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2016 (1) TMI 801 - ITAT PUNE

2016 (1) TMI 801 - ITAT PUNE - TMI - Penalty levied under section 271(1)(c) - additional income offered in the return of income submitted under section 153A - CIT(A) deleted the levy - Held that:- The assessee had furnished original return of income in which he had not declared its receipts from the profession, but pursuant to the search and seizure operation, certain incriminating documents were seized, which contained unrecorded receipts, expenses and investments in various financial years and .....

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(c) of the Act on unrecorded receipts, expenditure and investments declared by the assessee pursuant to search. - Decided against assessee.

Addition made by the Assessing Officer in the assessment proceedings pursuant to the original return of income filed by the assessee - Held that:- From the perusal of details, we find that the said addition was made by the Assessing Officer while passing the order under section 143(3) of the Act, which in turn, was confirmed by the CIT(A) and the .....

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al income assessed in the hands of assessee pursuant to search and delete the penalty for concealment on the alleged addition of ₹ 6,00,000/-.- Decided in favour of assessee in part. - ITA No s.2241 to 2244/PN/2012 - Dated:- 30-10-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri B.C. Malakar For The Respondent : Shri Pramod Shingte ORDER PER SUSHMA CHOWLA, JM: All the four appeals filed by the Revenue are against separate orders of CIT(A)-I, Nashik, a .....

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raised the following grounds of appeal :- 1. On the facts and in the circumstance of the case and in law, the learned CIT (A) erred in deleting penalty levied under section 271 (1) (c) amounting to ₹ 4,24,570/- without appreciating the settled legal position that the difference between the income disclosed under section 139 and 153A of the Act particularly when such difference is based on in incriminating seized material. 2. On the facts and in the circumstance of the case and in law, the .....

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oup cases of Thakkar and Kalantri group in appeal Nos.911 to 930/PN/2009 and 1006 to 1008/PN/ 2009 dated 10-02-2010 which was a direct decision. 4. On the facts and in the circumstance of the case and in law, the learned CIT (A) erred in not appreciating the fact that but for the search operations the assessee would not have offered additional income in the return filed under section 153A which is evidenced by his failure to offer the said additional income in the return filed under section 139. .....

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instead of explanation 5 A of that section on the facts of the case thus rendering his decision perverse and bad in law. 7. The appellant craves leave to add, alter, modify, delete amend any of the grounds, as per the circumstances of the case. 8. The appellant prays leave to adduce such further evidence to substantiate its case as the occasion may demand. 4. The issue raised in all the appeals relating to assessment years 2005-06 to 2008-09 is against the deletion of penalty levied under sectio .....

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of income on 30.11.2006 declaring total income of ₹ 9,08,700/-. Notice under section 153A of the Act was issued to the assessee and in response, the assessee furnished return of income declaring total income of ₹ 15,70,040/- including additional income of ₹ 6,61,344/- and agricultural income of ₹ 50,000/-. The Assessing Officer noted that during the course of search and seizure, incriminating documents marked as A-1, A-3, A-8, A-9, A-18 & A-19 were seized, which conta .....

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e Act at ₹ 79,39,778/- as against ₹ 56,43,236/- shown in the original return of income filed under section 139(1) of the Act. The assessee also amended other mistakes in the original return filed under section 139(1) of the Act and the total income from house property, profession and other sources after deduction under section VI-A worked out to ₹ 15,70,040/- i.e. declaring additional income of ₹ 6,61,344/-. The Assessing Officer noted that though the assessee had declare .....

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e meaning of Explanation 5A to section 271(1)(c) of the Act, penalty proceedings under section 271(1)(c) of the Act were initiated. Further, on verification of the assessment records, the Assessing Officer noted that the assessment for this assessment year had been completed under section 143(3) of the Act in the past vide order dated 26.12.2007. As a result of scrutiny loans of ₹ 6,00,000/- from two persons were found to be not explained and an addition of ₹ 6,00,000/- was made to t .....

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e said issue had been examined at length during the original assessment proceedings and the claim of the assessee was found to be non-genuine, and the addition in this regard has been confirmed by Pune Bench of Tribunal, hence, there was no force in the contention of the assessee. The said loans totaling ₹ 6,00,000/- since were shown in the balance sheet filed along with return of income filed pursuant to notice under section 153A of the Act, the same was held to be unexplained and income .....

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assessment year 2009-10 i.e. date of search, covering of the group of assessees. In the statement recorded under section 132(4) of the Act, the assessee further stated that the manner of earning the said additional income was also stated during the course of statement record under section 132(4) of the Act. Further, the claim of the assessee was that the additional income offered in the return of income submitted under section 153A of the Act included the income declared except the addition of .....

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h was unearthed during the course of search and was declared in the return subsequent to search. The Assessing Officer further held that the declaration made under section 132(4) of the Act does not entitle the assessee from immunity from penalty proceedings. With regard to the addition of ₹ 6,00,000/-, where the addition was confirmed by the Tribunal in assessee s hands, the Assessing Officer held there was no justification in the explanation of the assessee. The Assessing Officer in view .....

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ry or any other valuable articles were involved, but the additional income was found by the search party during the course of action was offered as additional income, where there was no direct linkage brought on record with any of the specified seized material, so as to establish the charge for levy of penalty in the present case. The CIT(A) further held that on going through the facts of the case, no direct linkage with regard to the seized material and the additional income of ₹ 6,61,344 .....

