TMI Blog2017 (4) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... an entry found during the course of search. If the assessee has declared such income voluntarily without unearthing such income during the course of search, then it would not be considered that the assessee has concealed the income. Explanation 5A would not be applicable. In the result, all the appeals are allowed and impugned penalties are deleted. - Decided in favour of assessee - IT(SS)A No.271 to 273/Ahd/2013 Asstt. Year: 2005-06, 2008-09 and 2009-10 - - - Dated:- 6-4-2017 - Shri Rajpal Yadav And Shri Manish Borad, JJ. Assessee by : Shri Bhavesh Shah, AR Revenue by : Shri James Kurian, Sr.DR O R D E R Rajpal Yadav, Present three appeals are directed at the instance of the assessee against the orders of the ld.CIT(A)-I, Ahmedabad dated 2.5.2013 passed for the Asstt.Years 2005-06, 2008-09 and 2009-10 respectively. Since common issue is involved in all these appeals, they are disposed of by this common order. 2. Sole grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty imposed under section 271(1)(c) of the Income Tax Act for each assessment year. 3. Brief facts of the case are that search and seizure operation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid tax thereon. Accordingly, penalty proceedings under section 271(1) Explanation 5A of the Income Tax Act, 1961 are initiated on now disclosed income in the return of income for the year under consideration. 5. In view of the discussion with the AR of the assessee and data made available on record the total income of the assessee is assessed as under: Total income as per return of income Rs.10,32,883/- Assessed income Rs.10,32,883/- This order is passed after obtaining approval of Addl. CIT, CR- 1, Ahmedabad vide letter No.Addl.CIT.CR-1/AHD/Approval u/s.153D/2011-12 dated 26.12.2011. 5. With the assistance of the ld.representatives, we have gone through the record. The ld.Revenue authorities for construing the additional income declared by the assessee in response to the notice under section 153A as concealed income, has formed the belief on the basis of Explanation 5(A) appended to section 271(1)(c) of the Act. Revenue authorities are of the opinion that since the assessee has not disclosed additional income in the original return, meaning thereby, it is to be assumed that he has di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee himself makes a statement under section 132(4) of the Act in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income which has not been disclosed in the returns of income to be furnished before the expiry of time specified in section 139(1); (b) that the assessee should specify in his statement under section 132(4) of the Act, the manner in which the income stood derived, and (c) the assessee has to pay tax together with interest, if any, in response to such undisclosed income. According to the assessees present before us, they have made voluntary disclosure, filed returns and paid taxes. Their explanation for availing the benefit of judgment of the Hon ble Gujarat High Court in the case of Kirit Dahyabhai Patel (supra) has been rejected by the ld.First Appellate Authority on the ground that the Explanation 5 is applicable on the cases where the search was initiated on or before the 1st June, 2007. After 1st July, 2007, the Explanation 5A to sub-section (1) of Section 271(1)(c) has been inserted vide Finance Act, 2007. Along with this Explanation, Section 271AAA has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) undisclosed income means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the 87[Principal Chief Commissioner or] Chief Commissioner or 87[Principal Commissioner or] Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been acquired by him by utilsing the whole or partly of his income from any previous year or any income based on any entry in any books of account or other documents or transactions found during the course of search, and the assessee claims that such entry in the books of account or other documents or transactions represents his income from any previous year, which has ended before the date of search, then, notwithstanding such income is declared by him in any return of income furnished on or after the date of search, he shall for the purpose of imposition of penalty under clause (c) of sub-section (1) of this Section be deemed to have been concealed particulars of income or furnished inaccurate particulars. The moot question for attracting this explanation is that in the course of search money, bullion, jewellery or income based on any entry in the books of accounts or other documents ought to have been found. In a given situation, no money or bullion or jewellery or income might have found from the assessees for the assessment years which were not part of specified previous year contemplated in section 271AAA or immunity available to the assessees under sub-clause (a) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has made some observation at his own, otherwise, in rest of the paragraphs he reproduced the submissions or the head-notes of the case laws. The observation of the AO in these paras read as under: 4. I have carefully considered the submissions made by the assesses. The contention of the assessee is not acceptable because, the