TMI Blog2017 (7) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... t is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153C, and not vis-a-vis the original return under Section 139. - Decided in favor of assessee - I.T.A. No. 6063/Mum/2013 - - - Dated:- 12-7-2017 - Shri D.T. Garasia, JM And Shri Manoj Kumar Aggarwal, AM Assessee by : G.P.Mehta, Ld. AR Revenue by : Suman Kumar, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2006-07 assails the order of Ld. Commissioner of Income Tax (Appeals)-32 [CIT(A)], Mumbai dated 05/08/2013 qua confirmation of penalty u/s 271(1)(C) of the Income Tax Act, 1961 for ₹ 8,07,840/-. 2. Facts leading to imposition of penalty are that pursuant to search operations on Euro Group of Companies on 03/08/2006, the husband of the assessee namely Vimal K. Rathi, being associated person was also covered under search operations. During the search operations, four blank promissory notes for ₹ 6 Lacs each dated 06/01/2006 were seized from the residence of husband of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 24 Lacs with respect to cash payment towards purchase of certain flat and the same has already been offered by way of additional income in the revised return of income filed by the assessee on 31/12/2008. 2.2 After considering the same, the assessment was completed on 24/12/2009 at ₹ 26,94,200/- as disclosed in the revised return of income. 2.3 Consequently, the penalty proceedings u/s 271(1)(c) were initiated in the quantum assessment and accordingly a show cause notice dated 24/12/2009 pursuant to Section 274 read with section 271(1)(C) was issued to the assessee which was followed by another notice dated 17/02/2012. 2.4 During penalty proceedings, the assessee contended that there was no difference in returned income and assessed income and therefore, the penalty was not warranted for. However, Ld. AO noted that additional income was offered only after the search operations were conducted and the same was not voluntary and therefore, imposed impugned penalty u/s 271(1)(c) of the act read with explanation 1. 2.5 The assessee contested the same on various legal grounds as well as on merits before Ld. CIT(A) vide impugned order dated 05/08/2013 and rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the revised return of income which has been accepted as such by the revenue and against the additional income offered by the assessee, penalty proceedings have been initiated u/s 271(1)(c) in the quantum assessment on the undisclosed income . Further, the assessee has been issued two show cause notices and pursuant to the same penalty has finally been imposed for concealment of income . In our opinion, the assessee was well aware of the grounds for which the penalty was being initiated / levied and in fact, the assessee actively contested the same by making various submissions as evident from the record. Therefore, we are not convinced with the legal grounds raised by Ld. AR and hence, inclined to dismiss the same. 5. On merits, It is an admitted fact that the assessee has filed revised return of income for impugned AY on 31/12/2008 after disclosing additional income of ₹ 24 Lacs therein to make up for the blank promissory notes found during the course of search operations. The return, being filed beyond statutory period as prescribed u/s 139(5) i.e. one year from end of relevant Assessment Year, is clearly non-est and nullity. However, it is noted that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the interpretation of this provision, this Court in Commissioner of Income Tax v. SAS Pharmaceuticals (2011) 335 ITR 259 (Del), stated that: It is to be kept in mind that Section 271(1)(c) of the Act is a penal provision and such a provision has to be strictly construed. Unless the case falls within the four-corners of the said provision, penalty cannot be imposed. Subsection (1) of Section 271 stipulates certain contingencies on the happening whereof the AO or the Commissioner (Appeals) may direct payment of penalty by the Assessee. Thus, what is required to be judged is whether there has been a concealment of income in the return filed by the assessee. 15. Earlier decisions indicated a conflict of opinion as to whether Section 271(1)(c) required the revenue to specifically prove mens rea on the part of the assessee to conceal his income. In order to remove the element of mens rea, the Finance Act, 1964 deleted the word deliberately that preceded the words concealed the particulars of his income in Section 271(1)(c). Nonetheless, even post the amendment, the Apex Court in K.C. Builders v. Assistant Commissioner of Income Tax, 265 ITR 562 (SC) held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. s opinion, the assessee had concealed his income. However, the mere fact that the assessee has filed revised returns disclosing higher income than in the original return, in the absence of any other incriminating evidence, does not show that the assessee has concealed his income for the relevant assessment years. On this point, several High Courts have also opined that the mere increase in the amount of income shown in the revised return is not sufficient to justify a levy of penalty. 18. The Punjab Haryana High Court in Commissioner of Income Tax v. Suraj Bhan, (2007) 294 ITR 481 (P H), held that when an assessee files a revised return showing higher income, penalty cannot be imposed merely on account of such higher income filed in the revised return. Similarly, the Karnataka High Court in the case of Bhadra Advancing Pvt Limited v. Assistant Commissioner of Income Tax, (2008) 219 CTR 447, held that merely because the assessee has filed a revised return and withdrawn some claim of depreciation penalty is not leviable. The additions in assessment proceedings will not automatically lead to inference of levying penalty. The Calcutta High Court in the case of Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent provisions. However, the provisions that are saved are those under Section 153B and 153C, so that these three Sections 153A, 153B and 153C are intended to be a complete code for post-search assessments. Considering that the non-obstante clause under Section 153A excludes the application of, inter alia, Section 139, it is clear that the revised return filed under Section 153A takes the place of the original return under Section 139, for the purposes of all other provisions of the Act. This is further buttressed by Section 153A (1)(a) which reads: Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shalla) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139. Upon perusal of the ratio of the same, we find that imposition of penalty is not automatic and the same being penal in nature has to be construed strictly and should fall within the four corners of the statutory provisions. The concealment has to be in the return of income filed by the assessee. Further, the provisions of Sections 153A, 153B and 153C are intended to be a complete code for post-search assessments. Considering that the non-obstante clause under Section 153A 153C excludes the application of, inter alia, Section 139, it is clear that the revised return filed under Section 153A 153C takes the place of the original return under Section 139, for the purposes of all other provisions of the act and accordingly, if the same has been accepted as such by the revenue, the penalty was not justified in view of the fact that return filed pursuant to Section 153C has to be looked at as a second chance to assessee to make good omission, if any, in the original return. Once AO accepts the revised return filed under Section 153C, the original return fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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