IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `G' : NEW DELHI)
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
and
SHRI A.T. VARKEY, JUDICIAL MEMBER
ITA Nos.4398 & 4399/Del./2012
(ASSESSMENT YEARS : 2005-06 & 2006-07)
ITO, Ward 35 (4), vs. Shri Ankur Aggarwal,
New Delhi. 150, Savita Vihar,
Delhi 110 092.
(PAN : AFTPA7234G)
ITA No.4400 & 4401/Del./2012
(ASSESSMENT YEARS : 2005-06 & 2006-07)
ITO, Ward 35 (4), vs. Shri Neeraj Jindal,
New Delhi. D-334, Vivek Vihar,
Delhi 110 095.
(PAN : AALPJ1305J)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Rohit Garg, Advocate
REVENUE BY : Shri Sujit Kumar, Senior DR
Date of Hearing : 03.08.2015
Date of Pronouncement : 19.08.2015
ORDER
PER BENCH :
These four appeals filed by the revenue are directed against the
separate orders of the Commissioner of Income-tax (Appeals)-XXVII,
New Delhi all dated 16.05.2012 for the assessment years 2005-06 and
2 ITA Nos.4398 to 4401/Del./2009
2006-07. As the issue is common in all the four appeals, the same are
disposed of by this common order for the sake of brevity.
2. First, we take up ITA No.4398/Del/2012 for the assessment year
2005-06.
3. The grounds of appeal taken by the revenue read as under :-
"1. The order of the CIT(A) is bad in law and is against the facts of the
case.
2. The CIT(A) erred in law and on facts in deleting the penalty
amounting to Rs.7,29,100/- made by the A.O. under section 271(1)(c) of
the Act by not appreciating the fact that the disclosure of income was the
result of search operation on the assessee and not voluntary.
3. On the facts and circumstances of the case the I.d. CIT(A) has
erred in ignoring the fact that provision of explanation 5(1) & explanation
5(2) of the section 271 (1)(c) of the Act are not applicable in this case.
4. Whether the disclosure made in response of the notice u/s
153A(1)(a) in respect of earlier assessment year i.e. A.Y. 2005-06 over
and above already returned income after the search operation held on
11.01.2007 can be said voluntary in nature.
5. The CIT(A) erred in law and on facts by ignoring that if in
pursuant to search operation, penalty is not levied for unearthing of
additional income detected during a search, it would be an open incentive
to all to conceal their income till such time it is detected by the
department.
6. The appellant craves leave to add, alter or amend any/all the
grounds of appeal before or during the course of hearing of the appeal."
4. For the relevant assessment year i.e. AY-2005-06, the return
declaring an income of Rs.1,72,799/- was filed under Section 139 (1) of
the Income-tax Act, 1961 (hereinafter `the Act) on 30.12.2005.
5. The assessee belonged to M/s J.M. Estate Developers Pvt. Ltd.
group of cases. Search and seizure operation u/s 132(4) of the Act was
3 ITA Nos.4398 to 4401/Del./2009
carried out on 11.01.2007 on the Group and directors of the aforesaid
company. A disclosure of Rs.16.00 Crores was made by the Group u/s
132(4) of the Act on behalf of different directors and relatives of the
directors. During the search, cash amounting to Rs.5,26,530/- and
jewellery worth Rs.17,85,785/- were found from the premises and lockers
of the assessee. Out of these assets, cash amounting to Rs.4,06,930/- was
seized, whereas no jewellery was seized. Notice u/s 153A of the Act was
issued on 26.02.2008, in response to which the assessee filed his return of
Income on 23.10.2008 declaring an income of Rs.23,38,731/-, thus
showing additional income of Rs.21,65,932/-. The Assessing Officer
completed the assessment u/s 153A read with section 143 (3) of the Act on
31.12.2008 after accepting the declared income by observing that, "After
examination of the details filed and discussion with AR of the assessee the
income of the assessee is accepted and assessed at Rs.23,38,731/-. "
6. The A.O. also initiated penalty proceedings u/s 271(1)(c) in the
assessment order by observing as under :
"From the seized records it is noticed that the assessee group
had offered a sum of Rs.16 Crores as unaccounted. income.
However, as the disclosure is consequence of the search, I am
of the view that the assessee has concealed the income. Thus,
penalty proceedings u/s 271 (1)(c) is being initiated
separately. "
7. Thereafter, the AO passed the penalty order u/s 271(1)(c) of the Act
on 26.06.2009 by imposing penalty amounting to Rs.1,34,640/- being
4 ITA Nos.4398 to 4401/Del./2009
100% of the amount of tax sought to be evaded on the concealed income of
Rs.4 Lakhs.
