9911796707
TMI Blog2012 (10) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted by Finance (No.2) Act of 2009 The assessee has declared undisclosed income, in the return filed, in response to notice u/s 153A of the Act and the CIT(Appeals), having regard to the facts of the case, invoked the currently applicable Explanation 5A Section 271(1)(c) of the Act and upheld the penalty, levied by the AO. In such a fact-situation, the CIT(Appeals) has acted in accordance with the currently operative and relevant penal provisions, with reference to the return of income, filed in response to Section 153A of the Act. In view of the above legal and factual discussions, and having regard to the express statutory provisions of Section 271(1)(c) of the Act read with Explanation 5A thereunder, as inserted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.06.2007, we do not find any infirmity, in the findings of ld CIT(Appeals) - Decided against assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... date has been expired on the date of search are not satisfied in appellant case & therefore the order of AO is bad & illegal. 6. That the Commissioner Of Income Tax (central) Appeal has wrongly confirmed the action of assessing officer of levying the penalty u/s 271(1)(c) despite of the fact that the assessee has filed an appeal before CIT(A) against Assessment Order passed u/s 143(3) read with 153A and the Assessing Officer instead of keeping it in abeyance has levied the penalty u/s 271(1)(c). 7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off." 2. In the course of present appellate proceedings, before the Bench, ld. 'AR' contended that the penalty levied u/s 271(1)(c) of the Act, by the AO and upheld by the CIT(A), is not in consonance with the relevant provisions of Section 271(1)(c) of the Act. The assessee had disclosed an additional income of ₹ 2,00,60,000/-, to buy peace of mind and to avoid the prolonged litigation. The assessee made disclosure of additional income, in the course of search operation, on the assurance given by the Department that no penalty u/s 271(1)(c) of the Act s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of the Act, at the time of filing of the regular return, were not applicable, to the facts of this case. The appellant had filed regular return within the due date. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT V Omkar Saran & Sons, 195 ITR 1 (S.C) and B.N.Sharma V CIT 226 ITR 442 (S.C). It was argued that search action u/s 132(1) of the Act was initiated, on 31.10.2007 and on that date itself, the original return of income was filed. Therefore, ld. 'AR' argued that the ingredients of Explanation 5A, to Section 271(1)(c) of the Act were not satisfied. The appellant filed the return of income for the relevant assessment year i.e. 2007-08, on 31.10.2007, i.e. the date on which search action was initiated and a hard copy of the same was filed, on 14.11.2007. The appellant filed return by e-mail, on 31.10.2007, on due date i.e. 31.10.2007 and, hence, the due date has not expired. Therefore, ld. 'AR' contended that provision of Section 271(1)(c) read with Explanation 5A thereunder are not applicable to the facts of the present case. 2(iv) Ld. 'AR', further, argued that the return was revised, on 23.07.2009, declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and corroborative evidences on record. 2(vi) Ld. 'AR' referred to page 2, 19, 28 to 37 of the Paper Book and relevant provisions of the Act. On merit, ld. 'AR' referred to para 2 of the assessment order and contended that no concealment has been established by the AO within the meaning of provisions of Section 271(1)(c) read with Explanation 5A thereunder. Ld. 'AR' also referred to the submissions filed before the CIT(A), to support his contentions. 3. Ld. 'DR', on the other hand, after narrating factual matrix of the case, supported the findings of ld. CIT(A), as contained in para 5.2, 5.3, 6.1 and 6.2 of the order. Ld. 'DR', further, contended that Explanation 5A to Section 271(1)(c) of the Act, as inserted by the Finance Act, 2009, with retrospective effect, from 1.6.2007, is applicable to the facts of the present case, in view of the legislative intent contained therein, for its operation. Thus, the Ld. 'DR' supported the findings of the AO, as well as that of the CIT(A), in the matter. 