TMI Blog2018 (3) TMI 1583X X X X Extracts X X X X X X X X Extracts X X X X ..... im in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. Assessment made u/s 153C or 148 - documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm - Held that:- When during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms, in which he was partner, on the basis of such documents found during the course of search, then for making addition in the hands of partners, provisions of section 153C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/PUN/2016, relating to assessment years 2009-10 2010-11. In order to adjudicate the issue, reference is being made to the facts in ITA No.95/PUN/2016, relating to assessment year 2009-10. 6. The assessee in ITA No.95/PUN/2016, relating to assessment year 2009-10 has raised the following grounds of appeal:- 1 . The ld . CIT ( A ) erred in confirming the levy of penalty of Rs . 2,52,604 /- u / s . 271 ( 1 )( c ) of the Act . 2 . The ld . CIT ( A ) failed to appreciate that the additional income declared by the assessee was based on estimates and there was no concrete evidence found during the course of search that the assessee had generated the undisclosed income declared during the course of search and hence, the levy of penalty on the additional income declared by the assessee was not justified at all . 3 . The ld . CIT ( A ) ought to have appreciated that the additional income was declared by the assessee in order to co - operate and buy peace with the dept . and therefore, no penalty was leviable in respect of the additional income declared by the assessee which was based on estimations and surmises . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of proprietary concern in the name of Gauri Mastani at Sadashiv Peth, Pune. She was also partner in five partnership firms and was drawing remuneration from these firms. The assessee in the case of proprietary concern, during the course of search proceedings along with her husband and associated firm had jointly declared additional income of ₹ 1 crore for assessment year 2009-10 for the group; out of which, the assessee declared sum of 7,30,000/- as her undisclosed income. The same was included in the return of income. The assessee explained that the said amount was utilized partly for renovation of outlet and partly for deposits made in Pat Sansthas. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act for concealing the particulars of income. In the order levying penalty under section 271(1)(c) of the Act, the assessee claimed that where additional income was offered by the assessee and was accepted as such and where the declaration was made on estimation basis and no seized documents were found to establish specific amount of income not disclosed by the assessee, the assessee stressed that no penal action is to be taken against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Supreme Court in MAK Data P. Ltd. Vs. CIT (2013) 358 ITR 593 (SC). Another aspect which was covered by CIT(A) was that once the assessee admits that certain amount represents her income, no further evidence would be necessary to show that it was amount which represented her income or that it represented her concealed income. Reliance in this regard was placed on various decisions of different High Courts. The CIT(A) thus, confirmed the penalty. 9. For the year 2010-11, the assessee and her husband and associated firms have jointly declared additional income at ₹ 1,54,00,000/-, out of which the assessee declared sum of ₹ 17,50,000/- as her income. In response to notice issued under section 153A of the Act, the assessee furnished the return of income. The declaration of additional income was linked to the amount incurred on the renovation of residence of ₹ 2.50 lakhs, deposits made in credit society in third party of ₹ 2 lakhs; renovation expenses incurred on the outlets of ₹ 3 lakhs and accounting for the jewellery found during the course of search of ₹ 10 lakhs. The CIT(A) also held the assessee liable for penalty under Explanation 5A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds. He further stated that penalty under section 271(1)(c) of the Act was initiated and levied for concealment of income, though notice issued under section 274 of the Act was vague. He further pointed out that once the additional income have been offered suo moto by the assessee, there was no merit in holding the assessee to be in default. 12. The learned Departmental Representative for the Revenue pointed out that the issue stands covered by the ratio laid down by Pune Bench of Tribunal in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (2015) 174 TTJ 516 (Pune). 13. In respect of partnership firms, the learned Authorized Representative for the assessee referred to additional grounds of appeal raised before the Tribunal. He stressed that where the facts were on record and the facts of search were on record, then the additional grounds of appeal can be admitted. He stressed that where papers were found from the residence of assessee and her husband and the statement was also made by the said persons in respect of additional income offered in the hands of partnership firm, then proceedings cannot be initiated under section 148 of the Act and the correct section to be applied is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed against the assessee by issuing notice under section 148 of the Act. He thus, stressed that after search proceedings carried out in the case of another person, it was open to the Assessing Officer either to proceed under Chapter XIV-B or under section 148 of the Act, copy of the decision was filed. 