TMI Blog2019 (8) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... he above discovery of evidence, it could not be said that Explanation 5A is not applicable. Therefore, the facts in the present appeal are quite distinguishable. Explanation 5A has been invoked on the basis of seized material admitted by the assessee persuading it to disclose additional income. - Decided against assessee. - IT(SS)A No.251 to 255/Ahd/2014 - - - Dated:- 30-7-2019 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER For The Assessee : Smt. Urvashi Sodhar, AR For The Revenue : Shri Apoorva Bharadwaj, Sr. DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: Present five appeals are directed at the instance of the assessee against common orders of the ld.CIT(A)-IV, Ahmedabad dated 2.4.2014 passed for the Asstt.Years 2005-06 to 2009-10. 2. Sole grievance of the assessee is that the ld. CIT(A) has erred in confirming penalty under section 271(1)(c) of the Income Tax Act, 1961 amounting to Asstt.Year Penalty Levied 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. Appeal to the CIT(A) did not bring any relief to the assessee. 6. The ld.counsel for the assessee at the very outset contended that identical issue was considered by the Tribunal in the case of Arvindbhai V. Bhansusali Vs. ACIT, IT(SS)A.No.271 to 273/Ahd/2013. The Tribunal has decided the appeal of that assessee on 6.4.2017. According to the ld.counsel for the assessee, in this order, order of the Tribunal in the case of Shri Mansukhbhai R. Sorathai and Others Vs. JCIT, Rajkot in IT(SS)A.No.46/RJT/2012 has been relied upon. [The undersigned is the author of both these orders]. On the strength of these orders, she contended that penalty under section 271(1)(c) with help of Explanation 5A can be imposed upon the assessee, if additional income declared in response to the notice under section 153A was represented/ supported by any material unearthed during the course of search. If this additional income is based only on the statement given under section 132(4) then penalty under section 271(1)(c) r.w.s Explanation 5A would not be imposable. She further contended that in the case of Shri Ashok Arjandas Makhijani, who is one of the assessees in the group concern, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of imposition of penalty under section 271(1)(c) of the Act. The Hon ble Court, thereafter, propounded that subclause (1) and (2) Explanation 5 provides exceptions for deeming the concealment of particulars of income. In that case, the Hon ble Court was dealing in sub-clause (2) of Explanation-5 and observed that in order to claim immunity as per sub-clause (2), three conditions have to be satisfied by the assessee. These three conditions are (a) that the assessee 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. ( 2) Nothing contained in sub-section (1) shall apply if the assessee,- ( i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; ( ii) substantiates the manner in which the undisclosed income was derived; and ( iii) pays the tax, together with interest, if any, in respect of the undisclosed income. ( 3) No penalty under the provisions of clause (c) of sub-section (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 rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 271AAA, therefore, we do not deem it necessary to construe and explain the meaning of Explanation 5A within the scope of Section 271AAA. The assessees as such cannot claim immunity akin to one available in sub-clause (1) and (2) of the Explanation 5, more particularly, on the strength of the judgment of Hon ble Gujarat High Court in the case of Kirit Dahyabhai Patel (supra). The ld.First Appellate Authority has dealt with these situation in an analytical manner and in right perspective. As far as the construction of meaning of Explanation 5A to section 271AAA by the ld.First Appellate Authority is concerned, we do not find any error. 9. At the cost of repetition, we would like to observe that as per Explanation 5A, if in the course of search initiated under section 132 on or after the 1st June, 2007, the assessee is found to be owner of any money, bullion, jewellery or other valuable article or things and the assessee claims such assets 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issues were discussed at length. 2.1 It is seen that the assessee had made disclosure unaccounted income of ₹ 22,00,000/- which was not disclosed in the return filed u/s. 139(1). This being concealed income, penalty proceedings u/s. 271(l)(c) of the I T Act is being initiated. 3. After verification, the total income is determined as under:- Total income as per return of income ₹ 28,45,960/- Total assessed income ₹ 28,45,960/- Agricultural income for rate purpose ₹ 6,14,131/- 4. Assessed u/s. 153A of the I T Act, 1961. Charge tax. Charge interest u/s. 234A, 234B and 234C of the I T Act, if any. Give credit for prepaid taxes after due verification. Demand notice and challan issued accordingly. Issue notice u/s. 271(1)(c)of the IT Act. 11. We have perused the penalty order also. There are only three paragraphs i.e. para-4, 6 and 7, where the AO has made some observation at his own, otherwise, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. Explanation .- For the removal of doubts, it is hereby declared that the examination of any person under this subsection may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. 13. A bare perusal of section would reveal that it empowers the authorized officer to examine during the course of search or seizure any person on oath. The disclosure made during the statement recorded under this section will be admitted in the evidence and can be used against the assessee in the proceeding. 14. No doubt, the disclosure or admission made u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 7 lakhs to his income. The Tribunal has also confirmed the addition by observing that there was nothing on record which indicated that the disclosure was taken from the assessee under duress, pressure or coercion. The retraction after lapse of two months from the date of disclosure by the assessee was considered as after-thought. The issue travelled before the Hon ble High Court. The Hon ble High Court has deleted the addition by observing that merely on the basis of disclosure, addition cannot be made. There should be some corroborative material. The following observations in para-26 of the judgement of Hon ble Court are worth to note. It reads as under: 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uable articles, to our mind, ought not to be based on this statement. When the assessees have taken specific plea that no money, bullion or jewellery or income based on any entries for these two assessment years was found during the course of search, the AO ought to have immediately referred the documents, entries or any asset found which is relevant to these assessment years in the penalty proceedings. He should have rejected the explanation of the assessee by demonstrating it as factually incorrect. Rather, the authorities have proceeded on the assumption that had there been no money, bullion, jewellery or income based on entries was not found, the assessee would have not made voluntary disclosure of the income in these returns. They failed to note the question no.25 also, where the assessees claimed immunity from penalty, and peace from litigation. To our mind inference of availability of money, bullion or assets embedded in the entries cannot be drawn from the statement of the assessee (extracted supra). They should have been found in physical form and pertaining to these years, only then, deeming fiction of concealment would trigger. Thus, the Revenue authorities have not refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, the penalty was to be deleted. From the above order, it is clear that there cannot be any penalty under explanation 5 A to section 271(1)C of the Act merely on the basis of the statement furnished under section 132(4) of the Act, until and unless it supported with the incriminating document. Accordingly, we hold that there cannot be any penalty under section 271(1)C of the Act in the given facts and circumstances. Hence the ground of appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. 10. A perusal of both the orders would indicate that the Tribunal was unanimous in its approach in holding that if during the course of search any incriminating material; money, bullion or jewellery was not unearthed, then additional income declared by the assessee in response to notice under section 153A, the deeming fiction of concealment under Explanation 5A would not be attracted. We do not have any hesitation in concurring with the above construction of Explanation 5A. But basic difference of applying it on the facts would arise as under in the present appeal. The assessee has appended the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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