TMI Blog2010 (2) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to immunity from penalty CIT(A) was not justified in deleting the penalty levied by the AO on additional income declared in returns filed in response to notice u/s 153A without examining that assessees had fulfilled the requirement of immunity prescribed in Expln. 5. No such argument has been advanced before us either that assessees were fulfilling these requirements of immunity to grant benefit under Expln. 5. We thus while setting aside the first appellate order to this extent, restore the penalty levied by the AO on such additional income declared in returns filed in response to notice under s. 153A. The grounds are accordingly allowed. Consequently the appeals are allowed. In the result, appeals are allowed. - I. C. SUDHIR J.M. and D. KARUNAKARA RAO A.M. Amrendra Kumar, for the Appellant. K. Srinivasan, for the Respondent. ORDER by the bench : In all these appeals preferred by the Revenue, the first appellate order has been questioned mainly on the ground that the learned CIT(A) has erred in deleting the penalty imposed under s. 271(1)(c) on the basis that it is not leviable on income declared in the return filed in response to notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be caused to the Revenue even if the cases involving legal issues of recurring nature are withdrawn, since the newly inserted provision takes care of the adverse eventuality which could have been put against the Revenue. The s. 268A of the Act reads as under : '268A. Filing of appeal or application for reference by IT authorities'(1) The Board may, from time to time, issue orders, instructions or directions to other IT authorities, fixing such monetary limits as it may deem fit'. 6. After insertion of s. 268A of the Act, the CBDT instruction passed under s. 119 of the Act has got statutory force and accordingly the Department is not supposed to prefer an appeal before the Tribunal against the first appellate order having tax effect below ₹ 2 lakhs and in case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against [cl. (4) of the said instruction]. Since in the present appeal in question undisputedly the quantum of penalty deleted is below ₹ 2 lakhs, the appeal is not maintainable as the same has been preferred in violation of the said CBDT Instruction No. 5 of 2008, having statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts recorded under s. 132(4) of the Act and that the fixed deposits found during the course of search were in the names of several persons who are employees of Janta Sahakari Bank Ltd., Yeola and their relatives and friends. These persons had handed over the fixed deposit receipts to the assessees' for obtaining cash credit facility from the bank on the basis of the security of the said fixed deposits. However, the assessees have admitted the said fixed deposits and interest thereon as their own income to avoid undue harassment to the said persons. The further contention of the assessees remained that penalty is not leviable on amount offered to tax in return filed in response to notice under s. 153A as laid down by the Pune Bench of the Tribunal in the case of Smt. Sarla M. Ahuja Ors. in ITA No. 1301/Pn/2007 dt. 26th Oct., 2007, (asst. yrs. 2000-01 to 2003-04). The learned CIT(A) though did not agree with the explanation of the assessee discussed above but in view of the cited decision in the case of Smt. Sarla M. Ahuja (supra) he has deleted the penalty on the basis that penalty is not leviable on the amount offered to tax in a return filed in response to notice under s. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive submitted that in the case of Asstt. CIT vs. Kirit Dahyabhai Patel (supra) after detailed discussion on the referred decisions as well as referring the circular and notification issued by the CBDT the learned Third Member has come to the conclusion that additional income declared in the returns filed in response to notice under s. 153A does not fall under the category of return mentioned in Expln. 