TMI Blog2013 (11) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271(1)(c) contemplates a situation where in the cases of search concealment penalty can be levied with reference to a return furnished before the date of search. In the present case, relying upon the discussion made in the case of Prem Arora Vs. DCIT [2012 (6) TMI 480 - ITAT DELHI], penalty levied u/s 271(1)(c) of the Income Tax Act is deleted as the entire income has been properly disclosed in the return filed by the assesse in response to notice u/s 153A - Decided in favor of Assessee. - ITA No.1479/Mum/2009 - - - Dated:- 23-4-2013 - I P Bansal and Rajendra, JJ. For the Appellant : Shri Rajiv Khandelwal For the Respondent : Shri Om Prakash Meena ORDER:- Per: I P Bansal: This is an appeal filed by the assessee. It is directed against the order passed by Ld. CIT(A)Central-IV, Mumbai dated 27/01/2009 for assessment year 2002-03. The grounds of appeal read as under: 1. On the facts and circumstances of the appellant s case and in law the Ld. CIT(A) erred in confirming the penalty of Rs.18,66,600/- levied by the AO u/s. 271(1)(c) of the Act. 2. The Ld. CIT(A) erred in confirming the penalty of Rs.18,66,600/- levied by the AO despite the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of search the statement of the assessee was also recorded on 16/11/2005. Copy of such statement is field at pages 24 to 33 of the paper book. The query relating to gift is contained in Question No.9 and surrender of the assessee regarding that amount is found in answer to Question No.22. Question No.9 and Question No.22 along with their answers being relevant are reproduced below: Q.9 It is seen from Capital Account of Shri Vrajlal T. Gala HUF for the year ended 31.3.2002 relevant to A.Y 2002-03 that the following gifts have been credited to your capital account. Dharmendra Kisan Rs. 3,033,284.00 Kiritbhai Hathibhai Patel Rs.3,033,284.00 Talakshi B. Gala Rs. 500,000.00 Panbai T. Gala Rs. 500,000.00 Please furnish documentary evidence of the above gifts and also furnish the complete address of the above donors. Ans: Shri Talakshi B. Gala and Smt. Panbhai T. Gala are my parents. They say with me and also my brother Vinod T. Gala. Shri Kiritbhai Hathibhai Patel is at doha and his address is P.O.Box No.17871, Doha Qatar. Shri Dharmendra Kisan Gandhi is at Dubai and his address is P.O.Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the return field in response to notice issued under section 153C and taxes have also been paid accordingly. In the assessment order the observation of AO with regard to these amounts are contained in para-5, which reads as under: 5. During the course of search, it was found that assessee had shown a gift from Mr. Dharmendra Kisan Gandhi( Non-Resident Indian) during the previous year relevant to A.Y 2002-03. Since, the assessee was not able to prove the genuineness of the gift, the amount of Rs.61 lakhs was declared as additional income for the year under consideration. Since the assessee had furnished inaccurate particulars of its income/concealed particulars of income, penalty proceedings are initiated U/s 271(1)(c) of the Act. Computation of income as per assessment order is as under: Computation of Total Income: Amount (Rs.) Income from Business: Share of Profit/Loss from Regd Firms 552 Less: Exempt U/S 10(2A) 552 Nil Income from Other Sources: Interest Received 6,67,423 Additional Income Disclosed U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be recovered from the assessee. The tax paid by the assessee was wrongly paid. Therefore, penalty proceedings should be dropped. It was submitted that as per judicial decisions consistent view has been taken that in a case where assessee has declared income by mistake, which otherwise is not taxable, then later on if assessee claims refund of taxes paid then the department is bound to refund the taxes recovered. Reference was made to the decision of Hon ble Delhi High Court in the case of SDS Mongia vs. CBDT, 160 Taxmann 101. In the said case assessee had declared the income as taxable and later on it was found that same is exempt from tax. A petition under section 264 was moved to CIT for refund of tax which was exempt. Hon ble Delhi High Court held that as per Article 265 of the Constitution no person shall be taxed without authority of law. Since there was no authority to tax the annuities received by the petitioner, using extra ordinary power will be appropriate to correct injustice. For this purpose reliance was also placed on various decisions which have been listed in the penalty order. 3.7 It was further submitted that in the case of assessee there is no concealment ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he donors. d) The appellant admitted that he was apprehensive that he might not be able to produce the donors to prove the genuineness of gift transaction. e) The appellant relied on several case laws to contend that penalty is not attracted in his case as the returned income and assessed income are the same. f) Lastly, the appellant submitted that the resurgent India bonds is not liable to be taxed as income and the same cannot be taxed on encashment. The resurgent India bonds are free from wealth tax and gift tax in India and this tax concession is available to the donee and transferee also. 4.1 It was submitted that the full facts of the gifts received from two NRI donors were placed before the AO, therefore, it cannot be said that there was concealment of income or inaccurate particulars of income were furnished. The declaration of gift as undisclosed income and offer there of was made in honest belief which does not warrant levy of penalty. 