TMI Blog2019 (4) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... an be made into the income of the assessee by way of revisiting the issue in the case in which the original assessment stood completed. Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) in case of already concluded assessment in the absence of any incriminating material found during the search action. Even it is not the case of the Assessing officer that there was any attempt or overt act on the part of the assessee to evade payment of due taxes. Under the circumstances, we hold that the action of the Assessing officer in initiating the penalty in the assessment proceedings carried out u/s 153A was not justified and the consequential levy of penalty being illegal is not sustainable in the eyes of law for the cases relating up to AY 2010-11. We order accordingly. Another legal ground taken by the assessee which goes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars furnished by the assessee were factually incorrect. Under the circumstances, even otherwise, on merits, the penalty u/s 271(1)(c) is not attracted in this case. - Revenue appeal dismissed - ITA Nos.41 to 44/CHD/2017, C.O. Nos.16 to 19/CHD/2018, ITA No.387/CHD/2017, C.O. No.30/CHD/2018, ITA Nos.51 to 54/CHD/2017, C.O. Nos.26 to 29/CHD/2018, C.O. Nos. 20 to 22/CHD/2017, ITA Nos. 48 to 50/CHD/2017 And C.O. Nos. 23 to 25/CHD/2017 - - - Dated:- 20-3-2019 - SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER For The Assessee : Sh. PankajBhalla, CAs For The Revenue : Smt. Chanderkanta, Sr. DR Order Per Sanjay Garg, Judicial Member: The captioned appeals by the Revenue and corresponding Cross objections by the assessee arise from the common orders for different assessment years passed by the Ld. Commissioner of Income Tax (A)-3, Gurgaon [hereinafter referred to as CIT(A) ]in case of each of the assessee. 2. Since the common issue relating to the levy of the u/s 271(1) (c) is involved in all the appeals, hence, these were heard together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 28.09.2011 The assesseesin their income tax returns had disclosed / offered certain incomes as detailed below for different assessment years as under the head income from other sources with the remarks subject to no explanation and paid due taxes thereupon. Name of assessee Assessment year Amount Sh. Kulwant Singh (M.D. of M/s Janta Land Promoters Ltd and M/s JLPL Infrastructure) 2008-09 1,66,80,000/- 2009-10 1,93,00,000/- 2010-11 2,10,00,000/- 2011-12 39,00,12,600/- 2012-13 94,50,000/- 2013-14 4,70,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings, the Assessing officer had asked about the sources of the aforesaid income offered / declared by the assessee regarding which the common explanation given by theassesseeswas that the same was from speculation in the sale / purchase of the agricultural land, however, no records were being maintained by the assessee in this regard and therefore, the income was offered u/s 69A subject to no explanation . Since theassessees could not satisfactorily explain the sources of income, the Assessing officer, therefore, invoked the Explanation 1 to section 271(1)(c) of the Act and initiated penalty proceedings. The assessee reiterated that he had no records orevidence relating to the source of income so earned. Therefore, the Assessing officer levied the penalty u/s 271(1)(c) of the Act, observing as under:- 10. Based on above discussion the following conclusions may be drawn A. The assessee has deposited various amounts in cash in her hank accounts, offered the same in his return of income under the head Income from other sources , has not submitted any explanation regarding the source of the same either during assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erebeing no tax sought to be evaded, penalty there under cannot be levied either, asthe said provision is rendered unworkable. 4.7 Para 8 of the above referred judgment of the Hon'ble Apex is reproduced as under:- Section 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. The asset must be one which falls within the contemplation of the section. It must bear that quality which brings s. 45 into play. To determine whether the goodwill of a new business is such an asset, it is permissible, as we shall presently show, to refer to certain other sections of the head Capital gains . Section 45 is a charging section. For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by s. 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by s. 45 to be the subject of the charge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the appellant's case as the claim made in the original return was withdrawn in the revised return filed. 5.1.2 HamirpurDistt. Cooperative Bank Ltd vs DCIT[ 2012] 25 Taxinann.com 306 Lackhnow- Trib.} In the above referred case, penalty was imposed as the amount claimed as deduction by the assessee did not even qualify to be regarded as 'expenditure' Thus, The facts of the case are completely different from the case of the appellant. 5.1.3 S. Sathyanarayananvs ACIT [2014] 50 Taxmann.com 200 {Madras} In the above referred case, during the course of search conducted under section 132 in the business premises and the residential premises of the father of the assessee, certain amount of cash books of account and documents in respect of the assessee were seized. The AO issued notices to the assessee filed the return of income disclosing certain income. The AO scrutinized the assessment and in respect of each assessment year, the Assessing officer made additons as undisclosed income and initiated penalty proceedings. The facts of the case are different as in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore contrary to the provisions of Income Tax Act. Keeping in view the aforesaid facts, the penalty imposed in this case is deleted. The grounds of appeal are hence allowed. As the similar issue is involved in all the other years (AY) 200910, A.Y 2011-12, and AY 2012-13), the penalty imposed in all these years is also deleted. 6. As a result, the appeal(s) of the appellant arc allowed in all the years under consideration i,e. AY 2008-09, AY 200910, AY 2010-11, and AY 2012-13. 