TMI Blog2016 (3) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... the show cause notice or from the assessment order. - Decided in favour of assessee - ITA No. 1386/Kol/2010, ITA No. 1387/Kol/2010, ITA No. 1388/Kol/2010 - - - Dated:- 10-2-2016 - Sri Mahavir Singh and Sri M.Balaganesh For The Appellant : Shri Nongothung Jungio, JCIT, ld.Sr.DR For The Respondent : Shri A.K Tibrewal, FCA, ld.AR ORDER Shri Sri M.Balaganesh, AM: These appeals of the revenue arise out of the separate orders of the Learned CIT(A), Central-II, Kolkata in Appeal No. 110/CC-XXVII/CIT(A)-C-II/KOL./09-10 dated 22.3.2010 for Asst Year 2005-06 ; Appeal No. 111/CC-XXVII/CIT(A)-C-II/KOL./09- 10 dated 22.3.2010 for Asst Year 2006-07 and Appeal No. 112/CC-XXVII/CIT(A)-CII/ KOL./09-10 dated 22.3.2010 for Asst Year 2007-08 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. The only issue involved in all these appeals is that whether the assessee is entitled for immunity from levy of penalty on account of Explanation 5 to Section 271(1)(c ) of the Act in respect of income offered after the search but in the return filed u/s 153C of the Act. Since identical issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heets which in the eyes of law are merely dumb documents. The assessee stated that however with a view to cooperating with the department filed returns of income u/s 153C of the Act for the Asst Years 2005-06 2006-07 offering additional income voluntarily and return u/s 139(1) of the Act offering regular income for Asst Year 2007-08 and paid taxes thereon. The Learned AO for the Asst Years 2005-06 , 2006-07 and 2007-08 levied penalty u/s 271(1)(c ) of the Act by stating that the assessee had not demonstrated the manner of deriving the undisclosed income and had made the disclosure u/s 132(4) of the Act followed by offering the same in the returns filed u/s 153C and 139(1) of the Act , as the case may be, only because of the search and not otherwise and in terms of Explanation 5 to section 271(1)(c ) of the Act, the assessee is deemed to have concealed the particulars of income. 3.2. The assessee had offered the undisclosed income based on the cash flow statement and cash rotation statement and had duly offered the interest income arising out of rotation of cash in its return of income. But the Learned AO without appreciating the same and thought that it is an interest expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eventhough not raised in original assessment proceedings , the assessee is not debarred from raising the same in the penalty proceedings as both the proceedings and distinct, separate and independent. He argued that this aspect goes into the root of the matter and hence could be raised at any time during the appellate proceedings and relied on certain case laws in support of his contentions. In response to this, the Learned DR vehemently objected to the same and argued that the validity of search assessment proceedings was never objected by the assessee in the assessment proceedings and accordingly prayed for dismissal of the petition in terms of Rule 27 of the ITAT Rules. 5.1. We have heard the rival submissions on this issue. We are not in agreement with the argument advanced by the Learned AR that the jurisdiction issue could be raised by him in Petition under Rule 27 of ITAT Rules without preferring cross appeal or cross objections. The provisions of Rule 27 of ITAT Rules is reproduced herein below for the sake of convenience :- The respondent though he may not have appealed, may support the order appealed against on any of the grounds decided against him. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Learned CIT(A) regarding non-recording of satisfaction in terms of section 153C of the Act and validity of search assessments thereon. Hence the petition filed by the assessee for the three asst years in terms of Rule 27 of the ITAT Rules is dismissed as unadmitted. 6. Apropos the grounds raised by the revenue, the Learned DR argued that but for the search, the assessee would not have come forward to disclose these undisclosed incomes and hence assessee has concealed the particulars of income and argued that penalty is leviable in terms of Explanation 5 to Section 271(1)(c ) of the Act. He argued that the assessee had not demonstrated the manner of deriving the undisclosed income and hence has not satisfied the cumulative conditions stipulated in Clause 2 of Explanation 5 to section 271(1)(c ) of the Act viz., (1) Assessee should have made disclosure u/s 132(4) of the Act followed by disclosure of the same in the return of income ; (2) Assessee specifies in the disclosure statement the manner in which undisclosed income was derived by him and (3) assessee pays the tax together with interest on such undisclosed income. He further argued that, even assuming without conced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse to this, the Learned DR relied on the provisions of Section 271(1B) of the Act which is introduced with retrospective effect from 1.4.1989. He relied on various case laws in support of his various contentions stated supra. 