TaxTMI 
TaxTMI 
2018 (3) TMI 1583
X X X X Extracts X X X X
X X X X Extracts X X X X
....100/PUN/2016, 102/PUN/2016, 105 & 106/PUN/2016 are three different partnership firms, relating to assessment years 2009-10 and 2010-11, except in the case of ITA No.102/PUN/2016 which only relates to assessment year 2010-11. 4. The issue which is raised in the present appeals is against penalty levied under section 271(1)(c) of the Act by invoking provisions of Explanation 5A of the Act. 5. First, we shall take up the appeals of assessee in ITA Nos.95 & 96/PUN/2016, relating to assessment years 2009-10 & 2010-11. In order to adjudicate the issue, reference is being made to the facts in ITA No.95/PUN/2016, relating to assessment year 2009-10. 6. The assessee in ITA No.95/PUN/2016, relating to assessment year 2009-10 has raised the following grounds of appeal:- 1. The ld. CIT(A) erred in confirming the levy of penalty of Rs.2,52,604/- u/s. 271(1)(c) of the Act. 2. The ld. CIT(A) failed to appreciate that the additional income declared by the assessee was based on estimates and there was no concrete evidence found during the course of search that the assessee had generated the undisclosed income declared during the course of search and hence, the levy of penalty on the additio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3A(a) of the Act, the assessee filed the return of income declaring total income of Rs. 13,01,560/- as against original return of income filed declaring income of Rs. 5,71,560/-. The assessee derived income from business of proprietary concern in the name of Gauri Mastani at Sadashiv Peth, Pune. She was also partner in five partnership firms and was drawing remuneration from these firms. The assessee in the case of proprietary concern, during the course of search proceedings along with her husband and associated firm had jointly declared additional income of Rs. 1 crore for assessment year 2009-10 for the group; out of which, the assessee declared sum of 7,30,000/- as her undisclosed income. The same was included in the return of income. The assessee explained that the said amount was utilized partly for renovation of outlet and partly for deposits made in Pat Sansthas. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act for concealing the particulars of income. In the order levying penalty under section 271(1)(c) of the Act, the assessee claimed that where additional income was offered by the assessee and was accepted as such and where the declar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Explanation 5A to section 271(1)(c) of the Act were attracted. The CIT(A) held that the provisions of Explanation 5A were clearly applicable. Further, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in MAK Data P. Ltd. Vs. CIT (2013) 358 ITR 593 (SC). Another aspect which was covered by CIT(A) was that once the assessee admits that certain amount represents her income, no further evidence would be necessary to show that it was amount which represented her income or that it represented her concealed income. Reliance in this regard was placed on various decisions of different High Courts. The CIT(A) thus, confirmed the penalty. 9. For the year 2010-11, the assessee and her husband and associated firms have jointly declared additional income at Rs. 1,54,00,000/-, out of which the assessee declared sum of Rs. 17,50,000/- as her income. In response to notice issued under section 153A of the Act, the assessee furnished the return of income. The declaration of additional income was linked to the amount incurred on the renovation of residence of Rs. 2.50 lakhs, deposits made in credit society in third party of Rs. 2 lakhs; renovation expenses incurred on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The learned Authorized Representative for the assessee again referred to page 26 of Paper Book and declaration of additional income offered in different hands. He further stated that penalty under section 271(1)(c) of the Act was initiated and levied for concealment of income, though notice issued under section 274 of the Act was vague. He further pointed out that once the additional income have been offered suo moto by the assessee, there was no merit in holding the assessee to be in default. 12. The learned Departmental Representative for the Revenue pointed out that the issue stands covered by the ratio laid down by Pune Bench of Tribunal in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (2015) 174 TTJ 516 (Pune). 13. In respect of partnership firms, the learned Authorized Representative for the assessee referred to additional grounds of appeal raised before the Tribunal. He stressed that where the facts were on record and the facts of search were on record, then the additional grounds of appeal can be admitted. He stressed that where papers were found from the residence of assessee and her husband and the statement was also made by the said persons in respect of additional in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in Gudwill Housing Ltd. Vs. ITO (2014) 45 taxmann.com 144 (Kar), wherein it has been held that Chpter XIV-B does not preclude the Assessing Officer to proceed against the assessee by issuing notice under section 148 of the Act. He thus, stressed that after search proceedings carried out in the case of another person, it was open to the Assessing Officer either to proceed under Chapter XIV-B or under section 148 of the Act, copy of the decision was filed. 