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TMI Blog2016 (5) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was issued and served upon the assessee. In response to the notice, the assessee has filed his returns of income for these assessment years on 16.9.2010. The assessee has declared the following incomes: A.Y. Remarks 2004-05 Return income of Rs. 9,66,830/- including Rs. 7,00,000/- being income offered on ad hoc basis 2005-06 Return income of Rs. 5,19,090/- including Rs. 3,36,000/- being income offered on ad hoc basis 2006-07 Return income of Rs. 8,47,210/- including Rs. 4,25,000/- being income offered on ad hoc basis 2007-08 Return income of Rs. 8,62,520/- including Rs. 1,50,000/- being income offered on ad hoc basis 2008-09 Return income of Rs. 11,10,570/- including Rs. 2,00,000/- being income offered on ad hoc basis 4. The ld.AO has passed the assessment order under section 153A on 18.10.2011. He accepted the returned income. In other words, no addition was made by the AO. The ld.AO has initiated penalty proceedings under section 271(1)(c) of the Act. After hearing the assessee, he has imposed penalty as indicated above. 5. Appeal to the CIT(A) did not bring any relief to the assessee. 6. Before us, the ld.counsel for the assessee, at the very outset, submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 271(1) is not triggered in of specific correlation between the disclosure of income to any asset or document seized during the search, still the penalty of concealment of income under the main section 271(1)(c) was to be imposed for not disclosing "income" in the returns originally filed u/s 139. This view has been taken by Hon'ble ITATDelhi in case of Smt Kiran Devi [2009] 125 TTJ 631 (Delhi). The income not disclosed in original return but declared after search is itself a concealed income and need not specifically be related to a particular seized asset or document because invoking of Explanation 5A to section 271(l)(c) is not at all necessary in such cases where the concealment of income is established from inaccurate filing of original return of income itself. 5. The filing of return after the search action with total income higher than the total income in original return, is mainly to preempt any action on part of department to correlate the material found at the time of search with the additional income. Therefore the background I and the circumstances in which such returns are filed hold the key to the answer whether such / returns are bona fide. In presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law on the strength of judgment of Hon'ble Gujarat High Court in the case of Kirit Dayabhai (supra). They drew our attention to Explanation 5 and thereafter point out the distinction between Explanation 5 and 5A. Therefore, we first take note of Explanation-5. The Explanation-5 appended with Section 271(1)(c) of the Act. This Explanation reads as under: "Explanation 5.-Where in the course of a search initiated under section 132 before the 1st day of June, 2007, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein ; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Court, thereafter, propounded that sub-clause (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 for availing the benefit of judgment of the Hon'ble Gujarat High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71AAA 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 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 mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. 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, 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 bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 132(4) of the Act during the course of search proceedings 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 corrobo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. 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 Rs. 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 Rs. 1 lakh made on account of unaccounted cash is confirmed and the addition of Rs. 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 rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities have not referred any documentary evidences demonstrating the fact that voluntary income offered by assessees in these two years actually unearthed during the course of search. Therefore, to our mind, the assessees do not deserve to be visited with penalties. We allow all the appeals of the assessees and delete penalties." 9. In the submission made by the ld.CIT-DR and extracted by us, the stand of the Revenue is that had the search been not carried upon the assessee, then, he would not have disclosed this additional income. Therefore, existence of money, bullion, jewellery and other valuable articles ought to be assumed, which has persuaded the assessee to disclose additional income. In other words, the stand of the Revenue is that disclosure of additional income is to be equated with inferential valuables must have been available at the time of search. The stand of the ld.CIT(A) in the impugned order was also on this line. The ld.DR in his submission has further contended that, if concealment is not established by deeming fiction available in the Explanation -5A, then, the concealment ought to be construed under the main provision. As far as the first fold of stand p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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