The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, on finding the additional income disclosed and returned in ITR filed under Section 153A, to be established to have originated out of seized material, upheld the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
The aforesaid observation was made by the Pune ITAT when appeals were preferred before it by the assessee, against the separate orders of the first appellate authority, Commissioner of Income Tax (Appeals), Pune [CIT(A)], for different assessment years, passed under Section 250 of the Income-tax Act,1961.
The ground of the appeals being the levy of penalty under section under Section 271(1)(c), the brief facts of the case were that the appellant assessee was an individual engaged in a medical profession, who for the AY 2017-18 had filed his original return of income, under Section 139(1) of the Income Tax Act, declaring total income of ₹64,46,610/- along with an agricultural income of ₹82,220/.
Consequent to a search action conducted under Section 132, certain incriminating material was seized, and the analysis thereof revealed certain unrecorded investments or expenditure of the appellant, which were over and above the value of investment recorded in the books of account maintained by him for his profession.
Pursuant to a notice under Section 153A of the Income Tax Act, the assessee returned a revised income of ₹1,64,73,700/- disclosing thereby, the previously suppressed & undisclosed cash receipts/income earned of ₹87,96,912/-, which was attributable to unrecorded investment made or expenditure incurred in terms of findings of the department. And since this additional income offered to tax by the appellant was found in tune with the findings made out of seized incriminating material, the AO accepted the same without variation vide his order passed under Section 153A.
Subsequently, on a similar line, the income for AY 2014-15 was also re-assessed under Section 153A of the Income Tax Act wherein, the appellant admittedly declared previously suppressed / undisclosed professional receipts as established from the entries of same seized incriminating material.
Based on the afore stated assessment, the assessee made a fresh claim by filing an appeal against the impugned order for AY 2017-18, seeking a telescopic effect of undisclosed income offered to tax in AY 2014-15. However, the CIT(A), on finding no force in the augments of the assessee, thus, rejected the claim of the appellant after giving his detailed findings & reasoning. And it is being aggrieved by the same that the assessee has preferred the instant appeal before the Tribunal.
Perusing the materials available on record, as well as hearing the opposing submissions of both sides as presented by Smt. Deepa Khare, the AR on behalf of the assessee, and by Shri M. G. Jasnani, the DR on behalf of the Revenue, the Pune ITAT observed, “Once it is clearly and undisputedly established that the additional income disclosed and returned in the ITR filed under Section 153A is indeed originated out of seized material, then explanation 5A of section 271 of the Act comes into play notwithstanding the returned income was accepted without variation”.
Finally, the coram of S.S Godara, the Judicial Member, and G.D Padmahshali, the Accountant Member, by relying upon the decision of the Bombay High Court in Dr. Nitin Laxmikant Lad Vs ACIT, thus held:
“Therefore, in the light of settled legal position the action of tax authorities in invoking the penal provisions for levy of penalty under Section 271(1)(c) on such account is well within the law and cannot be faulted with in view of decision of Hon’ble Jurisdictional Bombay High Court.”
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