9911796707
TMI Blog2018 (12) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Brief facts of the case are as under: The facts of the case as culled out from the records are that the appellant, is a partnership firm belonging to Siddhi Group of Navi Mumbai and has been engaged in the business of builders and developers. The appellant had undertaken to construct a shopping mall namely 'Little World' at Kharghar. Return of income was originally filed for the year under consideration declaring total income of Rs. 95,01,369/-. Subsequently, a search action u/s 132 of the Income Tax Act 1961 was conducted on 19.02.2009 in the case of the appellant along with other entities of the group. During the search and seizure operations, certain incriminating papers/documents/records were found and seized from the business premises of the appellant as well as from the residential premises of Shri Mayur Patel, who is one of the key persons of iho appellant group and in charge of sales and other affairs of the shopping mall 'Little World', During the search proceedings and the post-search proceedings, the appellant accepted that the transactions recorded in the said seized documents were cash receipts in respect of purchase of shops from the appellant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned income of Rs. 95,01,369/- and the total income was computed at Rs. 8,25,51,370/- and therefore according the Assessing Officer, penalty is exigible in respect of additional income of Rs. 7,30,50,000/-. The other argument of the Ld. AR that income returned under sec. 139(1) cannot be referred for levy of penalty and the income declared in the returns filed u/s 153A will have to be considered was also brushed aside by the Assessing Officer stating that such proposition cannot be accepted for the reason that the additional income was offered consequent to the search operations. The Assessing Officer also observed that the authorities relied upon by the appellant are clearly distinguishable and cannot be applied to the facts of the present case. The Assessing Officer further held that Explanation- 5A to sec, 271(l)(c) is applicable in this case and hence penalty is attracted. It was also noted by the Assessing Officer that there is no dispute about the quantum addition made in the assessment order and the appellant has concealed the particulars of income to the extent of Rs. 7,30,50,000/- on account of unaccounted cash receipts in respect of sale of units in the said shopping ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not been accounted for in the books of account. I offer the same .;- as the undisclosed income of M/s Gayatri Homes. I shall submit the AY wise bifurcation of this amount" 3.4.1 From a bare reading of the above extract in the assessment order, it is quite evident that the penalty proceedings were not initiated in a perfunctory manner by the AO and there is mention about initiation of penalty proceedings at three places in the assessment order, twice in the text of the order and again at the end of the order. This clearly shows that there was application of mind on the part of the Assessing Officer and prima facie satisfaction of Assessing Officer that the case may deserve imposition of penalty is clearly discernible from assessment order passed. As regards the mention of both the sections i.e. sec. 271(l)(c) and 271AAA in the assessment order, firstly, this is not a case where penalty proceedings are not initiated at all during the assessment proceedings. It needs to be appreciated that concealment of particulars of income and furnishing of inaccurate particulars thereof sometimes overlap and therefore merely because specific charge is not indicated in the assessment order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no evidence on the record that the Income-tax Officer was not satisfied in the course of the assessment proceeding that the firms had concealed its [particulars] of income. The assessment order is dated 10-21-1951, and there is an endorsement at the foot of the assessment order by the Income-tax Officer that action under section 28 had been taken for concealment of income indicating clearly that the Income-tax Officer was satisfied in the course of -the assessment proceedings that the firm had concealed its income. " (p. 549) 3.4.2 Similar view was taken by the Allahabad HC in the case of Nainu Ma I Het Chand vs. C1T [2007] 160 Taxman 49 that the satisfaction can be gathered from the assessment order. In the case of Oriental Insurance Co Ltd vs. ACIT, [2010-T10L-02-ITAT- DEL- New Delhi (Dated: October 30, 2009), ITAT Delhi has taken similar view that when the A.O. had at the end of the assessment order specifically stated that penalty proceedings are initiated separately, it would have to be held that the A.O. has recorded his satisfaction. In the present case also, the AO had material before him, as discussed in the assessment order, for being satisfied that the applicant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that primafacie satisfaction of the AO for initiating penalty proceedings for concealment of income is discernible from the assessment order, it is now examined whether penalty levied is justified having regard to the nature of addition made in the assessment order, in respect of which penalty was levied. The plea set up by the Ld. Counsel in this regard is that the proceedings commenced by notice issued u/s 153A are fresh assessment proceedings and that the income declared in such returns is the starting point for fresh assessment and since there was no addition to the income returned u/s 153A in the assessment order, there is no cause, for levy of penalty in view of Explanation-4 to sec. 271(l)(c). This plea of the appellant is not legally sustainable. Section 271(l)(c) visualizes imposition of penalty when the assessee has concealed income or when the assessee has furnished inaccurate particulars of income. In addition to these two situations, penalty can also be imposed, inter alia, when assessee is deemed to have concealed particulars of income under Explanations to sec. 271(l)(c). In the case of the appellant, the sequence of events clearly shows that but for search operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. Therefore, the argument of the appellant that the return filed u/s 153A is the starting point for fresh assessments and in view of Explanation-4 to sec. 271(l)(c), there is no concealment of income is bereft of any merit. 