4. We have carefully perused the rival submissions, facts of the case, Paper Book and the case laws cited by the parties. The brief facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of action u/s 132 of the I.T. Act, 1961, some incriminating documents were found and seized from the residence and business premises of the assessee. These documents were confronted while recording his statement u/s 132(4) of the IT. Act, 1961. The assessee surrendered a sum of ₹ 2,00,60,000/-.The details of surrender made by the assessee is as under: (a) Difference between registered value and agreement to sell for land purchased in Village Sundran, Tehsil Dera Bassi ₹ 1,03,60,000/- (b) Payment in cash for land at Manali ₹ 20,00 ,000/- (c) Undisclosed income of 21st Century Builders & Engineers for F.Y. 2006-07 ₹ 77,00,000/- Total : ₹ 2,00,60,000/- The assessee filed return u/s 153A of the Income Tax Act, 1961, on 23.07.2009 declaring the total income at ₹ 3,27,01,440/-. The retuned income of the assessee also included undisclosed income of ₹ 2,0060,000/-surrendered u/s 132(4) during the course of search operation. It was found that there was unaccounted investment of ₹ 1.03 crores in purchase of land at Village Sundran. Further it was found that amount of ₹ 20 lacs was paid in cash towards purchase of land at Manal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated against you may be kept in abeyance. On going through the records, it is seen that the assessment order was passed on 30.12.2009 and the same alongwith demand notice was served upon you on 50.12.2009. As per provisions of section 249(2) (b) appeal should have been filed within 30 days from the date of service of demand notice to you, whereas you have filed appeal before the Worthy CIT (Appeals)-!, Ludhiana on 21.05.2010. Therefore your request that the penalty proceedings may be kept in abeyance cannot be accepted and is hereby rejected. Further, as per your letter dated 22.01.2010, you have contented that no penalty should be levied in view of second proviso to explanation 5 of the section 271(1)(c) of the Income Tax Act and also that the additions made are less than the surrendered amount. It is further contented by you that the returned income has been accepted. In this regard, your attention is invited to explanation 5A to the section 271(1) (c) of the Income Tax Act, 1961, which reads as follows:- Explanation 5A.-Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,- (i) any mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits, it was submitted that the assessee had agreed to the additions subject to no penalty. It was further contended that the explanation 5A to section 271(l)(c) should be considered in the light of agreement between the department and the appellant. It was also contended that the assessee filed original return on 31-10-2007 and search was conducted on 31-10-2007 A surrender was made during the course of search subject to no penalty. It was also stated that the assessment was completed under section 143(3) and no addition was made. In its written submissions dated 22-06-10 the assessee placed reliance on 300 ITR 205 (SC) in the case of Sudershan Silk & Sarees Vs CIT and 142 CTR 49 (PAH) in the case of CIT Vs Jaswant Rai. 4.1 The reply of the assessee has been duly considered. As stated above, the assessee filed appeal before the worthy CIT(Appeals) -I, Ludhiana on 21-5- 10, which is belated. Therefore, the order of assessment cannot be stated to be subject matter of appeal unless the same is admitted by the Commissioner of Income Tax (Appeals). The assessee has not filed any order of the CIT(A) that the delay has been condoned and the appeal is admitted by the Worthy CIT(A). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded u/s 132(4) of the Income Tax /Act, 1961 on 31.10.2007 during the course of search. The relevant extracts regarding surrender made by the assessee are reproduced below:- "Q. / am showing you annexure A-1 of the documents seized from your office premises at SCO 8, Sector 5, Panchkula. Please explain Pages 83-88. Ans. This is an agreement to purchase land at Manali. I have paid40lakhs, through DDs and 20 lakhs by cash. Q. Please explain the source for these amounts. Ans. I would like to surrender 20 lakhs as undisclosed income from my business Twenty First Century Builders and Developers. Q. / am showing you pages 80-82 of annexure A-1. Please describe the same. Ans. This is an agreement to purchase land in Village Sundran, Tehsil Dera Bass/ in the name of me and my brother. I wish to surrender ₹ 1,03,60,000/- being the amount which is in excess of the amount for which the land has been registered (i.e. ₹ 35,00,000/-). The pages 70 to 74, 80 the annexure is one copy of the registered deed. Q. Do you have anything else to say. Ans. I would like to surrender an additional amount of ₹ 77 lakhs being the undisclosed income of the concern 21st Century Buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant findings of the CIT(A), as recorded in paras 5 to 6.5 are reproduced hereunder : "5. At the very outset, I will adjudicate on the Ground of Appeal No. 3, wherein the assessee has contended that the provisions of Explanation 5A to section 271(1) (c ) were wrongly invoked without appreciating the fact that the assessee has filed the return on or before due date of filing of return. 