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Facts
The appellant filed an original return for AY 2013-14. Subsequently, during a search on a third party (Malabar Group), incriminating material related to the appellant was found, leading to a notice u/s 153C. Although the appellant did not file a return in response, the assessment was completed, accepting additional income, and penalty proceedings u/s 271(1)(c) were initiated and confirmed by the CIT(A).
Held
The Tribunal found that the lower authorities failed to demonstrate a clear nexus between the seized material from the third-party search and the appellant's undisclosed income. It held that mere disclosure of additional income in response to a Section 153C notice does not automatically prove concealment. The matter was remitted back to the CIT(A) for a fresh disposal after providing the assessee a reasonable opportunity of being heard.
Key Issues
Whether penalty u/s 271(1)(c) for concealment of income can be levied when additional income is disclosed in response to a notice u/s 153C, without the department establishing a clear link between seized material from a third-party search and the assessee's alleged undisclosed income.
Sections Cited
271(1)(c), 132, 153C, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
: Asst.Year 2016-2017 : Asst.Year 2017-2018 ITA No.104/Coch/2025 : Asst.Year 2018-2019 Puthan Purayil Abdurahiman The Assistant Commissioner Tajus Residency, Kannur Road v. of Income-tax, Cen.Cir.2 West Hill, Kozhikode – 673 005. Kozhikode. PAN : AKPPA0229G. (Appellant) (Respondent) Appellant by : Sri.Arun Raj S, Advocate Respondent by : Smt.Leena Lal, Sr.AR Date of Date of Hearing : 29.05.2025 Pronouncement : 30.05.2025 O R D E R Per Prakash Chand Yadav, JM : These appeals filed by the assessee are directed against different orders of the Commissioner of Income-tax (Appeals)-3, Kochi [“CIT(A)” for short], all dated 24.10.2024, confirming penalty u/s.271(1)(c) of the Income-tax Act, 1961 (“the Act” hereinafter).
Since identical facts and issues are involved in all these appeals, they were heard together and are being disposed of vide consolidated order. For the sake of clarity and convenience, the facts relating to
The brief facts of the case are that the appellant is an individual. The original return of income for the assessment year 2013-2014 was filed on 15th July, 2013 declaring total income of Rs.3,66,650. Subsequently, during the course of search and seizure proceedings in the case of one Malabar Group of Companies conducted u/s.132 of the Act, it was stated that certain incriminating material relating to the appellant was stated to have been found and seized. Based on such incriminating material, the Assessing Officer (“the AO" hereinafter) issued notice u/s.153C of the Act on 08.05.2021. In response to the notice issued u/s.153C of the Act, the appellant did not file any return of income.
Against the said return of income, the assessment was completed by the AO vide order dated 6th March, 2022 passed u/s. 153C r.w.s. 144 of the Act accepting the returned income at Rs.13,78,550. Thereafter, the AO initiated penalty proceedings u/s.271(1)(c) of the Act vide show cause notice dated 15th March, 2022. In response to the show cause notice, it is submitted that the disclosure of additional income in response to notice u/s.153C of the Act is voluntary and is not based on the seized material, and therefore, the appellant is not in guilty of concealing any particulars of income, and therefore, the penalty was not exigible u/s.271(1)(c) of the Act. It is further contented that merely because the appellant is agreed to the additional income, it cannot be presumed that the appellant had concealed particulars of income, by & Ors. Puthan Purayil Abdurahiman. placing reliance on the judgment of the Hon’ble Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT. The AO rejecting the above explanation of the appellant and placing the decision of the Hon’ble Supreme Court in the case of MAK Data Private Limited v. CIT held that the appellant is guilty of concealing particulars of income and levied penalty of Rs.2,21,692vide order dated 23rd September, 2022.
Being aggrieved by the above order, an appeal was filed before the CIT(A), who vide the impugned order confirmed the penalty levied u/s.271(1)(c) of the Act.
Being aggrieved by the above order of the CIT(A), the appellant is before us in the present appeal.
We heard rival submissions and perused the material available on record. On a mere reading of the orders of the authorities below, it would be clear that the lower authorities had failed to discuss the evidences found as a result of search and seizure in the case of Malabar Group of companies, which led to the unearthing of the undisclosed income in the hands of the appellant. The AO also not discussed as to how the seized material led to unearthing of the undisclosed income and how the seized material in the case of Malabar Group of companies has relation to the appellant herein. Merely because the appellant has disclosed additional income in response to notice u/s.153C of the Act, it cannot lead to the conclusion that the appellant is guilty of concealing the particular of income or guilty of concealment of income. It is the case of assessment made u/s.153C of the Act, pursuant to the initiation & Ors. Puthan Purayil Abdurahiman. of search and seizure in the case of a third person. In the above circumstances, we remit the matter back to the file of the CIT (A) for de novo disposal of the appeal in accordance with law after affording a reasonable opportunity of being heard to the assessee.
In the result, the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced on this 30th day of May, 2025.