8. The assessee filed a revision petition u/s 264 of the Act dated
06.08.2009 before the CIT (Central-II), New Delhi against the order
passed by the A.O. The CIT (Central-II), New Delhi vide his order dated
10.03.2011, has held as under :-
"However, since the penalty order in question had already
been set aside by the undersigned and the proceedings had
been restored back to the file of the A.O. u/s 263 of the Act,
the present proceedings u/s 264 before me becomes
infructuous and is accordingly disposed off. "
9. With respect to proceedings u/s 263 of the Act referred to by the
CIT(Central-II) as above, CIT observed that the A.O. had imposed penalty
on the concealed income of only Rs.4,00,000/-, whereas in the return of
income filed by the assessee in response to notice u/s 153A, the assessee
had declared additional income of Rs.21,65,932/-. Therefore, the CIT
(Central-II) passed order u/s 263 of the Act on 10.3.2011 by holding that
the order passed by the A.O. was erroneous and prejudicial to the interests
of the revenue because the A.O. had passed the penalty order by
erroneously taking the figure of concealed income at Rs.4,00,000/- as
against the additional income of Rs.21,65,932/- declared by the asseessee.
The CIT(Central-II), therefore, set aside the penalty order and proceedings
were restored back to the file of the A.O. with the directions to dispose of
the matter in accordance with provisions with the Income-tax Act vis-a-vis
5 ITA Nos.4398 to 4401/Del./2009
judicial pronouncements on the issue, after affording proper opportunity to
the assessee.
10. In pursuance of these directions of the CIT (Central-II), the A.O.
passed penalty order u/s 271(1)(c) of the Act dated 29.09.2011 levying
penalty of Rs.7,29,100/- being 100% of the amount of tax sought to be
evaded on the concealed income of Rs.21,65,932/-.
11. Aggrieved, the assessee filed an appeal before the first appellate
authority and the CIT (A) deleted the penalty by observing as under :-
"22. I have carefully considered the submissions of the appellant, the
observations made by the A.O. in the penalty order and the facts of the
case. Penalty u/s 271 (1)(c) has been imposed in this case on the ground
that the additional income shown by the appellant in the return of income
filed in response to notice u/s 153A of the Act was not a voluntarily
disclosure. It has further been held by the A.O. that incriminating
documents were found during the course of the search and seizure
operations and disclosure made by the appellant u/s 132(4) of the Act was
as consequence of the search operations. Had there been no search at the
premises of M/s J M Estate Developers Pvt. Ltd. group including the
appellant, the appellant would not have disclosed the additional income
nor would he have offered the same for taxation. The appellant on the
other hand submitted that he had shown the additional income of Rs.21
,65,932/- voluntarily in his Return of Income filed in response to notice
issued u/s 153A on the basis of disclosure made by him u/a 132(4) of the
Act during the course of search. Such disclosure was made by the
appellant voluntarily to buy peace of mind, to cooperate with the
department and to avoid protracted litigation. It has been contended by the
appellant that no incriminating documents / material were found during
the course of search and no reference has been made by the A.O. to any
incriminating documents either in the assessment order or in the penalty
order. The income declared by the appellant in Return of Income filed in
response to notice u/s 153A has been accepted as such. Therefore, there
was no concealment of income with reference to the Return of Income and
in view of the provisions of section 153A, the return filed in response to
notice u/s 153A(l )(a) is treated as return filed u/s 139 of the Act.
Therefore, there was no concealment of any income and penalty U/S
271(1)(c) was not imposable in this case.
23. With regard to the case laws relied upon by the A.O., it is seen that
none of these case laws belonged in a situation where the income declared
6 ITA Nos.4398 to 4401/Del./2009
in the return of income filed in response to the notice u/s 153A of the Act
was accepted as such. Further, in the appellant's case no incriminating
material was found during the course of the search and none was pointed
out or brought on record by the A.O. either in the assessment order or in
the penalty order. In the case of Biland Ran Hargyan Dass (supra), the
matter before the Hon'ble Allahabad High Court related to the A.Y. 1978-
79 much before Explanation-5 to section 271(1)(c) and Section 153A were
brought on the statute. In the case of K P Sampath Reddy (supra), on the
basis of documentary evidence found during the course of survey, the
assessee had agreed to be assessed at a higher income than the returned
income whereas in the appellant's case the returned income has been
accepted. Moreover, offer for surrender in that case was made because of
several erroneous entries detected in the books of account whereas in the
appellant's case no such discrepancies have been pointed out by the A.O.
at any stage. In the case of Mohd. M Farooqi (supra), the explanation
offered by the assessee with regard to cash impounded by the police
authorities was not found to be satisfactory in as much as the assessee was
not able to point out how much cash belonged to him and how much
belonged to his brother and brother-in-law. The facts of the case of Sh.