4.2 After considering these submissions Ld. CIT(A) referring to Explanation-1 to section 271(1)(c) of the Act has observed that if explanation offered by the assessee regarding disclosure is either found to be false and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, it was submitted by Ld. AR that assessee was required to file documentary evidence of the gifts and the complete particulars of the donors and assessee was never required to prove the genuineness of the gifts. The disclosure made by the assessee in the statement was voluntary and was for the reasons stated in answer to Question No.22. Therefore, Ld. A.R pleaded that the disclosure made by the assessee was voluntary. The assessee was never asked to prove the genuineness of the gifts. According to terms of offer the bonds were free from tax on their premature encashment / interest even in the hands of the donees or survivors. Under misconception, the assessee offered the same and, did not retract from his statement and voluntarily offered the said amount and paid taxes. When amount itself was not taxable there is no question of levy of penalty. For this purpose Ld. AR relied upon the decision of Delhi High Court in the case of CIT vs. Bacardi Martini India Ltd., 206 CTR 250 (Del), wherein it has been held that withdrawal of claim of deduction of certain expenditure by the assessee by filing revised return or disallowance of an expenditure due to difference of opinion betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), it was held that onus had shifted on department to prove that returns were filed on account of detection by the department. It was held that penalty was not sustainable. For holding so reliance was placed on the decision of Hon ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal(supra). (2) National Textiles vs. CIT, 249 ITR 125(Guj) - In that case it was held that in order to justify levy of penalty for addition of cash credit, there must be some material circumstances leading to a reasonable conclusion that the amount does represent assessee s income and the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars; Explanation- 1 does not make assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. (3) CIT vs. Suresh Chandra Mittal (supra), wherein it has been held that the assessee surrendered additional income by way of revised return after persistent queries by the A.O once the revised return has been regularized by the revenue the explanation of the assessee that he has declared addition income to buy peace and to come out of vexatious litigation could be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act on 23/4/2008 admitting income of Rs.1,43,41,002/- from undisclosed business activities. The AO completed the assessment at retuned income under section 153A for assessment year 2004-05 and concealment penalty was initiated. It is on such disclosure penalty of Rs.47,51,579/- was imposed, which was upheld by Ld. CIT(A). The assessee agitated the levy of penalty on the ground that it could not be levied on the income declared in any of the returns filed in response to notice under section 153A as the income declared has to be treated as income duly disclosed to the department and there will be no concealment of income or furnishing of inaccurate particulars regarding said income. It was the main submission that return filed in response to notice under section 153A could also not be compared with the income declared in the returns filed under section 139 of the Act in order to determine the undisclosed income as returns filed earlier were abated and hence non-est It was submitted that on insertion of Explanation -5A to section 271(1)(c) and section 271 AAA in the statute w.e.f. 1st June 2007 by the Finance Act 2007, it is made clear that the additional income offered by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l particulars were submitted and income was offered to buy peace of mind. Ld. A.R submitted that the facts of the present case are on strong footing, therefore, penalty should be deleted. 7. On the other hand, Ld. D.R submitted that the AO while levying the penalty has levied the same on account of furnishing of inaccurate particulars of income as well as on account of concealment of income. The original return was filed by the assessee at only a sum of Rs.6,65,879/- which does not include unexplained gifts which assessee had offered at the time of search. Therefore, ld. DR pleaded that the assessee did not furnish accurate particulars of his income. Only on examination of these facts during the course of search proceedings the assessee declared such income and such action of the assessee was not voluntary. He submitted that taxability or otherwise of the bond is not the real issue but the issue is that whether or not the gift received by the assessee are genuine. He submitted that according to provisions only pending assessment are abated. Return filed by the assessee under section 139 of the Act is a part of record and cannot be ignored while determining the issue regarding fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch. Therefore, the assessee has concealed the particulars of his income or he has furnished inaccurate particulars of his income. In other words, the default of concealment of income by the assessee is viz-a-viz returned originally filed by him under section 139 of the Act and declaration of the income in return filed under section 153A is irrelevant for the purpose of levy of concealment of penalty. 10.1 As against the aforementioned position taken by the revenue it is the case of the assessee that he cannot be considered as guilty of the concealment for the reason that impugned income was disclosed in the return filed in response to section 153A. The income was offered in the statement recorded at the time of search itself. The default of concealment cannot be linked to the return filed under section 139(1) as for the assessment year under consideration, in accordance with the provisions of law, it will be wrong to take cognizance of return filed under section 139 as the assessment or reassessment proceedings for preceding six assessment years will be non-est. 10.2 It is also the case of the assessee that even otherwise there is no concealment as pre-encashment of the bonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return furnished before the date of search. Explanation-5 to section 271(1)(c) is reproduced below: Explanation 5.