TMI Blog2014 (3) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... sons as his own by the assessee on 28.01.2010. There was only an enquiry in progress on such accounts by the Department. Well before any notice was issued by the Department, assessee had come up with his disclosure and filed an affidavit before DDI(Investigation). Even Explanation (1) to Section 271(1)(c) could not have been applied on the assessee since assessee had offered explanation and furnished all particulars of the income disclosed by him. As already mentioned by us, particulars of every item of income offered by the assessee and added by the Assessing Officer is clearly available in the assessment order for assessment year 2009-10, wherein Assessing Officer has elaborately analyzed the information and particulars given by the assessee, as to how the credits in various bank accounts had come in. None of such explanation given by the assessee were found to be untrue or incorrect.- Decided in favour of assessee Penalty under section 271AAA - Held that:- The income finally computed by the Assessing Officer was less than the sum of ₹ 3,00,00,000/- declared by the assessee prior to the search in his letter dated 28.01.2010addressed to the DDIT(Investigation). In the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on information from Financial Intelligence Unit (In short FIU ) came to know that huge sums of money were deposited and withdrawn from certain Bank accounts with M/s. Vijaya Bank in the name of the following five individuals:- (1) Vijay Sankar Pandey, (2) Pradip Roy Chowdhury, (3) Biswamoy Mukherjee, (4) Sohanlal Jain, (5) Gopal Kumar Agarwal, 3. It seems summons under section 131 of the Act were issued on the above persons for explaining the source of the deposits. In response to such summons, Pradip Roy Chowdhury and Biswamoy Mukherjee among the above five persons appeared before DDIT(Investigation), Unit-III, Kolkata and stated in their statements given on 30.12.2009 that existence of such accounts, came to their knowledge only when they received letters from the Bank in March 2009. Their version was that assessee was their youth time friend, and they had accommodated him by signing Bank accounts opening form and cheques. In other words, according to them, except for signing the forms, they had no knowledge as to the transactions in the Bank accounts in their names. 4. On 28.01.2010, assessee wrote a letter to DDIT (Investigation), owning up the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of search. On 24.02.2010, during search operation at office premises, books, documents adn pen drive were seized as per Annexure A to Panchanama having identification marks AKS/Off/1 to AKS/Off/18 and AKS/Off/PD/1. Also cash of ₹ 86,370/- was found out of which ₹ 50,000/- was seized as per Annexure-1 to the Panchanama, details of bank accounts found were inventorized as per Annexure-2 to the Panchanama and passport of Ashoke Surana and others inventorised as per Annexure-3 to the Panchanama. Here during search Shri Ashoke Surana, assessee s brother, was present and his statement was also recorded u/s 132(4). During search at 126A, Sarat Bose Road, Kolkata-26 on 19.04.2010, some further documents were inventorized as per AKS/Off/19 to AKS/Off/21 and seized and also the statement of Sri Ajit Kumar Surana was again recorded . 5. Notices under section 153A of the Act were issued to the assessee for various assessment years starting from assessment years 2004-05 to 2009-10, on 15.09.2010. At this juncture, it has to be mentioned that, assessee had prior to the search, filed regular returns for all the assessment years involved, except for assessment year 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was revised thrice, First on 30.12.2010 to ₹ 2,63,24,313/-, second on 10.08.2011 to Rs.,22,25,130/- and third on 29.12.2011 to ₹ 1,92,56,130/-. Income as per the last revised return was accepted and assessment for 2010-11 completed under section 143(3) on 30.12.2011. 8. Reasons mentioned by assessee for revising the income during the course of assessment proceeding for assessment years 2007-08 and 2009-10, as can be culled out from the respective assessment orders, are summarized hereunder:- (i) Recording the correct figure of deposits in the five bank accounts for assessment year 2007-08, (ii) Reworking the correct figure of deposits in Bank account, by including the bank account of Rina Sinha, with M/s. DCB Bank, Kolkata, owned up by the assessee, as his own for assessment year 2009-10. 9. Reasons given by Assessing Officer for making further additions, apart from what was offered by assessee, for assessment year 2009-10 are summarized hereunder:- (i) Inclusion of alleged earnings from sale of shares of M/s. Bangla International Pvt. Ltd. done by one M/s. Kingshuk Niwas Pvt. Ltd. based on a statement given by the assessee on 24.02.2010, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closure was conditional in that penalty proceeding were not to be initiated. (iii) Disclosure was bonafide and made to buy peace. (iv) Apart from the statement given by the assessee, nothing was brought on record to show that the bank accounts belonged to the assessee. 