On voluntarily disclosure in response to notice u/s 153A before any detection by revenue, immunity from levy of penalty can’t be denied

Brief of the case:

In the case of DCIT Vs. Deepak Chaudhary Kolkata Bench of ITAT have held that the assessee has cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to Section 271(1)( c) of the Act and hence entitled for immunity from levy of penalty for all the assessment years under appeal. ITAT further held that the assessee had made voluntary disclosure of Rs. 25,00,000/- for the Asst Year 2005-06 during the course of search assessment proceedings after filing the return u/s 153A of the Act but before any detection by the department. The expression ‘to be furnished’ mentioned in Clause 2 of Explanation 5 to Section 271(1)(c) has to be construed as ‘required to be furnished u/s 153A of the Act.

Facts of the case:

• A search and seizure operation was conducted on 23.8.2006 u/s 132 of the Act in the Builder group of cases. The assessee is one of the individuals belonging to this group.
• In the course of search, the assessee was found to be in possession of undisclosed income and accordingly the assessee gave disclosure statement u/s 132(4) offering substantial income.
• In the course of assessment proceedings, the assessee disclosed further income of Rs. 25,00,000/- for the AY 2005-06.
• AO levied penalty u/s 271(1)(c ) for the AYs 2002-03 to 2005-06 on the ground that the assessee would not have come forward with the disclosure of undisclosed income.
• At the time of filing of the disclosure statement, as well as in course of the assessment proceedings, detailed cash flow charts and explanations were filed substantiating the disclosure made pursuant to search.

Contention of the revenue:

If search was not conducted, the assessee would not have come forward to disclose these undisclosed incomes and hence assessee has concealed the particulars of income and argued that penalty is leviable in terms of Explanation 5 to Section 271(1)(c).

Contention of the assessee:

• Assessee had cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to section 271(1)(c ) of the Act and hence is accordingly eligble for immunity from levy of penalty thereon.
• The provisions of Clause 2 of Explanation 5 to section 271(1)(c) is applicable for all the assessment years prior to the year of search.
• Additional disclosure of Rs. 25,00,000/-was made for AY 2005-06 voluntarily before any detection by the department.
• Nothing in the section 271(1)(c ) order of the Learned AO suggests that the additional income was detected by the department.
• The expression ‘to be furnished before the expiry of time specified in subsection (1) of section 139’ used in Clause 2 of Explanation 5 to section 271(1)(c ) of the Act might create some difficulty for claiming immunity and he argued that this very question has been answered in favour of the assessee by the Jurisdictional Calcutta High Court in the case of CIT Vs Brijendra Gupta in ITA No. 330 of 2009.

Held by CIT (A):

• CITA deleted the penalty for all the assessment years stating that the assessee had satisfied all the conditions stipulated in clause 2 to Explanation 5 to section 271(1)(c) and accordingly is entitled for immunity from levy of penalty.
• Assessee had made disclosure statement u/s 132(4) of the Act and had disclosed the same in the return filed in response to notice u/s 153A.
• Assessee had specified the manner in which such undisclosed income has been earned and paid taxes due thereon.

Held by ITAT:

• AO did not independently work out the quantum of undisclosed income which was different from or in excess of what was promised in the statement given u/s 132(4).
• Additional disclosure of Rs. 25,00,000/- for the AY 2005-06 was made before any detection by the department and was made voluntarily and hence the same has to be construed only as a revision of the disclosure statement u/s 132(4) of the Act as there was nothing contrary that was suggested in the penalty order u/s 271(1)(c ) of the Act with regard to the same.
• Reliance was placed on the decision of this tribunal in the case of DCIT vs Shayam Sunder Beriwal in ITA Nos. 1061 , 1062 & 1063 / Kol / 2008 wherein it was held that in the present case, this is also not a case of Revenue that the higher income declared by the assessee during the course of re-assessment proceedings only after being appraised by the department since the assessee paid tax of such higher income which was disclosed vide filing the return in response to notice under section 153C and such higher income has been filed by the assessee suo motu and before any specific finding by the Department the same cannot tantamount to concealment.
• It was held in DCWT vs Vivek Kr. Kathotia in WTA Nos. 02 to 08 / Kol / 2013, that the concept of a voluntary return of income may be important in penalty proceedings initiated in the normal assessment proceedings u/s 143(3) or 147 of the Act but not u/s 153A of the Act. When accepted by the AO then there is no concealment of income and consequently penalty u/s 271(1)(c ) of the Act cannot be imposed. The concealment of income is to be determined with regard to the return of income in response to notice u/s 153A of the Act.
• The immunity provided in Clause 2 of Explanation 5 to section 271(1)(c ) of the Act is available to all the assessment years prior to the year of search if the conditions stipulated thereon are satisfied.