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The Dy.CIT Central Circle-1 Surat Vs. Pravinkumar K.Bhakta C/o.Aditya Alluminium Pvt.Ltd. Chikhli Raod Vyara, Dist.Tapi Silvassa, Vapi
November, 19th 2013
             ,  Û `',  
             ,
      IN THE INCOME TAX APPELLATE TRIBUNAL
    AHMEDABAD BENCH " C " BENCH, AHMEDABAD

    ¢ ^ ..,    ^   , Û  
    BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER And
         SHRI KUL BHARAT, JUDICIAL MEMBER

               ./I.T.A.   No.2610/Ahd/2010
           ( [ [ / Assessment Year : 2007-08)
 The Dy.CIT          / Pravinkumar K.Bhakta
 Central Circle-1     Vs. C/o.Aditya Alluminium
 Surat                     Pvt.Ltd.
                           Chikhli Raod
                           Vyara, Dist.Tapi
                           Silvassa, Vapi
     . /  . / PAN/GIR No. : ABNPB 4798 G
   ( /Appellant)      ..       (× / Respondent)

               / Appellant by       :       Shri J.P. Jhangid Sr.DR
            ×   /Respondent by :                 Shri J.P. Shah

              / Date of Hearing       : 30/10/2013
              /Date of Pronouncement : 15/11/2013


                            / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

      This appeal by the Revenue is directed against the order of the
Ld.Commissioner of Income Tax(Appeals)-II, Ahmedabad (`CIT(A)' for
short) dated 16/06/2010 pertaining to Assessment Year (AY) 2007-08.
The Revenue has raised the following grounds of appeal:-

      i)    The Ld.CIT(A) has erred in Law and on facts in granting
            exemption to the assessee under Explanation 5 to Section
            271(1)(c) of the Act, when the disclosed income did not pertain
            to any money, bullion or valuation found during the course of
            search.
                                                     ITA No.2610/Ahd/2010
                                       The Dy.CIT vs.Pravinkumar K.Bhakta
                                                       Asst.Year ­ 2007-08
                                     -2-

      ii)    The Ld.CIT(A) erred in law and on facts in agreeing that the
             assessee satisfy all the conditions stipulated in Explanation 5
             below Section 271(1)(c) without appreciating the fact that the
             disclosure is made though statement recorded u/s.133A on
             15/11/2006 and not in the statement recorded u/s.132(4) of the IT
             Act (copy enclosed as AnnexureA)
      iii)   The Ld.CIT(A) has erred in holding that even if the manner of
             income is not explained, assessee is entitled for availing
             immunity under Explanation 5 to Section 271(1)(c) of the Act as
             per decision in the case of CIT vs. Mahendra C Shah 299 ITR
             305 (Guj), ignoring that the assessee did not disclosed manner in
             which the disclosed is earned u/s.132(4) on being asked to
             explain the same vide question No.23 of the statement dated
             15/11/2006 u/s.132(4) and nor explained it subsequently.
      iv)    The Ld.CIT(A) erred in deleting the penalty by relying upon the
             decision in the case of CIT vs. Mishrimani Soni 162 Taxman 53,
             ignoring that the facts of the case in the above case law is quite
             distinguishable from the facts of the instant case.
      v)     The Ld.CIT(A) has erred in holding that penalty is not leviable in
             this case as per decision of CIT vs. Mishriomani Soni 162
             Taxman 53, wherein it was held that Explanation 5 to section
             271(1)(c) of the Act does not make any distinction between
             tangible and intangible assets, ignoring that amended provision
             Explanation 5A to Section 271(1)(c) was come in to effect in the
             Finance Act 2009, making it applicable prospectively to the
             cases in which search was conducted on or after 01/06/2007 and
             in the instant case, the search action was carried out on
             15/11/2006.
      vi)    On the facts and circumstances of the case and in law, the
             ld.CIT(A) ought to have upheld the order of the AO.
      vii)   It is therefore prayed that the order of the CIT(A) be vacated and
             that of the AO be restored to the above extent.