Nithya Kalayani Textile Ltd. (supra) are not applicable to the appellant's
case, as in that case the issue involved was valuation of closing stock on
the basis of two varieties of cotton. Similarly, in the case of Mr. Sunil R
Kalro (supra), the issue involved was whether the penalty was leviable on
a representative assessee. In the case of Jasubhai Business P. Ltd.(supra),
the issue involved was the rejection of the assessee's claim with regard to
the certain expenditure as revenue expenditure and the treatment of the
same by the AO as capital expenditure. In the case of K R Malaimathi
(supra), the issue involved was explanation of cash credit entries. Thus,
the case laws relied upon by the A.O. in the assessment order had facts
which were not applicable to the facts of the appellant's case.
24. The appellant has relied on a number of case laws which have been
reproduced above. In the case of CIT Vs Shyamlal M Soni (supra), the
Hon'ble M.P. High court held that where the income returned in the
revised return was accepted and assessed in the hands of the assessee even
if that revised return was filed after search u/s 132 and after notice issued
u/s 148 of the Act and subsequent to enquiries made by the department
during the course of assessment proceedings, no penalty u/s 271(1)(c)
could be levied in that case. In the case of P V Ramana Reddy (supra),
ITA T Hyderabad in its order dated 6.01.2012 held that where the addition
was made on the basis of more or less on the offer made by the assessee
and the A.O. had not brought any incriminating material for concealment
on record and there was no material for establishing concealment
independently penalty U/S 271(1)(c) is not leviable. In the case of Joyeo
India Pvt. Ltd., ITAT Delhi held that once income is declared in the return
filed in pursuance to notice u/s 148 of the Act which is treated as return
filed U/S 139, no penalty u/s 271(1)(c) could be levied. In the case of
DCIT vs. Gopichand Roopchand Rajani (supra), ITAT Mumbai held that
where no incriminating material was found during the course of survey
and search for the relevant A. Y. and surrender made by the assessee
7 ITA Nos.4398 to 4401/Del./2009
during the course of survey was disclosed in the return of income filed in
response to notice u/s 153A(1)(a) and the same was accepted by the A.O.
without pointing out any incriminating material, discrepancy and
deficiency, then the assessee had neither furnished any inaccurate
particular of his income nor had he concealed his income.
25. This issue i.e. whether the penalty U/S 271(1)(c) can be imposed in
a case when the returned income declared in a Return of Income filed in
response to notice u/s 153A of the act has been accepted as such, has been
discussed in detail in a recent judgment of jurisdictional ITAT in the Case
Sh. Prem Arora vs. DCIT, Central Circel-25, New Delhi, 2012-TIOI-262-
ITAT-DEL, the facts of this case are as under-
Assessee in this case was searched by the department. During the
course of search certain incriminating documents were found. On
the basis of these documents it was found that assessee had been
carrying on unaccounted business activities. Accordingly, the AO
issued notice of See 153A for six assessment years. Assessee filed
his return disclosing substantial income. AO framed the
assessment after estimating the income of the assessee. The AO
however, could not add beyond the disclosure. In this backdrop the
AO levied penalty under section 271 (1)(c) on the ground that the
assessee had concealed particulars of his income. CIT(A) affirmed
the order of the AO.
