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2016 (3) TMI 85 - ITAT KOLKATA

2016 (3) TMI 85 - ITAT KOLKATA - TMI - Penalty u/s 271(1)(c ) - Addition in the order passed u/s 153C/143(3) - selection of assessment year - Held that:- We hold that the assessee had offered the business income on sale of flats in Asst Year 2009-10 in respect of cheque portion of sale consideration which has been accepted by the department in section 143(3) proceedings. Therefore the unaccounted cash element received on sale of flats was also assessable only in Asst Year 2009-10 and not in Asst .....

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factor in the penalty proceedings and hence the assessee cannot be attributed with any concealment of income or furnishing of inaccurate particulars of income for the Asst Year 2008-09 in this regard.

In view of the aforesaid findings and judicial precedents, we hold that once a particular income was not assessable in the Asst Year 2008-09 then even though the income might have been assessed in Asst Year 2008-09, penalty u/s 271(1)(c) of the Act cannot be imposed on the same. - Decid .....

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nd Appeal No. 75/CC-XII/CIT(A)C-II/11- 12 dated 21.11.2012 in the case of Akshara Projects Consortium against the order of the Learned AO levying penalty u/s 271(1)(c ) of the Income Tax Act 1961 (hereinafter referred to as the Act ). 2. As the facts involved in both these appeals are identical, they are taken up together and disposed off by this common order for the sake of convenience. 3. The only issue to be decided in these appeals is that whether in the facts and circumstances of the case, .....

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petition u/s 132(4) of the Act before the ADIT (Investigation) , Kolkata disclosing an amount of ₹ 80,82,140/- being the unaccounted income of the assessee consortium from sale of residential flats during the financial year 2007-08 relevant to Asst Year 2008-09 based on the documents seized u/s 132 of the Act with Identification Mark ALT/5 (page 15) from the office premises of M/s Akshara Shelters Pvt Ltd and others at Supra Court , 35, Lansdowne Terrace, Kolkata - 700026. Considering the .....

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lats to certain customers in cash in respect of seven parties, wherein costly and special marbles and fittings of the choice of flat buyers were provided . The Learned AO observed that the since the project under consortium i/e Akshara Gold at 32, Ramkrishna Samadhi Road, Kankurgachhi, Kolkata has not been completed during the year, the assessee consortium has not shown any income from the same other than its undisclosed cash receipts of ₹ 80,82,140/-. The assessment was completed u/s 153C .....

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y operation, lot of assets and documents were found and impounded by the survey team. During the course of search and seizure operation u/s 132 of the Act, Shri Prakash Chandra Agrawalla , one of the key persons of the group, filed a disclosure petition u/s 132(4) of the Act before the ADIT (Investigation) , Kolkata disclosing an amount of ₹ 37,85,080/- and ₹ 8,37,200/- being the unaccounted income of the assessee consortium from sale of residential flats during the financial year 20 .....

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r the Asst Year 2006-07 was filed on 1.10.2010 showing total income of Rs. Nil and the returns for Asst Year 2007-08 and Asst Year 2008-09 were filed on 4.10.2010 showing total income of Rs. Nil and ₹ 46,22,280/- respectively. No return of income was filed for the Asst Years 2003-04 to 2005-06 since the assessee consortium was incorporated only on 2.6.2005. Shri Prakash Chandra Agrawalla gave a statement u/s 131 of the Act on behalf of the group and demonstrated the manner of receiving the .....

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₹ 46,22,280/- for the Asst Year 2008-09. 4.2. The Learned AO initiated penalty proceedings u/s 271(1)(c ) of the Act in respect of both the assesses for the Asst Year 2008-09 after completion of section 153C assessments. During penalty proceedings, it was pleaded by the assessee that the assessee gave a disclosure petition u/s 132(4) of the Act agreeing to offer certain undisclosed income pursuant to the search and proved his bonafide by offering the same undisclosed income in the return f .....

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construed as voluntary offer made by the assesses. 4.3. On first appeal, the assesses raised an additional ground before the Learned CIT(A) challenging the imposition of penalty u/s 271(1)(c ) of the Act on the ground that the income on which penalty was imposed was not assessable at all in Asst Year 2008-09. The assesses pleaded that they were following completed contract method for recognition of revenue for their construction of flats activity and accordingly the construction projects got com .....

