TMI Blog2018 (12) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... e of concealment of income and noting that the assessee has pleaded that only notice u/s. 271AAAA was received. Hence, we deem it appropriate to remit this issue to the file of the CIT(A) only after factual examination of this claim, the case law on the issue cited above need to be considered. CIT(A) is directed to consider the issue and pass a speaking order. The penalty u/s. 271(1)(c) which are levied under the caption of Explanation 5A have to be levied irrespective of the fact whether the undisclosed income declared in search is disclosed by the assessee in the return of income furnished after the date of search. Hence, the assessee’s plea that the penalty should not be levied as the undisclosed income has been offered in the return of income pursuant to search cannot come to the rescue of the assessee. The case law cited by the ld. Counsel of the assessee in this regard with regard to the Kirit Dahyabhai Patel vs-ACIT, (2015 (1) TMI 201 - GUJARAT HIGH COURT) and DCIT-vs-Purti Sakhar Kharkhana (2013 (12) TMI 242 - ITAT NAGPUR) cannot help the case of the assessee as they were not rendered under the context of the penalty levied u/s. 271(1)(c) under Explanation 5A. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said seized documents were cash receipts in respect of purchase of shops from the appellant in Little World Mall which were over and above the agreement value and the same have not been accounted for in the books of account. Accordingly, these cash receipts were offered as undisclosed income of the appellant in the statements recorded during the search operations as under: SI. No. A.Y Amount (Rs.) 1 2008-09 8.00 Crores 2 2009-10 4.05 Crores total 12.05 Crores 4. Consequent to the aforesaid findings during the search operation, a notice u/s 153A was issued to the appellant on 29.09.2009 and in response to the notice, the appellant filed return of income on 30.11.2009 declaring total income of ₹ 8,25,51,370/- for this year, The assessment u/s 143(3) r.w.s. 153A was completed on 30.12.2010, assessing the total income of the appellant at ₹ 8,25,51,370/- as admitted by the appellant'in the return of income filed u/s 153A. The income admitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and hence penalty is attracted. It was also noted by the Assessing Officer that there is no dispute about the quantum addition made in the assessment order and the appellant has concealed the particulars of income to the extent of ₹ 7,30,50,000/- on account of unaccounted cash receipts in respect of sale of units in the said shopping mail. Accordingly, minimum penalty of ₹ 2,48,29,695/- was imposed on the appellant u/s 271(l)(c), which is the sole grievance of the appellant in the present appeal. 6. Against the above order, the assessee appealed before the ld. CIT(A). 7. The ld. CIT(A) elaborately referred to the contention of the assessee. However, he was not convinced. He upheld the penalty by holding as under: 3.4 The propositions canvassed by the Ld. Counsel for the appellant are carefully examined in the light of the facts of the case, material placed on record and the legal position as applicable to the year. The first contention of the appellant in the matter is that the AO initiated penalty proceedings u/s 271AAA/271(l)(c) mechanically as either/or option in respect of the alleged concealment of income and therefore the primafacie satisfaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71AAA in the assessment order, firstly, this is not a case where penalty proceedings are not initiated at all during the assessment proceedings. It needs to be appreciated that concealment of particulars of income and furnishing of inaccurate particulars thereof sometimes overlap and therefore merely because specific charge is not indicated in the assessment order, it does not vitiate the entire levy penalty when the penalty is levied later on a specific charge. Secondly, at times both the sections are mentioned in assessment orders passed consequent to the search and seizure operation as an abundant caution and for the reason that for some assessment year in the block period i.e. specified previous years, provisions of sec. 271AAA are applicable and for other years, provisions of sec.271(l)(c) are attracted. In such cases, what is important to be seen is whether penalty is levied by the AO on a specific charge and under a specific section in the penalty order. In the case of the appellant, during the penalty proceedings after affording an opportunity of being heard to the appellant and on appreciation of material and evidences available on record by the A.O. the penalty was levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Delhi has taken similar view that when the A.O. had at the end of the assessment order specifically stated that penalty proceedings are initiated separately, it would have to be held that the A.O. has recorded his satisfaction. In the present case also, the AO had material before him, as discussed in the assessment order, for being satisfied that the applicant has concealed the particulars of his income and it could be reasonably construed from the assessment order that the AO had prima facie satisfaction that the case may deserve imposition of penalty for concealment of income. In such circumstances, just because both the sections are mentioned in the assessment order, it cannot be said that primafacie satisfaction of the AO for levy of probable penalty is absent in the assessment order and the plea raised by the appellant in this regard cannot be countenanced. 3.4.2.1 The appellant has also argued that the penalty needs to be cancelled because the AO had issued the notice u/s 271AAA and not under section 271(1)(C) of the Act. In this regard the appellant ahs placed reliance on the Bangalore ITAT decision in the case of K Prakash Setty. 1 have considered this argument. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has concealed income or when the assessee has furnished inaccurate particulars of income. In addition to these two situations, penalty can also be imposed, inter alia, when assessee is deemed to have concealed particulars of income under Explanations to sec. 271(l)(c). In the case of the appellant, the sequence of events clearly shows that but for search operation in the case of appellant group of cases, the correct income earned by appellant to the extent of ₹ 7.30 crores for the year under consideration would have remained undisclosed and escaped taxation. Further, this is not a case where the additional income was declared on estimate basis or in respect of a debatable legal issue to buy peace or to avoid litigation. Specific evidences containing unit-wise unaccounted cash receipts relating to sale of Mall were found during the search at two premises and as a result the appellant had no option but to admit the undisclosed income. The omission of such receipts in the regular books of a/c or original return of income was not due to any bona fide or inadvertent or mistake on the part of the appellant. As already discussed, a particular modus operandi was adopted to under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case. This argument is also lacking in merit. Firstly, as admitted by the Ld. Counsel, the decisions relied upon were rendered in the context of Explanation 5 to sec. 271(l)(c), where clause (ii) of Explanation 5A i.e. where assessee is found to be the owner of 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, is absent. Secondly, even presuming for a while that the incriminating papers found during the search evidencing unaccounted cash receipts cannot be construed as documents as claimed by the appellant, the transactions representing appellant's undisclosed income as envisaged in Explanation 5A were found during the search and seizure operations. Thus, notwithstanding the position that undisclosed income of 7.30 crores was declared in the return filed u/s 153A and there was no other addition in the assessment order, the appellant shall for the purpose of imposition of penalty u/s 271(l)(c) be deemed to have concealed particulars of income. 3.4.5 Adverting to the case la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the penalty. In other cases any how there will be no penalty because the guilt itself is not established. . . 3.4.7 I find that in so many cases the Courts have upheld levy of concealment penalty where revised returns were filed subsequent to detection of the concealment in a survey or a search. The honorable'High Court of Madras confirmed the levy of penalty in the case of Commissioner of Income-tax v. C. Ananthan Chettiar213 ITR 401, In this case during search, cash and jewellery were found -and the Assessee filed revised return by disclosing additional income - No explanation was offered by assessee expect asserting that he had disclosed income only to buy peace with department- the Court held that in circumstances and facts of the case the Tribunal erred in setting aside penalty. 3.4.8 In the case of Banaras Chemical Factory [1977] 108 ITR 96 (ALL.) the honorable High Court Of Allahabad held that even when assessee makes a voluntary disclosure of its concealed income, he cannot be absolved from levy of penalty. 3.4.9 The honorable High Court of Kerala has in the case of P.C. Joseph Bros. [2000] 108 TAXMAN 253 (KER.) confirmed levy of penalty. In that case afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed. The said books of account pertained to the earlier financial years. Certain loose sheets including sales, etc., were also seized. The transactions made through bank accounts were found to have been mostly kept out of the books of account. After the aforesaid search and seizure carried out on 26-8-1986, the assessee filed a revised return, under the amnesty scheme disclosing additional income for the assessment years 1984-85 and 1985-86. The assessments were regularized by getting service of notice under section 148 and the assessments, were completed for both the years on disclosed amount only. Subsequently, penalty was levied. The assessee's contention was that no penalty was imposable under section 271(l)(c) as the revised returns filed by him had been accepted. 3.4.12 On appeal the court held that the assessee did not act voluntarily and bona fide in filing the revised return and offering the additional income and, admittedly, the revised return was not filed within the financial year or even before search and seizure was conducted and incriminating documents were recovered showing disclosed income of the assessee. The Assessing Officer was, therefore, fully justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, it would fall for the purposes of computation of total income for charging income-tax thereon. Thus, the term books of account referred to in this relevant sub-clause of Explanation 5 would mean those books of account whose main object is to provide credible data and information to file the tax returns. The credible accounting record provides best foundation for filing return of both direct and indirect taxes. Accounting is called a language of business. Its aim is to communicate financial information about the financial results.This is not possible unless the main objectives of the books of account are to maintain record of business to calculate profit earned or loss suffered during the period of time, to depict the financial position of the business: to portray liquidity position; to provide up-to-date information of assets and liabilities with a view to derive information so as to prepare profit and loss account and draw balance sheet to determine income and source thereof. Thus, the term books of account referred to in Explanation 5 must answer the above qualifications. It cannot be understood to mean compilation or collections of sheets in one volume. The books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but with specific intention or desire on the part of the assessee to hide or conceal income so as to avoid imposition of tax thereon. The words in Explanation 5 books of account, if any, maintained by him for any source of income are important words signifying the legislative intent embodied in the explanation warranting grant of immunity from penalty. The legislative intent is to admit only those books of account maintained by the assessee on his own behalf as by their very nature and circumstances are maintained for the purposes of drawing source of income. Therefore, when books of account are tendered for claiming benefit of Explanation 5 of section 271(1)( c ), it must be shown to be a book, that book must be a book of account, and on the top of it that must be one maintained for the purposes of drawing source of income under the Act. These essential requirements must be carefully observed while implementing tax legislation in the country where secret and parallel accounts based on frauds and forgery are extremely common and responsibility of keeping and maintaining accounts for the purposes of the tax legislation is honoured in the breach rather than the observance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /c. Secondly, even presuming for a while that some expenditure in relation to unaccounted cash receipts was incurred outside the books of account, the same cannot be allowed as expenditure as per the proviso to sec. 69C. In such a situation, the contention of the appellant that it offered gross cash receipts to tax to avoid litigation and the component of real income in such receipts is lower cannot be accepted. 