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2016 (6) TMI 975 - ITAT PUNE

2016 (6) TMI 975 - ITAT PUNE - TMI - Penalty u/s.271(1)(c) - declaration of income recorded u/s.132(4) - Held that:- It is the settled position of law that penalty proceedings and assessment proceedings are separate and distinct. The assessee can advance new arguments during penalty proceedings. We find although the above documents were filed before the lower authorities as certified in the paper book, however, the lower authorities have not commented upon this issue either in the assessment ord .....

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f ₹ 14,00,000/-. - Since the assessee in the instant case has declared the amount of ₹ 17,00,000/- and ₹ 10,00,000/- respectively on the basis of various discrepancies found in the seized documents during the course of search and the assessee has declared the same in the statement recorded u/s.132(4), therefore we hold that the assessee is liable to penalty u/s.271(1)(c) of the Act for concealing the particulars of his income to the extent of income arising from land busine .....

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ri Pramod Shingte For the Revenue : Shri Hitendra Ninawe ORDER Per R. K. Panda, AM This appeal filed by the Revenue is directed against the order dated 01-05-2013 of the CIT(A)-I, Nashik relating to Assessment Year 2008-09. 2. Deletion of penalty of ₹ 12,30,220/- levied u/s.271(1)(c) by the CIT(A) is the only issue raised by the Revenue in the various grounds of appeal. 3. Facts of the case, in brief, are that the assessee is an individual engaged in the business of wholesale trading in fo .....

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ditional income of ₹ 41 lakhs, the details of which are as under : (a) On account of land -Mr.Vardhaman Jain - 14 Lakhs (b) profit of unrecorded transactions in Kirana - 10 Lakhs (c) Land - Mr.Dilip Phadol - 17 Lakhs 4. The AO completed the assessment u/s.153A r.w.s.143(3) determining the total income at ₹ 57,39,630/- which was the income declared in the return filed in response to notice u/s.153A. 5. Subsequently, the AO initiated penalty proceedings and asked the assessee to explai .....

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evied. 6. However, the AO was not satisfied with the explanation given by the assessee. According to him, had there been no search the income would not have been unearthed. Therefore, it was not a voluntary disclosure and the assessee has concealed the particulars of such income within the meaning of Explanation 1 and 5A to section 271(1)(c) of the I.T. Act. The AO further noted that the income of ₹ 41 lakhs disclosed u/s.132(4) and offered in the return u/s.153A is based on entries in boo .....

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ully considered the facts of the case, the assessment order, the impugned penalty order and the submissions of the appellant. The additional income of ₹ 41,00,000/- consists of the following amounts:- Estimated Gross Profit - ₹ 10,00,000/- 1) Brokerage income and commission Received from Mr.Vardhaman Jain by Cheque dt. 26-02-208 - ₹ 14,00,000/- From Mr. Dilip Phadol 15,00,000/- Received by cheque dt.26-02-2008 And ₹ 2,00,000/- by cash - ₹ 17,00,000/- Rs.41,00,000/- .....

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y or in part) his income for any previous year. (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year; In the case under appeal no money, bullion, jewellery or other valuable article is involved with regard to the estimated gross profit of ₹ 10,00,000/- and ₹ 14,00,000/- and ₹ 17,00,000/- .....

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egular books of a/c of the assessee for that assessment year. ₹ 2,00,000/- in cash was received from Shri Dilip Phadol on a/c of undated chit. This commission income of ₹ 31,00,000/- was not offered to tax in the regular return of income filed u/s 139 for A.Y. 2008-09 on the ground that the same was an advance because the transaction relating to that was not finalized during F.Y. 2007-08. The assessee demonstrated that the property transaction on which the impugned commission/brokera .....

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7; 41,00,000/- in the return filed u/s lS3A which was not shown in the return filed u/s 139. It was detected during search and seizure operation conducted at his residence. Had the search not been conducted, this income would not have been unearthed. It is, therefore, not a voluntary disclosure and the assessee has concealed the particulars of such income within the meaning of Explanation 5A to section 271(1)(c) of the LT. Act". Therefore, penalty proceeding were initiated. However, on goin .....

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s reproduced below: "Explanation-I - Where in respect of any facts material to the computation of the total income of any person under this Act - (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner Appeals or Commissioner to be false or; (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and ma .....

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of mind. The appellant has also paid all the taxes. The above explanation of the appellant is found to be plausible and hence bonafide. Further, the explanation is not found to be false. In view of the above facts and in view of Explanation-I to section 271(1)(c) the penalty imposed by the A.O. for these assessment years is not justified. This proposition of law is supported by the following decisions : 1) National Textiles Vs. CIT 249 ITR 125 (Guj.) 2) Hergopalsingh Vs. CIT 258 ITR 85 (P&H .....