2.    Since the issues involved in these grounds of appeal are inter-
connected, the same are being disposed of by way of this consolidated
order for the sake of convenience.
                                                      ITA No.2610/Ahd/2010
                                        The Dy.CIT vs.Pravinkumar K.Bhakta
                                                        Asst.Year ­ 2007-08
                                   -3-

3.    Briefly stated facts are that the case of the assessee was picked up
for scrutiny assessment and the assessment u/s.143(3) of the Income Tax
Act,1961 (hereinafter referred to as "the Act") for AY 2007-08 was
framed vide order dated 18/12/2008, assessing total income of
Rs.11,10,400/-.   While    finalizing    the   assessment    order,   penalty
proceedings u/s.271(1)(c) of the Act were also initiated in respect of
undisclosed income.     In the penalty proceedings, the assessee made
various submissions before the Assessing Officer, who after considering
the submissions, levied penalty u/s.271(1)(c) of the Act. Against this, the
assessee preferred an appeal before the ld.CIT(A)-II Ahmedabad, who
after considering the submissions, deleted the penalty.            Now, the
Revenue is in appeal before us.




4.    The ld.counsel for the assessee reiterated the submissions as were
made before the lower authorities.        The ld.counsel for the assessee
submitted that the issue in this case is squarely covered by the decision of
the Hon'ble Jurisdictional High Court rendered in the case of CIT vs.
Mahendra C.Shah reported at 299 ITR 305 (Guj.). He submitted that
there was a survey action and the statement was recorded thereby the
assessee made disclosure, however, the said disclosure was retracted by
way of Affidavit but the AO assured him that no penalty would be levied,
therefore assessee filed the revised return of income and disclosed
additional income of Rs.9,01,193/- as disclosed u/s.132(4) of the Act on
12/12/2008 and paid taxes thereon. He made submission that under these
                                                    ITA No.2610/Ahd/2010
                                      The Dy.CIT vs.Pravinkumar K.Bhakta
                                                      Asst.Year ­ 2007-08
                                   -4-

facts, the immunity as provided under Explanation (5) to Section
271(1)(c) was available and placed reliance on various decisions.




5.    On the contrary, ld.Sr.DR supported the order of the AO and
submitted that the assessee had disclosed income only in the revised
return of income, therefore immunity provided under Explanation(5) to
Section 271(1)(c) of the Act is not available.




6.    We have considered the rival submissions, perused the material
available on record and gone through the orders of the authorities below.
The ld.CIT(A) decided the issue in favour of assessee on the basis that
the assessee surrendered the undisclosed income during the course of
search in his statement u/s.132(4) of the Act and offered it as income in
the return and also paid the tax. He has also given a finding on fact that
the returned income was accepted. Therefore, relying on the decision of
Hon'ble Rajasthan High Court rendered in the case of CIT vs. Mishrimal
Soni reported at 162 Taxman 53 and also the decision of Hon'ble Gujarat
High Court rendered in the case of CIT vs. Mahendra C.Shah reported at
299 ITR 305 (Guj.) ::172 Taxman 58, deleted the penalty. The Revenue
has made submissions that the ld.CIT(A) has erred in granting exemption
under Explanation 5 to Section 271(1)(c) of the Act when the disclosed
income did not pertain to money, bullion, jewellery or other valuable
article or thing found during the course of search. It is also the ground of
the Revenue that the ld.CIT(A) erred in law and on facts in agreeing that
                                                    ITA No.2610/Ahd/2010
                                      The Dy.CIT vs.Pravinkumar K.Bhakta
                                                      Asst.Year ­ 2007-08
                                   -5-

the assessee satisfy all the conditions stipulated in Explanation 5 below
Section 271(1)(c) of the Act without appreciating the fact that the
disclosure is made through statement recorded u/s.133A of the Act on
15/11/2006 and not in the statement recorded u/s.132(4) of the Act. This
ground of the Revenue is ex facie false and contrary to the records. As
per Annexure-A, the statement has been recorded u/s.132 of the Act and
not u/s.133A of the Act as claimed. Moreover, the AO categorically in
his order has recorded a finding that the statement u/s.132(4) of the Act
was recorded from the assessee. Hence, there is no substance in this
ground of the Revenue. Another submission of Revenue is that the
assessee has not explained the manner in which the disclosed income was
earned. The Hon'ble Jurisdictional High Court in the case of CIT vs.
Mahendra C.Shah(supra) has observed that according to the Revenue, the
statement made u/s.132(4) of the Act by the assessee at the time of search
does not contain any averment as to the manner in which such income
had been derived by the assessee. Furthermore, there is no payment of
tax along with the return of income which was originally filed and
payment of last tax has been made only subsequently after disclosing
such income in the revised return of income which is not warranted by
the language employed in exception No.2 so as to be entitled to immunity
from penalty for concealment. The Hon'ble High Court after observing
the contention of the Revenue held that the contentions raised on behalf
of the Revenue are not required to be accepted for the simple reason that
in the first instance, there is no prescription as to the point of time when
the tax has to be paid qua the amount of income declared in the statement
made under section1 132(4) of the Act. The Tribunal was justified in
                                                   ITA No.2610/Ahd/2010
                                     The Dy.CIT vs.Pravinkumar K.Bhakta
                                                     Asst.Year ­ 2007-08
                                  -6-