5 to s. 271(1)(c), hence assessees are not entitled to immunity from penalty. The learned Departmental Representative also placed reliance on the following decisions : (i) Sheraton Apparels vs. Asstt. CIT (2002) 175 CTR (Bom) 651 : (2002) 256 ITR 20 (Bom); (ii) Asstt. CIT vs Rupesh Bholidas Patel (2009) 16 DTR (Ahd)(Trib) 369 : (2009) 309 ITR 217(Ahd)(AT). The learned Departmental Representative also tried to define Books of account , entries in the books with the assistance of the decisions in the following cases : (i) Sheraton Apparels vs. Asstt. CIT (supra); (ii) Hakam Singh Ors. vs. CIT (1980) 124 ITR 228 (All); (iii) CIT vs. Handloom Emporium (2005) 199 CTR (All) 645: (2005) 149 Taxman 224(All). The learned Departmental Representative pointed out that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate Bench in the cases of Narayandas Mulji Thakkar and Karsandas Mulji Thakkar (supra), the proper way out is to refer the matter before the Hon'ble President, Tribunal to form a Special Bench to decide the issue under s. 255 of the Act. 11. Considering the above submissions, we find substance in the contention of the learned Departmental Representative that the decision of Third Member Bench in the case of Asstt. CIT vs. Kirit Dahyabhai Patel (supra) dt. 25th June, 2009 on the issue was not brought to the notice of the Pune Bench during the course of hearing of appeals in the cases of Narayandas Mulji Thakar and Karsandas Mulji Thakkar (supra) especially when the same was in existence at that time. The Third Member Bench decision in the case of Kirit Dahyabhai Patel (supra) had an occasion to discuss the issue in detail in view of several decisions cited before it including those which have been relied upon before us by the parties. It is also admitted fact that the Third Member Bench decision on the issue in the case of Kirit Dahyabhai Patel (supra) has been passed after the decision of Pune Bench of the Tribunal in the case of Smt. Sarla M. Ahuja Ors. (supra), hence b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 ITR (St) 21] explaining the amendment showing benefit of immunity conferred by Expln. 5(2), as amended by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 10th Sept., 1986. Hence the same cannot be ignored. Certainly there would have been substance in the contention of the learned Authorised Representative for sending a proposal by this Bench for constitution of a Special Bench to decide the issue if the present Bench would not have agreed with the latest elaborate decision of Third Member Bench of the Tribunal on the issue or the Co-ordinate Bench would have passed a detailed order after discussing that the learned CIT(A) had properly applied the decision of the Bench in the case of Smt. Sarla M. Ahuja (supra). But it is not the case of the assessee. The present situation has arisen only because the parties appearing in the cases of Narayandas Mulji Thakkar and Karsandas Mulji Thakkar (supra) of the group failed to bring to the notice of the Co-ordinate Bench about the existence of Third Member Bench order in the case of Asstt. CIT vs. Kirit Dahyabhai Patel (supra) which cannot be treated at par with a situation for referring the matter to a Special Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,25,910 In the case of Shri Rameshwar E. Kalantri. 2001-02 14,09,664 25,72,100 25,72,100 11,62,436 3,48,730 2002-03 11,84,551 20,49,140 20,49,140 8,64,584 2,59,374 Against the penalty levied the contention of the assessee before the learned CIT(A) remained that during the course of search proceedings the assessees group had declared income of ₹ 75 lakhs in statements recorded under s. 132(4) of the Act on account of investment in fixed deposits in fictitious names, unrecorded building construction and renovation expenses, investment in furnitures etc; the income was offered to tax only to buy peace of mind and to avoid protracted litigations subject to the condition that no concealment penalty under s. 271(1)(c) of the Act shall be levied; and that the income was not offered to tax in the original return of income due to ignorance of law as the assessees are uneducated. It was further contended that the AO has accepted the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of income, The AO, therefore, stated that the action of non disclosing correct income in the original return of income has clearly proved the intention of the assessee to conceal the particulars of income. The learned CIT(A) has confirmed the penalty by observing that had there been no search against the assessee, the assessee would not have disclosed income which was detected during the course of search and was offered for taxation by the assessee in the return filed under s. 153A of the Act. The Tribunal has discussed different situations regarding levy of penalty. In one situation the rental income derived by the assessee and revealed during the course of search was not declared in the original return of income furnished before the date of search. However, the said income was declared by the assessee at the time of search and the income was offered for taxation in the return filed under s. 153A of the Act. The assessee had made a statement under s. 132(4) declaring the aforesaid income and ultimately the assessee offered the same for taxation and the tax was already paid. The Tribunal held that the income already offered by the assessee in the return filed under s. 153A on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under s. 153A of the Act. In third situation the Tribunal deleted the penalty levied on other addition on the basis that the related transactions were recorded in the documents though the income was not declared in the original return of income but was offered for taxation in the return filed under s. 153A of the Act. In this regard the Tribunal has taken support of Expln. 