6. Now Revenue has come in appeals agitating the action of the CIT(A) in deleting the penalties, whereas, the assessees apart from taking certain legal grounds/pleas have also filed the cross objectionswith certain additional grounds in support of their contention that the penalty otherwise is not leviable. 7. We have heard the rival contentions and have alsogone through the record.So far as theappeals of the Revenue are concerned, the Ld. DR has not only addressed theoral argumentsbut has also submitted written submissions. The crux of the arguments of theLd. DR has been that heavy amounts were deposited in their bank accountsby theasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition in respect of those assessment years in the assessment proceedings carried out u/s 153A of the Act. That Explanation 1 to Section 271 was notapplicable in the facts of the case.Further,that even explanation given by the assessee that the aforesaid additional income was earned by speculation in the sale / purchase of agricultural land had been duly mentioned in Rule 9 Report submitted before the Income Tax Settlement Commission (in short ITSC ). Even the Explanation regarding the source and manner wasaccepted by the Department also in one of the case of Shri Kulwant Singh, assessee for assessment year 2013-14, wherein, penalty proceedings initiated u/s 271AAA were dropped by accepting the above explanation regarding the source of income from speculation in property business and after duly consideringthe order of the ITSC and Rule 9 Report. It has been submitted that, even otherwise, the explanation relating to the source of income has no role to play incontext of the provisions of section 271(1)(c) of the Act. That the provisions of section 271(1)(c) of the Act are since penal provisions theyhave to be strictly construed. Further, that the disclosure made by the assesseeswas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of the companyJantaLand Promoters Pvt Ltd., and not of the assessees in their individual capacity and, hence, any findings or report relating to the company was not applicable in the individual case of the assessee. Finally, has been submitted that if plea of the assessee for deleting the penalty onvoluntary disclosure was tobe accepted, than it would be unfair on the persons who have availed of voluntarydisclosureScheme said such VDS-2016 and PMGKY-2016 as theyhad paid penalty @ 25% and 10% respectively for voluntarydisclosure of their unaccounted income in these schemes.Further, it would alsobe unfairtothe persons who haveduly offered the taxes on the money deposited in the bank u/s 69A of the Act during demonetarization and had to pay tax @ 60% plus surcharge @ 25% totallingto. 75% tax u/s 115 BBE of the Act, apart from penaltyu/s 271 AAC of the Act @ 10% w.e.f. 1.4.2017. Further, that a specific charge was levied by the Assessing officer in the penalty notice regarding the concealment of particulars of income and, as such, there was no defect in thenotice. 10. We have heard the rival contentions and have also gone through the record. Since the legal plea ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) CIT Vs. Continental Warehousing Corporation (supra) CIT Vs. Kabul Chawla (supra) and subsequent decision of the Delhi High Court in the case of Principal CIT Vs. MeetaGutgutia Prop M/s Ferns N Petals , ITA 306/2017 and others decided vide order dated 25.5.2017, wherein, the Hon'ble Courts have been unanimous to hold that if no incriminating material is found during the search action, the addition in the case of already concluded that in the absence of any incriminating material found during the search action, no addition can be made into the income of the assessee by way of revisiting the issue in the case in which the original assessment stood completed. Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating material fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of subsection (1) of section 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 Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 271(1)(c) of the Act are not attracted because the relevant provisions of section 271AAA were applicable, is not tenable, yet we are of the view that otherwise, the provisions of section 271(1)(c) of the Act are not attracted in this case in view of our discussion made in the subsequent paras to this order. 15. Before proceedings further, we deem it fit to first discuss the relevant provisions ofsection 271(1)(c) of the Act as they stood during the relevant period / assessment year under consideration. 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- . (c ) has concealed the particulars of his income or furnished inaccurate particulars of [such income, or] he may direct that such person shall pay by way of penalty,- [( iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; (b ) in any case to which Explanation 3 applies, means the tax on the total income assessed [as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148; (c ) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished. 16. A perusal of the above referred to section 271(1)(c) of the Act reveals that there are twoparts of this section. The first part speaks about the charge which may invite penalty i.e. a person has concealed particulars of his income or furnished inaccurate particulars of income,he may be directed to pay certain sum by way of penalty as penalty. Now, the second part speaks about the quantum of amount payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for concealment of income or furnishing of inaccurate particulars of income. Then as per the clause (b) of Explanation 4, wherein, in a case to which Explanation3 applies i.e. where the concerned person fails to file within the stipulated period a return of income despite having taxable income, in that case, thetax sought tobe evaded will be the tax on the total income assessed but reduced bythe amount of advance tax,tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice u/s 148 of the Act. As per the above said provision what is material is the evasion of the tax and in that scenario, if a person does not file a return and, hence, does not disclose his particulars of income and meaning thereby concealed his particulars of income but if he before the issuance of notice for the reopening of the assessment u/s 148 of the Act, had deposited due taxes and the resultant addition after assessment does not create any liability topay any further tax, there will be no tax sought to be evaded. 