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llowed by Hon'ble ITAT Pune in the case of ITO Central-3 Vs, Prakash Champalal Kankaria, I.T.A. No.1465 to 1467/PN/2011 dated 22/03/2013. The facts of the assessee's case are identical with these decisions. The assessee's case therefore, is covered by these decisions of the jurisdictional Tribunal and fortify my decision. In view of the above facts and provisions of Explanation-I to section 271(1)(c), the appellant is not liable to penalty u/s. 271(1)(c). In view of the above facts a .....

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(A) the Revenue is in appeal before us. 9. The Ld. Departmental Representative strongly opposed the order of the CIT(A). He submitted that the Ld CIT(A) has deleted the penalty by holding that neither Explanation 1 nor Explanation 5A to section 271 (1)(c) is applicable to the assessee s case. However, the same is not correct. He has accepted the contention of the assessee that the amount of commission/brokerage of ₹ 31 lakhs was not offered in the regular return of income filed u/s.139 as .....

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se of search the assessee in his statement recorded u/s.132(4) has declared additional income of ₹ 41 lakhs and offered the same in the return of income filed in response to notice u/s.153A. The declaration made by the assessee was on the basis of entries found in the books of account, other documents and transactions, seized/impounded during the search action. Therefore, the assessee has committed default under the provisions of Clause (ii) of Explanation 5A to section 271(1)(c) of the Ac .....

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for the assessee on the other hand heavily relied on the order of the CIT(A). Referring to the copy of the assessment order, the Ld. Counsel for the assessee submitted that the AO has not mentioned as to what are the papers found or the nature of such document. Referring to pages 100 and 101 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the notings made thereon and submitted that those papers do not bear any date. Further, the cheques were received in the .....

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in A.Y. 2010-11, therefore, under the facts and circumstances of the case, the penalty levied by the AO was not correct and the CIT(A) was fully justified in deleting the same. He submitted that the assessee can always advance new arguments during penalty proceedings since the assessment proceedings and penalty proceedings are different. 11. So far as the decision relied on by the Ld. Departmental Representative in the case of Mrs. Sarita Kaur Manjeet Singh Chopra is concerned he submitted that .....

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ed on the following decisions : 1. ITO Vs. Prakash Champalal Kankaria and others - ITA Nos. 1465 to 1467/PN/2011, ITA Nos. 1468 to 1470/PN/2011 and ITA Nos. 1471 to 1473/PN/2011 order dated 22-03-2013. 2. Chandan K. Shewani Vs. DCIT - ITA No.235 & 236/PN/2010 order dated 29-08-2012. 3. Dilip Yeshwant Oak Vs. ACIT reported in (2011) 10 taxmann.com 264 (Pune). 4. Rajan H. Shinde Vs. DCIT reported in (2006) 104 TTJ 445 TM (Pune). 5. Harigopal Singh Vs. CIT reported in (2002( 125 Taxman 242 ( Pu .....

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declared additional income of ₹ 41 lakhs in the return filed in response to notice u/s.153A which has been accepted by the AO in the order dated 30-12-2011 passed u/s.143(3)/153A. We find the AO levied penalty u/s.271(1)(c) amounting to ₹ 12,30,220/- on account of undisclosed income of ₹ 41,00,470/- on the ground that the assessee has concealed the particulars of income to the extent of ₹ 41,00,470/-. Had there been no search the assessee would not have declared such addi .....

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arly, the amount of ₹ 17,00,000/- received from Mr. Dilip Phadol also relates to A.Y. 2010-11. Merely because the assessee on wrong assumption of facts has declared the income in A.Y. 2008-09 whereas the income relates to A.Y. 2010-11, therefore, penalty should not be levied on account of land transactions. So far as the additional income declared on account of Kirana Store is concerned, it is the submission of the Ld. Counsel for the assessee that penalty should not be levied on estimated .....

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on of account of Mr. Vardhaman Jain, copy of which is placed at paper book page 97, we find the amounts of ₹ 14 lakhs has been paid by Mr. Vardhaman Jain on 30-03-2010 and 31-03-2010 by cheques on which TDS of ₹ 1,40,000/- has also been deducted. The TDS Certificate copy is placed at page 98 of the paper book. Therefore, whether the amount of ₹ 14 lakhs relate to A.Y. 2008- 09 or A.Y. 2010-11 has not been examined for the purpose of levy of penalty. The TDS certificate filed at .....

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dings are separate and distinct. The assessee can advance new arguments during penalty proceedings. We find although the above documents were filed before the lower authorities as certified in the paper book, however, the lower authorities have not commented upon this issue either in the assessment order or penalty order or in the order of CIT(A). We therefore are of the opinion that levy of penalty u/s.271(1)(c) on the amount of ₹ 14 lakhs is not warranted under the facts and circumstance .....

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s is concerned, the same were declared in the statement recorded u/s.132(4) on the basis of the various discrepancies found by the search party. There is no proof that the same were received in A.Y. 2010-11 like in the case of Mr. Vardhaman Jain. Therefore, the question that arises is as to whether penalty can be levied on the above amounts within the meaning of Explanation 5A to section 271(1)(c) of the Act. We find a somewhat identical issue had come up before the Pune Bench of the Tribunal in .....

