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TMI Blog2016 (1) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... to search. - Decided against assessee. Addition made by the Assessing Officer in the assessment proceedings pursuant to the original return of income filed by the assessee - Held that:- From the perusal of details, we find that the said addition was made by the Assessing Officer while passing the order under section 143(3) of the Act, which in turn, was confirmed by the CIT(A) and the Tribunal. While filing the return of income under section 153A of the Act, the assessee had not included the said additional income. The penalty proceedings, if any had to be initiated and levied pursuant to proceedings under section 143(3) and not pursuant to proceedings under section 143(3) r.w.s. 153A of the Act. Accordingly, we find no merit in the said observations of the authorities below and we direct the Assessing Officer to levy penalty under section 271(1)(c) of the Act on the additional income assessed in the hands of assessee pursuant to search and delete the penalty for concealment on the alleged addition of ₹ 6,00,000/-.- Decided in favour of assessee in part. - ITA No s.2241 to 2244/PN/2012 - - - Dated:- 30-10-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,00,000/- was not offered in return filed under section 153A of the Act and also that ₹ 6,00,000/- added during assessment under section 143(3) had been confirmed by the last fact finding authority, the ITAT. 6. On the facts and in the circumstance of the case and in law, the learned CIT (A) erred in applying explanation I to section 271 (1 )(c) instead of explanation 5 A of that section on the facts of the case thus rendering his decision perverse and bad in law. 7. The appellant craves leave to add, alter, modify, delete amend any of the grounds, as per the circumstances of the case. 8. The appellant prays leave to adduce such further evidence to substantiate its case as the occasion may demand. 4. The issue raised in all the appeals relating to assessment years 2005-06 to 2008-09 is against the deletion of penalty levied under section 271(1)(c) of the Act. 5. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was conducted at the residential premises and Clinic of the assessee on 16.01.2009. During the course of search, certain books of account and documents were seized from the premises of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for this assessment year had been completed under section 143(3) of the Act in the past vide order dated 26.12.2007. As a result of scrutiny loans of ₹ 6,00,000/- from two persons were found to be not explained and an addition of ₹ 6,00,000/- was made to the total income under section 68 of the Act. The said addition was confirmed by the CIT(A) and also by the Tribunal vide order dated 31.05.2010. However, the assessee failed to include the said enhanced income of ₹ 6,00,000/- in the return of income filed under section 153A of the Act. The assessee was asked to explain his stand on this issue and he in turn, filed explanation to substantiate that the said loan deposits of ₹ 6,00,000/- were genuine. The Assessing Officer noted that the said issue had been examined at length during the original assessment proceedings and the claim of the assessee was found to be non-genuine, and the addition in this regard has been confirmed by Pune Bench of Tribunal, hence, there was no force in the contention of the assessee. The said loans totaling ₹ 6,00,000/- since were shown in the balance sheet filed along with return of income filed pursuant to notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271(1)(c) of the Act at ₹ 4,24,570/-. 7. The CIT(A) after referring to the Explanation 5 to section 271(1)(c) of the Act observed that no money, bullion, jewellery or any other valuable articles were involved, but the additional income was found by the search party during the course of action was offered as additional income, where there was no direct linkage brought on record with any of the specified seized material, so as to establish the charge for levy of penalty in the present case. The CIT(A) further held that on going through the facts of the case, no direct linkage with regard to the seized material and the additional income of ₹ 6,61,344/- on account of business income and ₹ 50,000/- on account of agricultural income declared, had been established. Therefore, Explanation 5A to section 271(1)(c) of the Act was not applicable to the case under appeal. The CIT(A) further held that in case Explanation (1) was applicable and since the assessee had offered to tax the additional income on account of estimated suppression of professional receipts and also on account of errors and omission and agricultural income, detected as a result of search, as ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings vis- -vis taxability of impugned amount of ₹ 6,00,000/-, in the absence of any incriminating documents found, no penalty could be levied on the said addition of ₹ 6,00,000/- by invoking the provisions of Explanation 5A to section 271(1)(c) of the Act. The CIT(A) thus, deleted penalty levied under section 271(1)(c) of the Act. 9. The Revenue is in appeal against the order of CIT(A). 10. The learned Departmental Representative for the Revenue pointed out that the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act had declared income of ₹ 15,70,040/- and agricultural income of ₹ 50,000/-, which included additional income of ₹ 6,61,344/-. However, the assessment was completed on the income of ₹ 15,70,040/- and addition of ₹ 6,00,000/- and agricultural income of ₹ 50,000/-. The learned Departmental Representative for the Revenue pointed out that the penalty under section 271(1)(c) of the Act had been levied on an addition of ₹ 6,61,344/- and ₹ 6,00,000/-. Merely because the income disclosed under section 132(4) of the Act has been declared by the assessee, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 271(1)(c) of the Act pointed out that search on premises of the assessee took place on 10.10.2007. Further, reliance was placed on the ratio laid down by Pune Bench of Tribunal in ACIT Vs. Mulay Construction P. Ltd. Ors. in ITA Nos.116 to 119/PN/2012 Ors. and since the provisions of Explanation 5A to section 271(1)(c) of the Act had already been amended, since there was addition of additional income in the hands of the assessee, there was merit in levy of penalty under section 271(1)(c) of the Act. 13. We have heard the rival contentions and perused the record. The issue arising in the present appeal is whether in cases where the assessee pursuant to search and seizure operation at his premises had declared additional income in the return of income, in response to notice under section 153A of the Act, whether in such cases, penalty under section 271(1)(c) of the Act is