IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `G', NEW DELHI
BEFORE SHRI O.P. KANT, ACCOUNTNAT MEMBER
AND
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA Nos.2044 & 2045/Del/2014
Assessment Years: 2006-07 & 2007-08
M/s. Spaze Towers Pvt. Ltd., Vs. DCIT,
Spazedge, Sector -47, Sohna Central Circle-II, Faridabad
Road, Gurgaon
PAN :AACCK8088R
(Appellant) (Respondent)
And
ITA No.2558/Del/2012
Assessment Year: 2008-09
DCIT, Vs. M/s. Spaze Towers Pvt. Ltd.,
Central Circle-II, Faridabad Spazedge, Sector -47, Sohna
Road, Gurgaon
PAN :AACCK8088R
(Appellant) (Respondent)
Assessee by Shri Rakesh Arora, CA
Department by Shri S.S. Rana, CIT(DR)
Date of hearing 10.10.2018
Date of pronouncement 20.11.2018
ORDER
PER O.P. KANT, AM:
The aforementioned appeals by the assessee and the
Revenue are directed against separate orders dated 23/01/2014;
23/01/2014 and 30/03/2012 passed by the Ld. Commissioner of
Income-tax (Appeals)-Central, Gurgaon [in short `the Ld. CIT(A)']
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ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
for assessment years 2006-07, 2007-08 and 2008-09
respectively. The issues involved in these appeals are identical in
the same set of circumstances and therefore, these appeals were
heard together and disposed off by way of this consolidated order
for convenience.
ITA No.2044/Del/2014 for AY:2006-07 (Assessee)
2. First we take up the appeal having ITA No. 2044/Del/2014
for assessment year 2006-07, wherein following grounds have
been raised by the assessee:
1. the Learned CIT(A) has erred in law & facts of the case in
sustaining the penalty of Rs.5,23,076/- u/s 271(1)(c) of
the Income Tax Act, 1961, rejecting the submissions and
explanations of the Assessee Company, which is arbitrary,
unjustified and bad in law.
2. The assessee craves the right to add, amend or modify
any ground of appeal.
3. Briefly stated facts of the case are that in the case of the
assessee, a search and seizure action under section 132 of the
Income Tax Act, 1961 (in short `the Act') was carried out on
29/04/2008. During the course of search proceeding, statement
of Sh. J.S. Chawla, Director of assessee company, were recorded
on oath u/s 132(4) of the Act and he surrendered an aggregate
amount of Rs.27 crores as undisclosed income for the entire
group for assessment year 2008-09 on the basis of the documents
found in seized during the course of the search. The assessee did
not file any regular return of income for the year under
consideration, which it was required to file as per the provisions
of section 139 of the Act. Consequent to the search action, the
Assessing Officer issued notice under section 153A of the Act
3
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
requiring the assessee to file the return of income in respect of
the assessment year under consideration, which was duly served
upon the assessee and in response the assessee filed return of
income declaring Nil income. During the assessment proceedings
under section 153A of the Act, the Assessing Officer confronted
seized documents appearing at page No. 77 of Annexxure A-7
seized from Party No.1, which was having mention of transaction
of some property for an amount of Rs.15,54,000/-. It was
explained by the assessee that said amount was part of the
surrender of additional income of Rs.27.00 crores made by Sh.
J.S. Chawla under section 132(4) of the Act and offered in the
return of income filed for assessment year 2008-09 by the
assessee. It was submitted that exact detail on the page were not
remembered and thus this income was included in assessment
year 2008-09 instead of AY 2006-07. In view of the Assessing
Officer, the relevant seized material was dated 10/02/2006,
which is relating to the assessment year under consideration,
accordingly, he added the income in the year under consideration
and initiated penalty proceedings under section 271(1)(c) of the
Act read with Explanation 5A. The Assessing Officer issued show
cause notice to the assessee as why the penalty under section
271(1)(c) of the Act may not be levied. According to the assessee,
it was merely shifting of income from assessment year 2008-09 to
assessment 2006-07 and in fact there was no additional income
for the year under question. The assessee further submitted that
though it has not challenged the same in quantum appeal, it
should not render the assessee liable for penalty under section
4
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
271(1)(c) of the Act. According to the assessee change of the
assessment year is due to difference of opinion of the year of
taxability only and not because of any finding, which was not
available before the search team. The assessee submitted that the
surrender was made in assessment year 2008-09 under bonafide
belief that the document pertain to assessment year 2008-09. The
assessee submitted that entire surrender of Rs.27 crore was
offered to tax and corresponding tax was also paid. He submitted
that surrender was offered with the condition that no penalty
proceeding and prosecution would be launched against the
assessee. The assessee contended applicability of Explanation 5A
to section 271(1)(c) of the Act in view of the voluntary declaration
of the undisclosed income. The Assessing Officer rejected the
contention of the assessee observing that in view of the deeming
provisions of explanation 5A below the section 271(1)(c) of the
Act, the assessee was liable for penalty and, accordingly, he levied
penalty of Rs.5,23,076/- at the rate of 100% of the tax sought to
be evaded. On further appeal, the Ld. CIT(A) upheld the penalty.
Aggrieved, the assessee is in appeal before the Tribunal raising
the grounds as reproduced above.
