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Dy. CIT, Central Circle, Aurangabad Versus Shri Naresh B. Jindal,

2015 (7) TMI 123 - ITAT PUNE

Penalty levied u/s.271(1)(c) - undisclosed income in the hands of director - CIT(A) deleted penalty levy - Held that:- CIT(A) deleted the penalty holding that the profit offered to tax by the directors of the different companies including the assessee in their hands in fact belongs to the said companies which have been earned by the said companies from their manufacturing activity. Therefore, such income has to be taxed in the hands of the respective companies and not in the hands of the directo .....

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No infirmity in the above finding given by the Ld.CIT(A). In the instant case the income declared and accepted by the assessee in the return filed in response to notice u/s.153A as undisclosed income is actually belongs to the company and he is not the owner of such income. The Ld. Counsel for the assessee also made a statement at the Bar that the assessee has not taken any benefit out of the amount disclosed. The tax paid on such undisclosed income has gone waste as no benefit out of such incom .....

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of the CIT(A), Aurangabad relating to Assessment Years 2006-07 to 2008-09 respectively. Since identical issue is involved in all the three appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. 2. Deletion of penalty levied u/s.271(1)(c) of the I.T. Act by the Assessing Officer is the only issue raised by the Revenue in the grounds of appeal against the order of CIT(A). 3. First we take up ITA No.1443/PN/2013 for A.Y. 2006-07 as .....

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roceedings the Assessing Officer noted that the assessee in his computation of income has shown income of ₹ 29,96,551/- as income declared in search u/s.132 . He noted that this income is in addition to the income declared originally in return of income filed u/s.139 of the I.T. Act. On being questioned by the Assessing Officer the assessee vide submission filed on 18-10-2011 stated as under : The assessee has accepted income u/s.132 during the year though there is no such direct evidence .....

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8377; 29,96,551/-. He therefore initiated penalty proceedings u/s.271(1)(c) of the I.T. Act read with Explanation 5A. 6. In response to the penalty notice the assessee submitted as under : 6.1 The assessee group has declared income during the course of search to cover all deficiencies & mistakes & honoured the declaration & paid taxes. 6.2 The assessee has co-operated in all proceedings & shall cooperate. 6.3 The assessee has never filed inaccurate particulars & not hidden an .....

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en by the assessee. He observed that statement of Shri Ghanshyam Goyal main concerned person of Kalika group was recorded u/s.132(4) of the I.T. Act. At the time of search at Kalika Steel Alloys Pvt. Ltd. on 08-07-2009 in the statement Shri Ghanshyam Goyal made declaration of income of ₹ 14 crores. Later on in the statement recorded u/s.131 of the Act by the ADIT (Investigation) Aurangabad on 17-08-2009 Shri Ghanshyam Goyal reiterated the declaration of income and gave detailed bifurcation .....

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ounted sales was declared in the hands of the directors. The assessee was one of such directors and an amount of ₹ 29,96,551/- was declared for the A.Y. 2006-07. He therefore held that the provisions of Explanation 5A to section 271(1)(c) of the I.T. Act are attracted. Further, irrespective of declaring income in the returned income after the date of search such income has to be considered as concealed income. He further observed that although the assessee and the group as such have cooper .....

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51/- has been offered to tax in the hands of the assessee only to avoid protracted litigation and to buy peace of mind. The said income represents profit on alleged suppressed sale of Kalika Steel Alloys Pvt. Ltd., in which the assessee is a Director; therefore, as held by the CIT(A), Aurangabad while deciding the appeals in the cases of Kalika Steel Alloys Pvt.Ltd. for A.Ys.2004-05 to 2010-11 and Kalika Steel Jalna Pvt. Ltd. for A.Ys.2006-07 to 2010-11 vide orders dated 14/05/2012, the income f .....

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₹ 29,96,551/- as held by CIT(A) is income of Kalika Steel Alloys Pvt.Ltd. It was argued that it is the settled law that the income incorrectly offered in the hands of any assessee is not liable to penalty u/s.271(1)(c) of the Act, as the income itself is incorrectly offered and taxed, the concealment penalty has no legs to stand. The assessee has filed written submission, raising the above contentions, vide letter dated 21/03/2013 which has been considered. 9. Based on the arguments advan .....

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8/2009 giving details of the said income offered is extracted below - "Q.No.4 It is to be noted that, as the assessee had claimed all expenses, direct and indirect, during the respective years, hence the total value of the goods so removed shall be unaccounted income of the assessee. Please comment. Ans:- I deny contention of DGCI that the members of Kalika group as mentioned in Q.No.2 had clandestinely removed the products. Even if it is assumed that such products are removed then a fact m .....