After hearing the parties the ITA T held that,
++ on bare reading of See 153A it is seen that this section starts
with a non-obstante clause relating to normal assessment procedure
covered by Sections 139, 147, 148, 149, 151 and 153 in respect of
searches made after 31st May, 2003. The sections, so excluded,
relate to filing of return, assessment and re-assessment
proceedings. Further section 153A intends to assess or reassess
total income of six assessment years immediately preceding the
assessment year relevant to the previous year in which such search
is conducted or requisition is made. Thus the legislative intention
is not to assess escaped income as in section 147 or undisclosed
income as was assessed U/S 158BC of the Act. The First Proviso
to sec. 153A makes it clear, that notice under sec. 153A will be for
each such six assessment years for assessment or re-assessment of
total income. Second Proviso to Section 153A provides that such
notice will have the effect of abating all the pending assessment or
re-assessment proceedings, so as to avoid multiplicity of
proceedings, which was a feature of block assessment;
++ when normal assessment procedure covered by Sections 139,
147, 148, 149, 151 and 153 has been completely excluded by
operation of non-obstante clause "Notwithstanding anything
contained" the search assessments made u/s section 153A of the
Act cannot be treated as continuance of normal assessment
8 ITA Nos.4398 to 4401/Del./2009
proceedings whether abated or not. Thus there is complete
detachment of assessment proceedings u/s 143 or 147 from search
proceedings u/s 153A of the Act. When scheme of search
assessment as designed by the Legislature does not prescribe to
take into-account the earlier assessment proceedings whether
abated or not, it will not be proper or justified to refer to returned
income u/s 139 for the purpose imposition of penalty u/s 271 (l)(c)
of the Act;
++ it follows that the concealment of income has to be seen with
reference to additional income brought to tax over and above
returned by the assessee in response to notice issued u/s 153A of
the Act. Accordingly in our considered opinion for the purpose of
imposition of penalty u/s 271 (l)(c) resulting as a result of search
assessments made uls153A, the original return of income filed u/s
139 cannot be considered;
++ as held above the penalty u/s 271 (l)(c) is imposable when there
is variation in assessed and returned income. If there is no
variation, there will be no concealment. When there is no
concealment, question levy of penalty u/s 271 (1)(c) of the Act will
not arise. This is settled position of law. The concept of voluntary
return of income may be important in penalty proceedings initiated
in course of normal assessment proceedings made u/s 143(3) or
147 but not u/s 153A. From above discussion it follows that where
retuned income filed u/s 153A is accepted by the assessing officer,
there will be no concealment of income and consequently penalty
u/s 271 (1 ) (c) cannot be imposed;
++ the Supreme Court in Varkey Chacko v. CIT has held that a
penalty for concealment of particulars of income or for furnishing
inaccurate particulars of income can be imposed only when the
assessing authority is satisfied that there has been such
concealment or furnishing of inaccurate particulars. A penalty
proceeding, therefore, can be initiated only after an assessment
order has been made which finds such concealment or furnishing
of inaccurate particulars. The penalty was permissible under the
law on the date on which the offence of concealment of income
was committed, that is to say, on the date of the offending return;
++ if the facts of the case are examined in the light of decision of
Delhi high Court in SAS Pharmaceuticals penalty u/s 271 (l)(c) is
not imposable where there is neither concealment of income nor
furnishing of inaccurate particulars of income in return filed u/s
153A of the Act. In earlier paragraphs we have held that the
concealment of income is to be determined with reference to the
return of income to be filed in response to notice u/s 153A of the
Act. Once returned income filed U/S 153A is accepted by the
assessing officer it can neither be a case of concealment of income
nor furnishing of inaccurate of particulars of such income. Hence,
9 ITA Nos.4398 to 4401/Del./2009
the assessee's case is squarely covered by the decision of Hon'ble
Delhi high Court in the case SAS Pharmaceuticals (supra). Hence,
penalty u/s 271 (l)(c) is not exigible.
26. Thus in the case of Prem Arora (supra), the Hon'ble ITA T Delhi
has held that the concept of voluntary return of income may be important
in penalty proceedings initiated in course of normal assessment
proceedings made u/s 143(3) or 147 but not u/s l53A. For the purpose of
imposition of penalty u/s 271 (1)( c) resulting as a result of search
assessments made u/s 153A, the original return of income filed u/s 139
cannot be considered. Penalty u/s 271(1)(c) is imposable when there is
variation in assessed and returned income. If there is no variation, there
will be no concealment. When there is no concealment, question levy of
penalty u/s 271(1)(c) of the Act will not arise. Therefore, where retuned
income filed u/s 153A is accepted by the assessing officer, there will be no
concealment of income and consequently penalty u/s 27 1(1)( c) cannot be
imposed.
27. In the appellant's case the income declared by the appellant U/S
132(4) was duly offered in the return of income filed in response to the
notice u/s 153A(1)(a) of the Act which was accepted as such without any
alteration in the income. Thus the income has been assessed on the basis
of income declared in the return without pointing out either in the
assessment order or in the penalty order, any incriminating material to
show that the appellant had either furnished inaccurate particulars of his
income or had concealed his income. Keeping in view the case laws
discussed above especially the decision in the case of Prem Arora by the
Hon'ble ITAT Delhi, it is held that penalty u/s 271(1)(c) was not leviable
in the appellant's case and the same is therefore, deleted.
