TMI Blog2010 (9) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... e levy of penalty under s. 271(1)(c) of the Act, the quantification of which is as given hereunder : In respect of Shabbir Allauddin Latiwala : Sl. No Assessment years Penalty levied under section 271(1)(c) 1 2001-02 Rs. 5,107 2. 2004-05 Rs. 63,944 3 2005-06 Rs. 73,519 In respect of Allauddin Ibrahim Latiwala : Sl. No Assessment years Penalty levied under section 271(1)(c) 1 2001-02 Rs. 6,100 2. 2002-03 Rs. 23,471 3 2003-04 Rs. 15,430 4 2004-05 Rs. 52,317 5 2006-07 Rs. 5,212 3. The common facts of the case are as narrated herebelow : 3.1 Shri Allauddin Ibrahim Latiwala and Shri Shabbir Allauddin Latiwala are father and son by relationship. Shri Shabbir Latiwala has been carrying on the business of import of and trading in timber in the name and style of Noorani Saw Mills. Shri Allauddin Latiwala has not been doing any business activity but deriving remuneration income from the proprietorship unit of his son. Both the individuals are independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the differential income so offered in the respective returns furnished in response to the notices under section 153A. He thereafter levied penalty treating these differential incomes as the concealed portion of incomes so as to levy penalty under section 271(1)(c) @ 100 per cent of the tax sought to be evaded in respect of these amounts, in each of the relevant years. The CIT(A) dismissed the appeal of the assessees for the reasons mentioned in the appellate order. The assessees are in appeals against this action of the AO, which was confirmed by the CIT(A)-IV, Ahmedabad. 4. The cases were heard from both the sides. The assessees filed a common paper book consisting of 85 pages and relied upon certain judgments delivered by various Courts and Tribunals. The CIT-Departmental Representative relied upon the exhaustive order of the CIT(A). These have been discussed in brief in following paras. Assessee's arguments: 5. (a) It was argued by Mr. Popat that since the returned income came to be accepted and since there is absolutely no discussion either in the body of the assessment order or in their respective penalty orders about the specific nature of this income or about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn furnished under section 153A post-search. It was observed in this judgment that the additional income so declared by the assessee was accepted by the AO in its entirety. It was further noted by the Hon'ble High Court that the contents of the seized materials were never discussed and no attempt was ever made to obtain explanation from the assessee in this regard. It was on the basis of this that the Tribunal concluded about such income belonging to the assessee as having been based on the offer of the assessee and not entirely on the seized documents, Tribunal further observed that since no attempt was ever made to find out the locus of the earning and the person who concealed such income, the AO could not have levied penalty under section 271(1)(c). The Tribunal accordingly deleted the penalty and the Hon'ble High Court indirectly confirmed the view of the Tribunal by mentioning that it is a finding of fact and no substantial question of law arises. (d) Mr. Popat also vehemently argued that even if there is no built-in immunity from levy of penalty under section 271(1)(c) and admitting about the non-applicability of Expln.5(2) of that section, automatic levy of penalty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of Hon'ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277. The Hon'ble Supreme Court had distinguished its earlier judgment of Dharmendra Textiles Processors (supra) and had in fact criticized its wrong interpretation being done by the Revenue while levying penalty in respect of every case of non-payment or short-payment of duty. Though this judgment was in the context of the leviability or otherwise of the penalty under section 11AC of the Central Excise Act, the judgment also expressly deals with the provisions of section 271(1)(c) as well. The Hon'ble Supreme Court has tried to carve out certain situations in which the penalty may be levied or otherwise. For example, the Hon'ble Supreme Court has held in this judgment that in order to levy penalty mens rea is not required to be established if there is a definite finding of concealment of income or of furnishing of inaccurate particulars of income. As against this, penalty cannot be levied merely because there is a technical default on the part of the assessee which may be arising out of the different interpretations of law or like reasons. The Hon'ble Supreme Court also lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) establishing anything of whatsoever nature about the type, nature and basis of differential income offered by the assessee and thus satisfaction of specific charge for which the penalty is being either initiated or being levied in due course of time. He accordingly vehemently argued that the penalties levied by the AO and sustained by CIT(A) are required to be deleted. Arguments of CIT-Departmental Representative : 6. (a) Shri Shankarlal Meena, the CIT-Departmental Representative heavily relied upon the exhaustive order of CIT(A). He submitted that it was very obvious that but for the search, the assessees would not have offered the additional income for taxation and it was only after the search and only after receiving notice under section 153A that they deemed it proper to incorporate the hitherto concealed income for taxation. The concealment of income on the part of the assessees was thus admitted by them by their very conduct and the AO was clearly not required to establish anything beyond the same. (b) The CIT-Departmental Representative also pointed out that there was a voluminous material admittedly and undisputedly found and seized by the Department during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 139(1) is yet to expire. The built-in immunity is otherwise not permissible. The CIT-Departmental Representative accordingly argued that the penalties levied by the AO and confirmed by the CIT(A) in all the cases are required to be upheld. Findings of the Bench: 7.(a) We have perused the arguments of both the sides. This issue is to be seen from two different angles-whether the assessees are eligible to claim immunity under Expln. 5(2) to section 271(1)(c) of the Act or not; and where the AO established about the satisfaction of charge while levying the penalty under section 271(1)(c) and if the answer to the later question is in negative, whether the fact of assessee having offered additional income in his returns furnished in response to notice under section 153A can be deemed to be a satisfaction on the part of the AO about original concealment of income on his part. These have been discussed in the following paras : (b) Regarding the first issue of eligibility or otherwise of the built-in immunity as prescribed in Expln. 5(2) under section 271(1)(c), there is clearly no doubt that the terms and conditions prescribed in the Explanation have clearly not been fulfilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and confirm the penalties. In a third case scenario, if there is nothing on record available in the files of the AO or in the files of CIT(A) which may indicate about any direct or even indirect linkage between the finding of search and the same getting translated into additional income being offered in due course of time, whether there was an obligation on the part of the AO to still levy a penalty under section 271(1)(c) without even running one extra mile, to at least look into the fact or the basis on which the additional income was offered for taxation so as to determine as to whether the same can be genuinely termed to be voluntary and suo motu in nature, as contended by the assessee or a forceful and compulsory offer of additional income flowing out of the development of search, as contended by the Revenue. (d) We have noticed from the records that neither the assessee is in a position to establish that, the additional income offered by him was a voluntary act on his side and had nothing to do with the findings of search or the documents seized therefrom. On the other side there is a clear failure on the part of Revenue as well in identifying the very foundation on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153A, and there is no direct or indirect linkage brought on record with reference to any of the specific seized materials, so as to establish the charge for which the penalty has been levied. The satisfaction of the charge in respect of concealment of income has thus clearly been not satisfied even while passing the order or even at the level of CIT(A). It is further noticed from the penalty orders that the AO has levied penalties on a common charge of concealment of income and thereby furnishing of inaccurate particulars of income. This also clearly establishes that there is an utter confusion in the mind of the AO even while levying the penalty as to the precise nature of charge, for which penalty is being levied. It has been the law of the land that no injury can be caused, to a person unless and until the precise violation committed by him is identified, brought to his notice and established beyond any doubt. (f) In view of what has been mentioned above we have no hesitation in holding that despite the failure being on both the sides, the penalties levied in different orders are required to be deleted considering the fact that the order of penalty is not a means of collec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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