TMI Blog2015 (8) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 during search was only to the tune of ₹ 5,26,530/- and it is not emerging from the records that the assessee has claimed during search that the cash seized (on 11.01.2007), belonged to him and that was owned 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 (2012 (6) TMI 480 - 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is detected by the department. 6. The appellant craves leave to add, alter or amend any/all the grounds of appeal before or during the course of hearing of the appeal. 4. For the relevant assessment year i. E. AY-2005-06, the return declaring an income of ₹ 1,72,799/- was filed under Section 139 (1) of the Income-tax Act, 1961 (hereinafter the Act) on 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 and lockers of the assessee. Out of these assets, cash amounting to ₹ 4,06,930/- was seized, whereas no jewellery was seized. Notice u/s 153A of the Act was issued on 26.02.2008, in response to which the assessee filed his return of Income on 23.10.2008 declaring an income of ₹ 23,38,731/-, thus showing additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)(c) of the Act dated 29.09.2011 levying penalty of ₹ 7,29,100/- being 100% of the amount of tax sought to be evaded on the concealed income of ₹ 21,65,932/-. 11. Aggrieved, the assessee filed an appeal before the first appellate authority and the CIT (A) deleted the penalty by observing as under :- 22. I have carefully considered the submissions of the appellant, the observations made by the A.O. in the penalty order and the facts of the case. Penalty u/s 271 (1)(c) has been imposed 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 consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of several erroneous entries detected in the books of account whereas in the appellant s case no such discrepancies have been pointed out by the A.O. at any stage. In the case of Mohd. M Farooqi (supra), the explanation 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 Mr. Sunil R Kalro (supra), the issue involved was whether the penalty was leviable on a representative assessee. In the case of Jasubhai Business P. Ltd.(supra), the issue involved was the rejection of the assessee s claim with regard to the certain expenditure as revenue expenditure and the treatment of the same by the AO as capital expenditure. In the case of K R Malaimathi (supra), the issue involved was explanation of cash credit entries. Thus, the case laws relied upon by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had been carrying on unaccounted business activities. Accordingly, the AO issued notice of See 153A for six assessment years. Assessee filed his return disclosing substantial income. AO framed the assessment after estimating the income of the assessee. The AO however, could not add beyond the disclosure. In this backdrop the AO levied penalty under section 271 (1)(c) on the ground that the assessee had concealed particulars of his income. CIT(A) affirmed the order of the AO. After hearing the parties the ITA T held that, ++ on bare reading of See 153A it is seen that this section starts with a non-obstante clause 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 assess escaped income as in section 147 or undisclosed income as was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income or for furnishing inaccurate particulars 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 facts of the case are examined in the light of decision of Delhi high Court in SAS Pharmaceuticals penalty u/s 271 (l)(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 Act. In earlier paragraphs we have held that the concealment of income is to be determined with reference to the return of income to be filed in response to notice u/s 153A of the Act. Once returned income filed U/S 153A is accepted by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Shri Prem Arora vs. DCIT, Central Circle 25, New Delhi in ITA No.4702/Del/2010 order dated 9th March, 2012 which has been relied on by the CIT (A) for deleting the penalty and therefore, he does not want us to interfere in the order. 15. We have heard both the parties and perused the material on record. We find that the assessee is an individual and belongs to M/s. J. M. Estate Developers Ltd. group. Search and seizure operation u/s 132 of the Act was carried 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 response thereto and declared an income of ₹ 23,38,731/-, thus there was an increase of additional income of ₹ 21,65,932/- (The original return for the relevant assessment year was filed on 30.12.2005 declaring an income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 for search assessments wherein search has been initiated after 31st May, 2003. The existence of the words all other provisions of this Act shall apply to the assessment made under this section in Explanation (i) of section 153A makes it clear that in search assessments, amongst others the provisions relating to penalty and prosecution will also be applicable. However, when normal assessment procedure covered by Sections 139, 147, 148, 149, 151 and 153 has been completely excluded by operation of nonobstante 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inserted into statute w. E.f 1.6.2003. Clause (i) of Explanation to section 153A clarify that subject to sections 153A, 153B and 153C, all other provisions of this Act shall apply to the assessment made under this section meaning thereby that provisions relating to penalty 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 total income of the assessee is to be determined for each of six assessment years. The assessment or re-assessment proceeding u/s 153A is not in continuation of assessment proceedings u/s 143 or sec. 147 of the Act. Since there is complete detachment of 153A proceedings from regular assessment proceedings u/s 143 or 147 and hence concealment of income is to be determined with reference to the return of income to be filed in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals (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 Act. In earlier paragraphs we have held that the concealment of income is to be determined with reference to the return of income to be filed in response to notice u/s 153A of the Act. Once returned income filed u/s 153A is accepted by 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(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 the assessee s ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated under sec. 132 before the first day of June, 2007 have been inserted by the Finance 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 of assets as well as any income based on any entry in any books of account or other documents or transactions. But no such provision relating to entries was in existence in Explanation 5 prior to insertion of Explanation 5A in section 271(1) of the Act. Hence the scheme of assessment till insertion of Explanation 5A and section 271AAA by the Finance Act, 2007 gave immunity to the assessees in respect of undisclosed income based on entries recorded in seized material. Explanation 5A substituted by the Finance Act, 2009 w. R. E.f. 1.6.2007 is reproduced as under: Explanation 5A.- Where, in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 during search was only to the tune of ₹ 5,26,530/- and it is not emerging from the records that the assessee has claimed during search that the cash seized (on 11.01.2007), belonged to him and that was owned 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 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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