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TMI Blog2018 (4) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... e case also, we do not find any justification to sustain the penalty imposed against the legal heir of late M.V. Rao - Decided in favour of assessee. - ITA No. 5255/Del./2013 And CO No. 48/Del./2014 - - - Dated:- 5-4-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For The Assessee : Sh. Anil Kumar Goel, C.A. For The Revenue : Ms. Shefali Swaroop, CIT/DR ORDER Per L.P. Sahu, A.M.: The appeal by the Revenue and cross-objections by assessee are directed against the order dated 25.07.2013 of ld. CIT(A)-I, New Delhi for the assessment year 2007-08. The Revenue has raised following grounds: 1. The order of Ld. CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the penalty of ₹ 68,57,990/- imposed by A.O. u/s. 271(1)(c) of IT Act, 1961 on the income concealed by the assessee and for furnishing inaccurate particulars of income which includes cash seized during the course of search amounting to ₹ 2,00,00,000/-. In the cross objections, the assessee has raised following grounds : 1. That the order of the Ld. A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also included in the returned income of ₹ 2,25,79,439/-. Assessment was framed by the Assessing Officer at income of ₹ 2,28,30,190/- . Two additions were made over and above the revised income (Rs.1,43,917/- representing foreign currency found during the search and ₹ 2,06,834/- on account of unexplained expenditure based on documents seized.) Penalty was imposed by the Assessing Officer on above four items, i.e., seized cash of ₹ 2.00 crore, increased income by way of revised return of ₹ 22,548/-, foreign currency of ₹ 1,43,917/- and unexplained expenditure of ₹ 2,06,834/-. The assessee died on 10.10.2011, information of which was furnished to the concerned Assessing Officer on 14.10.2011. The Assessing Officer initiated the penalty proceedings and notices were issued to Mr. M.V. Rao and passed the order on 27.03.2012 imposing penalty of ₹ 68,57,990/- against the legal heir on the above four additions by holding that the assessee has concealed his income within the meaning of section 271(1)(c) of the IT Act. Feeling aggrieved by the order of Assessing Officer, the legal heirs of Late M.V. Rao appealed before the CIT(A). The ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y deleted the penalty imposed by the Assessing Officer. The findings of the ld. CIT(A) are as under : 4.2 I have considered the assessment order, penalty order and submissions of the appellant. The search was conducted on 22.02.2007 and the return of income was due to be filed on 31.07.2007. Thus, at the time of search neither the previous year was completed nor the return was due. The appellant filed the return on 03.09.2007 declaring income of ₹ 2,24,55,890/-, which included the seized cash of ₹ 2,00,00,000/- as income from other sources, and paid the tax thereon. The provision applicable at that time, i.e. in searches initiated before 01.06.2007, was Explanation 5 to Section 271(1)(c). As per sub-clause (2) of this provision, penalty will not be attracted if the assessee makes a statement u/s 132(4) that such assets have been acquired out of his undisclosed income and also specifies the manner in which such income has been derived and pays the tax with interest thereon. 4.3 There is no dispute that appellant disclosed the amount of ₹ 2,00,00,000/-in the return filed u/s 139 and paid the due taxes along with interest thereon. The only reason the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immunity provided therein. I hold accordingly. This ground of appeal is allowed and penalty imposed on the admitted income of ₹ 2,00,00,000/- is cancelled. 4.5 So far as the amount of ₹ 23,548/- is concerned, this amount was voluntarily offered by the appellant and not as a consequence of any detection by the Department. Therefore, this amount would also not be subject to concealment penalty. This ground of appeal is allowed and penalty imposed on the admitted income of ₹ 23,548/- is cancelled. 6. From the above order of the ld. CIT(A) and order of the Assessing Officer and arguments advanced by the ld. AR, we observe that the case of the assessee stands supported by Explanation (5) to section 271(1)(c) which reads as under : Explanation 5.-Where in the course of a search initiated under section 132 before the 1st day of June, 2007, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) for any previous year which has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty u/s. 271(1)(c) of the Act envisaged in the decision of Karnataka High Court in CIT vs. Manjunatha Cotton Ginning Factory, 359 ITR 565, has held as under : 8. We are not required to consider the other contingencies for examination of legality and validity of the penalty under Section 271(1)(c) of the Act, but clauses (p), (q) (r) of the above referred observations are required to be considered. 9. As per the above referred decision of this Court, the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to whether it is for the concealment of income or furnishing incorrect particulars of the income said penalty proceedings is being initiated. Second aspect is that, as held by this Court, sending of printed form wherein the grounds mentioned in Section 271 of the Act would not satisfy the requirement of law. The third aspect for which the observations are made by this Court is that, the assessee should know the ground which he has to meet specifically otherwise the principles of natural justice would be violated and consequently, no penalty could be imposed on the assessee if there is no specific ground mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of foreign currency and ₹ 2,06,834/- on account of unexplained expenditure, we find that the ld. CIT(A) sustained on penalty on the premise that these additions were made in the assessment order on the basis of material found on search which stood confirmed in appeal before the CIT(A). It was also observed by the ld. CIT(A) that the assessee did not admit these additions nor showed them in the returned of income. 11. The ld. AR of the assessee reiterated the submissions made before the ld. CIT(A) and the arguments advanced in relation to notice u/s. 271 read with section 274 and in relation to acquiring the jurisdiction for imposing penalty against the legal heirs of the deceased, as advanced in appeal of the Revenue. 12. On the other hand, the ld. DR relied on the order of the ld. CIT(A) on this score. 13. After hearing both the sides and perusing the material on record, we are of the opinion that our findings recorded on the point of defective notice issued u/s. 271 read with section 274 and on the issue of jurisdiction of Assessing Officer to impose penalty against the legal heirs of Late MV Rao, shall apply mutatis mutandis in this case also. According ..... X X X X Extracts X X X X X X X X Extracts X X X X
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