3.4.4 But the argument of the appellant relying on certain judicial precedents is that the incriminating papers found during the search cannot be equated with documents as contemplated in Explanation 5A and therefore Explanation 5A is not applicable to the facts of the present case. This argument is also lacking in merit. Firstly, as admitted by the Ld. Counsel, the decisions relied upon were rendered in the context of Explanation 5 to sec. 271(l)(c), where clause (ii) of Explanation 5A i.e. where assessee is found to be the owner of any income based on any entry in any books of account or other documents or transactions and he claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to insertion of Explanation 5A and therefore the said decision has no application to the facts of the present case where the search was conducted on 19.02.2009. Similarly, the other cases relied ' upon by the appellant were rendered in a different factual context and insertion of Explanation 5A and as such the ratio of those ;e: s 3ns is of no avail to the case of the appellant. 3.4.6 It is also difficult to agree with the appellant's legal contention that because the concealment was detected during the course of a search, no penalty can be levied. If admission of guilt after detection is sufficient explanation then there will be no case where penalty can be levied, because in all cases where the guilt is established beyond reasonable doubt the guilty would admit it and he would be exonerated of the penalty. In other cases any how there will be no penalty because the guilt itself is not established. . . 3.4.7 I find that in so many cases the Courts have upheld levy of concealment penalty where revised returns were filed subsequent to detection of the concealment in a survey or a search. The honorable'High Court of Madras confirmed the levy of penalty in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took place at premises of assessee.- Tribunal also held that there was no material with assessee to show that mistake had crept in original return accidentally without any intention warranting deletion of penalty. The court held that on facts and having regard to aforesaid legal position, Tribunal was justified in confirming penalty levied by Assessing Officer. 3.4,11 The Jharkhand High Court in the following facts of the case confirmed levy of penalty in the case of Mahabit Prasad Bajaj 298 ITR 109 (JHARKHAND). For the relevant-assessment years, the assessments were completed under section 143(3). A search and seizure was conducted later under section 132 and in the course of the said search operations, 'certain books of account and papers relating to the business of the assessee were found and seized. The said books of account pertained to the earlier financial years. Certain loose sheets including sales, etc., were also seized. The transactions made through bank accounts were found to have been mostly kept out of the books of account. After the aforesaid search and seizure carried out on 26-8-1986, the assessee filed a revised return, under the amnesty scheme disclosing ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court raising the following substantial question of law (page 25): "Whether, on the facts and in circumstances of the case and law, the diaries, on the basis of which the additions were made could be regarded as books of account for the purposes of clause (1) of Explanation 5 to section 271(l)(c) of the Act so as to provide immunity to the appellants ?" Dismissing all the appeals, the Highs Court observed (page 32): The term 'books of account' referred to in clause (1) of Explanation 5 to section 271(1)(c) means books of account which have been maintained for determining any source of income. The term source of income, as understood in the Act is to identify or classify income so as to determine under which head, out of the various heads of income referred to in section 14 of the Act, it would fall for the purposes of computation of total income for charging income-tax thereon. Thus, the term 'books of account' referred to in this relevant sub-clause of Explanation 5would mean those books of account whose main object is to provide credible data and information to file the tax returns. The credible accounting record provides best foundation for filing return of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the business: to portray liquidity position; to provide up-to-date information of assets and liabilities with a view to derive information so as to prepare profit and loss account and draw balance sheet to determine income and source thereof. Thus, the term 'books of account' referred to in Explanation 5 must answer the above qualifications. It cannot be understood to mean compilation or collections of sheets in one volume. The books of account referred to are those books of account which are maintained for the purposes of the Act and not the diaries which are maintained merely man's private record; prepared by him as may be in accordance with his pleasure or convenience to secretly record secret, unaccounted clandestine transactions not meant for the purposes of the Act, but with specific intention or desire on the part of the assessee to hide or conceal income so as to avoid imposition of tax thereon. The words in Explanation 5 'books of account, if any, maintained by him for any source of income' are important words signifying the legislative intent embodied in the explanation warranting grant of immunity from penalty. The legislative intent is to admit only those books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with the contention that the income assessed to tax as undisclosed receipts from sale of shops at the Little World-Mall at Navi Mumbai are the gross sale receipts of the appellant and the actual component of 'income' in such receipts will be substantially lower. It was argued that the appellant in the course of search offered the entire gross receipts to tax to avoid litigation and as the component real of 'income' in such receipt would be substantially lower, the levy of penalty u/s 271(l)(c) on the gross receipts is not justified. 