additional income offered by the assesses only surfaced due to the search action carried by the department. Had there been no search, the portion of additional income would have remained concealed eternally. If in a regular case, on detection of concealment, penalty u/s. 271(1)(c) is leviable, how much more penalty becomes true and potent in a case where the concealment has been detected on account of proactive search action initiated by the department. In the case of the assessee, the assessee has not recorded details of his income and the same was worked out only during search and that too on the basis of the seized materials. In fact, it is an established judicial decision that 'documents seized during the search cannot be said the books of accounts maintained for any source of income, for the purposes of Explanation 5 (CIT Vs Glamour Restaurant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is an admissible evidence but not conclusive one. This presumption of admissibility of evidence is a rebuttable one, and if an assessee is able to demonstrate with the help of some material that such admission was either mistaken, untrue or based on misconception of facts, then solely on the basis of such admission no addition is required to be made. It is true that admission being declaration against an interest are good evidence, but they are not conclusive, and a party is always at liberty to withdraw the admission by demonstrating that they are either mistaken or untrue. In law, the retracted confession even may form the legal basis of admission, if the AO is satisfied that it was true and was voluntarily made. But the basing the addition on a retracted declaration solely would not be safe. It is not a strict rule of law, but only rule of prudence. As a general rule, it is unsafe to rely upon a retracted confession without corroborative evidence. Due to this grey situation, CBDT has issued Circular No.286/2/2003 prohibiting the departmental officials from taking confession in the search. The board is of the view that often the officials used to obtain confessions from the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of ₹ 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee. 27. In the above view of the matter, addition of ₹ 1 lakh made on account of unaccounted cash is confirmed and the addition of ₹ 6 lakhs is hereby deleted. 16. This decision has been followed by the Hon ble High Court in the case of CIT Vs. Chandrakumar Jethmal Kochar, 55 taxmann.com 292 (Guj). The Hon ble High Court has reproduced the discussion made by the Tribunal, and thereafter, concurred with the conclusions of the Tribunal by observing as under: 6. In view of the above discussion and considering the principal laid down in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessees do not deserve to be visited with penalties. We allow all the appeals of the assessees and delete penalties. 6. Similarly, Hon ble Delhi High Court in the case of Pr.CIT Vs. Neeraj Jindal Others, in ITA No.463/2016 and Others has considered this aspect and observed that Explanation 5 could be invoked if the income declared by the assessee has a nexus with any seized material. The discussion made by the Hon ble Delhi High Court in para-25 and 26 is worth to note. It reads as under: 25. This shows that Explanation-5 was specifically inserted to deal with the situation where higher income was disclosed in the return filed consequent to a search operation, and the assessee claimed that such addition of income did not imply that there was concealment. In other words, but for the insertion of Explanation-5, it would be open to the assessee to contend that additions made to his income in the return filed after the search operation, were only to buy peace and did not tantamount to concealment. This also flows from the language of Explanation-5 itself, wherein the words used by the Legislature are be deemed to have concealed the particulars of his income , which shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nhaiyalal, (2008) 299 ITR 19 (Raj), where it held that- We may consider the things from yet another aspect, viz., that under the set up of IT Act, in whatever eventuality the assessment may have to be made, i.e. whether a regular assessment, or assessment consequent upon escapement of income, or assessment of a block period, but in either case, the assessment has to be, with respect to the particular assessment year, relating to the concerned previous year, and the income derived, or found by the Department to have been derived, or earned, by the assessee, during particular previous year, has to be assessed during the relevant assessment year only, and assessment of such income cannot be shifted to any other past or future years, so much so that there may be cases, where the right of the Department to assessment may have been lost on account of passage of limitation also. Thus, it is clear that the Revenue has to establish that the assets seized during the search conducted on the assessee, related to the income of the assessee for the relevant assessment years i.e. AY 2005-06 and AY 2006-07. 7. Thus, in both these orders it has been observed that deeming fiction provide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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