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2015 (12) TMI 1025 - ITAT PUNE

2015 (12) TMI 1025 - ITAT PUNE - TMI - Penalty levied under section 274 r.w.s. 271(1)(c) - Held that:- We hold that the income offered by the assessee pertaining to the cash seized from the assessee and the declaration of the assessee that the said cash relates to the unaccounted cash received vide the sale transaction entered into by the assessee, which in turn, was declared by the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act, is the income de .....

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income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. The learned Authorized Representative for the assessee in a written Note had furnished the break-up of income on which pe .....

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er section 274 r.w.s. 271(1)(c) of the Act of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. The Learned Commissioner of Income-tax (Appeals) has erred in law and in facts in passing order u/s. 250 of the Act dated 28.05.2013 dismissing the appeal filed by the appellant. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not appreciating that the penalty order passed by the Assessing officer u/s 271 .....

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e 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 ₹ 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 ₹ 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 09.12.20 .....

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e was of her sister Mrs. Tripta Kaur. She further submitted that she had received entire cash element and her sister Mrs. Tripta Kaur was not concerned with the cash at all. The assessee, in response to notice under section 153A of the Act furnished return of income declaring total income of ₹ 2,04,91,850/- on 13.09.2010. The assessee offered 50% share of the agreement value i.e. ₹ 85,00,000/- and 100% share of cash element i.e. ₹ 1,70,00,000/- in her hands and computed the cap .....

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response thereto, issued the relevant notices under section 143(2)/142(1) of the Act. The Assessing Officer noted that the assessee had not declared the sale consideration of ₹ 2,55,00,000/- in her original return of income and subsequently after the search, had declared total amount of capital gains and hence, had concealed the particulars of income. Consequently, penalty proceedings under section 271(1)(c) of the Act were initiated against the assessee. Another aspect of sale of the pro .....

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e or personal effects and the fittings and fixtures of the entire building from bottom to top with its roof rights up to sky were sold by the assessee, as per receipt executed. Since the fittings and fixtures are attached to the property, the same were inextricably linked to the building 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 as .....

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ng Officer did not accept the contention of the assessee for the following reasons:- i) Assessee has sold her ancestral property for ₹ 3,40,00,000/-. However, the agreement is made for ₹ 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 consideration is not re .....

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, when the assessee was carrying cash from Pune to Delhi, she was searched by the Income Tax Department and then only the assessee committed that the cash is received by her out of sale of the ancestral property of Delhi. Till that date she did not file her revised return. vi) When the search was carried out on 09-12-2009 and when the cash was found in her possession then only she admitted true facts of the sold property. If search would not have taken place, she would not have offered this cash .....

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she had filed her revised return, the assessee was held to be liable for the levy of penalty under section 271(1)(c) of the Act. Similarly, in respect of the amount received against fittings and fixtures, the Assessing Officer held that the same was not exempted from tax and the assessee had concealed her income in this regard also and was liable to levy of penalty under section 271(1)(c) of the Act. The Assessing Officer thus, levied penalty under section 271(1)(c) of the Act on the difference .....

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consideration of ₹ 2.55 crores i.e. ₹ 85,000/- being assessee s share for cheque transaction and ₹ 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 ₹ 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 ₹ 63,89,143 .....

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of the Act could be levied, the CIT(A) observed that The penalty under sec. 271(1)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars, or, under the extended definition by the virtue of Explanation 5A to sec. 271(1)(c), for a deemed concealment of income. The CIT(A) further held that where two legal interpretations were plausible and where there was honest and bonafide difference of opinion, penalty for concealment should not and could not be imposed. The CIT( .....

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munity provided in Explanation 5 to section 271(1)(c) of the Act. The second plea raised by the assessee was that in the original return of income, the assessee had claimed excess deduction of ₹ 1,17,89,143/- comprising of re-investment in new residential properties for ₹ 63,89,143/- and investment in capital gains of ₹ 54,00,000/-. However, while filing the return in response to notice under section 153A of the Act, the assessee claims that it was advised that the claim in res .....

