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2015 (6) TMI 351 - ITAT MUMBAI

2015 (6) TMI 351 - ITAT MUMBAI - [2015] 41 ITR (Trib) 330 (ITAT [Mum]) - Penalty u/s 271(1)(c) - depreciation on the IPRs - Held that:- on the date of search, when Mr. Jingnesh Shah director of the assessee company withdrew the claim of depreciation on IPRs, the claim was already allowed by the CIT(A), but was sub judice before the ITAT in regular assessment proceedings.In such a situation, the issue could not have been made the subject matter of assessment under section 153A read with section 1 .....

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turn or the return in response to section 153A. In such a case incidence of penalty at all cannot be comprehended.

Coming to the correctness of addition, based on statement under section 132(4), we are in agreement with the submissions of the AR, that addition itself cannot be sustained simply on the basis of statement under section 132(4), as held in the case of Raj Pal Bhatia (2009 (11) TMI 531 - DELHI HIGH COURT). Also in the case of SMJ Housing (2013 (7) TMI 660 - MADRAS HIGH COUR .....

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C. Sharma, AM And Vivek Varma, JM,JJ. For the Appellant : Shri Chetan A Karia For the Respondent : Shri Pawan Kumar Beerla ORDER Per: Vivek Varma: Instant appeals are filed against the common order of the CIT(A)-38, dated 26.06.2011, covering assessment years 2002-03, 2004-05, 2005-06 & 2006-07, sustaining the penalty levied by AO under section 271(1)(c) in each of the above mentioned assessment years. The details are as under: Sr. No. Asst. Year Penalty Levied 1 2002-03 1,25,00,000 2 2004- .....

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by the assessee was capitalized by the assessee company in its books, on which the assessee claimed depreciation. 5. The facts pertaining to the issue are that in the regular assessment proceedings, the AO delved in the entire facts and in order dated 24.02.2005, disallowed the claim of depreciation on IPRs as acquired by it. 6. The assessee took legal advice from senior Chartered Accountants, who advised the assessee on the correctness of the claim of depreciation on IPRs. The assessee approach .....

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id litigation and to buy peace and remain out of the controversy. 8. It was in these proceedings, consequential to search and seizure operations, the issue of depreciation once again emerged and the AO initiated and levied the penalty under section 271(1)(c) of the Act, by invoking Explanation 5A to section 271(1)(c). 9. In the appeal before the CIT(A), pertaining to levy of penalty, the CIT(A), sustained the order of the AO. 10. Against this order of the CIT(A), the assessee is in appeal in the .....

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found to be the owner of- "i) any money, bullion, jewellery or other valuable article or they (hereafter in the Explanation referred to as assets) and the assessee s claim that such assets have been acquired by him by utility/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 document or transaction represents his income for any previous year, which has ended before the date of search and a) where the return of income .....

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particulars of his income or furnished inaccurate particulars if such income". 12. The AR drew our attention towards the addition itself. The AR submitted that the addition was result of the withdrawal of claim of depreciation, but, that by itself cannot become an item of addition and an item for reconsideration in the proceedings under section 153A. 13. The AR submitted that the AO made the addition on account of disallowance of depreciation on IPRs consequent to the withdrawal of the same .....

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the decision of Hon ble Madras High Court in the case of SMJ Housing vs CIT, reported in 357 ITR 698 (Mad) , wherein it was held that when in a case where the department accepted the return, as filed by the assessee prior to search, and there is nothing in evidence to show that any incriminating material has been found in the search, then Explanation 5 to section 271(1)(c) cannot be attracted. The AR pointed out that Explanation 5 is pari materia to Explanation 5A, which has been imported by th .....

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f account showed inaccurate particulars of income or concealed the particulars of income, the order of the Income-tax Appellate Tribunal is liable to be set aside. Accordingly, the same is set aside". 15. The AR, it may be mentioned has placed reliance on a number of decisions on the issue impugned, both before the CIT(A) and before us. The AR, basing his arguments on the same, pleaded that the penalties need to be deleted. 16. The DR primarily defended the orders of the revenue authorities .....

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ce of depreciation on IPRs by the AO in regular assessment proceedings was allowed by the CIT(A). The Director Mr. Jignesh Shah withdrew the claim of depreciation in the statement under section 132(4) during the course of search and seizure operations undertaken on the assessee. In 153A proceedings, the AO once again added the same but in these proceedings, the CIT(A) sustained the order of the AO. The AO as a consequence of the orders in 153A proceedings initiated and levied the penalty under s .....

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situation, the issue could not have been made the subject matter of assessment under section 153A read with section 143(3), because that provision contemplates, assessment of material found during the course of search along with the original ingredients of the original return. The important qualification is that the material must be incriminating and found during the search, and which may have the character of increasing the income declared in original ROI. 21. In the instant case, it is not th .....

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he 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 i .....

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, for the purposes of imposition of a penalty under clause (c) of subsection (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income". 23. When we analyze the expressions used in clause (i) to Explanation 5A, we find that the expressions used are definite to use the words "any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims .....

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"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",…, we find that even this shall not apply for the following reasons, (a) IPRs were acquired as a scheme awarded by the two Hon ble High Courts & (b) the withdrawal of the charge of depreciation was a suo moto decision to avoid litigati .....

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