AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 921
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....osure of income was the result of search operation on the assessee and not voluntary. 3. On the facts and circumstances of the case the I. D. CIT(A) has erred in ignoring the fact that provision of explanation 5(1) & explanation 5(2) of the section 271 (1)(c) of the Act are not applicable in this case. 4. Whether the disclosure made in response of the notice u/s 153A(1)(a) in respect of earlier assessment year i. E. A.Y. 2005-06 over and above already returned income after the search operation held on 11.01.2007 can be said voluntary in nature. 5. The CIT(A) erred in law and on facts by ignoring that if in pursuant to search operation, penalty is not levied for unearthing of additional income detected during a search, it would be an open incentive to all to conceal their income till such time it is detected by the department. 6. The appellant craves leave to add, alter or amend any/all the grounds of appeal before or during the course of hearing of the appeal." 4. For the relevant assessment year i. E. AY-2005-06, the return declaring an income of Rs. 1,72,799/- was filed under Section 139 (1) of the Income-tax Act, 1961 (hereinafter 'the Act) on 30.12.2005. 5. Th....
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....as above, CIT observed that the A.O. had imposed penalty on the concealed income of only Rs. 4,00,000/-, whereas in the return of income filed by the assessee in response to notice u/s 153A, the assessee had declared additional income of Rs. 21,65,932/-. Therefore, the CIT (Central-II) passed order u/s 263 of the Act on 10.3.2011 by holding that the order passed by the A.O. was erroneous and prejudicial to the interests of the revenue because the A.O. had passed the penalty order by erroneously taking the figure of concealed income at Rs. 4,00,000/- as against the additional income of Rs. 21,65,932/- declared by the asseessee. The CIT(Central-II), therefore, set aside the penalty order and proceedings were restored back to the file of the A.O. with the directions to dispose of the matter in accordance with provisions with the Income-tax Act vis-a-vis judicial pronouncements on the issue, after affording proper opportunity to the assessee. 10. In pursuance of these directions of the CIT (Central-II), the A.O. passed penalty order u/s 271(1)(c) of the Act dated 29.09.2011 levying penalty of Rs. 7,29,100/- being 100% of the amount of tax sought to be evaded on the concealed i....
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.... the appellant's case no incriminating material was found during the course of the search and none was pointed out or brought on record by the A.O. either in the assessment order or in the penalty order. In the case of Biland Ran Hargyan Dass (supra), the matter before the Hon'ble Allahabad High Court related to the A.Y. 1978-79 much before Explanation-5 to section 271(1)(c) and Section 153A were brought on the statute. In the case of K P Sampath Reddy (supra), on the basis of documentary evidence found during the course of survey, the assessee had agreed to be assessed at a higher income than the returned income whereas in the appellant's case the returned income has been accepted. Moreover, offer for surrender in that case was made because of several erroneous entries detected in the books of account whereas in the appellant's case no such discrepancies have been pointed out by the A.O. at any stage. In the case of Mohd. M Farooqi (supra), the explanation offered by the assessee with regard to cash impounded by the police authorities was not found to be satisfactory in as much as the assessee was not able to point out how much cash belonged to him and how much belonged to his bro....
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....g material, discrepancy and deficiency, then the assessee had neither furnished any inaccurate particular of his income nor had he concealed his income. 25. This issue i. E. whether the penalty U/S 271(1)(c) can be imposed in a case when the returned income declared in a Return of Income filed in response to notice u/s 153A of the act has been accepted as such, has been discussed in detail in a recent judgment of jurisdictional ITAT in the Case Sh. Prem Arora vs. DCIT, Central Circel-25, New Delhi, 2012-TIOI-262-ITAT-DEL, the facts of this case are as under- Assessee in this case was searched by the department. During the course of search certain incriminating documents were found. On the basis of these documents it was found that assessee had been carrying on unaccounted business activities. Accordingly, the AO issued notice of See 153A for six assessment years. Assessee filed his return disclosing substantial income. AO framed the assessment after estimating the income of the assessee. The AO however, could not add beyond the disclosure. In this backdrop the AO levied penalty under section 271 (1)(c) on the ground that the assessee had concealed particulars of his inc....
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....s held above the penalty u/s 271 (l)(c) is imposable when there is variation in assessed and returned income. If there is no variation, there will be no concealment. When there is no concealment, question levy of penalty u/s 271 (1)(c) of the Act will not arise. This is settled position of law. The concept of voluntary return of income may be important in penalty proceedings initiated in course of normal assessment proceedings made u/s 143(3) or 147 but not u/s 153A. From above discussion it follows that where retuned income filed u/s 153A is accepted by the assessing officer, there will be no concealment of income and consequently penalty u/s 271 (1 ) (c) cannot be imposed; ++ the Supreme Court in Varkey Chacko v. CIT has held that a penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. The penalty was permissible under the law....
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....s discussed above especially the decision in the case of Prem Arora by the Hon'ble ITAT Delhi, it is held that penalty u/s 271(1)(c) was not leviable in the appellant's case and the same is therefore, deleted. 28. In the result, the appeal is allowed." 12. The revenue, being aggrieved, has filed the appeal before us. 13. The Ld. DR submitted that the Explanation 5 of section 271(1)(c) has not been dealt with by the ld CIT(A) and when the said explanation is applied then penalty will be attracted and the AO rightly levied the penalty. So he pleaded that the order of the Ld. CIT(A) be reversed and the order of AO restored. 14. On the other hand, ld. AR for the assessee submitted that this issue is covered against the revenue by the decision of the co-ordinate Bench of ITAT in the case of Shri Prem Arora vs. DCIT, Central Circle 25, New Delhi in ITA No.4702/Del/2010 order dated 9th March, 2012 which has been relied on by the CIT (A) for deleting the penalty and therefore, he does not want us to interfere in the order. 15. We have heard both the parties and perused the material on record. We find that the assessee is an individual and belongs to M/s. J. M. Estate Develop....
