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TMI Blog2010 (2) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to immunity from penalty CIT(A) was not justified in deleting the penalty levied by the AO on additional income declared in returns filed in response to notice u/s 153A without examining that assessees had fulfilled the requirement of immunity prescribed in Expln. 5. No such argument has been advanced before us either that assessees were fulfilling these requirements of immunity to grant benefit under Expln. 5. We thus while setting aside the first appellate order to this extent, restore the penalty levied by the AO on such additional income declared in returns filed in response to notice under s. 153A. The grounds are accordingly allowed. Consequently the appeals are allowed. In the result, appeals are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ue even if the cases involving legal issues of recurring nature are withdrawn, since the newly inserted provision takes care of the adverse eventuality which could have been put against the Revenue. The s. 268A of the Act reads as under : '268A. Filing of appeal or application for reference by IT authorities'(1) The Board may, from time to time, issue orders, instructions or directions to other IT authorities, fixing such monetary limits as it may deem fit'." 6. After insertion of s. 268A of the Act, the CBDT instruction passed under s. 119 of the Act has got statutory force and accordingly the Department is not supposed to prefer an appeal before the Tribunal against the first appellate order having tax effect below ₹ 2 lakhs and in case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against [cl. (4) of the said instruction]. Since in the present appeal in question undisputedly the quantum of penalty deleted is below ₹ 2 lakhs, the appeal is not maintainable as the same has been preferred in violation of the said CBDT Instruction No. 5 of 2008, having statutory force under s. 268A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and that the fixed deposits found during the course of search were in the names of several persons who are employees of Janta Sahakari Bank Ltd., Yeola and their relatives and friends. These persons had handed over the fixed deposit receipts to the assessees' for obtaining cash credit facility from the bank on the basis of the security of the said fixed deposits. However, the assessees have admitted the said fixed deposits and interest thereon as their own income to avoid undue harassment to the said persons. The further contention of the assessees remained that penalty is not leviable on amount offered to tax in return filed in response to notice under s. 153A as laid down by the Pune Bench of the Tribunal in the case of Smt. Sarla M. Ahuja & Ors. in ITA No. 1301/Pn/2007 dt. 26th Oct., 2007, (asst. yrs. 2000-01 to 2003-04). The learned CIT(A) though did not agree with the explanation of the assessee discussed above but in view of the cited decision in the case of Smt. Sarla M. Ahuja (supra) he has deleted the penalty on the basis that penalty is not leviable on the amount offered to tax in a return filed in response to notice under s. 153A of the Act. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Asstt. CIT vs. Kirit Dahyabhai Patel (supra) after detailed discussion on the referred decisions as well as referring the circular and notification issued by the CBDT the learned Third Member has come to the conclusion that additional income declared in the returns filed in response to notice under s. 153A does not fall under the category of return mentioned in Expln. 5 to s. 271(1)(c), hence assessees are not entitled to immunity from penalty. The learned Departmental Representative also placed reliance on the following decisions : (i) Sheraton Apparels vs. Asstt. CIT (2002) 175 CTR (Bom) 651 : (2002) 256 ITR 20 (Bom); (ii) Asstt. CIT vs Rupesh Bholidas Patel (2009) 16 DTR (Ahd)(Trib) 369 : (2009) 309 ITR 217(Ahd)(AT). The learned Departmental Representative also tried to define "Books of account", "entries in the books" with the assistance of the decisions in the following cases : (i) Sheraton Apparels vs. Asstt. CIT (supra); (ii) Hakam Singh & Ors. vs. CIT (1980) 124 ITR 228 (All); (iii) CIT vs. Handloom Emporium (2005) 199 CTR (All) 645: (2005) 149 Taxman 224(All). The learned Departmental Representative pointed out that in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of Narayandas Mulji Thakkar and Karsandas Mulji Thakkar (supra), the proper way out is to refer the matter before the Hon'ble President, Tribunal to form a Special Bench to decide the issue under s. 255 of the Act. 11. Considering the above submissions, we find substance in the contention of the learned Departmental Representative that the decision of Third Member Bench in the case of Asstt. CIT vs. Kirit Dahyabhai Patel (supra) dt. 25th June, 2009 on the issue was not brought to the notice of the Pune Bench during