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Shankar Lal Khandelwal Versus Deputy Commissioner of Income Tax, Central Circle-1, Jaipur

Penalty U/s 271(1)(c) - Held that:- It is undisputed fact that the assessee has disclosed additional income in return filed U/s 153A on the basis of incriminating document found during the course of search. We have considered view that Explanation 5A is not required to be mentioned by the Assessing Officer specifically at the time of initiation or even in the show cause notice issued by the Assessing Officer, but basic defect we found that the ld Assessing Officer has mentioned at the time of in .....

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in the case of CIT Vs Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court )

Thus we are of the considered view that initiation of penalty proceedings is not as per law and Assessing Officer did not have any jurisdiction to impose penalty U/s 271(1)(c) of the Act. - Decided in favour of assessee - ITA No. 878/JP/2013 - Dated:- 11-3-2016 - SHRI R.P. TOLANI, JM AND SHRI T.R. MEENA, AM For The Assessee : Shri K.L. Moolchandani (CA) For The Revenue : Shri O.P. Bhateja (Addl.CIT) ORDE .....

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nd confirmed deserves to be deleted. 2. The sole ground of appeal is against confirming the penalty U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) at ₹ 13,00,000. The assessee derived income from salary, house property, business and other sources. Return for A.Y. 2007-08 was filed on 01/5/2007 declaring total income of ₹ 5,88,850/-. There was a search seizure operation carried out by the department on 16/11/2007. A notice U/s 153A of the Act was issued to the assessee a .....

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lars of income in the assessment order. The assessee challenged the quantum addition before the ld CIT(A) and Hon ble ITAT. Finally the addition remained ₹ 3,96,300/- being disallowance of work in progress (WIP)/construction expenses and addition of ₹ 1,25,000/- as income from taxi hiring. Accordingly the assessment was completed on 30/12/2009. The Assessing Officer issued notice U/s 274 read with Section 271-272 of the Act on 30/12/2009 in prescribed proforma by the Assessing Office .....

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me of ₹ 27,44,100/- as income from sale of plot, ₹ 3,73,798/- as additional income from Met Life Insurance, ₹ 2,46,000/- as profit on sale of electronics items and loss of ₹ 8,31,593/- in additional business of taxi running, which was not disclosed in return U/s 139 of the Act. In response to show cause notice, the ld AR submitted before the Assessing Officer during the penalty proceedings that the addition made under the various heads have been deleted to negligible amou .....

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ply, the ld Assessing Officer has held that submission or the claim made above, may be correct in respect of estimated additions mentioned above on account of WIP/construction expenses and the other additions are not based on estimation and in the form of additional income declared in return U/s 153A of the Act. The ld AR has not stated in respect of additional income disclosed in the return filed in compliance to notice U/s 153A of the Act and as to why such disclosure should not be considered .....

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Officer that the assessee has no explanation for his failure to disclose correct income in original return. Had there been no search in case of assessee, he would have not disclosed this additional income and it would have remained untaxed. His conduct/mens rea/intention is clear, is not disclosing correct and true income in original return and accordingly he is held that he has deliberately concealed the correct and true income in original return. The assessee is liable for penalty U/s 271(1)(c .....

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17/11/2007 at the residence and business premises of the assessee. Notice U/s 153A was issued on 14/2/2008. The appellant filed return in response to this notice on 01/8/2008 declaring income of ₹ 31,25,448/-. The ld Assessing Officer determined the income of the assessee at ₹ 7,87,12,887/- on the basis of seized material. Thereafter the assessee preferred appeal before the Hon ble ITAT and finally addition was confirmed besides the return of ₹ 3,96,300/- on account of disallo .....

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ticulars of income. He was not required to specified explanation 5A to Section 271(1)(c) while recording his satisfaction. She further held that search seizure operation in this case was carried out on 17/11/2008 and explanation 5A to Section 271(1)(c) was deeming provision has been inserted w.e.f. 01/6/2007. As per this Section, explanation 5A has been reproduced by the ld CIT(A) and by considering this Section, the assessee has deemed to conceal particulars of income. She further held that thi .....

