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TMI Blog2016 (2) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee failed to offer any explanation regarding the difference in income returned vide return filed u/s 139 of the Act and 153A of the Act at Rs. 2,03,010 and 37,66,627/-. 2. On the facts and in the circumstances of the case the learned CIT(A) erred in not appreciating that the additional income of Rs. 34,40,700/- was offered only in the return filed u/s 153A of the Act on specific issues based on incriminating seized documents for which the assessee did not offer any explanation. 3. On the facts and in the circumstances of the case 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 of the Act which is evidenced by his failure to offer the said additional income in the return filed under section 139 of the Act. 4. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the penalty to the tune of Rs. 30,295/- levied u/s 271(1)(c) of the Act, on the additional income of Rs. 90,000/- offered by the assessee in the return filed in response to notice under section 153A of the Act without appreciating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the additional income offered during the course of assessment proceedings, on which penalty under section 271(1)(c) of the Act was levied. The facts and issues raised in the present set of appeals are identical and we proceed to decide the present set of appeals by this consolidated order for the sake of convenience. 6. Briefly, in the facts of the present case, search and seizure action under section 132 of the Act was carried out at the premises of the assessee on 06.01.2010 and Survey under section 133A of the Act was carried out at the office premises of the assessee. Certain books of account and other incriminating documents were seized and impounded from the search / survey premises. The assessee for the year under appeal i.e. assessment year 2006-07 had filed the original return of income under section 139 of the Act on 14.03.2007 declaring total income of Rs. 2,03,010/-. In response to the notice under section 153A of the Act, the assessee furnished the return of income on 30.09.2010 declaring total income of Rs. 37,66,627/-, including additional income of Rs. 34,40,700/-. The additional income of Rs. 33,50,700/- was on account of advances received against booking of fla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch action in the case of assessee, the undisclosed income would not have been unearthed, hence, the contention of the assessee about voluntary disclosure of income to buy peace of mind and avoid litigation, was found to be incorrect by the Assessing Officer. The Assessing Officer held the assessee to have committed default within the meaning of Explanation (1) and clause (ii) of Explanation 5A to section 271(1)(c) of the Act and held the assessee exigible to levy of penalty. Further, the assessee had offered rental income of Rs. 12,000/- from two properties, Rs. 60,000/- on account of income from hotel Amantran at Trimbak Road, Nashik and Rs. 12,000/- on account of on-money on sale of plots at Nashik and this was also not a voluntary disclosure and the assessee was held to have concealed the particulars of income within the meaning of Explanation 5A to section 271(1)(c) of the Act. In view thereof, the assessee was held to have concealed the particulars of income to the extent of Rs. 35,24,700/- and penalty of Rs. 11,86,410/- was levied. 7. The CIT(A) held that where the assessee had recorded the entries of advances from customers in the books and shown the same in the balance she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n changing head of income by the Assessing Officer in assessment of income. Similarly, penalty levied on addition of Rs. 18,61,000/- under section 40(a)(ia) of the Act relating to assessment year 2009-10 was deleted by the CIT(A) since the addition was merely on deeming provisions. Another penalty levied on profit on sale of flat Rs. 22,250/- and 42,250/- in assessment years 2008-09 and 2009-10 was confirmed by the CIT(A), against which the assessee is not in appeal. The Assessing Officer had further levied penalty in respect of rent from shop and house of Rs. 12,000/- in assessment years 2006-07 to 2009-10. Since the addition was made on notional basis, the CIT(A) held that where the explanation offered by the assessee was found to be bonafide, there was no merit in levy of penalty under section 271(1)(c) of the Act. Further, addition was made on account of income from hotel of Rs. 60,000/- in assessment years 2006-07 and 2007-08, was also deleted by the CIT(A) as the estimated income was offered by the assessee to buy peace of mind and to avoid litigation and it was not proved that the assessee has in fact earned income from hotel business at Rs. 60,000/-. An addition of Rs. 12,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ota Vs. ACIT (2010) 40 SOT 543 (Mum-Trib). He further pointed out that the assessment head was changed because of charges during the course of search. 10. The learned Authorized Representative for the assessee pointed out that one of plots was held by the assessee for 8 years and the second plot was also held for long period and he further stated that in the original return of income, the profit arising on sale of plot was shown as long term capital gain. Our attention was drawn to the narration in the assessment order and pointed out that the assessee was in the construction activity. He stressed that the trader could hold two portfolios and in the absence of any incriminating material found and just because income was assessed in the head business income does not merit levy of penalty for concealment under section 271(1)(c) of the Act. Reliance in this regard was placed on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Bennet Coleman & Co. Ltd. (2013) 87 DTR 368 (Bom) and Hon'ble High Court of Madras in CIT Vs. Ganesan Builders Ltd. (2008) 299 ITR 403 (Mad). 