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TMI Blog2018 (6) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... ement during the course of search, specific details about each business concern and the source of earning such undisclosed income are not practically possible for the person giving the statement on behalf of the group concerns/individuals. The business income surrendered has been offered and assessed as business income only. We are, therefore, of the view that the learned Commissioner of Income Tax (Appeals) erred in confirming the findings of the AO levying penalty u/s 271AAA. We accordingly set aside the findings of the learned Commissioner of Income Tax (Appeals) and delete the penalty in the case of M/s Keti Sangam Infrastructure (I) Limited, in the case of Keti-T Construction (India) Limited and in the case of Keti Sangam Infrastructure (I) Limited levied u/s 271AAA of the Act. - Decided in favour of assessee. - ITA Nos. 516/Ind/2017, 1341, 1342,602 & 603/Ind/2016, ITA Nos. 1343 & 601/Ind/2016, ITA Nos. 513/Ind/2017, 1344/Ind/2016 & 514/Ind/2017, ITA No. 512/Ind/2017, ITA No. 515/Ind/2017 - - - Dated:- 27-6-2018 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For the Appellant : Shri Ajay Tulsiyan Amitesh Jain Shri Kapil Shah For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lyan Nav Nirman 2007-8 -do- 6,73,200 Kalyan Nav Nirman 2009-10 -do- 56,76,330 Kalyan Nav Nirman 2010-11 -do- 9,66,510 Kalyan Marble Granite 2010-11 -do- 6,47,000 Name of assessee A.Y. Penalty u/s 271(1)(c ) Amount Rs. Keti-T Construction 2010-11 -do- 72,81,800 Keti Sangam Infrastructure 2010-11 -do- 85,43,360 Keti Sangam Infrastructure 2009-10 -do- 6,28,330 Keti Sangam Infrastructure 2007-08 -do- 3,80,020 Name of assessee A.Y. Penalty u/s 271AAA Amount Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has been levied for concealment of particulars of income or furnishing inaccurate particulars of income. 6. Before us, the learned counsel for the assessee submitted that the penalty proceedings were initiated without specifying any charge and the notices u/s 274/271(1)(c) of the Act were issued on both the counts and without specifying any limb i.e. concealment of income or furnishing of inaccurate particulars of income. He further submitted that blanket penalty proceedings were initiated in all the cases u/s 271(1)(c). It was merely stated in the assessment orders that penalty proceedings are initiated u/s 271(1)(c) without specifying any charge. The penalty notices issued u/s 274 r.w.s. 271(1)(c) of the Act were also issued in the cyclostyled format without striking off either of the two charges i.e. concealment of income or furnishing of inaccurate particulars . He emphasized that even in the cases where penalty proceedings were initiated u/s 271AAA (i.e. for AYs 2011-12 2012-13), notices akin to the notices issued u/s 271(1)(c) were. Thus the penalty proceedings were initiated without specifying any particular or specific charge against the assessee either in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page no. 28 to 31 of case law paper book) (iii) The Honourable Supreme Court has dismissed the Special Leave Petition filed by the department against the above decision of Honourable Karnataka High Court in this case of M/s SSA S Emerald Meadows. The copy of the order of Honourable Supreme Court dated 05.08.2016 is enclosed at page no. 32. (iv) Even in the matter of search cases and penalty levied under Explanation 5A to section 271(1)(c), following the decision of Honourable Karnataka High Court in the case of Manjunath Cotton (Supra), it has been held that the show cause notice u/s 274 was defective as it does not spell out the grounds on which the penalty is sought to be imposed and consequently penalty imposed was cancelled. Mahabir Prasad Agrawal V/s ACIT Kolkatta in IT No. 738 739/Kol/2013 dated 15.01.2016 copy enclosed at page no. 33 to39 of case law paper book. The facts of this case are identical with the facts of the present appeals as in these appeals the show cause notices issued before imposing penalty did not specified as to whether the assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable on record and have also gone through the case laws cited by the learned counsel for the assessee. In this bunch of 9 appeals relating to different assessees which is a part of group cases under which search was carried out on 5.5.2011 u/s 132 of the Act, penalties were initiated u/s 271(1)(c) of the Act. The common legal ground taken by all these assessees is with regard to challenging the legality and validity of the notice u/s 271(1)(c) of the Act. It is admitted by both the parties that similar notices have been issued in all these cases. We reproduce below the notice issued in the case of K.T. Sangam Infrastructure (I) Limited dated 311.2014. Office of the Deputy Commissioner of Indore Tax (Centra)), Indore Aayakar Bhawan Main Building, Room No-l02, Opp-White Church: A.B Road,lndore PAN: AADCKOl29Q Dated- 3]/0112014 To, MIs Keti Sangam infrastructure (I) ltd Vidhya Deep, 15/3, Manoramaganj Indore (M.P) Sir, NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT, 1961 Whereas in the course of proceedings before me for the A.Y. 2009-10 it appears to me that you :- haye without reasonable oause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant contents of the Assessment Order are reproduced as under: Penalty u/s 271(1)(c) is separately as assessee has concealed the income. Relevant contents of the Penalty Order are reproduced as under:- As the assessee had not filed any appeal against order of the AO and it appears that the assessee is satisfied with the order passed by the AO. Therefore, it appears that the assessee has nothing to say and has no objection regarding imposing the penalty u/s 271(1)(c) of I.T. Act, 1961. Therefore, I impose a penalty of equal to 100% of tax sought to be evaded on account of the above acts of the assesee of ₹ 34,05,436/- i.e. 100% tax evaded. In the light of the above, we need to examine whether assessment order and the penalty order comply with the provisions of section 271(1)(c) of the Act. We find that on page 3 of the assessment order, the assessing order, AO observed as under:- As the assessee has concealed/furnished the inaccurate particulars of income therefore, penalty u/s 271(1)(C) is also initiated. 