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essee that since the black money or unrecorded part of sale consideration was declared by the assessee in her statement during search and disclosed at first available opportunity of hearing, she was not liable for levy of penalty for concealment. The CIT(A) observed that the money or cash was seized by the Department and only thereafter, the assessee declared the said amount in the return of income filed pursuant to notice issued under section 153A of the Act and no such income was declared in t .....

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ions 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 capita .....

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rt in CIT Vs. Escorts Finance Ltd. (2010) 328 ITR 44 / (2009) 183 Taxman 453 and Hon ble Kerala High Court in Kuttookaran machine Tools Vs. ACIT (2009) 313 ITR 413 (Ker). In view thereof, the CIT(A) held that the conduct of assessee as evidenced during the course of proceedings under the Act could not be held to be bonafide and the assessee was held to have concealed particulars of her income, by not revealing the unrecorded part of sale consideration of her ancestral property and also to have f .....

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ected to re-compute the penalty by granting the benefit of ₹ 5,00,000/-, which was held to be beyond the scope of concealed income. 9. The assessee is in appeal against the order of CIT(A). 10. The learned Authorized Representative for the assessee pointed out that the penalty under section 271(1)(c) of the Act was levied upon the assessee on two accounts i.e. unaccounted sale proceeds and also on account of withdrawal of exemption claimed under section 54 of the Act. After taking us throu .....

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arch. In such circumstances, where the assessee had offered the income in return of income, after surrendering additional income, 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. Anoth .....

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d 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 Representative for the assessee placed reliance on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Continental Warehousing Corporation (NHAVA Sheva ) Ltd. & Anr. ( .....

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e for the Revenue pointed out that para 3.2 of the assessment order reveals the satisfaction recorded by the Assessing Officer i.e. after elaborate discussion of the issue, where the assessee was found carrying cash and searched on the assessee only on the interception at airport itself, cash was found and declared by the assessee. The learned Departmental Representative for the Revenue pointed out that the Assessing Officer after discussing the facts of the case ad recorded satisfaction for ini .....

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concealment on the part of assessee but also wrong declaration made by the assessee. The learned Departmental Representative for the Revenue further stressed that even if the assessment was abated, no such income was declared in the original return of income filed by the assessee and there is no question of abatment in this regard. The learned Departmental Representative for the Revenue stressed that in the facts of the present case, the assessee had admitted to have accepted higher sale consid .....

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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 orde .....

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(1)(c) of the Act was attracted. 13. We have heard the rival contentions and perused the record. Search and seizure action was carried out against the assessee on 09.12.2009. While travelling from Pune to Delhi by air, the assessee was found to be in possession of cash of ₹ 1,60,76,800/-. The assessee was searched by the Investigation Wing under section 132 of the Act on 09.12.2009 and residence was also searched and cash of ₹ 1.60 crores was seized during the search proceedings. In .....

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was divided 50 : 50. In response to notice issued under section 153A of the Act, the assessee offered 50% of the Agreement value i.e. ₹ 85 lakhs and 100% of the cash element i.e. ₹ 1.70 crores in her hand and computed the income from capital gains and declared total income of ₹ 2,04,91,850/- on 13.09.2010. Against the income from capital gains computed at ₹ 2,41,17,168/-, the assessee also claimed exemption under section 54 of the Act at ₹ 38,40,098/-, on account of .....

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section 271(1)(c) of the Act were initiated. Beside the above said, there was another aspect of sale of property, wherein the assessee had claimed that it had sold fittings and fixtures of the said bungalow for ₹ 10 lakhs. However, in the absence of list of furniture or personal effects sold, the Assessing Officer was of the view that the fittings and fixtures attached to the property were inextricably linked to the building and consideration received thereon, was to be treated as capital .....

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₹ 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 u .....

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nt was shared by the co-owner. However, the entire cash amount was claimed to be received by the assessee. The Assessing Officer further considered that the assessee had offered the cheque amount and cash amount aggregating to ₹ 2.55 crores for taxation under the head long term capital gains . The Assessing Officer further observed that since the assessee had not declared this amount of capital gains in her original return and subsequently, after search has declared the total amount of cap .....

