When search is initiated, penalty is leviable u/s 271AAB and not under 271(1)(c)

PCIT Vs Jai Maa Jagdamba (Jharkhand High Court)

Jharkhand High Court held that when search is initiated, penalty is leviable under section 271AAB of the Income Tax Act. Accordingly, initiation of penalty proceedings u/s 271(1)(c) post initiation of search is unsustainable.

Facts- During the course of search, no incriminating material was found in the case of the respondent. The AO, subsequent to the said search had issued notice u/s. 153A of the Act to the respondent to furnish return of income of the respondent.

In response to the said notice, the respondent filed its return of income on 07.03.2016 showing loss at Rs. 2,40,73,444/-. In order to verify the genuineness of the aforesaid return of the respondent, the AO issued notice u/s. 143(2) of the Act to the respondent. AO also issued a notice u/s. 142(1) of the Act to the respondent seeking information from the respondent in respect of the audited financial statements of the respondent up-loaded on the Income Tax website.

The respondent filed a subsequent return of income manually before AO showing now a loss of Rs. 92,68,340/- for the same concerned period. The respondent filed another return of income manually before AO showing now an income of Rs. 19,73,110/-. As the respondent revised its return of income from loss of Rs. 2,40,73,444/- to income of Rs. 19,73,110/-; after issuance of notice u/s. 143 (2), questionnaire along with notice u/s. 142(1), the penalty proceedings were initiated for concealment of the particulars of income and/or inaccurate particulars of income to the tune of Rs. 2,60,46,553/- and notice u/s. 274 read with section 271 of the Act. Thereafter, the penalty proceedings continued and the Assessing Officer passed the penalty order imposing penalty amounting to Rs. 1,69,01,620/- u/s. 271(1) (c) of the Act on the respondent for concealing the particular of its income and for furnishing inaccurate particulars of such income.

Please become a Premium member. If you are already a Premium member, login here to access the full content.