4. In the sole ground, the assessee has challenged confirmation
of penalty of Rs.5,23,076/- levied under section 271(1)(c) of the
Act. Before us, the Ld. Counsel submitted that there was
reasonable cause in failure to report the income for the year
under consideration and thus penalty levied may be deleted as
the assessee has already paid taxes on the undisclosed income
filed in assessment year 2008-09 and thus, there is no loss to
5
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
Revenue. According to the Ld. Counsel, it was an honest error
and there was no concealment on the part of the assessee. In the
written submission filed the Ld. counsel submitted that
explanation 5A to section 271(1)(c) of the Act is not applicable in
the case of the assessee because as per the clause (ii) of the
deeming provisions, it attracted only on the act of the assessee to
claim that such income belongs to a particular year before the
search and since the assessee has not claimed that this income
belongs to assessment year 2006-07, there is no question of
applicability of cluse (ii) in the case of the assessee.
4.1 The Ld. counsel further submitted that at the time of
making surrender, the mapping of each and every paper found
during the course of the search could not be done and therefore
whole amount of Rs.27 crore was offered in the year of search and
taxes paid thereon. The Ld. counsel submitted that in fact the
paper on the basis of which addition has been made, is a dumb
document without any corroborative material in support of the
same and it was merely rough noting. It was submitted that the
Assessing Officer has merely shifted the income from assessment
year 2008-09 to assessment year 2006-07 on account of change
of opinion. In the written submission filed, the Ld. counsel relied
on the decision of the Hon'ble jurisdictional High Court in the
case of CIT Vs SAS Pharmaceutical (2011) 335 ITR 259 ,decision
of the Hon'ble High Court of Jharkhand in the case of CIT Vs
Ashim Kumar Agrawal, 153 TAXMAN 226 and decision of the
Hon'ble High Court of Madhya Pradesh in the case of CIT Vs SV
Electrical Private Limited 155 TAXMAN 158.
6
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
4.2 In the written submission it is further mentioned that the
levy of penalty is not automatic and merely certain additions have
been made in the assessment order, that itself does not ipso facto
mean that penalty automatically becomes leviable in relation
thereto. In support of the contention the Ld. counsel relied on the
decision of the Hon'ble Delhi High Court in the case of CIT Vs
global sales Corporation 145 taxman 530 and other decisions.
4.3 On the contrary, the Ld. DR submitted that assessee has not
challenged in quantum proceedings the shifting of income of
Rs.15,54,000/- from assessment year 2008-09 to the assessment
year under consideration. According to him, once the assessee
has accepted that the investment mentioned in the seized
document pertain to the year under consideration, the
Explanation 5A below the section 271(1)(c) of the Act is attracted
in the case of the assessee being a deeming provision and thus
assessee cannot escape from the liability of penalty under section
271(1)(c) of the Act. In support of the contention, the Ld. DR
relied upon following decisions:
1. Saniav Aqqarwal Vs CIT f20in 15 taxmann.com 34 (Punjab
& Haryana)/T20121 211 Taxman 178 (Punjab &
Haryana)(MAG.)
Assessee made disclosure during assessment proceeding under
section 131(1) on 5-1-2006 and offered to surrender amount
attributable to him in investment in property. Hon'ble P&H High
Court held that no immunity could be claimed by assessee from levy
of penalty in terms of Explanation 5 to section 271(1)(c)
2 CIT Vs Prasanna Duqar T20151 59 taxmann.com 99
(Calcutta)/T20151 371 ITR 19 (Calcutta)(MAG.)/r20151 279
CTR 86 (Calcutta)
Where Hon'ble Calcutta High Court held that even where subsequent
to search, O' assessee voluntarily disclosed a sum and offered said
sum to tax, since said amount was not disclosed in original return,
penalty levied under section 271(1 )(c) was justified
7
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
3. ACIT Vs Smt. J. Mythili (35 taxmann.com 86)
where Hon'ble ITAT Chennai held that where there was a search
upon assessee and she subsequent to search, in pursuance of notice
issued under section 153A, filed returns for relevant assessment
years and amount shown in returns filed as 'other income' was not a
part of her regular accounts, such amount would squarely come
within purview of concealed income liable to penalty under section
271 (1 )(c).
4. Smt. Kiran Devi Vs ACIT (2009) 125 TTJ 631 (Delhi)
where Hon'ble ITAT Delhi held that where certain income was c
sdosed in return filed in response to notice under section 153C
following searc- ch income was not disclosed in original return, it
was a clear case of concealment of ncome attracting penalty under
section 271(1 )(c); in such a case it was not even necessary to invoke
Explanation 5 to section 271(1)(c)
5. CIT Vs S J Prasad (2008) 220 CTR 169(KER.)
where Hon'ble Kerala High Court held that where a search was
conducted in assessee's premises and during search cash of Rs.
