TaxTMI 
TaxTMI 
2016 (4) TMI 552
X X X X Extracts X X X X
X X X X Extracts X X X X
....e date admitting the following incomes : Assessment Year Income returned (Rs.) 2002-02 9,24,202/- 2002-03 7,31,722/- 2004-05 4,95,693/- 2005-06 13,59,795/- 3. There was a search and seizure operation carried out u/s.132 of the Income Tax Act, 1961 (Act) on 23.8.2006 by the Income Tax department on the Builder Group of Cases of which the Assessee was a member. In the course of search, the Assessee was found to be in possession of undisclosed cash, and undisclosed income. The details are as given below :- S.No. Particulars of Income Amount (Rs.) 1. On account of cash found at residence & office 19,00,000/- 2. Income from relinquishment of tenancy rights at 9/12, Lal Bazaar Street, Kolkata. 92,45,700/- 3. Accretions from 4, Chowringhee Lane, Kolkaya from 01.01.2005 to 18.08.2006 2,62,76,335/- 4. Jessore Road Project of Diamond Group 12,00,000/- 5. Various miscellaneous transactions and receipts from 1st April, 2005 to 22nd August, 2006 26,00,000/- Total 4,12,22,035/- In effect, the assessee was in possession of undisclosed cash and income of Rs. 4,12,22,035/-. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... particulars of income. In the show cause notice u/s 274 of the Act issued prior to the passing of the order u/s 271(1)(c) of the Act imposing penalty, the AO has not specified as to whether the charge against the Assessee is for furnishing inaccurate particulars of income or for concealing particulars of income. 8. Before CIT(A) the assessee submitted that the assessee was entitled to immunity under Explanation 5 to section 271 of the Act as the assessee satisfies all the conditions laid down therein. The assessee also contended that Explanation 1 to section 271(1)(c) of the Act was not applicable to the case of the assessee because the assessee offered explanation in the course of assessment proceedings while offering additional income to tax and such offering was accepted by the AO without any modification and without any finding whatsoever against the bona fide of the workings submitted for the additional disclosure. The assessee also relied on certain judicial pronouncements in support of its claim that he was entitled to immunity under Explanation 5 to section 271 of the Act. 9. CIT(A) firstly held that Explanation 1 to section 271(1)(c) of the Act was applicable in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 5,71,956/- For Assessment Year 2004-05, the appellant on a total income of Rs. 20,26,660/- was liable to pay tax of Rs. 6,40,198/-, refund called back of Rs. 51,992/-, and interest u/s.234A of Rs. 5,289/-, interest u/s.234B of Rs. 2,34,957/- , and interest u/s.234D of Rs. 13,517/- , aggregating to Rs. 9,44,996/- , which had been discharged in part by way of TDS of Rs.l,63,242/-, self assessment tax u/s.140A of Rs. 5,27,991/- and regular tax of Rs. 2,01,275/-paid on 22-07-2008. The appellant is still due to pay tax and interest of Rs. 53,445/- . For Assessment Year 2005-06, the appellant on a total income of Rs. 84,75,7201- was liable to pay tax of Rs. 28,23,757/-, interest u/s.234A of Rs. 28,237/- , interest u/s.234B of Rs. 9,16,087/- and interest u/s.234C of Rs. 1,04,477/- ,aggregating to Rs. 38,72,558/- which had been discharged in part by way of self assessment tax u/s.140A of Rs. 25,67,626/- and regular tax of Rs. 7,29,558/- paid on 11-09-2008. The appellant is still due to pay tax and interest of Rs. 5,75,374/- . Appellant had not paid the entire tax with interest on the disclosed incomes for the Assessment Years. 2001-02, 2002-03, 2004-05 and 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 271 of the Act. The following were the relevant observations of CIT(A) in this regard : "On a careful examination of the facts of the case it is found that the Appellant/ Applicant has filed a chart showing year-wise details of disclosure of income and tax payment thereon. It is also apparent from the impugned order of my predecessor-inoffice and his orders in the related cases of the same group that his decision was based on the amounts due, in his opinion, as on the date of passing of the appellate order. Therefore, as a matter of abundant precaution, I decided to refer the matter to the AO who is the best person to certify the demand and payment position of the assessee. Vide this office letter No.CIT(A)/C-III/AMQPS2466J/KOL/2010-11/38 dated 29.04.2010 the chart showing liabilities as well as payments furnished by the assessee was forwarded to the AO who was requested to certify as to whether the appellant has paid all the taxes together with interest for the assessment years 2001-02, 2002-03, 2004-05 and 2005-06 before the appeal order dated 26.08.2009. Vide his letter No.DCIT/CCI/ Kol/Remand/2010-11/52 dated 10.05.2010 the AO has categorically stated "On verification....