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of the company, it can be seen that the cost of the material in the case of the KSAPL & KSJPL is as follows - KSAPL KSAPL KSJPL FY 06-07 61.50% FY 06-07 87.80% FY 07-08 68% FY 07-08 87.70% Thus, even if the GP rates are accepted 35% and 15% respectively, the unaccounted income would be as follows - Sr. No. Name of company F.Y. Amount of goods removed GP% as Undisclosed income 1 Kalika Steel Alloys Pvt.Ltd. 06-07 11185330.00 @35-3914936 11107800.00 @35-3887730 2 Kalika Steel Jalna Pvt. Ltd. 0 .....

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Alloys Pvt.Ltd. Ghanshyam G Goyal - 1957468 1943865 Arun Agrawal - 1957468 1943865 2 Kalika Steel Anil Goyal 2996551 1212567 4260756 Jalna Pvt.Ltd. Naresh Jindal 2996551 1212567 4260756 3 Giriraj Re- Rolls Pvt.Ltd. Ghanshyam G Goyal 779048 - 1328152 4 Bhoomi Re- Rolls Pvt.Ltd. Anil Goyal - 615115 Sunil Goyal - 615115 TOTAL 6772150 6340070 1,49,6 7,624 From the above charts, it is evident that the profit offered to tax by the Directors of the above mentioned companies, including the appellant, i .....

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fit on suppressed sale of the companies is to be taxed in the hands of the manufacturing companies and not in the hands of the Directors. Further as the status of companies & various Directors are different telescoping of income was also not allowed. It is settled position that in order to levy penalty u/s 271(1)(c), there has to be "income" of the assessee in respect of which particulars have been concealed. If the amount on which the penalty u/s 271(1)(c) has been levied is not i .....

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cussion, I am of the considered view that the A.O. is not justified in levying penalty u/s 271(1)(c) on the amount of ₹ 29,96,551/-. The penalty u/s 271(1)(c) of ₹ 10,23,160/- on the amount of 29,96,551/- is, therefore, cancelled. The A.O. is directed accordingly. The appellant has also raised another contention without prejudice to above contention that the A.O. has invoked Explanation-5A for levying penalty u/s 271(1)(c) of the I.T. Act which is applicable only when the ownership o .....

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os. 2 & 3 are allowed. 10. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds : 1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of ₹ 10,23,160/- imposed u/s 271(1)(c) of the Act. 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the amount on which penalty is levied, was not income of the assessee, ignoring the fact .....

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e statement of Shri Ghanshyam Goyal recorded u/s.132(4) on 18-07- 2009 the Ld. Departmental Representative submitted that in response to Question No.50 Shri Ghanshyam Goyal had declared an amount of ₹ 14 crores in the hands of 4 directors @ ₹ 3.5 crores each. He submitted that in his reply he has also mentioned that the said disclosure is to cover up all the discrepancies/differences in the books of account, difference in stock and difference of opinion in regard to the issues raised .....

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Act is clearly attracted. He accordingly submitted that the order of the CIT(A) be reversed and that of the order of the Assessing Officer be restored. 12. The Ld. Counsel for the assessee while supporting the order of the CIT(A) drew the attention of the Bench to Question Nos. 46, 47 and 48 of the said statement and submitted that these statements are in respect of alleged clandestine removal of goods in the case of Kalika Steel Alloys Pvt. Ltd. and Kalika Steel Jalna Pvt. Ltd. Referring to the .....

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on of the Bench to the income declared in the respective financial years by respective individuals. Referring to Question No.16 of the said statement (page 27 and 28 of the paper book) he submitted that the final tally of declaration of ₹ 14,01,61,595/- is income and in that the first item is unaccounted sale as per details mentioned in Question in 2 & 3 amounting to ₹ 2,80,79,840/- which is the amounts relating to clandestine removal of goods by these companies. He submitted tha .....

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of the statement recorded u/s.132(4) on which heavy reliance has been placed by the Revenue. He submitted that since the search took place on 08-07-2009 relating to A.Y. 2010-11 the return of income was not due to be filed on the date of search and therefore the same has been declared by these individuals in the return of income and paid taxes and accordingly the penalty u/s.271AAA has also been correctly deleted by the CIT(A). He submitted that since the income declared by the assessee in the .....

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es place on or after 01-06-2007, i.e. from A.Y. 2007-08 which can be leviable only after the assessee is found to be the owner on any asset such as money, bullion, jewellery or other valuable etc. or owner of any income based on any entry in books of account and he claims that such entry in the books of account represents his income. In short in the second limb of Explanation 5A it is provided that no penalty can be levied if the assessee does not claim that such an entry represents his income. .....

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Officer (except small amount of bank interest of ₹ 1,769/- which was not offered by mistake which is bonafide one that it is exempt u/s.80L which was previous there in the statute) penalty u/s.271(1)(c) of the I.T. Act cannot be levied. For the above proposition he relied on the following decisions : 1. Smt. Pramila D. Ashtekar Vs. ITO - (2014) 61 SOT 113 2. Dilip Kedia Vs.ADIT (2013) 40 taxmann.com 102 3. DCIT Vs. Purti Sekhar Karkhana (2013 59 SOT 29 4. Devidas Sukhani Vs. DCIT (2013) 1 .....

