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TMI Blog2015 (12) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the penalty u/s 271 (1)( c) of the Act Was void ab initio and hence the penalty order was also invalid. 4. The Learned Commissioner of Income-tax (Appeals) has erred in law and in fact in confirming the penalty u/s 271 (1) (c) of the Act to the tune of Rs. 47,11,104/-. 5. The appellant craves leave of Your Honour to add, alter, amend and/or delete all or any of the foregoing grounds of appeal. 3. The only issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act at Rs. 47,11,104/-. 4. Briefly, in the facts of the present case, search and seizure action was carried out against the assessee on 09.12.2009. The assessee was carrying cash of Rs. 1,60,76,800/-, while travelling from Pune to Delhi by air. The Investigation Wing of Pune searched the assessee under section 132 of the Act on 09.12.2009. Subsequently, her residence was also searched and cash of Rs. 1,60,00,000/- was seized during the course of search proceedings. The statement of assessee was recorded and she stated that she had sold ancestral propoperty at Delhi to one Mr. Sunil Nandra for Rs. 3,40,00,000/-. However, the agreement was made for Rs. 1,70,00,000/- only and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and the consideration on transfer of such fittings and fixtures were held to be treated as capital gains. 5. The Assessing Officer issued show cause notice under section 274 r.w.s. 271(1)(c) of the Act to the assessee in response to which, the assessee furnished written submissions. In the written submissions, the assessee claimed that it had suo motu offered income from long term capital gains and since the income was offered at the first available opportunity of hearing, no malafide intention could be attributed to the said disclosure and since the said transaction was duly accounted for by the assessee and the income was calculated in respect of the consideration stated in the agreement. The Assessing Officer did not accept the contention of the assessee for the following reasons:- "i) Assessee has sold her ancestral property for Rs. 3,40,00,000/-. However, the agreement is made for Rs. 1,70,00,000/- only. The reason for showing the under value of the property is to conceal income liability and other statutory liabilities. ii) The agreement value is received by the assessee by Pay order / D.D. etc., and the same is reflected in her bank accounts. But the cash considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or cash component of the sale consideration for tax. He further pointed out that the capital gains were worked out on consideration of Rs. 2.55 crores i.e. Rs. 85,000/- being assessee's share for cheque transaction and Rs. 1.70 crores being cash component entirely offered by the assessee, after search. It was also explained by him that in the original return of income, sale consideration of Rs. 85,000/- on sale of ancestral property was declared. However, excessive exemption on account of investment in new residential house was claimed on two residential properties amounting to Rs. 63,89,143/-, under legal advice. However, while filing return of income in response to notice under section 153A of the Act, the correct exemption of Rs. 38,40,098/- was claimed. The written submissions furnished by the assessee before the CIT(A) are incorporated under para 33 at pages 4 to 7 of the appellate order along with additional submissions made by the assessee under para 3.4 at pages 7 to 9 of the appellate order. After considering the various factors on which penalty under section 271(1)(c) of the Act could be levied, the CIT(A) observed that The penalty under sec. 271(1)(c) is a penalty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome on 30.07.2009, prior to the date of search. Further, the CIT(A) held that Explanation 5A to section 271(1)(c) of the Act squarely applied to the facts of the case. The CIT(A) further held that immunity claimed under Explanation 5A to section 271(1)(c) of the Act or section 271AAA of the Act was not available to the assessee as it represent neither the current year income i.e. search year nor has it been disclosed in return of income also filed by her under the provisions of section 139(1) of the Act on 30.07.2009. The second contention of the assessee that it had disclosed the entire capital gains and had claimed deduction in respect of more than one house property on the advice of Consultant, the CIT(A) held that such benefit was not allowable in view of clear-cut provisions of section 54 of the Act and in the absence of any ambiguity, there was no merit in the claim of the assessee. Further, the claim of the assessee of depositing the amount in the capital gains account as envisaged under section 54(2) of the Act was also not correct since the assessee had availed the deduction under section 54 of the Act in respect of two properties. Reliance on the Chartered Accountant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Authorized Representative for the assessee stressed that the discretion should be exercised in favour of the assessee. Reliance in this regard was placed on the ratio laid down by the Hyderabad Bench of Tribunal in Shri PV Ramana Reddy Vs. ITO in ITA Nos.1852 to 1857/Hyd/2011, relating to assessment years 1999-2000 to 2005-06, order dated 06.01.2012. Another issue raised by the assessee was that no satisfaction was recorded by the Assessing Officer since in the hands of the assessee, it was not case of any addition or disallowance and where no satisfaction had been recorded, no penalty under section 271(1)(c) of the Act was leviable. Reliance was placed on the ratio laid down by Nagpur Bench of Tribunal in DCIT Vs. Purti Sakhar Karkhana (2013) 23 ITR (Trib) 667 (Nagpur). Our attention was then drawn to the provisions of section 153A of the Act and it was pointed out that in the case of assessee, where the assessment had got abated, the original return of income could not be considered and whatever the declaration was made in the original return of income, could not be considered for invoking the provisions of section 153A of the Act. The learned Authorized Representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee and there was willful attempt not to declare correct income in the original return of income filed by the assessee, with an intention. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A) with special reference to paras 3.3 onwards. Further, reliance was placed upon by the Hon'ble Madras High Court in CIT Vs. S. D. V. Chandru (2004) 266 ITR 175 (Mad). The learned Departmental Representative for the Revenue stressed that where the knowledge had come with the Department of escapement of income after the search, Explanation 5A to section 271(1)(c) of the Act was attracted. 