holding that there would be sufficient compliance with the provision if
tax is shown to have been paid before the assessment was completed.
The Hon'ble High Court further held that in so far as the alleged failure
on the part of the assessee to specify in the statement under section
132(4) of the Act regarding the manner in which such income has been
derived, suffice it to state that when the statement is being recorded by
the authorized officer it is incumbent upon the authorized officer to
explain the provisions of Explanation 5 in its entirety to the assessee
concerned and the authorized officer cannot stop short at a particular
stage so as to permit the Revenue to take advantage of such a lapse in the
statement. The reason is not far to seek. In the first instance, the
statement is being recorded in the question and answer form and there
would be no occasion for an assessee to state and make averments in the
exact format stipulated by the provisions considering the setting in which
such statement is being recorded. The Hon'ble Jurisdictional High Court
after considering the judgement of Hon'ble        Allahabad High Court
rendered in the case of CIT vs. Radha Kishan Goel (2005) 278 ITR 454,
affirmed the view of the Tribunal and also followed the judgement of
Hon'ble Allahabad High Court, held that even if the statement does not
specify the manner in which the income is derived, if the income is
declared and tax thereon paid, there would be substantial compliance not
warranting any further denial of the benefit under exception No.2 in
Explanation 5 is commendable.


6.1.   Respectfully following the decision of Hon'ble Jurisdictional High
Court rendered in the case of CIT vs. Mahendra C.Shah(supra), we do
                                                                     ITA No.2610/Ahd/2010
                                                       The Dy.CIT vs.Pravinkumar K.Bhakta
                                                                       Asst.Year ­ 2007-08
                                                   -7-




not find any infirmity in the order of ld.CIT(A), the same is hereby
upheld.
7.          In the result, Revenue's appeal stands dismissed.
       Order pronounced in Court on the date mentioned hereinabove at caption page

                     Sd/-                                                          Sd/-
                 (..)                                                         (  )
                                                                             Û 
        ( N.S. SAINI )                                                   ( KUL BHARAT )
     ACCOUNTANT MEMBER                                                 JUDICIAL MEMBER

Ahmedabad;                  Dated        15 / 11 /2013
.., .../T.C. NAIR, Sr. PS
    /
      Copy of the Order forwarded to :
1.          / The Appellant
2.         × / The Respondent.
3.            / Concerned CIT
4.          () / The CIT(A)-II, Ahmedabad
5.          ,   ,  / DR, ITAT, Ahmedabad

6.         [  / Guard file.
                                                                                     / BY ORDER,

                     ×  //True Copy//

                                                                /  (Dy./Asstt.Registrar)
                                                                /
                                                        ,  / ITAT, Ahmedabad
                                                        ,
      1.    Date of dictation ..5.11.13&7.11.13 (dictation-pad 8+7pages attached at the end of this File)
      2.    Date on which the typed draft is placed before the Dictating Member ......7.11.13
      3.    Date on which the approved draft comes to the Sr.P.S./P.S.................
      4.    Date on which the fair order is placed before the Dictating Member for
            pronouncement......
      5.    Date on which fair order placed before Other Member............
      6.    Date on which the fair order comes back to the Sr.P.S./P.S.......15.11.13
      7.    Date on which the file goes to the Bench Clerk.....................15.11.13
      8.    Date on which the file goes to the Head Clerk..........................................
      9.    The date on which the file goes to the Assistant Registrar for signature
            on the order..........................
     10.    Date of Despatch of the Order..................

 
 
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