TaxTMI 
TaxTMI 
2016 (6) TMI 975
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....o notice u/s.153A the assessee furnished the return of income on 11-11-2011 declaring total income of Rs. 57,39,630/-. The above income included additional income of Rs. 41 lakhs, the details of which are as under : (a) On account of land -Mr.Vardhaman Jain - 14 Lakhs (b) profit of unrecorded transactions in Kirana - 10 Lakhs (c) Land - Mr.Dilip Phadol - 17 Lakhs 4. The AO completed the assessment u/s.153A r.w.s.143(3) determining the total income at Rs. 57,39,630/- which was the income declared in the return filed in response to notice u/s.153A. 5. Subsequently, the AO initiated penalty proceedings and asked the assessee to explain as to why penalty should not be levied. The assessee explained that the assessee while preparing the return of income has offered additional income of Rs. 41 lakhs on account of estimated GP/brokerage voluntarily in consonance with the statement recorded. The same income has been accepted. The assessee made the voluntary declaration to buy peace. Since the additional income offered for taxation is on account of estimation which has been accepted by the AO, therefore, no penalty should be levied. 6. However, the AO was....
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....icle is involved with regard to the estimated gross profit of Rs. 10,00,000/- and Rs. 14,00,000/- and Rs. 17,00,000/- on a/c of brokerage income received from Mr. Vardhaman Jain and Shri Dilip Phadol respectively was offered as an additional income. Out of the brokerage income of Rs. 31,00,000/-, Rs. 14,00,000/- and Rs. 17,00,000/- = Rs. 31,00,000/- were received from Shri Vardhaman Jain and Shri Dilip Jain respectively. The commission of Rs. 14,00,000/- was received from Shri Vardhaman Jain by cheque on 26/02/2008 on which TDS of Rs. 1,40,000/- was also made, which is recorded in the regular books of a/c of the assessee for that assessment year. Rs. 2,00,000/- in cash was received from Shri Dilip Phadol on a/c of undated chit. This commission income of Rs. 31,00,000/- was not offered to tax in the regular return of income filed u/s 139 for A.Y. 2008-09 on the ground that the same was an advance because the transaction relating to that was not finalized during F.Y. 2007-08. The assessee demonstrated that the property transaction on which the impugned commission/brokerage was received got finalized during the F.Y. 2009-10, when the search took place for which the return of income wa....
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....31,00,000/- on a/c of brokerage income to tax to buy peace of mind. The appellant has also paid all the taxes. The above explanation of the appellant is found to be plausible and hence bonafide. Further, the explanation is not found to be false. In view of the above facts and in view of Explanation-I to section 271(1)(c) the penalty imposed by the A.O. for these assessment years is not justified. This proposition of law is supported by the following decisions : 1) National Textiles Vs. CIT 249 ITR 125 (Guj.) 2) Hergopalsingh Vs. CIT 258 ITR 85 (P&H) In the case of CIT Vs. Bhimji Bhamji & Co. 146 ITR 145 (Bom.) it has been held that just because the assessee has agreed to an addition does not imply that he agrees that the income was concealed. The Hon'ble ITAT, Pune in the case of Chandan K. Shewani Vs. DCIT, Pune I.T.A. No.235 and 236/PN/2010 order dated 29/08/2012 has held that a penalty u/s 271(1)(c) cannot be levied on the additional income declared by the assessee in returns filed u/s 153A of the Act. This decision has been followed by Hon'ble ITAT Pune in the case of ITO Central-3 Vs, Prakash Champalal Kankaria, I.T.A. No.1465 to 1467/PN/2011....
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....d that the CIT(A) has deleted the penalty by holding that the explanation of the assessee is bonafide because he has offered the additional income to buy peace of mind. However, the same is contrary to provisions of the Act. Relying on the decision of the Pune Bench of the Tribunal in the case of Mrs. SaritaKaur Manjeet Singh Chopra vide ITA No.1562/PN/2013 order dated 30-10-2015 for A.Y. 2009-10 he submitted that the issue has been decided against the assessee. 10. The Ld. counsel for the assessee on the other hand heavily relied on the order of the CIT(A). Referring to the copy of the assessment order, the Ld. Counsel for the assessee submitted that the AO has not mentioned as to what are the papers found or the nature of such document. Referring to pages 100 and 101 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the notings made thereon and submitted that those papers do not bear any date. Further, the cheques were received in the year 2010 and the party has deducted TDS, therefore, the assessee could have declared the income in the year 2010-11. If the assessee would have declared such income in A.Y. 2010-11, the immunity provided u/s.2....