12. The learned Authorized Representative for the assessee in rejoinder pointed out that the language of the assessment order especially para 3.2 reflects the presumption that the levy of penalty under section 271(1)(c) of the Act was automatic. Hence, no satisfaction having been recorded by the Assessing Officer, no penalty could be levied under section 271(1)(c) of the Act. The next plea raised by the learned Authorized Representative for the assessee was that the reduction in claim of deduction under section 54 of the Act was not concealment of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the property were inextricably linked to the building and consideration received thereon, was to be treated as capital gains. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act with regard to the said addition. Consequent thereto, the Assessing Officer rejecting the claim of the assessee that it had suo motu offered the income from long term capital gains, and no malafide intention could be attributed to the said disclosure, hence, there was no merit in levy of penalty, held the assessee exigible to levy of penalty under section 271(1)(c) of the Act and levied penalty of Rs. 47,11,104/-. The CIT(A) elaborately considered the issue and upheld the levy of penalty. The assessee is in appeal against the order of CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act. 14. The first aspect of the issue raised by the assessee before us is that where no satisfaction has been recorded by the Assessing Officer, since in the hands of assessee, there was no addition whatsoever, as the income offered by the assessee was accepted in toto, no penalty under section 271(1)(c) of the Act could be levied. From the perusal of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the circumstances, which justifies the levy of penalty. For searches initiated under section 132 of the Act before first day of June, 2007, Explanation 5 was introduced by the Finance Act, 2007 with retrospective effect from 01.04.2003. Under the said section, where the assessee was found to be owner of any money, bullion, jewellery or other valuable articles or things and the assessee claims that such assets have been acquired by him by utilizing, wholly or in part his income, for any previous year, which had ended before the date of search, but the return of income for such year had not been furnished before the said date, or where the return of income had been furnished but such income had not been declared therein or for any previous year which is to end on or after the date of search, then notwithstanding that such income was declared by him in the return of income, he was deemed to have concealed particulars of his income or furnished inaccurate particulars of income, unless the income or the transactions were recorded in the books of account or the person in the course of search makes a statement under section 132(4) of the Act that the said money, bullion, jewe llery, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or furnished inaccurate particulars of his income. 17. The deeming provisions of Explanation 5A under section 271(1)(c) of the Act are applicable to all the searches initiated under section 132 of the Act on or after first day of June, 2007. The conditions laid down in the Explanation 5A is where during the course of search, the assessee is found to be in possession of any money, bullion, jewellery, valu able articles or things and the assessee claims that such assets have been acquired by him by utilizing wholly or in part his income, for any previous year on any income based on any entries in books of account, or other documents or transactions and he claims that such entries in the books of account or other documents or transactions represent his income for any previous year, then in cases where the return of income for such previous year had been furnished by the assessee prior to the date of search, but the said income had not been declared in the said return of income or the due date for filing the return of income had expired for such previous year and the assessee had not filed the return of income, it is further laid down that notwithstanding the fact that such in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatedly said that it is difficult to define the expression 'income' in precise terms. Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the salary received by the assessee. By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax. The said payment is, therefore, for and on behalf of the assessee. It is not a gratuitous payment. But for the said agreement and but for the said payment, the said tax amount would have been liable to be paid by the assessee himself He could not have received the salary which he did but for the said payment of tax. The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context. It would be unrealistic to say that the said payment had no integral c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of Expl. 5 of Sec. 271(1)(c) which was on the statute book upto 31-5-2007, Explanation 5A has been substituted for Expl. 5 by the Finance Act, 2007 w.e.f 1-6-2007. The said explanation was further amended by the Finance(No.2) Act, 2009 with retrospective effect from 01-07-2007 which is reproduced hereinabove. The Ld. Counsel has raised an important legal question whether the income declared by the assessee which is pertaining to the unrecorded expenditure can said to be the income which is contemplated in Explanation 5A(ii)? The answer to this question is in sec. 69-C which reads as under:- "Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year;" 20. So far as the Expl.- 5 which was on the statute book, the Courts have taken a view that it was having a limited application only to the extend of the money, bullion, jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of Tribunal and Hyderabad Bench of Tribunal in Shri PV Ramana Reddy Vs. ITO (supra). In view of binding precedent of Pune Bench on the said issue, we find no merit in the reliances placed upon by the learned Authorized Representative for the assessee on DCIT Vs. Purti Sakhar Karkhana (supra) and Shri PV Ramana Reddy Vs. ITO (supra). The other reliance placed upon by the learned Authorized Representative for the assessee on the decision of Pune Bench of Tribunal in Smt. Pramila D. Ashtekar Vs. ITO (2013) 39 taxmann.com 103 (Pune - Trib.), it may be pointed out that the said order of Pune Bench of Tribunal has been recalled in MA No.112/PN/2013, order dated 21.06.2013 and has no binding effect for deciding the present issue. Further reference was made to the decision of CIT Vs. Continental Warehousing Corporation (NHAVA Sheva) Ltd. & Anr. (supra), where the Hon'ble Bombay High Court has deliberated upon the scope of 153A provisions and has no relevance to the issue before us. 20. Another aspect of the issue of levy of penalty us 271(1)(c) of the Act is the wrong claim of deduction made by the assessee under section 54 and 54F of the Act. The CIT(A) vide para 3.10 to 3.11 has deli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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