28. In the result, the appeal is allowed."
12. The revenue, being aggrieved, has filed the appeal before us.
13. The Ld. DR submitted that the Explanation 5 of section 271(1)(c)
has not been dealt with by the ld CIT(A) and when the said explanation is
applied then penalty will be attracted and the AO rightly levied the
penalty. So he pleaded that the order of the Ld. CIT(A) be reversed and
the order of AO restored.
10 ITA Nos.4398 to 4401/Del./2009
14. On the other hand, ld. AR for the assessee submitted that this issue
is covered against the revenue by the decision of the co-ordinate Bench of
ITAT in the case of Shri Prem Arora vs. DCIT, Central Circle 25, New
Delhi in ITA No.4702/Del/2010 order dated 9th March, 2012 which has
been relied on by the CIT (A) for deleting the penalty and therefore, he
does not want us to interfere in the order.
15. We have heard both the parties and perused the material on record.
We find that the assessee is an individual and belongs to M/s. J.M. Estate
Developers Ltd. group. Search and seizure operation u/s 132 of the Act
was carried out on 11.01.2007 (AY 2007-08) on the said Group and
Directors of the said Group of companies. During the search, disclosure of
Rs.16 crores has made u/s 132 (4) of the Act on behalf of different
Directors and relatives of the Directors. During the search, cash
amounting to Rs.4,06,930/- was seized though there were jewellery worth
Rs.17,85,785/- was found but the same was not seized. Later on, we find
that notice u/s 153A was issued and assessee filed return of income in
response thereto and declared an income of Rs.23,38,731/-, thus there was
an increase of additional income of Rs.21,65,932/- (The original return for
the relevant assessment year was filed on 30.12.2005 declaring an income
of Rs.1,72,799/-, therefore, Rs.23,38,731/- - Rs.1,72,799/- comes to
Rs.21,65,932/-). Thereafter, we find that the AO completed the
assessment u/s 153A read with section 143(3) on 31.12.2008 after
11 ITA Nos.4398 to 4401/Del./2009
accepting the declared income returned by the assessee pursuant to section
153A and assessed at Rs.23,38,731/-. Thereafter, we find that the AO
initiated penalty proceedings u/s 271(1)(c) in the assessment order by
observing that from a perusal of the records, it has come to his notice that
assessee's group has offered a sum of Rs.16 crores as unaccounted income
and since the disclosure is in consequence to the search, he is of the
opinion that the assessee has concealed income and so, on the said reason,
penalty proceedings were initiated. Thereafter, we find that the AO passed
the penalty order u/s 271(1)(c) on 26.06.2009 by imposing a penalty
amounting to Rs.1,34,640/- taking the concealed income of assessee as
Rs.4 lakhs. Thereafter, we find that the assessee had filed revision petition
u/s 264 of the Act before the CIT (Central II), New Delhi who dismissed
the said petition of the assessee, however, took suo-motu cognizance u/s
263 of the Act and pointed out that the assessee had declared additional
income of Rs.21,65,932/- and the penalty imposed by the AO vide order
dated 26.06.2009 is erroneous because AO had only taken into account
Rs.4 lakhs as the concealed income. Pursuant to the said order, the AO
vide order dated 29.09.2011, levied a penalty of Rs.7,29,100/- being 100%
of the amount of tax sought to be evaded on the concealed income of
Rs.21,65,932/-. Similar is the case in assessment year 2006-07 also, only
the figures change. On appeal by the assessee against the penalty order
imposed upon them, the ld. CIT (A) was pleased to allow the appeal and
12 ITA Nos.4398 to 4401/Del./2009
deleted the penalty. The issue before us is that whether Explanation 5 to
section 271(1)(c) has been rightly considered by the ld. CIT (A) while
giving relief to the assessee.
