TMI Blog2000 (5) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1984-85. 2.1 The assessee in the income-tax return filed after the order under section 132(5), did not include value of jewellery amounting to Rs. 1,53,677 as per note given in Part-III and covering letter dated 29-9-1984. It was stated that the jewellery of value of Rs. 1,53,677 belonged to the assessee but its value was not being included as the same was treated as the income of assessee's husband in order under section 132(5) of the Income-tax Act. 2.2 The Assessing Officer consistent with the view he had taken in order under section 132(5), treated jewellery of value of Rs. 1,53,677 as belonging to assessee's husband and liable to be taxed in his hands as income from undisclosed sources under section 69A of the Income-tax Act. The above amount was assessed in the hands of Shri Piyush 0. Desai. As a protective measure, the amount of Rs. 1,53,677 was added in the hands of the assessee as per assessment orders dated 27-3-1987. The Assessing Officer initiated penalty proceedings under section 271(1)(c) both in the hands of the assessee as well as Shri Piyush 0. Desai. 2.3 The addition of Rs. 1,53,677 was challenged in appeal and ITAT in the appeal of the Revenue and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks [1980] 122 ITR 306 (Guj.). The assessee also placed reliance on the decision in the case of K.M. Bhatia (Quarry) v. CIT [1992] 193 ITR 379 (Guj.). It was contended that Assessing Officer has held that assessee has both concealed the particulars of income and also furnished inaccurate particulars of such income. Such an order was bad in law in the light of decision of Hon'ble Gujarat High Court. The learned CIT (Appeals) cancelled the penalty with he following observation: "4. I have carefully considered the facts of the case and the arguments advanced by the appellant. There is no dispute about the fact that during the course of the search a seizure operation at the residence of the husband of the appellant, Shri Piyush 0. Desai, ornaments/jewellery valuing Rs. 1,53,677 were claimed to be belonging to Smt. Pannaben P. Desai and in the order passed under section 132(5) of the Income-tax Act, these ornaments were held to be as belonging to Shri Piyush 0. Desai, the husband of the appellant. Further, the appellant has paid advance-tax in respect of the value of gold ornaments/jewellery on 31-3-1984, i.e. during the accounting period relevant to Assessment Year 1984-85. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rival submissions, in the light of material available on record, I am unable to agree with the submission advanced on behalf of the Revenue. It is evident from order of Assessing Officer under section 132(5) as also from regular assessment orders made under section 143(3) on 27-3-1987 that revenue authorities treated the jewellery as that of Shri Piyush 0. Desai and not of the assessee. The assessment in the hands of the assessee was made on protective basis. Thus, satisfaction which Assessing Officer must have before valid initiation of penalty proceedings was based on the finding that jewellery was owned by Shri Piyush 0. Desai. It was required to be disclosed by him in his return and by not doing so, he concealed his income and was liable to be penalised under section 271(1)(c) of the Income- tax Act. There was no finding at the time of initiation of proceedings that the assessee was the owner of the jewellery and was required to show it in her return and on account of her failure, she was to be charged under section 271(1)(c). The importance of recording a satisfaction by income-tax authorities that the default had been committed by the assessee which would attract provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saying 'in view of the fact that the ITAT has finally decided the fact that addition of Rs. 1,53,677 for unexplained jewellery under section 69A is to be done on substantive basis in the case of the assessee, it is not on protective basis.' 5.3 From the above, it is clear that Assessing Officer was levying penalty on the finding displaced by the ITAT. Thus, whereas satisfaction was recorded on the finding that Shri Piyush O. Desai was the owner of the seized jewellery, the penalty has been imposed on the finding that the assessee is the owner of the jewellery seized; a finding not arrived by the Assessing Officer during the course of assessment proceedings but given by ITAT much later. The circumstances taken for the levy of penalty were different from the circumstances on which satisfaction was recorded by the Assessing Officer. The action is clearly unjustified and bad in law. 5.4 The Assessing Officer also justified the levy under section 271(1)(c) by invoking Explanation 5 to the said section. Such Explanation came into operation on 1- 10- 1984 whereas the search in the present case had taken place in November, 1983 i.e. much before the introduction of Explanation. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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