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TMI Blog2016 (3) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s 153C of the Act. Since identical issue is involved in all the appeals, they are taken up together and disposed off by this common order for the sake of convenience. 3. The brief facts of this issue is that a search and seizure operation was conducted on 28.3.2007 u/s 132 of the Act in the business premises of Hotel & Resort Venture Private Limited, Bindal Lefin Private Limited, Forex Finance Limited and Salkia Estate Development Private Limited. The Learned AO observed that during the course of search, various documents evidencing transaction of Pratap Properties Ltd (assessee herein) were found and seized. The Learned AO of section 153A assessee observed that certain documents found and seized belonged to assessee and accordingly notice u/s 153C of the Act was issued to the assessee on 11.8.2008. In response to the said notice, the assessee filed return u/s 153C of the Act on 19.12.2008 for the Asst Years 2005-06 & 2006-07 and return u/s 139(1) of the Act on 19.12.2008 for the Asst Year 2007-08 declaring taxable income of Rs. 24,54,178/- ; Rs. 97,85,800/- and Rs. 50,50,982/- for the Asst Years 2005-06 ; 2006-07 & 2007-08 respectively. 3.1. In the course of search, invento ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is an interest expenditure claimed by the assessee which could not be available with the assessee as source in his cash flow statement and accordingly brought the following sums to tax separately in the assessments completed u/s 153C of the Act and section 143(3) of the Act for the Asst Years 2005-06 and 2007-08 respectively :- Asst Year 2005-06 - towards undisclosed interest - Rs. 9,06,250/- Asst Year 2007-08 - towards undisclosed interest - Rs. 36,51,503/- 4. The Learned CITA appreciated the contentions of the assessee and the various case laws relied upon by the assessee deleted the penalty u/s 271(1)(c ) of the Act for all the three years. Aggrieved, the revenue is in appeal before us for all the three years. The grounds raised for Asst Year 2005-06 are reproduced hereinbelow for the sake of brevity and there is no change in the grounds for other asst years except change in figure of penalty levied :- 1. That in the facts and circumstances of the case and in law, the Ld . CIT(A) has erred in cancelling the penalty of Rs. 12,29,6651 levied u/s 271 (1 )(c) of the Act, holding that all the conditions for immunity of the penalty laid down in clause (2) of Explanation 5 of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had not questioned the validity of search assessment and consequential penalty levied thereon in the grounds raised before the Learned CIT(A). Hence the Learned CIT(A) could not get an occasion to adjudicate the said issue. We hold that the recourse to Rule 27 of ITAT Rules could be resorted by the respondent assessee only in respect of grounds decided against him by the Learned CIT(A). Here is a case where no ground was raised before Learned CIT(A). We hold that two essential elements of Rule 27 come to the fore on its bare reading. First is the condition precedent for invoking this Rule and the second is scope of interference. In so far as the first element is concerned, we find that this Rule has been enshrined with a view to dispense justice to an assessee who is otherwise enttield to assail the correctness of the impugned order by filing appeal or cross objection, whether or not actually filed. This is borne out from the expression 'though he may not have appealed' used in the context of an assessee. This amply indicates the existence of a pre-right of the respondent to appeal, which may have remained un-availed. This Rule cannot help the respondent in a situation whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity is available for the assessee in terms of Clause 2 of Explanation 5 to Section 271(1)(c ) of the Act, it is available only for the year of search and for the previous year for which the due date of filing the return had not expired and hence the immunity, in any case, is not available for the earlier years other than these two years. In other words, the immunity cannot be made available to the assessee for the Asst Years 2005-06 and 2006-07. 