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2008 (4) TMI 367 - AT - Income TaxCancellation/deletion of Penalty levied u/s 271(1)(c) - existence of mens rea or not - advance tax, on the income of Rs. 60,000 offered as cash found short in the return filed under s. 153A, had not been paid and the additional income was offered without any evidence only to cover up the low income declared in the return filed earlier - recording of no satisfaction note - shortage of cash and unverifiable expenses found - HELD THAT - The levy of penalty is ill-founded in both the years. Firstly, no search warrant is admittedly issued against the assessee. It was issued only against husband of the assessee and other family members. In any case, the learned Departmental Representative could not bring on record any search warrant issued against the assessee in spite of learned CIT(A)'s giving a clear finding to this effect. Once there is no search warrant in the case of the assessee then provisions of s. 153A could not be invoked against the assessee. In the present case, there is no finding that any such tangible assets/documents are found in the search. There is also no satisfaction of the AO of the person who has been subjected to search that such tangible assets or documents belong to the assessee. In our considered view, the provisions relating to the satisfaction of the AO for initiating assessment proceedings after search are pari materia with s. 158BD. So far as conditions required to be satisfied before invoking s. 153C are concerned, they are the same which are required to be satisfied for initiating block assessment proceedings against other person as per s. 158BD. The recording of satisfaction of the AO of the person searched for coming to a belief that tangible assets/documents found in the search of the person against whom search warrant was issued is necessary for giving jurisdiction to the AO of such other person to whom such tangible assets/documents are required to be handed over. Since in the present case, neither there was any seizure of any tangible assets/documents which could belong to the assessee nor there is any satisfaction of the AO of Shri Paramjeet Singh, husband of the assessee or any other person who was subjected to search, the question of invoking the provisions of s. 153C does not arise. For this, we derive support from the decision of Manish Maheshwari vs. Asstt. CIT 2007 (2) TMI 148 - SUPREME COURT . Therefore, the issuance of notice u/s 153A against the assessee could not be said to be the one issued as read with s. 153C. Once the basic premise for initiating the provisions of s. 153A is incorrect, the question of levying penalty on the basis of such assessment does not arise. Even if penalty was levied, it cannot be sustained. For levy of penalty u/s 27l(1)(c) of the Act, there should be a legally valid assessment order. Even though such assessment order has not been challenged and has been accepted by the assessee, but that cannot be a ground to hold that it is a valid platform for levy of penalty. It is true that unless an assessment order apparently invalid will continue to hold the field and determine the rights and liabilities of the parties so long as it is not vacated by a higher forum, but determination of rights and liabilities would come to an end upto the stage of that order only. It cannot be extended further to build up a case for levy of penalty or for launching prosecution, particularly when at the penalty stage it is challenged that assessment order, which is the basis for levy of penalty is not valid and it is found that AO could not have passed an order either under s. 153A or under s. 153A r/w s. 153C for the reasons discussed. Thus, the first requirement for invoking Expln. 5 is that in a valid search, some tangible assets/documents must have been found which would reflect concealed income of the assessee and which have become basis for making addition of concealed income. It is an admitted position that there has not been any seizure of tangible assets/documents in the search which could be said to be belonging to the assessee. Therefore, it cannot be said that assessee has been found to be the owner of tangible assets and that such tangible assets have been acquired by her by utilizing her undisclosed income earned before the date of search, and also there is no claim by the assessee that she has acquired any such asset out of income not disclosed before the Department. We, therefore, uphold the order of learned CIT(A) in cancelling the penalty which had been levied by the AO on the basis of an apparently invalid assessment order and by invoking the provisions of Expln. 5 which, on the face of it, are not applicable, as no tangible asset belonging to assessee has been seized. As a result the appeals filed by the Revenue are dismissed.
Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act for Assessment Years 2000-01 and 2004-05. 2. Validity of assessment under Section 153A without a search warrant. 3. Applicability of Explanation 5 to Section 271(1)(c). Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c) for Assessment Years 2000-01 and 2004-05: The Revenue challenged the orders of the CIT(A) that canceled the penalties of Rs. 25,000 and Rs. 1,10,000 for the assessment years 2000-01 and 2004-05, respectively. The penalties were initially levied by the AO under Section 271(1)(c) of the Income Tax Act. The CIT(A) held that there was no concealment of income and no mens rea (guilty mind) on the part of the assessee. The CIT(A) also noted that no search warrant was issued in the name of the assessee and no evidence was found during the search to justify the additions made. 2. Validity of Assessment under Section 153A without a Search Warrant: The Tribunal examined whether the assessment under Section 153A was valid without a search warrant issued against the assessee. It was found that no search warrant was issued against the assessee, and the search was conducted on the premises of her husband and other family members. According to Section 153A, for an assessment to be valid, a search must be initiated under Section 132 or requisition of books/documents under Section 132A. Since no search warrant was issued against the assessee, the Tribunal concluded that the AO did not have the jurisdiction to issue a notice under Section 153A. 3. Applicability of Explanation 5 to Section 271(1)(c): The Tribunal also considered whether Explanation 5 to Section 271(1)(c) was applicable. Explanation 5 pertains to the concealment of income discovered during a search. The Tribunal found that no tangible assets or documents were seized during the search that belonged to the assessee. Without such evidence, Explanation 5 could not be invoked. The Tribunal emphasized that the mere addition of Rs. 60,000 in the return filed in response to the notice under Section 153A did not constitute concealment of income, as there was no evidence to prove that this amount was detected during the search. Conclusion: The Tribunal upheld the CIT(A)'s orders canceling the penalties for both assessment years. It found that the assessments under Section 153A were invalid due to the absence of a search warrant against the assessee. Furthermore, Explanation 5 to Section 271(1)(c) was not applicable as no tangible assets or documents indicating concealed income were found during the search. Consequently, the appeals filed by the Revenue were dismissed.
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