the course of hearing of appeals in the cases of Narayandas Mulji Thakar and Karsandas Mulji Thakkar (supra) especially when the same was in existence at that time. The Third Member Bench decision in the case of Kirit Dahyabhai Patel (supra) had an occasion to discuss the issue in detail in view of several decisions cited before it including those which have been relied upon before us by the parties. It is also admitted fact that the Third Member Bench decision on the issue in the case of Kirit Dahyabhai Patel (supra) has been passed after the decision of Pune Bench of the Tribunal in the case of Smt. Sarla M. Ahuja & Ors. (supra), hence being a later decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21] explaining the amendment showing benefit of immunity conferred by Expln. 5(2), as amended by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 10th Sept., 1986. Hence the same cannot be ignored. Certainly there would have been substance in the contention of the learned Authorised Representative for sending a proposal by this Bench for constitution of a Special Bench to decide the issue if the present Bench would not have agreed with the latest elaborate decision of Third Member Bench of the Tribunal on the issue or the Co-ordinate Bench would have passed a detailed order after discussing that the learned CIT(A) had properly applied the decision of the Bench in the case of Smt. Sarla M. Ahuja (supra). But it is not the case of the assessee. The present situation has arisen only because the parties appearing in the cases of Narayandas Mulji Thakkar and Karsandas Mulji Thakkar (supra) of the group failed to bring to the notice of the Co-ordinate Bench about the existence of Third Member Bench order in the case of Asstt. CIT vs. Kirit Dahyabhai Patel (supra) which cannot be treated at par with a situation for referring the matter to a Special Bench. In fact n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of search proceedings the assessees group had declared income of ₹ 75 lakhs in statements recorded under s. 132(4) of the Act on account of investment in fixed deposits in fictitious names, unrecorded building construction and renovation expenses, investment in furnitures etc; the income was offered to tax only to buy peace of mind and to avoid protracted litigations subject to the condition that no concealment penalty under s. 271(1)(c) of the Act shall be levied; and that the income was not offered to tax in the original return of income due to ignorance of law as the assessees are uneducated. It was further contended that the AO has accepted the income returned under s. 153A of the Act and has not made any additions while assessing the income under s. 153A r/w s. 143(3) of the Act. It was submitted further that the assessees have not retracted the income offered to tax in the statements recorded under s. 132(4) of the Act. The learned CIT(A) has, however, deleted the penalty on the basis that as per the provisions contained in s. 153A, all the assessment proceedings pending on the date of search stood abated and in that view of the matter the income declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed different situations regarding levy of penalty. In one situation the rental income derived by the assessee and revealed during the course of search was not declared in the original return of income furnished before the date of search. However, the said income was declared by the assessee at the time of search and the income was offered for taxation in the return filed under s. 153A of the Act. The assessee had made a statement under s. 132(4) declaring the aforesaid income and ultimately the assessee offered the same for taxation and the tax was already paid. The Tribunal held that the income already offered by the assessee in the return filed under s. 153A on the basis of assessee's declaration under s. 132(4) which was unearthed during the course of search on the basis of transactions recorded in the documents cannot be held to be the concealed income for the purpose of s. 271(1)(c) of the Act. In second situation the assessee had filed original return of income declaring income from short-term capital gain and income from other sources. Subsequently search was conducted against the assessee wherein the assessee declared certain income which was duly disclosed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Tribunal in para No. 15 of the said order, followed by the learned CIT(A) in the present case, has held that no penalty under s. 271(1)(c) is to be levied in respect of income which has already been declared by the assessee in the return filed in response to notice under s. 153A of the Act. The Tribunal has held so under this background as discussed by it in previous paras of the order (para No. 13) as "......the benefit given in Expln. 