5,75.000 was seized by department and in course of search
assessee gave a statement declaring that amount belonged to
another person but failed to prove same, there was concealment of
income by assessee by virtue of operation of Explanation 5 to section
271(1)(c)
6. CIT Vs Smt. Meera Devi (2012) 26 taxmann.com 132
(Delhi)/[2013] 212 Taxman 68 (Delhi)(MAG.)/[2012] 253 CTR
559 (Delhi)
In compliance to notice u/s 153C, assessee disclosed substantially
higher income adding other sources, i.e. rent from house property
and income from other sources. Hon'ble Delhi High Court held that
conduct of assessees in filing returns without full particulars fell
within mischief of section 271(1)(c) and they would also not be
entitled to claim benefit of exception, carved out in Explanation 5 to
section 271(1)(c)
7. Shourva Towers (P.) Ltd. Vs DCIT [20131 30 taxmann.com
10 (Delhi)/[2013] 213 Taxman 20 (Delhi)(MAG.)/[2013] 359 ITR
523 (Delhi)/[2013] 255 CTR 225 (Delhi)
Hon'ble Delhi High Court held that 'Escape route' from levy of
penalty as provided by clause (2) to Explanation 5 to section
271(1)(c) is available, when assessee, in his statement not only
offers or surrenders to tax amount in question which is later
assessed, but also complies with other conditions of having filed
return
8
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
4.4 We have heard the rival submissions and perused the
relevant material on record including the submissions filed by
both the parties. The undisputed fact in the case is that no
regular return of income was filed by the assessee and this
income of Rs.15,54,000/-was even not offered in the return of
income filed in response to notice under section 153A of the Act.
This income has been added by the Assessing Officer in
assessment completed under section 153A of the Act and penalty
has been levied invoking explanation 5A below section 271(1)(c) of
the Act. The assessee has not filed any appeal against the
addition in quantum proceedings under section 153A of the Act
and only challenged the penalty levied under section 271(1)(c) of
the Act. Since the penalty has been levied invoking Explanation
5A below the section 271(1)(c) of the Act, it is relevant to
reproduce the said section as under:
"Explanation 5A.-- Where, in the course of a search initiated under section 132
on or after the 1st day of June, 2007, the assessee is found to be the owner of--
(i) any money, bullion, jewellery or other valuable article or thing (hereafter in
this Explanation referred to as assets) and the assessee claims that such assets
have been acquired by him by utilising (wholly or in part) his income for any
previous year; or
(ii) any income based on any entry in any books of account or other documents or
transactions and he claims that such entry in the books of account or other
documents or transactions represents his income (wholly or in part) for any
previous year,
which has ended before the date of search and,--
(a) where the return of income for such previous year has been furnished before
the said date but such income has not been declared therein; or
(b) the due date for filing the return of income for such previous year has expired
but the assessee has not filed the return,
then, notwithstanding that such income is declared by him in any return of income
furnished on or after the date of search, he shall, for the purposes of imposition of
a penalty under clause (c) of sub-section (1) of this section, be deemed to have
concealed the particulars of his income or furnished inaccurate particulars of
such income."
9
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
4.5 On plain reading of above Explanation, it is evident that
income mentioned in clause (i) or (ii) would be deemed to have
been concealed, if it pertain to previous satisfying condition in
clause (a) or (b).
4.6 In the instant case, due date of filing the return of income
for the relevant previous year has expired and the assessee has
not filed return. Further in the return of income filed in response
to notice under section 153A also this income of Rs.15,54,000/-
has not been declared. Since the previous year corresponding to
the assessment year in consideration has ended before the date of
the search, the case of the assessee is covered by the conditions
of clause (b).
4.7 Further, in the case of the assessee addition has been
made on the basis of the entry found in the seized documents and
thus, clause (ii) is attracted. The Ld. counsel has argued before us
that the clause (ii) would be attracted only when the assessee
makes the claim that said income belong to a particular year
before the search. According to the Ld. counsel, the assessee
claimed that amount of Rs.15,54,000/-represented the income of
the assessment year 2008-09 and it is the Assessing Officer, not
the assessee has claimed that income belongs to assessment year
under consideration i.e. 2006-07. This argument of the Ld.
counsel is not acceptable because on the basis of the seized
document the Assessing Officer has shifted the income in
question to the assessment year in consideration and assessee
has not objected against the same and even not challenged the
10
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
said addition in appeal. This conduct of the assessee of not
objecting the addition of income to the assessment year under
consideration shows that the claim of income relevant to the year
under consideration has been accepted by the assessee. In such
circumstances, the assessee squarely falls under the deeming
provisions of Explanation 5A below section 271(1)(c) and cannot
escape from liability of penalty under section 271(1)(c) of the Act.
The decisions relied upon by the Ld. DR are in relation to
Explanation 5 to section 271(1)(c) of the Act and not in relation to
Explanation 5A. The Explanation 5 pertains to search initiated
before first day of June, 2007 whereas Explanation 5A pertain to
searches initiated on after first day of June, 2007. The main part
of the Explanation 5 is pari materia with Explanation 5A except
the conditions where levy of the penalty has been excluded. In the
cases relied upon by the Ld. DR the penalty was held to leviable
in terms of Explanation 5 to section 271(1)(c) of the Act despite
the income was disclosed in the return filed consequent to the
search proceeding. In the instant case, scenario is more worse
and the assessee has even not disclosed the said income in the
return of income filed for the year under consideration
consequent to search proceeding.