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....he return filed in response to notice u/s.153A which has been accepted by the AO in the order dated 30-12-2011 passed u/s.143(3)/153A. We find the AO levied penalty u/s.271(1)(c) amounting to Rs. 12,30,220/- on account of undisclosed income of Rs. 41,00,470/- on the ground that the assessee has concealed the particulars of income to the extent of Rs. 41,00,470/-. Had there been no search the assessee would not have declared such additional income of Rs. 41 lakhs. Therefore, the disclosure is not voluntary for which the assessee is liable for penalty within the meaning of section Explanation 1 and 5A to section 271(1)(c) of the I.T. Act. It is the submission of the Ld. Counsel for the assessee that the commission income which was declared in the assessment year A.Y. 2008-09 infact belongs to A.Y. 2010-11. M/s.Vardhaman Trading Company has deducted tax at source, copy of which is placed at page 98 of the paper book. Similarly, the amount of Rs. 17,00,000/- received from Mr. Dilip Phadol also relates to A.Y. 2010-11. Merely because the assessee on wrong assumption of facts has declared the income in A.Y. 2008-09 whereas the income relates to A.Y. 2010-11, therefore, penalty should not....
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....egarding the receipt of the same in A.Y. 2010-11 and if found correct to delete the penalty on the amount of Rs. 14,00,000/-. 14. So far as the other amounts are concerned, i.e Rs. 17 lakhs from land transaction with Mr. Dilip Phadol and unaccounted profit from Kirana business at Rs. 10 lakhs is concerned, the same were declared in the statement recorded u/s.132(4) on the basis of the various discrepancies found by the search party. There is no proof that the same were received in A.Y. 2010-11 like in the case of Mr. Vardhaman Jain. Therefore, the question that arises is as to whether penalty can be levied on the above amounts within the meaning of Explanation 5A to section 271(1)(c) of the Act. We find a somewhat identical issue had come up before the Pune Bench of the Tribunal in the case of Mrs. Sarita Kaur Manjeet Singh Chopra (Supra). We find the Tribunal after considering various decisions has upheld the penalty levied under the provisions of Explanation 5A to section 271(1)(c) of the Act by observing as under : "15. Now, coming to the issue that where the assessee had offered the income in the return of income filed after surrendering the additional income, can t....
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.... found in possession of money, bullion, jewellery, valuable articles or things, then in case he declared the same under the statement recorded under section 132(4) of the Act and thereafter, pays the taxes on the same, no penalty under section 271(1)(c) of the Act was levied on such person. 16. However, for searches initiated under section 132 of the Act on or after first day of June, 2007, another Explanation 5A was applicable, which was introduced by the Finance Act, 2007 w.e.f. 01.06.2007. The original Explanation 5A provided that where in the course of search, the assessee was found to be the owner of any money, bullion, jewellery, valuable articles or things and the assessee claims that such asset had been acquired by him by utilizing wholly or in part his income for any previous year or any income is based on any entry in books of account or other documents or transactions and he claims that the same represents his income for any previous year, then where the period has ended before the date of search and the due date for filing the return of income for such year has expired and the assessee has not filed the return of income, then notwithstanding that such income is....
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....provisions of the Explanation 5A to section 271(1)(c) of the Act, it is noted that the person is deemed to have concealed particulars of his income or furnished inaccurate particulars of such income, which is equivalent to the value of money, bullion, jewellery, valuable articles or things from the possession of the assessee during the course of search conducted on or after first day of June, 2007. Further, where any income is based on any entry in any books of account or other documents or transactions and he claims that all the above said represents his income for any previous year, then the Explanation lays down to that extent, the person would be deemed to have concealed his particulars of income or furnished inaccurate particulars of income. 18. Now, coming to the main provisions which constitute two portions i.e. what is concealment and quantum of penalty to be levied. The question is quantum of income on which penalty is to be levied. The said issue was before the Pune Bench of Tribunal in ACIT Vs. Mulay Construction P. Ltd. & Ors. in ITA Nos.116 to 119/PN/2012 & Ors. and it was held as under:- "16. The next limb of argument of the Ld. counsel is that Expla....
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...." 17. As per interpretation made by the Hon'ble' Supreme Court of sec. 2(24) of the Act, it is clear that it is an 'inclusive' definition and it covers all income come under charging provisions of the Act. If the argument of the learned counsel is to be accepted then no income can be taxed u/s. 68, 69, 69A, 69B, 69C & 69D. 18. It is necessary to refer to Explanation 5A which reads as under: "Explanation 5A - Where, in the course of a search initiated under section 132 on or before the 1st day of June 2007, the assessee is found to be the owner of (i) Any money, bullion, jeweler or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii) Any other income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and (a) where the return....
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....nt seized or otherwise was not covered. It is pertinent to note that sec. 69C provides that if any unrecorded expenditure is found and the assessee fails to explain the source of the said expenditure or explanation of the assessee is not satisfactory, then to the extent of the amount covered by such expenditure is treated as income. Ultimately what is taxed under Sec. 69 C of the Act is not the expenditure but it is basically the undisclosed income which has been applied for incurring the unrecorded expenditure. In our view, there is no merit in the argument of the Ld. Counsel that the assessee has only declared the amount expenditure. We therefore, hold that to the extent of the income offered by the assessee pertaining to the expenditure in the returns filed in response to notice u/s 153A, Explanation-5A is applicable and as there is a legal presumption against the assessee in respect of the said income detected during the course of search and seizure operation, the assessee case is squarely covered by Explanation- 5(ii) as the assessee himself has admitted the said undisclosed income." 19. Applying the said proposition to the facts of the present case, we hold that the ....