INCOME TAX ACT, 1961

Section 271(1)(c) Section 271AAA

Penalty under section 271(1)(c) - Leviability - Income surrendered in search not disclosed in return(s) filed in response to notice issued under section 153A(1)(a) -

Assessee had taken additional ground pertaining to levy of penalty under section 271(1)(c) . It was contended that the instant case of the assessee was covered under the provisions of section 271AAA. The background leading to additional ground was that for the assessment year 2005-06, return declaring income of Rs. 1,48,33,570 was filed on 28-10-2005. On 30-7-2009, a search and seizure operation under section 132(1) was conducted on the assessee, who was engaged in the business of manufacture and trading of metal sheets. During the course of search, certain documents were seized and the assessee had made surrender of Rs. 10.50 crores. Out of surrender of Rs. 10.50 crores, a sum of Rs. 3.50 crores was in respect of assessment year 2009-10 and the remaining Rs. 7 crores was in respect of assessment year 2010-11. It was argued that out of surrender of Rs. 10.50 Cr., Rs. 5,59,802 was allocated to the assessment year 2005-06 and accordingly, the assessment was made at the total income of Rs. 1,53,93,372. Having completed the assessment, the AO levied penalty under section 271(1)(c) read with Explanation 5A, observing that '...from the above, it is also seen that sub-section (b) of Explanation 5A to section 271(1)(c) is also clearly applicable in the said case'. CIT(A) had upheld the order of the AO levying penalty under section 271(1)(c).Held: Since in the present case search was conducted on 30-7-2009, hence section 271AAA was applicable for the assessment year 2010-11 only as the date of filing the return of income under sub-section (1) of section 139 for such year had not expired before the date of search. Explanation 5A(b) to section 271(1)(c) was applicable for the assessment years 2005-06, 2006-07 and 2007-08 as the date for filing the returns had already been expired and the assessee had not declared this income in the returns. From the assessment orders, it was found that the assessee had not declared the surrendered income in the returns filed in response to the notice issued under section 153A(1)(a). Thus, the submissions of the AR arguing that the income surrendered had been reflected/assessed was not correct on facts. Rather, it was the addition made by the AO based on the material which was found and seized during the course of search. From the above, the following conclusions can be drawn: assessee had not declared any income in the returns filed in response to the notice issued under section 153A(1)(a) more than what had been declared in the regular returns. The addition had been made by the revenue based on the seized material. The due date of filing of return had already been expired. Contention of AR that the presidential assent had been received on 13-8-2009, hence not applicable cannot be accepted as the provision of the Act clearly says that this provision is applicable with retrospective effect from 1-6-2007. Keeping in view, since no prima facie case can be made on applicability of any legal ground on this issue, admission of additional grounds taken by the assessee on this issue was declined.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2004-05 to 2010-11

INCOME TAX ACT, 1961

Section 271(1)(c) Section 271AAA

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