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TMI Blog2017 (11) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... he revised return filed under section 139(5) on December 27, 2010 and thereafter, in the return filed pursuance to issuance of notice under 153A on June 21, 2011. No specific arguments have been taken by the learned authorised representative to dispute the applicability of Explanation 5A in the instant case. In light of these undisputed facts, the provisions of Explanation 5A are clearly attracted in the instant case. We are unable to subscribe to the view that in the instant case since there was voluntary disclosure in good faith to buy piece and avoid litigation, the same should not be a basis for levy of penalty as subscribing to such a view would make Explanation 5A otiose which has been specifically invoked in the instant case. Whether for the purpose of imposition of penalty under section 271(1)(c) resulting as a result of search assessment made under section 153A, the original return of income filed under section 139 cannot be considered? - Held that:- The said issue is no more rest integra. Considering the non obstante clause under section 153A which excludes the application of section 139, the return filed pursuant to notice under section 153A takes the place of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant : S. R. Sharma, Chartered Accountant For the Respondent : O. P. Bhateja, Additional Commissioner of Income-Tax ORDER Vikram Singh Yadav (Accountant Member) 1. This is an appeal filed by the assessee against the order of the learned Commissioner of Income- tax (Appeals)-2, Jaipur dated January 11, 2016 for the assessment year 2010-11 confirming the levy of penalty of ₹ 8,27,866 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961. 2. Briefly the facts of the case are that the assessee filed his original return of income under section 139(1) of the Act on July 30, 2010 for the assessment year 2010-11 declaring a total income of ₹ 1,22,06,480. Thereafter search and seizure operation under section 132 of the Act was carried out on September 30, 2010 at the business and residential premises of the assessee. During the course of such search against the assessee, the authorised officer confronted the assessee with noting of the seized document identified as AS-1 page 5 found in the course of search conducted against Shri D. D. Modi on August 24, 2009 wherein 25,000 Govind Ji Lashkari was noted. In its sworn statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year ; where the return of income for such previous year has been furnished before the said date but such income has not been declared therein, then such income is deemed to be the income which the assessee has concealed. As per the Assessing Officer, the case of the assessee falls clearly within the ambit of Explanation 5A because the assessee surrendered the income during the course of search on May 30, 2010 in which an amount of ₹ 25 lakhs was surrendered and the return of income disclosing such income was filed on December 27, 2010 (revised return)/June 21, 2011 (return under section 153A after the due date of filing return of income under section 139(1) had elapsed on July 31, 2010. Thus, it is a fact that the assessee disclosed an amount of ₹ 25 lakhs in the return filed on December 27, 2010 which is a return filed after the date of search. The search has been initiated after June 1, 2007. Income of ₹ 25 lakhs pertains to the previous year 2009-10, which has been ended before the date of search. The return of income for that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness income offered during search'. This voluntary surrender is not suo motu act but because of search action conducted under section 132 of the Act, the assessee offered the additional income of ₹ 25,00,000 for the assessment year 2010-11. 3.2.4 Therefore, after the conduct of search on September 30, 2010 there is no need for filing of belated return/revised return under section 139(4) of the Act by offering the additional undisclosed income of ₹ 25 lakhs which is not recorded in his regular books of account, accordingly the assessee will not be entitled for immunity prescribed in section 139(5) of the Act. Therefore, the said return of income filed on December 27, 2010 becomes non est. In view of these facts, the Assessing Officer has correctly not taken this revised return filed on December 27, 2010 into cognizance. However, on being cornered and also contemplating future action of penalty under section 271(1)(c) of the Act by the Department, the assessee has tried to take shelter under the garb of section 139(4) of the Act so as to get immunity prescribed under section 139(5) of the Act. But this act of the assessee is of no use because the search operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the return. Thus under the amended provisions of the Income-tax Act, 1961 with respect to the penalty in cases of search as applicable today, there is no immunity as such, even if the full disclosure of such income is made in the statement under section 132(4) of the Act and also taxes has been paid thereon. The legislative language of Explanation 5A to section 271(1)(c) of the Act is such that it provides no escape route from the levy of penalty. This provision is directly applicable to this case where the assessee is duly disclosing the additional unaccounted income as admitted in the statement under section 132(4) of the Act by paying appropriate tax in the return of income filed under section 153A of the Act and the assessment under section 153A read with section 143(3) of the Act is made without any deviation from the returned income except interest (earned at 12 per cent. on ₹ 25 lakhs money advance) computed for the intervening period of 228 days. The facts of this case are that since the assessee offered the said undisclosed income in the revised return after the search operation i.e., on being cornered by the Department, it was a deliberate act of concealment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for tax and will deposit the self- assessment tax thereon. The assessee thereafter filed a revised return within time allowed under section 139(5) of the Income-tax Act, 1961 disclosing the said amount of ₹ 25 lakhs as its income from business and paid tax. In the return filed under section 153A the same income was disclosed. The learned Assessing Officer thus have no cogent evidence of such advance and also made no enquiry but addition got made on account of voluntarily disclosure of the said business income of ₹ 25 lakhs as stated above. Thus the addition is solely on the voluntary admission of the assessee in good faith to buy peace and avoid litigation. In the case of the assessee no material has been found corroborating the said advance. In CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC), the hon'ble Supreme Court held that where the assessee filed returns showing higher income after search to purchase peace and avoid litigation and the Department simply rested its conclusion on the act of the voluntary surrender by the assessee in good faith, the High Court was justified in holding that no penalty could be levied under section 271(1)(c). 