13. Assessing Officer was least impressed by the above reply. He proceeded to levy penalty under section 271(1)(c) for various assessment years at 100% of the tax sought to be avoided and for assessment year 2010-11 under Section 271AAA at 10% of the undisclosed income. Details of the penalties levied is summarized hereunder: Assessment Year Penalty under section 271(1)(c) Penalty under section 271AAA 2006-07 2,42,212/- ---- 2007-08 19,74,365/- ---- 2009-10 4,91,49,432/- ---- 2010-11 57,88,836 1,83,346/- 14. Assessee moved in appeal before the CIT(Appeals) for all the above years and was unsuccessful in any. Vis-a-vis the levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exonerate the assessee from the liability to penalty u/s 271(1)(c) of the Act. In the case of Shreeji Traders vs.- DCIT, Central Circle, Thane 136 ITD 249 (Mum), it is held that where despite search, assessee did not want to disclose real concealed income, the penalty is correctly levied u/s 271(1)(c). In the case of DCIT, Central Circle-1, Kolkata vs.- Sushma Devi Agarwal 133 ITD 155 (Kol)(TM), it is held that the penalty u/s 271(1)(c) is rightly imposed where revised return filed after detection of concealment by the AO. In the case of appellant, he agreed to various additions only after the concealment detected by the AO/ Department. 6.6. Further, as per the law, in the case of appellant the provisions of Explanation 5A to section 271(1)(c) are applicable because for the year under appeal the original return of income was filed by the appellant, but no income as per the benami bank accounts was declared therein. The additional income3 was declared by the appellant in the return filed in response to notice u/s 153A issued subsequent to the search operation. The provisions of Explanation 5A of section 271(1)(c) reads as under :- Explanation 5A Where, in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come relates to the previous year which has ended before the date of search. The appellant had filed return of income for such previous year but did not declare the income therein. Under the circumstances, even if the appellant has declared the undisclosed income in the return filed u/s 153A, he will be deemed to have concealed the particulars of his income for the purpose of imposition of penalty. As per Explanation 5A to section 271(1)(c), no immunity has been provided from the penalty if the undisclosed income was declared u/s 132(4) in the course of search proceedings, as provided earlier by Explanation 5 of this section. As far as the income admitted by the appellant in the course of assessment proceedings either by filing the letters or when confronted by the AO is concerned, t4he penalty is imposable under section 271(1)(c) because said admission was not voluntary but the result of enquiries conducted against the appellant. In view of above, I am of the opinion that the AO was justified in imposing the penalty u/s 271(1)(c) of the Act because the disclosure made by the appellant, as claimed by him, before the date of search or in the course of assessment proceedings wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g suo-motu returned the income, there could be no element of concealment or furnishing of inaccurate particulars. According to ld. A.R., Revenue cannot take refuge under any other explanatory clauses to Section 271(1)(c), since Explanation 5A was specifically intended for concealment arising in search cases. Reliance was placed on the following decisions: (i) M/s. Unimark Remedies Ltd. vs.- ACIT (ITA Nos. 409 411/Mum./2009, 290-292/Mum/2009, 3817/Mum/2011 dated 26.09.2012) of Mumbai Bench of the Tribunal. (ii) Sri Kiran Shah vs.- ACIT [ITA Nos. 5919 to 5925/Mum/2011, order dated 08.01.2014] again of Mumbai Bench of this Tribunal) In any case according to the ld. A.R., assessee having given full particulars of the income in the returns filed could not be fastened with a penalty. There was no intention to conceal. Revision of the income during the course of assessment proceedings for various years were only for correction of arithmetical mistakes in the calculation of credits in the respective bank accounts, which had to be broken up in to various years. There was no intention to conceal. As per the ld. A.R., assessee had not furnished any inaccurate particulars, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order that a sum of ₹ 1,86,49,244/- was disclosed by the assessee on 29.12.2011, in the revised return, after detection of the concealed income. According to him this observation was not correct since assessee had on 19.04.2010, prior to the search offered income of ₹ 3,00,00,000/- for assessment year 2010-11. The final assessed income came to ₹ 1,92,56,130/- only. Relying on the decision of the Hon ble Chandigarh Bench of this Tribunal in the case of JCIT vs.- Bhagwandas Gar [158 TTJ 132 (Chandigarh)] ld. A.R. submitted that income even if it was shown in a revised return would not attract levy of penalty if such income stood included in the disclosure statement already given by the assessee. 