Assessee's voluntary declaration of additional income from seized diary entries doesn't prevent section 271(1)(c) penalty imposition

The ITAT Hyderabad upheld penalty under section 271(1)(c) against an assessee who declared additional income based on seized diary entries in response to notice under sections 153A/153C. The assessee argued that penalty cannot be levied when additional income is voluntarily declared in returns filed post-search conducted after July 1, 2007. However, citing Sarita Kaur Manjeet Singh Chopra case, the tribunal found no infirmity in CIT(A)'s order confirming the penalty imposed by the Assessing Officer, dismissing the assessee's grounds of appeal.

---

---

Issues:
The appeal challenges the confirmation of penalty under section 271(1)(c) of the I.T. Act by the CIT (A) related to the assessment year 2016-17.

Facts and Decision:
The individual assessee derived income from salary and initially declared a total income of Rs. 15,58,070. Following a search and seizure action, the assessee filed a revised return admitting a total income of Rs. 70,78,070. The Assessing Officer found a red diary during the search, reflecting chit contributions. As the assessee failed to substantiate the sources of these contributions, he admitted additional income of Rs. 55,20,600. Subsequently, the Assessing Officer imposed a penalty of Rs. 17,05,680 under section 271(1)(c), which was upheld by the CIT (A).

Assessee's Argument:
The assessee contended that no penalty should be levied as the returned income was accepted by the Assessing Officer. Referring to relevant provisions, the assessee argued that the penalty should be based on the income assessed over and above the returned income. Additionally, citing case law, the assessee argued that penalty under section 271(1)(c) cannot be automatically imposed merely because a revised return showed higher income.

Revenue's Argument:
The Revenue supported the penalty, emphasizing the applicability of Explanation 5A to section 271(1)(c). It was argued that despite the declaration of additional income in the return filed post-search, the assessee was deemed to have furnished inaccurate particulars of income as per the explanation. Various tribunal decisions were cited to support this position.

Tribunal's Decision:
After considering arguments and precedents, the Tribunal found no infirmity in the CIT (A)'s order upholding the penalty. The Tribunal noted that the assessee admitted additional income based on seized diary entries, triggering penalty proceedings under section 271(1)(c) and Explanation 5A. The Tribunal held that the penalty was rightly imposed and sustained, dismissing the assessee's appeal.

Conclusion:
The Tribunal upheld the penalty imposed under section 271(1)(c) by the Assessing Officer and confirmed by the CIT (A), dismissing the assessee's appeal.

Order:
The appeal filed by the assessee was dismissed, and the order was pronounced in the Open Court on 18th January, 2024.

---