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TMI Blog2018 (3) TMI 1583X X X X Extracts X X X X X X X X Extracts X X X X ..... o merit in the plea of assessee and the same is dismissed. Levy of penalty us 271(1)(c) - claim of deduction under section 54 - Held that:- The assessee having made a wrong claim in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. Assessment made u/s 153C or 148 - documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm - Held that:- When during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016, relating to assessment years 2009-10 & 2010-11. In order to adjudicate the issue, reference is being made to the facts in ITA No.95/PUN/2016, relating to assessment year 2009-10. 6. The assessee in ITA No.95/PUN/2016, relating to assessment year 2009-10 has raised the following grounds of appeal:- 1. The ld. CIT(A) erred in confirming the levy of penalty of Rs.2,52,604/- u/s. 271(1)(c) of the Act. 2. The ld. CIT(A) failed to appreciate that the additional income declared by the assessee was based on estimates and there was no concrete evidence found during the course of search that the assessee had generated the undisclosed income declared during the course of search and hence, the levy of penalty on the additional income declared by the assessee was not justified at all. 3. The ld. CIT(A) ought to have appreciated that the additional income was declared by the assessee in order to co-operate and buy peace with the dept. and therefore, no penalty was leviable in respect of the additional income declared by the assessee which was based on estimations and surmises. 4. The order of Ld. CIT(Appeals) passed u/s 250 of the Income Tax Act, 1961 in so far as it is agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search proceedings along with her husband and associated firm had jointly declared additional income of ₹ 1 crore for assessment year 2009-10 for the group; out of which, the assessee declared sum of 7,30,000/- as her undisclosed income. The same was included in the return of income. The assessee explained that the said amount was utilized partly for renovation of outlet and partly for deposits made in Pat Sansthas. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act for concealing the particulars of income. In the order levying penalty under section 271(1)(c) of the Act, the assessee claimed that where additional income was offered by the assessee and was accepted as such and where the declaration was made on estimation basis and no seized documents were found to establish specific amount of income not disclosed by the assessee, the assessee stressed that no penal action is to be taken against the assessee. The Assessing Officer noted that contention of assessee that disclosure was made voluntarily and no incriminating documents were found during the course of search, was not true. He further observed that number of pages were found and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was amount which represented her income or that it represented her concealed income. Reliance in this regard was placed on various decisions of different High Courts. The CIT(A) thus, confirmed the penalty. 9. For the year 2010-11, the assessee and her husband and associated firms have jointly declared additional income at ₹ 1,54,00,000/-, out of which the assessee declared sum of ₹ 17,50,000/- as her income. In response to notice issued under section 153A of the Act, the assessee furnished the return of income. The declaration of additional income was linked to the amount incurred on the renovation of residence of ₹ 2.50 lakhs, deposits made in credit society in third party of ₹ 2 lakhs; renovation expenses incurred on the outlets of ₹ 3 lakhs and accounting for the jewellery found during the course of search of ₹ 10 lakhs. The CIT(A) also held the assessee liable for penalty under Explanation 5A to section 271(1)(c) of the Act on the aforesaid additional income declared at ₹ 17,50,000/-. 10. The assessee is in appeal against both the orders of CIT(A) relating to assessment years 2009-10 and 2010-11. 11. The learned Authorized R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered suo moto by the assessee, there was no merit in holding the assessee to be in default. 12. The learned Departmental Representative for the Revenue pointed out that the issue stands covered by the ratio laid down by Pune Bench of Tribunal in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (2015) 174 TTJ 516 (Pune). 13. In respect of partnership firms, the learned Authorized Representative for the assessee referred to additional grounds of appeal raised before the Tribunal. He stressed that where the facts were on record and the facts of search were on record, then the additional grounds of appeal can be admitted. He stressed that where papers were found from the residence of assessee and her husband and the statement was also made by the said persons in respect of additional income offered in the hands of partnership firm, then proceedings cannot be initiated under section 148 of the Act and the correct section to be applied is section 153C of the Act. He further pointed out that legal issue raised in the present appeal is without investigation of facts, needs to be admitted and adjudicated as held by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. Vs. CIT (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 148 of the Act, copy of the decision was filed. 15. The learned Authorized Representative for the assessee also submitted written note pointing out that the decision of the Hon'ble High Court of Karnataka was not applicable to the facts of the present case, since in the case before the Hon'ble High Court, the issue involved was whether Assessing Officer can issue notice under section 148 or 158BD of the Act. He further pointed out that section 158BD of the Act was part of Chapter XIV-B. Referring to section 153C of the Act, it was pointed out that the said section starts with non obstante clause and it specifically excludes the provisions of sections 147 / 148 of the Act. The Assessing Officer thus, submitted that in view of provisions of section 153C of the Act, the Assessing Officer could not issue notice under section 148 of the Act and complete the assessment under section 147 of the Act. Since non obstante clause was missing in section 158BD of the Act, he stressed that the decision of the Hon'ble High Court of Karnataka was not applicable for deciding the issue in the context of applicability of section 147 or 153C of the Act. He further reiterated that section 153C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to