5.1 I have considered the impugned order of the Id. AO and the submissions made by the assessee. In order to adjudicate on the issue, I shall refer to the provisions of Section 271 (1)( c) r/w Explanation 5A, which is reproduced below: 271. failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner of (Appeals) or the Commissioner in the course of any proceedings under this act, is satisfied that any person - (a) (b) (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) Explanation 5 A. - Where, in the course of a search initiated under section 132 on or after the 1st I day of June, 2007, the assessee is found to be the owner of - (i) Any money, bullion, jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch or in response to notice u/s 153A. In other words, penalty for concealment of income for search operations conducted after 1.6.2007 which are otherwise not covered u/s 271AAA are sought to be covered u/s 271(1)( c). Hence the invoking of the said provisions by the Ld. AO is upheld accordingly the ground of appeal no. 3 is dismissed". 6. I shall now take up ground no. 2 and 4 for adjudication in a consolidated manner. In Ground of appeal No. 2 the assessee has contended that the penalty u/s 271 (1) (c ) had been wrongly levied as the disclosure of the additional income of ₹ 2,00,60,000/- was subject to no penalty and that the income declared in the return filed u/s 153A was accepted by the Assessing Officer. Reliance was placed on the judgement of the Hon'ble Supreme Court in the case of Sudarshan Silk Sarees vs. CIT, 300 ITR 205. it was also averred that the Id. AO had not recorded satisfaction in assessment order and penalty order. That the penalty u/s 271 (1) (c) r.w. Explanation 5A was not mandatory where surrendered was bona-fide. Similarly in Ground of appeal No. 4 the assessee is aggrieved that penalty was levied conditional surrender of no penalty u/s 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific documents had been found on the basis of which the surrender was made and importantly the undisclosed income had it been shown in the return filed by the assessee u/s 139(1). The reasons for not having included the additional income in the return filed u/s 139 have not been elucidated by the assessee. Hence it is apparent that had it not been for the search operation and questions raised during recording of the statement, there would have been no disclosure of additional income by the assessee. Furthermore in the statement u/s 132(4) there is no indication that the tax liabilities arising thereof have been sought to be paid within stipulated due dates. Hence I am in the opinion that the assessee has not sufficiently covered himself with the immunity conferred u/s 271 (1) (c). 6. 3. The cases relied upon also do not come to the rescue of the assessee as the facts and circumstances are found to be distinguishable. In the cited case of Sudharshan Silks (supra) the Hon'ble Apex Court did not enter into any discussion regarding perversity if any of the finding of fact of the Tribunal which had upheld the action of the C1T{A) in deleting the penalty. The CIT(A) had noted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , has recorded satisfaction in the form of direction for the purpose of initiation of penalty proceedings u/s 271(1)(c) of the Act , at the end of each addition made in the asstt. order in question as "Penalty proceedings u/s 271(1)(c) are initiated separately" and also in the concluding para as "Issue notice u/s 271(1)(c) of the Act." In our considered view, the AO has complied with the legislative intent, as enshrined in the amended provisions of Section 271(IB), as reproduced above. There is no prescribed format under the Act or the Rules, for recording of satisfaction, in assessment order, for the purpose of initiating penalty proceedings u/s 271(1)(c) of the Act. It is a search case, where the assessee has made huge surrender, in view of the search operations. The AO, while passing the impugned assessment order, in such a search case, has issued direction for the purpose of initiation of penalty proceedings u/s 271(1)(c) of the Act, after applying his mind to the facts of the case. Therefore, the directions issued by the AO, in the matter, is fully covered by the amended provisions, as reproduced above. 