11. We have heard the rival contentions and perused the record. The issue arising in the present appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. In view of the above said additions made in the hands of assessee, the Assessing Officer held the assessee to be liable for levy of penalty under section 271(1)(c) of the Act and sum of Rs. 11,86,410/- was levied as penalty for concealment under section 271(1)(c) of the Act in assessment year 2006- 07, Rs. 28,35,000/- in assessment year 2007-08, Rs. 25,61,400/- in assessment year 2008-09 and Rs. 15,08,250/- in assessment year 2009-10. The tabulated details of the income offered in the return of income filed pursuant to issue of notice under section 153A of the Act are available at page s 2 and 3 of the appellate order in order levying penalty under section 271(1)(c) of the Act. 12. The issue arising before us is in relation to levy of said penalty upon the assessee in the respective years, which had been deleted by the CIT(A) and the Revenue is in appeal against the order of CIT(A). In respect of first addition made in all the respective years i.e. assessment years 2006-07 to 2009-10 with regard to advances received in cash from the customers, which in turn, have been shown in the balance sheet. The aforesaid additional income was offered by the assessee during the course of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the extent that the assessee 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 Rs. 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 gains. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act with regard to the said addition. Consequent thereto, the Assessing Officer rejecting the claim of the assessee that it had suo motu offered the income from long term capital gains, and no malafide intention could be attributed to the said disclosure, hence, there was no merit in levy of penalty, held the assessee exigible to levy of penalty under section 271(1)(c) of the Act and levied penalty of Rs. 47,11,104/-. The CIT(A) elaborately considered the issue and upheld the levy of penalty. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a question of exercising power under the said provision to impose penalty. The said section lays down that where the Assessing Officer or the CIT(A) in the course of any proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty stipulated in the aforesaid provision. 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 acquired by him by utilizing, wholly or in part his income, for any previous year, which had ended before the date of search, but the return of income for such year had not been furnished before the said date, or where the return of income had been furnished but such income had not been dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of his income. 17. The deeming provisions of Explanation 5A under section 271(1)(c) of the Act are applicable to all the searches initiated under section 132 of the Act on or after first day of June, 2007. The conditions laid down in the Explanation 5A is where during the course of search, the assessee 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition 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 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 amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the salary received by the assessee. By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax. The said payment is, therefore, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Chandan K. Shewani (supra) the Tribunal has held that to patch out the lacuna due to the judicial interpretation of Expl. 5 of Sec. 271(1)(c) which was on the statute book upto 31-5-2007, Explanation 5A has been substituted for Expl. 5 by the Finance Act, 2007 w.e.f 1-6-2007. The said explanation 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 offers no explanation about the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the Act and the assessee is exigible to levy of penalty on 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 of binding precedent of Pune Bench on the said issue, we find no merit in the reliances placed upon by the learned Authorized Representative for the assessee on DCIT Vs. Purti Sakhar Karkhana (supra) and Shri PV Ramana Reddy Vs. ITO (supra). The other reliance placed upon by the learned Authorized Representative for the assessee on the decision of Pune Bench of Tribunal in Smt. Pramila D. Ashtekar Vs. ITO (2013) 39 taxmann.com 103 (Pune - Trib.), it may be pointed out that the said order of Pune 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 prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of search and (a) where the return of income for such previous year has been furnished before the said date, but such income had not been declared therein or (b) the due date for filing the return of income for such assessment year had expired, but the assessee had not filed the return, then notwithstanding that such income is declared by him in any return of income filed on or after the date of search, he shall for the purpose of imposition of penalty under sub-section (1)(c), be deemed to have concealed particulars of his income or furnished inaccurate particulars of