-Where in the course of a [search initiated under section 132 before the 1st day of June, 2007], the assessee is found to be the owner of 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,- (a) for any previous year which has ended before the date of the 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 after the date of the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation is saved by the provisions of clauses (1) (2) of Explanation-5 as income relating to such assets or transactions if recorded in the case falling under clause(a) on or before the date of search and in case clause (b) on or before the date of search in the books of account, if any, maintained by the assessee and in a case where he makes a statement under section 132(4) of the Act that in such assets found in his control has been acquired out of his income which has not been disclosed so far in the return of income to be furnished before the expiry of time specified in subsection (1) of section 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. Therefore, in the case of the assessee Explanation-5 is the only enabling provision which can discard the action of the assessee to include the income which is subject to concealment penalty in the return filed after the date of search. If the case of the assessee falls within the mischief of Explanation-5 then only the department can link the levy of concealment penalty to the action of the assessee for not disclosing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed 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 concealment or no-disclosure as the assessee had made a complete disclosure in the income tax return and offered the surrendered amount for the purpose of tax. As it can be seen from the above observation that their Lordship have held that the concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be traced in the Income Tax return filed by it. The assessee can furnish particulars of income in is return and every thing would depend on the income tax return filed by the assessee and such view has been adopted by Hon ble High Court on the basis of Explanation-4 ,5 5A of section 271(1)(c) of the Act. It was further observed that the discrepancies were found during the course of survey, according to which surrender was made by the assessee. The question involved is not relating to quantum of assessable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Hon ble Allahabad High Court in the case of CIT (Central), Kanpur v. Shaila Agarwal (2011) 16 taxmann.com 232(All) has held that the word abatement is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/suit; abatement of legacies; abatement of nuisance; and all actions for such nature, which have the pendency or continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. The word pending occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words on the date of initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to our notice by the Ld. DR. 10.9 Reference can also be made to the decision of Mumbai ITAT in the case of Yogesh Parikh vs. ACIT (supra). In that case search was conducted on 10/1/2006 in respect of assessment year 2004-05. The original income was filed at an income of Rs.4,53,810/- on 27/10/04. In response to notice issued under section 153A of the Act return was filed on 10/7/2006. In the return the assessee had shown gift of Rs.9,25,000/- from his uncle on 1/10/2003, who was settled in USA. During the course of assessment proceedings the AO recorded statement of the assessee on 23/10/2007 and asked the assessee to produce his uncle to prove the creditworthiness and genuineness of the gift and at that stage assessee filed a revised return and offered the said gifted amount of Rs.9,25,000/- to tax. The AO being of the view that revised return cannot be termed and treated as valid return as it is not voluntarily submitted as per provisions of sub-section(5) of section 139 of the Act. Accordingly, the said amount was added to the total income of the assessee and concealment penalty was imposed. It was the case of the assessee that offering of gift amount to tax will not invite l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of time as provided under section 139(5), the same cannot be rejected or treated invalid; though for the purpose of penalty the Assessing Officer could treat the action of the assessee as not voluntary; but because of the investigation and enquiry of the Assessing Officer. Therefore, the revised return filed by the assessee within the period of limitation as prescribed under section 139 (5), cannot be held invalid. It is to be noted that when the assessee has already recorded the gift amount in the books of account and only to avoid the inconvenience and harassment to his uncle, the assessee offered the same to tax, would not automatically lead to the conclusion that the assessee had furnished inaccurate particulars of income or concealed particulars of income in the absence of any conclusive finding that the claim of the assessee was a bogus . In the aforementioned order one of us (i.e. Accountant Member is a party). The facts of the present case are on sound footing as the income was declared by the assessee in the return filed in response to notice under section 153A and not during the course of assessment proceedings. In the said case also Tribunal has relied upon the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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