15. The learned Authorized Representative for the assessee also submitted written note pointing out that the decision of the Hon ble High Court of Karnataka was not applicable to the facts of the present case, since in the case before the Hon ble High Court, the issue involved was whether Assessing Officer can issue notice under section 148 or 158BD of the Act. He further pointed out that section 158BD of the Act was part of Chapter XIV-B. Referring to section 153C of the Act, it was pointed out that the said section starts with non obstante clause and it specifically excludes the provisions of sections 147 / 148 of the Act. The Assessing Officer thus, submitted that in view of provisions of section 153C of the Act, the Assessing Officer could not issue notice under section 148 of the Act and complete the assessment under section 147 of the Act. Since non obstante clause was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hara S. Joshi had offered ₹ 7,30,000/- as additional income in financial year year 2009-10 and ₹ 14,50,000/- plus ₹ 3 lakhs in financial year 2010-11. The said additional income was declared by the assessee in the returns of income filed in response to notice issued under section 153A of the Act. 17. The issue which is raised in the present appeals before us is whether the assessee is exigible to levy of penalty under section 271(1)(c) of the Act read with Explanation 5A. Before going into merits of levy of penalty, it may be pointed out that satisfaction was recorded by the Assessing Officer that the assessee had concealed its income and penalty was also levied on the same account under Explanation 5A to section 271(1)(c) of the Act. The learned Authorized Representative for the assessee before us has stressed that in the notice issued under section 274 of the Act, there is no striking of inappropriate limb. We find that this issue has already been adjudicated at length by us in the case of Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08, dated 30.11.2016. Applying the ratio laid down by the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty . The Assessing Officer while completing assessment, noted that the assessee had not declared the sale consideration of Rs . 2 . 55 crores in the original return of income filed and subsequently after the search, the declaration was made on account of total amount of capital gains . The Assessing Officer recorded satisfaction in the body of the assessment order to the extent that the assessee had concealed the particulars of income and penalty proceedings under section 271 ( 1 )( c ) of the Act were initiated . Beside the above said, there was another aspect of sale of property, wherein the assessee had claimed that it had sold fittings and fixtures of the said bungalow for Rs . 10 lakhs . However, in the absence of list of furniture or personal effects sold, the Assessing Officer was of the view that the fittings and fixtures attached to the property were inextricably linked to the building and consideration received thereon, was to be treated as capital gains . The Assessing Officer also initiated penalty proceedings under section 271 ( 1 )( c ) of the Act with regard to the said addition . Consequent thereto, the Assessing Officer reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard . 15 . Now, coming to the issue that where the assessee had offered the income in the return of income filed after surrendering the additional income, can the assessee be held to have concealed its income vis - - vis original return of income filed by the 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 the CIT ( A ) in the course of any proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty stipulated in the aforesaid provision . The Explanation / s under section 271 ( 1 )( c ) of the Act set out the circumstances, which justifies the levy of penalty . F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 him in any return of income furnished on or after the date of search, he shall for the purpose of imposition of penalty under section 271 ( 1 )( c ) of the Act, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of income . The said Explanation 5A was substituted by the Finance ( No . 2 ) Act, 2009 with retrospective effect from 01 . 06 . 2007 with the amendment that where the return of income for such previous year had been furnished before the date of search, but such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch constitute two portions i . e . what is concealment and quantum of penalty to be levied . The question is quantum of income on which penalty is to be levied . The said issue was before the Pune Bench of Tribunal in ACIT Vs . Mulay Construction P . Ltd . Ors . in ITA Nos . 116 to 119 / PN / 2012 Ors . and it was held as under :- 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 definition has been explained by the Hon ble Supreme Court in the case of EMIL Webber ( supra ) which has been relied upon by the Ld . Counsel The relevant portion is in para no 7 which reads as under : 7 . The definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the owner 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 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 the return of income for such previous year has expired but 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 search, he shall, for the purposes of imposition of a penalty under clause ( c ) of sub - section ( 1 ) of this section, he deemed to have conceal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c . 