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ndra Agrawalla who had clearly demonstrated the manner of deriving the undisclosed income vis a vis the relevant seized documents. In other words, it was pleaded before the Learned CIT(A) that during the course of search, a paper showing sale of flats was found which included full details of sale of flats comprising cash and cheque portion separately. The key person of the group Shri Prakash Chandra Agrawalla admitted that the cash amount received on sale of properties was kept outside the books .....

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therefore, the income from sale of these flats have been assessed only in Asst Year 2009-10. Accordingly any consideration received on sale of flats and income therefrom could be assessed only in the Asst Year 2009-10. It was further argued that in the event of the purchaser of flat cancelling the agreement before the sale was made, the assessee had to return the cash portion also to him. The consideration was received against sale of flats which flats were given possession of or transferred to .....

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e Asst Year 2009-10 was filed on 30.9.2009 declaring total income of ₹ 2,95,64,546/- and assessment u/s 143(3) of the Act was completed on 31.12.2010 accepting the returned income. 4.3.1. It was further argued before the Learned CIT(A) that the assessee could raise a new point even in the penalty proceedings that the particular income was not assessable in the Asst Year under consideration or was not taxable at all. It was argued that Penalty proceedings are separate and independent of ass .....

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Shri Prakash Chandra Agrawalla himself in his statement u/s 132(4) of the Act admitted that the assessee received the cash component on sale of flats (sold in Asst Year 2009-10) in the assessment year 2008-09 and it was on that basis the income was correctly assessed in Asst Year 2008-09. In response to this, the assessee filed objections before the Learned CITA stating that there is no dispute about the facts between the department and assessee that the said amount was received against propose .....

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e same cannot be assessed as income for Asst Year 2008-09. The agreement by the assessee cannot override the provisions of the Act. It was further argued that the assessee is following sale or project completion method under mercantile system of accounting and therefore, even if, the cash was received as advance or earnest money against proposed sale of flats, it cannot be assessed in the year of receipt but has to be assessed as per the system of accounting followed by the assessee and accepted .....

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deleting the penalty made by AO amounting to ₹ 24,97,381/- u/s 271(1) (c) of the Act for the A.Y. 2008-09. The assessee consortium itself admitted receipt of money not disclosed in the books of accounts and on the basis of the said disclosure before DDIT (Inv), addition was made in its income. The assessee consortium was not in appeal for addition in the order passed u/s 153C/143(3) and on the basis of the said disclosure penalty proceeding was initiated and penalty u/s 271(1)(c) was impo .....

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e, the decision of the Hon ble CIT(A) Central-Il, Kolkata, is not acceptable, moreover the tax effect is above the monetary limit specified in the instruction no.3/2011, dt. 09.02.2011 of CBDT. 5. We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove and the various arguments advanced by the assessee before the Learned CITA remain undisputed and hence the same are not reiterated herein for the sake of brevity. 5.1. Fresh plea could be tak .....

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and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction whether it is pecuniary or territorial, or whether it is in respect of the subject matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties. 5.1.1. We also place reliance on the decision of the co-ordinate bench of Delhi Tribunal in the case of Tidewater Marine .....

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ssessee. 5.1.2. Reliance is placed on the decision of Hon ble Allahabad High Court in the case of Jaidayal Pyarelal vs CIT reported in (1973) Tax LR 880 (All), wherein it was held that with reference to a new plea taken in the penalty proceedings which was not taken in the regular assessment proceedings as under:- It is thus clear that the regular assessment order is not a final word upon the plea taken therein or which might have been taken at this stage. The assessee is entitled to show cause .....

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ty without jurisdiction is a nullity and its invalidity can be challenged whenever and wherever it is sought to be enforced or relied upon. 5.2. We find that the undisputed facts are that the assessee has recognized the revenue on sales made in Asst Year 2009-10 , when simultaneously, along with the execution of sale deed, possession was given to the parties and full consideration was received. We are in full agreement with the arguments of the Learned AR that for the purpose of assessment of sa .....

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the Constitution which states that No tax shall be levied or collected except by authority of law . We also place reliance on the following decisions in support of our proposition :- 5.2.1. Decision of Hon ble Supreme Court in the case of Co-operative Sugar (Chitpur) Ltd vs State of Tamilnadu reported in 1993 Supp (4) SCC 42 , wherein it was held that the icnome is to be assessed in accordance with the provisions of law and not in accordance with the agreement with the assessee to be assessed i .....

