TMI Blog2018 (11) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... the income was disclosed in the return filed consequent to the search proceeding. In the instant case, scenario is more worse and the assessee has even not disclosed the said income in the return of income filed for the year under consideration consequent to search proceeding. We are of the opinion that deeming provisions of Explanation 5A below section 271(1)(c) of the Act is attracted and for the purpose of imposition of the penalty under section 271(1)(c) of the Act, the assessee is deemed to have concealed particulars of his income or furnish inaccurate particulars of such income, thus the levy penalty by the Assessing Officer is accordingly upheld. The ground of the appeal raised by the assessee is accordingly dismissed. Penalty under section 271AAA - Held that:- The penalty under section 271AAA of the Act could be levied in specified previous year in respect of the undisclosed income unless admitted in a statement under section 132(4) and specified the manner in which income is derived and the manner has to be substantiated and tax has paid on the undisclosed income. In case any of the 3 conditions are not fulfilled, the penalty under section 271AAA would be levied. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been raised by the assessee: 1. the Learned CIT(A) has erred in law facts of the case in sustaining the penalty of ₹ 5,23,076/- u/s 271(1)(c) of the Income Tax Act, 1961, rejecting the submissions and explanations of the Assessee Company, which is arbitrary, unjustified and bad in law. 2. The assessee craves the right to add, amend or modify any ground of appeal. 3. Briefly stated facts of the case are that in the case of the assessee, a search and seizure action under section 132 of the Income Tax Act, 1961 (in short the Act ) was carried out on 29/04/2008. During the course of search proceeding, statement of Sh. J.S. Chawla, Director of assessee company, were recorded on oath u/s 132(4) of the Act and he surrendered an aggregate amount of ₹ 27 crores as undisclosed income for the entire group for assessment year 2008-09 on the basis of the documents found in seized during the course of the search. The assessee did not file any regular return of income for the year under consideration, which it was required to file as per the provisions of section 139 of the Act. Consequent to the search action, the Assessing Officer issued notice under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5A to section 271(1)(c) of the Act in view of the voluntary declaration of the undisclosed income. The Assessing Officer rejected the contention of the assessee observing that in view of the deeming provisions of explanation 5A below the section 271(1)(c) of the Act, the assessee was liable for penalty and, accordingly, he levied penalty of ₹ 5,23,076/- at the rate of 100% of the tax sought to be evaded. On further appeal, the Ld. CIT(A) upheld the penalty. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 4. In the sole ground, the assessee has challenged confirmation of penalty of ₹ 5,23,076/- levied under section 271(1)(c) of the Act. Before us, the Ld. Counsel submitted that there was reasonable cause in failure to report the income for the year under consideration and thus penalty levied may be deleted as the assessee has already paid taxes on the undisclosed income filed in assessment year 2008-09 and thus, there is no loss to Revenue. According to the Ld. Counsel, it was an honest error and there was no concealment on the part of the assessee. In the written submission filed the Ld. counsel submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee being a deeming provision and thus assessee cannot escape from the liability of penalty under section 271(1)(c) of the Act. In support of the contention, the Ld. DR relied upon following decisions: 1. Saniav Aqqarwal Vs CIT f20in 15 taxmann.com 34 (Punjab Haryana)/T20121 211 Taxman 178 (Punjab Haryana)(MAG.) Assessee made disclosure during assessment proceeding under section 131(1) on 5-1-2006 and offered to surrender amount attributable to him in investment in property. Hon ble P H High Court held that no immunity could be claimed by assessee from levy of penalty in terms of Explanation 5 to section 271(1)(c) 2 CIT Vs Prasanna Duqar T20151 59 taxmann.com 99 (Calcutta)/T20151 371 ITR 19 (Calcutta)(MAG.)