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 argument of the Ld . Counsel that the assessee has only declared the amount expenditure . We therefore, hold that to the extent of the income offered by the assessee pertaining to the expenditure in the returns filed in response to notice u / s 153A, Explanation - 5A is applicable and as there is a legal presumption against the assessee in respect of the said income detected during the course of search and seizure operation, the assessee case is squarely covered by Explanation - 5 ( ii ) as the assessee himself 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271 ( 1 )( c ) of the Act is leviable on such furnishing of inaccurate particulars of income . The learned Authorized Representative for the assessee in a written Note had furnished the break - up of income on which penalty was levied, which is as under :- Particulars Amount ( Rs .) Unaccounted sale proceeds on sale of property 1,70,00,000 Withdrawal of exemption claimed u/s.54 of the Act 32,77,070 22 . We uphold the order of CIT ( A ) in confirming the levy of penalty on the above said two accounts . Dismissing the grounds of appeal raised by the assessee, we uphold the order of CIT ( A ). 19. The issue raised in the present appeals i.e. ITA Nos.95 96/PUN/2016 is identical to the issue raised in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (supra) and following the same parity of reasoning, we uphold the levy of penalty under section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawn by partners for purchase of jewellery and construction of farm house. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act for concealing the particulars of income and notice under section 274 of the Act was issued. During the course of penalty proceedings, the main contention of assessee was that the disclosure was made voluntarily and no incriminating papers / documents were found. However, this plea of assessee was rejected by Assessing Officer as number of papers were found which were seized / impounded during both search and Survey operations. The calculation of unaccounted sales was also from the said documents. Further, one of partners Shailesh Joshi had accepted in his statement recorded under section 132(4) of the Act on 20.01.2011 that the said papers have been found and seized / impounded from his place. Further, in reply to question No.4 of statement recorded under section 132(4) of the Act on 11.03.2011, he admitted that on the basis of copies of seized / impounded papers, he had worked out year-wise details of additional income to be disclosed in the respective hands. As pointed out that the said details are also available at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion No.3, which are incorporated at pages 9 to 11 of Paper Book. The assessee also admitted that return of income for all the cases had been filed till assessment year 2010-11. The question No.5 dealt with search and Survey operations carried out at the residential and business premises, wherein evidences establishing suppression of total group turnover substantially, were found. In the statements deposed under oath by various entities such as Managers at outlets, supplier of Bread (Pav), etc. have provided actual figures of sale / consumption of Wada Pav and other allied products. It was thus, alleged that Joshi Wadewale group as a whole was indulging in suppression of actual turnover in order to show reduced profits. In reply, parner Shri Shailesh Joshi pointed out that Though I have not gone through all the loose papers and documents seized and impounded from various premises and have also not gone through the statements deposed by the related entities, I hereby confirm that there is suppression of actual turnover to certain extent as far as different concerns of the group are concerned. Question No.8 talked about loose paper bundle No.1 seized from the residence. Question No9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o FY 2007 - 08 there was no suppression of turnover since most of the outlets were new and limited sale used to take place . However, from FY 2008 - 09 to FY 2010 - 11, the turnover had increased . The same has not been fully reflected in the returns of income of the different entities of Joshi Wadewale Group . I accept that some papers related to these FYs show that there is suppression of turnover . I have not gone through all the papers, documents, statements of different persons etc . However, as per the best of my knowledge, I accept that there has been suppression of turnover for FY 2008 - 09 to FY 2010 - 11 . At this stage I am not able to work out the exact suppressed turnover ( unaccounted sales ) since there are various factors and various documents to be seen to arrive at the exact figure . However, since I am actually looking after the business and the net receipts, I am able to arrive at the total unaccounted income for the above financial years . The same are as below AY 2009 - 10 Rs . 1 Crore AY 2010 - 11 Rs . 1 . 5 Crores AY 2011 - 12 Rs . 2 . 