TMI Blog2015 (3) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... e having failed to specify the manner in which the undisclosed income is derived as well as of the assessee having failed to substantiate the same, and which in fact the ld. CIT(A) notes vide para 6.5.2 of his order. Clearly, these findings of fact would need to be addressed by the ld. CIT(A), either endorsing or reversing or otherwise modifying the same, i.e., based on his reappraisal of the materials found from the possession of, or otherwise furnished by, the assessee, or even the evidences led by it before him for the first time, of-course by and upon observing the due process of law (refer r. 46A). The onus to satisfy the conditions of the provision though, would only be on the assessee. In fact, all this would precisely be the purview of the first appellate authority in the set aside proceedings. - Decided in favour of revenue for statistical purposes - 5046/Mum/2012, 5249/Mum/2012 2008-09, 5251/Mum/2012 2008-09, 5252/Mum/2012 2008-09, 5250/Mum/2012 2008-09, 5168/Mum/2012 2009-10, 5166/Mum/2012 2009-10, 5169/Mum/2012 2009-10, 5167/Mum/2012 2009-10 - - - Dated:- 23-2-2015 - Shri I.P. Bansal And Shri Chandra Poojari JJ. Fot the Appellant : Dr. K.Shivram Shri Ajay R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -do- 8,50,508 Pg.10-15, Para 2.4.1- 2.4.8 4 31 Kirti P. Kanugo -do- -do- 5252/Mum-2012 -do- 8,50,508 Pg. No.10-15, Para 2.5.2- 2.5.8 5 34 Bhavika Kanugo -do- -do- 5250/Mum-2012 -do- 36,77,100 Page No.10-20, Para 2.5.1 -2.5.16 Note: As per the order passed by the Hon ble ITAT in the case of Prakash Steelage Ltd., ITA No.5221/Mum/2012 dtd. 28/01/2015 for a.Y 2009-2010 the said issue is covered in respect of penalty levied u/s. 271AAA, and the issue was restored back to file of the CIT(A) for examination of levy of penalty and for fresh consideration issue on merits (Pg. No.7, para 4.3) S.No. Sr.No. as per Board Name of the Assessee A.Y Appeal ITA No. Section Amount of Penalty CIT(A) order 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission , these appeals were heard together and disposed of by taking these appeals as covered by the aforementioned orders. As in the matters relating to penalty under section 271(1)(c) the Tribunal has decided the issue against the assessee and in relation to matters relating to levy of penalty under section 271AAA of the Act, the matter has been restored back. 6. It is in these circumstances these appeals were taken for hearing accepting the submissions of Ld. Sr. Counsel for the assessee that these appeals are covered by the aforementioned orders of the Tribunal. 7. For the sake of completeness the relevant observations of the Tribunal on the issue relating to levy of penalty under section 271(1)(c) of the act in the aforementioned order dated 26/11/2014 are reproduced below. 8. Now we will take up appeal for A.Y. 2008-09, being ITA No. 5257/Mum/2012, vide which following ground has been raised: The Hon ble Commissioner of Income Tax (Appeals) (herein referred as CIT(A) ) has erred in confirming order of the learned assessing officer levying the Penalty of ₹ 15,20,795/- u/s 271(1)(c) of Income Tax Act, 1961 without considering the facts and submissions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the show cause notice, the assessee submitted that vide letter dated 22.12.2010, the assessee has given detail reply with regard to amount declared towards incentive against the interest expending outside the books of account. Since the income has already been included in the return of income, no penalty should be levied. However, the assessing officer rejected the assessee s submission and held that in view of Explanation-5A to section 271(1)(c), the assessee is deemed to have concealed the particulars of income on the amount of ₹ 49,21,666/-, as the assessee had not shown this amount in the original return of income filed on 30.09.2008. Accordingly he levied penalty of ₹ 15,20,795/-. Such a penalty has also been confirmed by the Ld.CIT(A), relying on certain decisions which has been dealt by the Ld.CIT(A) at pages 31 to 33 of the appellate order. The sum and substance of his reasoning is that, in view of Explanation 5A to section 271(1)(c), immunity is not available to the assessee for undisclosed income found in respect of any assessment year in the course of search, for which the time limit for filing of return of income had elapsed. Thus he confirmed the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84,099/-. In the wake of search and seizure action, the assessee had made declaration for offering additional income, which was based on documents found at the time of search. The documents seized, revealed that the group concerns including assessee were indulged in receiving and paying of excess interest in cash over and above the receipt and payment of interest accounted in the regular books of account. The assessee has also incurred certain expenses which were towards process of loans paid by the assessee in cash or cheques under the head brokerage/commission. Statement of Shri Ashok M. Seth, Executive Director of the company was also recorded u/s 131 during the course of survey u/s 133A, which was carried out simultaneously and explained the contents of impounded material and its implication in the books of account. Base on the seized documents, an income of ₹ 49,21,666/- was offered as undisclosed income. This amount was included in the return of income filed on 17.08.2009, in response to notice u/s 153A dated 06.07.2009. After including this income the total income was shown at ₹ 6,21,05,765/-. In the assessment order, the assessing officer had discussed specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. Such Incentive of ₹ 1,46,666/- has been reed. In cash and has been declared as undisclosed Income. 