TMI Blog2012 (10) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... the return filed, in response to notice u/s 153A of the Act and the CIT(Appeals), having regard to the facts of the case, invoked the currently applicable Explanation 5A Section 271(1)(c) of the Act and upheld the penalty, levied by the AO. In such a fact-situation, the CIT(Appeals) has acted in accordance with the currently operative and relevant penal provisions, with reference to the return of income, filed in response to Section 153A of the Act. In view of the above legal and factual discussions, and having regard to the express statutory provisions of Section 271(1)(c) of the Act read with Explanation 5A thereunder, as inserted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.06.2007, we do not find any infirmity, in the findings of ld CIT(Appeals) - Decided against assessee - ITA No. 516/CHD/2012 - - - Dated:- 31-10-2012 - MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER For the Appellant: Shri Ajay Jain For the Respondent: Shri Akhilesh Gupta ORDER PER MEHAR SINGH, AM The assessee filed appeal against the order of CIT(A) dated 16.04.2012, for the assessment year 2007-08, wherein penalty u/s 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led due date has been expired on the date of search are not satisfied in appellant case therefore the order of AO is bad illegal. 6. That the Commissioner Of Income Tax (central) Appeal has wrongly confirmed the action of assessing officer of levying the penalty u/s 271(1)(c) despite of the fact that the assessee has filed an appeal before CIT(A) against Assessment Order passed u/s 143(3) read with 153A and the Assessing Officer instead of keeping it in abeyance has levied the penalty u/s 271(1)(c). 7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off. 2. In the course of present appellate proceedings, before the Bench, ld. 'AR' contended that the penalty levied u/s 271(1)(c) of the Act, by the AO and upheld by the CIT(A), is not in consonance with the relevant provisions of Section 271(1)(c) of the Act. The assessee had disclosed an additional income of ₹ 2,00,60,000/-, to buy peace of mind and to avoid the prolonged litigation. The assessee made disclosure of additional income, in the course of search operation, on the assurance given by the Department that no penalty u/s 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 5A to Section 271(1)(c) of the Act, at the time of filing of the regular return, were not applicable, to the facts of this case. The appellant had filed regular return within the due date. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT V Omkar Saran Sons, 195 ITR 1 (S.C) and B.N.Sharma V CIT 226 ITR 442 (S.C). It was argued that search action u/s 132(1) of the Act was initiated, on 31.10.2007 and on that date itself, the original return of income was filed. Therefore, ld. 'AR' argued that the ingredients of Explanation 5A, to Section 271(1)(c) of the Act were not satisfied. The appellant filed the return of income for the relevant assessment year i.e. 2007-08, on 31.10.2007, i.e. the date on which search action was initiated and a hard copy of the same was filed, on 14.11.2007. The appellant filed return by e-mail, on 31.10.2007, on due date i.e. 31.10.2007 and, hence, the due date has not expired. Therefore, ld. 'AR' contended that provision of Section 271(1)(c) read with Explanation 5A thereunder are not applicable to the facts of the present case. 2(iv) Ld. 'AR', further, argued that the return was revised, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , without bringing any cogent and corroborative evidences on record. 2(vi) Ld. 'AR' referred to page 2, 19, 28 to 37 of the Paper Book and relevant provisions of the Act. On merit, ld. 'AR' referred to para 2 of the assessment order and contended that no concealment has been established by the AO within the meaning of provisions of Section 271(1)(c) read with Explanation 5A thereunder. Ld. 'AR' also referred to the submissions filed before the CIT(A), to support his contentions. 3. Ld. 'DR', on the other hand, after narrating factual matrix of the case, supported the findings of ld. CIT(A), as contained in para 5.2, 5.3, 6.1 and 6.2 of the order. Ld. 'DR', further, contended that Explanation 5A to Section 271(1)(c) of the Act, as inserted by the Finance Act, 2009, with retrospective effect, from 1.6.2007, is applicable to the facts of the present case, in view of the legislative intent contained therein, for its operation. Thus, the Ld. 'DR' supported the findings of the AO, as well as that of the CIT(A), in the matter. 4. We have carefully perused the rival submissions, facts of the case, Paper Book and the case laws cited by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereunder : 2. Brief facts of the case are that a search . seizure operation u/s 132(1) of the Income Tax Act, 1961 was conducted at the residential and business premises of Shri Rajneesh Vohra his family on 31.10.2007. During the course of action u/s 132 of the I.T. Act, 1961, some incriminating documents were found and seized from the residence and business premises of the assessee. These documents were confronted while recording his statement u/s 132(4) of the IT. Act, 1961. The assessee surrendered a sum of ₹ 2,00,60,000/-.The details of surrender made by the assessee is as under: (a) Difference between registered value and agreement to sell for land purchased in Village Sundran, Tehsil Dera Bassi ₹ 1,03,60,000/- (b) Payment in cash for land at Manali ₹ 20,00 ,000/- (c) Undisclosed income of 21st Century Builders Engineers for F.Y. 2006-07 ₹ 77,00,000/- Total : ₹ 2,00,60,000/- The