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Sri Santosh Kumar Jain Versus Asst. Commissioner of Income Tax, Central Circle-4, Hyderabad

Penalty u/s. 271(1)(c) - proceedings u/s. 153A - Assessee admitted additional incomes and paid taxes thereon - Held that:- Since the facts in this case also are more or less similar to the case of the case of Dilip Kedia Vs. ACIT (2013 (7) TMI 934 - ITAT HYDERABAD ) and assessee filed his returns of income much before the provisions of Explantion-5A were introduced on the statute and as rightly held by the Supreme Court in the case of Reliance Petro Products [2010 (3) TMI 80 - SUPREME COURT], th .....

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allowed. - Decided in favour of assessee. - I.T.A. Nos. 1485, 1486, 1487/HYD/2013 - Dated:- 13-11-2015 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri A.V. Raghu Ram, AR For The Revenue : Shri M. Sitaram, DR ORDER These three appeals are by assessee against the common order passed by the Commissioner of Income Tax (Appeals)-III, Hyderabad dated 12-08-2013 for the AYs. 2004-05, 2005-06 & 2006-07 levying penalty u/s. 271(1)(c) of the Income Tax Act [Act] respectively in the t .....

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arious persons for conducting transactions belonged to him. There were shares purchased in various names through these bank accounts and profits had also been earned. Accordingly, in the proceedings u/s. 153A initiated against assessee, Assessee admitted additional incomes and paid taxes thereon. AO accepted the same in the respective assessment orders, however, initiated penalty proceedings u/s. 271(1)(c). The additional incomes offered and penalty imposed are as under: AY. Original Income retu .....

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T(A), it was submitted that assessee has owned up bank accounts of some other persons in good faith and had made declaration u/s. 132(4) by stating that no penalty would be leviable on the appellant. It was further contended that no income had been concealed as assessee had admitted the income in his return and AO had not made any additions over and above the returned income in these proceedings. He further contended that Explanation-5A would not be applicable to assessee, which was brought late .....

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Court in the case of Reliance Petro Products [322 ITR 165]. Ld. CIT(A) confirmed the penalty stating that entire arrangement was made with clear intention of tax evasion, accordingly, he confirmed the penalty. 6. Ld. Counsel reiterating the facts as submitted before the authorities, relied on the Co-ordinate Bench decision in the case of Mr. B. Rajeswara Rao in ITA Nos. 1531 to 1534/Hyd/2014 dt. 29-05-2015. 7. Ld. DR however, relied on the orders of the authorities to submit that penalty is warr .....

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earned thereon. It is also fact that assessee declared the incomes u/s. 132(4) and filed returns in response to the notices u/s. 153A. AO, even though analysed the nature of additions made in the order, ultimately the total income determined was same as returned by assessee, without any further additions. Thus, the returned income and assessed income in these proceedings u/s. 153A being the same, assessee s contention that there cannot be any penalty has to be accepted. These issues were anlayse .....

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itary issue in the present appeals is squarely covered by the order of the Coordinate Bench of Mumbai Tribunal in the case of Mr. Kiran Shah vs. ACIT, Central 15 & 16, Mumbai in ITA.No.5919 to 5925/Mum/2011 dated 08.01.2014 wherein the Tribunal while allowing the appeals of the assessee held as under : 13. …. It would be pertinent to refer to the decision of the Delhi Bench in the case of Prem Arora vs. DCIT (supra) wherein it has been held as under : On bare reading of Section 153A i .....

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tion is made. Thus, the legislative intention is not to assessee escaped income as in section 147 or undisclosed income as was assessed u1s. 158BC. The first proviso to Sec. 153A makes it clear that notice u/s. 153A will be for each of such six assessment years for assessment or reassessment of total income. Second proviso to section 153A provides that such notice will have the effect of abating all the pending assessment or reassessment proceedings, so as to avoid multiplicity of proceedings, w .....

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with reference to additional income brought to tax over and above income returned by the assessee in response to notice issued u/s. 153A. Accordingly, for the purpose of imposition of penalty u/s.271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered. Further, in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A. As held above the penalty u/s. 271(1)(c) is impos .....

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tion 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed. 14. …. 15. … 15.1….. 15.2. Considering the facts under appeal with the judicial decisions relied upon and cited hereinabove, we do not find any substance for the levy of penalty u/s.271(1)(c) of the Act. The A.O. is directed to delete the penalty so levied in all the assessment years under consideration. The appeals filed by the assessee for al .....