5 to s. 271(1)(c). Under this background when we read the order of the Tribunal in the case of Smt. Sarla M. Ahuja (supra), we find that the Tribunal in para No. 15 of the said order, followed by the learned CIT(A) in the present case, has held that no penalty under s. 271(1)(c) is to be levied in respect of income which has already been declared by the assessee in the return filed in response to notice under s. 153A of the Act. The Tribunal has held so under this background as discussed by it in previous paras of the order (para No. 13) as ......the benefit given in Expln. 5 cannot be denied to the present assessee, in as much as, the assessee has declared the income found recorded in certain documents at the time of search and has just offered the same for taxation in the return of income filed in respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n s. 153A, all the assessment proceedings pending on the date of search shall stand abated and in that view of the matter the income declared by the assessee in response to notice under s. 153A cannot be a subject-matter of imposing penalty under s. 271(1)(c) of the Act. As discussed above, the learned CIT(A) has deleted the penalty following the finding of the Tribunal in the case of Smt. Sarla M. Ahuja (supra) in para No. 15 of the order that no penalty under s. 271(1)(c) is to be levied in respect of income which has already been declared by the assessee in the return filed in response to notice under s. 153A of the Act. The learned CIT(A) has failed to appreciate that this finding was given by the Tribunal under the background of its observation in previous paras that the assessee had declared the income found recorded in certain documents at the time of search and further offered the same for taxation in the return of income filed in response to the notice under s. 153A of the Act. To justify his action the learned CIT(A) has again extracted few lines from para No. 13 of the order of the Tribunal in the case of Smt. Sarla M. Ahuja (supra) that by virtue of provisions contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) such income is, or the transactions resulting in such income are recorded, (i) in a case falling under cl. (a), before the date of the search; and (ii) in a case falling under cl. (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Chief CIT or CIT before the said date; or (2) he, in the course of the search, makes a statement under sub-s. (4) of s. 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-s. (1) of s. 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest if any, in respect of such income. 15. As per the above Explanation, notwithstanding the fact that such income is declared by the assessee in any return of income furnished on or after the date of the search, he, for the purpose of s. 271(1)(c), is deemed to have concealed the particulars of his income or furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancelled the penalty on two premises i.e., (i) by making applicability of concession in Expln. 5(2) to s. 271(1)(c) of the Act (ii) and penalty on returned income under s. 153A of the Act by considering the return filed under s. 139 of the Act as abated and non est in the eyes of law. As regards contentions of the taxpayer regarding applicability of the aforesaid Expln. 5 to s. 271(1)(c) of the Act, it is noticed that prior to the insertion of Expln. 5 to s. 271 by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1st Oct., 1984, as assessee, who was found to be the owner of any money, bullion, jewellery etc., recovered during the course of search, was entitled to explain that such assets were acquired by him by utilising his income relating to any previous year, whether it ended before the date of the search or is to end on or after the date of the search. By doing so the assessee could escape the liability to penalty under s. 271(1)(c) of the Act. In order to plug the loophole, the aforesaid Expln. 