assessee filed return u/s 153A of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08 -Regarding- Please refer to this office letter dated 30.12.2009, your reply dated 22.01.2010 and also your letters dated 01.06.2010, 10.06.2010 and 19.06.2010 also refer to this office letter dated 02.06.2010 and 17.06.2010. It has been stated by you in your letter dated 01.06.2010, 10.06.2010 19.06.2010 that you have filed appeal before the Worthy CIT(Appeals)-!, Ludhiana and that penalty proceedings initiated against you may be kept in abeyance. On going through the records, it is seen that the assessment order was passed on 30.12.2009 and the same alongwith demand notice was served upon you on 50.12.2009. As per provisions of section 249(2) (b) appeal should have been filed within 30 days from the date of service of demand notice to you, whereas you have filed appeal before the Worthy CIT (Appeals)-!, Ludhiana on 21.05.2010. Therefore your request that the penalty proceedings may be kept in abeyance cannot be accepted and is hereby rejected. Further, as per your letter dated 22.01.2010, you have contented that no penalty should be levied in view of second proviso to explanation 5 of the section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded vide written submission dated 22.06.10 that the assessment order is subject matter of appeal. It was stated that under the provisions of section 249(3) the Commissioner of Income-tax (Appeals) may admit an appeal after the expiration of 30 days, if he is satisfied that the appellant has sufficient cause for not presenting the appeal within the prescribed period. It was requested that in view of specific provisions of section 249(3) and 275(l)(a), the penalty proceedings should be kept in abeyance. On merits, it was submitted that the assessee had agreed to the additions subject to no penalty. It was further contended that the explanation 5A to section 271(l)(c) should be considered in the light of agreement between the department and the appellant. It was also contended that the assessee filed original return on 31-10-2007 and search was conducted on 31-10-2007 A surrender was made during the course of search subject to no penalty. It was also stated that the assessment was completed under section 143(3) and no addition was made. In its written submissions dated 22-06-10 the assessee placed reliance on 300 ITR 205 (SC) in the case of Sudershan Silk Sarees Vs CIT and 142 CTR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the due 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. 5.1 Statement of Shri Rajneesh Vohra (the assessee) was recorded u/s 132(4) of the Income Tax /Act, 1961 on 31.10.2007 during the course of search. The relevant extracts regarding surrender made by the assessee are reproduced below:- Q. / am showing you annexure A-1 of the documents seized from your office premises at SCO 8, Sector 5, Panchkula. Please explain Pages 83-88. Ans. This is an agreement to purchase land at Manali. I have paid40lakhs, through DDs and 20 lakhs by cash. Q. Please explain the source for these amounts. Ans. I would like to surrender 20 lakhs as undisclosed income from my business Twenty First Century Builders and Developers. Q. / am showing you pages 80-82 of annexure A-1. Pleas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y concealed the particulars of the income. Therefore, penalty u/s 271(1)(c)of the Income-tax Act is hereby imposed at ₹ 67,62,200/- which is @ 100% on the tax sought to be evaded. As per the provisions of the Act. 6. Ld. CIT(A), interalia, dismissed the appeal of the assessee and upheld the order of the AO, in the matter. The ld. CIT(Central), by referring to the provisions of Section 271(1)(c) read with Explanation 5A held that the provisions of Explanation 5A to Section 271(1)(c) of the Act are applicable to the assessee's case. The relevant findings of the CIT(A), as recorded in paras 5 to 6.5 are reproduced hereunder : 5. At the very outset, I will adjudicate on the Ground of Appeal No. 3, wherein the assessee has contended that the provisions of Explanation 5A to section 271(1) (c ) were wrongly invoked without appreciating the fact that the assessee has filed the return on or before due date of filing of return. 5.1 I have considered the impugned order of the Id. AO and the submissions made by the assessee. In order to adjudicate on the issue, I shall refer to the provisions of Section 271 (1)( c) r/w Explanation 5A, which is reproduced below: 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted fact that as the search and seizure operation u/s 132 was conducted after 1.6.2007, the provisions of Explanation 5A of Section 271(1) (c) are applicable in this case at hand. As for the dispute in the date of filing of return, the rationale behind the said provisions to my mind covers both situations where the due date for filing of return had expired on or before the date of search and the disclosure of income is included in the return filed after search,, as well as where the return was furnished without showing the undisclosed income which was declared subsequently in the return filed after search or in response to notice u/s 153A. In other words, penalty for concealment of income for search operations conducted after 1.6.2007 which are otherwise not covered u/s 271AAA are sought to be covered u/s 271(1)( c). Hence the invoking of the said provisions by the Ld. AO is upheld accordingly the ground of appeal no. 3 is dismissed . 