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provided it is established that the mistake is one apparent from records. In the instant case. the findings of the CIT(Appeals), my predecessor in office, are not supported by the finding noted by the Assessing Officer himself in his remand report dated 10.05.2010 the details of which had all along been a part of the Departmental records. So, I am of the opinion that there is a mistake apparent in the Appellate Order dated 26- 8-2009 passed in this case in ascertaining the correct factual position relating to payment of tax interest made by the Appellant/ Applicant on the disclosure of income made by him in course of the search. Such mistake needs to be rectified in the interest of justice as well as in terms of section 154 of the Act since all taxes having been paid by the Appellant/Applicant, he satisfied the requirements of availing itself of the immunity granted as per Explanation (5) u/s 271(1)(c) of the Income Tax Act, 1961. Therefore, the prayer for rectification u/s 154 of the Act 271 (l)( c) of the Income Tax Act, 1961. Therefore, the prayer for rectification u/s 154 of the Act is allowed on merit by this combined order for all the assessment years namely 2001-02,....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., makes a statement under sub-section (4) of Section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-section (1) of Section 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." In the present appeal we are concerned with clause (2) of Expln.5 to Sec.271 of the Act. In this regard it was brought to our notice that in the order dated 26.8.2009 passed by the CIT(A) which is impugned in the appeals filed by the Assessee, the satisfaction of the condition that (a) Income declared in the return of income filed u/s.153A of the Act, has been disclosed in a statement u/s 132(4) of the Act. And (b) In such statement the assessee specifies the manner in which such income has been derived has been accepted by the CIT(A) and the revenue has not challenged the said finding. The CIT(A) in the order dated 26.05.2010 of CIT(A)-Central-III, Kolkata has accepted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....truck off the irrelevant portion. In other words it was submitted that the show cause notice u/s 274 of the Act is not clear as to whether penalty is being imposed for concealing particulars of income or for furnishing inaccurate particulars of income. In this regard our attention was drawn to the decision of ITAT Kolkata Bench in the case of Satyananda Achariya Biswas vs DCIT in ITA No.05/Kol/2010 for A.Y.2003-04 dated 02.12.2015 wherein it was held that such defect in the show cause notice u/s.274 of the Act renders the order imposing penalty illegal. 20. We have carefully considered the rival submissions. As rightly pointed out by the learned counsel for the assessee the CIT(A) has in the original order dated 26.08.2009 accepted that the assessee satisfies all the conditions for grant of immunity under Explanation (5) to section 271 of the Act except the condition with regard to payment of tax with interest. In the order dated 26.8.2009 passed by the CIT(A) which is impugned in the appeals filed by the Assessee, the satisfaction of the condition that (a) Income declared in the return of income filed u/s.153A of the Act, has been disclosed in a statement u/s 132(4) of the Act.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deal with the question whether proper satisfaction was arrived at by the AO for initiating penalty proceedings u/s.271(1)( c ) in the course of concluding the assessment proceedings wherein the additions in respect of which penalty was imposed were made. 7. On the above issue the first aspect which we notice is that in the order of assessment, which we have extracted in the earlier part of this order, nowhere spells out or indicates that the AO was of the view that the Assessee was guilty of either concealing particulars of income or furnishing inaccurate particulars of income. The offer to tax of income by the Assessee has just been accepted. It is no doubt true that it is not the requirement of the law that the satisfaction has to be recorded in a particular manner, especially after the introduction of the provisions of Sec.271(1B) of the Act with retrospective effect from 1.4.1989. Nevertheless, as laid down by the Hon'ble Delhi High Court in the case of Ms.Madhushree Gupta (supra), the position of law both pre and post Sec.271(1B) of the Act is similar, inasmuch, the AO will have to arrive at a prima facie satisfaction during the course of proceedings with regard to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Income Tax Act, 1961. 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing......." 8. The Revenue places reliance only on the sentence appearing in para-10 of the judgment without reading it in the context of the observations in the last portion of para-9 of the said judgment. Therefore even the Hon'ble supreme court's decision suggests that the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. If the AO accepts all the contentions of the Assessee and the offer of income that has not been declared in the return of income to tax without indicating either directly or indirectly that the Assessee has concealed particulars of income or furnished inaccurate particulars of income, it cannot be said that satisfaction for initiation of penalty proceedings is discernible from the order of assessment. If the Assessee in good faith offers income to tax voluntarily prior to any positive detectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of inc....