8. We have heard the rival submissions and perused the materials available on record including the various paper books filed by the assessee containing the entire assessment and appellate records and the compilation of various case laws on the impugned subject. The facts stated hereinabove remain undisputed and the same are not reiterated herein for the sake of brevity. We find that no addition has been made in the assessment by the Learned AO in the search assessments completed for Asst Years 2005-06 , 2006-07 and 2007-08. Even the undisclosed interest income though added separately by the Learned AO in the assessment orders for the Asst Years 2005-06 and 2007-08, we find that the same has been duly considered already by the assessee in its computation of income and hence the same cannot be construed as an addition made to the returned income. The revenue had raised an objection for granting immunity contemplated under clause 2 of Explanation 5 to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pages 23 to 27 - Pages 28 to 32 - . Page 33 - .. Page 34 - .. Pages 35 to 37 - .. Pages 39 to 46 . Q. No. 19. Please go through the bunch of loose sheets marked HRV -10 and explain? Ans. This bound pages 1 to 53 relates to accounted and unaccounted transaction of M/s PPL. We find that the assessee had demonstrated the manner of deriving the undisclosed income vis- a- vis the seized documents to some extent and hence the statement of the Learned AO that the same was not demonstrated at all is not acceptable. We also hold that the manner of deriving the undisclosed income need not be demonstrated by the Learned AO in full when substantial compliance of immunity clauses have been satisfied by the assessee viz. filing of disclosure petition u/s 132(4) followed by filing of return thereon u/s 153C and paying taxes thereon. We place reliance on the decision of the Hon ble Gujarat High Court in the case of CIT vs Mahendra C Shah reported in (2008) 299 ITR 305 (Guj) , it was held that at page 315 :- In so far as the alleged failure on the part of the assessee to specify in the statement under section 132(4) of the Act regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C and u/s 139(1) of the Act. 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 of search assessments made under section 153A, original return of income filed under section 139 cannot be considered Held, Yes Whether concealment of income has to be seen with reference to additional income brought to tax over and above income returned by assessee in response to notice issued under section 153A and, therefore, once returned income under section 153A is accepted by Assessing Officer, it can neither be a case of concealment of income nor furnishing of inaccurate particulars 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act has to be understood as required to be furnished which in turn has to be understood as a return required to be furnished in response to notice u/s 153A of the Act. In this regard, we place reliance on the decision of the Jurisdictional Calcutta High Court in the case of CIT vs Brijendra Gupta in ITA No. 330 of 2009 dated 8.6.2015 , wherein the question raised before their Lordships and their decision rendered thereon is as under:- The following question of law was suggested by the revenue:- Whether on the facts and circumstances of the case, the Learned Tribunal was justified in law in confirming the order of the CIT(A) in deleting the penalty levied under section 271(1)(c ) of the Income Tax Act, 1961 on the ground that the assessee is entitled to immunity from penalty on account of Explanation 5 to section 271(1)(c ) when the assessee s case does not come under the purview of the exceptions provided therein. Held that : Clause (a) of Explanation 5 to section 271(1)(c ) contemplates income for any previous year for which returns has been furnished but the income since disclosed had not been shown. It is axiomatic that if such income had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 Income Tax (Appeal) holding their amounts disclosing after search, which was not previously offered to tax is not a concealment on the part of the respondent / assessee ? (b) 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 Income Tax (Appeal) holding the Assessing Officer was not justified in levying penalty under section 271(1)(c ) of the Income Tax Act, 1961 for the Assessment Years 2003-04 to 2005-06 ? Since both the questions are covered by the judgements passed by this Court in ITA 39 of 2010 (Commissioner of Income Tax , Central I, Kolkata vs Amardeep Singh Dhanjal) and in ITA 330 of 2009 (Commissioner of Income Tax, Central III, Kolkata vs Brijendra Gupta), both the questions are answered in the negative, against the revenue and in favour of the assessee. The appeal is dismissed. B) Jurisdictional High Court in the case of CIT vs Tapan Kumar Ghosh in ITA 6 of 2010 dated 3.9.2015 , wherein the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e returned under section 153A, if any. 14. Further, in the present case, it appears from the record that the assesses had satisfied all the conditions which are required for claiming immunity from payment of penalty under section 271(1)(c )of the Act. The provision does not specify any time limit during which the aforesaid amount i.e the amount of penalty with interest has