TMI Blog2018 (3) TMI 1676X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed income during search. After the suo moto disclosure by the assessee no requirement remained for the Revenue to make any further discovery at all. The requirement of Explanation 5A of the assessee being found during search to be the owner of assets acquired out of earlier undisclosed income is therefore met. The contention of the assessee that no incriminating material was found during search, we hold, has been rightly dismissed by the CIT(A). - decided against assessee. - ITA Nos.254 & 255/Chd/2017 - - - Dated:- 19-3-2018 - Shri Sanjay Garg And Ms. Annapurna Gupta, JJ. Appellant by: Shri Rajiv Gupta, CA Respondent by: Smt.Chanderkanta, Sr.DR ORDER Annapurna Gupta, Both these appeals filed by the assessee have been preferred against separate orders passed by the Ld. Commissioner of Income Tax(Appeals)-5, Ludhiana both dated 25.11.2016 relating to assessment years 2010-11 2011-12, confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). Since identical issue is involved in both the appeals, they were heard together and are being disposed off by this consolidated order. For the sake of convenience, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5A to section 271(1)(c) of the Act becoming applicable to searches conducted after 1.6.2007 and as per which the assessee was deemed to have concealed particulars to the extent of income declared after search which was not declared in the original return of income filed. 5. Aggrieved by the same the assessee has come up in appeal before us raising following effective ground: 1. That the learned CIT(A) has erred in confirming the penalty under section 271(1)(c) of the Act, 1961 imposed by the Assessing Officer against the facts and circumstances of the case. 6. Subsequently, vide a written communication dated 19.5.2017 the assessee raised additional grounds of appeal which read as under: 1. On the facts and the circumstances of the case in law, the penalty proceedings initiated vide notice u/s 274 read with section 271 of the I.T. Act,1961., dated 29.11.2013 are invalid and bad in law. 2. On the facts and are the circumstances of the case and in law, the penalty order dated 30.05.2014 passed u/s 271(l)(c) is invalid and bad in law. 7. At the time of hearing, the Ld. counsel for assessee pointed out that the additional grounds of appeal involved a point of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges; i) for concealment and ii) for furnishing inaccurate particulars of income and, therefore, the assessee was well aware of the charges against him so as to defend his case. The Ld. DR contended that it cannot be said, therefore, that the assessee s right for reasonable opportunity of being heard was prejudiced in any manner. The Ld. DR in this regard relied upon the following decisions: 1) CIT Vs. Smt.Kaushalya Others 216 ITR 660 2) CIT Vs. Mithila Motors (1984) 149 ITR 751 (Pat) 3) Grass Farms Resorts (P)Ltd. Vs. DCIT IT Appeal No.730 (jp) of 2011(ITAT, Jaipur Bench) 4) Airen Metals Pvt. Ltd. Vs. ACIT ITA No.820/JP/2016 (ITAT, Jaipur Bench) 5) Labh Singh Vs. ITO, Ward-3, Kaithal Date of orod 5.8.2016 6) Vasantbhai Haribhai Gajera Vs. DCIT ITA No.2189/Ahd/2014 (ITAT, Surat) 7) Trishul Enterprises Vs. ACIT ITA No.384 385/Mum/2014 (I.T.A.T., Mumbai Bench) 13. We have heard the rival contentions. The genesis of the arguments of the Ld. counsel for assessee originates from the order of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (supra) which was followed by the Hon'ble Karnataka High Court again in SSA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court has very lucidly explained that the purpose of issuing notice is to make the accused person aware of the charge against him for which he is being penalized i.e. for concealing particulars of income and/or furnishing inaccurate particulars of income so that he can adequately defend himself. The Hon'ble High Court further clarified that the same may be clear from the order of the authorities itself passed in proceedings during the course of which he was satisfied of the existence of the impugned condition, which is a statutory requirement for initiating penalty proceedings u/s 271(1)(c) of the Act. In such cases the Hon'ble High Court held, where ground for initiating penalty is clearly coming out from the order, reference to the order in the notice u/s 274 of the Act would be sufficient to make the person charged with the same, aware of the charge. As per the Hon'ble High Court, reference to the order in the notice which contains clear satisfaction of the authority of the existence of any of the grounds would be sufficient compliance of the aforesaid condition. The Hon ble High Court further held that in situation where the order of the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnish me return of income which you were required to furnish by a notice given under section of the Income Tax Act, 1961, dated____________________ . have without reasonable cause failed to comply with the notice u/s ------- --------------- issued on ---------------------- fixing the case for hearing on which was served on have concealed the particulars of your income and for furnishing inaccurate particulars of such income. 