2018 (4) TMI 1429 - AT - Income Tax

Tribunal upholds assessee's penalty immunity for voluntary disclosure, invalidates additional income penalty

The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, deleting the penalty imposed by the Assessing Officer under ... Penalty u/s 271(1)(c) - cash found during the search and additional income declared in the revised return - notice issued against deceased - defective notice - Held that:- The assessee has himself declared income into the return of income before issuing the notice u/s. 153A. Therefore, there is no concealment of any income. Even the Assessing Officer has not made addition on this score. Therefore, the penalty cannot be levied. In the penalty notice dated 29.12.2009, it has not been mentioned as to for which limb of section 271(1)(c), the notice was issued. The penalty order has been passed without assuming proper jurisdiction as per provisions of the Income-tax Act, in the name of legal heirs. All the notices were issued in the name of late MV Rao whereas the information regarding his death was submitted on 14.10.20111. No material on record before us to show that any notice for penalty was issued to the legal heir of late M.V. Rao before imposing penalty against such legal heir. On this aspect of the case also, we do not find any justification to sustain the penalty imposed against the legal heir of late M.V. Rao - Decided in favour of assessee. Issues Involved:1. Deletion of penalty imposed by the Assessing Officer under section 271(1)(c) of the IT Act, 1961.2. Validity of notice issued to the legal heir of the deceased assessee.3. Imposition of penalty on additional income declared and unexplained expenditures.Issue-wise Detailed Analysis:1. Deletion of Penalty Imposed by the Assessing Officer:The Revenue appealed against the order of the CIT(A) which deleted the penalty of Rs. 68,57,990/- imposed by the Assessing Officer under section 271(1)(c) on the grounds of income concealment and furnishing inaccurate particulars. The penalty was related to cash seized during the search amounting to Rs. 2,00,00,000/-. The CIT(A) found that the assessee disclosed the amount of Rs. 2,00,00,000/- in the return filed under section 139 and paid the due taxes along with interest. The CIT(A) concluded that the assessee fulfilled the conditions laid down in Explanation 5 to section 271(1)(c) and was entitled to immunity from penalty. The Tribunal upheld this finding, noting that the assessee voluntarily disclosed the income and paid taxes before the due date, thus no concealment occurred.2. Validity of Notice Issued to the Legal Heir:The assessee's legal heir contested the validity of the penalty notice issued by the Assessing Officer after the death of the original assessee. The Tribunal noted that the penalty notice dated 20.10.2011 was issued in the name of the deceased, and subsequent notices were also issued to the deceased. The penalty order was passed on 27.03.2012 against the legal heir without proper notice. The Tribunal held that the penalty imposed on the legal heir without proper jurisdiction and notice was unsustainable.3. Imposition of Penalty on Additional Income and Unexplained Expenditures:The assessee's cross-objections challenged the penalty on two additions: Rs. 1,43,917/- for foreign currency and Rs. 2,06,834/- for unexplained expenditure. The CIT(A) sustained the penalty on these additions as they were based on material found during the search and were not admitted by the assessee in the return of income. The Tribunal, applying the same reasoning as in the main appeal, found that the defective notice under section 271 read with section 274 and the lack of proper jurisdiction to impose penalty on the legal heir invalidated the penalty on these additions as well.Conclusion:The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, thus deleting the penalty imposed by the Assessing Officer. The Tribunal emphasized the importance of proper notice and jurisdiction in penalty proceedings and upheld the CIT(A)'s findings that the assessee had voluntarily disclosed the income and paid the due taxes, thus qualifying for immunity from penalty under Explanation 5 to section 271(1)(c).Order Pronounced:The order was pronounced in the open court on 5th April, 2018.