5.1 It was furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the notice under section 153A vis-a-vis the assessment passed under section 143(3) read with section 153A of the Act. The addition of ₹ 25 lakhs made by the assessee in the revised return/ return under section 153A was not based on any incriminating material found in the case of search in his case but was included voluntarily to avoid litigation. The addition for the alleged interest on the alleged advance was only estimated which was also not based on any incriminating material seized in the course of search. 5.3 In support, the learned authorised representative relied on the following judicial pronouncements : (A) Deputy CIT v. Purti Sakhar Karkhana [2013] 23 ITR (Trib) 667 (Nag); [2013] 35 taxmann.com 594 (Nagpur-Trib) held as under : Search assessments made under section 153A cannot be treated as continuance of normal assessment proceedings whether abated or not and, therefore, it will not be justified to refer to returned income under section 139 for the purpose of imposition of penalty under section 271(1)(c). Where the returned income filed under section 153A is accepted by the Assessing Officer and there is no variation in the assessed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of the estimated addition of ₹ 1,97,178 on the said alleged amount of ₹ 25 lakhs, it was submitted that the addition is not based on any incriminate document/paper found in the course of search. The assessee has not admitted or owned the alleged advance of ₹ 25 lakhs to Shri D. D. Modi nor admitted the receipt of any interest thereon. Thus the addition is merely on estimate as per the own perception of the learned Assessing Officer and this is neither a concealment of income nor furnishing of inaccurate particulars within the meaning of section 271(1)(c) or any Explanation thereunder as there was no direct or indirect linkage brought or record with reference to any specific seized material from the assessee and so the learned Assessing Officer has not established any charge for which penalty under section 271(1)(c) could be levied on the assessee. In CIT v. Dhillon Rice Mills [2002] 256 ITR 447 (P H) it was held that where additions were made on the estimate basis and the Department failed to prove the concealment of income penalty under section 271(1)(c) cannot be levied. In CIT v. SAS Pharmaceuticals [2011] 335 ITR 259 (Delhi) held that where additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the revised return filed under section 139(5) of Act/return under section 153A or on the addition of ₹ 1,79,198 being estimated addition made by the learned Assessing Officer on account of the estimated interest on the said alleged amount of ₹ 25 lakhs. The appeal order passed by the Commissioner of Income-tax (Appeals) confirming the penalty is not correct in law and on facts and, therefore, penalty confirmed by him deserves to be deleted. 6. The learned Department is heard who has vehemently argued the matter and relied on the order of the lower authorities. He has also referred to the decision of the hon'ble Calcutta High Court in the case of CIT v. Prasanna Dugar [2015] 371 ITR 19 (Cal) ; [2015] 59 Taxmann.com 99 (Cal) and it was submitted that a special leave petition filed against the said decision has been subsequently dismissed by the hon'ble Supreme Court. 7. We have heard the rival contentions and pursued the material available on record. The Assessing Officer has invoked the deeming provisions of Explanation 5A to section 271(1)(c) of the Act to levy penalty in the instant case. Section 271(1)(c) of the Act being in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search which happened on September 30, 2010. In the return of income furnished under section 139(1) on July 31, 2010 for the such financial year 2009-10, such income has not been disclosed. Such income has been disclosed subsequently in the revised return filed under section 139(5) on December 27, 2010 and thereafter, in the return filed pursuance to issuance of notice under 153A on June 21, 2011. No specific arguments have been taken by the learned authorised representative to dispute the applicability of Explanation 5A in the instant case. In light of these undisputed facts, the provisions of Explanation 5A are clearly attracted in the instant case. 7.2 Now coming to the other contentions raised by the learned authorised representative. Firstly, the learned authorised representative has placed reliance on the hon'ble Supreme Court decision in the case of CIT v. Suresh Chand Mittal (supra) for the proposition that there was voluntary disclosure in good faith to buy piece and avoid litigation and the same should not be a basis for levy of penalty. The said decision was rendered by the hon'ble Supreme Court much prior to the insertion of Explanation 5A by the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the language of Explanation 5 itself, wherein the words used by the Legislature are 'be deemed to have concealed the particulars of his income', which shows that there is a deeming fiction by virtue of which such additional income is considered as concealment. It such additions in the income in the return filed consequent to a search, were to automatically evidence concealment under section 271(1)(c), there would be no need for Parliament to enact a deeming fiction in the form of explanation ; such a reading would render Explanation 5 otiose and without any purpose. 7.3 Further, the learned Departmental representative has drawn our attention to the decision of the hon'ble Calcutta High Court in the case of CIT v. Prasanna Dugar (supra) which was rendered in the context of Explanation 5A to section 271(1)(c) of the Act. In that decision, the hon'ble High Court has held that the term voluntary has to seen in the context of statement not been recorded by applying force. It is in that sense a voluntary disclosure and it has been clarified by the assessee that he had not given any statement under pressure and he didn't want to rectify or modify the stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re applicable in different situation. In the case of the assessee, the clause (c) is clearly attracted which provides that in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished. 7.7 In the instant case, it is no doubt true that the returned income under section 153A has been accepted (except for an amount of ₹ 1,97,178) and assessed as such by the Assessing Officer. What is how ever relevant to examine is the difference between the amount of income assessed and amount of income in respect of which particulars have been deemed to have been concealed invoking the provisions of Explanation 5A. In the instant case, the particulars which have been deemed to have been concealed amounts to ₹ 25 lakhs and on such amount, the penalty has been rightly levied by the Assessing Officer. Therefore, this contention of the learned authorised representative does not support the assessee. 7.8 Now coming to the levy of penalty on the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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