9911796707
TMI Blog2019 (6) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... . Briefly stated, the facts of the case are that a search & seizure action u/s 132(1) of the Act was carried out on 17.12.2014 at the various premises of Vardhaman Group and the assessee, being one of the members of this group was also covered by search operations. The assessee is a director in two companies, namely M/s Richwell Enterprises Pvt. Ltd., and M/s Yashraj Commercial Complex Pvt. Ltd. and also a partner in the firms, M/s Vardhaman Builders and Developers (28.00% share), M/s Sethia Real Estate (33.33% share) and M/s Manglam Vardhman Developers LLP (25.00% share). 4. The assessee originally filed his return of income u/s 139(1) on 24.07.2014 declaring income from house property, remuneration and interest from these firms and interest from bank during this year totaling to Rs. 23,74,227/-. Thereafter, the assessee filed his revised return of income u/s 139(5) on 19.03.2015 declaring total income of Rs. 3,85,78,660/- which includes undisclosed income of Rs. 3,63,07,500/- which has been accepted by the assessee in his statement u/s 132(4) recorded during the course of search. In response to notice u/s 153A of the Act issued to the assessee on 11.02.2015, the assessee again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Punjab and Haryana decision in case of Commissioner of Income-tax (Central), Ludhiana vs. Bansal Abushan Bhandar [2014] 42 taxmann.com 9 (Punjab & Haryana) and Chennai Tribunal in case of ACIT, Central Circle 11(5) vs. Smt. J. Mythili. Finally, the AO has given his conclusive finding at para 7 of his penalty order wherein it has been stated that in view of the above cited and facts and legal position, the assessee is liable for penalty u/s 271(1)(c) of the Act on account of concealment of income and accordingly, the penalty of Rs. 1,23,40,919/- was levied u/s 271(1)(c) of the Act. 6. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). As per ld. CIT(A), the prerequisite for invoking of explanation 5A to section 271(1)(c) is that the assessee should be found to be owner of any money, bullion etc. found or entry in books of accounts or other documents found from the ownership of the assessee during the course of search which represents his undisclosed income for any previous year which has ended before the date of search and where the return of income for such previous year has been furnished before the date of search but such income has not been decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further held by the ld. CIT(A) that the AO has simply observed in the assessment order "Notice u/s 271(1)(c) is being issued". There is no finding as to whether it is for concealment of particulars of income or furnishing inaccurate particulars of income and the same cannot be considered as proper satisfaction so as to levy penalty u/s 271(1)(c). In support, the reliance was placed on the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 and Rajasthan High Court in case of Sheveta Construction Co. Pvt. Ltd., in ITA No. 534/2008 and various Co-ordinate Bench decisions. 9. It was further held by the ld. CIT(A) that the levy penalty is not automatic and since the provisions of explanation 5A have been invoked by the AO, the said deeming provisions are to be strictly construed. For invoking explanation 5A for deeming even when income being declared in the return furnished after search to be deemed to be concealment of particulars of income or furnishing inaccurate particulars, the earlier part of said explanation should also be applicable. The earlier part provides that in the course of search the assessee should be found to be owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving an opportunity to the Assessing Officer. It was submitted that the assessee has not challenged before AO about non-mentioning of the specific limb for levy of penalty in the show cause notice issued u/s 271(1)(c). Further, the assessee has not raised any specific grounds of appeal while filing the appeal in Form No. 35 and thereafter has taken additional ground of appeal during the appellate proceedings. The ld. CIT(A) has decided the issue without giving any opportunity of being heard to the AO which is nothing but violation of principle of natural justice. It was submitted that on this ground alone, the matter may please be set aside to the file of ld. CIT(A) with the direction to adjudicate the issue after giving a proper opportunity of being heard to the AO. 12. Further, the ld. CIT DR referred to the Third Member decision in case of HPCL Mittal Energy Ltd. vs. Addl. CIT [2018] 97 taxmann.com 3 (Amritsar-Trib) wherein at para 21, it was held as under:- "21. Apart from the above three situations in which the AO has clear-cut satisfaction, there can be another fourth situation as well. It may be when it is definitely a case of under-reporting of income by the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate particulars of income be levied when legality of assessment proceedings itself is subjudice before the Hon'ble High Court and the question to that effect has already been admitted in quantum appeal. In the present case, the assessee has not moved any appeal against the assessment order even before the ld.CIT(A) and therefore, there is no question of assessment proceedings being subjudice before the Hon'ble High Court. Accordingly, the decision of the Hon'ble High Court in case of Sheveta Construction doesn't support the case of assessee. 