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TMI Blog2016 (6) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-. Since the assessee in the instant case has declared the amount of 17,00,000/- and 10,00,000/- respectively on the basis of various discrepancies found in the seized documents during the course of search and the assessee has declared the same in the statement recorded u/s.132(4), therefore we hold that the assessee is liable to penalty u/s.271(1)(c) of the Act for concealing the particulars of his income to the extent of income arising from land business with Mr. Dilip Phadol – 17 lakhs and profit of unrecorded transaction in Kirana – 10 lakhs. The argument of Ld. Counsel for the assessee that penalty cannot be levied on estimated addition of income on Kirana is not applicable under the facts and circumstances of the case. The AO is directed to recompute the penalty accordingly - Decided partly in favour of revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... liable for penalty for concealing the income of ₹ 41,00,470/-. Rejecting the arguments advanced by the assessee the AO levied penalty of ₹ 12,30,220/- being the minimum penalty leviable at 100% of the tax sought to be evaded. 7. In appeal the Ld.CIT(A) deleted the penalty by observing as under: "7. I have carefully considered the facts of the case, the assessment order, the impugned penalty order and the submissions of the appellant. The additional income of ₹ 41,00,000/- consists of the following amounts:- Estimated Gross Profit - ₹ 10,00,000/- 1) Brokerage income and commission Received from Mr.Vardhaman Jain by Cheque dt. 26-02-208 - ₹ 14,00,000/- From Mr. Dilip Phadol 15,00,000/- Received by cheque dt.26-02-2008 And ₹ 2,00,000/- by cash - ₹ 17,00,000/- Rs.41,00,000/- The A.O. has imposed the impugned penalty by invoking Explanation-5A to section 271(1)(c) of the Act, relevant portion of which reads as under: "Explanation 5A- Where in the course of search initiated u/s.132 on or after Ist day of June, 2007, the assessee is found to be the owner of (i) any money, bullion, jewellery or other valuable article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en unearthed. It is, therefore, not a voluntary disclosure and the assessee has concealed the particulars of such income within the meaning of Explanation 5A to section 271(1)(c) of the LT. Act". Therefore, penalty proceeding were initiated. However, on going through the facts of the case reproduced above, it is seen that there is no money, bullion, jewellery or other valuable article, therefore, this Explanation 5A is not applicable to the case under appeal. This proposition of law is supported by the ratio laid down in the following decisions: 1. CIT Vs. Mohanlal Sharma 281 ITR 384 (Alla). 2. T. Kodeeswaran L/H of late A. Thangam Vs. ITO 123 TTJ 230. 7.2 In fact Explanation-I is applicable to the case under appeal, the relevant portion of which is reproduced below: "Explanation-I - Where in respect of any facts material to the computation of the total income of any person under this Act - (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner Appeals or Commissioner to be false or; (B) Such person offers an explanation which he is not able to substantiate and fails to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed penalty order u/s, 271(1)(c) dated 22/06/2012 imposing penalty of ₹ 12,30,220/- is, therefore, cancelled. 8. In the result, the appeal is allowed." 8. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 9. The Ld. Departmental Representative strongly opposed the order of the CIT(A). He submitted that the Ld CIT(A) has deleted the penalty by holding that neither Explanation 1 nor Explanation 5A to section 271 (1)(c) is applicable to the assessee's case. However, the same is not correct. He has accepted the contention of the assessee that the amount of commission/brokerage of ₹ 31 lakhs was not offered in the regular return of income filed u/s.139 as these amounts were in the form of advances for which the property transaction was not finalized in the financial year relevant to A.Y. 2008-09. He submitted that the above plea was never raised before the AO either during the course of assessment proceedings or during the course of penalty proceedings. Even the CIT(A) has not given any opportunity to the AO on the additional ground raised before him during the appeal proceedings. The Ld. Departmental Representative submitted that during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental Representative in the case of Mrs. Sarita Kaur Manjeet Singh Chopra is concerned he submitted that the said decision is not applicable to the facts of the present case. He further submitted that the amount of ₹ 10 lakhs has been declared on estimate basis on account of unrecorded transactions in Kirana. He submitted that various courts have held that penalty cannot be levied on estimated additions. He accordingly submitted that levy of penalty by the AO was unjustified under the facts and circumstances of the case and the CIT(A) was fully justified in deleting the penalty. He also relied on the following decisions : "1. ITO Vs. Prakash Champalal Kankaria and others - ITA Nos. 1465 to 1467/PN/2011, ITA Nos. 1468 to 1470/PN/2011 and ITA Nos. 1471 to 1473/PN/2011 order dated 22-03-2013. 2. Chandan K. Shewani Vs. DCIT - ITA No.235 & 236/PN/2010 order dated 29-08-2012. 3. Dilip Yeshwant Oak Vs. ACIT reported in (2011) 10 taxmann.com 264 (Pune). 4. Rajan H. Shinde Vs. DCIT reported in (2006) 104 TTJ 445 TM (Pune). 5. Harigopal Singh Vs. CIT reported in (2002( 125 Taxman 242 ( Punj. & Har.). 6. CIT Vs. Bhimji Bhanjee & Co. reported in (1985) 21 Taxman 290 (Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the confirmation of account of Mr. Vardhaman Jain, copy of which is placed at paper book page 97, we find the amounts of ₹ 14 lakhs has been paid by Mr. Vardhaman Jain on 30-03-2010 and 31-03-2010 by cheques on which TDS of ₹ 1,40,000/- has also been deducted. The TDS Certificate copy is placed at page 98 of the paper book. Therefore, whether the amount of ₹ 14 lakhs relate to A.Y. 2008- 09 or A.Y. 2010-11 has not been examined for the purpose of levy of penalty. The TDS certificate filed at page 98 of the paper book also shows that the amount of ₹ 14 lakhs relates to the period from 01-04-2009 to 31-03-2010 relating to A.Y. 2010-11. We therefore find force in the submission of the Ld. Counsel for the assessee that levy of penalty on this ₹ 14 lakhs is unjustified since the assessee could have availed immunity as per the provisions of section 271AAA had he declared the same in A.Y. 2010-11. It is the settled position of law that penalty proceedings and assessment proceedings are separate and distinct. The assessee can advance new arguments during penalty proceedings. We find although the above documents were filed before the lower authorities as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty stipulated in the aforesaid provision. The Explanation/s under section 271(1)(c) of the Act set out the circumstances, which justifies the levy of penalty. For searches initiated under section 132 of the Act before first day of June, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income, then notwithstanding the fact that the said income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of his income. 17. The deeming provisions of Explanation 5A under section 271(1)(c) of the Act are 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, valu able 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account the expression 'income' does not lose its natural connotation. Indeed, it is repeatedly said that it is difficult to define the expression 'income' in precise terms. Anything which can properly be described 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found by way of entries in the seized documents. While explaining the scope of Explanation 5A in the case of Chandan K. Shewani (supra) the Tribunal has held that to patch out the lacuna due to the judicial interpretation of Expl. 5 of Sec. 271(1)(c) which was on the statute book upto 31-5-2007, Explanation 5A has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153A of the Act. The learned Authorized Representative for the assessee on the other hand has placed reliance on the ratio laid down in DCIT Vs. Purti Sakhar Karkhana (supra), which is a decision of Nagpur Bench of Tribunal and Hyderabad Bench of Tribunal in Shri PV Ramana Reddy Vs. ITO (supra). In view 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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