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2016 (6) TMI 457 - ITAT KOLKATA

2016 (6) TMI 457 - ITAT KOLKATA - TMI - Penalty u/s. 271(1) (c) - income disclosed u/s. 132(4)and included in the return filed u/s. 153A - Held that:- On perusal of the said show cause notice issued u/s. 274 r.ws. 271(1)( c) of the Act purportedly issued to show cause why the penalty shall not be imposed, We find that irrelevant portion of such notice was not struck out by the AO. Therefore, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or .....

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rs of the CIT(A)-Central-III, Kolkata in Appeal Nos. 81/CC-VII/CIT(A), C-I/09-10 & 82/CC-VII/CIT(A),C-I/09-10 dated 07-03-2011 and 04-03-2011 for theassessment years 2005-06 and 2006-07 respectively against the orders of penalty levied u/s. 271(1) ( c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). ITA No. 921/Kol/2011 A.Y 2005-06 ( by the assessee) 2. In this appeal, the assessee has raised the following ground of appeal:- That the Ld. CIT(A) erred in confirming the impo .....

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n the amount of income disclosed u/s. 132(4) and included in the return filed u/s. 153A. The penalty levied is wrong and need to be deleted. 4. Besides above, the appellant assessee has initially raised the following common additional grounds of appeal for both the assessment years under consideration:- 1. That the ld. AO erred in not mentioning the limb of sec 271(1) ( c) that has been violated by the assessee, in the notice issued u/s. 274 r.w.s 271 of the Income Tax Act 1961. Further, the ld. .....

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the facts necessary for adjudication thereof are already available on record. With the consent of parties both the cases heard together and answer the same collectively and consolidated order is passed. 6. Brief facts of the case are that the assessee is a company and mainly engaged in business of transportation, civil construction and other related contractual jobs. A search and seizure operation was conducted u/s. 132 of the Act in the case of M/s. Dhansar Engineering Company Pvt. Ltd and its .....

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810/- as against the total income of ₹ 32,20,620/- declared u/s. 139(1) under original return filed on 19-12-2005 for A.Y 2005- 06. 7. In the course of search proceedings the assessee filed its explanation regarding cash etc... as found during the search with full particulars containing books of account etc. before the AO . The AO examined the same and no adverse inference was drawn against the assessee and the revised return of income as filed in response to notice dt: 12-05-2008 issued u .....

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of one Sri. Ravi Agarwala referring to seized document RAD/1 during search operation in books of account and not disclosing in the original return. In response to such penalty notice the assessee submitted that the said additional income above was offered by the assessee claiming as its own and disclosed the same in the return filed u/s. 153A of the Act and which shall be treated as original return filed u/s. 139(1) of the Act. After considering the various submissions of the assessee, the AO wa .....

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f ₹ 48,568/- being valuation fee. The A.O. considered the valuation fee as not allowable as business expenditure. However, the valuation fee was for the purpose of valuing the assets hypothecated to the bank for renewal of working capital loan. As regards, the penalty proceedings u/s. 271(1)( C ) for concealment of income, it has been admitted by the AO that this amount represents a sum disclosed u/s 132(4), as such Explanation 5 to section 271( 1) ( c) would come into force and the said e .....

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& 2006-07. so, returning higher income u/s 153A only reveals the good intention of the assessee which has been wrongly interpreted as concealment of income by the assessee. The income offered in the return u/s 153A is soumoto, before it could have been identified by you. No show cause notice was ever issued by you of department in connection with the same. Hence the same can't be treated as concealment of income in any year. As such penalty can't be imposed on such amount disclosed .....

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urn filed u/s 139 of the I.T. Act. The income disclosed m the return u/s 153A will be treated as income disclosed in the return filed u/s 139 of the l.T. Act. The return filed earlier years were abated by issue of nonce u/s 153A. Now, the return filed u/s. 153A is the only return filed u/e 139(1) of the I.T. Act. As per Explanation 5 to Sec. 27(1) (c) no penalty is leviable if the return is filed u/s. 139(1) of the I.T Act including the additional income. In view of the provisions of Sec. 153A, .....

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en search was conducted and those incriminating documents, unexplained jewellery etc are unearthed in course of search and the assessee was confronted with the same, the assessee had no other option but to make disclosure of incomes. Hence it is obvious that the income filed u/s. 153A was not disclosed voluntarily but directly related to the search took place . Had the search not taken place, the assessee would have never come out with the disclosure is voluntarily. The fact that the assessee ha .....