16. Similar issue was dealt by the co-ordinate Bench of this Tribunal in
Prem Arora vs. DCIT (149 TTJ 590) which the ld. CIT (A) has relied on to
allow the appeal. The relevant paragraph which are dealing with the issue
is as under :-
"11. Thus while section 153A prescribes for assessment or
reassessment of total income in search cases, section 153B
prescribes the time limit for completion of assessment under
sec. 153A. Section 153C relates to the cases where books of
accounts or documents or assets seized under sec. 132 or
requisition made under sec. 132A belong to a person other than
a person in whose case search under sec. 132 or requisition
under sec. 132A was made. Thus provisions of sections 153A,
153B and 153C are complete code for search assessments
wherein search has been initiated after 31st May, 2003. The
existence of the words "all other provisions of this Act shall
apply to the assessment made under this section" in Explanation
(i) of section 153A makes it clear that in search assessments,
amongst others the provisions relating to penalty and
prosecution will also be applicable. However, when normal
assessment procedure covered by Sections 139, 147, 148, 149,
151 and 153 has been completely excluded by operation of non-
obstante clause "Notwithstanding anything contained" the
search assessments made u/s section 153A of the Act cannot be
treated as continuance of normal assessment proceedings
whether abated or not. Thus there is complete detachment of
assessment proceedings u/s 143 or 147 from search proceedings
u/s 153A of the Act. When scheme of search assessment as
designed by the Legislature does not prescribe to take into
account the earlier assessment proceedings whether abated or
not, it will not be proper or justified to refer to returned income
u/s 139 for the purpose imposition of penalty u/s 271(1)(c) of
the Act. It follows that the concealment of income has to be
seen with reference to additional income brought to tax over
13 ITA Nos.4398 to 4401/Del./2009
and above returned by the assessee in response to notice issued
u/s 153A of the Act. Accordingly in our considered opinion for
the purpose of imposition of penalty u/s 271(1)(c) resulting as a
result of search assessments made u/s153A, the original return
of income filed u/s 139 cannot be considered.
12. Further in case of search initiated after 1.6.2003 a return
of income is always filed on issue of notice u/s 153A. As held
above the penalty u/s 271(1)(c) is imposable when there is
variation in assessed and returned income. If there is no
variation, there will be no concealment. When there is no
concealment, question levy of penalty u/s 271(1)(c) of the Act
will not arise. This is settled position of law. The concept of
voluntary return of income may be important in penalty
proceedings initiated in course of normal assessment
proceedings made u/s 143(3) or 147 but not u/s 153A. From
above discussion it follows that where retuned income filed u/s
153A is accepted by the assessing officer, there will be no
concealment of income and consequently penalty u/s 171(1)(c)
cannot be imposed.
......
......
24. The Assessing Officer has invoked provisions of
Explanation 5 to sec. 271(1)(c ) while imposing penalty in
assessment year 2004-05. It is also important to note that
Chapter XIVB was inserted in the statute by the Finance Act,
1995 w.e.f. 1.7.1995 which prescribed special procedure for
search assessments. No penalty u/s 271 or 271A or 271B, or
interest u/s 234A/234B/234C was leviable in respect of
undisclosed income determined in block assessment in view of
specific provisions of section 158BF of the Act. Section
158BFA was inserted by the Income -tax (Amendment), Act ,
1997 w.e.f. 1.1.1997 prescribing both interest and penalty for
concealment of income in respect of undisclosed income
determined u/s 158BC(c). Thus the provisions of Explanation 5
to section 271(1) remained inoperative during the period from
1.7.1995 to 31.05.2003.
25. Section 153A was inserted into statute w.e.f 1.6.2003.
Clause (i) of Explanation to section 153A clarify that subject to
sections 153A, 153B and 153C, all other provisions of this Act
14 ITA Nos.4398 to 4401/Del./2009
shall apply to the assessment made under this section meaning
thereby that provisions relating to penalty and prosecution will
also apply. It means that the Explanation 5 of section 271(1)
will also apply in search assessment made u/s 153A of the Act
provided that the conditions relating thereto are satisfied.
26. In the case before us the assessee has disclosed
undisclosed income in the return of income filed in response to
notice u/s 153A of the Act which has been accepted by the
assessing officer. We have held in earlier paragraphs that under
the scheme of search assessment u/s 153A, the total income of
the assessee is to be determined for each of six assessment
years. The assessment or re-assessment proceeding u/s 153A is
not in continuation of assessment proceedings u/s 143 or sec.
147 of the Act. Since there is complete detachment of 153A
proceedings from regular assessment proceedings u/s 143 or
147 and hence concealment of income is to be determined with
reference to the return of income to be filed in response to
notice u/s 153A of the Act. Once returned income is accepted
by the assessing officer it can neither be a case of concealment
of income nor furnishing of inaccurate of particulars of such
income. The assessee had disclosed income in the return of
income filed determined on the basis of entries recorded in
seized material.
27. Hon'ble Delhi High Court in the case of M/S S.A.S.
Pharmaceuticals (supra) while deciding the issue levy of
penalty u/s 271(1)(c) in paragraph 15 & 16 has held as under:
"15. It necessarily follows that concealment of
particulars of income or furnishing of inaccurate
particulars of income by the assessee has to be in the
income tax return filed by it. There is sufficient
indication of this Court in the judgment in the case of
Commissioner of Income Tax, Delhi-I Vs Mohan Das
Hassa Nand 141 ITR 203 and in Reliance Petro products
Pvt. Ltd (supra), the Supreme court has clinched this
aspect, viz., the assessee can furnish the particulars of
income in his return and everything would depend upon
the income tax return filed by the assessee. This view
gets supported by Explanation 4 as well as 5 and 5A of
section 271 of the Act as contended by the learned
counsel for the respondent.
