Ajay Traders vs. DCIT (ITAT Jaipur)

DATE: May 6, 2016 (Date of pronouncement)
DATE: June 2, 2016 (Date of publication)
AY: 2007-08
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Penalty under Explanation 5A to s. 271(1)(c) cannot be levied on the basis of a mere surrender by the assessee if no incriminating material has been found during search. MAK Data 358 ITR 593 (SC) considered

It is undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs. 15 lacs and requested not to impose penalty u/s 271(1)(c) of the IT Act. The AO imposed the penalty by invoking the Explanation 5A to section 271(1)(c) of the Act, which has been confirmed by ld. CIT (A) by considering the judgment of Hon’ble Supreme Court in the case of MAK Data Pvt. Ltd. vs. CIT (2013) 358 ITR 593 (SC). But for imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A of the Act. The issue has been considered by various High Courts as well as by ITAT as relied upon by the assessee, which are squarely applicable to the case of the assessee. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT (A).

(Raj Pal Bhatia (2011) 333 ITR 315 (Delhi), Financial Technologies (I) Ltd., (2015) 61 Taxmann.com 406, ITAT Jaipur Bench decision in the case of Shri Radhey Shyam Mittal, ITA No. 1013, 1014 & 1015/JP/2013 followed)

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