2020 (7) TMI 336 - AT - Income Tax

ITAT Mumbai deletes penalties for undisclosed income based on improper satisfaction recording and lack of specificity.

Jayant B Patel HUF Versus Deputy Commissioner of Income Tax, Central Circle-2 (3) Mumbai

The ITAT Mumbai ruled in favor of the assessee, deleting penalties imposed for undisclosed income found during a search and additions made during ... Penalty u/s 271(1)(c) - Assessment u/ 153A - addition towards bogus long term capital gain and addition towards unexplained cash expenditure - HELD THAT:- No penalty under Explanation-5 to Section 271(1)(c) of the Act could be levied in respect of undisclosed income found in the course of search but which were duly returned by the assessee in the return filed u/s.153A of the Act together with compliance of other conditions submitted in Clause-2 of Explanation-5 to Section 271(1)(c) of the Act which provides immunity to the assessee from levy of penalty. By this, the penalty levied for all the assessment years in the total sum is deleted. In respect of penalty on additions made during the course of assessments framed u/s.153A of the Act for three assessment years i.e. A.Yrs 2001-02, 2003-04 and 2007-08, we hold that the same is deleted for recording improper satisfaction on the part of the ld. AO by not mentioning the specific offence committed by the assessee in the quantum assessment order and also for initiating penalty on one limb and levying penalty on the other limb of the alleged offence. By this, the penalty levied for three assessment years is deleted. - Decided in favour of assessee. Issues involved:Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for various assessment years based on undisclosed income found during a search, compliance with conditions for immunity from penalty, satisfaction recorded by the assessing officer, and the application of legal principles in penalty proceedings.Analysis:1. Levy of Penalty under Section 271(1)(c):The appeals before the ITAT Mumbai involved the confirmation of penalty under section 271(1)(c) of the Income Tax Act for multiple assessment years. The primary issue was whether the Commissioner of Income Tax (Appeals) was justified in upholding the penalty. The appeals related to the imposition of penalties for the assessment years 2001-02 to 2007-08 based on undisclosed income discovered during a search operation. The key contention was whether the conditions for claiming immunity from penalty, as provided under Explanation-5, Clause-2 of Section 271(1)(c) of the Act, were met by the assessee.2. Compliance with Immunity Conditions:The ITAT found that the assessee had complied with all the conditions for immunity from penalty as specified in the statute. The assessee had declared the undisclosed income found during the search, included it in the returns filed under section 153A of the Act, and paid taxes on the same. Consequently, the Tribunal held that no penalty could be levied on the sums disclosed by the assessee in the returns filed under section 153A of the Act.3. Satisfaction Recorded by Assessing Officer:The assessing officer had initiated penalty proceedings for various additions made during the assessments under section 153A of the Act. However, there was a discrepancy in the satisfaction recorded by the assessing officer regarding the specific offense committed by the assessee. The ITAT observed a lack of clarity in the penalty order, where the assessing officer had not clearly specified whether the penalty was for concealment of income or furnishing inaccurate particulars of income.4. Legal Principles in Penalty Proceedings:The Tribunal highlighted the importance of the assessing officer clearly mentioning the specific offense committed by the assessee in penalty orders. It referred to relevant legal precedents, including the decision in the case of Samson Perinchery, to emphasize the significance of proper recording of satisfaction and the specific charge of offense in penalty proceedings. The Tribunal distinguished the recent decision in the Ventura Textiles case and held that the principles laid down in the Samson Perinchery case were applicable in the present matter.5. Decision and Outcome:Ultimately, the ITAT ruled in favor of the assessee, allowing all the appeals and deleting the penalties imposed for the assessment years in question. The Tribunal concluded that penalties could not be levied for the undisclosed income found during the search, and the penalties imposed for additions made during the assessment years were deleted due to the improper satisfaction recorded by the assessing officer and the confusion in specifying the offense committed by the assessee.This detailed analysis of the judgment from the Appellate Tribunal ITAT Mumbai provides insights into the legal intricacies surrounding the imposition of penalties under the Income Tax Act and the importance of complying with statutory provisions and legal principles in penalty proceedings.