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sult of search, as additional income to tax, and where the assessee had paid all the taxes, the explanation of the assessee was found to be plausible and hence, in view of Explanation (1) to section 271(1)(c) of the Act, the penalty imposed by the Assessing Officer for the assessment year was held to be not justified. Reliance in this regard was placed on the ratios laid down by the Hon ble Gujarat High Court in National Textiles Vs. CIT [2001] 249 ITR 125 (Guj) and the Hon ble Punjab & Hary .....

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sition of law as laid down by the Hon ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa 83 ITR 26 (SC). On the given facts in this case it is seen that the ld. AO has not applied his mind on the facts of the case and imposed the impugned penalty in a mechanical manner. It is settled position of law that penalty u/s 271(1)(c) cannot be levied merely because it is lawfull to do so. Use of discretion to levy penalty is independent of the decision as to whether concealment is .....

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ad included sum of ₹ 6,00,000/- on the ground that the addition was made originally and was upheld by the Tribunal, but was not declared in the return of income filed pursuant to notice issued under section 153A of the Act, cannot be said to be an issue arising the present appeal. Where the Assessing Officer had not imposed penalty under section 271(1)(c) of the Act in consequent to original assessment proceedings vis-à-vis taxability of impugned amount of ₹ 6,00,000/-, in the .....

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e Act had declared income of ₹ 15,70,040/- and agricultural income of ₹ 50,000/-, which included additional income of ₹ 6,61,344/-. However, the assessment was completed on the income of ₹ 15,70,040/- and addition of ₹ 6,00,000/- and agricultural income of ₹ 50,000/-. The learned Departmental Representative for the Revenue pointed out that the penalty under section 271(1)(c) of the Act had been levied on an addition of ₹ 6,61,344/- and ₹ 6,00,000/- .....

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w.e.f. 01.06.2007 and search was conducted on 16.01.2009. He further stated that the Finance Act, 2009 amended the Explanation 5A to section 271(1)(c) of the Act. It was explained that pursuant to search on 16.01.2009, the assessee received notice under section 153A of the Act on 12.05.2009 and filed return of income on 12.06.2009. The Finance Bill, 2009 was presented on 06.07.2009 and was assented on 19.08.2009 i.e. on the date of filing the return of income, law which was prevailing on that da .....

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een taken by Chandigarh Tribunal in Shri Rajnish Vohra Vs. DCIT in ITA No.516/CHD/2012, relating to assessment year 2007-08, order dated 31.10.2012, the present facts of the case are at variance. He further pointed out that where the assessee had declared additional income on estimate basis, there was no basis for invoking Explanation 5A to section 271(1)(c) of the Act. With regard to the second addition of ₹ 6,00,000/- the learned Authorized Representative for the assessee pointed out tha .....

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to section 271(1)(c) of the Act pointed out that search on premises of the assessee took place on 10.10.2007. Further, reliance was placed on the ratio laid down by Pune Bench of Tribunal in ACIT Vs. Mulay Construction P. Ltd. & Ors. in ITA Nos.116 to 119/PN/2012 & Ors. and since the provisions of Explanation 5A to section 271(1)(c) of the Act had already been amended, since there was addition of additional income in the hands of the assessee, there was merit in levy of penalty under se .....

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in ITA No.1562/PN/2013 , relating to assessment year 2009-10 and by order of even date held as under:- 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 ca .....

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ad received the entire cash consideration and the cheque consideration 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 exem .....

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had concealed the particulars of income and penalty proceedings under 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 bui .....

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vy of penalty under section 271(1)(c) of the Act and levied penalty of ₹ 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, a .....

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in cash and ₹ 1.70 crores was received in cheque. The cheque amount 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 ret .....

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in this regard. 15. Now, coming to the issue that where the assessee had 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 fu .....

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ovision. The Explanation/s under section 271(1)(c) of the Act set 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 acquire .....

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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, jewellery, 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 Explanatio .....

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, which was introduced by the Finance Act, 2007 w.e.f. 01.06.2007. 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 .....

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inaccurate particulars of income. The said Explanation 5A 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 .....

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is found to be in possession of any money, bullion, jewellery, 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 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 p .....

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ive of the same, he would be deemed to have concealed the 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 se .....

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and quantum of penalty to be levied. The question is quantum 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 per .....

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' 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 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 f .....

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t 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 connection with the salary received by the assessee. We a .....

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can be taxed u/s. 68, 69, 69A, 69B, 69C & 69D. 18. It 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 .....

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or 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, cl .....

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planation 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 o .....

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jewellery or any valuable assets or things which were found 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 .....

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u/s 153A, Explanation-5A is applicable and as there is a 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 .....

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such income which was detected during the course of search 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 .....

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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. 14. In the facts of the present case also, the assessee had furnished original return of income in w .....

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We find no merit in the said claim of the assessee, in view of our order of even date in the case of Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (supra). Accordingly, we uphold the levy of penalty under section 271(1)(c) of the Act on unrecorded receipts, expenditure and investments declared by the assessee pursuant to search. 15. The second aspect of the levy of penalty under section 271(1)(c) of the Act in assessment year 2005-06 is the addition of ₹ 6,00,000/-, which was made by the A .....

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