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TMI Blog2016 (2) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid amounts offered by the assessee on account of advances received in cash from customers shown in the balance sheet. Similarly, the gifts shown in the books of account which have been offered as additional income by the assessee during the course of search itself, in the statement recorded under section 132(4) of the Act is liable for levy of penalty under section 271(1)(c) of the Act i.e. on offer of income of ₹ 90,000/- in assessment year 2006-07 and ₹ 8,17,200/- in assessment year 2007-08. We find no merit in the order of CIT(A) in this regard that where the advances from customers, gifts received by the assessee and unsecured loan have been shown in the books of account and were part of the balance sheet filed by the assessee along with return of income originally filed by the assessee prior to date of search does not warrant the levy of penalty under section 271(1)(c) of the Act. In view of the amended provisions of Explanation 5A to section 271(1)(c) of the Act, the said finding of the CIT(A) is reversed and we hold that the assessee is liable to levy of penalty under section 271(1)(c) of the Act on the income offered by the assessee pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the said hotel. In view of the explanation of the assessee, which was not accepted by the Assessing Officer and addition was made in the hands of assessee on notional basis, does not justify the levy of penalty under section 271(1)(c) of the Act. We further hold that on such additions made in the hands of assessee and in the absence of any evidence found during the course of search, Explanation 5A to section 271(1)(c) of the Act is not attracted. Accordingly, we upho ld the order of CIT(A) in deleting penalty - Decided against revenue Addition on account of undisclosed profit on sale of flat - Held that:- The claim of the assessee in this regard is that the said income was voluntarily offered by the assessee and was not found during the course of search. In case, no evidence was found during the course of search, then admittedly, the provisions of Explanation 5A to section 271(1)(c) of the Act are not attracted. However, the assessee is exigible to levy of penalty for concealment under section 271(1)(c) of the Act under the substantive provisions since the assessee had failed to disclose the profits earned by it on the sale of flats of ₹ 22,500/- and 42,250/- in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [2013 (3) TMI 373 - BOMBAY HIGH COURT] . Accordingly, we uphold the order of CIT(A) in this regard as where the assessee only changed head of account and in the absence of any facts that claim of assessee was not bonafide, the deletion of penalty under section 271(1)(c) of the Act by the Tribunal was upheld. - Decided against revenue - ITA Nos. 1251 to 1254/PN/2013 - - - Dated:- 29-1-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Dheeraj Kumar Jain For The Respondent : Shri Nikhil Pathak ORDER PER SUSHMA CHOWLA, JM: This bunch of four appeals relating to the same assessee filed by the Revenue are against the consolidated order of CIT(A)-I, Nashik, dated 15.03.2013 relating to assessment years 2006-07 to 2009-10 against levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. This bunch of four appeals filed by the Revenue relating to the same assessee on similar issues were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The Revenue in ITA No. 1251/PN/2013 has raised the following grounds of appeal :- 1. On the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciating that the offer of this income was made by the assessee only on being confronted with the fact that the income was required to be brought to tax during assessment proceedings and the estimate of the said income is that of the assessee himself. 7. On the facts and in the circumstances of the case the learned CIT(A) erred in holding that provisions of explanation 1 of section 271 (1 )(c) or explanation 5A of that section does not apply to the facts of the case which is contrary to the evidence on record, thus rendering his decision perverse and bad in law. 8. The appellant craves leave to add, alter, modify, delete, amend any of the grounds as per the circumstances of case. 9. The appellant prays leave to adduce such further evidence to substantiate its case as occasion may demand. 4. The issue arising in all the appeals is against deletion of penalty levied under section 271(1)(c) of the Act. 5. The Assessing Officer had levied penalty under section 271(1)(c) of the Act at ₹ 11,86,410/- in assessment year 2006-07, ₹ 28,35,080/- in assessment year 2007- 08, ₹ 25,61,400/- in assessment year 2008-09 and ₹ 15,08,250/- in assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that the additional income was assessed in the hands of assessee, against which it had not filed any appeal. In view thereof, the claim of the assessee was that no penalty under section 271(1)(c) of the Act was leviable, where the additional income has been declared by the assessee and due taxes have been paid. The Assessing Officer noted that during the course of search, books of account and other incriminating documents were seized and statement of the assessee was recorded under section 132(4) of the Act, in which he admitted to the additional income of advances credited in cash in his books of account. The assessee stated that he had no evidence in respect of amount totaling ₹ 2,17,98,431/-. Further, the assessee also admitted that he had no documentary evidence in support of gift claimed of ₹ 90,000/- and ₹ 8,17,500/- in assessment years 2006-07 and 2007-08 respectively. He further offered ₹ 55 lakhs received as additional income for assessment year 2010-11 on account of seized documents. Another disclosure made by the assessee was on account of stock of TDR amounting to ₹ 16,89,185/- relating to assessment year 2008-09. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Explanation 5. In respect of other additions made on account of gift shown in the books of account, the CIT(A) observed that the assessee had claimed receipts of gift from his parents and close relatives received by cheque and in cash. The said gifts were recorded in the books of account not as income, but as gift and were reflected in the capital account and balance sheet filed along with return of income prior to the date of search. In view thereof, the CIT(A) held that the same did not represent income and the clause (ii) of Explanation 5A to section 271(1)(c) of the Act was not applicable to the case of the assessee. The CIT(A) deleted penalty levied on gifts shown in the books of account at ₹ 90,000/- and ₹ 8,17,200/- relating to assessment years 2006-07 and 2007-08 respectively. Similarly, penalty on loan of ₹ 4,15,000/- shown in the books of account and balance sheet filed with return of income for assessment year 2007-08, was deleted by the CIT(A) as Explanation 5A was not attracted since the loan had been reflected in the balance sheet prior to the date of search and the same was recorded in the books of account regularly maintained in the case of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was not in a position to explain the addition made on additional income in respect of item Nos.4 and 9, the learned Departmental Representative for the Revenue pointed out that the said additions were confirmed by the CIT(A) and the assessee is not in appeal. In respect of items 5 to 8, the learned Departmental Representative for the Revenue pointed out that penalty in respect of same was deleted by the CIT(A). The item 5 is on account of estimated rental for the second house and where the said rental was not shown by the assessee, the assessee is exigible to levy of penalty. In respect of item 6 i.e. disallowance made since the TDS was not deducted on labour payments under section 40(a)(ia) of the Act, the same was liable for levy of penalty under section 271(1)(c) of the Act. Further, the assessee had offered rental income during the course of assessment proceedings and on such rental income, penalty needs to be levied under section 271(1)(c) of the Act. The next addition made in the hands of assessee was by taxing income shown as long term capital gains in the original return of income as business income during the course of 153A proceedings. The CIT(A) had deleted the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch itself under statement recorded under section 132(4) of the Act on account of gift shown in the books of account amounting to ₹ 90,000/- and ₹ 8,17,200/- in assessment years 2006-07 and 2007-08 and also on account of unsecured loan shown in the books of account of ₹ 4,15,000/- in assessment year 2007-08. Admittedly, the said advances from customers, gifts and unsecured loans had been recorded in the books of account, balance sheet and the return of income filed by the assessee for the respective years, which were filed before search action taken under section 132 of the Act. Further, additions were made in assessment years 2006-07 to 2009-10 on account of undisclosed rent from two properties @ ₹ 12,000/- per annum. In assessment year 2008-09, addition was made on account of undisclosed profits on sale of flat at ₹ 22,250/- and in assessment year 2009-10 at ₹ 42,250/-. Further, in respect of disallowance on labour payments in view of the provisions of section 40(a)(ia) of the Act, additional income was offered in assessment year 2009-10 at ₹ 18,61,000/-. Another addition made in the hands of assessee was the estimated rental income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 09.12.2009. While travelling from Pune to Delhi by air, the assessee was found to be in possession of cash of ₹ 1,60,76,800/-. The assessee was searched by the Investigation Wing under section 132 of the Act on 09.12.2009 and residence was also searched and cash of ₹ 1.60 crores was seized during the search proceedings. In the course of recording of statement during the search proceedings, the assessee admitted that she had sold her ancestral property at Delhi for ₹ 3.40 crores, for which the Agreement was made for ₹ 1.70 crores and the balance amount was received in cash. The claim of the assessee was that though she had 50% share in the impugned property and the balance 50% share was owned by her sister Mrs. Tripta Kaur, but she had received the entire cash consideration and the cheque consideration was divided 50 : 50. In response to notice issued under section 153A of the Act, the assessee offered 50% of the Agreement value i.e. ₹ 85 lakhs and 100% of the cash element i.e. ₹ 1.70 crores in her hand and computed the income from capital gains and declared total income of ₹ 2,04,91,850/- on 13.09.2010. Against the income from capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153A of the Act vide para 3.2 noted that the total sale consideration of the ancestral property was ₹ 3.40 crores, out of which ₹ 1.70 crores was received in cash and ₹ 1.70 crores was received in cheque. The cheque amount was shared by the co-owner. However, the entire cash amount was claimed to be received by the assessee. The Assessing Officer further considered that the assessee had offered the cheque amount and cash amount aggregating to ₹ 2.55 crores for taxation under the head long term capital gains . The Assessing Officer further observed that since the assessee had not declared this amount of capital gains in her original return and subsequently, after search has declared the total amount of capital gains and thus, concealed the particulars of income and consequently, penalty proceedings under section 271(1)(c) of the Act were initiated separately by the Assessing Officer. The above said finding of the Assessing Officer is the deemed satisfaction recorded by the Assessing Officer before initiating penalty proceedings under section 271(1)(c) of the Act and in view thereof, we find no merit in the plea of the assessee in this regard. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been derived and pays the taxes together with interest. Under Explanation 5, an exemption was provided to the person who was searched and was found in possession of money, bullion, jewellery, v aluable articles or things, then in case he declared the same under the statement recorded under section 132(4) of the Act and thereafter, pays the taxes on the same, no penalty under section 271(1)(c) of the Act was levied on such person. 16. However, for searches initiated under section 132 of the Act on or after first day of June, 2007, another Explanation 5A was applicable, which was introduced by the Finance Act, 2007 w.e.f. 01.06.2007. The original Explanation 5A provided that where in the course of search, the assessee was found to be the owner of any money, bullion, jewellery, valuable articles or things and the assessee claims that such asset had been acquired by him by utilizing wholly or in part his income for any previous year or any income is based on any entry in books of account or other documents or transactions and he claims that the same represents his income for any previous year, then where the period has ended before the date of search and the due date for fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same, he would be deemed to have concealed the particulars of income or furnished inaccurate particulars of income. Reading the above said provisions of the Explanation 5A to section 271(1)(c) of the Act, it is noted that the person is deemed to have concealed particulars of his income or furnished inaccurate particulars of such income, which is equivalent to the value of money, bullion, jewellery, valuable articles or things from the possession of the assessee during the course of search conducted on or after first day of June, 2007. Further, where any income is based on any entry in any books of account or other documents or transactions and he claims that all the above said represents his income for any previous year, then the Explanation lays down to that extent, the person would be deemed to have concealed his particulars of income or furnished inaccurate particulars of income. 18. Now, coming to the main provisions which constitute two portions i.e. what is concealment and quantum of penalty to be levied. The question is quantum of income on which penalty is to be levied. The said issue was before the Pune Bench of Tribunal in ACIT Vs. Mulay Construction P. Ltd. Ors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in holding that the said tax amount is liable to be included in the income of the assessee during the said two assessment years. 17. As per interpretation made by the Hon'ble Supreme Court of sec. 2(24) of the Act, it is clear that it is an inclusive definition and it covers all income come under charging provisions of the Act. If the argument of the learned counsel is to be accepted then no income can be taxed u/s. 68, 69, 69A, 69B, 69C 69D. 18. It is necessary to refer to Explanation 5A which reads as under: Explanation 5A Where, in the course of a search initiated under section 132 on or before the 1st day of June 2007, the assessee is found to be the owner of (i) Any money, bullion, jeweler or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii) Any other income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. But the other income which was found recorded by any entry in the document seized or otherwise was not covered. It is pertinent to note that sec. 69C provides that if any unrecorded expenditure is found and the assessee fails to explain the source of the said expenditure or explanation of the assessee is not satisfactory, then to the extent of the amount covered by such expenditure is treated as income. Ultimately what is taxed under Sec. 69 C of the Act is not the expenditure but it is basically the undisclosed income which has been applied for incurring the unrecorded expenditure. In our view, there is no merit in the argument of the Ld. Counsel that the assessee has only declared the amount expenditure. We therefore, hold that to the extent of the income offered by the assessee pertaining to the expenditure in the returns filed in response to notice u/s 153A, Explanation-5A is applicable and as there is a legal presumption against the assessee in respect of the said income detected during the course of search and seizure operation, the assessee case is squarely covered by Explanation- 5(ii) as the assessee himself has admitted the said undisclosed income. 19. Apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brevity. 21. The assessee having made a wrong claim in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. The learned Authorized Representative for the assessee in a written Note had furnished the break-up of income on which penalty was levied, which is as under:- Particulars Amount (Rs.) Unaccounted sale proceeds on sale of property 1,70,00,000 Withdrawal of exemption claimed u/s.54 of the Act 32,77,070 22. We uphold the order of CIT(A) in confirming the levy of penalty on the above said two accounts. Dismissing the grounds of appeal raised by the assessee, we uphold the order of CIT(A). 14. The Tribunal in the aforesaid decision had held that as per Explanation 5A to section 271(1)(c) of the Act, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealed his particulars of income or furnished inaccurate particulars of income, where the return of income for such previous year has been furnished before the date of search, but such income had not been declared thereunder or where the due date for filing the return of income for such previous year had expired, but the assessee had not filed the return. Even if the additional income was declared by him in the return of income furnished on or after the date of search, he would be deemed to have concealed the particulars of his income or furnished inaccurate particulars of income. 