/r20151 279 CTR 86 (Calcutta) Where Hon ble Calcutta High Court held that even where subsequent to search, O' assessee voluntarily disclosed a sum and offered said sum to tax, since said amount was not disclosed in original return, penalty levied under section 271(1 )(c) was justified 3. ACIT Vs Smt. J. Mythili (35 taxmann.com 86) where Hon ble ITAT Chennai held that where there was a search upon assessee and she subsequent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. The undisputed fact in the case is that no regular return of income was filed by the assessee and this income of ₹ 15,54,000/-was even not offered in the return of income filed in response to notice under section 153A of the Act. This income has been added by the Assessing Officer in assessment completed under section 153A of the Act and penalty has been levied invoking explanation 5A below section 271(1)(c) of the Act. The assessee has not filed any appeal against the addition in quantum proceedings under section 153A of the Act and only challenged the penalty levied under section 271(1)(c) of the Act. Since the penalty has been levied invoking Explanation 5A below the section 271(1)(c) of the Act, it is relevant to reproduce the said section as under: 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 (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hifted the income in question to the assessment year in consideration and assessee has not objected against the same and even not challenged the said addition in appeal. This conduct of the assessee of not objecting the addition of income to the assessment year under consideration shows that the claim of income relevant to the year under consideration has been accepted by the assessee. In such circumstances, the assessee squarely falls under the deeming provisions of Explanation 5A below section 271(1)(c) and cannot escape from liability of penalty under section 271(1)(c) of the Act. The decisions relied upon by the Ld. DR are in relation to Explanation 5 to section 271(1)(c) of the Act and not in relation to Explanation 5A. The Explanation 5 pertains to search initiated before first day of June, 2007 whereas Explanation 5A pertain to searches initiated on after first day of June, 2007. The main part of the Explanation 5 is pari materia with Explanation 5A except the conditions where levy of the penalty has been excluded. In the cases relied upon by the Ld. DR the penalty was held to leviable in terms of Explanation 5 to section 271(1)(c) of the Act despite the income was disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee filed return of income declaring an income of ₹ 40,16,465/-including an additional income surrendered of ₹ 28, 30,000/-. The detail of the said surrendered income are as under: S. No. Page No/Annexure/Party Amount (in Rs.) 1. Party 2, Annexure 1, Page 17 26,00,000/- 2. Cash seized from locker no. 421 with Punjab Sindh Bank, in the name of Mr. Deepak Kumar Rita Kumar 2,30,000/- Total 28,30,000/- 6.1 The Assessing Officer completed the assessment by accepting the income returned by the assessee at ₹ 40,16,465/-, however, he initiated penalty under section 271(1)(c) of the Act in respect of the surrendered amount of ₹ 28,30,000/-. The Assessing Officer rejected the contention of the assessee opposing levy of the penalty and he levied penalty amounting to ₹ 9,52,578/- at the rate of 100% of the amount of tax sought to be evaded. The Ld. CIT(A) sustained the penalty holding that the assessee has not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n discussed and found to be not related to the Explanation 5A below the section 271(1)(c) of the Act, which has been invoked by the Ld. Assessing Officer. Since, clause (a) along with clause (ii) of Explanation 5A is attracted, in the instant case, the assessee is liable for penalty under section 271(1)(c) of the Act. Accordingly, in view of the deeming provisions of Explanation 5A to section 271(1)(c) of the Act, we hold the assessee liable for penalty under section 271(1)(c) of the Act for concealment of particulars of income or inaccurate particulars filed. The ground of the appeal of the assessee is accordingly dismissed. ITA No.2558/Del/2012 for AY:2008-09 (Revenue) 10. Now, we take up appeal of the Revenue having ITA No. 2558/Del/2012 for assessment year 2008-09, wherein following grounds have been raised:- a) Whether the order of CIT(A) is completely contrary to the facts and provisions of Explanation 5 A to section 271(1)(c) of the I.T.Act particularly ignoring the following provisions, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on 30/09/2008 declaring total income of ₹ 25,76,35,590/-. In response to notice issued under section 153A, again the assessee filed return of income declaring total income of ₹ 27,69,01,087/- thereby increasing the income of ₹ 1,92,65 ,497/- as compared to regular return of income filed. 11.1 In the assessment order the Assessing Officer has reproduced the detail of undisclosed income of ₹ 27 crore surrendered in the course of statement recorded under section 132(4) as under: Unexplained cash and jewellery: Rs.5.00 crores Unexplained cash investment as per agreement to sell: Rs.8.00 crores Unexplained income as per loose papers seized Rs.4.00 crores Unaccounted income in respect of Spazedge Project Rs.10.00 crores Total : ₹ 27.00 crores 11.2 The Assessing Officer has also reproduced the detail of the undisclosed income of ₹ 26,71,70,000/-offered to tax for the year under consideration (Rs.28,30,000/- i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petty amount of expenditure of ₹ 9,73,300/-considered as part of offer of ₹ 1,92,65,493/-as income from other sources. 2. Brokerage of ₹ 7,58,205/-paid in cash considered as paid out of income of ₹ 1,92,65,493/- offered as income from other sources. 