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Basil International Ltd. Versus Deputy Commissioner of Income Tax

2016 (4) TMI 206 - ITAT KOLKATA

Penalty u/s 271(1)(C) - income surrendered during the course of search - Held that:- any observation or finding recorded by the Assessing Officer in the assessment orders for all the four years under consideration, from which the satisfaction as required to be arrived at by him to initiate penalty proceedings under section 271(1)(c) is discernable. However, he has not been able to pinpoint any such observation or finding recorded by the Assessing Officer in this context. A perusal of the assessm .....

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n the assessment order, the initiation of penalty proceedings itself was bad in law and the penalties imposed in pursuance of such initiation are not sustainable.

It is also observed that the income surrendered during the course of search was declared by the assessee in the returns of income filed for three years under consideration, i.e. A.Y. 2004-05, 2005-06 & 2006-07 in response to the notices issued by the Assessing Officer under section 153A and the income so declared was accepte .....

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als), Central-III, Kolkata dated 28.08.2009, whereby he confirmed the penalties of ₹ 5,16,000/-, ₹ 23,54,000/-, ₹ 42,21,500/- and ₹ 25,800/- imposed by the Assessing Officer under section 271(1)(c) of the Act for assessment years 2004-2005, 2005-2006, 2006-2007 & 2007-2008 respectively. 2. The assessee in the present case is a Company which belongs to Basil/ Appelline Group. A search and seizure action under section 132 was conducted in the cases belonging to the said .....

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, a sum of ₹ 14,38,310, ₹ 65,62,943/- and ₹ 1,25,05,270/- was offered in the hands of the assessee for A.Y. 2004-05, 2005-06 and 2006-07 respectively in the returns of income filed in response to notices issued by the Assessing Officer under section 153A of the Act. The return of income for A.Y. 2007- 08 was regularly filed by the assessee under section 139(1) wherein additional income of ₹ 99,91,050/- was declared by the assessee and the same was claimed to be set off ag .....

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assessee in the return of income. 3. Subsequently penalty proceedings under section 271(1)(c) were initiated by the Assessing Officer in respect of additional income offered by the assessee in the returns of income filed in response to the notices issued under section 153A for A.Y. 2004-05, 2005-06 & 2006-07. Penalty proceedings under section 271(1)(c) were also initiated by the Assessing Officer in respect of additional income of ₹ 76,665/- offered by the assessee during the course of .....

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d acceptable by the Assessing Officer. According to him, the additional income was disclosed by the assessee only as a result of search and so the disclosure made by the assessee could not be considered as voluntary. He, therefore, proceeded to impose penalties of ₹ 5,16,000/-, 23,54,000/-, ₹ 42,21,500/- and ₹ 25,800/- for A.Y. 2004-05, 2005-06, 2006-07 & 2007-08 respectively being 100% of the tax sought to be evaded by the assesese in respect of additional income offered a .....

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turns of income and tax thereon having been paid, no penalty under section 271(1)(c) was leviable as per Clause 2 of Explanation 5 to sect ion 271(1)(c). This stand of the assessee was not found acceptable by the ld. CIT(Appeals). According to him, the income disclosed by the assessee was on account of undisclosed expenditure and not on account of any income utilized for acquiring money, bullion, jewellery or other valuable article or things found during the course of search. He also noted that .....

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s of the ld. CIT(Appeals), the assessee has preferred these appeals before the Tribunal. 5. The ld. Counsel for the assessee mainly raised three contentions in support of the assessee's case that the penalties imposed by the Assessing Officer under section 271(1)(c) and confirmed by the ld. CIT(Appeals) for all the four years under consideration are not sustainable. Firstly, he took us through the assessment orders passed by the Assessing Officer to show that the satisfaction required for in .....

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ce thereof are liable to be cancel led. Secondly, he contended that the income declared by the assessee in response to the not ices issued by the Assessing Officer under section 153A having been accepted in the assessments by the Assessing Officer without making any further addition, there was no case of any concealment of particulars of his income by the assesee or furnishing of inaccurate particulars of such income warranting levy of penalty as held by the Hon'ble Gujarat High Court in the .....

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ties below in support of the Revenue's case that the case of the assesese is a f it case to impose penalties under section 271(1)(c). He contended that the additional income was surrendered and offered by the assesese to tax in the returns of income filed in response to notice under section 153A only as a result of adverse findings of the search and seizure action and the same, therefore, cannot be considered as voluntary disclosure made by the assessee to exonerate him from the levy of pena .....

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he provisions of section 271(1B) of the Act as well as the decision of the Hon'ble Delhi High Court in the case of Ms. Madhushree Gupta -vs.- Union of India reported in 317 ITR 107 (Del.) and that of the Hon'ble Supreme Court in the case of MAK Data Pvt. Limited -vs. - CIT reported in 358 ITR 593 (SC) and it is worthwhile to refer to the observations recorded in this context by the Tribunal in paragraphs no. 6 & 7 of its order, which are extracted below:- "6. We shall now deal w .....

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cealing 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), th .....

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e of initiation of penalty proceeding, the order passed by the AO need not reflect satisfaction vis-a-vis each and every item of addition or disallowance, if overall sense gathered from the order is that a further prognosis is called for. The decision of the Hon'ble Supreme Court in the case of MAK Data (P) Ltd. (supra) has to be understood in the context of the facts of the said case. The relevant portion of the judgment in the aforesaid case, reads thus: "9. We are of the view that th .....

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and assessment orders and blank share transfer 8 deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered la .....

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income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. 10. The 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 obse .....

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e 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 taken advantage of by the AO to initiate penalty proceedings against the assessee without specifying the reasons why penalty proceedings are initiated u/s.271( .....

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nal in the case of Suvaprasanna Bhattacharya (supra), the ld. D.R. was required by us to point out any observation or finding recorded by the Assessing Officer in the assessment orders for all the four years under consideration, from which the satisfaction as required to be arrived at by him to initiate penalty proceedings under section 271(1)(c) is discernable. However, he has not been able to pinpoint any such observation or finding recorded by the Assessing Officer in this context. A perusal .....

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