notice issued under section 153A of the Act. 17. The issue which is raised in the present appeals before us is whether the assessee is exigible to levy of penalty under section 271(1)(c) of the Act read with Explanation 5A. Before going into merits of levy of penalty, it may be pointed out that satisfaction was recorded by the Assessing Officer that the assessee had concealed its income and penalty was also levied on the same account under Explanation 5A to section 271(1)(c) of the Act. The learned Authorized Representative for the assessee before us has stressed that in the notice issued under section 274 of the Act, there is no striking of inappropriate limb. We find that this issue has already been adjudicated at length by us in the case of Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08, dated 30.11.2016. Applying the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom), we have held that where recording of satisfaction by the Assessing Officer while initiating penalty is clear and not ambiguous, then merely because one of the limbs has not been struck off t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income and penalty proceedings under section 271(1)(c) of the Act were initiated. Beside the above said, there was another aspect of sale of property, wherein the assessee had claimed that it had sold fittings and fixtures of the said bungalow for Rs.10 lakhs. However, in the absence of list of furniture or personal effects sold, the Assessing Officer was of the view that the fittings and fixtures attached to the property were inextricably linked to the building and consideration received thereon, was to be treated as capital gains. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act with regard to the said addition. Consequent thereto, the Assessing Officer rejecting the claim of the assessee that it had suo motu offered the income from long term capital gains, and no malafide intention could be attributed to the said disclosure, hence, there was no merit in levy of penalty, held the assessee exigible to levy of penalty under section 271(1)(c) of the Act and levied penalty of Rs.47,11,104/-. The CIT(A) elaborately considered the issue and upheld the levy of penalty. The assessee is in appeal against the order of CIT(A) in confirming the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. The said section lays down that where the Assessing Officer or the CIT(A) in the course of any proceedings under the Act is satisfied that any person has concealed the particulars of his income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of search, but such income had not been declared therein or where the due date of filing the return of income for other previous year has expired, but the assessee had not filed the return of 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, 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MIL Webber (supra) which has been relied upon by the Ld. Counsel The relevant portion is in para no 7 which reads as under: "7. The definition of 'income' in clause (24) of Section 2 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of such income." 19. So far as the present assessee is concerned, clause (ii) to Explanation 5A is applicable. Admittedly, the expenditure which was not recorded has been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income which was detected during the course of search and seizure operation, which in turn has been offered by the assessee in return of income filed pursuant to notice issued under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating documents belonging to the assessee firm were found and therefore, the learned A.O. ought to have issued notice u/s. 153C for assessing the undisclosed income in the hands of the assessee firm as against notice u/s. 148 issued by him and therefore, the assessment order passed u/s. 147 is bad in law and accordingly, the penalty levied u/s. 271(1)(c) on the basis of an invalid assessment order was null and void." 21. In order to adjudicate the issues, we are referring to the facts and issues in ITA No.105/PUN/2016. The facts of present appeal are slightly at variance i.e. simultaneously to the search and seizure action under section 132 of the Act initiated against partners of assessee on 20.01.2011, Survey action under section 133 of the Act was carried out at the business outlet of assessee firm. The partners of assessee firm during the course of search and Survey proceedings had declared undisclosed income in various assessment years. The assessee had originally filed return of income before the date of search in both the years. For the years under consideration, notice under section 148 of the Act was issued to the assessee. In response thereto, the assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty levied under section 271(1)(c) of the Act. 22. In the original grounds of appeal filed, the assessee has challenged the levy of penalty of ₹ 3,09,000/- under section 271(1)(c) of the Act. Various grounds of appeal have been raised in this regard. Further, during the course of hearing, the assessee has filed additional grounds of appeal challenging jurisdiction of Assessing Officer in issuing notice under section 148 of the Act and consequent assessment order passed under section 147 of the Act being invalid in law and therefore, penalty levied under section 271(1)(c) of the Act on the basis of assessment order, to be null and void. The assessee by way of additional ground of appeal No.2 has further challenged the aforesaid proceedings initiated under section 148 of the Act and has alleged that the Assessing Officer ought to have issued notice under section 153C of the Act for assessing undisclosed income in the case of assessee firm. 23. The first issue which arises is the legal issue raised by assessee by way of additional grounds of appeal. Since the issue is purely legal and does not involve investigation of facts, the same is admitted for adjudication and we first de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson from the outlet. I admit that the sales as appearing on these pages are substantially more than the sales as per the sales recorded for filing the returns of income. I admit that all the sales have not been reflected in the regular books of account. 