3. Cash of ₹ 3 lakh considered as part of offer of Rs.1,92,65,493/- 4. Expenditure aggregating ₹ 5,35,340/-considered as part of offer of Rs.1,92,65,493/- 5. Cash expenditure ₹ 93,000/-considered as part of offer of Rs.1,92,65,493/- 6. Amount of ₹ 5 lakh considered as part of offer of Rs.1,92,65,493/- 7. Expenses aggregating to ₹ 8.11 Lacs considered as part of offer of Rs.1,92,65,493/- 8. Expenses aggregating to ₹ 40,78,500/-considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has stated that it has incorporated the income arising out of the above documents as income from other sources from which it is all the more clear that the assessee has accepted to earning the same from undisclosed sources. That the assessing officer has accepted in the disclosure of the assessee does not immune the assessee from penalty proceedings since element of concelament exists in the disclosure made by the assessee simply due to the fact that but for the search, the assessee would have not disclosed this income. Since the assessee itself while explaining the documents seized as well as the disclosure made has agreed to out of books transactions , nothing more is required to prove the concealment involved with respect to ₹ 95,65,493. 11.11 Thus, according to the Assessing Officer the assessee failed to include the undisclosed income of ₹ 95,65,493/- in the return of income filed under section 139(1) and therefore, falls under the ambit of sub-clause (b) of Explanation 5A of section 271(1)(c) of the Act. The Assessing Officer is of the view that mere acceptance of the disclosure of the assessee did not automatically give immunity from penalty proceeding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at any levy of penalty u/s 271(1) (c) on the ostensible concealed income is impossible. The assessee cannot be expected to do the impossible. 4.4 Be that as it may I also find that the assessment order has been framed on the basis of the return filed u/s 153A. As such the return filed u/s 139(1) is not the basis on which the assessment order has been finalized. In such circumstances the return filed u/s 153A should therefore be taken as the valid return, while the return u/s 139(1) is at best only for the record. 4.5 Thus any determination whether penalty is to be levied u/s 271(1)(c ) is to be seen on the basis of the return filed u/s 153 A. The said return reflects the correct income which had been declared and surrendered by the assessee during the search. In fact the income declared in the return is. more than the surrendered amount of ₹ 27 crores in the statement recorded u/s 132(4). In such facts and circumstances 1 am afraid penalty cannot be levied u/s 271(1)(c) as there is no concealment or filing of inaccurate particulars. There is only a difference of opinion on the facts. It is not a case whereby the Ld. AO has made deep investigation on the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find any reason for entertaining the application of the assessee under rule 27 of the ITAT Rules and accordingly, said application was rejected and parties were directed to argue the appeal of the Revenue. 16. The Ld. DR supporting the grounds raised that Ld. CIT(A) was not justified in cancelling the penalty under section 271(1)(c) of the Act invoking Explanation 5A. According to him, penalty under 271(1)(c) of the Act could be levied in case of additions made other than the undisclosed income surrendered during the course of statement under section 132(4) of the Act. The Ld. AR submitted that in view of the deeming provisions of Explanation 5A, the assessee is liable for the penalty even though the said income has been included in the return filed in response to notice under section 153A of the Act. 17. The Ld. counsel of the assessee, on the other hand, opposed the arguments of the Ld. DR and submitted that penalty under section 271(1)(c) of the Act invoking Explanation 5A cannot be invoked where the due date of filing of the return of income for such previous year has not expired. He also submitted that in the specific previous year only penalty under section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her with interest, if any, in respect of the undisclosed income. 23. The specified previous year has been defined under the section as under: Explanation.-For the purposes of this section,- ( a) . ( b) specified previous year means the previous year- ( i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or ( ii) in which search was conducted. 24. Since the previous year corresponding to the present assessment year ended before the date of such i.e. 31.03.2008 and due date of filing of the return of income had not expired before the date of the search, the previous year corresponding to present assessment year under consideration is a specified previous year, and thus penalty under section 271AAA could be levied. The penalty under section 271AAA of the Act could be levied in specified previous year in respect of the undisclosed income unless admitted in a statement under section 132( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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