5. It is therefore clear from the above facts your honour has wrongly Initiated penalty proceedings in assessee's case even after voluntary disclosure by the assessee and therefore the penalty proceeding initiated by Your Honour should be dropped. 6. It is therefore submitted that your assessee has not deliberately concealed any fact or concealed any particulars of income at' the 'time of filing of the return, hence no penalty should be levied. 7. In view of the above facts and above. legal case laws, it Is prayed that penalty proceedings in the case of the assessee should be dropped. However, the assessing officer has levied the penalty after invoking Explanation 5A to section 271(1)(c). The main issue before us is, whether under the aforesaid facts, penalty can be said to be leviable under Explanation 5A to section 271(1)(c). For sake of ready reference Explanation 5A which has been brought in the statute w.e.f. 01.06.2007 reads as under: [Explanation 5A- Where, in the course of a search initiated under section 132 on or after the 1 st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been provided in Explanation 5A. All the case laws which have been referred by the assessee, pertain to exception clauses provided in Explanation-5. Here in this case admittedly the search has taken place after 01.06.2007 and the return of income for the A.Y. 2008-09 had fallen due much before the date of search. In the return of income filed prior to the date of search, the income of ₹ 49,21,666/- was not included by the assessee. The additional income which has been declared after the date of search was in the return of income filed u/s 153A and not earlier. Thus in our view Explanation-5A is clearly attracted and the penalty levied by the AO u/s 271(1)(c) has rightly been confirmed by the Ld.CIT(A). Accordingly, the grounds raised by the assessee is dismissed and the assessee s appeal for A.Y. 2008-09 is dismissed. 7.1 In this view of the situation, after hearing both the parties in respect of ITA No.5046 and others, (1st set of appeals), the issue is decided against the assessee and these appeals are dismissed. 7.2 In respect of levy of penalty under section 271AAA of the Act, the relevant observations of the Tribunal as per aforementioned order dated 28/01/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in view by the ld. CIT(A) while deciding the assessee s case before him. Firstly, any income to be subject to penalty u/s.271AAA should be an undisclosed income , as defined vide Explanation below sub-subsection (4) the said section. The penalty in the instant case, however, has been levied on the income of ₹ 3,46,632/-, which, as it would appear to us on a reading of the assessment and penalty order, is only on account of a difference in the valuation of stock. Thus a finding as to the impugned incomes being undisclosed incomes is a pre-requisite for the application of the provision. Further, each of the three ingredients as specified u/s. 271AAA(2) would need to be separately examined for their satisfaction by the assessee if the penalty there-under is not to be levied and, thus, sustained. While this may seem axiomatic and, therefore, superfluous for us to be stating so, liable to be construed as an expression of over anxiety, we do so as we observe a gross overlooking of this vital aspect of the matter. As we observe, the undisclosed income of ₹ 562.62 lacs relating to stock was declared by the assessee, i.e., for the first time, only per its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, particulars of income, considering the deeming provisions in its respect under the section, s. 271AAA provides for a mandatory levy of penalty except where the assessee satisfies the conditions of section 271AAA(2). Even the saving upon proving a reasonable clause, as provided under section 273B, is not applicable for a penalty imposable u/s.271AAA, which is only in respect of undisclosed income, so that what alone is relevant is the applicability of the provision in the facts of the case. It is apparent from the reading of the said decision that the environmental conditions existing at the time of the search, including the manner in which the statement u/s.132(4) is generally recorded, prevailed with the hon ble court in holding of a substantial compliance in the facts of the case, i.e., qua the condition of admission of undisclosed income and the statement of the manner in which it is derived, also provided u/Expl.5 to s. 271(1)(c), saving penalty. As explained by it, this is as the assessee had no occasion to state or make averments in the manner as required by or under the law. Its prescription is therefore to be read contextually. The legal proposition that thus arises fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income and the consequent leakage of revenue for future, why could the same be not read so as to allow the assessee the latitude for providing the necessary details subsequently, i.e., where the disclosure u/s.132(4) is made under excruciating or difficult circumstances. The same of course would be under oath, making it a part of and refer to the earlier statement u/s. 132(4), complying thus substantially and effectively, with the substantive provision of law. Further, the further condition of substantiation , as provided u/s. 271AAA(2)(ii), which was not there in the case, being u/s. 271(1)(c), before the hon ble court in Mahendra C. Shah (supra), could only be interpreted to mean of the law casting a further obligation on the assessee to demonstrate the manner of deriving the undisclosed income, as specified per the statement u/s.132(4), as valid and true, i.e., stands validated and is on a firm basis; the presumption as to the truth of the materials found being already provided for u/s. 292C. The said decision would thus be of little assistance to the assessee. 5. In the result, the Revenue s appeal is allowed for statistical purposes 7.3 As it can be seen from the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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