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nce of Shri Naresh B. Jindal, Shri Arun S. Agrawal and Shri Anil N. Goyal, Accordingly, the declaration u/s.132(4) was conditional to the fact that no concealment of the penalty should be levied. 15. Referring to the decision of the Mumbai Bench of the Tribunal in the case of DCIT Vs. Goyal Properties and Estates Pvt. Ltd. vide ITA No.7132/Mum/2010 order dated 07-05-2012 he submitted that the Tribunal in the said decision has held that when the assessee has given the declaration during the cours .....

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he submitted that the Hon ble High Court has upheld the order of the Tribunal deleting the penalty where the assessee had made conditional offer of settlement stating that no penalty should be levied on the assessee. Since the order was made with the clear understanding that no penalty should be levied penalty levied u/s.271(1)(c) of the I.T.Act was held as not justified. He also relied on the following decisions on the above principle : 1. Bhagat & Company Vs. ACIT (2006) 101 TTJ (Mum) 553 .....

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ffer is concerned the Ld. Departmental Representative referred to the decision of Hon ble Supreme Court in the case of Mak Data P. Ltd. reported in 358 ITR 593 and submitted that the Hon ble Supreme Court has already decided the issue under such situation which is against the assessee. Therefore, the order of the CIT(A) should be reversed and that of the order of the Assessing Officer be restored. 18. After hearing both the sides, we find the issue involved in this appeal is identical to the iss .....

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ook place in the residential premises of different persons/associate concerns of the Kalika group of Jalna. The statement of Shri Ghanshyam C. Goyal, who is the main person of the group, was recorded u/s.132(4) of the I.T. Act in which he has declared undisclosed income of ₹ 14 crores in the name of 4 persons @ ₹ 3.5 crores each, the details of which are as under : 1. Shri Ghanshyam Chunilal Goyal Rs.3.50 Crores 2. Shri Arun Shrikishan Agrawal Rs.3.50 Crores 3. Shri Anil Nandkishor G .....

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of Kalika group as mentioned in Q.No.2 had clandestinely removed the products. Even if it is assumed that such products are removed then a fact may be considered that all indirect expenses were already debited. However, since the purchase of the raw material was not accounted for, hence the credit should be given to the assessee for the same. It is to be considered that the amount of Raw material is incurred @ 60-70% in the case of manufacturing of Ingots/Billets and that of 85-90% for the manu .....

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as Undisclosed income 1 Kalika Steel Alloys Pvt.Ltd. 06-07 11185330.00 @35-3914936 11107800.00 @35-3887730 2 Kalika Steel Jalna Pvt. Ltd. 06-07 16167552.00 @15-2425133 39954004.00 @i5-5993101 56810071.00 @15-8521511 3 Giriraj Re-Rolls Pvt. Ltd. 05-06 2225850.00 @35-779048 3794717.00 @35-1328151 4 Bhoomi Re-Rolls Pvt. Ltd. 07-08 3514942 @35-1230230 TOTAL 144760566.00 28079840 I want to state that I am disclosing the said amounts to buy peace of mind, however in principle, I am not accepting such .....

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Similarly we find in reply to Question No.16 of the said statement he has given the bifurcation of the amount of ₹ 14,01,61,595/- the details of which are as under : Q.No.16 Would you like to say anything further? Ans: Yes, want to state that as a result of the search action I am offering the amount of ₹ 14,01,61,595/-. The details of the same are as follows : Sr.No. Particulars Amount 1. On account of unaccounted sale as per details mentioned in (Question No.2 & 3) 2,80,79,844 2 .....

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AL 14,01,61,595 The assessee declared an amount of ₹ 19,57,468/- as undisclosed income for the impugned assessment year which is a part of unaccounted sale of the companies at ₹ 2,80,79,844/- and which has been accepted by the Assessing Officer in the return of income. However, he initiated penalty proceedings u/s.271(1)(c) of the I.T. Act read with Explanation 5A and levied penalty of ₹ 6,58,884/-. We find the Ld.CIT(A) deleted the penalty holding that the profit offered to ta .....

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have been concealed. Since in the instant case it is not the income of the assessee and the income belongs to that of the respective companies, therefore, penalty u/s.271(1)(c) of the I.T. Act cannot be levied by invoking either Explanation 1 or Explanation 5A to provisions of section u/s.271(1)(c) of the I.T. Act. He accordingly deleted the addition. We do not find any infirmity in the above finding given by the Ld.CIT(A). Even in the hands of the company, the assessee in principle has not acce .....

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ents his income. Therefore, in the instant case although the search has taken place after 01-06-2007, however, the fact remains that in view of second limb of the Explanation 5A no penalty can be levied if the assessee does not claim that such an entry represents his income. In the instant case the income declared and accepted by the assessee in the return filed in response to notice u/s.153A as undisclosed income is actually belongs to the company and he is not the owner of such income. The Ld. .....

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