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TMI Blog2011 (10) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same joint family for different assessment years as detailed below: SN ITA No. ITA No. Asst. Year Appellant Respondent 1 ITA 667/2008 659/B/06 2001-02 DCIT, Central Cir. - 2(3) B'lore Shri.S.Kumar B'lore 2 ITA 664/2008 660/B/06 2001-02 DCIT, Central Cir. - 2(3) B'lore Shri.S.Kumar (HUF), B'lore 3 ITA 670/2008 661/B/06 2001-02 " Shri. V. N. Sridhar, B'lore 4 ITA 673/2008 662/B/06 2003-04 " Shri. V. N, Sridhar, B'lore 5 ITA 511/2008 663/B/06 2001-02 " Smt. Muktha Sridhar, B'lore 6 ITA 512/2008 664/B/06 2002-03 " Smt. Muktha Sridhar, B'lore 7 ITA 513/2008 665/B/06 2003-04 " Smt. Muktha Sirhdar, B'lore 8 ITA 514/2008 666/B/06 2001-02 " Smt. Sathyavathi, B'lore ITA Nos. 565, 567, 570, 572, 574, 589, 592, 594, 598, 600, 601, 602, 605, 609, 611, 614, 617, 621, 622, 625, 628, 632, 630, 637, 641, 596, 582 of 2008 are directed agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 745/Bang/06 2001-02 -do- Smt. N. Nagaratna, Bangalore ITA 637/2008 746/Bang/06 2002-03 -do- -do- ITA 641/2008 747/Bang/06 2003-04 -do- -do- 2. In the above batch of appeals, the following substantial questions of law have been formulated for adjudication: 1. Whether the Appellate Authorities were correct in holding that the penalty levied by the Assessing Officer under section 271(1)(c) of the Act, is not sustainable in law in respect of an amount shown as gift received in the original return, which was found to be incorrect as per material detected in the search and was the undisclosed income of the assessee? 2. Whether the Appellate Authorities were correct in deleting the penalty levied as the assessee filed revised return declaring part of searched income in order to buy peace with the department so that penalty will not be levied by relying on the judgment of the Apex Court in 251 ITR 9 confirming the judgment of M. P. High Court in 241 ITR 124 which was applicable to assessment years 1983-84 to 1986-87 based on the law declared by Apex Court in 168 ITR 705, which is held to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above substantial questions of law. 6. According to the learned counsel for the Revenue Mr. Sheshachala, once the amount shown as gift received in the original return was found to be incorrect as per material detected in the search and which was undisclosed by the assessee in their return of income, the Assessing Officer was justified in levying penalty under Section 271(1)(c) of the Act. According to the learned counsel, after insertion of explanation to Section 271(1)(c) of the Act in the light of the judgment of the Apex Court in K.P. Madhusudhanan v. CIT [2001] 251 ITR 99/118 Taxman 324 the law relied upon by the Tribunal and the Appellate Authority in CIT v. Sureshchandra Mittal [2001] 251 ITR 9/119 Taxman 433 (SC), CIT v. Suresh Chandra Mittal [2000] 241 ITR 124/[2002] 123 Taxman 1052 (MP) and Sir Shadi Lal Sugar General Mills Ltd. v. CIT [1987] 168 ITR 705/33 Taxman 460A (SC) is not good law. According to Mr. Seshachala, the appellate authority committed an error by accepting the explanation offered by the assessees that the entire income detected was declared in the revised return, which was factually incorrect. According to the learned counsel, the defence of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is non-compliance of Section 132(4) of the Act so far as all other assessees except Mr. Sridhar. He strenuously contends that explanation 5(2) of Section 271(c) is not applicable to other assessees except Sridhar if no reason is disclosed. The statement of the party relating to the business affair is part of return of income. Till revised returns filed, income was not shown as income, but they were purposely shown as gift. Therefore the appeals deserve to be allowed. 9. Learned counsel for the respondents - assessees in reply further contends that as notice was given to Prakash Tea Agency Group, Mr. Sridhar on behalf of all the persons of group has given the statement on 27.2.2004 after oath being administered to him. Therefore it is as good as explanation on behalf of all the persons pertaining to Prakash Tea Agency group. He further contends that Mr. N. Shashindra, Smt. Vani Shashindra, Mr. Muktha Sridhar have stated that statement given by Mr. V.N. Sridhar was in their absence and they abide by what has been stated by Mr. V.N. Sridhar. Therefore according to him, the statement recorded under section 132(4) of the Act is as good as statement of others and even otherwise let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [***] furnished inaccurate particulars of such income, ( d ) ** ** ** he may direct that such person shall pay by way of penalty- [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 date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee and it was brought to tax. Quantum proceeding has reached finality and same has been accepted by the assessees. 