to be paid. Admittedly when the assessee herein have paid the entire amount with interest, the Assessing Officer ought to have granted them immunity available under Section 271(1)(c ) of the Income Tax Act. 18. For the foregoing reasons, the present appeals stand allowed. The order of the Tribunal is quashed and set aside. Consequently, the order of the CIT(A) is restored. The question of law involved in this appeals is answered in favour of the assesee and against the revenue. D. Rajasthan High Court in the case of CIT vs Kanhaialal reported in (2008) 299 ITR 19 (Raj) , it was held that :- Where the Assessing Officer had found the income to relate to different assessment years, in different volumes, as contra distinguished to the one submitted by the assessee, and had accordingly ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of time limit under section 139(1) of the Act whereas the due date for filing of return under section 139(1) of the Act for the assessment years 2001-02 to 2005-06 had already expired and returns filed prior to the date of search and for the assessment years 2006-07 also the return was not filed on the due date. We have heard Mr.Sinha extensively and gone through the impugned judgement and order of the Learned Tribunal. The Learned Tribunal has recorded the fact that the record does not show that the Assessing Officer had detected the additional income in the assessment proceedings. It further recorded upon perusal of the records that small variation in income was due to bona fide mistakes and difficulties in working out the undisclosed income. It is further recorded that the voluntary action on the part of the assessee to settle the tax issues for peace of mind appears from the conduct of the assessee. While recording the aforesaid fact, the Learned Tribunal ultimately relied on a decision of the Tribunal rendered in the case of Additional CIT vs Prem Chand Garg. Mr. Sinha, however, is unable to say whether the earlier decision of the Tribunal in the case of Prem Chand G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether proper satisfaction was arrived at by the AO for initiating penalty proceedings u/s.271(1)(c), in the course of concluding the assessment proceedings, wherein the additions in respect of which penalty was imposed were made. On the above issue, the first aspect which, we notice is that in the order of assessment, which we have extracted in the earlier part of this order, nowhere spells out or indicates that the AO was of the view that the assessee was guilty of either concealing particulars of income or furnishing inaccurate particulars of income. The offer to tax of income by the assessee has just been accepted. It is no doubt true that it is not the requirement of the law that the satisfaction has to be recorded in a particular manner, especially after the introduction of the provisions of Sec.271(1B) of the Act with retrospective effect from 1.4.1989. Nevertheless, as laid down by the Hon ble Delhi High Court in the case of Ms.Madhushree Gupta (supra), the position of law both pre and post Sec.271(1B) of the Act is similar, inasmuch, the AO will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing . 7. The Revenue places reliance only on the sentence appearing in para-10 of the judgment without reading it in the context of the observations in the last portion of para-9 of the said judgment. Therefore even the Hon ble supreme court s decision suggests that the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. If the AO accepts all the contentions of the assessee and the offer of income that has not been declared in the return of income to tax without indicating either directly or indirectly that the assessee has concealed particulars of income or furnished inaccurate particulars of income, it cannot be said that satisfaction for initiation of penalty proceedings is discernible from the order of assessment. If the assessee in good faith offers income to tax voluntarily prior to any positive detection by the AO, such voluntary offer cannot be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to Section 271(1)( c) of the Act and hence entitled for immunity from levy of penalty for all the assessment years under appeal; - the assessee had filed the returns u/s 153C and u/s 139(1) of the Act as the case may be, and the same has been accepted in the search assessments and regular assessment, no penalty u/s 271(1)(c ) of the Act could be levied ; - the expression to be furnished mentioned in Clause 2 of Explanation 5 to Section 271(1)(c ) has to be construed as required to be furnished u/s 153A of the Act - no satisfaction with regard to specific charge of concealment, as contemplated in section two limbs of section 271(1)(c ) of the Act , was recorded by the Learned AO and the same is not discernible either from the show cause notice or from the assessment order; Accordingly, the grounds raised by the revenue for all the assessment years are dismissed. 9. To sum up, the appeals of the revenue are dismissed and the petition filed by the assessee under Rule 27 for the three assessment years are also dismissed. THIS ORDER IS PRONOUNCED IN OPEN COURT ON Dt 10 -02-2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