19. Now coming to the relevant clause (c) to Explanation 4, which is residuary clause which speaks that in any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions reads as under:- 61.11 New Explanation 4 defines the amount of tax sought to be evaded . According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure, the tax sought to be evaded will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression tax sought to be evaded given earlier is a case to which Explanation 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed. 21. Even in the Explanation 1, what is relevant is any fact material to computation of total income of any person regarding which such person fails to offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017 and section 271AAC of the Act w.e.f. 1.4.2017. In our view, the above contention of the Ld. DR is not tenable. The relevant section115 BBE and section 271AAC for the sake of convenience are reproduced as under;- 115BBE. (1) Where the total income of an assessee,- (a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i). (2) Notwithstanding anything contained in this Act, no deduction in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e.f, 1-4-2017 16aInserted byFinance Act, 2018 w.e.f. 1-4-2017 24. It is pertinent to mention here that prior to 1.4.2013, there was no section115BBE. Section 115 BBE was inserted vide Finance Act 2012 to tax the income referred to in section 68, 69, 69A, 69 B, 69 C or 69D at a flat rate of 30%. Prior to 1.4.2013, any unexplained income of the assessee either offered by himself or detected by the Assessing officer are to be taxed as per the normalrate as prescribed from time to; time. However, during the period of demonetarization in the year 2017, it was noticed that the assesseeshadstarted taking benefit of the provisions of sections 68, 69, 69A and started depositing their unaccounted for / undisclosed income in the bank account declaring the same as their income of the assessment year under consideration in the return of income and paying taxes @ 30% as providedu/s 115BBC of the Act, act of the assessee was taken as contributory factor in failure of the Voluntary Disclosure Scheme. Hence, to curb this practice, the government substituted sub section (1) of section115 BBE to provide that wherein in the return of income furnished by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir income into rotation / accounted for by paying 30% tax and declaring the same under the aforesaid sections in the return of income yet, the Government still has not come with the penalty provisions inrespect of such voluntarily declared income in the return of income, rather has chosen toenhance the tax rate form 30% to 60%. The penalty u/s 271AAC of the Act is leviable only if suchan income is not declared in the return of income.In view of our above discussion of the matter, since in these cases the assesse have decaled the income in question in the return of income itself, the tax at the maximum rate slab duly paid thereupon, the returned income accepted as such without any addition on this issue, hence, there was amount of tax sought to be evaded, hence, it cannot be said to be a fit case for levy of penalty u/s 271(1)(c) of the Act. 26. Even otherwise, a perusal of clause (iii) to section 271(1) reveals that as per the relevant provisions, the Assessing officer may direct a person who as per clause (c) has concealed the particulars of income or furnished inaccurate particulars of such income to pay by way of penalty, a sum which shall not be less than but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer which were not only the part of the assessment records but also the part of the Rule 9 report submitted by the Assessing officer before the Income Tax Settlement Commission during the course of proceedings u/s 245D (4)of the Act in the case of M/s Janta Land Promoters Ltd. The Ld. Counsel for the assessee has also invited our attention to the penalty order of the Assessing officer passed in the case of assessee Mr. Kulwant Singh for the assessment year 2013-14, whereby, the Assessing officer had initiated the proceedings u/s 271AAA of the Act, however, the same were dropped accepting the explanation of the assessee. A perusal of the relevant documentsand replies filed by the assessees before the Assessing officer, it reveals that respective assessees though have duly explained the source, made and manner of the earning of income which has been disclosed by the assessee in the return of income, however, they could not substantiate the said earning of income with documentary evidence. At the same time, even the Assessing officer has not brought or put in any case that the income in question declared by the assessees was not from the sources, mode and manner explained, rather, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were under bonafide belief that they need not required to file the separate cross objections. 29. We are not convinced with the above explanation given by the assessees for condonation the long delay ranging from 378 days to 429 days in filing the present cross objections. Moreover we have already dealt with the legal objections taken by the assessees which go to the root of the case while adjudicating the appeals of the Department. However, we do not deem it fit at this stage to look in the issues raised by the assessees which requires examination of factual aspects of the case. The applications of the assessees for condonation of delay in filing the cross objections, are, therefore, dismissed and consequently the cross objections filed by the assessees are dismissed. However, the dismissal of the Cross objections filed by the assessees will not have any bearing on our adjudication given on the legal issues raised by the assesses while deciding the appeals of the revenue. In view of this, all the appeals of the Revenue and Cross objections filed byassessees are hereby dismissed. Order pronounced in the Open Court on 20.03.2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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