21. Ld. A.R. further submitted that Assessing Officer had not initiated any penalty proceeding in the assessment order for assessment year 2009-10 in so far as the addition of ₹ 4,00,56,380/- made for Bank deposits in the name of Smt. Rina Sinha. Assessing Officer had not considered it as concealed income. Assessing Officer had mentioned initiation of penalty proceedings, only for the addition of ₹ 5,29,50,000/- being alleged share sale effected by M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment proceedings, he had clearly given details and particulars of the source from where the funds had come into the various Bank accounts, leaving no scope for any levy of penalty for non-disclosure. 24. Per contra, ld. D.R. submitted that the disclosure of Bank accounts argued by the assessee to have been made voluntarily done was not actually so. When assessee came to know that investigation was being conducted based on inputs from FIU, with respect to deposits in Bank accounts of the five persons and finding that the said account holders had admitted such Bank accounts to have been opened for and on behalf of the assessee, he came forward with a declaration before the Revenue. Just because the declaration was prior to the date of search would not, according to the ld. D.R. make it a voluntary one. Countering the argument of the assessee that satisfaction was not recorded with regard to some of the items on which additions were made, Ld. D.R. submitted that such satisfaction was clearly discernable on a reading of the assessment order and this was very much in the mind of the Assessing Officer. At the end of the each assessment order, Assessing Officer had clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bank accounts, except for their rememberance that some account opening forms were signed by them, at the behest of the assessee. In the case of account of Smt. Rina Sinha, it seems she had submitted a letter on 09.12.2011 in response to a summons, wherein she stated that her account with M/s. DCB Bank was solely maintained by the assessee. Assessee had in his letter dated 19.04.2010 addressed to DDIT (Investigation) specifically stated that credits in the above bank accounts represented undisclosed income deployed by him. The said letter of the assessee, which makes a specific reference to his earlier disclosure dated on 29.01.2010, is reproduced hereunder:- From: Ajit Kumar Surana, Flat No. 1B, 29, Shakespeare Sarani, Kolkata-700 017 (PAN : ALBPS 1149 Q] 19th April, 2010 To The Ld. DDIT (Inv.) Unit-III(3). Aayakar Bhawan Annexe, P-13, Chowringhee Square, Kolkata-700 069 Sub. : Disclosure of income u/s 132(4) of the Income Tax Act, 1961, - Petition. Search and seizure operations were conducted in my office premises at 126A, Surat Bose Road, Ground Floor, Kolkata and in my residential premises at Flat No. 1B, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010, well after the declaration filed by the assessee to DDIT(Investigation) on 29.01.2010. Additions made by the Assessing Officer in all the years except for assessment year 2009-10 were entirely for the deposits in the Bank accounts of the six persons. In the returns filed under section 139(1), prior to the search assessee had not included any such amount. However, in the returns filed pursuant to notices under section 153A assessee had included the deposits in the impugned Bank accounts except for the deposits in the name of Smt. Rina Sinha. Though ld. Counsel for the assessee argued that penalty proceedings were not initiated in accordance with law, even if we ignore that argument, it is clear that income offered by the assessee through his declaration dated 28.01.2010, filed on 29.01.2010, prior to the search operation cannot be considered as a sum which was concealed or a sum on which inaccurate particulars were filed, in respect of assessments completed under section 153A and 143(3) of the Act, after the search. 29. Nature of income whether it was based on a voluntary disclosure by the assessee or investigation done by the Department would be important only in a penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, for the purpose of imposition of penalty u/s. 271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered. Further, in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A. As held above the penalty u/s. 271(1)(c) is impossible when there is variation in assessed and return income. If there is no variation, there will be no concealment. When there is no concealment, question of levy of penalty u/s. 271(1)(c) will not arise. This is settled position of law. The concept of voluntary return of income may be important in penalty proceedings initiated in course of normal assessment proceedings made u/s. 143(3) or 147 but not under section 153A. From above discussion it follows that where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed. 14. This view has also been followed by the Mumbai Bench in the case of M/s. Unimark Remedies Ltd Vs ACIT in ITA Nos. 409 to 411/M/09 and ITA Nos. 290 to 292/M/09 wherein the Tribunal at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not found to be the owner of any such things mentioned in Explanation-5 therefore explanation -5 does not apply on the facts of the case. The decisions relied upon by the Ld. DR relate to the cases where explanation-5/5A were applicable. Therefore, all the decisions relied on by the Ld. DR are misplaced. The DR has also referred to Sec. 271AAA but that section has been brought in statute by the Finance Act 2007 w.e.f 1.4.2007. Therefore, that section is not applicable in the present case. 15.2. Considering the facts under appeal with the judicial decisions relied upon and cited hereinabove, we do not find any substance for the levy of penalty u/s. 271(1)(c) of the Act. The AO is directed to delete the penalty so levied in all the assessment years under consideration. The appeals filed by the assessee for all the above assessment years are allowed . 