TaxTMI 
TaxTMI 
2016 (10) TMI 492
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....otice issued under sec. 153A, the assessee furnished return of income along with year-wise bifurcation of Rs. 10 crores surrendered by the assessee immediately after the completion of search. The Assessing Officer framed assessments under sec. 153A accepting the returns of income filed for the assessment years under consideration. The Assessing Officer thereafter initiated penalty proceedings under sec. 271(1)(c) of the Income-tax Act, 1961 and levied the penalty for the assessment years under consideration. The aggrieved assessee approached the first appellate authority but could not succeed. The action of the learned CIT(Appeals) in upholding the penalty levied by the Assessing Officer for these assessment years has been questioned by the assessee before the ITAT. 4. In support of the ground, the Learned AR has furnished following submissions in the shape of written synopsis: 1. It is submitted that on 18.02.2011, a search and seizure action was conducted at the premises of the assessee and its group companies. It is pertinent to mention here that neither any money, bullion, jewellery or other valuable article or thing was found nor any income based on any entry in bo....
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....response to the above the assessee vide its letter dated 20.03.2013, intimated that said notings in all the diaries had been written merely for reference purpose only and has nothing to do with the actual working of the company. The assessee, however just to honour the surrender, has offered proportionate amount belonging to each year as its Income as depicted in above chart. 6. It is submitted that the AO after analyzing all the facts and circumstances accepted the amount of income offered by the assessee for various years and has framed the assessment on returned income. It is crucial to reproduce the final observation of the AO at Page No-4 of the Assessment Order. "The above contention of the assessee has been considered and found to be acceptable since the assessee has honoured the surrender made during the course of search" 7. Thereafter, the AO vide notice dated 28.03.2013, initiated penalty proceedings against the assessee copies of the notices are at Page No-1-5 of the PB. Assessee filed its reply before the AO, wherein it has been contended that there is no concealment at all and the assessee does not fall under the rigors of explanation 5A of t....
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....to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind 11. It is submitted that the above decision has been followed by various benches of the ITAT, for example recently Calcutta bench of the ITAT in the following cases, which were also covered under explanation 5A of section 271(1)(C) of the Act, has followed the verdict of Manjunath cotton and has quashed the penalty proceedings after observing that the notice of penalty u/s 274 was not specific in as much as the AO has not struck off the irrelevant clauses of the notice. a. Thakur Prasad Sao in ITA No1534/Cal/2013 dated 23.03.2016( Copy in Decisions Paper Book) b. Ramesh Prasad Sao in ITA No-997/Kol/2011 dated 03.02.2016( Copy in decisions PB) c. Parmeshwari Devi- Copy of the decision is annexed in Paper book-Delhi Bench 12. In view of the above it is submitted that the penalty levied by the AO deserve to be deleted on this ground alone. Submissions of th....
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....search. If that be so then penalty cannot be levied at all. 21 It is submitted that the Ld CIT(A) has failed to appreciate that search was conducted in 2011, letter offering surrender was made in 2011 itself(within four days) and assessment was framed in 2013, which means department was in possession of the alleged incriminating material for almost two years, and if the department was of the view that surrender made is an eyewash then it would have refused to accept the surrender and would have framed the assessment on the basis of material gathered in search. However, additions were made solely relying on the surrender made by the assessee. Therefore, now revenue cannot allege concealment or furnishing of inaccurate particulars. Acceptance of surrender for the purpose of assessment without corroborating with seized material and refusal of the surrender for levying penalty is not permissible. 22 The Ld CIT(A) has failed to appreciate that there are two Circulars of the Board namely circular number 286 of 2003 and 286 of 2013, which prohibits confessional statement and directs the authorities to concentrate on documentary evidence- Copy of the circulars is there in....
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.... surrender before the detection of any unrecorded transactions. 27 It is next submitted that Chairman of the assessee Company was not aware of the guidelines of CBDT, in which guidelines it has been prescribed that no surrender would be obtained from any assessee and if any surrender would be obtained it will be taken adversely. There are two circulars of the board namely one of the 2003 and one of the 2014. See Page No- 60-62 of Decisions Paper book. This fact and position of law would also prove that the surrender was bona fide and made in order to cooperate with department. 28 It is next submitted that there are decisions of ITAT & High Courts, wherein referring to these circulars, even additions have been deleted. Therefore, it can be said that even after lapse of 2 years, from the date of surrender and filing of ROI in 2013. Assessee has obliged his surrender and cooperates with the department under a bona-fide belief that he will be exonerated from penalty, if we will cooperate with department. Premsons decision- 29 Further assessee seeks to rely on the judgment of Suresh Chand Mittal reported in 251 ITR 9(SC) larger bench. In this case it ....