5 cannot be denied to the present assessee, in as much as, the assessee has declared the income found recorded in certain documents at the time of search and has just offered the same for taxation in the return of income filed in response to the notice under s. 153A of the Act"; and ".......AO initiated penalty proceedings only for the difference of income assessed under s. 153A(b) of the Act and the income declared in the return filed in response to notice under s. 153A of the Act, the decisions relied upon by the CIT(A) relating to difference of income shown in the original return of income and the revised return of income are not applicable to the present case". Thus the issue as to whether penalty is leviable on the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in respect of income which has already been declared by the assessee in the return filed in response to notice under s. 153A of the Act. The learned CIT(A) has failed to appreciate that this finding was given by the Tribunal under the background of its observation in previous paras that the assessee had declared the income found recorded in certain documents at the time of search and further offered the same for taxation in the return of income filed in response to the notice under s. 153A of the Act. To justify his action the learned CIT(A) has again extracted few lines from para No. 13 of the order of the Tribunal in the case of Smt. Sarla M. Ahuja (supra) that by virtue of provisions contained in s. 153A all the assessment proceedings pending on the date of search shall be abated and in that view of the matter the income declared by the assessee in the return filed in response to notice under s. 153A cannot be the subject-matter of imposing penalty under s. 271(1)(c) while completing the assessment under s. 153A(b) of the Act. It is worth repeating over here that the AO in that case had initiated penalty proceedings only with regard to the difference in the assessed income un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-s. (1) of s. 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest if any, in respect of such income." 15. As per the above Explanation, notwithstanding the fact that such income is declared by the assessee in any return of income furnished on or after the date of the search, he, for the purpose of s. 271(1)(c), is deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income except where such income or the transaction resulting in such income is recorded on or before the date of the search in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the CIT before the date of search. The learned CIT(A) while deleting the penalty has not mentioned about fulfilment of this condition of Expln. 5 by the assessee though he has rightly rejected the explanation shown b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1st Oct., 1984, as assessee, who was found to be the owner of any money, bullion, jewellery etc., recovered during the course of search, was entitled to explain that such assets were acquired by him by utilising his income relating to any previous year, whether it ended before the date of the search or is to end on or after the date of the search. By doing so the assessee could escape the liability to penalty under s. 271(1)(c) of the Act. In order to plug the loophole, the aforesaid Expln. 5 was inserted w.e.f. 1st Oct., 1984 and is applicable to a situation where in the course of a search under s. 132 of the Act the assessee is found to be the owner of any money, bullion jewellery or other valuable article or thing and the assessee claims that such assets have been acquired by him utilising, wholly or in part, his income for any previous year which has already ended before the date of the search or which is to end on or after the date of the search. In view of the Explanation, notwithstanding the fact 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 purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere subjected to search under s. 132 after filing their original returns of income. Certain incriminating documents were found during the course of said search and thereafter notices under s. 153A were issued to the assessees. In response to the said notice, assessees filed their returns of income in terms of provisions of s. 153A(1)(a) declaring additional income over and above income which was returned in their original returns. The returns filed in pursuance of notice under s. 153A were accepted by the AO and the assessment orders were passed. Simultaneously, the penalty proceedings under s. 271(1)(c) were also initiated. The assessees submitted that since they had made a confession under s. 132(4) and disclosed the manner in which income was earned and taxes were paid, no penalty was leviable in view of the provisions of Expln. 