such income. As held by the Tribunal in Sarita Kaur Manjeet Singh Chopra Vs. ITO (supra), the deeming provisions of Explanation 5A to section 271(1)(c) of the Act are applicable to all searches initiated under section 132 of the Act on or after 01.06.2007. Admittedly, in the case of the assessee before us, search on the premises of the assessee under section 132 of the Act was carried out on 06.01.2010, hence, the amended provisions are attracted. The Tribunal further held that where the conditions laid down in Explanation 5A are attracted, the person is deemed to have concealed particulars of his income or furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuant to issue of notice under section 153A of the Act. Such additional income offered by the assessee falls within the purview of Explanation 5A to section 271(1)(c) of the Act of the Act and t he assessee is liable for levy of penalty under section 271(1)(c) of the Act on the aforesaid amounts offered by the assessee on account of advances received in cash from customers shown in the balance sheet. Similarly, the assessee is thus, held to be liable for levy of penalty on the additional income of Rs. 33,50,700/-, 49,10,200/- Rs. 75,01,500/- and Rs. 25,22,100/- in assessment years 2006-07 to 2009-10. Similarly, the gifts shown in the books of account which have been offered as additional income by the assessee during the course of search itself, in the statement recorded under section 132(4) of the Act is liable for levy of penalty under section 271(1)(c) of the Act i.e. on offer of income of Rs. 90,000/- in assessment year 2006-07 and Rs. 8,17,200/- in assessment year 2007-08. We find no merit in the order of CIT(A) in this regard that where the advances from customers, gifts received by the assessee and unsecured loan have been shown in the books of account and were part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer vide para 9 of the assessment order for assessment year 2006-07 had made the aforesaid addition on account of house property at Malegaon and shop at Nashik, as no income in respect of the said property has been offered to tax. The assessee offered to tax the notional income in respect of the said vacant house at Malegaon and shop at Nashik. The assessee admittedly, had not received any income from two properties and the income was assessed in the hands of assessee on notional basis as the assessee owned one self occupied property at Nashik. The said addition was made in the hands of assessee during the course of assessment proceedings and no information in this regard was found during the course of search proceedings. In view thereof, the provisions of Explanation 5A to section 271(1)(c) of the Act are not applicable. However, the substantive provisions of section 271(1)(c) of the Act are attracted, but in view of the notional income being assessed in the hands of assessee and in the absence of any evidence found during the course of search or otherwise as to the receipt of rental income from the said properties, we find no merit in the levy of penalty under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 22,500/- and 42,250/- in assessment years 2008-09 and 2009-10. Accordingly, we reverse the order of CIT(A) in this regard and direct the Assessing Officer to levy penalty under section 271(1)(c) of the Act on additions of Rs. 22,250/- and Rs. 42,250/- in assessment years 2008-09 and 2009-10. 22. Now, coming to the next addition of on-money received on sale of plot of Rs. 12,000/- in assessment year 2006-07 and Rs. 10,000/- in assessment year 2007-08. Admittedly, the said on-money received by the assessee was not disclosed by him in the return of income. Though no evidence was found during the course of search in this regard, but the factum of on-money received was accepted by the assessee during the course of assessment proceedings. In view thereof, where the assessee had not offered true taxes on the income declared by the assessee and addition was made on account of on-money received on sale of plots in the hands of assessee, then the provisions of section 271(1)(c) of the Act with regard to concealment of income are attracted and the assessee is liable to levy of penalty under substantive provisions of section 271(1)(c) of the Act. We reverse the order of CIT(A) in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eletion of penalty under section 271(1)(c) of the Act by the Tribunal was upheld. In the present case also, there is no finding that the claim of the assessee was not bonafide. Accordingly, we uphold the order of CIT(A) in this regard. 25. In view of our finding in the paras hereinabove, we hold that the penalty under section 271(1)(c) of the Act is upheld on the following additions:- i) Advances received in cash from customers of Rs. 33,50,700/-, Rs. 49,10,200/-, 75,01,500/- and 25,22,100/- in assessment years 2006-07 to 2009-10, respectively; ii) Gifts shown in books of account of Rs. 90,000/- in assessment year 2006-07 and Rs. 8,17,200/- in assessment year 2007-08; and iii) Unsecured loan of Rs. 4,15,000/- in assessment year 2007-08 26. The above said incomes were offered as additional income in the return of income under section 153A of the Act and penalty leviable on aforesaid additions is upheld. Further, we also uphold the levy of penalty under section 271(1)(c) of the Act on the following additions made during the course of assessment proceedings:- i) Undisclosed profit on sale of flat of Rs. 22,250/- in assessment year 2008-09 and Rs. 42,250/- in assessment year ..... 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