15. It is therefore a case where the satisfaction has been recorded for both the limbs of section 271(1)(c) and finally, the penalty has been levied for violation of both the limbs of section 271(1)(c) of the Act. The initiation of penalty proceedings has happened by recording of satisfaction in the assessment order and the issuance of notice u/s 274 is thus in continuation of recording of such satisfaction and has thus to be read along with the assessment order and not disjoint of the assessment order. It is not a case where the penalty has been initiated for one limb and finally levied in respect of another limb. The AO has been consistent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 271(1)(c) is not applicable, it was submitted that first of all, the question comes as to whether the assessee can revised its ROI. It was submitted that the assessee has filed its ROI u/s 139 on 27.07.2014. Thereafter, a search was conducted on 17.12.2014 during which the assessee has declared undisclosed income, on the basis of incriminating material found during the search, in his statement recorded u/s 132(4). Thereafter, a notice u/s 153A was issued to the assessee on 11.02.2015 and the assessee has filed ROI on 19.03.2015 and on 27.03.2015 declaring the total income of Rs. 3,85,78,660/- including undisclosed income of Rs. 3,63,07,500/-. It was submitted that u/s 139(5), assessee can revise return of income where he discovers any omission or any wrong statement which is not the case of the assessee. It was submitted that no cognizance could be given to the revised ROI filed on 19.03.2015 i.e. after the search and issue of notice u/s 153A of the Act. 17. Regarding the finding of the ld. CIT(A) that explanation 5A to section 271(1)(c) cannot be applied to the facts of instant case in view of the term "due date" for filing of return of income as used in clause (b) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR submitted that the assessee is a partner in M/s Sethia Real Estate and M/s Mangalam Vardhaman Developers LLP and Director in two companies, M/s Richwell Enterprises Pvt. Ltd. and Yashraj Commercial Complex Pvt. Ltd. These firms/companies are in the business of construction of residential complexes and other related activities and the assessee was not doing any business in his individual capacity. The assessee in his return of income has declared income from house property, remuneration and interest from these partnership firms. A search was conducted on the assessee on 17.12.2014 and statement of the assessee was recorded u/s 132(4) in which the assessee has voluntarily surrendered a sum of Rs. 9,92,49,633/- for AY 2014-15. It was further submitted that the assessee filed original return of income on 24.07.2014 before date of search and revised return of income on 19.03.2015 and return in response to notice u/s 153A on 27.03.2015. The Assessing Officer completed the assessment without making any addition in the income of the assessee and income as per return filed in response to notice u/s 153A was accepted. Separately, the Assessing Officer initiated penalty proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h any undisclosed income was found and disclosed by the assessee. The assessee simply in order to buy peace disclosed the additional income in his statement made u/s 132(4) of the Act which was accepted by the AO peacefully without making any further additions. Drawing reference to the assessment order dated 24.11.2016, the ld. AR submitted that no mention in the order that the disclosure made by the assessee pertained to any seized assets or incriminating transactions and no incriminating documents found and considered at the time of assessment. Further referring to the penalty order u/s 271(1)(c), it was submitted that the AO has simply reproduced the provisions of explanation 5A and some case laws and not mention about any incriminating documents even at the time of passing the penalty order. Further reliance was placed on the Co- ordinate Bench decision in case of Radha Shyam Mittal vs. DCIt (2017) 88 taxmann.com 336 wherein it was held that penalty u/s 271(1)(c) read with explanation 5A cannot be levied if addition is not based on any incriminating material found during the course of search on the basis of money, bullion, jewellery or any entry in the books of account. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mad.), CIT vs. Suresh Chandra Mittal [2000] 241 ITR 124/[2002] 123 Taxman 1052 (MP), and CIT vs. Suraj Bhan [2007] 294 ITR 481/159 Taxman 26 (Punj. & Har.) 24. It was further submitted that the order passed u/s 143(3) r/w section 153A does not specify under which limb the penalty is initiated. Nor does notice u/s 274 do so. It was submitted that for levy of penalty u/s 271(1)(c), ld. AO has to apply his mind and come to a conclusion that whether the penalty is being levied for concealment of particulars of income or for furnishing inaccurate particulars of income. It was submitted that there is heavy onus on the ld. AO initiating penalty of proving the assessee guilty of concealment of income as penalty proceedings result into undue hardship for the assessee. Thus it is inevitable that the authority levying penalty should be fully satisfied after proper application of mind that it is a fit case for levy of penalty. In the assessment order dated 24.11.2016 passed u/s 143(3) rws 153A of income tax Act, ld. AO has just mentioned that notice u/s 271(1)(c) of the Act is being issued, without mentioning the exact nature of default of the assessee. Attention was also drawn towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no occasion arises to refer to the previous return filed u/s 139(1). For all purposes, including for the purpose of levying penalty u/s 271(1)(c), the return that has to be looked at is the one filed u/s 139(5) and sec. 153A and section 139(5) and section 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the Assessing Officer accepts the revised return/return filed u/s 153A, the original return u/s 139(1) abates and becomes non est. The concealment has to be seen with reference to the return that is filed by the assessee. Thus, for the purpose of levying penalty u/s 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee u/s 139(5) or sec. 153A, and no vis-à-vis the original return u/s 139(1). It was further submitted that no penalty can be imposed on the assessee as per clause (a) of explanation 5A as the assessee had declared all the income in the revised return filed u/s 139(5) of Act which was well within the time limit prescribed