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is wrong since the said Explanation is applicable in respect of search initiated before 01.06.2007 but in this case search was initiated on 22.08.2007 i.e. after 01.08.2007. In respect of search initiated u/s. 132(1) on or after 01.08.2007, newly inserted Explanation 5A, inserted by Finance Act, 2007 w.e.f 01.06.2007 and as substituted by Finance ( no.2) Act, 2009 w.e.f 01.06.2007 is applicable. In the instant case the search was initiated after 01.06.2007 and therefore, the Explanation 5A is ap .....

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rance that penalty shall not be levied. The assessee has also relied upon the judgements of the following cases:- 1. Illumination India -Vs- Asst.CIT(2006) 100 TTJ 426(Pune) 2. CIT -Vs- Suresh Chandra Mittal (2001) 170 CTR 182(SC) 3. Lotus learning (P) Ltd -Vs- DCIT (2006) 7 SOT 540(Mum) 4. CIT -Vs- Punjab Tyre 162 ITR 571 5. CIT -Vs- Shiv Oil and Dal Mill (2006) 281 ITR 221(All) 6. Navbharat Enterprises (P) Ltd -Vs- Asstt.CIT (2009) 118 ITD 8(Hyd) 7. CIT -Vs- Santosh Financier (2001) 247 ITR 74 .....

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on of search & seizure and as such malafide is apparent. In view of the above and the Explanation 5A, the assessee s explanations are not satisfactory. In view of above, I am satisfied that this a fit case for imposition of penalty u/s. 271(1) (c) for concealment of particulars of income in the return filed u/s. 139 and accordingly, an amount of ₹ 3,55,422/- is imposed as penalty u/s. 271(1) (c ) of the I.T Act, 1961. 8. Aggrieved by such order of the AO, the assessee preferred an appe .....

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ed the penalty order as imposed by the AO by observing as under:- 4. I have carefully considered the submission of the L.d A.r . There is no dispute that during the course of search evidence of unaccounted interest income earned during the F.Y.2004-05 amounting to ₹ 9,71,2981 was found . The return of income for the year under consideration was filed by the assessee, as per provision of section 139(1) of the Act on 19.12.2005 but the above income was not declared in the return filed under .....

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on l53A of the Act, the appellant is not liable for penalty. The submission of the assessee was considered and found to have no merit in the light of the explanation 5 A to section 271 (l) ( c) inserted by the finance Act 2007 which reads as under: "Explanation 5A - Where in the course of search initiated under section 132 (on or after the I" day of June, 2007), the assessee is found to be the owner of- (a) any money, bullion, jewellery or other valuable article or thing (hereinafter i .....

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urn of income for such previous year has been furnished before the said date but such income has not been declared therein: (b) the due date for filing the return of income for such year has expired and the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished 'on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have .....

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income for the previous year in question on 19.12.2005. However the income in question was not offered in the said return filed under section 139(1) of the Act. . Hence notwithstanding that such income is declared by him in return of income furnished after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub- section (1) of this section, be deemed to have concealed the particular of his income or furnished inaccurate particulars of such income. Co .....

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before us by raising the additional ground of appeal for both the assessment years under consideration, which have been mentioned herein above. 10. During the course of hearing before us the Ld. Counsel for the assessee contended that the case on hand is covered and falls for consideration of Judgment of the Hon ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), wherein the Hon ble High Court has held that in order to impose penal .....

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being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. He also relied on the order dated 06-11-2015 of the Tribunal in the case of Suvaprassanna Bhattacharya Vs. ACIT, Kolkata in ITA No. 1303/Kol/2010 for the AY 2006- 07. 11. On the contrary, the ld. DR has relied on the orders of the lower authorities. He further submitted that the case is not covered by the said Judgment of the Hon ble Karnataka High Court in the case of supra. .....

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notice was not struck out by the AO. Therefore, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income. We find that the assessee as relied on the B Bench of Kolkata Tribunal order dated 06-11- 2015 in the case of Suvaprassanna Bhattacharya Vs. ACIT, Kolkata in ITA No. 1303/Kol/2010 for the AY 2006-07 is applicable to the case on hand. The relevant findings in the order of Tribunal are reproduced herein .....

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levied for furnishing inaccurate particulars of income or concealing particulars of such income . The Hon ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon ble High court has further laid down that certain print .....

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and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act. NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they co .....

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ld be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of la .....

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e (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the o .....

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hould be imposed only on the grounds on which he is called upon to answer. 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. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the .....

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was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing .....

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y is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard pro forma without striking of the relevant clauses will lead to an inference as to non-application of mind. The final conclusion of the Hon ble Court was as follows:- 63. In the light of what is stated above, what emerges is as under: a) Penalty under Secti .....

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thority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to .....

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r the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the asses .....

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cer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed .....

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roceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of .....

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