4.8 In the cases relied upon by the Ld. counsel issue of levy
penalty under deeming provision of Explanation 5A to section
271(1)(c) of the Act was not for consideration before the Hon'ble
Court and, therefore, those decisions are not applicable to the
facts of the instant case. The assessee has failed to demonstrate
any reasonable cause before us except that seized material was
11
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
not with the assessee at the time of filing return of income, which
also remained unsubstantiated.
4.9 In view of the aforesaid discussion, we are of the opinion
that deeming provisions of Explanation 5A below section 271(1)(c)
of the Act is attracted and for the purpose of imposition of the
penalty under section 271(1)(c) of the Act, the assessee is deemed
to have concealed particulars of his income or furnish inaccurate
particulars of such income, thus the levy penalty by the
Assessing Officer is accordingly upheld. The ground of the appeal
raised by the assessee is accordingly dismissed.
ITA No.2045/Del/2014 for AY: 2007-08 (Assessee)
5. Now we take up the appeal of the assessee having ITA No.
2045/Del/2014 for assessment year 2007-08, wherein following
grounds have been raised:
1. The Learned CIT(A) has erred in law & facts of the case in
sustaining the penalty of Rs.9,52,578/- u/s 271(1)(c) of
the Income Tax Act, 1961 for the year in question as the
amount of Rs.28,30,000/- declared by the assessee in the
year under consideration, rejecting the submissions and
explanations of the assessee Company, which is arbitrary,
unjustified and bad in law.
2. The assessee craves the right to add, amend or modify any
ground of appeal.
6. The facts of the case of the year under consideration are
more or less similar to the facts of the case for the assessment
year 2006-07, except few changes. In the year under
consideration, the assessee filed regular return of income under
section 139(1) of the Act on 31/10/2007 (prior to the date of
such) declaring an income of Rs.11,86,465/-. Further,
12
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
consequent to the search , in response to the notice issued under
section 153A of the Act, the assessee filed return of income
declaring an income of Rs.40,16,465/-including an additional
income surrendered of Rs.28, 30,000/-. The detail of the said
surrendered income are as under:
S. No. Page No/Annexure/Party Amount (in Rs.)
1. Party 2, Annexure 1, Page 17 26,00,000/-
2. Cash seized from locker no. 2,30,000/-
421 with Punjab & Sindh
Bank, in the name of Mr.
Deepak Kumar & Rita
Kumar
Total 28,30,000/-
6.1 The Assessing Officer completed the assessment by
accepting the income returned by the assessee at Rs.40,16,465/-,
however, he initiated penalty under section 271(1)(c) of the Act in
respect of the surrendered amount of Rs.28,30,000/-. The
Assessing Officer rejected the contention of the assessee opposing
levy of the penalty and he levied penalty amounting to
Rs.9,52,578/- at the rate of 100% of the amount of tax sought to
be evaded. The Ld. CIT(A) sustained the penalty holding that the
assessee has not discharged the primary burden of presumption
of concealment with cogent explanation.
7. Thus we find that in the present case, the assessee has
offered the income of Rs.28,30,000/- ( i.e. on which penalty has
been levied) in the return of income filed in response to notice
under section 153A of the Act consequent to the search action,
whereas in the assessment year 2006-07, the surrendered income
was not filed in the return of income filed for the assessment year
2006-07.
13
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
8. Both the parties agreed that issue in dispute in the year
under consideration is covered by the arguments made in the
appeal for assessment year 2006-07. The Ld. counsel of the
assessee relied on the decision in the case of CIT Vs. Mohandas
Hassa Nand, reported in 141 ITR 203 (Del.), CIT versus Reliance
Petro Products Private Limited, 322 ITR 158 (SC) and CIT Vs. SAS
Pharmaceuticals, 335 ITR 259 (Delhi), though he admitted that
these decisions were not in relation to Explanation 5A below
section 271(1)(c) of the Act. According to him as far as proceeding
under section 153A is concerned, there is no allegation of
furnishing inaccurate particulars of income and also returned
income and assessed income being same, penalty was not leviable
in view of the decision of the Tribunal in the case of Prem Arora
Vs. DCIT, reported in 56 SOT 14 (Del) .
9. We have heard the rival submissions and perused the
relevant material on record including written submissions of the
both the parties. We have already discussed in detail the
provisions of Explanation 5A to section 271(1)(c) of the Act in
earlier paragraphs while adjudicating the appeal for assessment
year 2006-07 . In view of the Explanation 5A to section 271(1)(c)
of the Act, an income based on the entry in the documents found
represented income of the previous year [i.e. clause (ii)], which is
ended before the date of the search and the assessee has not
declared such income in the regular return of income filed before
the date of search [i.e. clause (a)], the assessee is deemed to have
concealed particulars of his income or furnished inaccurate
particulars of such income. In the instant case, in the original
14
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
return of income filed on 31/10/2007, (prior to the date of such)
the said income/- of Rs.28,30,000/- was not declared. There is
no dispute this factual finding. The decisions relied upon by the
assessee have already been discussed and found to be not related
to the Explanation 5A below the section 271(1)(c) of the Act,
which has been invoked by the Ld. Assessing Officer. Since,
clause (a) along with clause (ii) of Explanation 5A is attracted, in
the instant case, the assessee is liable for penalty under section
271(1)(c) of the Act. Accordingly, in view of the deeming provisions
of Explanation 5A to section 271(1)(c) of the Act, we hold the
assessee liable for penalty under section 271(1)(c) of the Act for
concealment of particulars of income or inaccurate particulars
filed. The ground of the appeal of the assessee is accordingly
dismissed.
