TMI Blog2018 (9) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... of filing of the return has expired which was 30.11.2014 nor assessee has filed the return of income which was filed on 31.08.2016 due to the fact that assessment for assessment year under appeal has abated on the date of the search because the assessee was governed by the provisions of Section 153A. Therefore, the assessee has correctly filed return of income after the issue of notice under section 153A of the I.T. Act within the time allowed under that Section. Thus, in the present case, the deeming provisions of Explanation 5A cannot be applied because at the time of search for the relevant previous year under appeal, the due date of filing of the return of income had not expired. Learned Counsel for the Assessee rightly contended that since due date of filing of the return under section 139 has not expired on the date of the search, therefore, assessee could not have filed the return of income under section 139 and as per law, assessee was required to file return of income under section 153A of the I.T. Act only. Thus we are of the view that Explanation 5A to Section 271(1)(c) of the I.T. Act is not applicable to the facts. Therefore, no penalty could have been levied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153A of the I.T. Act issued on 22.08.2016. The A.O. issued statutory notice for completion of the assessment. It is noted here that prior to the search on Neha Jewellers group of cases, search and seizure action was carried on R.K. Kedia group of cases from 13.06.2014 to 17.06.2014, Mr. R.K. Kedia deposed before the Income Tax Authorities in his statement on oath that he is a Commission Agent who arranges different type of accommodation entries such as bogus long term capital gain through various entry operators. Mr. R.K. Kedia has further admitted on oath that various paper companies are controlled and managed by various accommodation entry operators not doing any actual working but are being used for providing bogus long term capital gain to various beneficiaries. Neha Jewellers group was also a beneficial of such bogus long term capital gain arranged by Mr. R.K. Kedia through these companies. During search operations on Mr. R.K. Kedia group of cases, documents seized as Annexure-A-28 etc., reveals that bogus long term capital gain has been obtained by the family members of the assessee as facilitated by Mr. R.K. Kedia. The seized documents evidenced that unaccounted cash ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from other sources of ₹ 18,65,587/- in respect of shares in the name of Smt. Kanika Agarwal and commission expenses of ₹ 13,80,014/-. 4.1. The A.O. after discussion made the assessment on revised return of income at ₹ 7,15,82,750/-. Thus, return of income was accepted. The A.O. however, noted that since the assessee did not file return of income under section 139 of the I.T. Act and return is only filed in response to notice under section 153A of the I.T. Act, therefore, the above surrendered income represents undisclosed income of the assessee as per the provisions of Section 271AAB of the I.T. Act and A.Y. 2014- 2015 under appeal is the specified year of the assessee as the assessee is a working partner of M/s. Brijwasi Jewellers. Hence, penalty proceedings under section 271AAB of the I.T. Act is initiated. The A.O. vide separate order levied the penalty under section 271AAB of the I.T. Act, 1961. 5. The assessee challenged the penalty order under section 271AAB of the Act before the Ld. CIT(A) and it was submitted that penalty under this provision is not leviable as the A.Y. 2014-2015 was not covered under the definition of specified year as due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of ITAT, Pune Bench in the case of ACIT, Central Circle, Kolhapur vs. D.M.Corporation Private Limited in ITA.Nos.137 to 141/Pune/2016 and in the case of Ajit Ramchandran Jadhv vs. ACIT, Circle-3, Nanded (2017) 82 taxmann.com 58 (Pune Tribunal). The penalty proceedings could not be initiated for both the limbs of Section 271(1)(c) of the Act. It was submitted that Explanation 5A to Section 271(1)(c) of the Act is not attracted in the case of the assessee. No incriminating material was found during the course of search. Surrender was not based on any material found during the course of search. Since the A.O. accepted the revised return filed by the assessee under section 153A of the I.T. Act, the original return under section 139 abates and become non-est. The assessee relied upon the decision of Hon ble Delhi High Court in the case of Pr. CIT vs. Neeraj Jindal Another (2017) 393 ITR 1 (Del.) (HC). 