under the Act. Learned AO has also accepted the same income without making any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s 153A was issued to the assessee on 11.02.2015 and in response to the said notice, the assessee furnished his return of income on 27.03.2015 declaring total income of Rs. 3,85,78,660/-which includes undisclosed income of Rs. 3,63,07,500/- which has been accepted by the assessee himself during the course of his statement u/s 132(4) of the Act and therefore, penalty proceedings u/s 271(1)(c) are being initiated separately. Thereafter, towards the end of the para 6 of the assessment order, the AO has stated that a notice u/s 271(1)(c) is being issued. Therefore, we find that the penalty proceedings have been initiated qua the undisclosed income which has been admitted by the assessee during the course of search in his statement u/s 132(4) of the Act and which has subsequently been reported to tax in the return filed in response to notice u/s 153A of the Act. The penalty proceedings proposed to be initiated is therefore qua the undisclosed income admitted during the course of search and not qua the addition made while passing the assessment order u/s 143(3) read with section 153A of the Act. The fact that the AO while passing the assessment order has taken note of said disclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is a case of concealment of income. As we have held above, the satisfaction which has been recorded while passing the assessment order is qua the undisclosed income admitted by the assessee during the course of search and the AO while passing the penalty order has given a clear finding that the explanation 5A to section 271(1)(c) is clearly attracted in the instant case and it's a case of deemed concealment of income by the assessee. We therefore find that there is a clear and specific finding about deemed concealment of income by the Assessing Officer while passing the penalty order. Therefore, even though the notice initiating penalty proceedings is not so specific about the specific charge, however, in the penalty order, there is a clear finding in terms of charge of deemed concealment which has been fastened on the assessee by the Assessing Officer. Therefore, we do not see any infirmity in the penalty order so passed by the Assessing Officer as far as the argument regarding specific charge not been stated while initiating the penalty proceedings. In this regard, we refer to the decision of the Third Member in case of HPCL Mittal Energy ltd (supra) wherein it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71(1)(c) of the Act: (1) Firstly, it talks about a situation where the search has been initiated u/s 132 on or after the 1st day of June, 2007. In the present case, the search has been conducted on the assessee on 17.12.2014. Therefore, this condition is satisfied in the instant case. (2) The second condition is that in the course of search so conducted, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year which has ended before the date of search. In the instant case, there is nothing on record which demonstrates that any money, bullion, jewellery or other valuable article or thing has been found during the course of search and even this is not the case of the Revenue. Therefore, this condition is not relevant in the instant case and has not been dealt upon by us. (2A) The second alternate condition is that during the course of search, the assessee is found to be owner of any income based on any entry in books of accounts or other documents or transactions and the assessee claims that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said date of search, the only return which has been filed is on 24.07.2014 which has been filed u/s 139(1) wherein the assessee has disclosed the total income of Rs. 22,71,160/- and has therefore not included the undisclosed income as per the statement recorded u/s 132 (4) of the Act. At the same time, as we have stated above, this condition has to be read along with second alternate condition in the sense that the assessee has to be firstly found to be owner of the undisclosed income and he admits the same and only in a scenario where the same is satisfied, the question of declaring such undisclosed income in the return of income will arise for consideration. Where it is ultimately determined that the assessee is found to be owner of the undisclosed income, the fact that such undisclosed income has not been declared in the return of income filed before the date of search, this condition can be said to be satisfied. (3A) Now coming to the third alternate condition, it talks about a situation where the assessee has not filed his return of income and due date for filing the return of income for "such previous year" has expired. In the instant case, the assessee has duly filed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search, the assessee is found to be owner of any income based on any entry in books of accounts or other documents or transactions. The second limb states that the assessee claims that such entry in the books of accounts or other documents or transactions represent his income wholly or in part for any previous year which has ended before the date of search. The first limb relates to findings by the Revenue during the course of search that the assessee is the owner of the income for the relevant previous year and the second limb talks about the claim and the admission by the assessee that such income represents his income for the said previous year. Therefore, there has to be finding by the Revenue that the assessee is the owner of such income for the relevant previous year and acceptance/admission by the assessee that such income represent his income wholly or in part for any previous year ended before the date of search. Further, such findings and admission should be based on any entry in books of accounts or other documents or transactions found during the course of search. Where either of the two limbs is satisfied and other limb is not satisfied, the penalty cannot be levied as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed after the date of search, is not sufficient to invoke the deeming provisions of explanation 5A of the Act as both the limbs needs to be satisfied cumulatively. 