ITA No.2558/Del/2012 for AY:2008-09 (Revenue)
10. Now, we take up appeal of the Revenue having ITA No.
2558/Del/2012 for assessment year 2008-09, wherein following
grounds have been raised:-
a) Whether the order of CIT(A) is completely contrary to the
facts and provisions of Explanation 5 A to section 271(1)(c) of
the I.T.Act particularly ignoring the following provisions,
"notwithstanding that such income is declared by him in any
return of income furnished on or after the date of search, he
shall, for the purposes of imposition of a penalty under
clause (c) of sub-section (1) of this section, be deemed to have
concealed the particulars of his income or furnished
inaccurate particular of such income.
b) Whether on facts and circumstances the learned CIT(A) erred
in deleting the penalty of Rs. 95,65,435/- levied u/s
15
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
271(1)(c) read with Explanation 5A of the I.T Act by ignoring
the fact that explanation 5A is a deeming provision wherein
penalty is to be levied if the assessee fulfils the condition
mentioned in sub clause (a) or (b) of the Explanation 5A and
that in the instant case, the assessee failed to incorporate
the said amount in its return of income even after the due
date had been expired thereby making itself liable for
penalty in sub clause of explanation 5A of sec 271(1)(c) of the
I.T.Act ?
c) Whether on facts and circumstances of !d.CIT(A) erred in
deleting the penalty of Rs.37,53,835/- levied u/s 271(1)(c )
read with explanation 5A of the l,T.Act by ignoring the fact
that the assessee failed to explain the notings found in
seized materials and did not produce any documentary
evidence or reconciliation with books of accounts ?
d) Whether the order of CIT(A) contains perverse findings
completely ignoring the facts and the provisions of
Explanation 5A of 271(1)(c) of the IT Act, Some such findings,
given by CIT(A), are as under:
(i) "In such circumstances I feel that any levy of penalty
u/s 271(1)(c) on then ostensible concealed income is
impossible. The assessee cannot be expected to do the
impossible." (Para 4.3 of the order)
(ii) "The assessee had covered himself with the immunity
conferred u/s 271(1)(c) on the date of search itself."
(Para 4.9 of the order)
(iii) " In such facts and circumstances I am afraid penalty
cannot be levied u/s 271(1)(c ) as there is no
concealment or filing of inaccurate particulars. There is
only a difference of opinion on the facts. It is not a case
whereby the Ldi AO has made deep investigation on the
documents on the basis of which he encountered or
found out concealment or filing of inaccurate particulars."
(Para 4.5 of the order)
16
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
11. The facts of the instant case have already been
reproduced in earlier Paras. The facts, qua the issue in dispute
are that search in the case of the assessee was conducted on
29/04/2008 and the regular return of income for the year under
consideration was filed by the assessee on 30/09/2008 declaring
total income of Rs.25,76,35,590/-. In response to notice issued
under section 153A, again the assessee filed return of income
declaring total income of Rs.27,69,01,087/- thereby increasing
the income of Rs.1,92,65 ,497/- as compared to regular return of
income filed.
11.1 In the assessment order the Assessing Officer has
reproduced the detail of undisclosed income of Rs.27 crore
surrendered in the course of statement recorded under section
132(4) as under:
Unexplained cash and jewellery: Rs.5.00 crores
Unexplained cash investment as per agreement to sell: Rs.8.00 crores
Unexplained income as per loose papers seized Rs.4.00 crores
Unaccounted income in respect of Spazedge Project Rs.10.00 crores
Total : Rs. 27.00 crores
11.2 The Assessing Officer has also reproduced the detail of the
undisclosed income of Rs.26,71,70,000/-offered to tax for the
year under consideration (Rs.28,30,000/- in assessment year
2007-08) as under:
1. Unexplained cash investment as per Rs.8,00,00,000/-
agreement to sell vis-à-vis M/s Kay
Kay Designer T Owners Pvt. Ltd.
2. Income lying as unaccounted cash Rs.5,22,50,000/-
(asset):
17
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
[this is out of undisclosed incomes,
documents relevant to which were
found during the search to the extent of
income of Rs.4,66,86,971/- only]
3. Undisclosed income untilized for Rs.1,92,65,493/-
undisclosed expenditure, as traced out
from the seized documents
4. Undisclosed income in respect of Rs.11,56,54,507/-
Spazedge project by adopting %
Total Rs.26,71,70,000/-
11.3 In the assessment order, the Ld. Assessing Officer
accepted the undisclosed income offered of Rs.5,22,50,000/-
against unaccounted cash, Rs.8,00,00,000/- against unexplained
cash investment as per the agreement to sell vis-à-vis M/s Kay
Kay designer Tower Private Limited, Rs.11,56,54,507/- against
undisclosed income in respect of Spazedge project.
11.4 In addition to the above the Assessing Officer made
following additions to the income returned under section 153A of
the Act:
1. Payment of the commission of Rs.51,398/-not reflected in
books of accounts (para 10.6.2 of the assessment order).
