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TMI Blog2003 (11) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Mohan T. Kukreja and Shri Sunil T. Kukreja. The sources of income declared by the assessee for the year under consideration were share of profit from various partnership firms, rental income and disclosure under s. 132(4) of the IT Act, 1961, made during the course of search. The AO further observed that during the course of search there were many incriminating pieces of evidence indicating charging of 'on-money' by Kukrejas on sale of flats, unaccounted expenses in various projects, loans taken by the group not recorded in books of account and Benami investments by Kukrejas. In the course of search, in his statement dt. 6th Feb., 1995, under s. 132(4), Shri Sunil T. Kukreja, the assessee, had disclosed income of Rs. 40,00,000. In the assessment under s. 143(3), the AO made various additions on account of unaccounted cash found during the search, unexplained jewellery found during search, unexplained investment in electronic gadgets, unaccounted expenses appearing on p. 149 of Annex. A-1 and unaccounted expenses in Pali Hill bungalow. 3. In response to notice under s. 271 r/w s. 274 of the IT Act, 1961, dt. 27th March, 1998, the assessee submitted vide letter dt. 17th April, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as per Expln. 5 to s. 271(1)(c) were not satisfied in the present case. The AO also held that the assessee should be deemed to have concealed the particulars of his income or furnishing inaccurate particulars of such income, because the assessee had not claimed that the assets found in his possession had been acquired by him out of income disclosed under s. 132(4) and that the income disclosed by the assessee under s. 132(4) related to the previous year relevant to the asst. yr. 1995-96, the previous year which was to end on or after the date of search. The AO was, therefore, satisfied that on the facts and in the circumstances of the case this is a fit case for levying penalty under s. 271(1)(c) and levied penalty amounting to Rs. 23,92,872 @ 150 per cent of the tax sought to be evaded on the concealed income of Rs. 40,24,225. Aggrieved by the penalty order dt. 29th Sept., 1998, the assessee preferred an appeal before the CIT(A). 4. Before the CIT(A), the assessee's representative filed written submissions with a paper book containing 36 pages. In the written submissions the assessee referred to the statement of late Shri Omprakash Tolaram recorded on 25th/26th Oct., 1994 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery, seized during the course of the search and/or in the assets reflected in the seized material and cash found. Anything contrary to this effect as might have been stated earlier is corrected herein. I seek immunity from penalty and prosecution." The statement of the assessee was also recorded on 6th Feb., 1995 and the assessee specifically referred to the following portion of the said statement: "Q. No. 2. Please go through the statement of Shri Omprakash T. Kukreja made later and state as to what you have to say in respect of disclosure of Rs. 40,00,000 (Rupees forty lakhs) in your name. A. 2. I have perused the statement of Shri Omprakash Kukreja made today and I hereby confirm the disclosure of additional income of Rs. 40,00,000 in my name and confirm the statement regarding the mode of earning of income and utilisation of such income. Q. No. 3. Do you want to say anything else? Ans. Yes, I seek immunity from penalty and prosecution on disclosure of additional income of Rs. 40,00,000." 5. After considering the submissions of the assessee, the CIT(A) cancelled the penalty levied by the AO, holding as under: "18. I have carefully considered the reasonings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered only in the context of Expln. 5 to s. 271(1)(c). From the reading of the penalty order it is quite clear that the AO has imposed penalty only under Expln. 5 to s. 271(1)(c) and for this purpose she could take the concealed income only at Rs. 40,00,000. Since Rs. 40,00,000 were declared by the appellant under s. 132(4) and were also included in the taxable income of the appellant in the return of income submitted, it is crystal clear that any adjudication in the present case with regard to levy of penalty has to be made only in the context of Expln. 5 to s. 271(1)(c). 19. It is well-settled that penalty proceedings are quasi-criminal in nature and the opportunity of hearing to be granted to the assessee for imposing penalty, has to be real and not illusory. For this purpose the assessee must be initiated regarding the real default committed by him and the case which he is supposed to meet. In the present case there was no indication in the show-cause notice that the AO intended to invoke Expln. 5 to s. 271(1)(c) in the appellant's case for the purpose of imposing penalty. There was also no indication in the body of the assessment order regarding the same. In view of this I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the appeal is allowed." The CIT(A) went on to give some more reasons for the sake of completeness. He observed that if there was any ambiguity in the matter of manner of earning the disclosed income, it was the duty of the search party to have put further questions to late Shri Omprakash Kukreja and the assessee. Neither late Shri Omprakash Kukreja nor the assessee was further questioned on this point. Hence, the CIT(A) did not accept the argument of the AO that the assessee had not disclosed the manner of earning the disclosed income. In this connection, he referred to the decision of the Tribunal in the case of Mahendra Chimanlal Shah vs. Asstt. CIT (1994) 120 CTR (Ahd)(Trib) 284. He further observed that in the present case it could not be said that the assessee had not paid the taxes together with interest on the disclosed income and if the cash seized was adjusted, there would be refund due to the assessee. He thus held that the assessee has satisfied all the conditions necessary for getting immunity from penalty under Expln. 5 to s. 271(1)(c), except one condition of filing of return within the time prescribed under s. 139(1). Here also, it was to be noted that the head o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the penalty under s. 271(1)(c) imposed by the AO has rightly been cancelled by the first appellate authority. He reiterated the assessee's submissions before the Revenue authorities. He stated that the assessee was a partner in various firms which were legally bound to get their accounts audited as per the provisions of the IT Act and hence the due date for filing of return in the case of the assessee was 31st Oct., 1995. In this case search and seizure operations had commenced on 25th Oct., 1994 and were completed on 6th Feb., 1995. During this period the regular office work of the assessee and the group concerns was disrupted. On 18th Oct., 1995, Shri Omprakash Tolaram was shot dead in the office premises in presence of remaining two partners and staff. This tragedy put the remaining members of the family and staff in great fear and disrupted the normal functioning of the office. The learned authorised representative further submitted that late Shri Omprakash Tolaram and the assessee being lay persons could not have understood the various complicated points of law inherent in Expln. 5 to s. 271(1)(c) and they thought that on declaration of income they would get immunity fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had also requested the AO to adjust the seized cash of Rs. 1,84,000. The CIT(A) has observed in his order that if there was no other demand outstanding against the assessee, there was no reason why the seized cash of Rs. 1,84,000 could not be treated as advance tax for the asst. yr. 1995-96 and if it were so treated, there would not have been demand in the present case with regard to the disclosed income of Rs. 40,00,000. On verification of records, he also found that in the present case some refund relating to asst. yr. 1996-97 had been adjusted and the only demand outstanding for the asst. yr. 1995-96 was only Rs. 10,650, and if the seized cash of Rs. 1,84,000 was adjusted against the same, the assessee would be entitled for refund. He also mentioned that the IT Act has not prescribed any time-limit for payment of taxes in respect of disclosed income. The assessee had fulfilled almost all the conditions prescribed in Expln. 5 to s. 271(1)(c) for the benefit of immunity from penalty. The belated filing of return also could be understood in the background of the head of the family having been murdered in the month of October when the return was due to be filed. It could be accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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