TaxTMI 
TaxTMI 
2010 (9) TMI 852
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....sessment years Penalty levied under section 271(1)(c) 1 2001-02 Rs. 6,100 2. 2002-03 Rs. 23,471 3 2003-04 Rs. 15,430 4 2004-05 Rs. 52,317 5 2006-07 Rs. 5,212 3. The common facts of the case are as narrated herebelow : 3.1 Shri Allauddin Ibrahim Latiwala and Shri Shabbir Allauddin Latiwala are father and son by relationship. Shri Shabbir Latiwala has been carrying on the business of import of and trading in timber in the name and style of Noorani Saw Mills. Shri Allauddin Latiwala has not been doing any business activity but deriving remuneration income from the proprietorship unit of his son. Both the individuals are independently assessed to tax. 3.2 A search at the business premises of Shri Shabbir Latiwala and at the common residential premises of both the assessees was carried out by the Department in the month of October, 2006. During the course of this action, certain documents and loose papers indicating undisclosed assessees were found, which were put under seizure. During the course of this search, which was carried out at the business/residential premises of the assessees, Shri Shabbir Latiwala originally made....
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.... against this action of the AO, which was confirmed by the CIT(A)-IV, Ahmedabad. 4. The cases were heard from both the sides. The assessees filed a common paper book consisting of 85 pages and relied upon certain judgments delivered by various Courts and Tribunals. The CIT-Departmental Representative relied upon the exhaustive order of the CIT(A). These have been discussed in brief in following paras. Assessee's arguments: 5. (a) It was argued by Mr. Popat that since the returned income came to be accepted and since there is absolutely no discussion either in the body of the assessment order or in their respective penalty orders about the specific nature of this income or about the source thereof, the AO could not have jumped to the conclusion that this represented the concealed income of the assessees and penalty could not have been accordingly levied. (b) It was further argued that, the penalty proceeding is held to be independent of corresponding assessment proceeding and since the penalty is a deterrent for the erring assessees and not a mode for collecting the legitimate dues of the Government, the AO is clearly required to run one extra mile for establishing with ....
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....ffer of the assessee and not entirely on the seized documents, Tribunal further observed that since no attempt was ever made to find out the locus of the earning and the person who concealed such income, the AO could not have levied penalty under section 271(1)(c). The Tribunal accordingly deleted the penalty and the Hon'ble High Court indirectly confirmed the view of the Tribunal by mentioning that it is a finding of fact and no substantial question of law arises. (d) Mr. Popat also vehemently argued that even if there is no built-in immunity from levy of penalty under section 271(1)(c) and admitting about the non-applicability of Expln.5(2) of that section, automatic levy of penalty and that too without the AO even knowing as to the nature of additional income offered and of the resultant charge is clearly not permitted in view of the judgment of Hon'ble Supreme Court in the case of Union of India v. Rajasthan Spg. & Wvg. Mills [2009] 180 Taxman 609 and of Jodhpur Bench of Tribunal in the case of Ashapurna Buildcon (P.) Ltd. v. Asstt. CIT [2009] 28 SOT (Jodh.)(URO). (e) Mr. Popat also relied upon the judgment of Jodhpur Bench of Tribunal in Ashapurna Buildcon (P.) Ltd. (sup....
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.... the Central Excise Act, the judgment also expressly deals with the provisions of section 271(1)(c) as well. The Hon'ble Supreme Court has tried to carve out certain situations in which the penalty may be levied or otherwise. For example, the Hon'ble Supreme Court has held in this judgment that in order to levy penalty mens rea is not required to be established if there is a definite finding of concealment of income or of furnishing of inaccurate particulars of income. As against this, penalty cannot be levied merely because there is a technical default on the part of the assessee which may be arising out of the different interpretations of law or like reasons. The Hon'ble Supreme Court also laid down that the leviability or otherwise of the penalty would depend upon the existence or otherwise of the conditions expressly stated in the section and once the section is applicable in a case, the concerned authority would have no discretion in quantifying the amount and penalty must be imposed. The learned Authorised Representative also relied upon the other judgment of Hon'ble Supreme Court in the case of CIT v. Reliance Petro products (P.) Ltd. (h) In the backdrop of the abovementi....
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....tive heavily relied upon the exhaustive order of CIT(A). He submitted that it was very obvious that but for the search, the assessees would not have offered the additional income for taxation and it was only after the search and only after receiving notice under section 153A that they deemed it proper to incorporate the hitherto concealed income for taxation. The concealment of income on the part of the assessees was thus admitted by them by their very conduct and the AO was clearly not required to establish anything beyond the same. (b) The CIT-Departmental Representative also pointed out that there was a voluminous material admittedly and undisputedly found and seized by the Department during the course of search. The assessees have agreed from time and again that these seized materials related to several unaccounted transactions carried out by them at the relevant point of time. The magnitude and nature of the seized material were of such a scale that they were forced to prepare supplementary books of account so as to quantify the additional income for taxation for different years. The assessees have also agreed that traditional income offered by them in various years is prim....
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....nd where the AO established about the satisfaction of charge while levying the penalty under section 271(1)(c) and if the answer to the later question is in negative, whether the fact of assessee having offered additional income in his returns furnished in response to notice under section 153A can be deemed to be a satisfaction on the part of the AO about original concealment of income on his part. These have been discussed in the following paras : (b) Regarding the first issue of eligibility or otherwise of the built-in immunity as prescribed in Expln. 5(2) under section 271(1)(c), there is clearly no doubt that the terms and conditions prescribed in the Explanation have clearly not been fulfilled and the assessee can never claim such immunity from penalty insofar as the completed years are concerned, if either the returns thereof were already furnished or the time-limit prescribed under section 139(1) has already expired. It is noticed from the record that in each of the eight years, subject matter of this common order, the assessees failed in complying with this basic requirement. They are thus clearly not eligible for claiming any immunity from levy of penalty. The ratio of ....
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....the fact or the basis on which the additional income was offered for taxation so as to determine as to whether the same can be genuinely termed to be voluntary and suo motu in nature, as contended by the assessee or a forceful and compulsory offer of additional income flowing out of the development of search, as contended by the Revenue. (d) We have noticed from the records that neither the assessee is in a position to establish that, the additional income offered by him was a voluntary act on his side and had nothing to do with the findings of search or the documents seized therefrom. On the other side there is a clear failure on the part of Revenue as well in identifying the very foundation on the basis of which the assessees have offered additional income in various years and to link such foundation with the documents or other records that may have been found during the course of search. We have noticed from the assessment order as well as from the order of CIT(A) that except for mentioning that the assessees offered additional income for taxation while furnishing the returns of income in response to notice under section 153A they have not mentioned anything about the linkage....