13. Subsequently, penalty proceedings under Section 271(1)(c) of the Act came to be initiated against the respondents - assessees. Before the authority concerned, the assessees denied furnishing of inaccurate particulars or concealment of income and further contended that though, the donors of the gifts are all identifiable and available to confirm the gifts, only with a view to buy peace with the department, the same was declared as undisclosed income. According to the representatives of the respondents - assessees, imposition of penalty cannot be automatic as there being no mens rea or guilty mind on the part of the respondents conceal the income. 14. Ultimately rejecting all the contentions, the authority concerned passed an order holding that statements recorded during the course of search reveal that gifts were agreed as not genuine and therefore the income has been offered to tax. It was further opined that the assessee group has neither established the existence of the donors or their creditworthiness. It was also opined (that the assessee gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence there cannot be imposition of penalty on the gifts. It further opined that commission for arranging gifts was also surrendered in the revised returns and same is subject to penalty as per Explanation (5). 17. So far as imposition of penalty on the amount surrendered as commission, the respondents - assessees have not challenged and the said finding has reached finality. So far as the other finding that no penalty could be imposed on the unexplained gifts in view of surrendering the same in the revised returns which was already recorded in the books of account, the Revenue has come up in these appeals. 18. Explanation-5 to Section-271(1)(c) depends upon the particulars found with the assessee at the time of search under Section-132 of the Act. As a matter of fact, Explanation-5 to sub-section (1) of Section-271 was inserted by amendment. This new explanation is a special provision applicable to cases when assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing revealed in the course of a search under Section-132 of the Act. If the assessee asserts and claims that the abovementioned assets were acquired by him by utilising (wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section-276C of the Act. In this context, they proceeded to hold that in the case of Dilip N. Shroff v. Jt. CIT [2007] 161 Taxman 218 (SC) the conceptual and contextual difference between Section 271(1)(c) and section 276-C of the Act was lost sight of. He places reliance on the decision in the case of Ashok Kumar Gupta v. CIT [2006] 287 ITR 376/157 Taxman 339 (Punj. Har.) to contend that concession given in Explanation-5 to Section 271(1)(c) is meant for the persons who after surrendering the undisclosed Income pay the amount of tax alongwith interest, if any, on such income before the due date and such benefit cannot be extended to an assessee where he comes up with a plea of non-availability of funds for payment of tax on surrendered income. Their Lordships further opined that only circumstances that could be explained for absolving the payment of penalty are indicated in Explanation-5 itself. He also relies on the decision in the case of P. K. Metrani v. CIT AIR 2007 SC 386 to contend that Section-132 being a complete code by itself, it cannot int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or furnishing inaccurate particulars of such income. The assessee would get the immunity from paying the penalty if he is able to explain the causes as stated in clause (1) or (2) of Explanation-5. 22. The respondent's counsel relied on various decisions so far as Clause-2 of Explanation-5 to Section-271 of the Act. 23. He places reliance on the decision in the case of CIT v. Mishrimal Soni [2007] 289 ITR 77/162 Taxman 53 (Raj.) to contend that expression 'possession' used in clause (2) of Explanation 5 to Section 271 is not confined to physical possession, but extends to other type of possession which is capable of being held. It was further held that as long as the assessee comes with a clean breast of his undisclosed income represented by assets found to be in possession of the assessee, he is not deemed to have concealed his income or concealed particulars thereof. 