30. No doubt here in of the assessee s case, what was finally assessed, except for assessment year 2006-07 was higher than the income returned in the return filed pursuant to notice under section 153A of the Act. For assessment year 2007-08, such difference was only due to correction of mistakes in calculation of deposits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k accounts held in different names, due to various developments with regard to the investigation into such Bank accounts. Still it remains a fact that such declaration was given prior to the search. Therefore, deposits in such Bank accounts cannot be considered as something which came out of the search. In our opinion, application of Explanation 5A is ousted at the threshold. 32. That concealment of income is to be determined with reference to return of income filed in respect to notice under section 153A of the Act and that there is complete detachment of such proceedings from regular assessment proceedings is clearly coming out of the decision of the Coordinate Bench in the case of Unimark Remedies Limited vs.- ACIT [ITA Nos. 409-411/Mum/2009 290-292/Mum/2009- order dated 26.09.2012[ (paper book pages 186 to 208). Para 24 of the said order of the Coordinate Bench is relevant and reproduced hereunder:- 24. The Assessing Officer has invoked provisions of Explanation 5 to sec. 271(1)(c ) while imposing penalty in assessment year 2004-05. It is also important to note that Chapter XIVB was inserted in the statute by the Finance Act, 1995 w.e.f. 1.7.1995 which prescribed spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for initiating penalty proceedings. A reading of the judgment of the Hon ble Apex Court clearly show that though such a requirement of recording of satisfaction is not there, the fundamental aspect of satisfaction being present has not been dispensed with. Assessment order for assessment year 2009-10 in which substantial additions have been done by the Assessing Officer, in our opinion, does not at any place show that Assessing Officer had reached any such satisfaction. Except for the addition of ₹ 5,29,15,000/- for alleged sale of shares of M/s. Bangla Entertainment Pvt. Ltd. and addition of ₹ 15,00,000/- for share application money reflected in seized documents, on other additions, namely for deposits in the bank accounts of Mrs. Rina Sinha and for minor s income of ₹ 1,93,500/- clubbed, there is nothing to show any concealment to have been done by the assessee. Assessing Officer simply mentioned that assessee had owned up the Bank account of one Smt. Rina Sinha with Development Credit Bank, Brabourne Road Branch, Kolkata. There is nothing on record to show that such disclosure made by the assessee during the course of assessment proceedings was on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective persons and copies of the same has already been furnished to you. Under the circumstances, this sum of ₹ 10,15,000/- shall not part of my income . It is clearly mentioned by the Assessing Officer that the explanations given by the assessee were reasonable and acceptable in so far as the disclosure in respect of Bank accounts of Smt. Rina Sinha and other five accounts were concerned. 34. As to the addition of ₹ 5,29,50,000/- for the alleged sale of shares of M/s. Bangla Entertainment Pvt. Ltd., by M/s. Kingshuk Niwas, again for assessment year 2009-10, Assessing Officer has indeed stated that penalty proceeding was being initiated separately. The question therefore is whether such amount can be considered as concealed or a sum on which inaccurate particulars were filed by the assessee. Vis-a-vis this addition the question raised by the Assessing Officer and the answer given by the assessee is reproduced hereunder:- Q. 4 : As per the chart of shareholders submitted by you there was one share holder of M/s. Bangla Entertainment Pvt. Ltd. by the name of M/s. Kingshuk Niwas Pvt. Ltd. of 40, Weston Street, Kolkata-12, who had sold 5000 shares to M/s. Highl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s you may recall that M/s. Krishna Trading had received ₹ 60 lakhs from M/s. Highlight Commodeal on sale of 2500 shares of M/s. Bangla Entertainment to it. What is your comments on this circular flow of fund starting with sale of shares of a company where you and your family members/ companies held majority shares, and ending in receipt of at least ₹ 15 lakhs, apparently as share application money, by two of your family companies namely M/s. Gaurisuta Business )P)Ltd. and Channel Eight Studio Ltd.? Ans. : I have no direct link with these companies and I am not aware of their day to day transactions. The office where search were conducted is also the registered office of those