TMI Blog2016 (7) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal by the Revenue are directed against the common orders of Commissioner of Income Tax (Appeals) Central-I, Kolkata dated 05.03.2013. Assessments were framed by DCIT, Central Circle-VII Kolkata u/s 153C/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 24.12.2010 for assessment years 2006-07 and 2007-08 respectively. Penalty levied by Assessing Officer u/s 271(1)(c)/274 of the Act vide his orders dated 27.12.2011 respectively. 2. Except figure the issues are same in both the appeals therefore we are taking the facts of the case for AY 2006-07 as a lead case for the sake of convenience, we pass a consolidated order for both the appeals. Grounds raised by Revenue per its appeal are reproduced below:- 1. The CIT(A), Central-I, Kolkata has erred in deleting the penalty u/s. 271(1)(c) imposed upon the assessee to the tune of ₹ 36,86,345/- by the AO. 2. On the facts and circumstances of the case and also in law, the CIT(A) has erred in deleting the penalty on the presumption that Explanation 5A to Sec. 271(1)(c) does not apply to assessment completed u/s. 153C of the IT Act. 3. On the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gandhi. Accordingly, AO issued summon u/s 131 of the Act to assessee, on confrontation, he accepted that the payment was made for the investment in the land through various companies as detailed under:- Sl No Name of company Paid to FY Amount (Rs) Remark(s) 1 Mayur Sales Pvt. Ltd. Gayatri Mondal (1) 2005-06 100,800/- Gayatri Mondal (2) 2005-06 100,800/- Hari Das Mondal 2005-06 4,763,950/- Narayan Das Mondal 2005-06 536,350/- Registration charges 2005-06 585,845/- Arun Kr. Bhoumik 2006-07 20,240/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested in the AY 2006-07 and balance of ₹ 34,60,000.00 was invested in the AY 2007-08. The assessee during the course of search proceedings u/s 132A of the Act has admitted the undisclosed investment and offered the same to tax in the respective years as stated above. Accordingly, AO further issued notice as Explanation 5 to Section 271(1)(c) of the Act for initiating penalty proceedings on the assessee. In response thereto, it was submitted that assessee vehemently came forward and offered the aforesaid undisclosed investment as income and for that purpose, assessee has filed revised return of income. Assessee has paid all the taxes on the undisclosed income which was accepted by AO in Assessment proceedings. However, AO disregarded the plea of assessee by holding that assessee filed the return income u/s 139 of the Act before the date of search and such income was not declared therein. The income was declared by the assessee as a result of search which was initiated after 01.06.2007 and the provision of Explanationn-5A is applicable. Accordingly, AO has levied the penalty on account of concealment of income u/s 271(1)(c) of the Act. 5. Aggrieved, assessee preferred an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, no search was initiated u/s. 132 of the Act. There is no question of levying the penalty under Explanation 5A to Sec. 271(1)(c) of the Act. In view of the above, L d CIT(A) held that the provisions of Explanation 5A to Section 271(1)(c) of the Act are not applicable to the assessee and accordingly deleted the penalty imposed by AO. Being aggrieved by this order of L d CIT Revenue is in appeal before us. 6. The ld. DR before us submitted that the instant case of the assessee is duly covered under explanation 5A to section 271(1)(c) of the Act and vehemently relied on the order of AO. On the other hand, Ld AR filed paper book which is running pages from 1 to 97 and reiterated same submission as stated before L d CIT(A) and submitted various case laws in support of its claim which are reproduced below:- 1) DCIT vs. Shri Vivek Kr. Kathoria WTA No. 02-08/Kol/2013 dt. 15.05.2015 2) DCIT vs. M/s Pratap Properties Pvt. Ltd. ITA No.1386-88/Kol/2010 dt. 10.02.2016 He further submitted that assessee has voluntarily disclosed income without detection by the Department. All the documents impounded during the search proceedings were pertaining to different compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not applicable to assessee. At this juncture, we would like to reproduce the provision of Explanation 5A to Sec. 271C which are reproduced as under :- [ 271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) . (2) [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 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 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, which has ended before the date of search and,- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposing penalty have to be held as bad in law and liable to be quashed. The Hon ble Karnataka High Court in the case of Manjunatha Cotton 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 could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough 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 same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for 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 assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) I ..... 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