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TMI Blog2016 (10) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... ime and again vide its Circulars No. 286 of 2003 and 286 of 2013 prohibited the assessing authorities to make assessment solely on the basis of confessional statements of the assessee and to concentrate on documentary evidence. The very purpose behind it is that in case of retraction from its statements by the assessee, the case of the Revenue should not fail. We thus while setting aside the orders of the authorities below direct the Assessing Officer to delete the penalty questioned in the above ground of the appeals for the assessment years under consideration. The ground is accordingly allowed in favour of assessee - ITA Nos. 7034 to 7038/Del/2014 - - - Dated:- 19-9-2016 - SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Assessee by : Sh. P.C. Yadav, Adv. Department by : Sh. P. DAM Kanunjna, Sr. DR ORDER Per I. C. Sudhir, J. M. 1. In all these appeals preferred by the assessee, the action of the Learned CIT(Appeals) in sustaining the penalty levied under sec. 271(1)(c) of the Income-tax Act, 1961 at ₹ 8,53,281 in assessment year 2006-07, ₹ 73,54,710 in assessment year 2007-08, ₹ 6,81,615 in assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to buy peace of mind as well as a gesture of cooperation towards the department and subject to the condition that no penal action under any provisions of the IT Act would be taken against the assessee. Out of the surrender of ₹ 10 Crore an amount of ₹ 8, 45, 00,000/- was surrendered in the hands of assessee and balance of the amount was surrendered in the hands of one of the director namely K.C.Mittal. 3. It is submitted that thereafter the AO after receiving the material from the investigating wing issued the notice of 153A on 22.02.2013. The assessee, in response to the notices of 153A, has filed its ROI along with year wise bifurcation of ₹ 10 Crore as mentioned on Page 3 of AO‟s order. The chart is reproduced hereunder for ready reference. Asst. Year Returned Income Amount Surrender Total Returned Income Pg of PB 2006-07 3,83,07,350/- 25,35,000/- 4,08,42,350/- 51 OF PB 2007-08 6,24,10,990/- 2,18,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Action of the AO has been affirmed by the CIT (A) and now assessee is in appeal. Submissions of the assessee in respect of ground number 1 4:- 9. Penalty is void-ab-initio:-It is submitted that in the instant case a perusal of the notice issued by the AO under section 274 of the ITA Act would show that he has not struck off the irrelevant clause of the notice, meaning thereby the AO has not apprise the assessee about the specific charge, under which assessee has been held guilty of penal action. It is submitted that these types of notices are severely criticized by the various high courts and apex court in the following judgments and ultimately penalty has been quashed. Reference can be made to the following decisions. a. Ramila Ben Vs ACIT 60 TTJ 171(Ahmadabad) b. CIT Vs Mannu Engg. 122 ITR 306(Guj) c. Dillip N Sherrof reported in 291 ITR 519(SC)- Wherein these kind of notices are severely criticized by the Apex Court. d. Smt Rita Saudhrey reported in 146 taxation 59(Del) e. Manjunath Cotton Mills reported in 359 ITR 0565(Kar).-Recent Decision. 10. It is pertinent to mention here that in the case of Manjunath (Supra) also the income wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 5A of section 271(1)(C) made it clear that for invoking the same, framing of assessment u/s 153A, on the basis of incriminating material found in the course of search, is sine-qua-non particularly for those years for which no proceedings are pending on the date of search. 14. It is submitted that clause (a) of explanation 5A is not at all applicable in the present case, and as per clause (b) presence of any income based on any entry in books of accounts or other documents is a condition precedent. Admittedly in the present case no income, based on any entry in books of assessee, has been detected in the course of assessment proceedings. 15. It is next submitted that provisions of Explanation 5A are deeming and penal provisions therefore they are to be construed in a stricter manner and nothing can be imported in the statute which is not there in the section. 16. It is submitted that it is an admitted fact that nothing was found in search which has been corroborated by the AO with the surrender of the assessee during the course of assessment proceedings. It is submitted that recently Hon‟ble Mumbai Bench of the ITAT in the case of Sejal Exports (India) in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble T.S.Thakur ji b. CIT Vs Nayana P Dedhia reported in 270 ITR 572(AP) c. Aggrwal Farms Vs ITO 85 TTJ 723(Del) 23 It is next submitted that the CIT-(A) has failed to appreciate that no assessments were pending (except for AY 2010-11) on the date of search and hence quantum additions were not at all tenable in the eyes of law had the assessee would have retracted the surrender. Further it is now well settled law that addition under new provisions can only be made, on the basis of some incriminating material found in search in respect of those years, assessment of which were not pending on the date of search. A statement alone dehors any material cannot be treated as incriminating material (Delhi High Court in Rajpal Bhatia 333 ITR 315). Further a reference can be made to the following decisions a. CIT Vs Kabul Chawala reported in 380 ITR 573(Del). b. CIT Vs Kurele Paper reported in 380 ITR 571(Del). 24. It is submitted that so far as AY 2010-11 would concern the CIT (A) has failed to appreciate that in this year the AO has failed to corroborate the surrender with any documentary evidence and further failed to scrutinize the regular items also and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks to rely on the following decisions. a. CIT Vs Harkaran Das Ved pal- 336 ITR 8(Del) b. CIT Vs Shri Ramdas Motors reported in 238 ITR 177(AP) 30 It is next submitted that provisions of section 271(1)(C) are discretionary provisions as is evident from the fact that the legislature has used the expression may and the same are not automatically invoke able in each and every case. In the context reliance can be placed on the decision of Hon‟ble Hyderabad Bench in the case of K. Dheedar Ahmed reported in 97 ITD 240(Hyd) wherein the Hon‟ble Bench after referring to the decision of Hon‟ble Apex Court in the case of Hindustan Steel Ltd. Vs State of Orrisa reported in 83 ITR 26(SC) has held that at least in some exceptional cases, discretion vested in the officer should be used to drop proceedings . A reference can also be made to the decision of Hon‟ble Delhi High Court in the case of CIT Vs Maya Rani Reported in 92 ITR 394(Del), wherein it has been held by the Jurisdictional High Court that word may‟ used in section 271(1) means that the authorities have a discretion either to levy or not to levy a penalty. 