25. Question No.11 was as under:- "Q11 During the course of search and survey operations carried out at the residential and business premises the parties have come across the evidences which establish that the total group turnover has been suppressed substantially when compared to the turnover disclosed in the return of income. In the statements deposed under oath by various entities such as the managers at the outlets, the supplier of Bread (Pav), etc. have provided the actual figures of sale (consumption) of Wada Pav and other allied products. All this goes to establish that Joshi Wadewale group as a whole is indulging in suppression of actual turnover in order to show reduced profits thereby minimizing the tax burden. Please offer your comments in view of the different papers shown to you." A11 I have gone through various loose papers and documents seized and impounded from various premises and have also gone through som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom different outlets. He also explained that total made on the said pages represented the gross sales on that day of that outlet. 'Ghari', 'Cash' represented the net amount of cash handed over to Shailesh Joshi by the relevant person from the outlet. He also referred to the sales appearing on the said pages and admitted that these were substantially more than sales as per sales recorded for filing return of income. In response to next query raised and in view of loose papers and documents seized and impounded from his different residences and some of the statements of related persons, he confirmed that there was suppression of actual turnover in the financial years 2008-09 to 2010-11 and accordingly, offered unaccounted income for the said years. For assessment year 2009-10, additional income of ₹ 1 crore of the group was offered; for assessment year 2010-11, ₹ 1.50 crores and for assessment year 2011-12, ₹ 2.50 crores was offered. The said additional income was then bifurcated amongst the entities year-wise as per the details placed at page 23 of Paper Book. In other words, the documents were seized during the course of search at the residence of assessee, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C of the Act and not under section 148 of the Act. 28. The first issue which arises is whether the assessment in such circumstances was to be made under section 153C or 148 of the Act and connected issue is whether such an issue of assessment being completed under a particular section was valid or not, can be raised while deciding the issue of levy of penalty under section 271(1)(c) of the Act against the income assessed in the hands of assessee. In this regard, the learned Authorized Representative for the assessee has pointed out that the issue stands covered by the ratio laid down in ITO Vs. Shri Shailendra B. Agrawal (supra) and in bunch of appeals with lead order in ACIT Vs. Shamsundar Laxman Jagtap (supra). The relevant provisions of the Act to which reference is being made is section 153C of the Act which provides as under:- "153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, such books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other person in accordance with provisions of section 153A of the Act. Section thus, very clearly lays down the procedure to be followed when during the course of search on a person any money, bullion, jewellery or valuable article or thing, or any books of account or documents or any information contained therein pertains to or relate / relates to other than the person searched; then first, all the said assets or information is to be handed over to the Assessing Officer, who is incharge of the person other than the person searched and then the Assessing Officer has to proceed and determine the income of the other person in accordance with provisions of section 153C of the Act. The said section very clearly also lays down that the provisions of section 153C of the Act are to be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 1952. Nonetheless, the Income-tax Officer issued a notice to the assessee under section 34(1)(a) on July 9, 1952, and then proceeded to assess the assessee under that section. The assessee raised before the Tribunal a contention that the notice under section 34(1)(a) having been issued in spite of the assessee having file a return in proper time it was invalid and that the appeal filed by the department before the Tribunal should be dismissed. The Tribunal did not allow the assessee to raise the contention on the ground that it had been only raised at the time of the arguments in the appeal before the Tribunal as a fresh ground and that if the ground was allowed to be urged and it succeeded, the result would be that the entire assessment proceedings would have to be held invalid and even the assessment on the undisputed amount of the income against which the assessee had not appealed would thereupon go y the board." 32. The Hon'ble High Court held as under:- "Held, (i) that when the assessee had filed a voluntary return for the year 1947-48, the notice under section 34(1)(a) was wrongly issued and the proceedings in pursuance thereof were invalid; and (ii) that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,000/- paid after the end of the year in question. We see no reason to interfere with this finding. We see less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the respondent ought not be prejudiced. 25. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corporation Limited. This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal. 26. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may be pointed out herein itself that Chapter XIV-B of the Act consisting of sections 158B to 158BH of the Act provided special procedure for assessment of search cases i.e. search initiated under section 132 of the Act on or after 30.06.1995 upto 31.05.2003. Thereafter, in cases of searches conducted after 31.05.2003, the assessment in the case of search or requisition case is to be carried out under section 153A to 153C of the Act. The said provisions fall within Chapter XIV of the Act i.e. by insertion of sections 153A to 153D of the Act by the Finance Act, 2003 w.e.f. 01.06.2003, procedure of assessment has undergone change. The provisions of section 153C of the Act are at variance to the provisions of section 158BD of the Act, which was the issue before the Hon'ble High Court of Karnataka (supra). The ratio which has been laid down in relation to section 158BD of the Act by the Hon'ble High Court of Karnataka cannot be relied upon for deciding the issue in the context of applicability of section 153C of the Act vis-à-vis 147 / 148 of the Act. Accordingly, we find no merit in the reliance placed upon by the learned Departmental Representative for the Revenue. We hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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