Tribunal cancels penalties for disclosed income under Section 271(1)(c)

The Tribunal canceled penalties imposed under section 271(1)(c) on additional income disclosed during a search under section 132 for two assessment years. The immunity under Explanation 5 to section 271(1)(c) applied to both furnished and yet-to-be-furnished returns, granting immunity for disclosed income. Penalties were canceled for differences in deductions due to withdrawal of claims in the original return. The Tribunal held that the voluntary nature of disclosure during the search was irrelevant for penalty imposition. The appeals of the assessee were allowed, and those of the Revenue were dismissed.

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Issues Involved:
1. Levy of penalty u/s 271(1)(c) on quantum of income disclosed during the search u/s 132.
2. Cancellation of penalty on various disallowances and differences between the assessee's claim and disclosed return of income.

Summary:

Issue 1: Levy of Penalty u/s 271(1)(c) on Income Disclosed During Search u/s 132
The assessee, a private limited company, filed its returns for AY 1987-88 and AY 1988-89. During a search u/s 132 on 29th and 30th Nov 1988, undisclosed investments and unrecorded entries totaling Rs. 82 lakhs were disclosed. The assessee filed revised returns incorporating these disclosures. The AO imposed penalties on the additional income disclosed during the search, rejecting the assessee's claim of immunity under Expln. 5 to s. 271(1)(c) r/w s. 132(4).

On appeal, the CIT(A) confirmed the penalty on the disclosed income but canceled it for other differences. The Tribunal held that the immunity under cl. (2) of Expln. 5 to s. 271(1)(c) applies to both returns already furnished and those yet to be furnished. Thus, the assessee was entitled to immunity for the disclosed income of Rs. 1,70,000 and Rs. 13,30,000 for AY 1987-88 and AY 1988-89, respectively. Consequently, the penalties for both years were canceled.

Issue 2: Cancellation of Penalty on Various Disallowances and Differences
The CIT(A) had canceled the penalty on various differences due to the withdrawal of the assessee's claim of deductions in the original return. The Tribunal upheld this decision, noting that the voluntary or otherwise nature of the disclosure during the search was irrelevant under Expln. 5 to s. 271(1)(c). The Tribunal also dismissed the Revenue's reliance on a similar case, as the facts differed significantly.

Conclusion:
The Tribunal canceled the penalties for both years and allowed the assessee's appeals, while dismissing the Revenue's appeals.

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