Penalty u/s 271(1)(c) cannot be levied when returned income is accepted as it is

Brief of the case:

• The ITAT Chandigarh in the case of Sh. Praveen Garg vs. ACIT held that penalty u/s 271(1)(c) can be levied only in the cases of concealment of income in the return of income filed by the assessee. In the present case, the return filed in response to notice u/s 153A was accepted by the AO as it is which also included surrendered income not disclosed in the original return due to bonafide error.
• Therefore, when there is no concealment in the return filed in response to notice u/s 153A , penalty u/s 271(1)(c) not sustainable.
  

Facts of the case:

• The assesse derives income from House Property and share in the partnership firm. A search under sect ion 132(1) of the Act was conducted on 15.07.2008 at the residences and office of the individual and group concerns of M/s B.R.S Institute of Medical Sciences group of cases including the residence. In response to notice under sect ion 153A of the Act, the assessee filed his return of income on 22.02.2010 declaring income of Rs.67,68,610/-.AO accepted such return and the case of the assessee was assessed at the returned income of Rs. 67,68,610/- vide an order u/s 153A(1)(b).
• Assessee was served a notice for the initiation of penalty proceedings wherein the assessee was asked to explain why penalty as per explanation 5-A to sect ion 271( l ) (c) of the Act should not be levied as the return has not been fi led by the assessee within the due date. Consequently, the penalty under section 271( l ) (c) of the Act of Rs. 22,42,867/- was imposed by the Assessing Officer.
• The CIT(A) accepted the assessee’s plea that being a partner in an audit firm and also in a non-audit Firm, the assessee can file its return of income only after finalization of the Income Tax Return of the all the firms. However, this plea of assessee does not help as the surrender of additional income was disclosed in the return filed in response to notice u/s 153A. Hence, it is apparent that had it not been for the search operation and questions raised during recording of the statement, there would have been no disclosure of additional income by the assessee. Hence, the assessee was not entitled to immunity conferred u/s 271 (1) (c) Explanation 5A.
• Aggrieved assessee is in appeal before ITAT.
  

Contention of the Assessee:

• The learned counsel for the assessee contended that the Explanation 5-A to sect ion 271(1) (c) of the Act is not applicable in the case of the assessee as there was no entry found in the books of account for which penalty was initiated.
• Further, Explanation 5-A to sect ion 271(1) (c) of the Act is not applicable in the case of the assessee as the due date of return in the case of the assessee was 30.9.2008, which has not expired on the date of search .Reliance was placed on the decision of ITAT Mumbai in the case of Kshiti R. Maniar Vs. ACIT in ITA No.1020/Mum/2011.
• The assessee is not a technical person and it was advised that the surrendered amount has to be shown in the return filed in response to sect ion 153A of the Act . The error committed by the assessee was bonafide and inadvertent and, therefore, penalty is not leviable.
  

Held by ITAT Chandigarh:

• Tribunal observed that the assessee is a partner in two firms and the books of account of one firm is subject to tax audit. Therefore, in his case the due date of filing of the return cannot be 31.7.2008 and it would be 30.9.2008. This fact was admitted by the learned CIT (Appeals) in his findings.
• Therefore, at the time of search on 15.7.2008, the due date of filing of the return for assessment year under appeal i.e. 2008-09 had not expired because the due date of filing of the return was 30.9.2008.
• As such in the present case, the deeming provisions of Explanation 5-A cannot be applied because at the time of search, the due date for filling return for the relevant previous year had not expired.
• Further, the penalty upheld by CIT(A) for concealment of income because the returned income u/s 153A was accepted which included the surrendered income too.
• Thus, since there was no concealment of the income in the return filed in response to notice u/s 153A , penalty u/s 271(1)(c) cannot be levied.
• In result the appeal of the assessee was allowed.