2018 (12) TMI 1068 - AT - Income Tax

Tribunal partially allows appeal, remits validity issue to CIT(A) for factual examination. Upholds penalty for income concealment.

The Tribunal partially allowed the appeal for statistical purposes, remitting the issue of the validity of the show cause notice to the CIT(A) for a ... Levy of penalty u/s. 271(1)(c) - income admitted in the return filed in response to notice u/s 153A - A.O. has issued notice both u/s. 271(1)(c) and section 271AAA - Held that:- A.O. has given the said notice out of abundant caution. Prima facie satisfaction of the A.O. regarding the concealment was clearly exhibited in the assessment order. Hence, the CIT(A) has found no reason to hold that the penalty is liable to be quashed since the notice u/s. 271(1)(c)and 271AAA both were issued and notice u/s. 271AAA was not acted upon. We find that the reasoning given by the CIT(A) above is cogent. The assessee has received both notices. Notice u/s. 271AAA was issued by the A.O. under abundant caution only and it was not subsequently acted upon. As regards the striking off the relevant limb in the notice u/s. 271(1)(c) this issue was never raised before the ld. CIT(A). In our considered opinion, the adjudication of this issue needs reference to the original records in order to examine the veracity of the assessee’s claim, in view of the ld. CIT(A)’s finding that the penalty was levied on specific charge of concealment of income and noting that the assessee has pleaded that only notice u/s. 271AAAA was received. Hence, we deem it appropriate to remit this issue to the file of the CIT(A) only after factual examination of this claim, the case law on the issue cited above need to be considered. CIT(A) is directed to consider the issue and pass a speaking order. The penalty u/s. 271(1)(c) which are levied under the caption of Explanation 5A have to be levied irrespective of the fact whether the undisclosed income declared in search is disclosed by the assessee in the return of income furnished after the date of search. Hence, the assessee’s plea that the penalty should not be levied as the undisclosed income has been offered in the return of income pursuant to search cannot come to the rescue of the assessee. The case law cited by the ld. Counsel of the assessee in this regard with regard to the Kirit Dahyabhai Patel vs-ACIT, (2015 (1) TMI 201 - GUJARAT HIGH COURT) and DCIT-vs-Purti Sakhar Kharkhana (2013 (12) TMI 242 - ITAT NAGPUR) cannot help the case of the assessee as they were not rendered under the context of the penalty levied u/s. 271(1)(c) under Explanation 5A. Hence, we find that there is no infirmity in the order of the ld. CIT(A) upholding the levy of penalty on merits of the case. - Appeal of assessee is partly allowed for statistical purposes. Issues Involved:1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Prima facie satisfaction of the Assessing Officer (AO) regarding concealment of income.3. Validity of the show cause notice issued under Section 274.4. Applicability of Explanation 5A to Section 271(1)(c).5. Consideration of judicial precedents and their relevance to the case.Detailed Analysis:1. Confirmation of Penalty under Section 271(1)(c):The appellant's appeal was against the order of the Commissioner of Income Tax (Appeals) confirming a penalty of Rs. 2,48,29,695/- levied under Section 271(1)(c) for the assessment year 2008-09. The penalty was imposed due to the concealment of income amounting to Rs. 7,30,50,000/- which was detected during a search operation. The appellant argued that since the income declared in response to the notice under Section 153A was accepted without any additions, there was no cause for penalty. However, the AO and CIT(A) held that the penalty was justified as the additional income was offered only after the search operation, indicating concealment.2. Prima Facie Satisfaction of the AO:The appellant contended that the AO initiated penalty proceedings mechanically without prima facie satisfaction. The CIT(A) rejected this argument, stating that the AO had clearly recorded the initiation of penalty proceedings in the assessment order and discussed the modus operandi of the appellant's concealment of income. The CIT(A) emphasized that the AO's satisfaction was discernible from the assessment order, indicating that the proceedings were not initiated in a perfunctory manner.3. Validity of the Show Cause Notice:The appellant argued that the show cause notice issued under Section 274 was defective as it did not specify the exact limb of the charge. The CIT(A) and the Tribunal noted that the notice was issued both under Sections 271(1)(c) and 271AAA, but the penalty was ultimately levied under Section 271(1)(c) on the specific charge of concealment. The Tribunal remitted the issue back to the CIT(A) for a factual examination of the claim regarding the defect in the notice.4. Applicability of Explanation 5A to Section 271(1)(c):Explanation 5A to Section 271(1)(c) was brought into statute to deal with cases where concealed income is discovered during a search operation. The CIT(A) held that the appellant was deemed to have concealed income even if it was disclosed in the return filed in response to the notice under Section 153A. The Tribunal upheld this view, stating that the penalty under Explanation 5A is applicable irrespective of the fact that the undisclosed income was declared in the return filed after the search.5. Consideration of Judicial Precedents:The appellant relied on various judicial precedents to argue against the penalty. The CIT(A) and the Tribunal distinguished these cases, noting that they were either not relevant to the facts of the present case or were decided under different legal contexts. The Tribunal also noted that the issue of the validity of the notice under Section 271(1)(c) was not raised before the CIT(A) and required a factual examination.Conclusion:The Tribunal partially allowed the appeal for statistical purposes, remitting the issue of the validity of the show cause notice to the CIT(A) for a factual examination. The Tribunal upheld the CIT(A)'s decision on the merits of the case, confirming the penalty under Section 271(1)(c) for concealment of income as per Explanation 5A. The case was directed to be reconsidered by the CIT(A) with reference to the judicial precedents and the factual findings on the notice issue.