By TIOL News Service

AHMEDABAD, SEPT 04, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether taxpayer gets immunity from penal claws, once tax along with interest offered by him on undisclosed income stood accepted by Department without any further addition. YES IS THE VERDICT.

Facts of the case:

During the year under consideration, a search u/s 132(2) was conducted in the case of Savvy Group and various documents/books of accounts /other valuable articles were found and seized from various premises. During the course of search, partners of the assessee firm made voluntary disclosure of income of Rs.2 Crore in the statement recorded u/s 132(4) for A.Y 2007-08. Subsequently, the return was filed declaring income at Rs.1,19,12,160/- inter alia including undisclosed income of Rs.2 Crores. The scrutiny assessment was therefore finalized u/s 143(3) r/w/s 153A r/w/s 153(B)(i)(b) accepting the returned income of Rs.1,19,12,160/-. However, penalty proceedings u/s 271(1)(c) was initiated on the unaccounted income disclosed by assessee, since such unaccounted income was accepted by assessee only after the search.

On appeal, the CIT(A) accepted the submission on behalf of assessee relying upon Clause (2) of Explanation 5 of Section 271(1)(c) and quashed the penalty levied u/s 271(1)(c). On further appeal, the ITAT observed that all the three conditions of immunity provided under Clause (2) of Explanation 5 of Section 271(1)(c) were satisfied.

High Court held that,

++ having heard the fact that after the disclosure during search, the assessee filed its return and as such paid the tax with interest and whatever was disclosed in the return, was accepted by the AO and there was no further addition, this Court is of the opinion that assessee shall be entitled to immunity as per Clause (2) of Explanation 5 of Section 271(1)(c). Thereforefore, this Court is in complete agreement with the view taken by the Tribunal.

(See 2018-TIOL-1811-HC-AHM-IT)