15. The learned Authorized Representative for the assessee also submitted written note pointing out that the decision of the Hon'ble High Court of Karnataka was not applicable to the facts of the present case, since in the case before the Hon'ble High Court, the issue involved was whether Assessing Officer can issue notice under section 148 or 158BD of the Act. He further pointed out that section 158BD of the Act was part of Chapter XIV-B. Referring to section 153C of the Act, it was pointed out that the said section starts with non obstante clause and it specifically excludes the provisions of sections 147 / 148 of the Act. The Assessing Officer thus, submitted that in view of provisions of section 153C of the Act, the Assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made under section 132(4) of the Act in the hands of different persons are available at page 26 of Paper Book. The assessee Mrs. Vasundhara S. Joshi had offered Rs. 7,30,000/- as additional income in financial year year 2009-10 and Rs. 14,50,000/- plus Rs. 3 lakhs in financial year 2010-11. The said additional income was declared by the assessee in the returns of income filed in response to notice issued under section 153A of the Act. 17. The issue which is raised in the present appeals before us is whether the assessee is exigible to levy of penalty under section 271(1)(c) of the Act read with Explanation 5A. Before going into merits of levy of penalty, it may be pointed out that satisfaction was recorded by the Assessing Officer that the assessee had concealed its income and penalty was also levied on the same account under Explanation 5A to section 271(1)(c) of the Act. The learned Authorized Representative for the assessee before us has stressed that in the notice issued under section 274 of the Act, there is no striking of inappropriate limb. We find that this issue has already been adjudicated at length by us in the case of Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 120....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessment, noted that the assessee had not declared the sale consideration of Rs.2.55 crores in the original return of income filed and subsequently after the search, the declaration was made on account of total amount of capital gains. The Assessing Officer recorded satisfaction in the body of the assessment order to the extent that the assessee had concealed the particulars of income and penalty proceedings under section 271(1)(c) of the Act were initiated. Beside the above said, there was another aspect of sale of property, wherein the assessee had claimed that it had sold fittings and fixtures of the said bungalow for Rs.10 lakhs. However, in the absence of list of furniture or personal effects sold, the Assessing Officer was of the view that the fittings and fixtures attached to the property were inextricably linked to the building and consideration received thereon, was to be treated as capital gains. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act with regard to the said addition. Consequent thereto, the Assessing Officer rejecting the claim of the assessee that it had suo motu offered the income from long term capital gains, and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee. Section 271(1) of the Act makes provision for levying penalties on assessee in different eventualities, one such eventuality is for concealment of income or furnishing of inaccurate particulars of income. Only on fulfillment of the conditions stipulated in section 271(1)(c) of the Act, there arises a question of exercising power under the said provision to impose penalty. The said section lays down that where the Assessing Officer or the CIT(A) in the course of any proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty stipulated in the aforesaid provision. The Explanation/s under section 271(1)(c) of the Act set out the circumstances, which justifies the levy of penalty. For searches initiated under section 132 of the Act before first day of June, 2007, Explanation 5 was introduced by the Finance Act, 2007 with retrospective effect from 01.04.2003. Under the said section, where the assessee was found to be owner of any money, bullion, jewellery or other valuable articles or things and the assessee claims that su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... imposition of penalty under section 271(1)(c) of the Act, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of income. The said Explanation 5A was substituted by the Finance (No.2) Act, 2009 with retrospective effect from 01.06.2007 with the amendment that where the return of income for such previous year had been furnished before the date of search, but such income had not been declared therein or where the due date of filing the return of income for other previous year has expired, but the assessee had not filed the return of income, then notwithstanding the fact that the said income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of his income. 17. The deeming provisions of Explanation 5A under section 271(1)(c) of the Act are applicable to all the searches initiated under section 132 of the Act on or after first day of June, 2007. The conditions laid down in the Explanation 5A is where during the course of search, the assessee is found to be in possession of any money, bullion, jewellery, valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and declared "income" which was pertaining to the amount covered by the unrecorded expenditure but the fact remains that the assessee did not declare any "expenditure' but it is only the income. The Ld. Counsel referred to the definition of the income given in sec. 2(24) of the Act. The scope of the said definition has been explained by the Hon'ble Supreme Court in the case of EMIL Webber (supra) which has been relied upon by the Ld. Counsel The relevant portion is in para no 7 which reads as under: "7. The definition of 'income' in clause (24) of Section 2 of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account the expression 'income' does not lose its natural connotation. Indeed, it is repeatedly said that it is difficult to define the expression 'income' in precise terms. Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....previous year has expired but the assessee has not filed the return then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income." 