31 It is submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also been accepted by the AO categorically in the order of assessment. However he has levied the penalty on the ground that explanation 5A cannot be ignored. However the revenue has not brought any material on record to prove that the explanation of the assessee is false or any income has been assessed on the basis of any entry mentioned in seized documents. 24 It is submitted that, as per the decision of Reliance petrochemicals reported in 322 ITR 158(SC) inaccurate particulars have to be seen with reference to the documents annexed with the ROI. And if they are correct or there is no material on record to show that the details furnished by the assessee are not correct then penalty under section 271(1)(C) is not leviable. 25 It is submitted that accounts of the assessee are audited and no adverse remarks have been made by the auditors in this regard. Therefore, it is incorrect to say that assessee had furnished inaccurate particulars of his income. Therefore as per the judgment of Reliance Petro Chemicals it is not a case where assessee has furnished any inaccurate particulars of his income. Had the AO detected some more amount and have added the same to the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. The learned counsel for the assessee drew out attention to the show cause notice issued u/s. 274 of the Act before imposing penalty and submitted that the said notice doe s not specify as to whether the assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income . He pointed out that show cause notice does not strike out the irrelevant portion viz., furnished inaccurate particulars of income or concealed particulars of such income . He further drew attention to the assessment order also stating that there is no charge specified in the assessment order itself. He drew our attention to a decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton Ginning Factory (2013) 218 Taxman 423 (Kar.) wherein it was held that if the show cause notice u/s. 274 of the Act does not specify as to the exact charge viz., whether the charge is that the assessee has furnished inaccurate particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer is not sure whether he is levying penalty for furnishing of inaccurate particulars of its in income or concealment of the income. The learned counsel for the assessee drew out attention to the show cause notice issued u/s. 274 of the Act before imposing penalty and submitted that the said notice doe s not specify as to whether the assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income . He pointed out that the pointed show cause notice does not strike out the irrelevant portion viz., furnished inaccurate particulars of income or concealed particulars of such income . He drew our attention to a decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton Ginning Factory (2013) 218 Taxman 423 (Kar.) wherein it was held that if the show cause notice u/s. 274 of the Act does not specify as to the exact charge viz., whether the charge is that the assessee has furnished inaccurate particulars of income or concealed particulars of income by striking out the irrelevant portion of pointed show cause notice, then the imposition of penalty on the basis of such invalid sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals) and the Commis sioner. (i) The imposition of penalty is not automatic. (j) The imposition of penalty even if the tax liability is admitted is not automatic. (k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by the authorities it has resulted in payment of such tax or such tax liability came to be admit ted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. The provisions of penalty proceedings cannot be distinctly applied in assessments related to search and other regular assessment. Therefore the principles laid down by the decision of Hon ble Karnataka High Court also squarely applies to the facts of the present case even though exploration 5A of section 271(1)(C) is invoked. Similar view has been taken by other coordinate benches in following decisions:- 1) DCIT Central circle versus Shaym Sundar Dhanuka 1869 1870/KOL/2013 2) Smt. Champa Goel Vs ACIT ITA No 696/Chd/2012 3) Nisheeth Kumar Jain versus ACIT ITA 961 964/KOL/2013 4) Harishkumar Sarogi V DCIT ITA No 1222-1226/Kol/2011 1496-1499/Kol/2011 Following the decision of the Hon ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. Secondly these facts are undisclosed that assessments for the assessment years under consideration have been framed under sec. 153A of the Act accepting the returns of income on the surrendered amounts filed by the assessee in response to the notice issued under sec. 153A of the Act as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT(A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under Section 139 of the Act, as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under Section 271(1)(c ) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under Section 153A, if any. Similar are the facts in the case of Sajal Exports (India) vs. ACIT (supra) wherein the Assessing Officer had completed the assessment under sec. 153A by accepting the additional income so offered by the assessee, the Assessing Officer initiated penalty proceedings under sec. 271(1)(c) of the Act and levied penalty relying upon the Explanation-5A to section 271(1)(c) of the Act, the Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce return of income under sec. 153A is accepted by the Assessing Officer, it can neither be a case of concealment of income nor furnishing inaccurate particulars of such income. In the present case, it is evident from the assessment order that the Assessing Officer has reproduced in the assessment order, the surrender letter written by the assessee to the Joint Director of Income Tax (Investigation). On the basis of the said letter the Assessing Officer has noted that the assessee had made only a lump sum surrender of ₹ 10 crores and no bifurcation whatsoever based on seized documents or on the basis of financial years was submitted by the assessee. Regarding Annexures A-2, A-3, A-4, A-5, A-6, A-7 and A-9 which were diaries seized during the course of search contained certain payments made by the assessee company spreading out in different financial years starting from financial year 2006-07 to 2010-11, the assessee explained that the notings in all the diaries are written merely for reference purpose only and there was no continuity in the entries that have been recorded in the diaries and that the said diaries contain many other figures which had no significance to the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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