allowed the appeal of the assessee and canceled the penalty imposed under Section 271(1)(c) of the Income Tax Act. The Tribunal found that the imposition of penalty was not justified based on precedents and the timing of the original return filing. The Tribunal emphasized that the penalty cannot be imposed without actual concealment or non-disclosure of income particulars, leading to the cancellation of the penalty in this case.

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Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Applicability of law for imposing penalty under Section 271(1)(c) at the time of filing the original return.
3. Retrospective effect of Explanation 5A of Section 271(1)(c) inserted by the Finance Act, 2009.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:

The primary issue in this case is the imposition of a penalty amounting to Rs. 2,36,000/- under Section 271(1)(c) of the Income Tax Act. The penalty was levied by the Assessing Officer following a search and seizure operation conducted at the premises of the Bestech group, which included the assessee. The assessment was completed on a total income of Rs. 3,25,98,240/- and the penalty proceedings culminated in the imposition of the penalty at the minimum rate of 100%.

The Tribunal noted that in similar cases involving members of the same group, such as Alok Bhandari, Rajendra Bhandari, and M/s Bestech Hospitalities Pvt. Ltd., the penalty under Section 271(1)(c) had been deleted. The Tribunal relied on these precedents to conclude that the issue in dispute was squarely covered in favor of the assessee.

2. Applicability of Law for Imposing Penalty under Section 271(1)(c) at the Time of Filing the Original Return:

The assessee argued that the law applicable for imposing the penalty under Section 271(1)(c) is the law in force at the time of filing the original return. In this case, the original return was filed on 11.11.2008, while the Finance Act (No. 2) of 2009, which inserted Explanation 5A to Section 271(1)(c) with retrospective effect from 1.6.2007, came into effect later.

The Tribunal agreed with the assessee's contention, emphasizing that the law prevailing on the date of filing the return is applicable for the imposition of penalty. The Tribunal cited the case of Alok Bhandari, where it was held that once a return is filed pursuant to notice under Section 153A, it is treated as a return filed under Section 139 of the Act. The penalty for concealment or furnishing inaccurate particulars of income has to be seen vis-a-vis the return filed by the appellant. Since the income was declared and accepted under Section 139 r.w.s. 153A of the Act, the question of concealment or furnishing inaccurate particulars does not arise.

3. Retrospective Effect of Explanation 5A of Section 271(1)(c) Inserted by the Finance Act, 2009:

The Revenue argued that Explanation 5A to Section 271(1)(c) of the Act, made effective retrospectively from 1.6.2007, justified the imposition of the penalty. However, the Tribunal noted that the original return of income in the instant case was filed before the return filed in the case of Alok Bhandari, where the Tribunal had quashed the penalty under Section 271(1)(c).

The Tribunal emphasized that the deeming fiction enacted in Explanation 5A as on the statute on 03.03.2009 (the date of filing the return of income under Section 153A) is not applicable to the facts of the appellant-company. The Tribunal also cited several judicial precedents, including Prem Arora vs. DCIT, CIT vs. SAS Pharmaceuticals, and others, to support the view that penalty cannot be imposed unless there is actual concealment or non-disclosure of particulars of income.

Conclusion:

The Tribunal concluded that since the facts and circumstances of the instant case are identical to those in the case of Alok Bhandari, the penalty under Section 271(1)(c) of the Act should be canceled. The Tribunal allowed the appeal of the assessee and quashed the penalty.

Order:

The appeal of the assessee is allowed, and the penalty under Section 271(1)(c) of the Act is canceled. The order was pronounced in the open court on 07/12/2017.

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