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2015 (12) TMI 699 - ITAT JAIPUR

2015 (12) TMI 699 - ITAT JAIPUR - TMI - Penalty u/s 271(1)(c) - surrender of income - suo motu further income declared in the returns filed u/s 153A - Held that:- It is trite law that penalties should not be imposed unless the case falls under the four corners of law mandating the penalty. Thus such laws are to be strictly implemented. Adverting to explanation 5A to section 271(1)(c) if explicitly refers to “Where, in the course of a search initiated under section 132 on or after the 1st day of .....

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ation of word transaction mentioned in sub clause ii of explanation. 5A cannot be accepted. This is simply so as there is no mention of any specific transaction. Beside there should be any evidence found during the course of search. Thus in my considered view impugned penalties cannot be sustained under explanation 5A to section 271(1)(c).

While interpreting proviso to sec. 153A, various judicial forums have held that additions in respect of finalized assessments cannot be made unless .....

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penalties confirmed by the ld. CIT(A) u/s 271(1)(c) are deleted. - Decided in favour of assessee. - ITA No. 1013, 1014 & 1015/JP/2013 - Dated:- 4-12-2015 - SHRI R.P. TOLANI, JUDICIAL MEMBER For the Petitioner : Shri Vijay Goyal, CA & Shri Mridul Goyal, Advocate For the Respondent : Shri Raj Mehra, JCIT-. DR ORDER PER R.P. TOLANI, JM These are assessee s appeals arising out of ld. CIT(A), Central, Jaipur three different orders dated 17-10-2013 challenging confirmation of penalty imposed u/s .....

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iness premises of the assessee group on 27/08/2008, during the course of search no incriminating material, evidence or documents whatsoever were found. Since search officer unrelentingly demanded declaration of additional income, assessee had no alternative but to surrender certain income in search statement, relevant part of the statement is as under: I have perused the affidavit notarized on 14-09-2010 wherein it has been averred by the appellant that the expenses on the marriage of his son Sh .....

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e appellant. No details of the names, addresses, confirmations of the persons who gave such gifts to the assessee along with the details of the amount of gifts, source of withdrawal, copy of cash book or bank account has been filed along with this affidavit. In absence of any details of substantiating evidence it is not clear how the AO was required to verify the averments made in this affidavit. The AO has therefore held this affidavit to be self serving evidence and has rejected it while passi .....

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ments it is seen that the appellant had fabricated seals of different business concerns. These were used to generate bogus bills and the sundry creditors for such bogus purchases could not be verified by him. It was on the basis of these documents that he admitted to having earned unaccounted income from the business concern M/s Mittal & Company and in response to question 12 he has admitted that he had spent this amount on the marriage of his sons and purchase of the jewellery which was als .....

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rriages. It was on the basis of these documents that the surrender was made. In search statement, the assessee thus declared ₹ 30.00 lacs as his undisclosed income from pharmaceutical business and additional income of ₹ 10,84,897/- qua marriage expenses of son Saurabh and house renovation were declared in the returns filed u/s 153A for AY 2003-04, AY 2005-06 and AY 2006-07. For balance amount ₹ 19,15,303/- assessee retracted however, ld AO not accepting the retraction made the .....

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nt taken during search as under:- AY Date of Filing Total Income declared Additional Income declared Particulars of additional Income 2003-04 30-03-2009 495210 4,00,000 Income surrendered in statement u/s 132(4) on account of marriage of son Shri Prafful Mittal 2005-06 30-03-2009 661150 5,00,000 Income surrendered in statement u/s 132(4) on account of marriage of son Shri Deepak Mittal 55,200 Income surrendered on account of unexplained cash creditors recorded in regular books 2006-07 30-03-2009 .....

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ee filed detailed explanation contending that the penalty was not leviable on merits as well under law. Qua these items of income neither ant incriminating material was found during search, nor any statement was record and no amount was offered. There was no justification of penalty in a case assessee suo motu offered further income to avoid any complications. The explanation did not find favor with ld. AO who imposed the impugned penalty in respective years as mentioned in above table. Aggrieve .....

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ent or record was found about pharmaceutical business. Looking at the unrelenting attitude of the department and to stop the agony of family members caused by search proceedings on all the residential and business premises, assessee declared an amount of ₹ 30.00 lacs qua only alleged pharmaceutical business and ₹ 10,84,897/- representing the unaccounted expenses in marriage and renovation in house. As mentioned above the retraction of balance amount ₹ 19,15,303/- by the assesse .....