5 was inserted w.e.f. 1st Oct., 1984 and is applicable to a situation where in the course of a search under s. 132 of the Act the assessee is found to be the owner of any money, bullion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case before us. The Third Member has followed its earlier decision of Ahmedabad Bench in a group case of Asstt. CIT vs Rupesh Bholidas Patel (supra) based on the decision of Hon'ble Bombay High Court in the case of Sheraton Apparels vs. Asstt. CIT (supra). Besides, the facts of the present case are akin to the facts of the case in Asstt. CIT vs. Kirit Dahyabhai Patel (supra). In that case also the assessees engaged in the business of land development were subjected to search under s. 132 after filing their original returns of income. Certain incriminating documents were found during the course of said search and thereafter notices under s. 153A were issued to the assessees. In response to the said notice, assessees filed their returns of income in terms of provisions of s. 153A(1)(a) declaring additional income over and above income which was returned in their original returns. The returns filed in pursuance of notice under s. 153A were accepted by the AO and the assessment orders were passed. Simultaneously, the penalty proceedings under s. 271(1)(c) were also initiated. The assessees submitted that since they had made a confession under s. 132(4) and disclosed the manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of account nor disclosed to the CIT/Chief CIT before the search nor the source of the same explaining the manner of deriving was provided. We thus respectfully following the Third Member Bench decision on the issue in the case of Kirit Dahyabhai Patel (supra) which is also supported by the decision of Hon'ble jurisdictional Bombay High Court in the case of Sheraton Apparels vs. Asstt. CIT (supra), hold that the learned CIT(A) was not justified in deleting the penalty in question levied by the AO without appreciating the totality of facts and decision in the case of Smt. Sarla M. Ahuja (supra) properly. The learned CIT(A) while deleting the penalty has failed to appreciate that immunity under Expln. 5 to s. 271(1)(c) is not available to the present assessees. Further with regard to explanation about the bona fide reason behind the non-disclosure of the said additional income in original return, the learned CIT(A) has rightly not agreed to the assessee in absence of evidence. We thus while setting aside first appellate order on the issue, restore the penalty levied by the AO. Relevant grounds of the Revenue's appeals are accordingly allowed. Consequently ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of composite order of appellate authority an issue which involves more than one year, appeal shall be filed in respect of all the assessment years even if the tax effect is less than the prescribed monetary limit in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed. He also submitted that decision of Hon'ble Bombay High Court in the case of CIT vs. Madhukar K. Imandar, HUF (supra) is thus not applicable in the present case. Having gone through the said clause No. 5 of the CBDT Instruction No. 5 of 2008 as well as the decision of Hon'ble High Court in the case of Madhukar K. Imandar, HUF (supra), we find substance in the submission of learned Departmental Representative. Undisputedly a composite order has been passed by the learned CIT(A) for the assessment years in question though in some assessment years tax effect is below ₹ 2,00,000. Thus preference of appeals even in those years where tax effect is below ₹ 2,00,000 but are the subject-matter of the same composite order of the appellate authority, cannot be said that these appeals before the Tribunal are in violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus not tenable, hence rejected. We thus proceed to adjudicate the appeals on its merits. 19. For better appreciation of the facts, we hereunder reproduce the details of income shown in the original return, income offered to tax under s. 153A, income assessed by the AO under s. 153A r/w s. 143(3), amount on which penalty has been levied by the AO and the amount of penalty. Shri Shankarlal B. Thakkar. Asst. yr. Amount of penalty (Rs.) Income as per original return (Rs.) Income as per return filed under s. 153A (Rs.) Income assessed under s. 153A/ 143(3) (Rs.) Amount on which penalty levied (Rs.) Amount offered to tax in return under s. 153A on which penalty is levied (Rs.) 1 2 3 4 5 6 7 2000-01 25,880 1,44,550 2,05,190 2,05,190 60,646 60,646 2001-02 24,384 1,69,610 2,21,41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 1,58,450 1,97,320 6,47,370 ' 4,72,673 4,49,673 2005-06 3,05,920 1,91,350 8,49,180 10,94,280 8,41,809 6,53,572 Shri Vijay kumar S. Thakkar. 2000-01 7,710 1,30,000 1,30,490 1,40,490 10,000 ' 2001-02 10,390 1,28,300 1,48,790 1,48,790 20,000 20,000 2002-03 72,320 1,30,000 3,50,490 3,65,596 2,33,750 2,20,000 2003-04 32,840 1,38,850 2,19,040 2,36,938 97,598 79,700 From the above facts we note that in most of the cases the additional income has been assessed under s. 153A(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
