INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Leviability - Assessee offered additional income during search and paid taxes -

During search at residence of assessee, documents pertaining to sale of property were found and seized. AO noted that assessee declared Rs. 50 lakhs, being 50% of Rs. 1 crore as her share of sale consideration in capital gains computation. AO further noted that the agreement to sale seized during search, revealed the true value of sale consideration to be Rs. 3.5 crores. When confronted, assessee and her husband admitted in statement under section 132(4) that the actual sale consideration received was Rs. 3.5 crores. Consequently, in return filed under section 153C, the assessee declared capital gain by showing the sale consideration as Rs. 1.75 crore being 50% of her share in true sale consideration. Further, AO noted that assessee declared interest on saving bank account, which was not declared in original return. Subsequently, AO levied penalty under section 271(1)(c) by holding that assessee furnished inaccurate particulars of the sale consideration and concealed the particulars of interest income. Held: Admittedly, assessee offered additional income during the search and paid taxes on the same. It was also noted that no addition had been made by AO on such income offered by assessee and had been accepted by Revenue. It was noted that while passing the assessment order, AO recorded satisfaction in respect of concealment towards the additional income offered by assessee. Further, notice issued under section 274 was for both the limbs being filing of inaccurate particulars of income as well as concealment. Further, on perusal of the penalty order passed by AO, it was clear that all throughout the submissions made by assessee was in respect of concealment of income regarding the additional sale consideration of land, however, AO levied penalty for furnishing inaccurate particulars of sale consideration of the land. Thus, it was a clear non-application of mind by AO. Besides, it is settled that where no addition to the income declared by the searched person in the return filed, pursuant to search, is made, it is not open to the Revenue to levy penalty by virtue of Explanation 5 to section 271. Hence, the penalty levied under section 271(1)(c) was deleted.

REFERRED : Pr. CIT v. Rajkumar Gulab Badgujar (2019) 111 Taxmann.com 257 (SC) : 2019 TaxPub(DT) 6306 (SC)

FAVOUR : In assessee's favour

A.Y. : 2011-12

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