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2015 (7) TMI 323 - ITAT MUMBAI

2015 (7) TMI 323 - ITAT MUMBAI - TMI - Levy of penalty u/s. 271(1)(c) - unexplained jewellery found - whether the saving of Explanation 5 to section 271(1)(c) is attracted in the facts and circumstances of the case, which would prima facie apply inasmuch as the impugned jewellery was found during the course of search? - Held that:- The assessee has not been able to; rather, has not even attempted to substantiate her explanation of the jewlery having been gifted on the occasion of weddings in the .....

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and, in fact, seizure of the relevant assets.

Both Explanation (1A) and (1B) to section 271(1)(c) shall, resultantly, apply in the facts of the case. It may be argued that the Revenue has not invoked the said Explanation. The same is not required to be separately invoked when the assessee is show-caused on section 271(1)(c) (CIT v. Prabhu Dayal Lallu Ram [2005 (1) TMI 39 - PUNJAB AND HARYANA High Court]; CIT v. K.P. Madhusudanan [2000 (1) TMI 15 - KERALA High Court]. The law, through .....

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on.There is, further, no plea of the disclosure per the return as made to purchase peace of mind and/or avoid litigation. The plea would even otherwise be inconsistent with the facts of the case; wholly unsubstantiated and, accordingly, not maintainable either on facts or in law.

We confirm the levy of penalty imposed at the minimum sum thereof, i.e., at 100% of the tax sought to be evaded. In this regard, the assessee states of the correct amount of income disclosed and assessed bein .....

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ner of Income Tax (Appeals)-41, Mumbai ( CIT(A) for short) dated 24.01.2011, confirming the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 ( the Act hereinafter) for Assessment Year (AY) 2007-08 vide order dated 25.06.2009. 2. The facts of the case in brief are that a search u/s. 132 of the Act was conducted at the business and residential premises of various persons/concerns belonging to the Balaji Group of cases, including the assessee, on 10.11.2006. Jewellery worth ₹ 53 lac .....

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-, including ₹ 29,13,895/- on account of un-explained jewellery found and seized during the search from the assessee s possession, paying taxes thereon. The said income, offered as Income from Other Sources , was assessed as such vide order u/s. 143(3) dated 16.12.2008. In penalty proceedings u/s. 271(1)(c), initiated along with, the assessee, on being show-caused, invoked the immunity provided by Explanation 5 to section 271(1)(c) of the Act. The assessee had offered the excess jewellery .....

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. CIT [2010] 40 SOT 543 (Mum). Aggrieved, the assessee is in second appeal. 3. Before us, like submissions were made, with each side relying on case law, as under: Assessee: (a) CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj) (b) CIT v. E.V. Valashanmugham [2006] 286 ITR 626 (Mad) (c) CIT v. Radha Kishan Goel [2005] 278 ITR 454 (All). Revenue: Shreej Traders v. Dy. CIT [2012] 136 ITD 249 (Mum), which, in turn, relies on several case law. 4. We have heard the parties, and perused the material on .....

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peals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person - (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or 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 cla .....

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eturn 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 income, unless, - (1) such income is, or the transactions resulting in such income are recorded,- (i) in a case falling under clause (a), before the date of the search; and (ii) in a case falling under clause (b), on or before su .....

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furnished before the expiry of time specified in sub-section (1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. 4.2 As apparent, it (Explanation 5 to s. 271(1)(c)) provides for deeming concealment of particulars of income or furnishing inaccurate particulars of income under the condition of the assessee claiming the assets, of which it is found to be the owner of dur .....

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e, particulars of income has two exceptions to it, per the provision itself, listed as clauses (1) and (2) thereof. Clause (1) stipulates that the assessee shows of having recorded the relevant income in the books of account maintained for any source of income, or otherwise disclosed prior to the date of detection. Exception (2), which is independent of clause (1), provides for immunity where the assessee discloses both the income and the manner of its earning in the statement u/s. 132(4) made d .....

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tion 5 to section 271(1)(c) cannot be denied. In our clear view, Explanation 5 to section 271(1)(c) is not attracted in the first place. The question of its saving, or that provided per clause (2) thereof, being applicable, or not so, thus, does not arise. This is as, firstly, the assessee nowhere claims the impugned jewellery, or any part thereof, to have been acquired by her by utilizing her income for any previous year, much less the relevant previous year. This is, as apparent, a prerequisit .....

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wer to Question # 4), with answer to Q. #3 clarifying the jewellery contained in the Locker as belonging to her and her family members, specifying them by name. Further, no other family member, including her son, Deepak Kumar Agarwal (whose statement is at PB pages 22-24), who were also examined, threw any light on the source of the acquisition of the said jewellery, or even otherwise toward its ownership, even as also emphasized by the AO in the remand report dated 12/1/2011 (PB 19). There is, .....

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er possession during search in part, being unable to substantiate the same for the entire jewellery. This, then, constitutes our second principal objection to the invocation of Explanation 5 to s. 271(1)(c). True, the assessee returns the value of the unexplained jewellery per her return of income for the relevant year. However, that by itself would not operate to attract the said Explanation; its ingredients being not satisfied. The jewellery was found from her locker/residence. To the extent e .....

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excess, i.e., unexplained, jewellery. That she was so found by the Revenue during the course of search, is incidental and by itself of no consequence. It would not by itself be sufficient to attract Explanation 5. In fact, given the provisions of sections 69/69A, the return of income is by itself of little consequence; she having been found to be the owner of valuable articles, for which she has no explanation for their source, i.e., which she could substantiate, so that the same was even other .....

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nstant case we have found the basic ingredients or pre-requisites for the application of the provision as not met. This answers the question arising for being answered, as listed at the beginning of this discussion, against the assessee and in favour of the Revenue. That the reasons informing our decision may be different from that which prevailed with the Revenue, is, again, of little moment. 4.3 The income being admitted, the question that next arises is if the assessee has been able to substa .....

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uire the names of the donors, besides confirmations from the donors. Rather, how could gift to another form part of her income, i.e., going by her explanation. The same is no more than a bald plea, contradicted by the assessee s own stand of returning the same as her income, albeit consequent to search. The same, however, cannot be regarded as voluntary by any stretch of imagination, being in consequence of a search and findings thereat, i.e., detection and, in fact, seizure of the relevant asse .....

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