19. So far as the present assessee is concerned, clause (ii) to Explanation 5A is applicable. Admittedly, the expenditure which was not recorded has been found by way of entries in the seized documents. While explaining the scope of Explanation 5A in the case of Chandan K. Shewani (supra) the Tribunal has held that to patch out the lacuna due to the judicial interpretation of Expl. 5 of Sec. 271(1)(c) which was on the statute book upto 31-5-2007, Explanation 5A has been substituted for Expl. 5 by the Finance Act, 2007 w.e.f 1-6-2007. The said explanation was further amended by the Finance(No.2) Act, 2009 with retrospective effect from 01-07-2007 which is reproduced hereinabove. The Ld. Counsel has raised an important legal question whether the income declared by the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee, which in turn, was declared by the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act, is the income detected during the course of search and seizure operation. The case of the assessee is squarely covered by the provisions of Explanation 5A to section 271(1)(c) of the Act and the assessee is exigible to levy of penalty on such income which was detected during the course of search and seizure operation, which in turn has been offered by the assessee in return of income filed pursuant to notice issued under section 153A of the Act. The learned Authorized Representative for the assessee on the other hand has placed reliance on the ratio laid down in DCIT Vs. Purti Sakhar Karkhana (supra), which is a decision of Nagpur Bench of Tribunal and Hyderabad Bench of Tribunal in Shri PV Ramana Reddy Vs. ITO (supra). In view of binding precedent of Pune Bench on the said issue, we find no merit in the reliances placed upon by the learned Authorized Representative for the assessee on DCIT Vs. Purti Sakhar Karkhana (supra) and Shri PV Ramana Reddy Vs. ITO (supra). The other reliance placed upon by the learned Authorized Representative for the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submits that the learned A.O. had no jurisdiction to issue notice u/s. 148 to the assessee and accordingly, the assessment order passed u/s. 147 was invalid in law and therefore, the penalty levied u/s. 271(1)(c) on the basis of an invalid assessment order was null and void. 2] The assessee submits that in the course of search on Shri Shailesh Joshi and Smt. Vasundhara Joshi, incriminating documents belonging to the assessee firm were found and therefore, the learned A.O. ought to have issued notice u/s. 153C for assessing the undisclosed income in the hands of the assessee firm as against notice u/s. 148 issued by him and therefore, the assessment order passed u/s. 147 is bad in law and accordingly, the penalty levied u/s. 271(1)(c) on the basis of an invalid assessment order was null and void." 21. In order to adjudicate the issues, we are referring to the facts and issues in ITA No.105/PUN/2016. The facts of present appeal are slightly at variance i.e. simultaneously to the search and seizure action under section 132 of the Act initiated against partners of assessee on 20.01.2011, Survey action under section 133 of the Act was carried out at the business outlet of assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee declaring additional income was neither voluntary nor bonafide and had been filed after detection of concealment on search / Survey. The Assessing Officer thus, held the assessee to have concealed particulars of income within meaning of section 271(1)(c) of the Act and held the assessee liable for levy of penalty at Rs. 3,09,000/-. The CIT(A) upheld the penalty levied under section 271(1)(c) of the Act. 22. In the original grounds of appeal filed, the assessee has challenged the levy of penalty of Rs. 3,09,000/- under section 271(1)(c) of the Act. Various grounds of appeal have been raised in this regard. Further, during the course of hearing, the assessee has filed additional grounds of appeal challenging jurisdiction of Assessing Officer in issuing notice under section 148 of the Act and consequent assessment order passed under section 147 of the Act being invalid in law and therefore, penalty levied under section 271(1)(c) of the Act on the basis of assessment order, to be null and void. The assessee by way of additional ground of appeal No.2 has further challenged the aforesaid proceedings initiated under section 148 of the Act and has alleged that the Assessing Officer o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... I confirm that these are seized from my residence at 64 & 65, Durga Apartments, Mahalaxmi Nagar, Bibwewadi, Pune. These pages are the daily receipt and expenses account from different outlets. The total made on these pages represent the gross sales on that day of that outlet. "Ghari', "Cash' represent the net amount of cash handed over to me by the relevant person from the outlet. I admit that the sales as appearing on these pages are substantially more than the sales as per the sales recorded for filing the returns of income. I admit that all the sales have not been reflected in the regular books of account. 25. Question No.11 was as under:- "Q11 During the course of search and survey operations carried out at the residential and business premises the parties have come across the evidences which establish that the total group turnover has been suppressed substantially when compared to the turnover disclosed in the return of income. In the statements deposed under oath by various entities such as the managers at the outlets, the supplier of Bread (Pav), etc. have provided the actual figures of sale (consumption) of Wada Pav and other allied products. All this goes to establish....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t two different places. Certain documents were found from his residence at Ameya Apartments, Shaniwar Peth, Pune. Thereafter, loose paper bundles Nos.6, 7, 8 and 9 were seized from the residence at Durga Apartments, Mahalaxmi Nagar, Bibwewadi, Pune. The explanation of assessee in respect of said bundles was that these were daily receipts and expenses account from different outlets. He also explained that total made on the said pages represented the gross sales on that day of that outlet. 