TMI Blog2013 (6) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, the assessee case is squarely covered by Explanation- 5(ii) as the assessee himself has admitted the said undisclosed income. What is taxed u/s. 269C is the amount covered by the unrecorded expenditure and ultimately it is nothing but income applied. Admittedly, unrecorded income was also found, so in our opinion, to the extent of the quantum of unrecorded income relating to these four assessment years the assessee has source to incur the unrecorded expenditure and hence, without making any classification of unaccounted expenditure found during the course of search.We, therefore, direct the Assessing Officer to work out the penalty on the net of the unrecorded expenditure (Unrecorded Expenditure – Unrecorded Income) as shown above for all the assessment years. - I.T.A. No. 116 to 119/PN/2012, ITA No. 1644/PN/2011 & C.O. No. 7, 8 & 9/PN/2013 - - - Dated:- 25-6-2013 - Shri G.S. Pannu, Accountant Member And Shri R.S. Padvekar, Judicial Member For the Petitioner : Shri Sunil Ganoo For the Respondent : Shri Hemant Kumar Luava ORDER Per R.S. PADVEKAR, JM This batch of five appeals and three Cross Objections are arising out of common order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT (A) erred in holding that the penalty is not imposable on unexplained expenditure added under section69C of the Act. 5. On the facts and in the circumstances of the case the learned CIT (A) erred in holding that the penalty is imposable only on inadmissible unexplained expenditure. 4. The assessee has also filed a Cross appeal for the A.Y. 2006-07 and has taken the following effective ground: On the facts and in the circumstances prevailing in the case and as per the provisions of law, the CIT(Appeal) has erred in confirming the penalty order under section 271(1)(c) passed by DCIT central circle Aurangabad to the tune of ₹ 604380/-, out of ₹ 870879/-. Considering the facts and evidences presented before him and explanation filled by the appellant, the CIT(Appeal) is not justified in confirming the penalty of ₹ 604380/-. The aforesaid confirmation of the penalty order partly is not legally sustainable being arbitrary and devoid of merits, the same may please be deleted. 5. The assessee has filed the Cross Objections in A.Ys. 2003-04, 2004-05 and 2005-06 and has taken the following grounds which are common in all the assessment years: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - -vis the unrecorded expenditure can be summarized as under:- A.Y. Unaccounted expendit ure (Rs.) Inadmissible expenditure out of unaccounted expenditure (Rs.) Admissible expenditure out of unaccounted expenditure (Rs.) Unaccounted income (Rs.) Excess of admissible expenditure over unaccounted income (Rs.) 2003-04 10,43,004 2,93,978 7,49,026 6,95,000 54,026 2004-05 7,44,304 3,13,952 4,30,352 5,00,165 -- 2005-06 11,00,682 3,71,994 7,28,688 10,93,690 -- 2006-07 23,57,180 20,14,601 3,42,579 1,62,706 1,79,873 8. While giving set off of the unrecorded income found during the course of search, the Ld. CIT(A) held as under: I have carefully considered the facts of the case and rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized material also contains notings of admissible business expenditure on which the AO has levied penalty u/s 271(1)(c) of the Act. In view of the above facts and discussion, I am of the considered view that the AO is not justified in levying in penalty on admissible unrecorded business expenditure. In respect of assessment years 2003-04, 2004-05 and 2005-06, the unaccounted income of the appellant is more than inadmissible unrecorded expenditure pointed out by the AO and hence, the said expenditure can be out of unaccounted income and hence does not remain unexplained. The penalty u/s 271(1)(c) is therefore not leviable on the unrecorded expenditure for A.Y. 2003-04, 2004-05 and 2005-06 The AO is directed accordingly. Ground No. 3 and 4 for A.Y. 2003-04, 2004-05 and 2005-06 are allowed. 11.5 In respect of A.Y. 2006-07, it has been noticed that the inadmissible unexplained expenditure is much more than unaccounted income of the appellant and hence, the same is certainly the income of the appellant liable to tax and represents income liable to penalty. Therefore, the penalty u/s 271(1)(c) in A.Y. 2006-07 is to be confirmed. The A.O is directed accordingly. Ground No. 3 and 4 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 993) 200 ITR 483 (SC) wherein the definition of income u/s 2(24) is explained. He therefore, concluds his argument by submitting that no penalty is leviable at all and the Ld. CIT(A) was not justified in confirming the penalty for A.Y. 2006-07. We have also heard the Ld. DR. 12. We have heard the rival submissions and perused the record. In this case, there are two types of incomes which are subjected to the penal consequences u/s 271(1)(c) of the Act. There was search and seizure operation carried out against the assessee on 10-10-2007. The assessee filed return of income declaring undisclosed income. It is true that in the course of search and seizure operation, it was revealed that the assessee has earned income which was not recorded as well as there was expenditure which was not recorded in the regular books of account. The assessee admitted and offered the amount covered by the expenditure which was found unrecorded in the documents seized. The assessee did not declare the income which was detected in consequence of the search and seizure operation. The details of the unrecorded expenditure are given in this order itself hereinabove. 