companies. However, if your honour considers the sum involved as income in my hand for the relevant period then to avoid litigation and buy peace I am ready to accept such addition of ₹ 15 lakhs. However, I hope your honour will be kind enough not to initiate any penalty proceedings for such addition. In our opinion, no concealment whatsoever can be made out from the answer given by the assessee on the above amount. On the other hand, assessee clearly states that he had no dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under section 271 read with Section 274 of the Income Tax Act, 1961 . As against the above facts, in the case before us there was no survey or search at any place, prior to the disclosure of the bank accounts in the name of five persons as his own by the assessee on 28.01.2010. There was only an enquiry in progress on such accounts by the Department. Well before any notice was issued by the Department, assessee had come up with his disclosure and filed an affidavit before DDI(Investigation). Even Explanation (1) to Section 271(1)(c) could not have been applied on the assessee since assessee had offered explanation and furnished all particulars of the income discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders in due course. Subsequently, these details were filed by the assessee during November, 2011 and afterwards, these detailed information i.e. name of shareholders, number of shares held by them etc. were matched . Assessee had even prior to the date of search requested the Department to appropriate towards tax, the balance of ₹ 5.16 crores lying in the Bank accounts towards his tax dues. There is no case for the Revenue that there remained any tax and interest payable by the assessee for assessment year 2010-11. Thus, in our opinion, all the three conditions specified in sub-section 2 of Section 271AAA stood satisfied. In the case of CIT vs.- Pioneer Marble Interior Pvt. Ltd. (2012) 68 DTR 01, Coordinate Bench of this Tribunal held as under :- 7. We find that under the scheme of Section 271 AAA, there is a complete paradigm shift so far as penalty in respect of unaccounted income unearthed as a result of search operation carried out on or after 1st June 2007 is concerned. Unlike in the case of penalty under section 271(1)(c), Section 271 AAA, without any reference to findings or presumptions of concealment of income or the findings or presumptions of furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening portion of section 271(1) of the Act requires the Assessing Officer to record satisfaction in the course of such proceedings, and the satisfaction has to be as regards the concealment of particulars of income or furnishing inaccurate particulars of income. Section 271 AAA, as the statute unambiguously provides, does not require any subjective satisfaction of the Assessing Officer to be arrived at during the assessment proceedings, and, therefore, the outer limit of payment before the conclusion of assessment proceedings will not come into play . 38. In the case of Dinesh Kumar Ambalal vs.- CIT (supra), Hyderabad Bench of this Tribunal in relation to whether section 271AAA or section 271(1)(c) is to be applied with regard to levy of penalty held as under :- 9. Coming to the issue of levy of penalty, assessee s contention that Explanation (5A) does not apply to the facts of the case is correct. Explanation 5A to S.271(1)(c) reads as under- Explanation 5A.- Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of- (i) any money, bullion, jewellery or other val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, the seizure was within the financial year, which ended on 31.3.2009 and therefore, the provisions of Explanation 5A do not apply, as the previous year has not ended before the date of search. The assessee s contention that provision of Explanation 5A to S.271(1)(c) does not apply has to be accepted in view of the specific provisions of the said Explanation. 10. On the contrary, the provision of S.271AAA, as contended by the assessee, are applicable. The said provisions read as under- Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahd/2012 vide order dated 20.07.2012, and the said decision relied upon by the assessee clearly applies to the facts of the present case. In that case also, the facts are that for assessment year 2009-10, the assessee admitted income of ₹ 35,53,000 from purchase and sale of land consequent to search conducted on 24.09.2008, when the penalty was levied under S.271(1)(c), the learned CIT(A) deleted the penalty, and the same was confirmed by the Tribunal with the following observations- 7. We have heard the learned DR and carefully perused the material on record. It is evident from the order of the learned AO that search was conducted on 24-09-2008. Looking at the provisions of section 271AAA of the Act it becomes abundantly clear that where search has been initiated u/s 132 of the Act, on or after 01-06-2007, section 271AAA comes into play while as section 271(1) (c) is barred by virtue of section 271AAA sub section (3). Section 271AAA sub section (1) and (3) are reproduced herein below for reference: Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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