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TMI Blog2019 (4) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... (9) TMI 80 - DELHI HIGH COURT]; [ 2017 (5) TMI 1224 - DELHI HIGH COURT] have been unanimous to hold that if no incriminating material is found during the search action, the addition in the case of already concluded that in the absence of any incriminating material found during the search action, no addition can be made into the income of the assessee by way of revisiting the issue in the case in which the original assessment stood completed. Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) in case of already concluded assessment in the absence of any incriminating material found during the search action. Even it is not the case of the Assessing officer that there was any attempt or overt act on the part of the assessee to evade payment of due taxes. Under the circumstances, we hold that the action of the Assessing officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot coexist. That when a finding is recorded that the assessee has indeed disclosed, then the conclusion as regards concealment is bad. Even it cannot be said that the assessee furnished inaccurate particulars of income. There was no material on record to indicate that the particulars furnished by the assessee were factually incorrect. Under the circumstances, even otherwise, on merits, the penalty u/s 271(1)(c) is not attracted in this case. - Revenue appeal dismissed X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act had not expired. It is further pertinent to mention here that no incriminating material was found during the search action. Thereafter,the assessee as per prescribed procedure filed the returns u/s 153A of the Act which was same / identical to the original returns of income filed by the assessee u/s 139(1) of the Act. The assessment u/s 153A of the Act read with section 143(3) of the Act was completed by the Assessing officer for all the assessment years as per returned income and no additions etc. were made. During the assessment proceedings, the Assessing officer had asked about the sources of the aforesaid income offered / declared by the assessee regarding which the common explanation given by theassesseeswas that the same was from speculation in the sale / purchase of the agricultural land, however, no records were being maintained by the assessee in this regard and therefore, the income was offered u/s 69A 'subject to no explanation'. Since theassessees could not satisfactorily explain the sources of income, the Assessing officer, therefore, invoked the Explanation 1 to section 271(1)(c) of the Act and initiated penalty proceedings. The assessee reiterated that he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o "the tax sought to be evaded". In the appellant case, the retuned income and the assessed income are same. There was no tax sought to be evaded. 4.6 It has been held in the case of B.C. SrinivasShetty 128 ITR 294 (SC) thatwhen the computation provisions fail, the charging provisions cannot he applied.By the same logic, when the computation provisions u/s 271(l)(c) fail, therebeing no tax sought to be evaded, penalty there under cannot be levied either, asthe said provision is rendered unworkable. 4.7 Para 8 of the above referred judgment of the Hon'ble Apex is reproduced as under:- "Section 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. The asset must be one which falls within the contemplation of the section. It must bear that quality which brings s. 45 into play. To determine whether the goodwill of a new business is such an asset, it is permissible, as we shall presently show, to refer to certain other sections of the head " Capital gains ". Section 45 is a charging section. For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed case, the assessee had claimed bad debts in the original return filed and thereafter filed revised return and withdrew claim of bad debts. The AO accepted revised computation filed during assessment proceedings and also levied Penalty u/s 271(l)(c). Thus the facts of the case are different from the appellant's case as the claim made in the original return was withdrawn in the revised return filed. 5.1.2 HamirpurDistt. Cooperative Bank Ltd vs DCIT[ 2012] 25 Taxinann.com 306 Lackhnow- Trib.} In the above referred case, penalty was imposed as the amount claimed as deduction by the assessee did not even qualify to be regarded as 'expenditure' Thus, The facts of the case are completely different from the case of the appellant. 5.1.3 S. Sathyanarayananvs ACIT [2014] 50 Taxmann.com 200 {Madras} In the above referred case, during the course of search conducted under section 132 in the business premises and the residential premises of the father of the assessee, certain amount of cash books of account and documents in respect of the assessee were seized. The AO issued notices to the assessee filed the return of income disclosing certain income. The AO scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said provision is rendered unworkable. The computation of penalty with respect to the tax at ₹ 51,54,120/- is therefore contrary to the provisions of Income Tax Act. Keeping in view the aforesaid facts, the penalty imposed in this case is deleted. The grounds of appeal are hence allowed. As the similar issue is involved in all the other years (AY) 200910, A.Y 2011-12, and AY 2012-13), the penalty imposed in all these years is also deleted. 6. As a result, the appeal(s) of the appellant arc allowed in all the years under consideration i,e. AY 2008-09, AY 200910, AY 2010-11, and AY 2012-13." 6. Now Revenue has come in appeals agitating the action of the CIT(A) in deleting the penalties, whereas, the assessees apart from taking certain legal grounds/pleas have also filed the cross objectionswith certain additional grounds in support of their contention that the penalty otherwise is not leviable. 