3.3. As per section 271 (1)(c), the assessing officer is empowered to impose penalty if in the course of any proceedings under this Act is satisfied that any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to hold that the penalty order can not be invalidated on account of any mistake or affect or omission if anywhere in view of the provision of section 292B of the Act. This finding of the Ld. CIT (A) is contrary to the judgment of the Hon ble Karnataka High Court rendered in the case of CIT and Another Vs. Manjunatha Cotton and Ginning Factory,359 ITR 565(Kar.) (supra). The Hon ble Karnataka High Court has held as under:- 63. In the light of what is stated above, what emerges is as under : (a) Penalty under section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. (e) The existence of such conditions should be discernible from the assessment order or the order of the appellate authority or the revisional authority. (f) Even if there is no specific finding regarding the existence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in section 271 are mentioned would not satisfy the requirement of law. (r) The assessee should know the grounds which he has to meet spe cifically. Otherwise, the principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (t) The penalty proceedings are distinct from the assessment pro ceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. (u) The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on the merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. In the light of the above judgment we are unable to affirm the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for levy of penalty was not specific. It is now a settled proposition that when the charge itself is not a specific and is vague, penalty cannot be levied. As held by the Hon-ble Supreme Court in the case of T. Ashok Pai v . CIT (2007) 292 ITR 11 (SC) wherein it was laid down that it is a settled proposition that concealment of income . and furnishing inaccurate particulars of income carry different - connotation.-It is settled proposition that where the charge for )e'vrying penalty is not specific, the notice issued under section 271 (1)(c) is bad in law as it does not specify by which limb of section 271 (1 )(c) of the Act under which it has been initiated. When the notice does not specify the charge for Levy of penalty, it has been held that the penalty cannot be levied. 8.1. Further reliance in the case of CIT v. Manjunath Cotton Ginning Factory [20131 359 ITR 565 (Karnataka) ( copy filed Paper Book Page No. 01-27) is placed whereas it was observed in para 59 that the practice of the Department sending a printed form where all the grounds mentioned in Section 271are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income or of having concealed particulars of such income. We may also draw support for the recent decision of coordinated bench Mumbai Tribunal in the case of Meharjee Cassinath Holdings Pvt. Ltd. v. ACIT Circle 4(2) in I.T.A. No. 2555/ Mum/2012 order dtd. 28.04.2017 [PB- 40-54] has also held that the notice issued u/ s. 274 by the AO is untenable as it suffers from the vice of non-application of mind. In this case though the AO recorded in the assessment order that penalty proceedings under section 271 (l )(c) are to be initiated for furnishing of inaccurate partioufar s of income, however, in the notice ujs. 274 both the limbs of section 271 (l)(c) were reproduced in the proforma notice and the relevant clauses was not struck off. Whereas in the case of the assessee no specific charges were levied in the assessment order as well as penalty show cause notice. 8.3. In this regard, our view is also supported by the decision of Hon 'bIe Supreme Court in case of CIT v. Suresh Chandra Mittal [2000] 251 ITR 9(SC), wherein the Supreme Court has upheld the decision of the Hon 'ble Madhya Pradesh High Court CIT in the case of Suresh Chandra Mittal [2000] 241 ITR 124 (MP), wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory reported in 359 ITR 565 (Kar) has inter-alia held as under: (p) Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) i.e., whether it is for concealment of income or for furnishing of inaccurate particulars of income (q) Sending printed form where all the ground mentioned in section 271 are mentioned would not satisfy requirement of law. 11.9 The above said decision of Hon ble High Court of Karnataka in the case of CIT v. Manjunatha Cotton Ginning Factory (supra) has been followed by the Hon ble High Court of Karnataka in the case of CIT v. SSA s Emerald Meadows 73 taxmann.com 241 and the relevant portion is as under: 2. This appeal has been filed raising the following substantial questions of law: 1 Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? 2 Whether, on the facts and in the circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inaccurate particulars of income. From the perusal of the notice u/s 274 r.w.s. 271 of the Act, Assessing officer has not specified as to under which of the two limbs the penalty is imposable. In the circumstances and facts of the case, the penalty proceedings so initiated by the AO are bad in law and accordingly the penalties so initiated are ordered to be cancelled and the order/s of the learned CIT (A) are reversed. Thus, the legal ground raised is decided in favour of the assessee and is allowed. 