15 ITA Nos.4398 to 4401/Del./2009
16. No doubt, the discrepancies were found during the
survey. This has yielded income from the assessee in the
form of amount surrendered by the assessee. Presently,
we are not concerned with the assessment of income, but
the moot question is to whether this would attract penalty
upon the assessee under provisions of section 271(1)(c)
of the Act. Obviously, no penalty can be imposed unless
the conditions stipulated in the said provisions are duly
and unambiguously satisfied. Since the assessee was
exposed during survey, may be, it would have not
disclosed the income but for the said survey. However,
there cannot be any penalty on surmises, on conjectures
and possibilities. Section 271(1)(c) of the Act has to be
construed strictly. Unless it is found that there is actually
a concealment or non-disclosure of the particulars of
income, penalty cannot be imposed. There is no such
concealment or non-disclosure as the assessee had made
a complete disclosure in the income tax return and
offered the surrendered amount for the purpose of tax."
If the facts of the case are examined in the light of decision of
Hon'ble Delhi high Court in SAS Pharmaceuticals (supra)
penalty u/s 271(1)(c) is not imposable where there is neither
concealment of income nor furnishing of inaccurate particulars
of income in return filed u/s 153A of the Act. In earlier
paragraphs we have held that the concealment of income is to
be determined with reference to the return of income to be filed
in response to notice u/s 153A of the Act. Once returned
income filed u/s 153A is accepted by the assessing officer it can
neither be a case of concealment of income nor furnishing of
inaccurate of particulars of such income. Hence, the assessee's
case is squarely covered by the decision of Hon'ble Delhi high
Court in the case SAS Pharmaceuticals (supra). Hence, penalty
u/s 271(1)(c) is not exigible.
28. The next contention of ld AR of the assessee is that if the
provisions of Explanation 5 of section 271(1) in respect of
searches initiated on or before 1.6. 2007 were sufficient enough
for imposition of penalty u/s 271(1)(c), there was no need for
inserting of Explanation 5A and section 271AAA into the
statute by the Finance Act, 2007. On the contrary ld CIT(DR)
has contended that the amended provisions of Explanation 5
16 ITA Nos.4398 to 4401/Del./2009
will apply to the fact of the assessee's case. Provisions of
Explanation 5 of section 271(1) comes into operation in the
cases where in the course of a search the assessee is found to be
the owner of any money, bullion, jewellery or other valuable
article or thing, and the assessee claims that such assets have
been acquired by him by utilizing (wholly or in part) his income
(a) for any previous year which has ended before the date of
search but the return of income for such year has not been
furnished before the said date or where such return has been
furnished before the said date, such income has not been
declared therein; or (b) for any previous year which is to end on
or after the date of the search, then, notwithstanding that such
income is declared by him in any return of income furnished on
or before the date of search, he shall, for the purposes of
imposition of a penalty under section 271(1)(c ) be deemed to
have concealed the particulars of his income or furnished
inaccurate particulars of such income unless the case falls in
exceptions provided either under clause (1) or clause (2) of the
Explanation 5. Clause (1) covers the cases where such income
or transactions resulting in such income is/are recorded in the
books of accounts maintained by him for any source of income
before the date of search or such income is otherwise disclosed
to chief commissioner or commissioner before the date of
search. On the other hand Clause (2) is applicable where the
assessee makes a statement under section 132(4) that any
money, bullion, jewellery or other valuable article or thing
found in his possession or under his control has been acquired
out of his income which has not been disclosed in his return of
income to be furnished before the expiry of time specified in
sub-sec. (1) of sec. 139 and also specifies in the statement the
manner in which such income has been derived and pays tax
together with interest, if any, in respect of such income.
29. We also find that the Finance Act, 2007 has inserted
words "search initiated under sec. 132 before the first day of
June, 2007" in Explanation 5 of sec. 271(1) of the Act. Further
Explanation 5A was inserted in the Statute by the Finance Act,
2007 in respect of a search initiated under section 132 on or
after the 1st day of June, 2007. Thus Explanation 5 will not be
applicable in respect of a search initiated on or after 1.6.2007.
