9911796707
TMI Blog2019 (9) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... . In all the four captioned appeals, the assessee has challenged the action of the Revenue towards imposition of penalty under s.271(1)(c) of the Act. The facts being broadly common, all the appeals were heard together and are being disposed of by the common order. 3. We shall first take up assessee's appeal in IT(SS)A Nos. 551 & 552/Ahd/2012 & 283/Ahd/2014 concerning AYs. 2005-06, 2006-07 & 2007-08 respectively arising out of a common order of the CIT(A) for appreciating the facts in perspective. 4. The assessee has challenged imposition of penalty of Rs. 25,20,000/- each for assessment years i.e. 2005-06 & 2006-07 and Rs. 27,72,000/- for AY 2007-08. Briefly stated, the assessee is engaged in the business of manufacturing, maintenance and repairing of electrical transformers. A search action under s.132 of the Act was carried out in the Amod Group of cases including the Director of the assessee company (Shri Harshad Mehta) on 11.02.2009. Simultaneously, survey proceedings under s.133A of the Act were also carried out at the business premises of the assessee company. Consequent upon search, the Director of the assessee admitted certain excess stock of goods pertaining to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income' in respect of additional income disclosed in the return filed in response to notice under s.153C of the Act. It was thus submitted that while the initial 'satisfaction' in the course of the assessment was formed towards 'furnishing of inaccurate particulars of income' qua the original return filed under s.139 of the Act, the CIT(A) however has confirmed the penalty for a different offence namely 'concealment of particulars of income'. The learned counsel for the assessee thus pointed out that while the person issuing direction to impose penalty was 'satisfied' about the offence towards 'furnishing of inaccurate particulars of income', the CIT(A), in first appeal, has totally changed the complexion of the offence and confirmed the penalty for a different offence i.e. 'concealment of particulars of income'. The learned counsel submitted that law in this regard is well settled and referred to the decision of the co-ordinate bench of Tribunal in Shri Kantibhai Naranbhai Prajapati vs. ITO ITA No. 2880/Ahd/2014 order dated 15/02/2018 which specifically dwells upon such fact situation. The learned counsel thus contended that the penalty so imposed on a altogether different edifice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess physical quantity was found at the time of search as pointed out at the first instance before the AO as can be seen from para 4 of the penalty order dated 28.06.2011 concerning AY 2005-06. Thus, a hypothetical estimation and equal distribution thereof as additional income offered in the return filed under s.153C of the Act to buy peace and to ward off litigation (bereft of such physical stock) ought not to have attracted penalty under s.271(1)(c) of the Act. The learned counsel accordingly submitted in conclusion that imposition of penalty under s. 271(1)(c) of the Act is thus without sanction of law and therefore penalty so imposed by different penalty orders appealed against, are required to be struck down and the penalties imposed for various assessment years requires to be cancelled. 8. The learned DR, on the other hand, relied upon the order of the lower authorities and submitted in furtherance that specific incriminating documents showing notings towards excess stock was found from the residential premises of the Director and as a sequel thereto, the assessee company has offered the additional income towards excessive stock apportioned in three years i.e. AYs. 2005-06, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "8. We straight away find that the AO vide penalty order dated 25/11/2013 under s.271(1)(c) of the Act imposed penalty on additions made alleging 'concealment of particulars of income'. However, the CIT(A), on the other hand, has confirmed the penalty on the ground of 'furnishing inaccurate particulars of income'. Apparently, the basis and foundation for imposition of penalty has been altered by the CIT(A). It is thus ostensible that findings recorded by the CIT(A) show that penalty has been confirmed on a different premise and the original satisfaction for imposition of penalty has been altered or modified by the appellate authority. In such circumstances, where the original basis of imposition of penalty has been altered in a significant way by the first appellate authority, the very basis for sustaining the penalty is rendered nonexistent. Needless to say, the imposition of penalty is solely dependent upon the 'satisfaction' of the AO [unless initiated by CIT(A)] and nonelse. The ground for action by AO was allegation of 