TaxTMI 
TaxTMI 
2009 (8) TMI 128
X X X X Extracts X X X X
X X X X Extracts X X X X
....led in response to above notices, the assessee disclosed additional income. 3. The position in different years as copied in Annex. I to the written submissions of the assessee is as under: -------------------------------------------------------------- Asst. year Income in Income Income assessed original returned besides agricultural return under under s. 153C income s. 139 -------------------------------------------------------------- 1999-2000 Rs. 1,85,870 Rs. 3,57,410 Rs. 3,57,140 -------------------------------------------------------------- 2000-01 Rs. 2,66,279 Rs. 37,12,580 Rs. 37,12,580 -------------------------------------------------------------- 2001-02  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... After considering various submissions of the assessee, learned CIT(A) confirmed the levy. He has recorded sequence of events and his observations are pertinent for the asst. yr. 1999-2000. These are as under: "6. I have given careful consideration to the submissions made by the learned Authorised Representative of the appellant. I have also perused the material on record including the assessment folder. It is noticed that the AO had issued summons under s. 131 of the IT Act, 1961 on 3rd March, 2006 to the appellant asking her to explain the source of deposits in her bank account No. 26688 with Punjab National Bank, Rana Pratap Bagh, New Delhi, and account No. 7652 in SBI, G.T. Karnal Road, Delhi. The bank account No. 26688 was detected as a result of search operations under s. 132 of the IT Act, 1961 carried out at the residential premises of Shri K.N. Mehrotra, an employee of M/s Prabhat Zarda Group. In response to these summons, neither anybody appeared before the AO nor any adjournment application was filed. The AO thereafter issued notice under s. 153C to the appellant on7th March, 2006which was served on her on7th March, 2006asking her to file her return of income for the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 131 by the AO on3rd March, 2006. But, for the reasons best known to the appellant, she failed to comply with the summons. Again, there was no compliance to the notice under s. 153C, dt.7th March, 2006issued by the AO calling for her return of income by16th March, 2006. It was only when the AO issued specific query letters asking the appellant to give complete details of all the bank accounts held by her and to explain the source of credit entries in her bank accounts that the appellant felt cornered and then decided to file the return of income in response to notice under s. 153C declaring additional income as mentioned in the earlier para. Had the search not taken place at the residential premises of Shri K.N. Mehrotra and had the proceedings under s. 153C not been initiated against the appellant, the undisclosed deposits in her bank account would have gone undetected by the Department as the same were not declared voluntarily by her in the return of income filed by her under s. 139. The appellant's non-co-operation in complying with the summons under s. 131 as well as notice under s. 153C clearly shows that she was taking chances and was in no mood to come out clean before the D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is declared by him in any return of income filed on or after the date of search, provisions of s. 271(1)(c) shall be attracted. Explanation 5 does not make any distinction between the assessment completed under s. 153A or under s. 153C. A plea could be taken that since in Expln. 5, the words mentioned are 'date of search', it is applicable to only assessment made under s. 153A but this cannot be so as the assessment completed under s. 153C is on the same footing as the one completed under s. 153A. Moreover, in the proviso to s. 153C(1), it has been mentioned that in such cases, the date of search shall be construed as the date of receipt of books of account or documents or other seized assets by the AO having jurisdiction over such other person. In the present case, the deposits in the bank account of the appellant had not been disclosed in the return of income for the relevant assessment year filed by her before the date of search. Therefore, her case is covered by Expln. 5(a) and notwithstanding that such income was declared by her in the return of income filed by her on 28th March, 2006 after the issue of notice under s. 153C, she is liable for penalty under s. 271(1)(c). 6.3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ainst the penalty for concealment of particulars of income, as confirmed by the CIT(A)-III, vide orders dt.12th Dec., 2007. Such penalties were levied by the AO by invoking Expln. 5 to s. 271(1)(c) of the IT Act, 1961 (the Act). 2. In terms of the order of the AO, dt.27th June, 2007under s. 271(1)(c) of the Act, the appellant had filed a return under s. 139 of the Act declaring incomes as detailed at Annex. 1. 3. While such returns were pending assessment, a search operation under s. 132 of the Act was conducted on13th Jan., 2004at the residential premises of one Shri K.N. Mehrotra, an employee of Prabhat Zarda Group atDelhi. During the course of the search operations, one Annex. A8 was seized which pertained to the appellant and which was a copy of the bank statement of the appellant in Punjab National Bank, Rana Pratap Bagh, New Delhi. 4. The appellant was summoned by Dy. CIT (Central)-XIV and was later issued notice under s. 153C of the Act in compliance with which a return was duly filed as described more particularly at Annex. 1. In assessment, vide order dt. 28th Dec., 2006, the returned income along with agricultural income was accepted, with minor variations in asst. yr.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....penalty on that very basis. 9. Be that as it may, it requires to be noticed that the principle of law is that tax provisions are to be strictly construed. There cannot be any laxity or let up in reading tax provisions. No tax can be based on opinion or on intentions. One can do no better than to repeat the classic statement of Rowlatt, J. in Cape Brandy Syndicate vs. IRCs (1921) 1 KB 64 at 71. 