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2017 (4) TMI 1426 - AT - Income TaxPenalty u/s 271(1)(c) - search and seizure operation - proceedings u/S 153A initiated consequently - penalty imposed on difference between the income declared in the return originally filed prior to search qua the return filed subsequently in compliance of notice u/s 153A in pursuance of search action - HELD THAT:- In search cases, the explanation has been specifically inserted to section 271(1)(c) to deal with situation where higher income was disclosed in the return filed consequent to a search operation and the assessee claims that such addition do not necessarily imply concealment. Thus, in terms of Explanation-5, the penalty on undisclosed income discovered in the course of search under S. 132 cannot be entirely ruled out. relied on Hon’ble Gujarat High Court in KIRIT DAHYABHAI PATEL [2015 (1) TMI 201 - GUJARAT HIGH COURT] As a matter of general proposition, there can be no concealment of income till filing of return as per normal provisions of section 271(1)(c) as the concealment of income can be attributed only with reference to the return filed. However, as noted, the Explanation-5 dealing with search cases provides an exception and departure to this general rule that concealment is committed vis-à-vis the return filed alone. In view of overriding provision of Explanation-5 the default under s.271(1)(c) gets triggered towards undisclosed income, immediately on search action pending filing of return subject to ‘escape route’ as provided in the said Explanation. it is difficult to reckon the case made out by the assessee that additional income declared in the post search returns would be entitled to immunity from penalty in a sweeping manner regardless of the satisfaction of conditions as provided for its non-applicability as enumerated under clause(2) of Explanation-5. The abstract proposition of non-applicability of penalty proceedings in all circumstances (wherever undisclosed income has been included in the return filed post-search) is singularly misplaced and is not supported by the factual context in which the decision in Kirit Dahyabhai Patel [2009 (6) TMI 654 - ITAT AHMEDABAD-B] was rendered. On holistic considerations, it is manifest that the abstract proposition suggested on behalf of the assessee that penalty can be reckoned only with reference to return of income filed under 153A regardless of concealment detected in the course of search will, in our humble opinion, spell redundancy to the operation of Explanation-5 as well as Explanation-5A (as substituted in place of Explanation 5) in equal measure. Thus we find in the instant case that the Assessee is entitled to relief from the clutches of penalty u/s 271(1)(c) owing to absence of description of undisclosed assets as specified in Explanation-5 and not because of blanket non-applicability of Explanation-5 per se on 153A returns as sought to be propounded by the assessee. Unexplained investments on bunglow - HELD THAT:- We find force in the argument on behalf of the assessee. The partnership-firm has admittedly paid taxes on the unexplained peak credit. The aforesaid income is thus available at the command and control of the partners of the firm in ordinary course. The assessee being one of its partners can possibly have unilateral access to the entire unexplained peak credit owing to mutual agency. Therefore, the explanation of the assessee cannot be said to wholly improbable and hence cannot be summarily brushed aside. Consequently, while the addition has been sustained partially in quantum proceedings based on proportion of share in partnership, such finding do not ipso facto apply in the penalty proceedings in view of the difference in its scope and consideration vis-a-vis quantum proceedings. Thus, benefit of doubt is required to be assigned in favour of assessee on the touchstone of preponderance of probabilities.
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