7. In response to this, the Learned AR argued that the assessee is entitled for immunity provided in Clause 2 of Explanation 5 to Section 271(1)(c ) of the Act for all the three assessment years ( i.e AYs 2005-06 , 2006-07 & 2007-08) and also argued that though the assessee had duly stated the manner in which undisclosed income has been derived in the sworn statement recorded from Shri Bimal Kumar Jhunjhunwala u/s 132(4) of the Act on 29.3.2007 during continuance of search proceedings that commenced on 28.3.2007 vide Reply to Question No. 10, 14 , 16 & 19. The Learned AR further argued that the manner od deriving the undisclosed income need not be demonstrated by the assessee. He argued further that the moment disclosure u/s 132(4) is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act since according to revenue, the assessee has not demonstrated the manner of deriving the undisclosed income. In this regard, it would be pertinent to get into the various questions and replies given by Shri Bimal Kumar Jhunjhunwala, key person of the assessee group, in his sworn statement recorded on 29.3.2007. The relevant portions are extracted herein below for the sake of convenience:- Q.No.10. Kindly go through the bunch of loose sheets marked HRV-1 and explain the contents therein ? Ans. This bunch contains written pages from 1 to 48 . Of these the following are explained below - Page 1 - ...... Pages 2 -8 - .......... Pages 9 to 10 - ........... Pages 11 to 48 relate to M/s Pratap Properties Ltd (PPL). This is company which has investment in various properties in Kolkata and Howrah. The company originally belonged to the Chamarias but is in the processof being taken over by us. The cash flow statements from Pages 30 -42 contain transactions which are both accounted as well as unaccounted. The quantum of unaccounted payments will be submitted by verifying the same with the regular books in due course. Q. No. 14. Please go through the bunch of loose sheets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, suffice it state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in its entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by the Allahabad High Court in the case of CIT Radha Kishan Goel (2005) 248 ITR 454. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by exception No.2 while making statement under section 132(4) of the Act. The view taken by the Tribunal as well as the Allahabad High Court to the effect that even if the statement does not specify the maner in which the income is derived, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of six assessment years - Whether penalty under section 271(1)(c ) cannot be imposed by invoking Explanation 5 in assessment year 2004-05 in respect of cash found in previous year relevant to assessment year 2007-08 , merely on presumption that assessee might have been in possession of cash throughout period covered by search assessments - Held, yes [ in favour of assessee] 8.1.1. We find that this decision of Delhi Tribunal has been followed by this Tribunal in the case of DCWT vs Vivek Kr. Kathotia in WTA Nos. 02 to 08 / Kol / 2013 dated 15.5.2015, wherein it was held that :- That the concept of a voluntary return of income may be important in penalty proceedings initiated in the normal assessment proceedings u/s 143(3) or 147 of the Act but not u/s 153A of the Act. When accepted by the AO then there is no concealment of income and consequently penalty u/s 271(1)(c ) of the Act cannot be imposed. The concealment of income is to be determined with regard to the return of income in response to notice u/s 153A of the Act. Therefore, in the present circumstances and facts of the case once the returned wealth is accepted by the AO u/s 153A of the Act then there cannot be a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income would not have arisen. When the return had been filed but the income since discovered was not disclosed, the question of concealment naturally arises. The legislature, however, made a conscious departure by carving out an exception provided the conditions laid down in Clause (i) or Clause (ii) thereof have been complied with. We are, in this case, concerned with Clause (ii). One of the conditions is that the assessee makes a statement under section 132(4) that the assets unearthed have been acquired out of his income which has not been dislosed so far in his returns of income already filed. The difficulty arises by the use of the expression "to be furnished before the expiry of time specified in sub-section (1) of section 139". A confusion is likely to arise as to whether the departure has been sought to be made by the legislature only for those cases where the statement as regards undisclosed income was made pertaining to a previous year for which time to file return under section 139 had not expired. But that was not the intention because the expression "unless" appears after Clauses (a) and (b) of Explanation which provides for imposition of penalty. Therefore, "unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case the learned Tribunal has committed error in applying the provisions of the Explanation 5 of Section 271(1)(c ) of the Income Tax Act, 1961 and thereby committed error in law in modifying the