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s 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 income (wholly or in part) for any previous year, which has ended before the date of search and,- (a) where the return of income .....

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the particulars of his income or furnished inaccurate particulars of such income.] From the reading of above provision, it is clear that in the case of searches carried out after 01.06.2007 the penalty for the previous years can only be imposed where the assessee is: - (i) found to be owner of any money, bullion, jewellery or other valuable article or thing found acquired by utilizing the income of previous year (ii) or any income based on any entry in any books of account or other documents or .....

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e additional income offered in the returns filed u/s 153A was purely on the basis of disclosure made in search statement, therefore deeming provisions of Explanation 5A to section 271(1)(c) are not at all attracted in assessee s case, consequently impugned penalty can not be imposed under these facts case of the assessee. Since the penalty under explanation 5A to section 271(1)(c) is deeming in nature consequently penalty cannot be levied on the income qua for which the ingredients of explanatio .....

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y proceedings were taken for hearing, assessee could not produce evidence supporting the cash gifts, therefore, assessee suo motu offered income in 153A returns even though there was neither incriminating material nor any declaration by statement. In penalty proceedings, assessee to this effect also filed a duly sworn affidavit to support his contentions which is placed on paper book. Ld AO except summarily holding it to be self-serving document has not controverted it as no further verification .....

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urn filed u/s 153A is part of the declaration of ₹ 30.00 lacs in statement u/s 132(4). Assessee had no pharmaceutical business at all which was arbitrarily forced on assessee and in assessment assessee s version was found to be correct as no addition was made. Even though no incriminating material whatsoever was found in search in this behalf, to spare the wrath of the department assessee suo motu offered ₹ 10,84,897/- as unaccounted expenses in marriage and renovation in house in th .....

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not based on any incriminating material and offered by assessee to ward off the rigor created by search actions and consequent proceedings. Imposition of further penalty is highly unjustified in these facts and circumstances. Penalty proceedings are distinct and separate and even the legality of addition made can be challenged in penalty proceedings. It is not disputed that no material whatsoever found during the course of search. Original assessments for AY 2003-04, AY 2005-06 had become final .....

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for only 50 percent of the sales in the regular set of books and certain purchases were not accounted for. In order to avoid difficulties and litigation, the assessee came forward with an offer of income additional to that estimated by the Assessing Officer and filed revised returns. In the course of the assessment proceedings penal action was initiated under section 271(1)(C) of the Income-tax Act, 1961, in which the maximum penalty was levied repelling the assessee's contention that a pro .....

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ow that the assessee was given an assurance that no penalty was levied, the facts clearly suggested that such an inducement must have been given by the searching party; that when only partial evidence in support of concealment for a very limited period was detected there was no reason why any person would go to offer much higher amounts for a large number of years ; that in view of the deposition given under section 132(4) followed by the co-operating attitude of the assessee in paying the tax n .....

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der section 271(1)(C). The High Court answered the reference in favour of the Department. On appeal to the Supreme Court: Held, reversing the decision of the High Court, that the final fact-finding authority was the Appellate Tribunal and its decision on the facts could be gone into by the High Court only if a question had been referred on whether the finding of the Tribunal was perverse, in the sense that it was such as could not reasonably have been arrived at on the material placed before the .....

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High Court. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it whether the finding arrived at by the Tribunal on the facts was perverse in the sense that no reasonable person could have taken such a view. The ld. AR of the assessee submitted that assessment proceedings and penalty proceedings are two separate proceedings. The additions made during assessmen .....

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in the case of the assessee. Further the penalty proceedings are separate from assessment proceedings and the finding in the assessment proceedings does not lead to conclusion that the assessee has concealed the income. The penalty u/s. 271(1)(c) is not automatic. The ld AO has not brought on record any positive material to show that the income is based on the entries recorded in seized documents. There must be independent finding as held by Hon ble Calcutta High Court in the case of Durga Kama .....

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statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judici .....

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ed on the orders of authorities below. It is not disputed that no incriminating material was found during the search and declared income stands deleted by ITAT and the additions in question were declared in the return by the assessee. Ld. DR further contends that explanation 5A to section 271(1)(c) is applicable inasmuch as sub clause ii thereof refers to word transaction and the impugned addition impliedly mean to be the transactions of the assessee. It is contended that penalties have been rig .....

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