Where assesse has declared its income at maximum rate and return of income was accepted without addition, penalty u/s 271(1)(c) cannot be levied: #ITATChandigarh

Facts of the case:

• The assessee, in ongoing assessment for search under section 153A had disclosed certain income for block assessment years in its return of income as income from other sources with remarks ‘subject to no explanation’ and duly paid all the taxes thereupon at maximum tax rate applicable.
• The Assesee’s common explanation regarding the source of income was that it was from speculation in sale/purchase of the agriculture land and no proper books of account were maintained by him.
• The assessing officer, levied penalty on account of 271(1)(c) without bringing any incriminating material found during search in respect of the said income, on records.

Contentions held in the case:

Department:

• No satisfactory explanation was provided by the assessee regarding the source of income, the assessing officer, therefore, invoked explanation 1 to section 271(1)(c) and initiated penalty proceedings under section 271(1)(c).
• Officer contended that heavy amounts were deposited in bank accounts by the assessee and then declared in their returns of income spread over six years totaling to Rs 60.02 crores, however, the transactions value to earn Rs. 60.02 crores was multiple times of this amount. Such transaction value, spread over six years undertaken by four different individuals, could not be made without maintenance of proper records.

Assessee:

• The assessee contended, that his case was not a case of concealment or furnishing of inaccurate particulars of income and that all the facts with regard to the income were declared in the original return itself.
• After perusal of relevant documents and replies filed by the assessee before the assessing officer, it revealed that assessee though have duly explained the source, mode and manner of the earning of income which has been disclosed by the assessee in its return of income, however they can’t substantiate their income with documentary evidence.

Conclusion:

ITAT Chandigarh Bench held that Assessing officer has not put in any case that the income in question declared by the assessee was not from the sources, mode and manner explained and therefore in absence of any incriminating material found during search action and in assessment proceedings carried out under section 153A, Assessing officer is precluded from initiating penalty proceedings under section 271(1)(c).

Source: [2019] 104 taxmann.com 340 (Chandigarh-Trib) ITAT CHANDIGARH BENCH ‘A’, Deputy Commissioner of Income-Tax v. Kulwant Singh