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....nbsp; Submissions of the assessee in respect of Ground number 8 are as under:- 32 It is submitted that provisions of section 153A are non-obstantive provisions they exclude the operation of section 139(1), meaning thereby the return filed in pursuance to a notice of 153A would replace the original return filed under section 139(1) of the Act. And concealment of income has to be seen with reference to the fresh return filed in pursuance to the notice of 153A of the Act. 33 It is submitted that if there is no difference in the returned income( filed in response to the notice of 153A) and assessed income then no penalty under section 271(1)(C) would be leviable as held in the following judgments, wherein it has been held that return filed in pursuance to the notice of 153A would replace the original return and concealment has to be judge with reference to the new return a. Prem Arrora, vide it‟s order dated 09-03-2010 in ITA No 4702 of 2010- Copy in decisions Paper Book b. Sejal Export ITA No 5724 of 2012 Mumbai- Copy in decisions Paper Book 23 Explanation of the assessee not proved to b....
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...." 5. The Learned Senior DR on the other hand has placed reliance on the orders of the authorities below. He submitted that the assessee had surrendered Rs. 10 crores as undisclosed income due to incriminating documents found during the course of search. He submitted that the declaration of income was made only after search thus it is clear in view of Explanation-5A to sec. 271(1)(c) of the Act that there was concealment of particulars of income and furnishing inaccurate particulars thereof on the part of the assessee towards the income surrendered to attract levy of penalty under sec. 271(1)(c) of the Act. 6. The Learned AR rejoined with the submissions that there was no incriminating material found during the course of search and assessment was already framed under sec. 143(3) of the Act well before the date of search and only in the assessment year 2010-11, the assessment was pending on the date of search. In the assessment year 2010-11 as well, no corroborative evidence was there to justify the addition made in the assessment framed under sec. 153A of the Act. He submitted that the acceptance of the returns of income for the assessment years under consideration filed in re....
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....pression 5A of the income tax act has to be initiated for which notice under section 271 (1) (C) is being issued separately. Then he went on to say that :- " However as discussed above, I am satisfied that the assessee is liable for facing penalty proceedings under section 271 (1) ( c) of the income tax act 1961 read with explanation 5A thereto, with regards to the addition of Rs. 2535000/- as detailed above and accordingly penalty proceedings are being initiated separately for the issue of notice under section 274 of the act." Further at the end of the assessment order it has been stated that in respect of income is disclosed to tax/additions made a separate notice under section 274 read with section 271 (1) ( c ) is issued in respect of all the disclosures/additions above. The first contention raised by Ld. authorized representative is that in the notice issued there is no reference about whether the show cause is for furnishing of inaccurate particulars of income or concealment of income. Therefore he submitted that when the charge made against the assessee is twin charge the notice is not a valid notice for levy of the penalty. Even if the para No. 8 of the penalty ....
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....ty have to be held as bad in law and liable to be quashed. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act. "63. In the light of what is stated above, what emerges is as under : (a) Penalty under section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. (e) The existence of such conditions should be discernible from the assessment order or the order of the appellate authority or the revisional authority. (f) Even if there is no specific finding regarding the existence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and 1(B) it should be discernible from the said order which would by a legal fic....
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....l the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. (r) The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. (u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on the merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." [un....
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.... disclosure is made and assessed by the Ld. assessing officer. In view of this it is apparent that disclosure is without any material but merely on the statement of appellant. In our view, there may be several reasons for making surrender by an assessee and merely on this basis an inference beyond doubt cannot be drawn that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the surrendered income to attract penal provisions under sec. 271(1)(c) of the Act. In the present case, vide letter on 22.2.2011 i.e. immediately after the completion of search, the assessee has offered a lump sum surrender of Rs. 10 crores well before issuance of any summons, notice, questionnaire from the investigation wing of the Revenue, with this submission that the surrender was made to buy peace of mind as well as a gesture of cooperation towards the department and subject to the condition that no penal action under any provisions of the Income-tax Act, 1961 would be taken against the assessee. Further Hon'ble Gujarat High Court in case of Kirit Dayabhai patel V ACIT (ITA 1181 of 2010) has held as under "13. Considering....
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....ut the undisclosed income, if any, that can be gathered from those documents". The ITAT held that the Assessing Officer should make specific reference to the documents based upon which the undisclosed income was assessed by him and the validity of the order of penalty must be determined with reference to the information, facts and material in the hands of the authority imposing penalty at the time the order was passed. It was held that the Assessing Officer did not refer to any of the documents or material found during the course of search from which the impugned undisclosed income was found out, hence the tax authorities could not have placed reliance on Explanation-5A to sec. 271 of the Act without making specific reference to the documents, which reveal about concealment of income i.e. the conditions prescribed in the Explanation 5A has not been satisfied. Similar view as expressed by the ITAT in the case of Sejal Exports (India) (supra), discussed in the above paragraph, has been expressed by Delhi Bench of the ITAT in the case of Pawan Kumar Gupta vs. ACIT (supra). The ITAT in that case has held that concealment of income has to be seen with reference to addition brought to....