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TMI Blog2018 (4) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and circumstances of the case, Ld. A.O. has erred in law and on facts in imposing penalty without giving an adequate opportunity of being heard and by not observing the principles of natural justice.." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : During the search and seizure operation at the residential premises of the assessee, certain documents/loose papers were seized. An amount of Rs. 25,00,000/- was surrendered by the assessee and an amount of Rs. 39,00,000/- was seized on account of entries recorded in the documents seized from the residential premises. On the basis of completed assessment, AO initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act'). Disagreeing with the contentions raised by the assessee, AO proceeded to conclude that the assessee has concealed accurate particulars of his income by not disclosing the income which was surrendered by him during the course of search and seizure and thereby levied a penalty of Rs. 23,08,480/- @ 200% of the tax sought to be evaded. 3. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has restricted the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurate particulars in the quantum are sufficient to confirm the penalty. 9. The ld. AR for the assessee contended that in view of the categoric statement made by the assessee u/s 132 (4), his case falls under the exception provided under clause (2) of Explanation (5) to section 271(1)(c). Perusal of the copy of statement recorded u/s 132 (4), available at pages 4 to 11 of the paper book, shows that the assessee has surrendered the amount of Rs. 25,00,000/- and Rs. 39,00,000/- during search and seizure operation with clear intention to buy peace and avoid litigation with request not to impose any penalty and has also made a statement that the tax thereon be adjusted from the cash seized. 10. Hon'ble High Court of Allahabad in case cited as CIT vs. Radha Kishan Goel (supra) wile deciding the identical issue held as under :- "From a perusal of Expln. 5 it is evident that in circumstances which otherwise did not attract the penalty provisions of s. 271(1){c), a deeming provision was introduced as to attract the penalty provisions to those cases as well. But an exception in cl.(2) of Expln. 5 where the deeming provision will not apply if during the course of search the assessee mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non-disclosure of money, bullion, jewellery, etc. Thus, much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make Expln. 5(2) inapplicable. For the reasons stated above, there is no error in the order of the Tribunal and the same is upheld." 11. Similarly, Hon'ble High Court of Gujarat in case of CIT vs. Mahendra C. Shah also held that in case tax on income declared in statement u/s 132 (4) was paid before assessment was completed Exception (2) to Explanation (5) is applicable. Operative part of the judgment in CIT vs. Mahendra C. Shah (supra) is reproduced for ready reference as under :- "There is no prescription in Exception 2 of Expln. 5 of s. 271(1)(c) as to the point of time when the tax has to be paid qua the amount of income declared in the statement made under s. 132 (4). The Tribunal was justified in holding that there would be sufficient compliance of the provision if tax is shown to have been paid before the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place on 3rd July, 1987 the return of income was not due before 31st July, 1988. Therefore, whether the income represented by the value of the asset was shown in the return of income or not became irrelevant once a declaration had been made about such income having not been disclosed till the date of search in the return of income to be furnished before the time specified in s. 139(1) as required by the earlier part of Exception No.2. In fact, at the cost of repetition, it is required to be stated that the legislative intent and the scheme that flows from a plain reading of the provision makes it clear that in relation to search and seizure proceedings, for becoming entitled to immunity from levy of penalty the basic requirement is in case of Exception No. 1 relevant entry in the books of account or disclosure before the competent authority, and in relation to Exception No. 2 disclosure in the statement made under s. 132(4). Disclosure or otherwise in the return of income post the date of search would not absolve an assessee from the deeming provision, namely, 'deemed concealment' once an assessee is found in possession of a valuable asset at the time of search. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case as the assessee has paid tax on the income surrendered as per statement recorded u/s 132 (4) at the time of search and seizure operation together with interest before the completion of assessment. 13. Moreover, the assessee has categorically mentioned in his statement u/s 132 (4) that the surrendered amount has been invested by him in cash out of unaccounted income generated as well as unaccounted commission income which may be generated out of the papers and documents found and seized in his residence. 14. So, when the assessee has come up with voluntary confession in order to buy peace and avoid litigation, he is entitled to the benefit of Exception (2) to Explanation 5 (2) to section 271(1)(c) and as such, the deeming provisions contained under Explanation 5 (2) are not applicable. Furthermore, the AO has initiated the penalty proceedings half-heartedly without satisfying himself, "as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income". Because perusal of the assessment order, available at pages 12 to 14 of the paper book, relevant pages 14 & 15, show that the AO while recording his satisfaction h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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