24. He also places reliance on the decision in the of CIT v. E.V. Balashanmugham [2006] 286 ITR 626 (Mad.) to contend that the statements made by the assessee during the course of search under Section-132 of the Act can be taken note of and the explanation offered by the assessee in such statement in the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id before assessment was completed. It was further held that explanation -2 of explanation - 5 itself specifies payment of tax together with interest, if any indicating that Legislature did not stipulate any specified time limit for payment of tax. Referring to Radha Kishan Goel's case (supra). Their Lordships proceeded to hold that once income is declared and tax thereon is paid, it would amount to substantial compliance not warranting any denial of benefit under Explanation 5 of Section 271(1)(c) of the Act. 29. He further places reliance on the decision in the case of CIT v. Manmohan Goel [2005] 149 Taxman 578 (All.). In this case, a search was conducted in the residential as well as business premises of the assessee in which cash, jewellery and other valuable articles and things were found and seized and subsequently, assessee declared his income under Section 132(4) and moved application for settlement. Assessment was completed on disclosed income of the assessee and thereafter penalty proceedings were initiated. Held on facts conditions laid down in Explanation 5(2) to Section 271(1)(c) were fulfilled and no penalty was leviable. Their Lordships held that the basic idea or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [See Malabar Industrial Co. Ltd. v. CIT [2000]2 SCC 718]. 33. He also places reliance on the decision in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) wherein it is held as under: 8. ...... The basic reason why decision in Dilip N. Shroff's case (supra) was overruled by this Court in Dharamendra Textile Processors' case (supra), was that according to this Court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in case of Dilip N. Shroff (supra). However, it must be pointed out that in Dharamendra Textile Processors' case (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff's case (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff's case (supra) to the effect that mens rea was an essential Ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff's case (supra) was overruled. 34. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven the details not only relating to himself, but also other family members. He also refers to a joint letter dated 26.2.2004 signed by all the family members which was already submitted to the concerned authorities indicating that all the details are already mentioned. He has stated in the statement the manner in which the income was derived i.e. the tea business of the family. He has also disclosed the details of the income were shown in the respective returns and it is offered for taxation in the respective years in the hands of the concerned persons. He also answers the question No.6 saying that the amount shown against M/s Prakash Tea Agency is out of the income of the tea business of the firm and the income shown by him and Mr. Shashindra is the professional income of tea testing and similarly the income received by others is on account of undisclosed income earned by them. 38. Apparently the oath would be administered to the deponent by the officer concerned from the department. It is at the option of the concerned officer such statement would be recorded. If no statement is recorded under section 132(4) of other persons, there is no procedure to compel the officer to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4). 39. It is now well settled that the mens rea regarding concealing and inaccurate particulars need not be established by the department. It is also not in dispute that the immunity from imposing penalty available under two clauses of Explanation (5) can be extended to the respondents - assessees depending upon the facts and circumstances of each case if the explanation offered is to the satisfaction of the officer concerned. This Court can refer to the facts only if the Tribunal on facts has proceeded to give a perverse finding. In the present case, we are not faced with such a situation. The facts have to be referred because of the stand of the Revenue in these appeals contending that the benefit of statement of Mr. V.N. Sridhar cannot be extended to other respondents - assessees. Before concluding the search, a declaration was obtained from this group on 26.2.2004 and surrender of undisclosed income was made vide the statement dated 27.2.2004 recorded under section 132(4) of the Act. The search commenced on 6.1.2004 and the statement under section 132(4) of the Act was obtained. Under these circumstances, naturally the assessee would start thinking that if a declaration is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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