9911796707
TMI Blog2024 (10) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... leted. - Shri Saktijit Dey, Vice President And Shri M. Balaganesh, Accountant Member For the Assessee : Shri Ashwani Kumar, CA And Shri Ankur Agarwal, CA For the Department : Shri Shyam Manohar Singh, Sr. DR ORDER PER M. BALAGANESH, AM: ITA no. 1945/Del/2023 (A.Y. 2017-18 u/s 270A of the I.T. Act, 1961]: The appeal of the assessee in ITA no. 1945/Del/2023 arises out of the order passed by the learned Commissioner of Income-tax (Appeals)-23, New Delhi [hereinafter referred to as the learned CIT(A) ], in appeal no. CIT(A), Delhi- 23/10421/2016-17 dated 08.05.2023, against the penalty order dated 30.01.2023, passed under section 270Aof the Income-tax Act, 1961 [hereinafter referred to as the Act ], passed by the Assistant Commissioner of Income Tax, Central circle-4, Delhi [hereinafter referred to as the learned AO ], for assessment year 2017-18. 2. We have heard rival submissions and perused the materials available on records. The penalty u/s 270A of the act was levied by the learned AO in the sum of Rs. 5,11,281/-. This penalty appeal arose out of the quantum assessment proceedings completed u/s 153A read with section 143(3) of the Act on 19.09.2021 by the learned AO. This quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness promotion expenses to the tune of Rs. 10,79,175/- and initiated penalty proceedings u/s 271AAB (1A)(b) of the Act. 7. The quantum proceedings travelled to this Tribunal at the behest of the assessee. This Tribunal deleted both the disallowances made by the learned AO in the sums of Rs. 1,17,710/- and Rs. 10,79,175/- and allowed the appeal of the assessee in ITA no. 1299/Del/2021 for assessment year 2018-19 dated 10.05.2023. Since the additions were deleted, the penalty proceedings u/s 271AAB (1A)(b) of the Act would have no legs to stand and accordingly deserves to be deleted. 8. Now, what effectively survives, is levy of penalty u/s 271AAB (1A)(b) of the Act on the suo moto disallowance of expenses of personal nature u/s 37 of the Act made by the assessee in the return filed in response to notice issued u/s 153A of the Act in the sum of Rs. 12,30,000/-. As stated in the earlier part of the order, it is not in dispute that assessee had indeed made suo moto disallowance of Rs. 12,30,000/- in the return filed in response to notice issued u/s 153A of the Act. The penalty proceedings u/s 271AAB of the Act had been initiated only pursuant to search assessment completed u/s 153A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be imposed. Subsection (1) of Section 271 stipulates certain contingencies on the happening whereof the AO or the Commissioner (Appeals) may direct payment of penalty by the Assessee. Thus, what is required to be judged is whether there has been a concealment of income in the return filed by the assessee. 15. Earlier decisions indicated a conflict of opinion as to whether Section 271(1)(c) required the revenue to specifically prove mens rea on the part of the assessee to conceal his income. In order to remove the element of mens rea, the Finance Act, 1964 deleted the word deliberately that preceded the words concealed the particulars of his income in Section 271(1)(c). Nonetheless, even post the amendment, the Apex Court in K.C. Builders v. Assistant Commissioner of Income Tax, 265 ITR 562 (SC) held that: The word concealment‟ inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of nondisclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease in the amount of income shown in the revised return is not sufficient to justify a levy of penalty. 18. The Punjab Haryana High Court in Commissioner of Income Tax v. Suraj Bhan, (2007) 294 ITR 481 (P H), held that when an assessee files a revised return showing higher income, penalty cannot be imposed merely on account of such higher income filed in the revised return. Similarly, the Karnataka High Court in the case of Bhadra Advancing Pvt Limited v. Assistant Commissioner of Income Tax, (2008) 219 CTR 447, held that merely because the assessee has filed a revised return and withdrawn some claim of depreciation penalty is not leviable. The additions in assessment proceedings will not automatically lead to inference of levying penalty. The Calcutta High Court in the case of Commissioner of Income Tax v. Suresh Chand Bansal, (2010) 329 ITR 330 (Cal) held that where there was an offer of additional income in the revised return filed by the assessee and such offer is in consequence of a search action, then if the assessment order accepts the offer of the assessee, levy of penalty on such offer is not justified without detailed discussion of the documents and their explanation whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original return under Section 139, for the purposes of all other provisions of the Act. This is further buttressed by Section 153A (1)(a) which reads: Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. 