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to Section 271(1)(c) i.e. search conducted on or after 01/6/2007, unaccounted income disclosed by the assessee has not been disclosed in the original return filed on 01/5/2007. During the course of search, incriminating documents were found, on that basis, the addition has been made, which has been confirmed by the Hon ble ITAT. The AR of the assessee argued before the ld CIT(A) that the return U/s 153A was filed voluntarily but these arguments were found misrepresented by the ld CIT(A). He exam .....

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referred the statement recorded U/s 132(4) of the assessee dated 16/11/2007, which has been reproduced on page No. 9 and 10 of the ld CIT(A) s order for penalty. On that basis, she held that the assessee was indulging in property business, the investment and profit from which were not declared in the return of income. The assessee claimed voluntarily to the disclosure was factually found incorrect to the ld CIT(A). She further reproduced the finding of the ld CIT(A) for quantum addition and Hon .....

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aws:- (i) Addl.CIT Vs Chandrakantha and another (MP) 205 ITR 607. (ii) CIT Vs. Md. Warasat Hussain (Patna) 171 ITR 405. (iii) A.M. Shah & Co. Vs. CIT (Guj) 238 ITR 415 (iv) CIT Vs Krishnaswamy and Sons (Mad) 219 ITR 157. The ld CIT(A) further relied on the decision of Hon ble Delhi High Court in the case of Cit Vs Usha International Ltd. ITA No. 1696/2006 dated 05/11/2012 wherein penalty U/s 271(1)(c) held justified on the basis of incriminating documents found during the course of search. A .....

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imate para of the assessment order. Penalty proceedings U/s 271(1)(c) for concealing particulars of income and for furnishing inaccurate particulars of income are initiated . During the course of initiation of penalty proceedings, the ld Assessing Officer has not mentioned Explanation 5A inserted to Section 271(1)(c) of the Act, thus penalty has not been initiated within the meaning of Explanation 5A. Formal show cause letter in a cyclostyled form ticking therein the nature of the default as 271 .....

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urnished inaccurate particulars of income. It is further argued that proceedings under this Section were initiated and processed in respect of additions as made during the course of assessment proceedings. This argument also made before the Assessing Officer during the penalty proceedings that all the additions were deleted whatever additions remained are estimated additions. The ld Assessing Officer in the body of the penalty order himself accepted the assessee s submission that the submission .....

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revenue known to the appellant for invoking the provisions of Explanation 5A. Thus, penalty imposed by the Assessing Officer confirmed by the ld CIT(A) is against the principle of equity and natural justice. He further challenged the quantum of penalty calculated by the Assessing Officer. He argued that the assessee disclosed in original retrn of income of ₹ 5,88,850/- after reducing from the returned income U/s 153A at ₹ 31,25,450/-, the additional income is remained to be considere .....

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CIT & ACIT, Bangalore Vs Chandrasekaran (Karn) 9 and decision of Hon'ble Delhi High Court in the case of CIT Vs. M/s Jain Export Private Ltd.. The ld AR has further drawn our attention on expert opinion on Explanation 5A and argued that as per this opinion, no penalty under Explanation 5A to Section 271(1)(c) can be imposed. He further relied on the decision in the case of ITO Vs Gope M. Rochlani of Hon ble ITAT Mumbai G Bench (2013) 158 TTJ (Mum) 120. The operative portion of the order .....

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ssee that in spite assessee s case not being covered by the immunity provided under explanation 5A to section 271(1)(c) I hold that even if the assessee is not in a position to establish conclusively that additional income was offered by him voluntarily but at the same time I find that AO has also not been able to identify the very foundation on the basis of which assessee had offered additional income. The AO neither in the course of assessment proceedings nor in the penalty proceedings has bee .....

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ed that the notice U/s 271 is to be specific on imposing of penalty U/s 271(1)(c) i.e. concealed particulars of income or furnishing inaccurate particulars of income for which he relied on the decision in the case of H. Lakshminarayana Vs. ITO (ITAT Banglore Tribunal (a) ITA Nos. 992 to 996/Ban/2014 order dated 3rd July, 2015 wherein the decision of Hon'ble Karnataka High Court in the case of CIT & Anr. Vs Manjunatha Cotton and Ginning Factory has been considered wherein it has been held .....