order of penalty of Rs. 4,17,926/- in relation to the Assessment Years 2003-04 and 2005-06" Since we find that the issue stands covered by the judgements delivered in ITA 39 of 2010 (Commissioner of Income Tax , Central -I, Kolkata vs Amardeep Singh Dhanjal) and in ITA 330 of 2009 (Commissioner of Income Tax, Central -III, Kolkata vs Brijendra Gupta), in favour of the assessee, the question is answered in the negative, against the revenue and in favour of the assessee. The appeal is dismissed. C) Gujarat High Court in the case of Kirit Dahyabhai Patel vs ACIT in Tax Appeal No. 1181 of 2010 with Tax Appeal No. 1182 to 1185 of 2010 dated 3.12.2014, wherein the question raised before their Lordships and their decision rendered thereon is as below:- "Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in restoring the penalty imposed under section 271(1)(c ) of the Act holding that benefit under Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Explanation 5. E. Madras High Court in the case of CIT vs S.D.Chandru reported in (2004) 266 ITR 175 (Mad) , it was held that :- Penalty u/s 271(1)( c) was not leviable by operation of Explanation 5 in a case where a statement u/s 132(4) was filed in course of a search and seizure and therefore, admitted a larger income for the earlier years on which tax with interest had been paid. F. Rajasthan High Court in the case of ACIT vs Gebilal Kanhaialal reported in (2004) 270 ITR 523 (Raj) , it was held that:- Penalty u/s 271(1)(c ) was not leviable by operation of Explanation 5 in a case where a statement u/s 132(4) was filed in course of a search and seizure and thereafter the assessee has disclosed a particular concealed income and surrendered it for tax and tax had been together with interest. 8.2. The next aspect is as to whether the immunity provided in clause 2 of Explanation 5 to section 271(1)(c ) of the Act is available to all the assessment years. We hold that the immunity provided in Clause 2 of Explanation 5 to section 271(1)(c ) of the Act is available to all the assessment years prior to the year of search if the conditions stipulated thereon are satisfied. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit in this appeal for admission. Accordingly, the same is dismissed. 8.3. The next aspect to be considered is as to whether proper satisfaction was recorded by the Learned AO either in the show cause notice for initiating penalty proceedings or in the assessment order. We hold that it is the bounden duty of the Learned AO that he has to record the specific charge on which the assessee has committed the crime and which has to be answered by him i.e whether assessee has concealed the particulars of income or furnished inaccurate particulars of his income. This should be clearly spelt out in the assessment order and in the show cause notice and should be clearly discernible thereon. In this regard, we place reliance on the recent decision of the Hon'ble Apex Court in the case of CIT , Panchkula vs Jai Laxmi Rice Mills Ambala City reported in (2015) 64 taxmann.com 75 (SC) vide order dated 20.11.2015, wherein it was held that :- 5. As pointed out above, in so far as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under section 271E of the act, though in that order the Assessing Officer wanted penalty proceeding to be initiated u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed during the course of the proceedings. At the stage of initiation of penalty proceeding, the order passed by the AO need not reflect satisfaction vis-avis each and every item of addition or disallowance, if overall sense gathered from the order is that a further prognosis is called for. The decision of the Hon'ble Supreme Court in the case of MAK Data (P) Ltd. (supra) has to be understood in the context of the facts of the said case. The relevant portion of the judgment in the aforesaid case, reads thus: "9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer 8 deeds duly signed, have been impounded in the course of survey proceedings under Section 133A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment as a whole and are satisfied that satisfaction for initiation of penalty proceedings is not discernible from the order of assessment. We therefore concur with the argument of the learned counsel for the assessee that initiation of penalty proceedings was not proper in the present case and on that ground the imposition of penalty u/s.271(1)( c) of the Act is unsustainable. 8.2 The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act. The final conclusion of the Hon'ble Court was as follows:- "63. In the light of what is stated above, what emerges is as under: a) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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