TaxTMI 
TaxTMI 
2016 (8) TMI 1130
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....ion of penalty amount from 300% to 100% against the order of ld CITA. The appeals of the assessee are against the confirmation of levy of penalty @ 100% by the ld CITA. 3. The only issue to be decided in all these appeals is as to whether the penalty u/s 271(1)( c) of the Act could be levied in respect of income offered after the search but in the return filed u/s 153A of the Act. 4. The brief facts of this issue is that a search and seizure operation was conducted on 24.1.2008 u/s 132 of the Act in the Sribir Group (Sarawgi) of cases. The assessee is one of the individuals belonging to this group. Sribir Group is a Giridih based leading business group of Jharkhand , engaged in the manufacturing activities of sponge iron, TMT bars, wires, nail etc besides running petrol pumps and owning agencies of Bajaj Auto & Mahindra Auto , operating from Giridih and Kolkata. A search and seizure operation was carried out at the residence of the assessee at Sarawgi Sadan, Dumri Road, Giridih, Jharkhand on 24.1.2008 besides conducting search in various factory and residential premises of the group. Besides a search and seizure operation was conducted in the residence at Flat No. 2, 3rd floo....
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....iculars 03-04 04-05 05-06 06-07 07-08 08-09 1 Income admitted u/s. 139(1) 125974 169888 253220 38221 676289 N.A. 2 Additional income offered in proceedings u/s. 153A pursuant to statement u/s. 132(4) 129946 3894000 9191000 3855000 6671000 126261040 3 Income disclosed in computation u/s. 153A 255920 4063688 9444220 4243221 7347289 127486910 4 Income assessed u/s. 153A 255920 4063688 9444220 4243221 7347289 127486910 5 Any other addition made in order u/s. 153A beyond the income returned u/s. 153A NIL NIL NIL NIL NIL NIL Total sum Rs.15,00,01,986/- 4.2. This was followed by further letter dated 5.10.2009 wherein detailed explanation substantiating the manner in which undisclosed income was derived by the assessee for each asst year was given by the assessee and enclosing the fund flow analysis for each assessment year for the purpose of computation of undisclosed income. It was submitted that the authorized officer had informed both the assessee as well as his eldest brother Shri S.K Sarawgi at the time of search, that if d....
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....e offer to pay tax on undisclosed income of Rs. 15 crores. We find that except the undisclosed income offered by the assessee in the statement recorded u/s 132(4) of the act and subsequently in the return filed u/s 153A of the Act, the ld AO did not detect any further undisclosed income in the search assessment. We find that the assessee had deposited the taxes due on the said income. We find that the ld AO had held that since the income was disclosed only at the time of search and not in the return filed u/s 139(1) of the Act, there was deliberateness in the action of the assessee warranting levy of penalty. 5.1. The ld AR argued that consequent on completion of search, there were proposals for centralization of case records of Sarawgi Group first at Ranchi and thereafter at Patna. On the other hand, the assessee was requesting for centralization of assessment records of the group at Kolkata where the registered office of Atibir Industries Ltd was situated. Since the issue of centralization of records had not reached finality, the assessee did not have any idea about the correct jurisdiction and it was alos not possible for him to obtain inspection of the seized records so as t....
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....ome declared u/s 153A of the Act without making any addition. He argued that in the instant case, the assessee had made full disclosure in the return of income, cooperated in the assessment proceedings and paid full and proper taxes along with interest in the income disclosed in the return filed u/s 153A of the Act. It is not a case where the assessee had made false disclosures in the return of income or failed to cooperate during the assessment proceedings. Further, it is also not a case where no explanations were furnished or the explanation furnished were found to be false. It would be pertinent to note that the ld AO was unable to identify any further undisclosed income other than the income offered by the assessee. He stated that ultimately the penalty has been levied on the ground that but for the search, the assessee would not have come forward for disclosure of his undisclosed income and pay taxes thereon. With regard to arguments of Learned DR that but for the search this undisclosed income could not have been unearthed, the Learned AR argued that this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in CIT vs Amardeep ....
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....ate of search also would get covered by the Explanation 5A to section 271(1)(c ) of the Act. In this regard, we hold that the assessee was made to understand the penalty provisions as it stood on the date of search and disclosure was made accordingly with a bona fide belief that no penalty would be levied. Just because the law is changed retrospectively, the assessee cannot be invited with a penal liability when his case was falling under the erstwhile provisions of Explanation 5A to Section 271(1)( c) of the Act on the date of search. In this regard, we draw reference to the decision of Full Bench of Hon'ble Supreme Court in the case of CIT vs Vatika Township (P) Ltd reported in (2014) 367 ITR 466 (SC) wherein it was held :- 31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's....
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....on 5A has been made with retrospective effect from 1.6.2007 and is applicable to searches initiated after 1.6.2007, the issue is whether this amendment to Explanation will apply to returns filed before the amended explanation became part of the Statute in 2009. In the instant case the Assessee had filed return of income on 7.7.2008. He filed revised return pursuant to notice u/s 153A on 12.11.2008. Thus both the original return as well as the revised return was filed before the amendment to Explanation5A became a part of the Statute." In the instant case, the notice u/s 153A of the Act was issued on the assessee only on 3.8.2009 and the return in response to such notice was filed on 31.8.2009 and by that time the amended provisions of Explanation 5A to Section 271(1)(c ) of the Act would become applicable , but still the circumstances leading to delayed issuance of notice u/s 153A of the Act and filing of return thereon could not be ignored in the facts and circumstances of the case. As stated earlier, there was lot of correspondences between the assessee and the revenue with regard to centralization of cases to Ranchi and Patna and ultimately that dispute got settled vide order....
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....tion 5A (amended provisions) could not be made applicable to the assessee. 5.5. Another argument advanced by the ld AR is that the show cause notice issued u/s 274 read with section 271(1)(c ) of the Act is defective in as much as the ld AO had not struck off the relevant portion in the show cause notice as to whether the assessee had concealed his income or furnished inaccurate particulars of income. Reliance was placed on the decision of the Hon'ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar) . We find that the ld AO had merely made a tick mark in the show cause notice for the Asst Year 2003-04 without striking off the specific charge on which the assessee has to meet while replying to the penalty notice. In respect tof Asst Years 2004-05 to 2007-08, we find that the ld AO had not even given any tick or struck off the irrelevant portion and had merely given a blank show cause notice by just mentioning the name of the assessee, Asst Year, date and time of penalty hearing. The ld AR pointed out that the Hon'ble Karnataka High Court in the aforesaid decision has considered the effect of Sec.271(1B) of the A....
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....n the effect of not striking off the irrelevant portion in the show cause notice u/s.274 of the Act as follows: 9. The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for "furnishing inaccurate particulars of income" or "concealing particulars of such income". On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for "furnishing inaccurate particulars of income" or "concealing particulars of such income". 9.1. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. M.anjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of....
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....d on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on th....
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.... 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 order of the Appellate Authority or 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) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner ....
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.... 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 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." (emphasis supplied) 9.3. It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. The aforesaid ruling will squarely ap....