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ad offered the income in the return of income filed after surrendering the additional income, can the assessee be held to have concealed its income vis-à-vis original return of income filed by the assessee. Section 271(1) of the Act makes provision for levying penalties on assessee in different eventualities, one such eventuality is for concealment of income or furnishing of inaccurate particulars of income. Only on fulfillment of the conditions stipulated in section 271(1)(c) of the Act, .....

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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 .....

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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, valuable articles or things, has been acquired by him out of his income, which has not been so far disclosed, but specifies the manner in which the said income has been derived and pays the taxes together with interest. Under Explanation 5, an exemption was provided to the person who was searched and was .....

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6.2007 . The original Explanation 5A provided that where in the course of search, the assessee was found to be the owner of any money, bullion, jewellery, valuable articles or things and the assessee claims that such asset had been acquired by him by utilizing wholly or in part his income for any previous year or any income is based on any entry in books of account or other documents or transactions and he claims that the same represents his income for any previous year, then where the period ha .....

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was substituted by the Finance (No.2) Act, 2009 with retrospective effect from 01.06.2007 with the amendment that where the return of income for such previous year had been furnished before the date of search, but such income had not been declared therein or where the due date of filing the return of income for other previous year has expired, but the assessee had not filed the return of income, then notwithstanding the fact that the said income is declared by him in any return of income furnish .....

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ery, 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 .....

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particulars of income or furnished inaccurate particulars of income. Reading the above said provisions of the Explanation 5A to section 271(1)(c) of the Act, it is noted that the person is deemed to have concealed particulars of his income or furnished inaccurate particulars of such income, which is equivalent to the value of money, bullion, jewellery, valuable articles or things from the possession of the assessee during the course of search conducted on or after first day of June, 2007. Furth .....

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ntum of income on which penalty is to be levied. The said issue was before the Pune Bench of Tribunal in ACIT Vs. Mulay Construction P. Ltd. & Ors. in ITA Nos.116 to 119/PN/2012 & Ors. and it was held as under:- 16. The next limb of argument of the Ld. counsel is that Explanation 5A(ii) contemplates income and not the expenditure . In this case, it is undisputed fact that the assessee came forward and declared income which was pertaining to the amount covered by the unrecorded expenditur .....

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ve definition. It adds several artificial categories to the concept of income but on that account the expression 'income' does not lose its natural connotation. Indeed, it is repeatedly 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 amo .....

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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 connection with the salary received by the assessee. We are, therefore, of the opinion that the High Court and the .....

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is necessary to refer to Explanation 5A which reads as under: Explanation 5A - Where, in the course of a search initiated under section 132 on or before the 1st day of June 2007, the assessee is found to be the owner of (i) Any money, bullion, jeweler or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii) Any other inco .....

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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, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 19. So far as the present assessee is concerned, clause (ii) to Explanation 5A is applicable. Admittedly, the .....

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09 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 .....

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nd during the course of seach and seizer operation and owned by the assessee. But the other income which was found recorded by any entry in the document seized or otherwise was not covered. It is pertinent to note that sec. 69C provides that if any unrecorded expenditure is found and the assessee fails to explain the source of the said expenditure or explanation of the assessee is not satisfactory, then to the extent of the amount covered by such expenditure is treated as income. Ultimately what .....

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legal presumption against the assessee in respect of the said income detected during the course of search and seizure operation, the assessee case is squarely covered by Explanation- 5(ii) as the assessee himself has admitted the said undisclosed income. 19. Applying the said proposition to the facts of the present case, we hold that the income offered by the assessee pertaining to the cash seized from the assessee and the declaration of the assessee that the said cash relates to the unaccounted .....

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and seizure operation, which in turn has been offered by the assessee in return of income filed pursuant to notice issued under section 153A of the Act. The learned Authorized Representative for the assessee on the other hand has placed reliance on the ratio laid down in DCIT Vs. Purti Sakhar Karkhana (supra), which is a decision of Nagpur Bench 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 f .....

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