2024 (2) TMI 632 - AT - Income Tax

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

Shri Kishan Kumar Agarwal, Secunderabad Versus Asstt. C.I.T. Central Circle 2 (4), Hyderabad

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 ... Penalty u/s 271(1)(c) - additional income in the return filed in response to notice u/s 153A/153C - HELD THAT:- In the instant case, the assessee on the basis of various entries mentioned in the seized diary admitted additional income of over and above the returned income which was accepted by the Assessing Officer. As relying on Sarita Kaur Manjeet Singh Chopra vs. Income Tax Officer [2015 (12) TMI 1025 - ITAT PUNE] in absence of any decision brought to our notice the assessee to the proposition that penalty cannot be levied u/s 271 (1)(c) of the Act in a case where search has taken place after 1.7.2007 and the assessee has declared the additional income in the return filed in response to notice u/s 153A/153C, we do not find any infirmity in the order of the learned CIT (A) in confirming the penalty levied by the Assessing Officer. Accordingly, the grounds raised by the assessee are dismissed. 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.