20. Therefore, the position that emerges from the above-mentioned provision is that once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein ; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the 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 unless, - (1) such income is, or the transactions resulting in such income are recorded, - (i) in a case falling under clause (a), before the date of the search ; and (ii) in a case falling under clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch represents the value of the assets found in his possession during the search) in his return filed after the search, it will be deemed that such return disclosing higher income was filed only because the assets were found in his possession during the search. Put differently, if not for the search, the Legislature deems that the assessee would not have disclosed such income in the return filed subsequently. Explanation-5 also contains two exceptions, where the assessee would not be deemed to have concealed his income and would gain immunity from levy of penalty- first, if such income is or the transactions resulting in such income are recorded in the books of account maintained by the assessee for any source of income or such income was otherwise disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of the search; second, in the course of the search, the assessee makes a statement under Section 132(4) that the assets found in his possession have been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of the time specified in Section 139(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be sufficient to show concealment under Section 271(1)(c). 26. Now for the Revenue to invoke Explanation-5, it would have to prove that its requirements are clearly fulfilled in the present case. In order for Explanation-5 to apply, it is necessary that there must be certain assets (such as money, bullion etc.) found in the possession of the assessee during the search, and that the assessee must claim that such assets have been acquired by him by utilising (wholly or in part) his income. Moreover, such income must be in relation to a particular previous year that has either ended before the date of the search or is to end on or after the date of the search and such income is declared subsequently in the return of income filed after the search. Therefore, it is only when assets are found during the search which the assessee claims have been acquired by him by utilizing (wholly or in part) his income for any particular previous year, and then declares such income (which he utilized in acquiring the assets found) in a subsequent return filed after the date of search, would it be deemed that the assessee has concealed his income. In other words, the assets seized during the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the assessee based on seized material. The assessee had drawn cash flow statement for the entire period of six years in order to determine undisclosed income based on seized material for each of six assessment years. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment year 2004-05 merely on presumption that the assessee might have been in possession of cash throughout the period covered by search assessments. The income offered to tax u/s 153A for assessment year 2004-05 is based on entries recorded in the seized material. Unlike provisions of Explanation 5A, the provisions of Explanation 5 cannot be invoked in assessment year 2004-05 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2004-05 is based on presumptions, surmises and conjectures. It is settled law that suspicion howsoever strong, it cannot take place of actual evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of six assessment years has to be rejected. In view of above discussion we are of the considered opinion that even the amended provisions of Explanation 5 cannot be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... throughout the period of assessment years under consideration has to be rejected. It is difficult to see any infirmity in the decision of the learned ITAT in the present case. Levy of penalty under Section 271(1)(c) cannot be on the basis of surmises and conjectures. Thus, Explanation-5 cannot assist the claim of the revenue in the present case for the relevant assessment years under consideration before this Court for the simple reason that for the relevant assessment years, 2005-06 2006-07, no material was recovered during the search. Rather, the assessee added ₹ 21,65,932/- in the return filed pursuant to notice under section 153A. That amount was not relatable to any sum recovered or article seized. Therefore, the question of adding or not adding amounts after the search and falling within the mischief of Explanation 5 to Section 271(1)(c) cannot arise in the facts and circumstances of this case. 29. Based on the above discussion, this Court is of the opinion that Explanation-5 cannot be relied upon by the Revenue in the relevant assessment years under consideration before this Court, and in the absence of recourse to Explanation-5, there is no incriminating evidence to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