6. I shall now take up ground no. 2 and 4 for adjudication in a consolidated manner. In Ground of appeal No. 2 the assessee has contended that the penalty u/s 271 (1) (c ) had been wrongly levied as the disclosure of the additional income of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the surrender was consequent to search and seizure operation wherein specific documents regarding property transaction were found and seized. The Hon'ble Judicial High Court in the case of Careers Education Infotech Pvt. Ltd (336 ITR 257 of 2011) vide its decision dated 31.03.2011 has held that no doubt even voluntary surrender of concealed income may not exonerate the assessee of its liability to pay penalty if it can be held that there was concealment of income or furnishing of inaccurate particulars. In the case at hand, the surrender in the statement u/s 132(4) cannot be said to be voluntary as specific documents had been found on the basis of which the surrender was made and importantly the undisclosed income had it been shown in the return filed by the assessee u/s 139(1). The reasons for not having included the additional income in the return filed u/s 139 have not been elucidated by the assessee. Hence it is apparent that had it not been for the search operation and questions raised during recording of the statement, there would have been no disclosure of additional income by the assessee. Furthermore in the statement u/s 132(4) there is no indication that the tax l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1B)-Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause(c). 7(i) The AO, in the impugned assessment order passed u/s 153A of the Act as a consequence of search operation, at the business and residential premises of the assessee appellant, has recorded satisfaction in the form of direction for the purpose of initiation of penalty proceedings u/s 271(1)(c) of the Act , at the end of each addition made in the asstt. order in question as Penalty proceedings u/s 271(1)(c) are initiated separately and also in the concluding para as Issue notice u/s 271(1)(c) of the Act. In our considered view, the AO has complied with the legislative intent, as enshrined in the amended provisions of Section 271(IB), as reproduced above. There is no prescribed format under the Act or the Rules, for recording of satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f addition made by the AO, on appreciation of incriminating documents, seized in the course of search operation. The AO, made an addition of ₹ 1.03 crores, on account of difference between the registered value and agreement to sell, for land purchased in village Sundran, Distt.Dera Bassi. The CIT(A) has discussed this issue in para 5 to 6.5 of the impugned appellate order, wherein it has been concluded that unaccounted investment of ₹ 1.03 crores has been made by the assessee appellant, in purchase of land at village Sundran. The assessee has admitted this factum, in the course of statement recorded u/s 132(4) of the Act, in the course of search operations. In the course of assessment proceedings, AO confronted such documents to the assessee and he failed to furnish any source of undisclosed investment, except stating that the impugned amount has been included in the surrender made in the course of search operation. The AO, also initiated penalty proceedings u/s 271(1)(c), in respect of such additions made by him. The last sentence of para 5, whereby penalty proceedings u/s 271(1)(c) were initiated reads as, penalty proceedings u/s 271(1)(c) are initiated separately . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the said decision and found that the same is not applicable to the present case. The Hon'ble Supreme Court has rendered the decision, in the case of Sudershan Silk Sarees (supra), for assessment year 1984-85 to 1987-88, in the context of the facts obtaining in that case. The findings of the Tribunal were upheld by the Hon'ble Supreme Court. In this case, Hon'ble Tribunal upheld the findings of the CIT(A) and recorded that although there was nothing on record to show that assessee was given assurance that no penalty would be levied, the facts clearly suggested that such an inducement must have been given by the searching party, that only partial evidence in respect of concealment for a very limited period was detected, there was no reason why any person would go to offer much higher amount for a large number of years. In opinion of the Tribunal, it was found not a fit case, for levy of penalty u/s 271(1)(c) of the Act. In the present case, facts are clearly different and distinguishable. Assessee has declared the income, in the return filed, in response to Section 153A of the Act. Declaration of additional income, in the course of deposition u/s 132(4) of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case. The decision relied upon by the appellant has been rendered by the Hon'ble Delhi High Court in the context of Section 158BFA(2) of the Act. Consequently, ratio laid down in the said decision is patently inapplicable to the facts and statutory provisions applicable to the present case. In view of this, ratio of the said decision is not applicable to the facts of the present case. 16. Ld. 'AR', further, placed reliance on the decision in the case of CIT V Jaswant Rai 142 CTR 49 (P H). The jurisdictional High Court, in this case, held that the assessee agreed to addition, on the assurance that no penalty would be levied, is a finding of fact and does not give rise to any question of law. The Hon'ble jurisdictional High Court has applied its decision, in the case of Banta Singh Kartar Singh V CIT (1980) 125 ITR 239 while adjudicating the case relied upon by the assessee. The Hon'ble jurisdictional High Court held that where there is an agreement between the assessee and the Income tax authorities, it would be appropriate that an order, based on an agreement, would give rise to grievance and could be agitated in appeal. The assessee agreed to cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat penalty cannot be levied in case of higher income shown in the revised return of income. 