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elf has undergone many amendments which was considered by the Co-ordinate Bench in the case of Dilip Kedia V/s. ACIT (40 Taxman.com.102)-(Hyd) dated 26-07-2013. The said case was analysed and considered in another Co-ordinate Bench decision in the case of Shri Santosh Kumar Agarwal Vs. DCIT in ITA No.665/Hyd/2015 dt.14-10-2015, wherein it was held that : 8. We have considered the rival submission and perused the relevant material on record. We find that the assessee has originally field the retu .....

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mately completed under S.143(3) read with S.153A by the Assessing Officer on dated 25.3.2013, accepting the income disclosed in the said return. The main question to be considered in this case is the legal question as to the applicability of Explanation 5A to S.271(1)(c) of the Act to the present case. The said Explanation has come on to the statute book by virtue of insertion of the same below S.271(1)(c) by the Finance (No.2) Act, 2009, with retrospective effect from 1.6.2007. 9. An analysis o .....

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ty was deleted applying Explanation 5, relate to search initiated prior to 1.6.2007 and hence are not applicable to the instant case. 19. A new explanation 5A was introduced by Finance Act 2007, w.e.f 1.6.2007 to cover searches initiated after 1.6.2007 which read as under: Explanation 5A.- Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,- (i) any money, bullion, jewellery or other valuable article or thin .....

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e date for filing the return of income for such year has expired and 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 the search, he shall, for the purposes of imposition of a penalty under clause (c)of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 20. While the new explanation does away with the .....

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section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of- (i) any money, bullion, jewellery or other valuable article or thing (hereafter 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 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 accoun .....

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ome 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, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 21. In the Circular No 5/2010 dated 3.6.2010 issued by the CBDT explaining the provisions of the Finance Act (no. 2) 2009, the amendment to explanation 5A was explained as under: 53.2 By substituting the Explanation 5A it has been clarif .....

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ome for the years covered by the search, then the addition made shall not be considered as deemed concealment. It is only by the Amendment to explanation 5A by the Finance (no.2) Act 2009, (which received the assent of the president on 13.8.2009), that addition made in the course of assessment u/s 153A, will be deemed to be concealed income, even if the Assessee had filed a return of income earlier for the relevant Assessment Year. Prior to the amendment, if an assessee had already filed a retur .....

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n pursuant to notice u/s 153A on 12.11.2008. Thus both the original return as well as the revised return was filed before the amendment to Explanation5A became a part of the Statute. The Supreme Court in the cases of Addl CIT v Onkar saran (195 ITR 1) has held that in case of return filed in response to Notice u/s 148, law prevailing as on the date of filing of return will govern the levy of penalty by holding as under: Even in a case where a return filed in response to a notice under section 14 .....

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be noted that the assessee filed the original return of income on 10.10.2005. In the event a search has occurred before the 1st day of June, 2007, i.e. after filing of return by the assessee, and on or before the day S.5A has been introduced, then assessee s case would have been governed by Explanation 5, in which case, as assessee has disclosed the amounts under S.132(4) followed by the return, no penalty could be levied as per the provisions of Explanation 5 available upto the date 30th May, .....

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r the new Explanation 5A was brought on statute, the assessee was covered by the new Explanation 5A. As considered above in different eventualities, the assessee was not visited with penalty, except in the last considered situation of search being conducted after 13.8.2009. 11. The Supreme Court in the case of Addl CIT v Onkar Saran (195 ITR 1) has held that in case a return is filed in response to Notice u/s 148, law prevailing as on the date of filing of return will govern the levy of penalty. .....

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ing as on the date of filing of return should be the basis of levy of penalty and not on the subsequent amendment, even if the amendment is retrospective. The Delhi High Court in the case of Engineers Impex (P) Ltd. & Ors. Vs. D.D. Sharma (244 ITR 247) has held as under: 12. Penal provisions in the statutes have to be considered strictly in the sense that if there is a reasonable interpretation which would avoid the penalty, that interpretation ought to be adopted. When the legislature impos .....

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602]. An Explanation is appended to a section to explain the meaning of the words contained in the section and normally is to be read to harmonise with and to clear up any ambiguity in the main section. However, in the present case, the Explanation inserted has widened the scope of the main section and has created an obligation breach of which entails penalty and subjects to criminal prosecution. This Explanation to s. 194A has been inserted w.e.f. 1st June, 1987, and obviously is prospective an .....

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section has been widened by the insertion of the Explanation w.e.f. 1st June, 1987, which has created a liability and obligation to deduct tax on interest even where the interest income is credited to any account in the books of account of the payee including credit given in the account called "interest payable account" or "suspense account". Similar view is also taken by the coordinate bench of the Tribunal in the case of Dilip Kedia V/s. ACIT (supra), wherein the penalty wa .....

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