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ITO, Ward 35 (4) , New Delhi Versus Shri Ankur Aggarwal and Shri Neeraj Jindal,

2015 (8) TMI 921 - ITAT DELHI

Penalty under section 271(1)(c) - disclosure of income as the result of search operation on the assessee and not voluntary - CIT(A) deleted the penalty - Held that:- Provisions of Explanation 5 are applicable in the cases where during the course of search initiated on or before 1.6.2007 any money, bullion, jewellery or other valuable article or thing is found in the possession or under control of the assessee ; and in the instant case of the assessee, the search was conducted on 11.01.2007 and c .....

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ice. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment years 2005-06 & 2006-07, which are before us, merely on presumption that the assessee might have been in possession of the seized cash throughout the period covered by search assessments. The income offered to tax u/s 153A for assessment years 2005-06 and 2006-07 cannot be said to be based on assets seized, because from the assessment order, it is clear that search was on 11.01.2007 (i. E AY 2007-08), the cash seized .....

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- ITAT DELHI), the provisions of Explanation 5 cannot be invoked in assessment years 2005-06 and 2006-07 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2005-06 & 2006-07 is based on assumptions and presumptions. It is settled law that suspicion howsoever strong, cannot take the place of evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of assessment years under consideration has to .....

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: Shri Rohit Garg, Advocate For The Revenue : Shri Sujit Kumar, Senior DR ORDER PER BENCH : These four appeals filed by the revenue are directed against the separate orders of the Commissioner of Income-tax (Appeals)-XXVII, New Delhi all dated 16.05.2012 for the assessment years 2005-06 and 2006-07. As the issue is common in all the four appeals, the same are disposed of by this common order for the sake of brevity. 2. First, we take up ITA No.4398/Del/2012 for the assessment year 2005-06. 3. T .....

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the fact that provision of explanation 5(1) & explanation 5(2) of the section 271 (1)(c) of the Act are not applicable in this case. 4. Whether the disclosure made in response of the notice u/s 153A(1)(a) in respect of earlier assessment year i. E. A.Y. 2005-06 over and above already returned income after the search operation held on 11.01.2007 can be said voluntary in nature. 5. The CIT(A) erred in law and on facts by ignoring that if in pursuant to search operation, penalty is not levied f .....

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30.12.2005. 5. The assessee belonged to M/s J. M. Estate Developers Pvt. Ltd. group of cases. Search and seizure operation u/s 132(4) of the Act was carried out on 11.01.2007 on the Group and directors of the aforesaid company. A disclosure of ₹ 16.00 Crores was made by the Group u/s 132(4) of the Act on behalf of different directors and relatives of the directors. During the search, cash amounting to ₹ 5,26,530/- and jewellery worth ₹ 17,85,785/- were found from the premises a .....

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by observing that, After examination of the details filed and discussion with AR of the assessee the income of the assessee is accepted and assessed at ₹ 23,38,731/-. 6. The A.O. also initiated penalty proceedings u/s 271(1)(c) in the assessment order by observing as under : From the seized records it is noticed that the assessee group had offered a sum of ₹ 16 Crores as unaccounted. income. However, as the disclosure is consequence of the search, I am of the view that the assessee .....

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al-II), New Delhi vide his order dated 10.03.2011, has held as under :- However, since the penalty order in question had already been set aside by the undersigned and the proceedings had been restored back to the file of the A.O. u/s 263 of the Act, the present proceedings u/s 264 before me becomes infructuous and is accordingly disposed off. 9. With respect to proceedings u/s 263 of the Act referred to by the CIT(Central-II) as above, CIT observed that the A.O. had imposed penalty on the concea .....

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against the additional income of ₹ 21,65,932/- declared by the asseessee. The CIT(Central-II), therefore, set aside the penalty order and proceedings were restored back to the file of the A.O. with the directions to dispose of the matter in accordance with provisions with the Income-tax Act vis-a-vis judicial pronouncements on the issue, after affording proper opportunity to the assessee. 10. In pursuance of these directions of the CIT (Central-II), the A.O. passed penalty order u/s 271(1 .....