8. We have also carefully perused and considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded u/s 132(4) of the Act, in the course of search operations. In the course of assessment proceedings, AO confronted such documents to the assessee and he failed to furnish any source of undisclosed investment, except stating that the impugned amount has been included in the surrender made in the course of search operation. The AO, also initiated penalty proceedings u/s 271(1)(c), in respect of such additions made by him. The last sentence of para 5, whereby penalty proceedings u/s 271(1)(c) were initiated reads as, "penalty proceedings u/s 271(1)(c) are initiated separately". 11(i) In the course of search operation, certain documents, in the form of copies of agreement form of Sale Deed dated 10.02.2006, between Shri Shamsher Singh, Village Rangri, P.O.Manali and M/s 21st Century Resorts, for the land measuring 00.45.035 hectares at Manali, for ₹ 1.55 Cr. Documents clearly show that a sum of ₹ 40 lacs had been paid through DD and ₹ 20 lacs in cash. In the course of assessment proceedings, the AO confronted such documents, to the assessee and the assessee merely stated that such amount has been surrendered in the course of search operation. The AO, ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must have been given by the searching party, that only partial evidence in respect of concealment for a very limited period was detected, there was no reason why any person would go to offer much higher amount for a large number of years. In opinion of the Tribunal, it was found not a fit case, for levy of penalty u/s 271(1)(c) of the Act. In the present case, facts are clearly different and distinguishable. Assessee has declared the income, in the return filed, in response to Section 153A of the Act. Declaration of additional income, in the course of deposition u/s 132(4) of the Act is not relevant in the present case, in view of the explanation 5A to Section 271(1)(c) of the Act inserted by the Finance (No.2) Act 2009, with retrospective effect from 1.6.2007, as the search was conducted in this case, on 31.10.2007. Therefore, declaration made in the statement u/s 132(4) is not relevant, in the context of Explanation 5A to Section 271(1)(c) of the Act. In view of this, it cannot be said that any inducement or promise was made or extended by the revenue, to the assessee, for non-levy of penalty u/s 271(1)(c) of the Act, at the time the appellant filed his return of income, in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assurance that no penalty would be levied, is a finding of fact and does not give rise to any question of law. The Hon'ble jurisdictional High Court has applied its decision, in the case of Banta Singh Kartar Singh V CIT (1980) 125 ITR 239 while adjudicating the case relied upon by the assessee. The Hon'ble jurisdictional High Court held that where there is an agreement between the assessee and the Income tax authorities, it would be appropriate that an order, based on an agreement, would give rise to grievance and could be agitated in appeal. The assessee agreed to certain addition, in the course of assessment proceedings, in the case relied upon by the assessee. In this case, search & seizure operations were conducted at the premises of the assessee, on 28.05.1984 and the decision was rendered by the jurisdictional High Court, in the light of the then relevant provisions of the Act. At that relevant point of time, even Explanation 5 to Section 271(1)(c) was not on Statute, which was inserted by Taxation Laws (Amendment) Act, 1984 w.e.f. 1.10.1984. In the facts of the present case, it is evident that there is no agreement between the assessee and the Department, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment had not discharged its burden of proving concealment and simply rested its conclusion on the act of voluntary surrender made by the assessee in good faith and hence, penalty could not be levied. In the present case, the assessee has filed return of income, in response to notice u/s 153A of the Act. The appellant has not revised such return of income and, hence, it is not a case of revised return of income. The assessee had already admitted undisclosed income in the course of search operation in the statement recorded u/s 132(4) of the Act, which was later on returned, in response to notice u/s 153A of the Act. In this context, it is pertinent to mention here that Hon'ble jurisdictional High Court in the case of Rajesh Chawla V CIT 154 Taxman 364 has held that it is not possible to hold that in every case, mere surrender of income will foreclose any action for concealment of income. It was, further, held that the decision of Hon'ble Supreme Court, in Sri Shadi Lal and CIT V Suresh Chandra Mittal 251 ITR 9 (S.C) have rightly been distinguished by the Tribunal. Relevant part of the decision is reproduced hereunder : "4. The above discussion by the Tribunal clearly sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original returns but was unable to discharge the burden of proof under the Explanation and (ii) that for the purpose of calculation of penalty the difference between the tax on the incomes shown in the first returns and the tax on the incomes assessed should be taken as the amount of tax that would have been evaded, the appellant preferred appeals to the Supreme Court. The Supreme Court dismissed the appeals holding that there was no error of law in the order of the High Court. Decision of the Gauhati High Court in F.C. Agarwal v. CIT (1976) 102 ITR 408 affirmed." 