15. In the facts of the present case, the condition as in clause (ii) of Explanation 5A is applicable i.e. the income is based on the entry in books of account of the assessee and other documents and he declared that such entry in the books of account or other documents represents his income for any previous year, which had ended before the date of search. Further, though the assessee had furnished the return of income for such previous year before the date of search, but such income had not been declared thereunder, in such circumstances, the assessee even if assessee had declared the said amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee pursuant to search carried out at his premises, during the course of recording of statement under section 132(4) of the Act and by way of additional income in the return of income filed pursuant to issue of notice under section 153A of the Act. 16. Similarly, unsecured loans shown in the books of account of ₹ 4,15,000/- in assessment year 2007-08 is liable for levy of penalty under Explanation 5A to section 271(1)(c) of the Act, which was offered by the assessee as additional income during the course of search and also declared in the return of income filed pursuant to notice under section 153A of the Act. 17. Applying the ratio laid down by the Pune Bench of Tribunal in Sarita Kaur Manjeet Singh Chopra Vs. ITO (supra), we hold that the assessee is exigible to levy of penalty under Explanation 5A to section 271(1)(c) of the Act on the incomes offered in the return of income pursuant to issue of notice under section 153A of the Act. 18. Now, coming to second set of additions made to the return of income in relation to the additions made by the Assessing Officer while completing assessment proceedings under section 153A r.w.s. 143(3) of the Act. The various add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of assessee and in the absence of any evidence found during the course of search or otherwise as to the receipt of rental income from the said properties, we find no merit in the levy of penalty under section 271(1)(c) of the Act on such notional rent. Accordingly, we uphold the order of CIT(A) in this regard with special reference to para 11.3 at page 22 of the appellate order. The penalty was levied by the Assessing Officer on such addition in assessment years 2006-07 to 2009-10 and we uphold the order of CIT(A) in all the years in directing the Assessing Officer to delete penalty levied under section 271(1)(c) of the Act. 20. The second addition made in the hands of assessee is on account of notional rental income from hotel of ₹ 60,000/- in assessment years 2006-07 and 2007-08. The offer of the rental income during the course of assessment proceedings was to buy peace of mind and to avoid litigation. However, there is no finding of any of the authorities that the assessee had indeed received the aforesaid rental income from the said hotel. In view of the explanation of the assessee, which was not accepted by the Assessing Officer and addition was made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the provisions of section 271(1)(c) of the Act with regard to concealment of income are attracted and the assessee is liable to levy of penalty under substantive provisions of section 271(1)(c) of the Act. We reverse the order of CIT(A) in this regard and uphold the levy of penalty under section 271(1)(c) of the Act on receipt of on-money of ₹ 12,000/- in assessment year 2006-07 and ₹ 10,000/- in 2007-08. 23. The next addition made in the hands of assessee is on account of disallowance of labour payment of ₹ 18,61,000/- in assessment year 2009-10 i.e. for non-payment of taxes at source. The addition was made in the hands of assessee by the Assessing Officer for non-deduction of tax at source and in view of the provisions of section 40(a)(ia) of the Act. The disallowance was made in the hands of assessee on account of deeming provisions of the Act. However, it is not the case of Revenue authorities that the aforesaid amount on account of labour was not paid by the assessee. Merely because the addition has been made in the hands of assessee, does not justify the levy of penalty under section 271(1)(c) of the Act. We hold that there is no merit in the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid additions is upheld. Further, we also uphold the levy of penalty under section 271(1)(c) of the Act on the following additions made during the course of assessment proceedings:- i) Undisclosed profit on sale of flat of ₹ 22,250/- in assessment year 2008-09 and ₹ 42,250/- in assessment year 2009-10; and ii) On-money received on sale of plot at Vadala of ₹ 12,000/- in assessment year 2006-07 and ₹ 10,000/- in assessment year 2007-08. 27. However, we uphold the order of CIT(A) in deleting the penalty levied on the following additions:- i) Undisclosed rent from shop and house of ₹ 12,000/- each in assessment years 2006-07 to 2009-10; ii) Disallowance of labour payment u/s.40(a)(ia) of ₹ 18,61,000/- in assessment year 2009-10; iii) Rent income from Hotel of ₹ 60,000/- each in assessment years 2006- 07 and 2007-08; and iv) Offered to tax as capital gain in return, whereas taxed by A.O. as business income of ₹ 24,48,300/- in assessment year 2007-08 The grounds of appeal raised by the Revenue are thus, partly allowed. 28. In the result, all the appeals of the Revenue are partly allowed. Order pronounced on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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