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in this case on the ground that the additional income shown by the appellant in the return of income filed in response to notice u/s 153A of the Act was not a voluntarily disclosure. It has further been held by the A.O. that incriminating documents were found during the course of the search and seizure operations and disclosure made by the appellant u/s 132(4) of the Act was as consequence of the search operations. Had there been no search at the premises of M/s J M Estate Developers Pvt. Ltd. .....

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erate with the department and to avoid protracted litigation. It has been contended by the appellant that no incriminating documents / material were found during the course of search and no reference has been made by the A.O. to any incriminating documents either in the assessment order or in the penalty order. The income declared by the appellant in Return of Income filed in response to notice u/s 153A has been accepted as such. Therefore, there was no concealment of income with reference to th .....

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was accepted as such. Further, in the appellant s case no incriminating material was found during the course of the search and none was pointed out or brought on record by the A.O. either in the assessment order or in the penalty order. In the case of Biland Ran Hargyan Dass (supra), the matter before the Hon ble Allahabad High Court related to the A.Y. 1978-79 much before Explanation-5 to section 271(1)(c) and Section 153A were brought on the statute. In the case of K P Sampath Reddy (supra), o .....

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tion offered by the assessee with regard to cash impounded by the police authorities was not found to be satisfactory in as much as the assessee was not able to point out how much cash belonged to him and how much belonged to his brother and brother-in-law. The facts of the case of Sh. Nithya Kalayani Textile Ltd. (supra) are not applicable to the appellant s case, as in that case the issue involved was valuation of closing stock on the basis of two varieties of cotton. Similarly, in the case of .....

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ssessment order had facts which were not applicable to the facts of the appellant s case. 24. The appellant has relied on a number of case laws which have been reproduced above. In the case of CIT Vs Shyamlal M Soni (supra), the Hon ble M.P. High court held that where the income returned in the revised return was accepted and assessed in the hands of the assessee even if that revised return was filed after search u/s 132 and after notice issued u/s 148 of the Act and subsequent to enquiries made .....

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he case of Joyeo India Pvt. Ltd., ITAT Delhi held that once income is declared in the return filed in pursuance to notice u/s 148 of the Act which is treated as return filed U/S 139, no penalty u/s 271(1)(c) could be levied. In the case of DCIT vs. Gopichand Roopchand Rajani (supra), ITAT Mumbai held that where no incriminating material was found during the course of survey and search for the relevant A. Y. and surrender made by the assessee during the course of survey was disclosed in the retur .....

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en discussed in detail in a recent judgment of jurisdictional ITAT in the Case Sh. Prem Arora vs. DCIT, Central Circel-25, New Delhi, 2012-TIOI-262-ITAT-DEL, the facts of this case are as under- Assessee in this case was searched by the department. During the course of search certain incriminating documents were found. On the basis of these documents it was found that assessee had been carrying on unaccounted business activities. Accordingly, the AO issued notice of See 153A for six assessment y .....

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relating to normal assessment procedure covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31st May, 2003. The sections, so excluded, relate to filing of return, assessment and re-assessment proceedings. Further section 153A intends to assess or reassess total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus the legislative intention is not to a .....

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when normal assessment procedure covered by Sections 139, 147, 148, 149, 151 and 153 has been completely excluded by operation of non-obstante clause Notwithstanding anything contained the search assessments made u/s section 153A of the Act cannot be treated as continuance of normal assessment proceedings whether abated or not. Thus there is complete detachment of assessment proceedings u/s 143 or 147 from search proceedings u/s 153A of the Act. When scheme of search assessment as designed by th .....

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se of imposition of penalty u/s 271 (l)(c) resulting as a result of search assessments made uls153A, the original return of income filed u/s 139 cannot be considered; ++ as held above the penalty u/s 271 (l)(c) is imposable when there is variation in assessed and returned income. If there is no variation, there will be no concealment. When there is no concealment, question levy of penalty u/s 271 (1)(c) of the Act will not arise. This is settled position of law. The concept of voluntary return o .....

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ulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. The penalty was permissible under the law on the date on which the offence of concealment of income was committed, that is to say, on the date of the offending return; ++ if the f .....