18(i) The relevant part of the decision of Hon'ble Gauhati High Court in F.C.Agarwal V CIT 102 ITR 408 is reproduced hereunder : "Penalty-Burden of proof-Assessee filing revised return-Showing much larger income-Assessee not able to establish inadvertent mistake or omission in original return-Penalty based on original return-Validity- Revised return filed for earlier year after coming into force of Expl. To Section 271(1)(c)-Applicability of Expl.-Effect of revised return under Section. 139(5)-Revised return filed before advertisement by Board that revised return would excuse false original return-Applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 23 (P&H) upheld the similar view that where revised return, showing higher income is filed after detection of concealed income, by the Deptt., imposition of penalty would be justified. It is pertinent to mention here that Hon'ble High Court has considered the decision of the Hon'ble Supreme Court in CIT V Suresh Chandra Mittal (supra) & Agarwal F.C. V CIT (supra); Agarwal (G.C.) V CIT (supra); Madhu Sudan K.P. V CIT 251 ITR 91 and Rajesh Chawla v CIT (supra). 22. In view of the above discussion, the case law relied upon by the assessee, does not support the contention raised by the assessee. The assessee further placed reliance on the decision of the Hon'ble Karnataka High Court, in the case of CIT V Jewels Paradise 101 ITR 265 (Kar). 23. We have perused the facts of the case and ratio laid down by the Hon'ble Karnataka High Court and found that the Hon'ble Karnataka High Court has adjudicated the issue of cash seized as a result of search action on different set of facts and circumstances. Therefore, the case law relied upon by the assessee is factually and distinguishable. 24. Ld. 'AR' contended that provisions of Explanation 5A to Section 271(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the first appellate authority are co-terminus, with those of the AO. The CIT(Appeals) can do what the AO could do and can also direct the latter to do what the latter failed to do. It is settled legal proposition that first appellate authority is vested with all the plenary powers which the AO has in the matter. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision, the appeal is preferred, to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by the Statute. It is also settled legal proposition that first appellate authority is competent and duty bound to consider a matter before him in all its aspects. Therefore, having regard to the facts of the present case, ld CIT(Appeals) has invoked the correct Explanation 5A, as reproduced above, which was made effective retrospectively w.e.f. 1.6.2007, as introduced by the Finance (No.2) Act of 2009. In the present case, the search operations were conducted u/s 132(1) of the Act, on 31.10.2007 and consequently, the latest Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectively. The exact dates of these returns are not available on record. Assessments were made on the assessee for determining its total income at ₹ 28,513/- for the assessment year 1961-62 and ₹ 28,463/- for the assessment year 1962-63. The assessment orders are dated 30.3.1962 and 28.11.1963 respectively. Subsequently, the AO issued notice on 09.03.1965 u/s 148 of the Act. The assessee filed its return of income on 27.2.1969, disclosing the same income as in the original return. The Finance Act, 1968, amended Section 271(1)(c) w.e.f. 1.4.1968. The ratio laid down by the Hon'ble Apex Court was based on such factual matrix of the case. 29. In the present case, the normal return of income, for the assessment year 2007-08 was filed by the assessee, on 31.3.2007 i.e. the date of search itself. However, the assessee filed his return of income in response to notice dated 27.1.2009 issued u/s 153A of the Act, on 23.7.2009, declaring income of ₹ 3,27,01,440/-, including the additional amount of ₹ 2,00,60,000/-, declared by the assessee, in the statement recorded u/s 132(4) of the Act. The assessee filed return of income, in response to the said notice u/s 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
