TaxTMI 
TaxTMI 
2019 (4) TMI 1287
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....issue under consideration are that theassessees here-in-above are the promoters and directors of M/s Janta Land Promoters Pvt Ltd. The original returns u/s 139(1) of the Income-tax Act, 1961 (in short 'the Act') for different assessment years by the assessees were filed within the due dates prescribed for the same, detailed as under: Name of assessee the as sessee A.Y. Date of filing Kulwant Singh 2008-09 23.09.2008 Kulwant Singh 2009-10 30.07.2009 Kulwant Singh 2010-11 29.07.2010 Kulwant Singh 2012-13 29.09.2012 Kulwant Singh 2011-12 28.09.2011 Manjit Kaur 2008-09 10.12.2008 Manjit Kaur 2009-10 31.07.2009 Manjit Kaur 2011-12 28.09.2011 Paramjit Singh 2008-09 31.03.2009 Paramjit Singh 2010-11 31.07.2010 Paramjit Singh 2011-12 28.09.2011 Jaswant Kaur 2007-08 31.03.2008 Jaswant Kaur 2009-10 31.07.2009 Jaswant Kaur 2010-11 27.09.2010 Jaswant Kaur 2011-12 28.09.2011 The assesseesin their income tax returns had disclosed / offered certain incomes as detailed below for different assessment years as under the head 'income from other sou....
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....e, invoked the Explanation 1 to section 271(1)(c) of the Act and initiated penalty proceedings. The assessee reiterated that he had no records orevidence relating to the source of income so earned. Therefore, the Assessing officer levied the penalty u/s 271(1)(c) of the Act, observing as under:- "10. Based on above discussion the following conclusions may be drawn A. The assessee has deposited various amounts in cash in her hank accounts, offered the same in his return of income under the head "Income from other "sources", has not submitted any explanation regarding the source of the same either during assessment proceedings or current penalty proceedings. B. The case of the assessee is covered under explanation 1(A) of 271(l)(c) of the I T Act. As well as various judgments of superior courts. 11. Sufficient opportunities to present her case has been afforded to the asSessee. The replies filed by the assessee have been considered and found to be not correct. 11. Based on the above discussion, I am satisfied that this is a fit case for imposition of penalty in terms of Sec. 271(l)(c) of the I.T.Act,1961." 5. Being aggrieved by the iden....
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....". Section 45 is a charging section. For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by s. 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by s. 45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the I. T. Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while a certain incom....
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.... father of the assessee, certain amount of cash books of account and documents in respect of the assessee were seized. The AO issued notices to the assessee filed the return of income disclosing certain income. The AO scrutinized the assessment and in respect of each assessment year, the Assessing officer made additons as undisclosed income and initiated penalty proceedings. The facts of the case are different as in this case discussed above, the assessee had disclosed the said income in the return filed in response to the notice u/s 153C after-certain amount of cash, books of accounts and documents in respect of assesses were seized during the search and was not a case of voluntary disclosure as in the case of the appellant. 5.1.4 MAK DATA (P) Ltd Vs. CIT-II {2013} 38 Taxmann.com 448 (SC) In this case, the appellant filed its return declaring certain income. During the course of the assessment proceedings, it was noticed by the AO that certain documents were impounded in the course of survey proceedings in the case of sister concern of the assessee. Thereafter, a show cause was issued by the AO in response to which the assessee made an offer to surrender....
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....We have heard the rival contentions and have alsogone through the record.So far as theappeals of the Revenue are concerned, the Ld. DR has not only addressed theoral argumentsbut has also submitted written submissions. The crux of the arguments of theLd. DR has been that heavy amounts were deposited in their bank accountsby theassesseesand then declared in their returns of income spread over six yearstotaling to Rs. 60.02 crores. That the volume of transactions toearn Rs. 60.02 crores would bemanytimes of this amount. Such volume of transactionsspread over six years undertaken byfour different individuals could not be withoutmaintenance of theproper records. Therefore, theexplanation of theassesseese that they have not maintained any accounts in this respect was not bonafide and, thus,theassessees have failed to disclose truly and fully all the material facts relating to the computation of their total income. Thus,the condition laid down inExplanation 1(B) to section 271(1)(c)of the Act was not fulfilled and, therefore, Assessing officer has rightly imposed / levied penalty. That as per Explanation 1 to section 271(1)(c) of the Act, it was not necessary for the Assessing officer to....
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....ven otherwise, the explanation relating to the source of income has no role to play incontext of the provisions of section 271(1)(c) of the Act. That the provisions of section 271(1)(c) of the Act are since penal provisions theyhave to be strictly construed. Further, that the disclosure made by the assesseeswas 'voluntary disclosure' and no concealment was detected bythe Department. That evenotherwiseExplanation 4 was not attracted in this case. That thepurpose of Explanation 4 of section 271(1)(c) was that the quantum of penalty imposable for concealment of income should be with reference to the tax sought to be evaded instead of income concealed. That tax sought to be evaded shall be difference betweenthe tax determined in respect of total income assessed and that taxthat would have been payable, had the income, other thanthe concealed income, been total income. That it was never the intention of the Parliament to include declared income in the ambit of concealed income for the purpose of levyof penalty u/s 271(1)(c) of the Act. The Ld. Counsel for the assessee, therefore, has submitted that since the declared income and assessed income inthis case was sameand that the returns fi....