5 Crores T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash received was also found from the residence of persons searched. The disclosure was also made on account of sales not reflected in regular books of account and as such, related to the evidence found from the residence of Shailesh Joshi at Durga Apartments, Bibwewadi. In this regard, the plea which has been raised by the learned Authorized Representative for the assessee is that where evidence of unaccounted income had been found from the premises of searched person and the same relates to an entity other than the searched person, then proceedings if any, had to be started against the person, other than the searched person, then provisions to be applied is section 153C of the Act. 27. Before proceedings further, it may be pointed out that additional income assessed in the hands of partnership firms was based on additional income surrendered by the partner of different partnership firms before us, while his statement was being recorded under section 132(4) of the Act on 20.01.2011 i.e. on the date of search. Shri Shailesh Joshi, the person searched and the partner of various concerns before us had offered additional income and had also given bifurcation of the additional income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub - section ( 1 ) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person . .. ( 2 ) Where books of account or documents or assets seized or requisitioned as referred to in sub - section ( 1 ) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied notwithstanding anything contained in sections 139, 147, 148, 151 and 153 of the Act. Applying the said provisions to the facts of the present case, wherein certain documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm i.e. one of the assessees before us, then for making aforesaid addition, recourse which was open to the Assessing Officer was to initiate proceedings under section 153C of the Act. Where the provisions of said section are to be applied, then no proceedings can be initiated under section 147, 148, 151 and 153 of the Act. Accordingly, we hold that when during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms, in which he was partner, on the basis of such documents found during the course of search, then for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued and the proceedings in pursuance thereof were invalid; and ( ii ) that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded, the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings . If the ground succeeds, the only result would be that the appeal would fail . The acceptance of the ground would show that the entire assessment proceedings were invalid, but yet the Tribunal which hears the appeal would have no power to disturb or to set aside the order in favour of the appellant . That order would stand and would have full effect in so far as it is against the respondent . The ground would serve only as a weapon of defence against the appeal . Hence, the refusal of the Tribunal to allow the assessee to challenge for the first time before it the validity of the notice and assessment under section 34 while considering the appeal filed by the department against the order of the Appellate Assistant Commissioner was not in accordance with law . 33. The Hon ble Bombay High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal . 26 . We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it . They have not remanded the matter to the Assessing Officer to consider the same . Both the orders expressly direct the Assessing Officer to allow the deduction of Rs . 40,00,000 /- under section 43B of the Act . The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs . 40,00,000 /- under section 43B of the Act . 34. Further, the Pune Bench of Tribunal had already decided similar issue in ITO Vs. Shri Shailendra B. Agrawal (supra) and ACIT Vs. Shamsundar Laxman Jagtap (supra). 35. We may also consider the said plea of assessee from another angle that the Hon'ble Supreme Court in CIT Vs. Khoday Eswarsa and Others (1972) 83 ITR 369 (SC) has laid down that findings given in assessment proceedings could not be considered as conclusive for the purpose of levy of penalty under section 271(1)(c) of the Act. The Hon ble Apex Court held that no doubt the findings in assessment proceedings may h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the context of applicability of section 153C of the Act vis- -vis 147 / 148 of the Act. Accordingly, we find no merit in the reliance placed upon by the learned Departmental Representative for the Revenue. We hold that in view of non obstante clause in section 153C of the Act, in case where the conditions laid down in section 153C of the Act are clearly attracted i.e. in case of search and consequent documents found during the course of search, relating to other person, then assessment, if any, has to be completed under section 153C r.w.s. 143(3) of the Act and no assessment in such case could be completed under section 148 of the Act. We hold so. The assessee before us has challenged the said proceedings during levy of penalty for concealment. The assessment made in the hands of assessee under section 143(3) r.w.s. 147 of the Act has not been challenged by the assessee and hence, stands completed. The income so assessed in the hands of assessee stands assessed. However, in view of our decision in the paras hereinabove that in the given circumstances, proceedings under section 153C of the Act were required to be initiated and not proceedings under section 148 of the Act, though t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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