2. Additional amount of Rs.7,02,437/- paid for which there is no
corresponding entry in the books of accounts (Para10.7.2 of
the assessment order)
3. Rs. 30,00,000/- paid has not been recorded in the books of
accounts (para 10.8.2 of the assessment order).
11.5 The Assessing Officer initiated penalty under section
271(1)(c) of the Act read with Explanation 5A in respect of the
above additions. The Ld. Assessing Officer further reduced the
18
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
income of the assessee amount of Rs.15,54,000/-which, he
shifted from current assessment year to assessment year 2006-
07.
11.6 We also note that the Assessing Officer initiated penalty
under section 271(1)(c) of the Act in respect of the following
amount, though no separate addition was made in the
assessment order under section 153A of the Act:
1. Petty amount of expenditure of Rs.9,73,300/-considered as
part of offer of Rs.1,92,65,493/-as income from other
sources.
2. Brokerage of Rs.7,58,205/-paid in cash considered as paid
out of income of Rs.1,92,65,493/- offered as income from
other sources.
3. Cash of Rs. 3 lakh considered as part of offer of
Rs.1,92,65,493/-
4. Expenditure aggregating Rs.5,35,340/-considered as part
of offer of Rs.1,92,65,493/-
5. Cash expenditure Rs.93,000/-considered as part of offer of
Rs.1,92,65,493/-
6. Amount of Rs. 5 lakh considered as part of offer of
Rs.1,92,65,493/-
7. Expenses aggregating to Rs.8.11 Lacs considered as part of
offer of Rs.1,92,65,493/-
8. Expenses aggregating to Rs.40,78,500/-considered as part
of offer of Rs.1,92,65,493
19
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
9. Cash payment of Rs.2,04,000/-considered as part of offer
with Rs.1,92,65,493/-
10. Cash expenditure of Rs.13,12,627/-considered as part
of offer of Rs.1,92,65,493/-
11.7 In para 15 of the assessment order, the Assessing Officer
also noted of issue of separate notice of penalty under section
271AAA in respect of the disclosure of Rs.24,79,04,507/-
containing amount discussed in paragraph 8 ( unaccounted cash
of Rs. 5,22,50,000), paragraph 9 (unexplained investment
purchase of the property amounting to Rs.8 crore), paragraph 10
(undisclosed cash of Rs.5.225 crores) , paragraph 12 (
undisclosed income in respect of the project amounting to
Rs.11,56,54,507/-).
11.8 The Assessing Officer issued show cause notice for levy of
penalty under section 271(1)(c) of the Act in respect of the total
amount of Rs.1,33,19,328/- which consisted of Rs.37,53,853/-
and Rs.95,65,435/-. The first amount of Rs.37,53,853/- which
comprised of Rs.30,00,000/-; Rs.7,02,437/- and Rs.51,398.20 as
mentioned in para 11.4 of this order. The second amount of
Rs.95,65,435/-comprised of the amounts as mentioned in para
11.6 of this order for which were held as out of books of accounts,
no separate addition was made as same were considered against
offer of income from other sources of Rs.1,92,65,493/-.
11.9 Before the Assessing Officer, the assessee contended that
Explanation 5A below the section 271(1)(c) is not applicable in the
instant assessment year as the search had taken place on
20
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
29/04/2008 and on said date due date of filing of return of
income was not expired. In such case, penalty cannot be levied
invoking the deeming provision of Explanation 5A below section
271(1)(c)of the Act.
11.10 The Ld. Assessing Officer did not accept the contention of
the assessee and levied the penalty on the amount of
Rs.95,65,493/-observing as under:
"From the submissions made by the assessee it is seen that the
assessee has accepted to the transactions or contents in the
documents seized to be out of books and has therefore agreed to
surrender . Secondly while explaining all the documents mentioned
above has stated that it has incorporated the income arising out of
the above documents as income from other sources from which it is
all the more clear that the assessee has accepted to earning the
same from undisclosed sources. That the assessing officer has
accepted in the disclosure of the assessee does not immune the
assessee from penalty proceedings since element of concelament
exists in the disclosure made by the assessee simply due to the fact
that but for the search, the assessee would have not disclosed this
income. Since the assessee itself while explaining the documents
seized as well as the disclosure made has agreed to out of books
transactions , nothing more is required to prove the concealment
involved with respect to Rs 95,65,493."
11.11 Thus, according to the Assessing Officer the assessee
failed to include the undisclosed income of Rs.95,65,493/- in the
return of income filed under section 139(1) and therefore, falls
under the ambit of sub-clause (b) of Explanation 5A of section
271(1)(c) of the Act. The Assessing Officer is of the view that mere
acceptance of the disclosure of the assessee did not automatically
give immunity from penalty proceeding since element of
concealment exist in the disclosure made by the assessee because
21
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
if there had been no search, the assessee would not have
disclosed the above amount.