11. The ld. CIT(A) concluded as under: To sum up, provisions of Explanation-5A to section 271(l)(c) have been especially brought into statute to deal with this kind of cases where the assessee had already filed its return of income u/s. 139 and search proceedings lead to discovery of concealed income pertaining to such period. In such cases, the assessee is deemed to have concealed particulars of its income even if such concealed income is disclosed in the return of income filed in response to notice issued u/s. 153C /153A and the returned income is accepted as it is by the AO. The facts of the case when appreciated with reference to the provisions of Explanation 5A to section 271(l)(c) leave no room for doubt that penalty in this case is clearly exigible for concealm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uj) (2017) (ix) DCIT-vs-Purti Sakhar Kharkhana, 35 taxmann.com 594 (Nagpur)(2013) 16. The ld. Counsel of the assessee further submitted that the 3rd Member decision of ITAT Amritsar in the case of HPCL Mittal Energy Ltd. vs. ACIT (in ITA No. 554 555/Asr/2014 vide order dated 07.05.2018) is not applicable here. 17. Per contra, the ld. Departmental Representative (ld. DR for short) as regards the merits of the case, the ld. CIT(A) has passed a very elaborate order covering all the issues raised by the assessee. As regards the assessee s plea on the preliminary issue, the ld. DR submitted that the ld. CIT(A) has fully covered this issue also. He submitted that the assessee had not denied that he had not received the notices u/s. 271(1)(c) and 271AAA. He further submitted that as regards the issue of striking off the relevant portion in the notice issued is concerned, he submitted that this issue was never raised before the authorities below. In any case, he submitted that this issue is covered in favour of the Revenue by the several case laws: 18. Upon careful consideration, we find that the preliminary issue raised by the ld. Counsel of the assessee has two limbs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of sec. 271AAA are applicable and for other years, provisions of sec.271(l)(c) are attracted. In such cases, what is important to be seen is whether penalty is levied by the AO on a specific charge and under a specific section in the penalty order. In the case of the appellant, during the penalty proceedings after affording an opportunity of being heard to the appellant and on appreciation of material and evidences available on record by the A.O. the penalty was levied under a specific section 271(l)(c) and on a specific charge that the appellant concealed particulars of income. We find that the reasoning given by the ld. CIT(A) is cogent. The assessee has received both notices. Notice u/s. 271AAA was issued by the A.O. under abundant caution only and it was not subsequently acted upon. 19. As regards the issue of striking off the relevant limb in notice u/s. 271(1)(c) is concerned, we find that this issue was never before the ld. CIT(A). In fact, the ld. CIT(A) in his order noted that the assessee had argued that the penalty needs to be cancelled because A.O. has issued notice u/s. 271AAA and not u/s.271(1)(c). The ld. CIT(A) has categorically found that the penalty u/s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s satisfied that any person- ( a ) 76[***] ( b ) has 77[***] failed to comply with a notice 78[under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or] under sub-section (1) of section 142 or sub-section (2) of section 14379[or fails to comply with a direction issued under sub-section (2A) of section 142], or ( c ) has concealed the particulars of 80his income or 81[***] 80furnished inaccurate particulars of 82[such income, or]80 83[( d ) has concealed the particulars of the fringe benefits or furnished inaccurate particulars80 of such fringe benefits,] he may direct that such person shall pay by way of penalty,- ( i ) 84[***] 85[( ii ) in the cases referred to in clause ( b ), 86[in addition to tax, if any, payable] by him, 87[a sum of ten thousand rupees] for each such failure ;] 88[( iii ) in the cases referred to in clause ( c ) 89[or clause ( d )], 90[in addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed 91[three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his income 92[or fringe benefits] or the furnishing of inaccurate par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 23. We find that the main emphasis of the ld. Counsel of the assessee in this case is that the issue is covered in favour of the assessee by the decision of the ITAT in the case of Sidhi Home Makers (supra). In this case, we find that the penalty was quashed on a finding that the notice issued by the A.O. u/s. 271(1)(c) is untenable and, hence, the penalty imposed by the A.O. u/s. 271(1)(c) was directed to be deleted. The Tribunal has also given a finding that the issue of notice u/s. 271AAA was erroneous. In this case, we have already found above in the present case the issue of validity of notice u/s. 271(1)(c) on account of non striking off of relevant limb was not before the ld. CIT(A) and we have already remitted the same to the file of the ld. CIT(A) to give a factual finding on this account. Hence, this case law on this point does not come to the rescue of the assessee. Moreover, several case laws from the Hon'ble jurisdictional High Court as well as Hon ble Apex Court referred hereinabove also need to be considered by the ld. CIT(A), apart from factual finding on the issue raised. 24. In the result, this appeal by the assessee is partly allowed for sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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