13. Now the issue before us is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try in the books of account or other documents or transactions, which is claimed as income by the assessee, the same would be treated as deemed concealment of the particulars of income or furnishing inaccurate particulars of income. So far as the present assessee is concerned, the date of search is 15.6.2004 and hence, Explanation 5A to Sec. 271(1)((c ) is not applicable. It is well settled rule of interpretation of the penalty provisions that the same should be strictly interpreted and there is no scope for any presumption for levy of the penalty unless statute specifically provides same. 9. So far as the Explanation-3 to Sec. 271(1)(c) is concerned, which reads as under : Explanation 3.- Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act. In the present case, as the returned income and income assessed are the same, otherwise also, no penalty can be levied. We, therefore, hold that in all the appeals before us, the Assessing Officer was not justified in levying the penalty u/s. 271(1)(c ) of the Act. We, accordingly, delete the penalties levied by the Assessing Officer in all the appeals for the above mentioned reasons. 14. It is noticed that in para 7, the Tribunal has made observation So far as Explanation 5A is concerned, it is brought on the Statute Book w.e.f. 1.6.2007 i.e. from the Assessment Year 2007-08 . The Ld. Counsel submits that the said observation is finding of the Tribunal. With due respect, we are unable to accept the submission of the Ld. Counsel. Admittedly, in a very clear terms, the Tribunal has held that the facts in the cases of Smt. Pramila Ashtekar and others (supra) are clearly covered by the decision in the case of Chandan K. Shewani (supra) and the Tribunal followed the decision of Chandan K. Shewani (supra). While reproducing the observations in the summarized form, it appears that there is a mistake in para no. 7 in the Order of Smt. Pramila K. Ashtekar and ors. (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 was never before the Tribunal. We, therefore, reject the argument of the Ld. Counsel that the issue arising in this appeal is clearly covered by the decision of Smt. Pramila Ashtekar and others (supra) to the extent of the income declared in the return filed in response to notice u/s 153A of the Act. 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 expenditure but the fact remains that the assessee did not declare any expenditure but it is only the income. The Ld. Counsel referred to the definition of the income given in sec. 2(24) of the Act. The scope of the said definition has been explained by the Hon ble Supreme Court in the case of EMIL Webber (supra) which has been relied upon by the Ld. Counsel The relevant portion is in para no 7 which reads as under: 7. The definition of 'income' in clause (24) of Section 2 of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Any other 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 for such previous year has been furnished before the said date but such income has not been declared therein or (b) the due date for filing the return of income for such previous year has 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 expenditure which was not recorded has been found by way of entries in the seized documents. While explaining the scope of Explanation 5A in the case of Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect 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. 21. Another limb of the argument of the Ld. Counsel is that undisclosed income is also detected and hence, the Ld. CIT(A) is justified in giving the set off of the said undisclosed income against the amount of expenditure for determining the amount of income for the purpose of levying the penalty. We find that the Ld. CIT(A) has made the classification of the expenditure in two parts (i) inadmissible unrecorded expenditure and (ii) admissible recorded expenditure. The classification made by the Ld. CIT(A) is reproduced in para no. 4 of this order. The Ld. CIT(A) has observed that some expenditure was admissible as business expenditure only and the Assessing Officer is not justified in levying the penalty u/s. 271(1)(c) of the Act on said explanation. He has also noted that there was unrecorded income which was also detected from the seized material. The Ld. CIT(A) allowed the set off of the unrecorded income against the admissible unrecorded business expenditure in the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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