Sunil Kumar Agarwal Vs ACIT (ITAT Kolkata)
ITAT Kolkata: Retraction Accepted – No Incriminating Material, Penalty u/s 271(1)(c) Deleted- Forced Disclosure Without Evidence Can’t Sustain Penalty – ITAT Kolkata
Kolkata Tribunal deleted penalty levied u/s 271(1)(c), holding that Explanation 5A was wrongly invoked when no incriminating material was found during search and disclosure stood retracted.
A search u/s 132 was conducted on 05.02.2021 against Healthcare/ESKAG group. Assessee, being a key person, was covered. He originally filed ROI for AY 2015-16 declaring income of ₹21.03 lakh. Pursuant to notice u/s 153A, he filed ROI declaring ₹1.61 crore including additional income of ₹1.40 crore disclosed during search u/s 132(4). However, assessee retracted by affidavit dated 18.02.2021, stating disclosure was forced on behalf of group. AO accepted retraction but still initiated penalty u/s 271(1)(c), levying ₹47.90 lakh on “concealment,” by applying Explanation 5A. CIT(A) upheld penalty.
Tribunal’s Observations
- Additional disclosure of ₹1.40 crore was not based on any incriminating document, seized asset, or unrecorded entry during search.
- Explanation 5A applies only where undisclosed assets/income are found during search & not disclosed in earlier returns. Here, nothing of that sort was seized.
- Disclosure under coercion, later retracted, cannot by itself justify penalty. A retracted statement, without corroborative evidence, is unsafe to rely upon.
- CBDT Circular No. 286/2/2003 itself cautions officers not to obtain confession during search without evidence.
- Tribunal relied on CIT vs. Raj Pal Bhatia (333 ITR 315 Delhi HC) & Beni Prasad Lahoti vs. DCIT (2022 Kol-Trib) that additions/penalties cannot rest solely on retracted statements.
Tribunal held Explanation 5A to s.271(1)(c) inapplicable; penalty imposed on voluntary disclosure without seized material was unsustainable. Orders of CIT(A) were set aside, penalty deleted. Both appeals allowed.