2. You are hereby requested to appear before me at 11.30AM on 26.12.2013 and show cause why an order imposing a penalty on you should not be made under section 274 read with section 271 of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1 )(c) of the I.T.Act,1961. (SUKHJIT SINGH) Dy. Commissioner of Income Tax, Central Circle-Ill, Ludhiana. The charge against the assessee is therefore on both Courts which as pointed out above by us has been held to be plausible as the same can be overlapping in certain circumstances. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand, supported the order of the Ld.CIT(Appeals). 19. We have heard the rival contentions. The relevant finding of the Ld.CIT(Appeals) while upholding the levy of penalty after dealing with the above contentions of the assessee before him is as under: To decide the issue, it is relevant to note here that there was an amendment in section 271(1} by Finance Act 2007 and a new explanation 'Explanation 5A' was inserted w.e.f. 01.06.2007, which is applicable to cases where search u/s 132 was initiated on or after 1st day of June 2007. Further 'Explanation 5' has been made applicable to cases where search was initiated before 1st day of June 2007. In the present case under consideration search action u/s 132 was initiated on 30.06.2009, therefore, this case is covered by the provisions of 'Explanation 5A' which is reproduced 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the normal return of income for the assessment year 2007-08 was filed by the assessee, on 31.3,2007 i.e. the date of search itself. However, the assessee filed his return of income in response to notice dated 27.1.2009 issued u/s 153A of the Act, on 23.7.2009, declaring income of ₹ 3,27,01,440/-, including the additional amount of ₹ 2,00,60,000/-,declared by the assessee, in the statement recorded u/s 132(4) of the Act. The assessee filed return of income, in response to the said notice u/s 153A of the Act, on 23.7.2009 and on the date of filing the return, the Explanation 5A inserted by the Finance (No.2)Act of 2009, with retrospective effect from 1.6.2007, was on the Statute. In the present case, return of income was filed in response to notice u/s 153A of the Act, which is covered by Explanation 5A to Section 271(1) (c) of the Act, inserted by Finance (No.2) Act of 2009. The facts of present case, are not similar to the facts, as obtaining, in the case law, relied upon by the assessee, as discussed above. 30. Further, the provisions of Section 153A are specifically are brought on the Statute book, for assessment, in case of search u/s 132(1) of requisition of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is relevant to reproduce the provisions of Explanation 5A to section 271(1) since the challenge of the assessee is to the applicability of the said Explanation in the facts of the present case: [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 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 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; (b) the date for filing the return of income for such previous year has expired but the assessee has not filed the return. Then, notwithstanding that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessees own admission, he had not disclosed income to the tune of ₹ 28lacs earned during the year. Then subsequently during assessment proceedings the assessee claims /admits to have invested this income in two properties. What this tantamounts to is that the surrender made by the assessee was on account of undisclosed income for the year, invested in assets. And since the assessee had suo moto made the surrender it tantmounted to the assessee himself coming clean before the Revenue about the fact of earning such income and investing it in assets. Thus at the point of time when the surrender was made by the assessee during search the Revenue for all purposes had found the assessee to be the owner of assets acquired out of earlier undisclosed income during search. After the suo moto disclosure by the assessee no requirement remained for the Revenue to make any further discovery at all. The requirement of Explanation 5A of the assessee being found during search to be the owner of assets acquired out of earlier undisclosed income is therefore met. The contention of the assessee that no incriminating material was found during search, we hold, has been rightly dismissed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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