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ble to pay penalty. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty pr .....

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notice in prescribed proforma U/s 274 is defective as such ld Assessing Officer ticked without specifically mentioned that penalty proceeding has been initiated for concealed particulars of income or furnished inaccurate particulars of income. He further referred recent decision of Hon ble Kolkata ITAT Tribunal in the case of DCIT Vs Pratap Properties Pvt. Ltd. ITA Nos. 1386 to 1388/Kol/2010 order dated February, 10, 2016 and prayed to delete the penalty confirmed by the ld CIT(A). 5. At the out .....

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atisfied that it is a fit case for initiation of penalty proceeding U/s 271(1)(c) and the same are being initiated below . Thereafter various notices issued to the assessee and in penalty order also, the Assessing Officer has imposed the penalty on concealed income. The ld CIT(A) has thoroughly examined the legal aspect raised during the course of appeal proceedings in appeal order. He further relied on the decision in the case of CIT Vs Prasanna Dugar (2015) 59 taxmann.com 99 (Kol) wherein pena .....

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cess stock was found during the course of search, which was declared after search in the return. The Assessing Officer initiated penalty proceedings for concealing/furnishing of inaccurate particulars of income by the assessee and after due consideration, the penalty was levied. The penalty was set aside by the ld CIT(A) on the ground that in the order of the assessment, requisite satisfaction was not recorded in absence of which levy of penalty was without jurisdiction by following decision of .....

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l which became final. The basis of additions was particulars of income which were concealed by the assessee but came to light during search. In these circumstances, satisfaction of the Assessing Officer that the assessee concealed particulars of assessable income was patent as is clear from the observations in the order of assessment. At the end of the assessment order it was mentioned that penalty proceedings have been initiated separately. The Hon ble Court also considered Sub-Section (1B) of .....

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ted could not affect the validity of levy of penalty. In view of the judgment of this court in Pearey Lal & Sons (EP) Ltd s case (supra), the view taken by the Tribunal cannot be held to be erroneous. The ld DR further referred decision of Hon ble ITAT Jaipur Bench in the case of M/s Grass Field Farms & Resorts Pvt. Ltd. Vs. DCIT in ITA No. 730/JP/2011 A.Y. 2006-07 order date 27/10/2015 wherein penalty was confirmed by the Third Member on purchase price of land was recorded on less value .....

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onducted on 17/1/2008, penalty was imposed on additional income disclosed for various years wherein the Hon ble Tribunal held that the assessee has offered additional income of ₹ 20 lacs over and above the excess cash balance found during the course of search. It is also admitted fact that the revenue did not seize any other incriminating material, which compelled the assessee to make this disclosure. Hence the additional income of ₹ 20 lacs was not a voluntary offer. Accordingly, th .....

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ars of income or furnished inaccurate particulars of income . The ld Assessing Officer again gave notice during the course of penalty proceedings on 23/1/2012 wherein he gave show cause notice U/s 271(1)(c) for imposing of penalty without specifying the limb for reasons to impose the penalty, whether it is for concealed particulars of income or furnished inaccurate particulars of income. The ld CIT(A) has considered all the aspect and held that Explanation 5A to Section 271(1)(c) is applicable a .....

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fically at the time of initiation or even in the show cause notice issued by the Assessing Officer, but basic defect we found that the ld Assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed the particulars of income and furnished inaccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting .....

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the order is that a further prognosis is called for. It would be sufficient compliance with the law that there is a prima facie evidence for concealment of particulars of income or furnishing inaccurate particulars of income. Even after this section, the Assessing Officer has to satisfy the particular limb of initiation of penalty imposable U/s 271(1)(c) of the Act at the time of assessment proceedings. The Hon ble Karnataka High Court in the case of CIT vs. M/s Manjunatha Cotton & Ginning .....

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