5.2. The Ld. CIT(A), however, did not accept the contention of assessee and noted that Ld. CIT(A) has power to initiate penalty proceedings 271(1)(c) of the Act. The Ld. CIT(A) has recorded satisfaction during proceedings pending under the Act. Since no return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 143(3) of the I.T. Act. The A.O. initiated the penalty proceedings under section 271AAB of the I.T. Act. The A.O. did not initiate the penalty proceedings under section 271(1)(c) of the I.T. Act. The A.O. vide separate order levied the penalty under section 271AAB of the I.T. Act, which have been deleted by the Ld. CIT(A) vide impugned order on the reasons that the time for filing of income tax return for assessment year under appeal has already been expired before date of search and therefore, provisions of Section 271AAB are not applicable to assessment year under appeal. The Ld. CIT(A), however, initiated the penalty proceedings under section 271(1)(c) of the I.T. Act read with Explanation 5A to Section 271(1)(c) of the I.T. Act. Learned Counsel for the Assessee submitted that Explanation 5A to Section 271(1)(c) of the I.T. Act is not applicable to the facts of the case because no return was filed by assessee before the date of the search. The assessee has not filed the return of income and the return was filed in response to notice under section 153A which would become the first return as per Section 153A itself. Explanation 5A covers previous year before date of search, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, submitted that there were no justification for the Ld. CIT(A) to levy penalty under section 271(1)(c) of the I.T. Act. 7. On the other hand, Ld. D.R. relied upon the Order of the Ld. CIT(A). He has submitted that the Board Circular do not apply to assessee as assessee has no business income, therefore, due date of filing of the return was 31.07.2014. He has submitted that power of Ld. CIT(A) is co-terminus to that of the A.O. The assessee filed revised return which showed concealment of income. He has submitted that since no original return was filed disclosing the returned income, therefore, penalty was rightly imposed. He has relied upon the decision of Hon ble Calcutta High Court in the case of CIT vs. Prasanna Dugar (2015) 371 ITR 19 (Calcutta) (HC), Order of ITAT, Madras Bench in the case of ACIT vs. Smt. J. Mythili 35 taxmann.com 86, Order of ITAT, Delhi Bench in the case of Smt. Kiran Devi vs. ACIT (2009) 125 TTJ 631 (Del.), Judgment of Hon ble Kerala High Court in the case of CIT vs. S.J. Prasad (2008) 220 CTR 169 (Kerala), Judgment of Delhi High Court in the case of CIT vs. Smt. Meeradevi (2012) 253 CTR 559 (Del.), Judgment of Delhi High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income-tax Act, 1961, is not automatic. For levy of penalty under section 271(1)(c), the conditions laid out therein have to be specifically fulfilled. Section 271(1)(c) of the Act, being in the nature of a penal provision, requires strict construction. The word conceal in section 271(1)(c) would require the Assessing Officer to prove that specifically there was some conduct on the part of the assessee which would show that the asses see consciously intended to hide his income. When an assessee has filed revised returns after a search has been conducted, and such revised returns have been accepted by the Assessing Officer, merely by virtue of the fact that such return showed a higher income, penalty under section 271(1)(c) cannot be automatically imposed. Considering that the non obstante clause under section 153A excludes the application, inter alia, of 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. Thus it is clear that when the Assessing Officer has accepted the revised return filed by the assessee under section 153A, no occas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return under section 153A had been accepted by the Assessing Officer there was no concealment of income. Moreover, for the relevant assessment years, 2005-06 and 2006-07, no material was recovered during the search. Rather, the assessee added ₹ 21,65,932 in the return filed pursuant to notice under section 153A. That amount was not relatable to any sum recovered or article seized. Therefore, the question of adding or not adding amounts after the search and falling within the mischief of Explanation 5 to section 271(1)(c) could not arise in the facts and circumstances of this case. The deletion of penalty was justified. 8.3. ITAT, Chandigadh Bench in the case of Shri Praveen Garg, Moga vs. ACIT, Central Circle-II, Chandigarh in ITA.No.350/Chd./2013 for the A.Y. 2008-2009 vide Order dated 09.09.2015 (Author by one of us J.M.) in paras 9 to 11 held as under : 9. We have considered the rival submissions and perused the material available on record. It is not in dispute that the search was conducted on 15.7.2008 at the premises of the assessee. The Assessing Officer levied penalty as per Explanation 5-A to section 271(1)(c) of the Act because the return has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holly 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 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, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. Thus, in case of search conducted on / or after 1st June 2007, penalty for concealment of income and furnishing of inaccurate particulars of income is deemed under Explanation 5A. However, two exceptions or saving c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-08, at the time of search, penalty cannot be levied under the deeming provisions of Explanation 5A. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that on this preliminary ground, penalty levied by the Assessing Officer and as confirmed by the Commissioner (Appeals) cannot be sustained and same is deleted. 10. Considering the facts of the case in the light of the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra), it is clear that in the case of the assessee, search had taken place on 15.7.2008. The due date of filing of the return for assessment year under appeal i.e. 2008-09 had not expired on the date of the search as the due date of filing of the return of income under section 139(1) was 30.9.2008. Thus, in the present case, the deeming provisions of Explanation 5-A cannot be applied because at the time of search, the relevant previous year for the assessment year under appeal, the due date of filing of the return of income had not expired. Thus, the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra) is squarely applicable to the facts and circumstances of the case. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 26.09.2014 whereby the due date for furnishing return of income from 30.09.2014 was extended to 30.11.2014 for the A.Y. 2014- 2015, in such a case, since assessee was a working partner of the firm i.e., M/s. Brijvasi Jewellers and accounts are to be audited under section 44AB of the I.T. Act. Thus, in the case of the assessee the due date of filing of the return under section 139 was extended up-to 30.11.2014. The A.O. issued notice under section 153A on 22.08.2018 and assessee immediately in response to such notice, filed return of income on 31.08.2016, which was further revised and assessee declared return of income of ₹ 7,15,82,750/- including the surrendered income which have been accepted by the A.O. as it is in the assessment order dated 21.12.2016 under section 153A read with Section 143(3) of the I.T. Act. According to second proviso to Section 153A of the I.T. Act, the assessment or re-assessment, if any, relating to any assessment year falling within period of six assessment years referred to in this subsection pending on the date of initiation of search under section 132 or making or requisitioned under section 132A, as the case may be shall abate. 8.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or furnishing inaccurate particulars of such income. Therefore, necessary ingredients for application of Explanation 5A to Section 271(1)(c) has been that the previous year has ended before date of the search and that where return of income for such previous year has been furnished before the said date but such income has not been declared therein or the due date for filing of the return of income of such previous year has expired but assessee has not filed the return of income. 10. In the instant case, considering the facts, Explanation 5A to Section 271(1)(c) of the I.T. Act, is not applicable in the case of the assessee, as the due date of filing of the return in the case of the assessee was extended up to 30.11.2014, which has not expired on the date of search on 16.10.2014. The assessee has filed the return of income on 31.08.2016 under section 153A of the I.T. Act on receiving the notice under section 153A issued on 22.08.2016. The assessee is admittedly a partner in the firm M/s. Brijvasi Jewellers and accounts are to be audited under section 44AB of the I.T. Act, which is admitted by the A.O. in the assessment order. It is, therefore, clear that in the present case, at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 132 on or after 1st July, 2012, assessee shall pay by way of penalty, in addition to tax, if any, payable by him a sum computed @ 10% of the undisclosed income of the specified previous year. The definition of specified previous year means, the previous year which has ended before the date of the search, but the date of furnishing the return of income under section 139(1) for such year has not expired before the date of the search and the assessee has not furnished the return of income for the previous year before the date of the search. This provision is attracted in the case of the assessee because the due date of furnishing of the return under section 139(1) of the I.T. Act, for the assessment year under appeal has not expired before date of the search as it was 30.11.2014 and that assessee has not furnished the return of income for such previous year before date of the search because it was filed under section 139A on 31.08.2016. The Ld. CIT(A), however, under some wrong interpretation of the provisions of Law, cancelled the penalty under section 271AAB of the I.T. Act in the same impugned order. Sub- Section 2 of Section 271AAB of the I.T. Act provides that no penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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