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assessee. Section 271(1) of the Act makes provision for levying penalties on assessee in different eventualities, one such eventuality is for concealment of income or furnishing of inaccurate particulars of income. Only on fulfillment of the conditions stipulated in section 271(1)(c) of the Act, there arises a question of exercising power under the said provision to impose penalty. The said section lays down that where the Assessing Officer or t he CIT(A) in the course of any proceedings under t .....

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spective effect from 01.04.2003. Under the said section, where the assessee was found to be owner of any money, bullion, jewellery or other valuable articles or things and the assessee claims that such assets have been acquired by him by utilizing, wholly or in part his income, for any previous year, which had ended before the date of search, but the return of income for such year had not been furnished before the said date, or where the return of income had been furnished but such income had no .....

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rticles or things, has been acquired by him out of his income, which has not been so far disclosed, but specifies the manner in which the said income has been derived and pays the taxes together with interest. Under Explanation 5, an exemption was provided to the person who was searched and was found in possession of money, bullion, jewellery, valuable articles or things, then in case he declared the same under the statement recorded under section 132(4) of the Act and thereafter, pays the taxes .....

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asset had been acquired by him by utilizing wholly or in part his income for any previous year or any income is based on any entry in books of account or other documents or transactions and he claims that the same represents his income for any previous year, then where the period has ended before the date of search and the due date for filing the return of income for such year has expired and the assessee has not filed the return of income, then notwithstanding that such income is declared by h .....

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ch income had not been declared therein or where the due date of filing the return of income for other previous year has expired, but the assessee had not filed the return of income, then notwithstanding the fact that the said 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 or furnished inaccurate particulars of his income. 17. The deeming provisions of Explanation 5A under section 271( .....

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ount, or other documents or transactions and he claims that such entries in the books of account or other documents or transactions represent his income for any previous year, then in cases where the return of income for such previous year had been furnished by the assessee prior to the date of search, but the said income had not been declared in the said return of income or the due date for filing the return of income had expired for such previous year and the assessee had not filed the return .....

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articulars of his income or furnished inaccurate particulars of such income, which is equivalent to the value of money, bullion, jewellery, valuable articles or things from the possession of the assessee during the course of search conducted on or after first day of June, 2007. Further, where any income is based on any entry in any books of account or other documents or transactions and he claims that all the above said represents his income for any previous year, then the Explanation lays down .....

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r:- 16. The next limb of argument of the Ld. counsel is that Explanation 5A(ii) contemplates income and not the expenditure . In this case, it is undisputed fact that the assessee came forward and declared income which was pertaining to the amount covered by the unrecorded expenditure but the fact remains that the assessee did not declare any expenditure but it is only the income. The Ld. Counsel referred to the definition of the income given in sec. 2(24) of the Act. The scope of the said defin .....

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ult to define the expression 'income' in precise terms. Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the salary receiv .....

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on Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context. It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee. We are, therefore, of the opinion that the High Court and the authorities under the Act were right in holding that the said tax amount is liable to be included in the income of the assessee during the said two assessment years. 17. As per interpretation made by the Hon'ble .....

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r of (i) Any money, bullion, jeweler or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii) Any other income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for .....

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f a penalty under clause (c) of sub-section (1) of this section, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 19. So far as the present assessee is concerned, clause (ii) to Explanation 5A is applicable. Admittedly, the expenditure which was not recorded has been found by way of entries in the seized documents. While explaining the scope of Explanation 5A in the case of Chandan K. Shewani (supra) the Tribunal has held that to patch .....

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expenditure can said to be the income which is contemplated in Explanation 5A(ii)? The answer to this question is in sec. 69-C which reads as under:- Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed .....

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that sec. 69C provides that if any unrecorded expenditure is found and the assessee fails to explain the source of the said expenditure or explanation of the assessee is not satisfactory, then to the extent of the amount covered by such expenditure is treated as income. Ultimately what is taxed under Sec. 69 C of the Act is not the expenditure but it is basically the undisclosed income which has been applied for incurring the unrecorded expenditure. In our view, there is no merit in the argumen .....

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has admitted the said undisclosed income. 19. Applying the said proposition to the facts of the present case, we hold that the income offered by the assessee pertaining to the cash seized from the assessee and the declaration of the assessee that the said cash relates to the unaccounted cash received vide the sale transaction entered into by the assessee, which in turn, was declared by the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act, is the in .....

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he other hand has placed reliance on the ratio laid down in DCIT Vs. Purti Sakhar Karkhana (supra), which is a decision of Nagpur Bench of Tribunal and Hyderabad Bench of Tribunal in Shri PV Ramana Reddy Vs. ITO (supra). In view of binding precedent of Pune Bench on the said issue, we find no merit in the reliances placed upon by the learned Authorized Representative for the assessee on DCIT Vs. Purti Sakhar Karkhana (supra) and Shri PV Ramana Reddy Vs. ITO (supra). The other reliance placed upo .....

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