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y the assessing officer it can neither be a case of concealment of income nor furnishing of inaccurate of particulars of such income. Hence, the assessee s case is squarely covered by the decision of Hon ble Delhi high Court in the case SAS Pharmaceuticals (supra). Hence, penalty u/s 271 (l)(c) is not exigible. 26. Thus in the case of Prem Arora (supra), the Hon ble ITA T Delhi has held that the concept of voluntary return of income may be important in penalty proceedings initiated in course of .....

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refore, where retuned income filed u/s 153A is accepted by the assessing officer, there will be no concealment of income and consequently penalty u/s 27 1(1)( c) cannot be imposed. 27. In the appellant s case the income declared by the appellant U/S 132(4) was duly offered in the return of income filed in response to the notice u/s 153A(1)(a) of the Act which was accepted as such without any alteration in the income. Thus the income has been assessed on the basis of income declared in the return .....

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2. The revenue, being aggrieved, has filed the appeal before us. 13. The Ld. DR submitted that the Explanation 5 of section 271(1)(c) has not been dealt with by the ld CIT(A) and when the said explanation is applied then penalty will be attracted and the AO rightly levied the penalty. So he pleaded that the order of the Ld. CIT(A) be reversed and the order of AO restored. 14. On the other hand, ld. AR for the assessee submitted that this issue is covered against the revenue by the decision of th .....

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arried out on 11.01.2007 (AY 2007-08) on the said Group and Directors of the said Group of companies. During the search, disclosure of ₹ 16 crores has made u/s 132 (4) of the Act on behalf of different Directors and relatives of the Directors. During the search, cash amounting to ₹ 4,06,930/- was seized though there were jewellery worth ₹ 17,85,785/- was found but the same was not seized. Later on, we find that notice u/s 153A was issued and assessee filed return of income in r .....

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e pursuant to section 153A and assessed at ₹ 23,38,731/-. Thereafter, we find that the AO initiated penalty proceedings u/s 271(1)(c) in the assessment order by observing that from a perusal of the records, it has come to his notice that assessee s group has offered a sum of ₹ 16 crores as unaccounted income and since the disclosure is in consequence to the search, he is of the opinion that the assessee has concealed income and so, on the said reason, penalty proceedings were initiat .....

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#8377; 21,65,932/- and the penalty imposed by the AO vide order dated 26.06.2009 is erroneous because AO had only taken into account ₹ 4 lakhs as the concealed income. Pursuant to the said order, the AO vide order dated 29.09.2011, levied a penalty of ₹ 7,29,100/- being 100% of the amount of tax sought to be evaded on the concealed income of ₹ 21,65,932/-. Similar is the case in assessment year 2006-07 also, only the figures change. On appeal by the assessee against the penalty .....

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ile section 153A prescribes for assessment or reassessment of total income in search cases, section 153B prescribes the time limit for completion of assessment under sec. 153A. Section 153C relates to the cases where books of accounts or documents or assets seized under sec. 132 or requisition made under sec. 132A belong to a person other than a person in whose case search under sec. 132 or requisition under sec. 132A was made. Thus provisions of sections 153A, 153B and 153C are complete code fo .....

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onobstante clause Notwithstanding anything contained the search assessments made u/s section 153A of the Act cannot be treated as continuance of normal assessment proceedings whether abated or not. Thus there is complete detachment of assessment proceedings u/s 143 or 147 from search proceedings u/s 153A of the Act. When scheme of search assessment as designed by the Legislature does not prescribe to take into account the earlier assessment proceedings whether abated or not, it will not be prope .....

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u/s 139 cannot be considered. 12. Further in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s 153A. As held above the penalty u/s 271(1)(c) is imposable when there is variation in assessed and returned income. If there is no variation, there will be no concealment. When there is no concealment, question levy of penalty u/s 271(1)(c) of the Act will not arise. This is settled position of law. The concept of voluntary return of income may be importa .....