'Ghari', 'Cash' represented the net amount of cash handed over to Shailesh Joshi by the relevant person from the outlet. He also referred to the sales appearing on the said pages and admitted that these were substantially more than sales as per sales recorded for filing return of income. In response to next query raised and in view of loose papers and documents seized and impounded from his different residences and some of the statements of related persons, he confirmed that there was suppression of actual turnover in the financial years 2008-09 to 2010-11 and accordingly, offered unaccounted income for the said years. For assessment year 2009-10, additional income of Rs. 1 crore of the group was o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such by the assessee. However, in the present appeal filed against levy of penalty under section 271(1)(c) of the Act, the assessee has raised jurisdictional issue against the assessment completed in the case of assessee. The case of assessee is that assessment in the respective years should have been completed by invoking provisions of section 153C of the Act and not under section 148 of the Act. 28. The first issue which arises is whether the assessment in such circumstances was to be made under section 153C or 148 of the Act and connected issue is whether such an issue of assessment being completed under a particular section was valid or not, can be raised while deciding the issue of levy of penalty under section 271(1)(c) of the Act against the income assessed in the hands of assessee. In this regard, the learned Authorized Representative for the assessee has pointed out that the issue stands covered by the ratio laid down in ITO Vs. Shri Shailendra B. Agrawal (supra) and in bunch of appeals with lead order in ACIT Vs. Shamsundar Laxman Jagtap (supra). The relevant provisions of the Act to which reference is being made is section 153C of the Act which provides as under:- "1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....very clearly lays down that notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153 of the Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing seized or requisitioned, belongs to; or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, such books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other person in accordance with provisions of section 153A of the Act. Section thus, very clearly lays down the procedure to be followed when during the course of search on a person any money, bullion, jewellery or valuable article or thing, or any books of account or documents or any information contained therein pertains to or relate / relates to other than the person searched; then first, all the said assets or information is to be handed over ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 (Bom) had laid down the proposition that the Tribunal can permit the assessee to take new ground before the Tribunal during arguments in answer to an appeal filed by the Revenue. The factual aspect before the Hon'ble High Court was as under:- "In the reference for the assessment year 1947-48, he assessee filed a voluntary return on March 28, 1952. Nonetheless, the Income-tax Officer issued a notice to the assessee under section 34(1)(a) on July 9, 1952, and then proceeded to assess the assessee under that section. The assessee raised before the Tribunal a contention that the notice under section 34(1)(a) having been issued in spite of the assessee having file a return in proper time it was invalid and that the appeal filed by the department before the Tribunal should be dismissed. The Tribunal did not allow the assessee to raise the contention on the ground that it had been only raised at the time of the arguments in the appeal before the Tribunal as a fresh ground and that if the ground was allowed to be urged and it succeeded, the result would be that the entire assessment proceedings would have to be held invalid and even the assessment on the undisputed amount of the income....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ground became available on account of change of circumstances or law". 19....... 20...... 21...... 22...... 23...... 24. In the case before us, the CIT(A) and the Tribunal have held the omission to claim the deduction of Rs.40,00,000/- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,000/- paid after the end of the year in question. We see no reason to interfere with this finding. We see less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the respondent ought not be prejudiced. 25. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corporation Limited. This is clear from the fact that these judgme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....partmental Representative for the Revenue further stressed that once search proceedings had been carried out in the case of another person, then it was open to Assessing Officer either to proceed under Chapter XIV-B or under section 148 of the Act. It may be pointed out herein itself that Chapter XIV-B of the Act consisting of sections 158B to 158BH of the Act provided special procedure for assessment of search cases i.e. search initiated under section 132 of the Act on or after 30.06.1995 upto 31.05.2003. Thereafter, in cases of searches conducted after 31.05.2003, the assessment in the case of search or requisition case is to be carried out under section 153A to 153C of the Act. The said provisions fall within Chapter XIV of the Act i.e. by insertion of sections 153A to 153D of the Act by the Finance Act, 2003 w.e.f. 01.06.2003, procedure of assessment has undergone change. The provisions of section 153C of the Act are at variance to the provisions of section 158BD of the Act, which was the issue before the Hon'ble High Court of Karnataka (supra). The ratio which has been laid down in relation to section 158BD of the Act by the Hon'ble High Court of Karnataka cannot be relied upo....