leviable. We have deliberated on similar issue in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO in ITA No.1562/PN/2013 , relating to assessment year 2009-10 and by order of even date held as under:- 13. We have heard the rival contentions and perused the record. Search and seizure action was carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated penalty proceedings under section 271(1)(c) of the Act with regard to the said addition. Consequent thereto, the Assessing Officer rejecting the claim of the assessee that it had suo motu offered the income from long term capital gains, and no malafide intention could be attributed to the said disclosure, hence, there was no merit in levy of penalty, held the assessee exigible to levy of penalty under section 271(1)(c) of the Act and levied penalty of ₹ 47,11,104/-. The CIT(A) elaborately considered the issue and upheld the levy of penalty. The assessee is in appeal against the order of CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act. 14. The first aspect of the issue raised by the assessee before us is that where no satisfaction has been recorded by the Assessing Officer, since in the hands of assessee, there was no addition whatsoever, as the income offered by the assessee was accepted in toto, no penalty under section 271(1)(c) of the Act could be levied. From the perusal of assessment order, it is clear that the Assessing Officer after considering the facts of the case and also the return of income filed by the assessee pursuant to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007, Explanation 5 was introduced by the Finance Act, 2007 with retrospective effect from 01.04.2003. Under the said section, where the assessee was found to be owner of any money, bullion, jewellery or other valuable articles or things and the assessee claims that such assets have been acquired by him by utilizing, wholly or in part his income, for any previous year, which had ended before the date of search, but the return of income for such year had not been furnished before the said date, or where the return of income had been furnished but such income had not been declared therein or for any previous year which is to end on or after the date of search, then notwithstanding that such income was declared by him in the return of income, he was deemed to have concealed particulars of his income or furnished inaccurate particulars of income, unless the income or the transactions were recorded in the books of account or the person in the course of search makes a statement under section 132(4) of the Act that the said money, bullion, jewellery, valuable articles or things, has been acquired by him out of his income, which has not been so far disclosed, but specifies the manner in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re applicable to all the searches initiated under section 132 of the Act on or after first day of June, 2007. The conditions laid down in the Explanation 5A is where during the course of search, the assessee is found to be in possession of any money, bullion, jewellery, valuable articles or things and the assessee claims that such assets have been acquired by him by utilizing wholly or in part his income, for any previous year on any income based on any entries in books of account, or other documents or transactions and he claims that such entries in the books of account or other documents or transactions represent his income for any previous year, then in cases where the return of income for such previous year had been furnished by the assessee prior to the date of search, but the said income had not been declared in the said return of income or the due date for filing the return of income had expired for such previous year and the assessee had not filed the return of income, it is further laid down that notwithstanding the fact that such income which has been discovered due to the search proceedings, is declared by him in any return furnished on or after the date of search, but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the salary received by the assessee. By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax. The said payment is, therefore, for and on behalf of the assessee. It is not a gratuitous payment. But for the said agreement and but for the said payment, the said tax amount would have been liable to be paid by the assessee himself He could not have received the salary which he did but for the said payment of tax. The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context. It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee. We are, therefore, of the opinion that the High Court and the authorities und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been substituted for Expl. 5 by the Finance Act, 2007 w.e.f 1-6-2007. The said explanation was further amended by the Finance(No.2) Act, 2009 with retrospective effect from 01-07-2007 which is reproduced hereinabove. The Ld. Counsel has raised an important legal question whether the income declared by the assessee which is pertaining to the unrecorded expenditure can said to be the income which is contemplated in Explanation 5A(ii)? The answer to this question is in sec. 69-C which reads as under:- Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year; 20. So far as the Expl.- 5 which was on the statute book, the Courts have taken a view that it was having a limited application only to the extend of the money, bullion, jewellery or any valuable assets or things which were found during the course of seach and seizer oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of binding precedent of Pune Bench on the said issue, we find no merit in the reliances placed upon by the learned Authorized Representative for the assessee on DCIT Vs. Purti Sakhar Karkhana (supra) and Shri PV Ramana Reddy Vs. ITO (supra). The other reliance placed upon by the learned Authorized Representative for the assessee on the decision of Pune Bench of Tribunal in Smt. Pramila D. Ashtekar Vs. ITO (2013) 39 taxmann.com 103 (Pune Trib.), it may be pointed out that the said order of Pune Bench of Tribunal has been recalled in MA No.112/PN/2013, order dated 21.06.2013 and has no binding effect for deciding the present issue. Further reference was made to the decision of CIT Vs. Continental Warehousing Corporation (NHAVA Sheva) Ltd. Anr. (supra), where the Hon ble Bombay High Court has deliberated upon the scope of 153A provisions and has no relevance to the issue before us. 14. In the facts of the present case also, the assessee had furnished original return of income in which he had not declared its receipts from the profession, but pursuant to the search and seizure operation, certain incriminating documents were seized, which contained unrecorded receipts, exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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