'In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used'. In terms of this dicta, it is not possible to travel beyond the stipulations of the statute. It is particularly not possible at this stage of the proceedings to say that in the original return the bank deposits were not disclosed as income and, as such, if reckoned from that angle, concealment stands out. Such cannot be said for two further reasons, being, that once a notice for a return is issued under s. 153C of the Act, the pending proceedings abate and if proceedings are not initiated, any pending return is rendered superflu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eposterous and unbecoming of the character of a legal proceeding; in the second place, completely violative of the norms of natural justice and in the third place tendentious and vague. Penalty provisions therefore must be construed with redoubled strictness. 13. On the proposition that penalty proceedings merit strict construction and are to be construed within the terms and language of the statute and that in case of doubt, is required to be interpreted in favour of the tax payer, the following authorities are relied upon: (i) CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (l973) 88 ITR 192 (SC) 195; (ii) C.A. Abraham vs. ITO (l961) 41 ITR 425 (SC); (iii) B.L. Banik vs.St.ofTripura(1990) 78 STC 283 (Gau) at p. 294; (iv) CIT vs. P.M. Shah (1993) 203 ITR 792 (Bom) at p. 799; (v) J.K. Synthetics Ltd. vs. CTO (l994) 94 STC 422 (SC) at p. 432. Thus, the AO having recorded a satisfaction as to the nature of the charge and having intimated the charge on the basis of such satisfaction, it is not possible thereafter while considering an appeal against that order, to ignore the charge as made, and conceive of a fresh charge as ought to have been correctly made. In other words, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act, inter alia, for the following reasons: (i) The section applies in the case of an assessee where there is a search. There was admittedly no search in this case on13th Jan., 2004; such search was there on Sri K.L. Mehrotra who is a person different from the assessee. The AO has erroneously equated a search on a different and distinct assessee as corresponding to a search on the appellant. The CIT(A) has also erroneously agreed with those findings of the AO little realizing that neither he himself nor the AO had any authority under law to change or in any way alter the contents of the provisions of a statute and that too in a penalty matter. In sum, therefore, there being no search on the assessee, the applicability of Expln. 5 to s. 271(1)(c) of the Act was barred at the threshold itself. (ii) Without prejudice to (i) above, the Explanation could be invoked only in a situation where the assessee is found to be the owner of any money, bullion, jewellery or other valuable articles or things. In the subject case, the allegation is only with regard to the recovery of a piece of paper at the premises of a third party during a search. Even the information on that paper did not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re relied upon for relief herein also. Placed for most favourable consideration. Sd/- (Authorised Representative) 10th July, 2009" 10. Shri Sampath also placed reliance on the following decisions of the Tribunal cancelling penalty levied on other ladies similarly placed and whose bank statements were also found and seized in the same search at the premises of Shri K.N. Mehrotra: (a) ITA Nos. 569 to 573jDel/2008. Delhi Bench 'A' in case of Smt. Anju Devi vs. Asstt. CIT; (b) ITA Nos. 564 to 568/Del/2008. Delhi Bench 'B' in case of Smt. Meera Devi vs. Asstt. CIT. 10.1 In the light of above. he submitted that no penalty under s. 271(1)(c) is exigible. 11. We have given careful thought to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed to buy peace of mind. On the other hand, it is clearly established that concealment of income was detected consequent to search carried by the Revenue. No authority, not even Tribunal in favour of other assessees of the same group, has recorded that income not disclosed in returns under s. 139 and assessed under s. 153C of IT Act was not the concealed income of the assessee. The bare assertions of the assessee are contrary to material on record and are to be rejected. A clear case of concealment of income under s. 271(1)(c) has been made out in all the assessment years under consideration. 12. The assessee has also contended that in the assessment order, there is no finding that assessee concealed or furnished inaccurate particulars of income. This claim is also factually incorrect. 12.1 In assessment order for asst. yr. 1999-2000, after recording sequence of events leading to search at residential premises of Shri K.N. Mehrotra and refusal of the assessee to attend to summons under s. 131 and action taken under s. 153C and the return filed by the assessee, the AO as per para 5 has observed as under: "Since the assessee has filed the return of income after the date of sear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e expiry of time specified in sub-s. (1) of s. 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest. if any, in respect of such income." 12.3 The exceptions provided in the Explanation have no application here and are not relevant. The highlighted portion is required to be read in the assessment order in the light of reference to Expln. 5. There is, therefore, a clear finding fully supported by facts that assessee concealed income in the returns originally filed under s. 139, notwithstanding that such income was disclosed after search and after detection of the concealed income in returns in response to notices under s. 153C. These facts are clearly emerging from the assessment orders leading to valid initiation of penalty proceeding and penalty orders. In the light of unassailable facts, no prejudice has even been alleged or claimed by the assessee. 13. We are, therefore, of the view that technical argument raised on behalf of the assessee does not advance the case of the assessee. 14. We may now turn to legal arguments advanced on behalf of the assessee, based on invoking of Expln. 5 to s. 271(1)(c) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee fails to prove that such explanation was bona fide. The AO has wrongly invoked the provisions of Expln. 5 to impose penalty under s. 271(1)(c). Since the provisions of Expln. 5 are not attracted in the case of both the assessees, penalties imposed by AO and confirmed by the learned CIT(A) deserve to be deleted in all the appeals. We order accordingly." 15.1 Above decision was followed in other cases of Smt. Meera Devi and Smt. Anju Devi without any value addition. 