5 to s. 271(1)(c). However, the AO rejected these contentions of the assessees and levied penalty @ 100 per cent of the tax sought to be evaded on the ground that neither transactions relating to concealed income were recorded in the books of account nor disclosure was voluntary. This approach of the AO has ultimately been upheld by the Third Member Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting the penalty in question levied by the AO without appreciating the totality of facts and decision in the case of Smt. Sarla M. Ahuja (supra) properly. The learned CIT(A) while deleting the penalty has failed to appreciate that immunity under Expln. 5 to s. 271(1)(c) is not available to the present assessees. Further with regard to explanation about the bona fide reason behind the non-disclosure of the said additional income in original return, the learned CIT(A) has rightly not agreed to the assessee in absence of evidence. We thus while setting aside first appellate order on the issue, restore the penalty levied by the AO. Relevant grounds of the Revenue's appeals are accordingly allowed. Consequently ITA No. 1008/Pn/2009 having penalty below ₹ 2,00,000 is dismissed and remaining appeals are allowed. ITA Nos. 911 to 916, 918, 919, 921, 922, 924 to 930 & 939 to 942/Pn/2009 The Revenue has impugned first appellate order mainly on the ground that the learned CIT(A) has erred in deleting/reducing the penalty levied by the AO under s. 271(1)(c) of the Act in respect of income declared by the assessee in response to notice under s. 153A of the Act. 17. It is a gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus not applicable in the present case. Having gone through the said clause No. 5 of the CBDT Instruction No. 5 of 2008 as well as the decision of Hon'ble High Court in the case of Madhukar K. Imandar, HUF (supra), we find substance in the submission of learned Departmental Representative. Undisputedly a composite order has been passed by the learned CIT(A) for the assessment years in question though in some assessment years tax effect is below ₹ 2,00,000. Thus preference of appeals even in those years where tax effect is below ₹ 2,00,000 but are the subject-matter of the same composite order of the appellate authority, cannot be said that these appeals before the Tribunal are in violation of the said Instruction No. 5 of 2008 of the CBDT. Before the Hon'ble High Court there was no such issue of composite order. The situation which had arisen before the Hon'ble High Court in Madhukar K. Imandar's case (supra) was answered by the first part of cl. No. 5 of the instruction. For ready reference said cl. No. 5 is reproduced hereunder : "5. The AO shall calculate the tax effect separately for every assessment year in respect of the disputed issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.) Income as per return filed under s. 153A (Rs.) Income assessed under s. 153A/ 143(3) (Rs.) Amount on which penalty levied (Rs.) Amount offered to tax in return under s. 153A on which penalty is levied (Rs.) 1 2 3 4 5 6 7 2000-01 25,880 1,44,550 2,05,190 2,05,190 60,646 60,646 2001-02 24,384 1,69,610 2,21,410 2,21,410 51,948 51,948 2002-03 23,445 1,74,930 2,27,730 2,34,570 53,009 52,400 2003-04 23,756 1,86,850 2,39,250 2,43,980 57,423 52,400 2004-05 19,489 2,25,470 2,77,870 2,78,480 52,484 52,400 2005-06 2,49,551 2,97,200 9,94,300 10,05,434 7,08,234 6,97,125 Shri Yogesh S. Thakar. 2000-01 36,970 1,41,020 2,26,600 2,60,100 1,13,000 83,000 2001-02 48,900 1,33,610 2,46,610 2,61,970 1,23,000 1,13,000 2003-04 58,040 1,49,530 2,84,530 3,28,177 1,74,970 1,35,000 2004-05 98,110 2,12,300 4,90,780 5,06,029 2,74,750 2,61,000 2005-06 2,47,330 2,12,050 7,24,440 9,03,569 6,71,600 4,91,000 Shri Kishorekumar S. Thakkar. 2000-01 11,685 1,30,000 1,48,990 1,52,524 22,674 18,990 2001-02 45,225 1,20,000 2,30,490 2,34,020 90,000 90,000 2002-03 83,390 1,25,000 3,71,490 4,40,530 2,63,375 2,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 153A(b) of the Act and the income declared in the return filed in response to notice under s. 153A of the Act. On an identical issue raised hereinabove in Kalantri Group cases, we following the decision of Third Member Bench in the case of Kirit Dahyabhai Patel (supra) have come to the conclusion that since additional income declared in returns filed in response to notice under s. 153A does not fall under category of return mentioned in Expln. 5 to s. 271(1)(c), assessees were not entitled to immunity from penalty. Under these circumstances, we are of the view that the learned CIT(A) was not justified in deleting the penalty levied by the AO on additional income declared in returns filed in response to notice under s. 153A of the Act without examining that assessees had fulfilled the requirement of immunity prescribed in Expln. 5. No such argument has been advanced before us either that assessees were fulfilling these requirements of immunity to grant benefit under Expln. 5. We thus while setting aside the first appellate order to this extent, restore the penalty levied by the AO on such additional income declared in returns filed in response to notice under s. 153A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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