11.12 In respect of the amount of Rs.37,53,835/-the Assessing
Officer levied the penalty observing as under:
"The above contention cannot be accepted since if the assessee
considered addition made by the A.O. of Rs 37,53,835/- as covered
up by Rs 55,63,029/- which is a balancing figure not covered up by
any discrepancies then firstly the assessee should have objected to
it during the course of assessment proceedings and should have
proved how Rs 55.63,029/- is only a balancing figure which was
surrendered by the assessee in order to complete the lumpsum
declaration of Rs 27Cr.The assessee has failed to do so in
assessment as well as in penalty proceedings, secondly, the total
disclosure made by the assessee of Rs 27 Cr is made by the
assessee voluntarily after considering the documents, cash found
and jewellery. Rather the assessee has itself in submission as per
para No 2.3.3, stated that it had evaluated all the papers seized and
then enhances its income while filing return u/s 153A of the I.T. Act.
So there is no question of any amount being merely a balancing
amount which covers no discrepancies, to that extent assessee's
submission is self contradictory."
11.13 In this manner, the Ld. Assessing Officer levied penalty
amounting to Rs.45,27,240/- at the rate of 100% of the amount
of tax sought to be evaded.
11.14 The Ld. CIT(A), however, deleted the penalty on the
ground that determination of the penalty levied has to be made
on the basis of the return filed under section 153A of the Act and
not on the basis of the return filed under section 139(1) of the
Act. The relevant finding of the Ld. CIT(A) is reproduced as under:
"4.3. 1 have gone through the facts of the case and the
submissions of the assessee. It is an admitted fact that the search
and seizure operation was conducted on 29.04.2008. The assessee
22
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
obtained copies of the seized materials on 23.02.2010, as intimated
by the AO, Central Circle-11, Faridabad vide letter dated 20.03.2012
when requested for the precise date. In other words, the assessee
filed the regular return of income u/s 139(1) prior to obtaining copies
of the seized records. In such circumstances 1 feel that any levy of
penalty u/s 271(1) (c) on the ostensible concealed income is
impossible. The assessee cannot be expected to do the impossible.
4.4 Be that as it may I also find that the assessment order has been
framed on the basis of the return filed u/s 153A. As such the return
filed u/s 139(1) is not the basis on which the assessment order has
been finalized. In such circumstances the return filed u/s 153A
should therefore be taken as the valid return, while the return u/s
139(1) is at best only for the record.
4.5 Thus any determination whether penalty is to be levied u/s
271(1)(c ) is to be seen on the basis of the return filed u/s 153 A. The
said return reflects the correct income which had been declared and
surrendered by the assessee during the search. In fact the income
declared in the return is. more than the surrendered amount of Rs.
27 crores in the statement recorded u/s 132(4). In such facts and
circumstances 1 am afraid penalty cannot be levied u/s 271(1)(c) as
there is no concealment or filing of inaccurate particulars. There is
only a difference of opinion on the facts. It is not a case whereby the
Ld. AO has made deep investigation on the documents on the basis
of which he encountered or found out concealment or filing of
inaccurate particulars.
4.6......................
4.7......................
4.8......................
4.9 Lastly I may also stated that the assessee had covered
himself with the immunity covered u/s 271(1)(c) on the date of
search itself. The return of income u/s 139(1) was filed later without
availing the copies of the seized documents and in the return filed in
response to section 153A, the assessee amended any errors it may
have inadvertently missed out earlier by declaring an income higher
than the surrendered amount."
11.15 Aggrieved with the finding of the Ld. CIT(A) of deleting the
penalty, the Revenue is in appeal before the Tribunal raising the
grounds as reproduced above.
23
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
12. Before us, the Ld. counsel of the assessee also filed
application under rule 27 of the ITAT Rules, 1963 submitting that
in the instant case penalty could have been levied under section
271AAA of the Act and not under section 271(1)(c) as only done
by the Assessing Officer and, thus, order of the Ld. CIT(A)
cancelling the penalty imposed under section 271(1)(c) might be
sustained albeit on the ground of legal submission that in the
specified year the penalty under section 271AAA could be levied.
13. The Ld. DR opposed admission of the application under
Rule 27 of the ITAT Rules on the ground that under Rule 27, the
assessee may support the order appeal against on any of the
grounds decided against him. According to him, in the present
case, no ground is decided against the assessee and therefore
assessee is not entitled to file application under Rule 27 of the
ITAT Rules.
14. We have heard the submission of the both the parties on
the issue of application under Rule 27 of the ITAT rules. The rule
27 of the ITAT Rules read as under:
"Respondent may support order on grounds decided against
him.
27. The respondent, though he may not have appealed, may support
the order appealed against on any of the grounds decided against
him."
15. The present appeal has been filed by the Revenue and
thus, the assesses is respondent. In view of the plane reading of
the rule, it is evident that respondent may file application
supporting the order on any of the ground decided against him.
24
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
But in the present case the Ld. CIT(A) has decided all the grounds
in favour of the assessee, thus, we do not find any reason for
entertaining the application of the assessee under rule 27 of the
ITAT Rules and accordingly, said application was rejected and
parties were directed to argue the appeal of the Revenue.
16. The Ld. DR supporting the grounds raised that Ld. CIT(A)
was not justified in cancelling the penalty under section 271(1)(c)
of the Act invoking Explanation 5A. According to him, penalty
under 271(1)(c) of the Act could be levied in case of additions
made other than the undisclosed income surrendered during the
course of statement under section 132(4) of the Act. The Ld. AR
submitted that in view of the deeming provisions of Explanation
5A, the assessee is liable for the penalty even though the said
income has been included in the return filed in response to notice
under section 153A of the Act.