7. We have heard the rival contentions and have alsogone through the record.So far as theappeals of the Revenue are concerned, the Ld. DR has not only addressed theoral argumentsbut has also submitted written submissions. The crux of the arguments of theLd. DR has been that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer otherwise wasprecluded from making any addition in respect of those assessment years in the assessment proceedings carried out u/s 153A of the Act. That Explanation 1 to Section 271 was notapplicable in the facts of the case.Further,that even explanation given by the assessee that the aforesaid additional income was earned by speculation in the sale / purchase of agricultural land had been duly mentioned in Rule 9 Report submitted before the Income Tax Settlement Commission (in short 'ITSC'). Even the Explanation regarding the source and manner wasaccepted by the Department also in one of the case of Shri Kulwant Singh, assessee for assessment year 2013-14, wherein, penalty proceedings initiated u/s 271AAA were dropped by accepting the above explanation regarding the source of income from speculation in property business and after duly consideringthe order of the ITSC and Rule 9 Report. It has been submitted that, even otherwise, the explanation relating to the source of income has no role to play incontext of the provisions of section 271(1)(c) of the Act. That the provisions of section 271(1)(c) of the Act are since penal provisions theyhave to be strictly construed. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the case before the ITSC was that of the companyJantaLand Promoters Pvt Ltd., and not of the assessees in their individual capacity and, hence, any findings or report relating to the company was not applicable in the individual case of the assessee. Finally, has been submitted that if plea of the assessee for deleting the penalty onvoluntary disclosure was tobe accepted, than it would be unfair on the persons who have availed of voluntarydisclosureScheme said such VDS-2016 and PMGKY-2016 as theyhad paid penalty @ 25% and 10% respectively for voluntarydisclosure of their unaccounted income in these schemes.Further, it would alsobe unfairtothe persons who haveduly offered the taxes on the money deposited in the bank u/s 69A of the Act during demonetarization and had to pay tax @ 60% plus surcharge @ 25% totallingto. 75% tax u/s 115 BBE of the Act, apart from penaltyu/s 271 AAC of the Act @ 10% w.e.f. 1.4.2017. Further, that a specific charge was levied by the Assessing officer in the penalty notice regarding the concealment of particulars of income and, as such, there was no defect in thenotice. 10. We have heard the rival contentions and have also gone through the record. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) 'CIT Vs. Continental Warehousing Corporation'(supra) 'CIT Vs. Kabul Chawla' (supra) and subsequent decision of the Delhi High Court in the case of 'Principal CIT Vs. MeetaGutgutia Prop M/s Ferns 'N' Petals", ITA 306/2017 and others decided vide order dated 25.5.2017, wherein, the Hon'ble Courts have been unanimous to hold that if no incriminating material is found during the search action, the addition in the case of already concluded that in the absence of any incriminating material found during the search action, no addition can be made into the income of the assessee by way of revisiting the issue in the case in which the original assessment stood completed. Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of subsection (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "undisclosed income" means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in view of our discussion made in the subsequent paras to this order. 15. Before proceedings further, we deem it fit to first discuss the relevant provisions ofsection 271(1)(c) of the Act as they stood during the relevant period / assessment year under consideration. " 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- ……. (c ) has concealed the particulars of his income or furnished inaccurate particulars of [such income, or] …… he may direct that such person shall pay by way of penalty,- [( iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A ) such person fails to offer an expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 148; (c ) 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." 16. A perusal of the above referred to section 271(1)(c) of the Act reveals that there are twoparts of this section. The first part speaks about the charge which may invite penalty i.e. a person has concealed 'particulars' of his income or furnished inaccurate particulars of income,he may be directed to pay certain sum by way of penalty as penalty. Now, the second part speaks about the quantum of amount payable. As per clause (iii), the Assessing officer may direct such a person against whom the above charge is established topay in addition to the tax, if any, payable a sum which isnot less than,but which shall not exceed three times, the amount of tax sought to the evaded by a reason of such concealment of particulars of income or furnishing of inaccurate particulars of income. 17. Now, Explanation 1 strongly relied upon by the Ld. DR speaksabout of deeming fiction rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the issue of notice u/s 148 of the Act. As per the above said provision what is material is the evasion of the tax and in that scenario, if a person does not file a return and, hence, does not disclose his particulars of income and meaning thereby concealed his particulars of income but if he before the issuance of notice for the reopening of the assessment u/s 148 of the Act, had deposited due taxes and the resultant addition after assessment does not create any liability topay any further tax, there will be no tax sought to be evaded. 