10. He rejected this by observing that firstly, no evidence is placed on record to indicate that the appellant incurred expenditure over and above the expenditure recorded in the regular books of a/c. Secondly, even presuming for a while that some expenditure in relation to unaccounted cash receipts was incurred outside the books of account, the same cannot be allowed as expenditure as per the proviso to sec. 69C. In such a situation, the contention of the appellant that it offered gross cash receipts to tax to avoid litigation and the component of real income in such receipts is lower cannot be accepted. 11. The ld. CIT(A) conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs-MWP Ltd., 264 CTR 502 (Kar) (2014) (vi) CIT & Anr-vs-Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Karn)(2013) (vii) Madhushree Gupta-vs-Union of India & Anr, 317 ITR 107 (Delhi) (2009) 15. As regards the merits of the case, the ld. Counsel of the assessee submitted that the assessee has offered a sum of Rs. 7,30,50,000/- for tax against the notice u/s. 153A which has been accepted by the A.O. without addition. Hence, he pleaded that since there is no addition, there cannot be any penalty u/s. 271(1)(c). He placed reliance upon Explanation 4 to section 271(1)(c). In this regard, the ld. Counsel of the assessee placed reliance upon the case laws: (viii) Kirit Dahyabhai Patel-vs-ACIT, 80taxmann.com 162 (Guj) (2017) (ix) DCIT-vs-Purti Sakhar Kharkhana, 35 taxmann.com 594 (Nagpur)(2013) 16. The ld. Counsel of the assessee further submitted that the 3rd Member decision of ITAT Amritsar in the case of HPCL Mittal Energy Ltd. vs. ACIT (in ITA No. 554 & 555/Asr/2014 vide order dated 07.05.2018) is not applicable here. 17. Per contra, the ld. Departmental Representative (ld. DR for short) as regards the merits of the case, the ld. CIT(A) has passed a very elaborate order c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order, firstly, this is not a case where penalty proceedings are not initiated at all during the assessment proceedings. It needs to be appreciated that concealment of particulars of income and furnishing of inaccurate particulars thereof sometimes overlap and therefore merely because specific charge is not indicated in the assessment order, it does not vitiate the entire levy penalty when the penalty is levied later on a specific charge. Secondly, at times both the sections are mentioned in assessment orders passed consequent to the search and seizure operation as an abundant caution and for the reason that for some assessment year in the block period i.e. specified previous years, provisions of sec. 271AAA are applicable and for other years, provisions of sec.271(l)(c) are attracted. In such cases, what is important to be seen is whether penalty is levied by the AO on a specific charge and under a specific section in the penalty order. In the case of the appellant, during the penalty proceedings after affording an opportunity of being heard to the appellant and on appreciation of material and evidences available on record by the A.O. the penalty was levied under a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the file of the ld. CIT(A). The ld. CIT(A) is directed to consider the issue and pass a speaking order. 22. As regards the merits of the case is concerned, we find that the ld. CIT(A) has given a elaborate finding on this issue also. It is noted that the penalty has been levied u/s. 271(1)(c) under Explanation 5A. We may gainfully refer to Explanation 5A of section 271(1)(c) in this regard which reads as under: Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1) If the 70[Assessing] Officer or the 71[***] 72[Commissioner (Appeals)] 73[or the 74[Principal Commissioner or] Commissioner] in the course of any proceedings under this Act75, is satisfied that any person- (a) 76[***] (b) has 77[***] failed to comply with a notice 78[under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or] under sub-section (1) of section 142 or sub-section (2) of section 14379[or fails to comply with a direction issued under sub-section (2A) of section 142], or (c) has concealed the particulars of 80his income or 81[***] 80furnished inaccurate particulars of 82[such income, or]80 83[(d) has concealed the particulars of the fri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty should not be levied as the undisclosed income has been offered in the return of income pursuant to search cannot come to the rescue of the assessee. The case law cited by the ld. Counsel of the assessee in this regard with regard to the Kirit Dahyabhai Patelvs-ACIT, 80taxmann.com 162 (Guj) (2017) and DCIT-vs-Purti Sakhar Kharkhana, 35 taxmann.com 594 (Nagpur)(2013) cannot help the case of the assessee as they were not rendered under the context of the penalty levied u/s. 271(1)(c) under Explanation 5A. Hence, we find that there is no infirmity in the order of the ld. CIT(A) upholding the levy of penalty on merits of the case. 23. We find that the main emphasis of the ld. Counsel of the assessee in this case is that the issue is covered in favour of the assessee by the decision of the ITAT in the case of Sidhi Home Makers (supra). In this case, we find that the penalty was quashed on a finding that the notice issued by the A.O. u/s. 271(1)(c) is untenable and, hence, the penalty imposed by the A.O. u/s. 271(1)(c) was directed to be deleted. The Tribunal has also given a finding that the issue of notice u/s. 271AAA was erroneous. In this case, we have already found above in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
