TaxTMI 
TaxTMI 
2010 (7) TMI 665
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted, Assessing Officer adjusted it only on 7/5/2008 and therefore wrongly levied interest u/s. 234B and concluded that Assessee is not covered by the immunity u/s. clause (2) of Explanation 5 to Section 271(1)(c) and hence penalty may be deleted. 4. Without prejudice to above, the Ld. CIT(A) failed to appreciate that no interest u/s. 234A and 234C is leviable and hence, penalty may be deleted. 5. Without prejudice to above, the assessee was under a bonafide belief that no interest u/s. 234A, 234B & 234C is payable as per the return of income and hence, penalty may be deleted. 6. Without prejudice to above, the Ld. CIT(A) failed to appreciate that Assessee voluntarily offered the undisclosed income for taxation to buy peace and avoid penalty proceedings and the department failed to discharge the burden of proving concealment and hence penalty of Rs.12,60,000/- may be deleted. 7. The Ld. CIT(A) Officer failed to appreciate that notice u/s. 153A was bad in law and the consequent assessment order is null and void as 153A is mandatory to issue notice requiring assessee to file returns for six assessment years preceding the year of search and he must make ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee. Relying on the judgement of the Hon'ble High Court of P&H in the case of Ashok Kumar Gupta vs. CIT 287 ITR 376, he considered that that the immunity can be availed of by an assessee only if the tax on the surrendered income along with interest is paid immediately after surrender and in any case before filing of return of income. In the instant case, even considering the adjustment of seized cash of Rs.12,00,000/- the assessee paid only tax on surrendered income and the interest thereon remained unpaid as on the date of filing return in response to notice under section 153A. Thus, AO held that the assessee was not entitled to the immunity under clause 2 of Explanation 5 to section 271 and levied the impugned penalty under section 271(1)(c). 4. It was contended before the CIT(A) that the assessee has disclosed all material facts, which are duly accepted in the assessment completed under section 143(3) r.w.s. 153A and the assessee had voluntarily offered undisclosed income to buy peace and relied on various case laws for cancellation of penalty. The CIT(A) confirmed the penalty stating as under: - "6.2 I have considered the facts of the issue as well as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e payment of taxes on surrendered income and interest thereon had not been fulfilled. 6.4 In view of the discussion in the above paragraphs it is held that the appellant is not entitled to exception provided under clause 2 of Explanation 5 to section 271(1)(c) and that the appellant having furnished inaccurate particulars of his income as admitted in the statement recorded on oath, the penalty has been correctly levied, irrespective of whether interest u/s. 234A, 234B or 234C was payable or not. It is further held that the appellant did not voluntarily disclose any income and that the surrender was made only after the appellant was searched and the said statement recorded." 5. Before us, referring to the paper book filed in this regard from page No. 1 to 36 and various case laws from page 37 to 150 and further documents placed on record with reference to the copy of original return filed on 16.07.2003, it was the submission of the learned counsel that penalty cannot be levied as the assessee had filed return of income and the Department had accepted same in the order passed under section 143(3) r.w.s. 153A., hence, when there is no addition to the returned in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as per section 234B sub-section 3 interest is payable for period commencing on the day following the date of determination of total income. Explanation 2 to section 234B(1) states that, where, in relation to an assessment, an assessment is made for the first time u/s 147 or 154A, the assessment so made shall be regarded as a regular assessment for the purpose of this section. 5. Interest u/s. 234B is only Rs.230/- as per the return filed which is paid by the assessee. 6. Without prejudice, the learned Assessing Officer failed to appreciate that though the Application of the assessee dated 3/3/2006 to adjust seized cash of Rs.12,00,000/- towards tax liability was not rejected, Assessing Officer adjusted it only on 7/5/2008 and therefore wrongly levied interest u/s. 234B and concluded that Assessee is not covered by the immunity clause (2) of Explanation 5 to Section 271(1)(c) and hence penalty may be deleted. Gopal Chand Khandelwal vs. ACIT (1995) 52 ITD 661 (Del) (666-669) 7. Sec. 234C is not applicable as section 234C has not been amended so as to bring within its ambit the assessments under section 153A. 8. As the entire interest is paid befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that agreeing to additions does not follow that the amount agreed to be added was concealed. There may be hundred and one reasons for such admissions, i.e. when the assessee realises the true position does not dispute certain disallowances but that does not absolve the Revenue to prove means rea of quasi-criminal offence. The learned counsel also relied on the decision in the case of CIT vs. Suresh Chandra Mittal 241 ITR 9 (SC) for the above proposition. The learned counsel also distinguished the case of Ashok Kumar Gupta vs. CIT 287 ITR 376 (P&H) stating that in that case neither the return was filed nor the admitted tax was paid. It was the submission that the assessee had voluntarily offered the income and hence, penalty is not attracted both on facts and also on law. 7. The learned D.R., however, referred to the penalty order of the A.O. and the order of the CIT(A). It was his submission that the assessee has not paid tax plus interest and referred to the consequential order passed by the A.O. subsequently under section 154 giving credit to Rs.12,00,000/- seized and submitted that the assessee had to pay an amount of Rs.2,70,948/- out of which an amount of Rs.2,14,553....