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Mahendra B. Kataria, M/s. Sarika Jewellers Versus ACIT, Cent. Cir. 1 Surat

2016 (5) TMI 1094 - ITAT AHMEDABAD

Penalty under section 271(1)(c) - assesse disclosed the income on the basis of declaration made in the statement under section 132 - Held that:- The assessee has demonstrated that the additional income declared in response to the notice received under section 153(A) and 153(c) of the Act are based on the declaration made in the statement under section 132(4) of the Act. Shri Mahendra B. Kataria has disclosed that income was earned for accepting on-money. ₹ 12 lakhs has been accounted for i .....

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Member For the Assessee : Ms. Urvashi Shodhan, AR For the Revenue : Shri Dinesh Singh, Sr. DR ORDER Per Rajpal Yadav, Judicial Member The assessees are in appeal before us against the orders of the ld.CIT(A)-II, Surat dated 18.2.2011 passed for the Asstt.Year 2005-06 in the respective appeals of the appellants. 2. Solitary grievance of the appellants is that the Id.CIT(A) has erred confirming the penalty of ₹ 3,91,580/- (in the case of Mahendra K. Kataria) and ₹ 1,80,380/- (in the ca .....

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as residential premises of Shri Mahendra B. Kataria group at Silvassa. Survey under section 133A was also undertaken at various places. During the course of search, statement of Shri Mahendra B. Kataria was recorded under section 132(4) of the Income Tax Act. He admitted total unaccounted income of ₹ 1,37,00,000/- vide answer to question nos.23 and 25 of the statement. A disclosure of ₹ 12.00 lakhs was made by Shri Mahendra B. Katariya in his individual capacity, which has been offer .....

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r Annexure -C/F. Shri Sajjanraj Pokhraj Shah, one of the partners of the assessee firm, had admitted ₹ 43.00 lakhs as additional undisclosed income of the assessee-firm. In response to the notice under section 153C, the assessee has filed its return of income on 18.1.2008 declaring total income at ₹ 4,52,175/-. The AO has passed an assessment order under section 143(3) r.w.s. Section 153C of the Act on 26.12.2008. He worked out the taxable income of the assessee equivalent to the one .....

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roversy before us is that whether both the assessees are entitled for immunity as per clause (2) of Explanation (5) of Section 271(l)(c) of the Act. The Id.counsel for the assessees, while impugning the orders of the Revenue authorities has pointed out that the issue in dispute is squarely covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of Kirit Dayabhai Patel, 121 ITD 159 (Ahd)(TM) = Tax Appeal Nos.1181, 1182 and 1185 of 2010. She placed on re .....

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and (iii) taxes together with interest are paid on such income. She emphasized that the assessees have filed their return of income, disclosed the income on the basis of declaration made in the statement under section 132 of the Income Tax Act. They have paid taxes along with interest and the AO has neither made reference to any material nor made any addition. He simply accepted the return of income. 8. The Id.DR, on the other hand, relied upon the orders of the Revenue authorities. 9. On due c .....

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icable legal position. 9. As learned Counsel for the assessee rightly points out, the issue is now covered, in favour of the assesses, by Hon ble jurisdictional High Court's judgement in the case of Kirit Dahyabhai Patel vs. ACIT (ITA Nos.1181, 1182 & 1185 of 2010; judgement dated 03.12.2014), wherein reversing the very Third Member decision of this Tribunal which was relied upon by the CIT(A), Their Lord ships have observed as follows: "8. We have heard learned advocates for the pa .....

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t such assets have been acquired by him by utilising (wholly or in part) his income- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, wherein such return has been furnished before the said date, such income has not been declared therein: or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any retur .....

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he books of account, if any, maintained by him for any source of income of such income is otherwise disclosed to the [principal Chief Commissioner or Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] before the said date; or (2) he in the course of the search, makes a statement under subsection (4) of section 132 that any money, bullion, jewellery or other valuable article of thing found in his possession or under his control, has been acquired out of his income wh .....

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prior to the date of the search and, in the statement given under Section 132(4) the assessee admitted the receipt of undisclosed income for those years and also specified the manner in which such income had been derived and thereafter pays the tax on that undisclosed income with interest, then such undisclosed income would get immunised from the levy of penalty. 10. Looking to the facts and circumstances of the case, it would be relevant to refer the decision relied upon by learned senior advoc .....

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r after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purpose of imposition of penalty under Section 271(1) (C). The only exceptions to such a deeming provision or to such a presumption of concealment are given in sub-clauses (1) and (2) of Explanation 5. In this case, we are concerned with interpretation .....

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in the return of income to be furnished before expiry of time specified in Section 139(1). Such statement was made by the Karta during the search which concluded on August 1, 1987. It is not in dispute that condition No.1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(C) was that the assessee should specify, in his statement under Section 132(4), the manner in which income stood derived. Admittedly, the second condition, in the present case als .....

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t, if any, in respect of such undisclosed income. However, no time limit for payment of such tax stood prescribed under clause(2). The only requirement stipulated in the third condition was for the assessee to pay tax together with interest . In the present case, the third condition also stood fulfilled. The assessee has paid tax with interest upto the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that .....

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return before the due date provided that the assessee had made a statement, during the search and explained the manner in which the surrendered amount was derived, and paid tax as well as interest on the surrendered amount. 12. At this stage, it is required to be noted that the Apex Court in the case of Commissioner of Income Tax, West BanagalI Vs. Vegetable Products Ltd. (supra), has held that if the Court finds that the language of a taxing provision is ambiguous or capable of more meaning tha .....

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ior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under Section 139 of the Act, as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under Section 271(1)(c ) of the I.T. Act and the penalty .....

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entire amount with interest, the Assessing Officer ought to have granted them immunity available under Section 271(1)(C ) of the Income Tax Act. 15. The decision relied upon by learned advocate for the respondent will not apply to the facts of the present case. 16. In view of the aforesaid facts of the case and also the principle laid down in the decisions relied upon by the learned senior counsel for the appellant more particularly the principle laid down in the case of Assistant Commissioner .....

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he benefit of the provisions of Explanation 5(2) to Section 271(1)(c) of the Income Tax Act. 10. Respectfully following the esteemed views of Hon ble jurisdictional High Court, we uphold the grievance of the assessee. In view of the fact that the income in question was covered by the declaration made in the statement recorded under section 132(4) and the tax thereon was duly paid by the assessee, the provisions of Explanation 5 to section 271(1)(c) of the Act will come into play on the facts of .....

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