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....in assessment year 2006-07 also, only the figures change. On appeal by the assessee against the penalty order imposed upon them, the ld. CIT (A) was pleased to allow the appeal and deleted the penalty. The issue before us is that whether Explanation 5 to section 271(1)(c) has been rightly considered by the ld. CIT (A) while giving relief to the assessee. 16. Similar issue was dealt by the co-ordinate Bench of this Tribunal in Prem Arora vs. DCIT (149 TTJ 590) which the ld. CIT (A) has relied on to allow the appeal. The relevant paragraph which are dealing with the issue is as under :- "11. Thus while section 153A prescribes for assessment or reassessment of total income in search cases, section 153B prescribes the time limit for completion of assessment under sec. 153A. Section 153C relates to the cases where books of accounts or documents or assets seized under sec. 132 or requisition made under sec. 132A belong to a person other than a person in whose case search under sec. 132 or requisition under sec. 132A was made. Thus provisions of sections 153A, 153B and 153C are complete code for search assessments wherein search has been initiated after 31st May, 2003. The existence....
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....-05. It is also important to note that Chapter XIVB was inserted in the statute by the Finance Act, 1995 w. E.f. 1.7.1995 which prescribed special procedure for search assessments. No penalty u/s 271 or 271A or 271B, or interest u/s 234A/234B/234C was leviable in respect of undisclosed income determined in block assessment in view of specific provisions of section 158BF of the Act. Section 158BFA was inserted by the Income -tax (Amendment), Act , 1997 w. E.f. 1.1.1997 prescribing both interest and penalty for concealment of income in respect of undisclosed income determined u/s 158BC(c). Thus the provisions of Explanation 5 to section 271(1) remained inoperative during the period from 1.7.1995 to 31.05.2003. 25. Section 153A was inserted into statute w. E.f 1.6.2003. Clause (i) of Explanation to section 153A clarify that subject to sections 153A, 153B and 153C, all other provisions of this Act shall apply to the assessment made under this section meaning thereby that provisions relating to penalty and prosecution will also apply. It means that the Explanation 5 of section 271(1) will also apply in search assessment made u/s 153A of the Act provided that the conditions relating t....
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....pulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey, may be, it would have not disclosed the income but for the said survey. However, there cannot be any penalty on surmises, on conjectures and possibilities. Section 271(1)(c) of the Act has to be construed strictly. Unless it is found that there is actually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the income tax return and offered the surrendered amount for the purpose of tax." If the facts of the case are examined in the light of decision of Hon'ble Delhi high Court in SAS Pharmaceuticals (supra) penalty u/s 271(1)(c) is not imposable where there is neither concealment of income nor furnishing of inaccurate particulars of income in return filed u/s 153A of the Act. In earlier paragraphs we have held that the concealment of income is to be determined with reference to the return of income to be filed in response to notice u/s 153A of the Act. Once returned income filed u/s 153A is accepted by the assessing officer it can nei....
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.... has not been disclosed in his return of income to be furnished before the expiry of time specified in sub-sec. (1) of sec. 139 and also specifies in the statement the manner in which such income has been derived and pays tax together with interest, if any, in respect of such income. 29. We also find that the Finance Act, 2007 has inserted words "search initiated under sec. 132 before the first day of June, 2007" in Explanation 5 of sec. 271(1) of the Act. Further Explanation 5A was inserted in the Statute by the Finance Act, 2007 in respect of a search initiated under section 132 on or after the 1st day of June, 2007. Thus Explanation 5 will not be applicable in respect of a search initiated on or after 1.6.2007. Further the words "search initiated under sec. 132 before the first day of June, 2007" have been inserted by the Finance Act, 2007 w. E.f. 1.6.2007. In our considered opinion the amended provisions of Explanation 5 will be applicable only for assessment year 2008-09 if any money, bullion, jewellery or other valuable article or thing is found from the possession of the searched person in respect whom searches are initiated on or after 1.4.2007 to 31.05.2007. 30. In c....
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....sessee ; and in the instant case of the assessee, the search was conducted on 11.01.2007 and cash of Rs. 5,26,530/- was found from the possession of the assessee ; and so the cash was admittedly, not seized during the relevant assessment years before us. In other words, the assessee had surrendered undisclosed income and cash was seized during search in A.Y 2007-2008, and not in the relevant assessment years. However, in the relevant assessment year under consideration before us, the assessee has made an addition of Rs. 21,65,932/- in the return filed pursuant to section 153A notice. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment years 2005-06 & 2006-07, which are before us, merely on presumption that the assessee might have been in possession of the seized cash throughout the period covered by search assessments. The income offered to tax u/s 153A for assessment years 2005-06 and 2006-07 cannot be said to be based on assets seized, because from the assessment order, it is clear that search was on 11.01.2007 (i. E AY 2007-08), the cash seized during search was only to the tune of Rs. 5,26,530/- and it is not emerging from the records that the assessee ha....