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the revised return filed under 153A as well. It was his submission that the assessee has not disturbed the capital gain computation or the claim of exemption under section 54F while offering the amount of Rs.40,00,000/- as speculation profit along with share of income from the firm under the head "Profits and Gains of Business or Profession". Accordingly the CIT(A) was correct in conforming the penalty as assessee has not bonafidely admitted any income in the original return and there was concealment to that extent of Rs.40,00,000/-ie. income which was admitted in the return filed after the search and seizure proceedings. It was also his submission that the return filed after search and seizure proceedings cannot be considered as voluntary. He accordingly supported the orders of the A.O. levying and the CIT(A) confirming the penalty. 8. We have considered the issue. Before adverting to the legal propositions it is necessary to place on record the factual positions vis-à-vis the returns filed by the assessee. As seen from the return filed originally by the assessee for A.Y. 2003-04 on 16th July 2003 the assessee has admitted the following: - (a) Income....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 13. The CIT(A), however, considered that Explanation 5 is not applicable to the facts of the case and by elaborate discussion on the issue, which was extracted in the earlier part, he confirmed the penalty holding that Explanation 5 was not all applicable to the facts of the case. 14. As seen from the facts and the findings of the CIT(A) in this regard, we are of the opinion that Explanation 5 to section 271(1)(c) is not applicable to assessee's case. Since the said Explanation operates in a case where the assessee is found to be the owner of any money, jewellery and other valuable articles or thing and as such the assets have been acquired by him by utilising the income these provisions are not applicable to assessee's case as the assessee has not found to be owner of any such asset. What the assessee has done is that the assessee has earned speculative profit from the transactions of shares or from the business in cash and then converted the same into long term capital gains and received the sale proceeds in a modus operandiadopted to disclose only long term capital gains and when confronted with the transactions the assessee admitted that it was an accomm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ginal return and admittedly this speculation profit was earned in share transaction outside the books of account as per the statement given in the course of search. In view of this the assessee's contention that sale of shares cannot be treated as unexplained cash credit on merits cannot be accepted. 17. The issue whether immunity is available to the assessee when additional income was disclosed in the return u/s 153A was also considered by the Coordinate Bench in the case of ACIT vs. Kirit Dahyabhai Patel reported in 121 ITD 159 (TM) (One of us, the President as Vice President, Ahd. Bench as the Third Member) wherein these issues are discussed in para 10 to 13 of the Third Member order as under: - "10. Before me the main argument on behalf of the assessees was that since s. 271(1)(c) was applicable to an assessment made under s. 153A, the immunity from penalty given by Expln. 5(2) to s. 271(1)(c) was available to the assessees. Reliance is placed on the judgment of the Madras High Court in the case of CIT vs. S.D.V. Chandru (supra) and the Rajasthan High Court in CIT vs. Kanhaiyalal (2008) 214 CTR (Raj) 611 : (2008) 299 ITR 19 (Raj) and the order of the Alla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....returns related to earlier assessment years. To the same effect is the judgment of the Rajasthan High Court in CIT vs. Kanhaiyalal (supra). In fact, in this case the High Court has observed that it is not merely the right of the assessee to file returns for the earlier assessment years after the date of the search pursuant to declarations made under s. 132(4) but it is his obligation to do so and the immunity conferred by Expln. 5(2) cannot be taken away or watered down. The view taken by the Madras High Court in S.D.V. Chandru's case (supra) has been noticed by the Ahmedabad Bench of the Tribunal in the group case of Rupesh Bholidas Patel (supra) but the Bench has preferred to follow the judgment of the Bombay High Court in the case of Sheraton Apparels (supra), a decision which has also been followed by the learned AM in the present appeals. The learned AM has also referred to the order of the Tribunal in the group case of Rupesh Bholidas Patel (supra) and in para 13 of his order has held that since it is a case of the same group and the facts and circumstances of the assessees' cases are similar to those in the case before the Tribunal, he would draw support for his view from th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 162 ITR (St.)] The above circular explaining the amendment shows that the benefit of immunity conferred by the Expln. 5(2), as amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 w.e.f. 10th Sept., 1986, is confined to the return for the year in respect of which the previous year is yet to end or even though ended, the time for filing the return under s. 139(1) is yet to expire. In the present case, the search took place on 4th Sept., 2003. In respect of the asst. yr. 2003-04, for which the previous year would have ended on 31st March, 2003, the return under s. 139(1) would be due latest by 31st Oct., 2003. In respect of all the earlier years, needless to add, the due dates for filing returns under s. 139(1) would have ended much earlier. Returns were filed by the assessees after the search, in response to notices issued under s. 153A, on 31st May, 2004. The addtional income declared in these returns do not fall under the category of the return mentioned in Expln. 5(2) to s. 271(1)(c). Therefore, the assessees are not entitled to the immunity from penalty. 13. I accordingly agree with the view taken by the learned AM on this aspect of the matter ....