39. Further, such findings by the AO that the assessee is the owner of income should be based on any entry in books of accounts or other documents or transactions found during the course of search. The only finding that we have noted in the penalty order is that the assessee has declared undisclosed income during the course of search in his statement u/s 132(4) and the same has been accepted and offered to tax subsequently in the return of income so filed in response to notice u/s 153A of the Act. Admittedly and undisputedly, there is, however, no finding in the penalty order to the effect that the assessee is found to be the owner of income based on any entry in books of accounts or other documents or transactions found during the course of search. In our view, the penalty proceedings, being independent of quantum proceedings, such findings should necessarily reflect in the penalty order and in absence thereof, on this ground itself, the impugned penalty proceedings deserve to be set-aside. 40. Having said that, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion activities through various companies and firms such as M/s Sethia Real estate, M/s Richwell Enterprises Pvt. Ltd., M/s Manglam Vardhman Developers and others. In response to Question No. 12 wherein he was asked in terms of various projects being carried out by these companies and the firms, he has stated that the project Silver Crown has been carried out by M/s Sethia Real estate, project Imperial Heights and project Horizon by M/s Richwell Enterprises and project Arcadia Greens by M/s Manglam Vardhaman Developers. The statement of Shri Vivek Sethia thus corroborates the statement of the assessee, as we have noted above, that the construction business was undertaken by the companies/firms and not by the assessee and his son in their individual capacity. 43. Now coming to the specific disclosure made by Sh. Vivek Sethia relevant for the impugned assessment year, we refer to Question No. 26 wherein the assessee and his son have surrendered an amount of Rs. 7,05,00,000/-(Rs. 3,17,50,000). The said surrender is basis a document seized during the course of search referred to Annexure-AS, Exhibit- 5, Page No. 1/6. On perusal of the said single piece of unsigned and loose paper so fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission and surrender has been made by the assessee in his individual capacity and not by the companies/firms, the second limb can only be said to be satisfied in the instant case. As we have stated above, the first limb relates to findings by the Revenue during the course of search that the assessee is the owner of the income for the relevant previous year and the second limb talks about the claim and the admission by the assessee that such income represents his income for the said previous year. Therefore, there has to be finding by the Revenue that the assessee is the owner of such income for the relevant previous year and acceptance/admission by the assessee that such income represent his income wholly or in part for any previous year ended before the date of search. In the instant case, the first limb is not satisfied, therefore, the penalty cannot be levied as the requirement is satisfaction of both the limbs individually and cumulatively. 46. The fact that the construction business and various constructions projects were undertaken by the Companies/firms and not by the assessee and his son in their individual capacity is an admitted position which has been accepted and ackn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the companies/ firms and not the assessee and his son which are found to be the owner of the undisclosed income. The fact that the assessee and his son have declared the undisclosed income in their individual return of income and have paid taxes thereon and the fact that the Revenue has also accepted the same, the same is true as far as the quantum proceedings are concerned and which has now attained finality, however, when it comes to penalty proceedings, the provisions have to be read strictly and only where the conditions specified therein are satisfied, the penalty can be held justified. 47. Looking at the matter from another perspective, as we have noted above, basis the documents found and seized during the course of search, read along with the statements so recorded u/s 132(4), what has been found is the expenditure towards capital cost/purchase of land relating to various construction projects being executed by M/s Manglam Vardhaman Developers and M/s Richwell Enterprises Pvt. Ltd The question that arises for consideration is whether the said expenditure towards capital cost/purchase of land, represents or deemed to represent income in the hands of the assessee. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course and not vice-versa. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein such amounts may be deemed as income in absence of satisfactory explanation. In our view, the deeming fiction so envisaged under Section 69 and Section 69B cannot be extended and applied automatically in context of section 271AAB. It is a well-settled legal proposition that the deeming provisions are limited for the purposes that have been brought on the statute book and have therefore to be applied in the context of provisions wherein they have been brought on the statue book and not otherwise. In the instant case, the deeming provisions contained in section 69 and section 69B could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the AO has not even invoked the said deeming provisions in the quantum proceedings. Therefore, even on this account, the deeming fiction cannot be extended to the pena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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