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rein it was held that even if the assessee credited more amount or excess amount, income can be assessed only which relates to the particular year. 5.2.4. Decision of co-ordinate bench decision of Pune Tribunal in the case of Dhanvarsha Builders & Developers Pvt Ltd vs DCIT reported in (2006) 102 ITD 375 , wherein it was held that : The conduct of search and seizure operation in a particular year does not lead to an inference that the undisclosed income detected as a consequence thereof has .....

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in the case of CIT vs Motilal C. Patel & Co reported in (1988) 173 ITR 666 (Guj) , wherein it was held that earnest money received for sale of property is not assessable in the year of receipt but is assessable in the year of completion of sale of the said flats. 5.2.7. Decision of Hon ble Bombay High Court in the case of Jainarayan Babulal vs CIT reported in (1988) 170 ITR 399 (Bom) , wherein it was held that the entries aggregating to ₹ 24,600/- were made during the course of the fi .....

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ducts Ltd reported in 203 ITR 672 (Cal) wherein it was held that : The question is whether the income which, according to the revenue, the assessee sought to conceal or furnish inaccurate particulars of income was for the assessment year in question. If certain income is not liable to be assessed as income of any particular assessment year, the question of concealing such income or furnishing inaccurate particulars of such income by the assessee while filing the return for the said assessment ye .....

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cannot be levied in the relevant assessment year 2005-06 because the income of capital gain is not at all assessable in that assessment year. Accordingly, we delete the penalty levied and confirmed by lower authorities and this appeal of the assessee is allowed. 5.3. But for the search, income would not have been disclosed We find that the Learned DR argued that but for the search and survey action, the assessee would not have come forward with the offer of undisclosed income by way of disclosu .....

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ccurring in sub-section (1) of section 271 of the Act and contending that even during survey when it was found that the assessee had concealed the particular of his income, it would amount concealment in the course of any proceedings . The words in the course of any proceedings under this Act are prefaced by the satisfaction of the Assessing Officer or the Commissioner of Income-tax (Appeals). When the survey is conducted by a survey team, the question of satisfaction of Assessing Officer or the .....

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ecessarily follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in the income-tax return filed by it. There is sufficient indication of this in the judgment of this Court in the case of CIT v. Mohan Das Hassa Nand [1983] 141 ITR 203 / 13 Taxman 328 and in Reliance Petro products (P.) Ltd. (supra), the Supreme Court has clinched this aspect, viz., the assessee can furnish the particulars of income in his return and everything .....

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y upon the assessee under the provisions of section 271(1)(c) of the Act. Obviously, no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey, may be, it would have not disclosed the income but for the said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. Section 271(1)(c) of the Act has to be construed strictly. Unless it is found that there is .....

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n favour of assessee. 5.3.1. It will be relevant to discuss the following case law at this juncture i.e the decision of ITAT Delhi Bench in the case of Prem Arora vs DCIT reported in (2012) 24 taxmann.com 260 (Delhi) wherein the head notes are reproduced herein below:- Section 271(1)(c ), read with section 153A, of the Income Tax Act, 1961 - Penalty - For Concealment of income - Assessment Year 2004-05 - Whether for purpose of imposition of penalty under section 271(1)(c ) resulting as a result .....

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of such income - Held, yes - Search was conducted on 22-11-2006 and cash was found from possession of assessee - Assessee had drawn cash flow statement for entire period of six years in order to determine undisclosed income based on seized material for each of six assessment years - Whether penalty under section 271(1)(c ) cannot be imposed by invoking Explanation 5 in assessment year 2004-05 in respect of cash found in previous year relevant to assessment year 2007-08 , merely on presumption th .....

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f the Act but not u/s 153A of the Act. When accepted by the AO then there is no concealment of income and consequently penalty u/s 271(1)(c ) of the Act cannot be imposed. The concealment of income is to be determined with regard to the return of income in response to notice u/s 153A of the Act. Therefore, in the present circumstances and facts of the case once the returned wealth is accepted by the AO u/s 153A of the Act then there cannot be a case of concealment of income or furnishing inaccur .....

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Accordingly the assessee is not liable to have penalty u/s 271(1)(c ) of the Act. 5.3.3. We would like to place reliance on the decision of the Jurisdictional High Court in the case of CIT vs Shri Samit Roy in ITA 354 of 2009 dated 3.9.2015, wherein the questions raised before their Lordships and their decision rendered thereon is as below:- (a) WHETHER on the facts and in the circumstances of the case the Income Tax Appellate Tribunal erred in law in upholding the order of Commissioner of Incom .....

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