Further the words "search initiated under sec. 132 before the
first day of June, 2007" have been inserted by the Finance Act,
2007 w.e.f. 1.6.2007. In our considered opinion the amended
17 ITA Nos.4398 to 4401/Del./2009
provisions of Explanation 5 will be applicable only for
assessment year 2008-09 if any money, bullion, jewellery or
other valuable article or thing is found from the possession of
the searched person in respect whom searches are initiated on or
after 1.4.2007 to 31.05.2007.
30. In case of a search initiated on or after 1.6.2007 as
provided in Explanation 5A, the assessee will be liable for
penalty/s 271(1)(c) both in respect of assets as well as any
income based on any entry in any books of account or other
documents or transactions. But no such provision relating to
entries was in existence in Explanation 5 prior to insertion of
Explanation 5A in section 271(1) of the Act. Hence the scheme
of assessment till insertion of Explanation 5A and section
271AAA by the Finance Act, 2007 gave immunity to the
assessees in respect of undisclosed income based on entries
recorded in seized material. Explanation 5A substituted by the
Finance Act, 2009 w.r.e.f. 1.6.2007 is reproduced 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
18 ITA Nos.4398 to 4401/Del./2009
(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."
17. A reading of the above order makes it clear that the provisions of
Explanation 5 are applicable in the cases where during the course of search
initiated on or before 1.6.2007 any money, bullion, jewellery or other
valuable article or thing is found in the possession or under control of the
assessee ; and in the instant case of the assessee, the search was conducted
on 11.01.2007 and cash of Rs.5,26,530/- was found from the possession of
the assessee ; and so the cash was admittedly, not seized during the
relevant assessment years before us. In other words, the assessee had
surrendered undisclosed income and cash was seized during search in A.Y
2007-2008, and not in the relevant assessment years. However, in the
relevant assessment year under consideration before us, the assessee has
made an addition of Rs.21,65,932/- in the return filed pursuant to section
153A notice. Explanation 5 to section 271(1) of the Act cannot be invoked
in assessment years 2005-06 & 2006-07, which are before us, merely on
presumption that the assessee might have been in possession of the seized
cash throughout the period covered by search assessments. The income
19 ITA Nos.4398 to 4401/Del./2009
offered to tax u/s 153A for assessment years 2005-06 and 2006-07 cannot
be said to be based on assets seized, because from the assessment order, it
is clear that search was on 11.01.2007 (i.e AY 2007-08), the cash seized
during search was only to the tune of Rs.5,26,530/- and it is not emerging
from the records that the assessee has claimed during search that the cash
seized (on 11.01.2007), belonged to him and that was owned by him in the
relevant assessment years i.e. AYs 2005-06 and 2006-07. Unless there is a
clear finding in this respect, Explanation 5 of Section 271(1)(c) cannot be
of any help to the department. As rightly pointed out by the Coordinate
Bench in Prem Arora (supra), the provisions of Explanation 5 cannot be
invoked in assessment years 2005-06 and 2006-07 in respect of entries
recorded in seized material. Thus invoking of Explanation 5 in assessment
year 2005-06 & 2006-07 is based on assumptions and presumptions. It is
settled law that suspicion howsoever strong, cannot take the place of
evidence and hence the contention of the Revenue that assessee was in
possession of cash throughout the period of assessment years under
consideration has to be rejected. In view of above discussion we are of the
considered opinion that even the amended provisions of Explanation 5
cannot be applied in assessment years 2005-06 & 2006-07. Consequently
penalty u/s 271(c) cannot be imposed by invoking Explanation 5 of the Act
in assessment years 2005-06 & 2006-07 in respect of cash found in
previous year relevant to assessment year 2007-08.
20 ITA Nos.4398 to 4401/Del./2009
18. In the light of the above discussion and the aforesaid order of the
coordinate Bench, we do not find any merit in the submissions of the ld.
DR and we do not find any infirmity in the order of the ld. CIT (A)
deleting the penalty levied by the AO. Therefore, we uphold the impugned
order of the CIT (A) and dismiss both the appeals of the department in the
case of Shri Ankur Aggarwal.
19. Coming to the appeals filed by the Department (ITA Nos.4400 &
4401/Del/2012) for AY 2005-06 & 2006-07 in the case of Shri Neeraj
Jindal, we find the facts to be similar and the ld. DR could not point any
difference in the facts which could persuade us to take a different view
from the case decided above. So, we are inclined to uphold the impugned
order of the ld. CIT (A) and dismiss both the appeals of the department.
20. In the result, all the appeals of the revenue are dismissed.
Order pronounced in open court on this 19th day of August, 2015.
Sd/- sd/-
(N.K. SAINI) (A.T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 19th day of August, 2015
TS
21 ITA Nos.4398 to 4401/Del./2009
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-XXVII, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.
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