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2017 (7) TMI 29 - AT - Income TaxPenalty u/s. 271(1)(c) - undisclosed assets - unexplained cash found - non-explanation by the assessee - Held that:- The cash found is in fact from the business premises of the four firms, only two of which belong to the assessee. Two, it is the source of the assets found or admitted (refer s. 292C), for which explanation, supported by material, is to be furnished, and do not themselves explain the assets. In fact, once the amount of undisclosed assets has been arrived at (Rs.141.96 lacs), its configuration loses significance, and it is this amount which had to be explained, which could be either in terms of assets already disclosed (and accepted) and/or the income disclosed since. The assessee had no case either in the quantum proceedings (in the second round) nor has any in the penalty proceedings, proceeded with on the conclusion of the former. We, accordingly, find no merit in the assessee’s case in the instant proceedings. CIT(A) has clearly misled himself in stating that the assessee has explained the residual assets of ₹ 57.52 lacs, with we rather finding the assessee to have been allowed unmerited relief in assessment. The very fact that the tribunal restored the matter back qua the said amount implies that it did not consider the same as explained. The quantum proceedings stand since finalized. The penalty can therefore only be levied with reference to the income assessed. The income returned pursuant to the search is the same as originally disclosed. There is no question of the assessee having agreed to an amount, disclosing income to that extent, which he continues to contest even in the second round. The AO, however, has levied penalty on the entire income assessed (Rs. 34.86 lacs), which includes ₹ 2.73 lacs returned by the assessee. The same can only be levied with reference to the tax sought to be evaded as defined in Explanation 4 to s. 271(1)(c). The AO shall recompute the penalty amount, and the assessee gets part relief.
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