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t is also important to note that Chapter XIVB was inserted in the statute by the Finance Act, 1995 w. E.f. 1.7.1995 which prescribed special procedure for search assessments. No penalty u/s 271 or 271A or 271B, or interest u/s 234A/234B/234C was leviable in respect of undisclosed income determined in block assessment in view of specific provisions of section 158BF of the Act. Section 158BFA was inserted by the Income -tax (Amendment), Act , 1997 w. E.f. 1.1.1997 prescribing both interest and pen .....

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enalty and prosecution will also apply. It means that the Explanation 5 of section 271(1) will also apply in search assessment made u/s 153A of the Act provided that the conditions relating thereto are satisfied. 26. In the case before us the assessee has disclosed undisclosed income in the return of income filed in response to notice u/s 153A of the Act which has been accepted by the assessing officer. We have held in earlier paragraphs that under the scheme of search assessment u/s 153A, the t .....

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by the assessing officer it can neither be a case of concealment of income nor furnishing of inaccurate of particulars of such income. The assessee had disclosed income in the return of income filed determined on the basis of entries recorded in seized material. 27. Hon ble Delhi High Court in the case of M/S S. A.S. Pharmaceuticals (supra) while deciding the issue levy of penalty u/s 271(1)(c) in paragraph 15 & 16 has held as under: 15. It necessarily follows that concealment of particulars .....

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the assessee. This view gets supported by Explanation 4 as well as 5 and 5A of section 271 of the Act as contended by the learned counsel for the respondent. 16. No doubt, the discrepancies were found during the survey. This has yielded income from the assessee in the form of amount surrendered by the assessee. Presently, we are not concerned with the assessment of income, but the moot question is to whether this would attract penalty upon the assessee under provisions of section 271(1)(c) of t .....

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me, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the income tax return and offered the surrendered amount for the purpose of tax. If the facts of the case are examined in the light of decision of Hon ble Delhi high Court in SAS Pharmaceuticals (supra) penalty u/s 271(1)(c) is not imposable where there is neither concealment of income nor furnishing of inaccurate particulars of income in return filed u/s 153A of the Ac .....

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nce, penalty u/s 271(1)(c) is not exigible. 28. The next contention of ld AR of the assessee is that if the provisions of Explanation 5 of section 271(1) in respect of searches initiated on or before 1.6. 2007 were sufficient enough for imposition of penalty u/s 271(1)(c), there was no need for inserting of Explanation 5A and section 271AAA into the statute by the Finance Act, 2007. On the contrary ld CIT(DR) has contended that the amended provisions of Explanation 5 will apply to the fact of th .....

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e 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 before the date of search, he shall, for the purposes of imposition of a penalty under section 271(1)(c ) be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income .....

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132(4) that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in sub-sec. (1) of sec. 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. 29. We also find that the Finance Act, 2007 has inse .....

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nce Act, 2007 w. E.f. 1.6.2007. In our considered opinion the amended provisions of Explanation 5 will be applicable only for assessment year 2008-09 if any money, bullion, jewellery or other valuable article or thing is found from the possession of the searched person in respect whom searches are initiated on or after 1.4.2007 to 31.05.2007. 30. In case of a search initiated on or after 1.6.2007 as provided in Explanation 5A, the assessee will be liable for penalty/s 271(1)(c) both in respect o .....

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the Finance Act, 2009 w. R. E.f. 1.6.2007 is reproduced as under: Explanation 5A.- Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the 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 incom .....

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s expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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. 17. A reading of the above order makes it clear that the provisions of Explanation 5 are applicable in the .....

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closed income and cash was seized during search in A.Y 2007-2008, and not in the relevant assessment years. However, in the relevant assessment year under consideration before us, the assessee has made an addition of ₹ 21,65,932/- in the return filed pursuant to section 153A notice. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment years 2005-06 & 2006-07, which are before us, merely on presumption that the assessee might have been in possession of the seized c .....

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ned by him in the relevant assessment years i. E. AYs 2005-06 and 2006-07. Unless there is a clear finding in this respect, Explanation 5 of Section 271(1)(c) cannot be of any help to the department. As rightly pointed out by the Coordinate Bench in Prem Arora (supra), the provisions of Explanation 5 cannot be invoked in assessment years 2005-06 and 2006-07 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2005-06 & 2006-07 is based on assum .....

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