11.12 Moreover, even on merits, the reason which led the authorities below to levy the impugned penalty is that there was no voluntary declaration by the assessee. We have already held, while disposing off Grounds 1 to 1.4 and Grounds 3 to 3.6 in ITA Nos. 1004/Del/2011and 1005/Del/2011 for assessment years 2004-05 and 2005-06, that the income declared by the assessee was voluntary and the nature of income was not unexplained investment under section 69 of the Act. In view of the above findings, we are of the considered view that penalty is not leviable even on the facts of the case of the assessee company and it is not a case where there was any detection of income by the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no doubt did not show the amounts received as alleged gifts as his income, but no details of loans - are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the AO requiring him to furnish details of any loans/gifts, if any, the assessee offered the amounts received as alleged gifts as his income and before it could be detected by the AO. There was thus no concealment of the particulars of his income nor there remained furnishing of any inaccurate particulars of his income. It vanished before it could be detected. 21. The correct and accurate disclosure may be by filing the revised return or by furnishing the particulars of such income before the detection by the AO. The mere fact that the assessee had not revised returns or that the offer was by letter to avoid harassment to the assessee and the donors who were non-resident persons, it cannot convert an offer to ITA No. 1004, 1005/D/2011, 4388/D/14 Others Assessment year 2004-05 Othrs tax as concealment of income. Therefore, in my opinion the assessee has not furnished inaccurate particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following penalties levied u/s 271(1)(c) of the Act in all these cases :- Name of assessee A.Y. Amount Rs. Kalyan Iron 2007-08 3,67,000 Kalyan Nav Nirman 2007-8 6,73,200 Kalyan Nav Nirman 2009-10 56,76,330 Kalyan Nav Nirman 2010-11 9,66,510 Kalyan Marble Granite 2010-11 6,47,000 Name of assessee A.Y. Amount Rs. Keti-T Construction 2010-11 72,81,800 Keti Sangam Infrastructure 2010-11 85,43,360 Keti Sangam Infrastructure 2009-10 6,28,330 Keti SangamInfrastructure 2007-08 3,80,020 14. In view of our above findings wherein we have quashed the very initiation of penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive business activities only. The assessee also explained these incomes before the Investigation wing and also in the returns of income filed subsequently through notes, which are enclosed in the respective paper books. 4. It is further submitted that even otherwise it is implied that the additional/ undisclosed income is generated from the business carried on by the assessee, as there can be no other source of generating such income. Further the assessee offered these income as business income, which was assessed and accepted without any variation and adverse comments in the assessment order. 5. So far as the issue of specifying and substantiating the manner of earning undisclosed income,which is sole ground on which penalties u/s 271AAA have been levied and confirmed, it is submitted that an important aspect of the matter is that the appellant was never required to explain and substantiate the method or manner of deriving such income, which duty was casted upon the Authorised Officer, as has been held by various High Courts and various Tribunals. For this proposition the appellants place reliance on the following decisions. (i) The decision of The Hon'ble Gujarat Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the assessee has not substantiated the manner in which the undisclosed income was derived. Before going ahead we would first like to reproduce the provisions of section 271AAA of the Act :- Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manner in which the undisclosed income was derived. The learned counsel for the assessee has contended that during the course of giving the statement, the assessee admitted the undisclosed income and pursuant thereto there was no further question asked by the Assessing Officer to the assessee for substantiating the manner in which the undisclosed income was derived. It was also contended that the undisclosed income was earned out of the business income as accepted by Mr. Tikamchand Garg who gave the statement on behalf of group concern and in the return of income filed after the search the surrendered income has been disclosed as business income in various business concerns/associates and the same has been assessed as business income by the revenue authorities. Further no other addition was made and the return of income including the unaccounted business income was accepted by the revenue authorities. The revenue s contention is that the onus heavily lies on the assessee because the immunity has been sought from paying penalty @ 10% and if this benefit is to be taken then the onus lies heavily on the assessee to fulfill the conditions enumerated u/s 271AAA of the Act. 20. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores, by stating that this amount covers and represent any undisclosed income receipts, discrepancy or disallowances or any valuable article or things, money, jewellery, documents or papers found / or seized during the search operation. Such undisclosed income is disclosed on the basis discrepancies found in loose papers and books of accounts etc. during search in the course of our business activity. Thus, apparently the ssessee has made disclosure of undisclosed income, which has been earned from business activity not fully disclosed in the books of accounts. Accordingly, Shri Tikamchnad Garg has also gave postdated cheque against payment of taxes. Accordingly, the family members have shown this undisclosed return of income filed in response to notice u/s 153A. The perusal of statement recorded us 1324 shows that no specific question was put regarding manner in which the undisclosed income was derived. However, impliedly the manner of income earned was from business income only. We are also of the view that the assessee has already disclosed undisclosed income in proceeding and but not clearly specified the manner in which the said income derived as it was not asked for. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosure of money, bullion, jewellery, etc. Thus, we are of the opinion that much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case) in the absence of anything to the contrary. Therefore) mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable. 7.1. Thus, applying the ratio of above decision, when the assessee has disclosed the income during search and paid the taxes and it has been accepted no penalty under section 271AAA is called for just because the manner in which such income was earned not specified in statement under section 132(4) of the Act. The following the ratio of said decision the coordinated bench of Delhi Tribunal deleted the penalty under section 271AAA in the case of Raj Rani Gupta v. DCIT [ITA. o.3371/Del/2011) (PB-78-88) by relying on the decision of Hon'bl Allahabad High Court in the case of CIT v . Radha Kishan Goel [2005]; 278 lTR 454 (Allahabad)[2006] 152 Taxrrian 290/ 200 CTR 300(All) and Honble Gujarat High Court in the case of Mahendra C Shah CIT v . Mahendra C. Shah [2008] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly the argument that but for the search, this income would not have been offered does not hold any water and deserve to be dismissed. Our view is also supported by decision of coordinated bench in the case of Shri Ashok Kumar Sharma vs. DCIT (2012)31 CCH310 (Cuttack-Trib)/77 DTR241/149 TTJ 33 wherein it was held that (where the assessee has disclosed concealed income while giving statement u/s 132 during the course of search and paid tax thereon and showed said undisclosed income in return filed under head income fromj business and Department has accepted these returns and accordingly passed assessment orders. 7.3 Further reliance is placed in the case of DCIT vs. Ashok Nagrath [2015J 154 lTD 448/ 57 taxmann.com 15(Delhi-Trib) where assessee agreed for a declaration on account of excess stock-in trade and paid tax together with interest, no penalty under section 271 AM would be levied. 7.4. Our view is also supported with decision in the case of Concrete Developers vs. ACIT [2013] 34 taxrriann.com 62 (Nag-Trib) wherein it was held that where assessee had disclosed certain amount during the course of search, and paid taxes thereon filed return showing said income as bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d due taxes has been paid by the assessee. Hence, we hereby set-aside the impugned orders of the authorities below and cancel the penalty levied u/s. 271AAA of IT Act in the cases of the above 7 appeals by the assessees by allowing by allowing their appeals. 22. We further observe that the Hon'ble High Court of Gujrat in another case of Principal CIT vs. M/s Shahlon Silk Mills Pvt. Ltd.; Tax Appeal No. 824 of 2017 dated 5.2.2018 relying upon the judgment of CIT vs. Mahindra C. Shah which was in connection with penalty u/s 271(1)(c) of the Act, again applied the same findings adjudicating the issue relating to 271AAA of the Act and held as follows :- 1. These Tax Appeals arise in common background. We may notice facts from Tax Appeal No.823 of 2017. The appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal dated 27.03.2017 raising following questions for our consideration: [A] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal erred in confirming the order of CIT(A) by ignoring the fact that the assessee has not fulfilled the conditions laid down u/s 271AAA? [B] Whether on the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by Allahabad High Court in case of CIT v. Radha Kishan Goel (supra). Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Exception No. 2 while making statement under Section 132(4) of the Act. The view taken by the Tribunal as well as Allahabad High Court to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under Exception No. 2 in Explanation 5 is commendable. 5. In the result, Tax Appeals are dismissed. Similarly Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group of assessees relating to the instant appeals and in the given facts and circumstances, find that the assessees are eligible for getting immunity from paying penalty u/s 271AAA of the Act as the undisclosed income has been admitted during the course of search and the manner of earning income is from business sources, due taxes with interest have been paid, surrendered income has been offered as business income in returns of income filed and they have been accepted and assessed as business income only and in this manner the assessee has successfully fulfilled all the three conditions u/s 271AAA of the Act. Even otherwise, if the revenue has not asked specific question relating to the manner of deriving undisclosed income, the assessee while fulfilling the first condition of admitting the undisclosed income has already specified the manner of earning the income i.e. from business sources and the statement u/s 132(4) of the Act was not for individual business concern, but was for the group concerns/companies/business associates/individuals and at the point of time of giving the statement during the course of search, specific details about each business concern and the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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