19. Now coming to the relevant clause (c) to Explanation 4, which is residuary clause which speaks that in any other case, the difference between the total income assessed and the tax that would have beenchargeable,had such total income been reduced by the amount of income in respect of which particulars have been concealed which means that the tax payable on the income in respect of which particulars have been concealed or inaccurate particulars of income furnished. 20. A collective reading of all the three clauses reveal that for the calculation of the quantum of penalty, it is not the income in respect of which particulars have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure, ' the tax sought to be evaded' will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression 'tax sought to be evaded' given earlier is a case to which Explanation 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed." 21. Even in the Explanation 1, what is relevant is any fact material to computation of total income of any person regarding which such person fails to offer an 'Explanation' or Explanation which is found to be falseby the Income-tax authorities or an Explanation which is not able to substantiate, then, theamount added or disallowed incomputing total income of suchperson as a result thereof deemed to represent the income inrespect of which particulars have beenconcealed. So, firstly what is relevant is the material fact to the computation of total income. The word 'computation' here is relevant which means that the fact must be material which has the effect of any addition or disallowance in the income to be computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 16[or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) 16a[and clause (b)] of sub-section (1)." Section 271AAC "271AAC. (1) The Assessing Officer may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of ten per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income and paying taxes @ 30% as providedu/s 115BBC of the Act, act of the assessee was taken as contributory factor in failure of the Voluntary Disclosure Scheme. Hence, to curb this practice, the government substituted sub section (1) of section115 BBE to provide that wherein in the return of income furnished by the assessee, the total income of an assessee includes an income referred to in sections 68, 69, 69A, 69B and 69 C or section 69D, or otherwise added or determined by the Assessing officer during the assessment proceedings under the above provisions, then the tax at the flat rate of 60%will be payable on such an income disclosed or determined. Further to mark a difference between the self-declared income in the aforesaid provisions and the cases where the Assessing officer determined /detected such income in the aforesaid sections 68, 69, 69A, 69B and 69 C or section 69D,the penalty provisions of section 271AAC comes into operation which provides that if such an income is suo moto declared by the assessee in his return, then no penalty is leviable and if it is otherwise detected by the Assessing officer, in addition to the tax payable u/s 115BBC, such an assessee will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of clause (iii) to section 271(1) reveals that as per the relevant provisions, the Assessing officer may direct a person who as per clause (c) has concealed the particulars of income or furnished inaccurate particulars of such income to pay by way of penalty, a sum which shall not be less than but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income. So as per the above provisions for the levy of penalty there must be some amount of tax sought to be evaded which should be by reason of the concealment of particulars of income or furnishing of inaccurate particulars of income of such income by the assessee. Hence, if there is no amount of tax sought to be evaded by reason of concealment of particulars of income or inaccurate particulars of income, the penalty cannot be computed or to say that the penalty under the provisions will be 'Nil'. It is pertinent to mention here that Explanation-1to section 271(1)(c) of the Act also provides that if a person fails to offer an explanation or explanation offered is found to be false by the Income-tax Authority or he fails to substantiate such explanation, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, they could not substantiate the said earning of income with documentary evidence. At the same time, even the Assessing officer has not brought or put in any case that the income in question declared by the assessees was not from the sources, mode and manner explained, rather, the source of income was from some other transactions to the knowledge of the Assessing officer. It is a case where the assessees could not prove by evidence the source of income earned, however, at the same time the Assessing officer has also not disapproved the explanation given by the assessees. For invoking the penal provisions of section 271(1)(c) of the Act, there must be an overt act on the part of the assessee of concealment of income or furnishing of inaccurate particulars of income. Since the explanation given by the assessees has not been proved to be false or otherwise disapproved by the Assessing officer, hence, under the circumstances, it cannot be said that the assessees have concealed the particulars of income or furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act.The assesses, themselves, declared income in question and paid the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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