'concealment'. This ground has been substituted by CIT(A) to 'furnishing inaccurate particulars of income' while confirming the penalty quantified by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression 'belongs to' with expression 'relates to' or 'refers to'. The Hon'ble Court went on to explain the purport of the expression by giving illustration of a registered sale deed which essentially implied something more than a casual connection. In the wake of the aforesaid judgment, merely because a document/loose paper was found in the possession of a searched person showing reference to certain entries relatable to a third person, the said documents/loose paper by itself would not tantamount to be belonging to the third person. Similar view has been expressed in the case of Renu Constructions Pvt. Ltd. (Delhi) 399 ITR 262 (Del.) and Kamleshbhai Dharamshibhai Patel 263 CTR 362 (Guj). The co-ordinate bench Tribunal in Shailesh S Patel vs. ITO (2018) 97 taxmann.com 570 (Ahmedabad Trib.) has also reiterated the aforesaid pre-requisite for formation of 'satisfaction' for the purposes of Section 153C of the Act. No averment is found from the case records that the documents seized towards excess stock did belong to and was the property of the company and not of the Director from whose custody it was found. Therefore, in such non-descript and innocuous situation, where the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome which is evidenced from the fact that the assessee did not offer true and correct income in the regular returns already filed for the respective assessment years in question prior to search. In this background, we notice that pre-amended and erstwhile Explanation 5A as it stood at the time of search applied only to non-file assessees who were searched under s.132 of the Act at the relevant time of search. To put it differently, Explanation 5A was strangely not applicable to those assessee who had already filed their returns under s.139 of the Act prior to search howsoever may be the extent of wrong doing or concealment. To bring home this point, it may be relevant to reproduce pre-amended Explanation 5A, as inserted by the Finance Act, 2007, w.e.f. 1.6.2002 which read as under: "Explanation 5A.-Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,- (i) any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is income or furnished inaccurate particulars of such income." 9.7 Thus, as can be observed, the application of pre-amended Explanation was limited to non-filer assessee whereas this anomaly was corrected in substituted Explanation. To elaborate, while the original Explanation 5A introduced by the Finance Act, 2007 w.e.f. 01.06.2007 held the persons guilty of concealment where the return was not filed only, the substituted Explanation 5A roped in with retrospective effect from 01.06.2007 by Finance (No.2) Act, 2009 attempted to cover both filers of return of income as well as non-filers for the purposes of penalty on undisclosed income found. Thus, when viewed the law as existing on the date of initiation of search, Explanation 5A was attracted only where the assessee failed to file return of income altogether. Hence, when seen with reference to date of search 11.02.2009 in the present case, the provisions of erstwhile Explanation 5A were not attracted to the assessee as the return of income was already filed prior to search and put on record. The application of amended provisions of Explanation 5A of Section 271(1)(c) of the Act which came into force by an amendment subsequent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both grounds; namely concealment of particulars of income as well as furnishing inaccurate particulars of income. Thus, the 'satisfaction' recorded in the assessment order has undergone substantial change which is not in sync with judicial precedents recorded on the point. This apart, the penalty is not sustainable also for the fact that it could not be successfully demonstrated that 'satisfaction' as mandated under s.153C of the Act was properly recorded. Thirdly, the documents seized from the searched person were required to be belonging to the assessee herein and not merely relatable to the assessee. The onus placed on Revenue in this regard is not discharged. 12. We observe that the CIT(A) himself has rightly acknowledged that penalty cannot be imposed towards incorrect claim of set-off of earlier year losses. In parity with the observations made for other assessment years, we find merit in the plea of the assessee for deletion of penalty on remaining points on grounds noted above. The order of the CIT(A) is thus set aside and the AO is directed to delete the penalty of Rs. 5,26,000/- concerning AY 2004-05. 13. In the result, the appeal of the assessee for AY 2004-05 in ITA(S ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