16. We have carefully considered submissions of assessee relating to invoking/application/non-application of Expln. 5 to s. 271(1)(c) of the IT Act. If free and without judicial constraint to follow the decision of a Co-ordinate Bench, we would have perhaps agreed with the view taken by learned CIT(A) to Expln. 5. The said Explanation does not mention that search should be of the assessee and copy of bank statement found in search can be treated as evidence of assessee's ownership of "money" or "other valuable article". Therefore, to examine import of Expln. 5 with reference to finding recorded by learned CIT(A), the issue could be referred for consideration. However, the finding of the Co-ordinate Benches that Ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of cl. (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed, Explanation 2: Where the source of any receipt, deposit, outgoing or investment in any assessment year is claimed by any person to be an amount which had been added in computing the income or deducted in computing the loss in the assessment of such person for any earlier assessment year or years but in respect of which no penalty under cl. (iii) of this sub-section had been levied, that part of the amount so added or deducted in such earlier assessment year immediately preceding the year in which the receipt, deposit, outgoing or investment appears (such earlier assessment year hereafter in this Explanation referred to as the first preceding year) which is sufficient to cover the amount represented by such receipt, deposit or outgoing or value of such investment (such amount or value hereafter in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....collected at source and self-assessment tax paid before the issue of notice under s. 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. Explanation 5: Where in the course of a search initiated under s. 132 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eclared in the return under the proviso to cl. (a) of sub-s. (1) of s. 143 and additional tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustment so made. Explanation 7: Where in the case of an assessee who has entered into an international transaction defined in s. 92B, any amount is added or disallowed in computing the total income under sub-s. (4) of s. 92C, then, the amount so added or disallowed shall, for the purposes of cl. (c) of this sub-section, he deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished, unless the assessee proves to the satisfaction of the AO or the CIT(A) or the CIT that the price charged or paid in such transaction was computed in accordance with the provisions contained in s. 92C and in the manner prescribed under that section, in good faith and with due diligence. (1A) Where any penalty is imposable by virtue of Expln. 2 to sub-s. (1), proceedings for the imposition of such penalty may be initiated notwithstanding that any proceedings under this Act in the course of which such penalty proceedings could have been initiate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orce and applicable to the relevant assessment year. (6) Any reference in this section to the income shall be construed as a reference to the income or fringe benefits, as the case may be, and the provisions of this section shall, as far as may be, apply in relation to any assessment in respect of fringe benefits also." 16.2 In the case of K.P. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC), their Lordships of the Supreme Court held as under: "The Explanation to s. 271(1)(c) is a part of s. 271. When the AO or the AAC issues a notice under s. 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By virtue of the notice under s. 271, the assessee is put to notice that, if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall he deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, and, consequently be liable to the penalty under the section. No express invocation of the Explanation to s. 271 in the notice under s. 271 is necessary befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the fact that Expln. 1 to s. 271(1)(c) is an integral part of s. 271(1)(c) as held by the Punjab & Haryana High Court in the case of Capital Cinema vs. CIT (1989) 80 CTR (P&H) 131 : (1989) 179 ITR 628 (P&H)?" Their Lordships in the light of decision of Hon'ble Supreme Court in the case of K.P. Madhusudhanan vs. CIT held that Explanation being part of the section, there was no need to invoke Explanation before applying it. 16.7 It is further to be understood that Explanations deal with cases of "deemed concealment" and not of actual concealment fully established. Even if burden is taken to be on the Revenue, the same is also discharged in this case. We, therefore, fail to appreciate why penalty for concealment of income under main s. 271(1)(c) cannot be imposed or upheld for not disclosing "income" in the returns originally filed under s. 139 of the IT Act. Income withheld and not shown in those returns was the concealed income which was detected by the Revenue in the search in these cases. Why assessee should not pay penalty on such concealed income is beyond our comprehension. 16.8 In our considered opinion, it was totally unnecessary on the facts of these cases for the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m. He, therefore, took proceedings under s. 34 of the Indian IT Act, 1922, and added the said sum in the reassessment. In due course he issued a notice for levy of penalty and levied Rs. 68,501 as penalty for the concealment of income in the return. The penalty was levied in respect of the return filed in the original assessment proceedings. The legality of the penalty so levied came to be challenged before the Tribunal. Before the Tribunal there were two appeals, one against the levy of penalty in the original assessment proceedings and the other against the levy of penalty in the reassessment proceedings. The Tribunal cancelled the penalty levied in respect of the original assessment proceedings, but sustained the penalty levied in the course of the reassessment proceedings. The question before the Supreme Court was, in effect, whether two penalties could be levied with reference to the concealment as shown above? The Supreme Court pointed out that the ITO had full jurisdiction to make the second order of penalty, and that he did not lose that jurisdiction merely because he had omitted to recall the earlier order. It was also pointed out that the two orders could not be in force ....