17. We have perused the ratio laid down by the Hon'ble Supreme Court in the case relied upon by the ld. 'AR' and found that in that case, the assessee had originally filed returns showing meager income. However, after action u/s 132 of the Act, a notice u/s 148 was served on him and the assessee filed revised return showing higher income. Eventually, assessment orders were passed and the returns submitted regularized u/s 148 of the Act. It is under such circumstances, the Hon'ble Apex Court held that Department had not discharged its burden of proving concealment and simply rested its conclusion on the act of voluntary surrender made by the assessee in good faith and hence, penalty could not be levied. In the present case, the assessee has filed return of income, in response to notice u/s 153A of the Act. The appellant has not revised such return of income and, hence, it is not a case of revised return of income. The assessee had already admitted undisclosed income in the course of search operation in the statement recorded u/s 132(4) of the Act, which was later on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied-Quantum-Difference between tax assessed in first returns and the tax on the incomes assessed should be taken as the tax which would have been evaded-Income-tax Act,1961 ss. 139(5), 271(1)(c), Expl. From the decision of the Gauhati High Court in F.C.Agarwal v. CIT (1976) 102 ITR 408 to the effect that the Appellate Tribunal was correct in holding on the facts, (i) that penalties under Section 271(1)(c) of the Income-tax Act,1961, read with the Explanation thereto, were justified in respect of the assessment years in question, since the assessee had filed revised returns disclosing much larger incomes than those disclosed in the original returns but was unable to discharge the burden of proof under the Explanation and (ii) that for the purpose of calculation of penalty the difference between the tax on the incomes shown in the first returns and the tax on the incomes assessed should be taken as the amount of tax that would have been evaded, the appellant preferred appeals to the Supreme Court. The Supreme Court dismissed the appeals holding that there was no error of law in the order of the High Court. Decision of the Gauhati High Court in F.C. Agarwal v. CIT (1976) 102 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income filed, in response to notice u/s 153A of the Act. Therefore, the case law relied upon by the assessee is not applicable to the facts of the present case. 20. It is, further, submitted that Hon'ble Allahabad High Court defined detection in Mool Chand Mahesh Chand V CIT (1978) 115 ITR 1 (All) and held that even in a case where ITO starts investigation, what was lying concealed, or hidden or what continue to elude observation, would also be covered in a case of detection. Detection is anterior to profit or established is anterior. 21. The Hon'ble jurisdictional High Court in the case of Prem Pal Gandhi V CIT (2001) 335 ITR 23 (P H) upheld the similar view that where revised return, showing higher income is filed after detection of concealed income, by the Deptt., imposition of penalty would be justified. It is pertinent to mention here that Hon'ble High Court has considered the decision of the Hon'ble Supreme Court in CIT V Suresh Chandra Mittal (supra) Agarwal F.C. V CIT (supra); Agarwal (G.C.) V CIT (supra); Madhu Sudan K.P. V CIT 251 ITR 91 and Rajesh Chawla v CIT (supra). 22. In view of the above discussion, the case law relied upon by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose 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. 25. In this context, it is pertinent to mention here that powers of the first appellate authority are co-terminus, with those of the AO. The CIT(Appeals) can do what the AO could do and can also direct the latter to do what the latter failed to do. It is settled legal proposition that first appellate authority is vested with all the plenary powers which the AO has in the matter. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in a case where a return, filed in response to the notice u/s 148 involve an element of concealment, the law applicable would be the law, as it stood at the time when the original return was filed, for the assessment year in question and not the law as it stood on the date, on which the return was filed in response to the notice u/s 148 of the Act. The Hon'ble Supreme Court, by following this decision in B.N.Sharma V CIT (supra), laid down similar ratio. The facts of the case in Omkar Saran Sons (supra) are that the assessee is a HUF family. For the assessment year 1961-62 and 1962-63, it filed return of income, showing total income of ₹ 18,935/- and ₹ 24,943/- respectively. The exact dates of these returns are not available on record. Assessments were made on the assessee for determining its total income at ₹ 28,513/- for the assessment year 1961-62 and ₹ 28,463/- for the assessment year 1962-63. The assessment orders are dated 30.3.1962 and 28.11.1963 respectively. Subsequently, the AO issued notice on 09.03.1965 u/s 148 of the Act. The assessee filed its return of income on 27.2.1969, disclosing the same income as in the original return. The Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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