17. The Ld. counsel of the assessee, on the other hand,
opposed the arguments of the Ld. DR and submitted that penalty
under section 271(1)(c) of the Act invoking Explanation 5A cannot
be invoked where the due date of filing of the return of income for
such previous year has not expired. He also submitted that in the
specific previous year only penalty under section 271AAA could
be levied, and therefore, the Assessing Officer was not justified in
levying penalty under section 271(1)(c) of the Act. According to
him, the Ld. CIT(A) was justified in deleting the penalty.
18. We have heard the rival submissions and perused the
relevant material on record. The undisputed facts in the case are
that search was conducted on 29/04/2008 and the due date for
25
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
filing return of income for the assessment year 2008-09 was not
expired before the date of the search.
19. In the present appeal, the Assessing Officer has invoked
Explanation 5A for levy of penalty under section 271(1)(c) of the
Act.
20. From the plain reading of the Explanation 5A, it is evident
that for invoking the clause (ii) or (ii) in respect of any previous
year, which has ended before the date of the search either of
condition as under should be satisfied:
(a) the return of income for such previous year has been
furnished before the said date but such income has not
been declared in or
(b) the due date for filing return of income for such previous
year has expired but the assessee has not filed return of
income.
21. We note that in the instant case the due date of filing of
the return of income for the previous year corresponding to the
year under consideration had not expired on the date of the
search i.e. condition (b) and therefore the Explanation 5A could
not be attracted for holding the assessee liable for levy of penalty
under section 271(1)(c) of the Act.
22. The other argument of the Ld. counsel of the assessee is
that the penalty in case of a specified year could be levied under
section 271AAA of the Act only. On perusal of the relevant
provisions we find that penalty under section 271AAA of the Act
can be levied in respect of undisclosed income in a specified
26
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
previous year if any of the following 3 conditions contained in
section 271AAA(2) are not fulfilled:
"Penalty where search has been initiated.
271AAA. (1) ...............................................
(2) Nothing contained in sub-section (1) shall apply if the assessee,--
(i) in the course of the search, in a statement under sub-section (4)
of section 132, admits the undisclosed income and specifies the
manner in which such income has been derived;
(ii) substantiates the manner in which the undisclosed income was
derived; and
(iii) pays the tax, together with interest, if any, in respect of the
undisclosed income."
23. The specified previous year has been defined under the
section as under:
"Explanation.--For the purposes of this section,--
(a) .............................................................
(b) "specified previous year" means the previous year--
(i) which has ended before the date of search, but the date of filing
the return of income under sub-section (1) of section 139 for such
year has not expired before the date of search and the assessee has
not furnished the return of income for the previous year before the
said date; or
(ii) in which search was conducted."
24. Since the previous year corresponding to the present
assessment year ended before the date of such i.e. 31.03.2008
and due date of filing of the return of income had not expired
before the date of the search, the previous year corresponding to
present assessment year under consideration is a specified
previous year, and thus penalty under section 271AAA could be
levied. The penalty under section 271AAA of the Act could be
levied in specified previous year in respect of the undisclosed
27
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
income unless admitted in a statement under section 132(4)
and specified the manner in which income is derived and the
manner has to be substantiated and tax has paid on the
undisclosed income. In case any of the 3 conditions are not
fulfilled, the penalty under section 271AAA would be levied.
25. But, if the Assessing Officer has made any addition other
than the undisclosed income stated under section 132(4) and find
the assessee liable for concealment of particular of income or
furnishing inaccurate particular of income, he may initiate
penalty under section 271(1)(c) of the Act in respect of those
additions. The Assessing Officer may levy penalty invoking the
main provisions of the section 271(1)(c) of the Act and
Explanation other than Explanation 5 and 5A, if applicable, but
cannot take shelter of deeming provisions of Explanation 5/5A for
levy of penalty under section 271(1)(c) of the Act. Because, the
deeming Explanation 5A cannot be invoked for a specified
previous year, which has been specifically barred by way of clause
(a) or (b) of the Explanation 5A.
26. In the instant case before us, the Assessing Officer has
levied penalty under section 271(1)(c) of the Act only invoking the
Explanation 5A below section 271(1)(c) of the Act and not held the
assessee liable for concealment of particular of income or
furnishing of inaccurate particular of income on the basis of
Explanation other than Explanation 5A.
27. In view of the aforesaid discussion, the penalty levied by
the Assessing Officer under section 271(1)(c) of the Act is
cancelled and the action of the Ld. CIT(A) in deleting the penalty
28
ITA No.2044 & 2045/Del/2014;
ITA No. 2558/Del/2012
is upheld. The grounds of the appeal of the Revenue are
accordingly dismissed.
28. In the result, the appeal filed by the Revenue as well as
the application filed under Rule 27 of the ITAT Rules by the
assessee are dismissed.
Order is pronounced in the open court on 20th November, 2018.
Sd/- Sd/-
KULDIP SINGH O.P. KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 20th November, 2018.
RK/-(D.T.D.)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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