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...., that a specific charge was levied by the Assessing officer in the penalty notice regarding the concealment of particulars of income and, as such, there was no defect in thenotice. 10. We have heard the rival contentions and have also gone through the record. Since the legal plea taken by the counsel for the assesses in relation to the appeals relating up to assessment years 2010-11 wherein the original assessment proceedings already stood completed and not abated as on the date of search action and that no incriminating material found during the search action go to the root of the case and is crucial to determine the very validity of the initiation of penalty proceedings in an assessment framed u/s 153A of the Act, hence the same is taken first for adjudication. The Ld. Counsel for the assesseesin this respect has relied upon various judicial decisions including the decision of the Hon'ble Bombay High Court in the case of 'CIT Vs. Murli Agro Products Pvt Ltd', (2014) 49 taxman.com 172 (Bom.), ITA No.36 of 2009 and in the case of 'CIT Vs. Continental Warehousing Corporation' ITA No. 523 of 2013 reported in (2015) 279 CTR 0389 (Bombay) and of the Hon'ble Delhi High Court....
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....h the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating material found during the search action. Even it is not the case of the Assessing officer that there was any attempt or overt act on the part of the assessee to evade payment of due taxes. Under the circumstances, we hold that the action of the Assessing officer in initiating the penalty in the assessment proceedings carried out u/s 153A of the Act was not justified and the consequential levy of penalty being illegal is not sustainable in the eyes of law for the cases relating up to AY 2010-11. We order accordingly. 12. Another legal ground taken by the assessee which goes to the root of the case is that so far as the assessment year 2012-13 is concerned, the Assessing officer was not justified initiating or levying penalty u/s 271(1)(c) of the Act. That for the year under consideration, the penalty proceeding , if any, thatcould be initiated was to be under the provisions of section 271AAA of the Act as the assessment y....
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....d to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted." 13. A perusal of the above provisions reveals sub section (3) to section 271AA of the Act bars the levy of penalty under the provisions of section 271(1)(c) of the Act in respect of undisclosed income referred to in sub section (1). The undisclosed income has also been defined under the provisions of section 2....
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.... three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A ) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B ) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. ... [Explanation 3.-Where any person fails, without reasonable cause, to furnish within the period specified in sub-sectio....
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....ii), the Assessing officer may direct such a person against whom the above charge is established topay in addition to the tax, if any, payable a sum which isnot less than,but which shall not exceed three times, the amount of tax sought to the evaded by a reason of such concealment of particulars of income or furnishing of inaccurate particulars of income. 17. Now, Explanation 1 strongly relied upon by the Ld. DR speaksabout of deeming fiction regarding the concealment of particulars of income which speaks that if a person fails to offer an 'explanation' or which is found by the concerned income tax authorities to be false or such person could not substantiate in respect ofany fact material to thecomputation of his total income, then theamount added or disallowed incomputing total income of such person as a result thereof, shall be deemed torepresent the income in respect of which particulars have been concealed. Further, as per the Explanation 3, where a person fails to furnish within the stipulated period his return of income for any assessment year and thereafter, the concerned income tax authority, either the Assessing officer or the CIT (A) finds that in respect of such asse....
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.... would have beenchargeable,had such total income been reduced by the amount of income in respect of which particulars have been concealed which means that the tax payable on the income in respect of which particulars have been concealed or inaccurate particulars of income furnished. 20. A collective reading of all the three clauses reveal that for the calculation of the quantum of penalty, it is not the income in respect of which particulars have been concealed or furnished or inaccurate particulars of income furnished that is relevant but it is the resultant addition to the income of the assessee on account of such concealed particulars of income or furnishing of inaccurate particulars of income. If despite the detection of concealment of income or furnishing of inaccurate particulars of income,in the resultant effect, there is no addition into the income of the assessee or the assessee has already paid taxes on suchincome in respect of which particulars have beenconcealed or inaccurate particulars of income have been furnished, then, as per Explanation4, there will be no tax sought to be evaded and therebyno penalty will beleviable u/s 271(1)(c) of the Act. In our view, clause....
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....n which is not able to substantiate, then, theamount added or disallowed incomputing total income of suchperson as a result thereof deemed to represent the income inrespect of which particulars have beenconcealed. So, firstly what is relevant is the material fact to the computation of total income. The word 'computation' here is relevant which means that the fact must be material which has the effect of any addition or disallowance in the income to be computed after the assessment proceedings and it has also been provided that the amount added or disallowed into theself-assessed income represents the income, particulars of whichhas been concealed and further a combined reading of the sub sections (a), (b) (c) and Explanation 4 would show that tax sought to be evaded is the tax payable on such amount in respect of which particulars have been concealed.The word 'Explanation' here is not to be applied broadly to include explanation regarding each and every fact or particulars of income such as the source of income, manner of earing of income etc., rather, the word 'explanation' here has a limited scope, whereby, it has restricted that the offering of explanation that the material fact....
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....a[and clause (b)] of sub-section (1)." Section 271AAC "271AAC. (1) The Assessing Officer may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of ten per cent of the tax payable under clause (i) of sub-section (1) of section 115BBE: Provided that no penalty shall be levied in respect of income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D to the extent such income has been included by the assessee in the return of income furnished under section 139 and the tax in accordance with the provisions of clause (i) of sub-section (1) of section 115BBE has been paid on or before the end of the relevant previous year. (2) No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of the income referred to in sub-section (1). (3....
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.... such an income disclosed or determined. Further to mark a difference between the self-declared income in the aforesaid provisions and the cases where the Assessing officer determined /detected such income in the aforesaid sections 68, 69, 69A, 69B and 69 C or section 69D,the penalty provisions of section 271AAC comes into operation which provides that if such an income is suo moto declared by the assessee in his return, then no penalty is leviable and if it is otherwise detected by the Assessing officer, in addition to the tax payable u/s 115BBC, such an assessee will be liable to pay penalty equal to a sum computed @ 10% of the tax payable on such unexplained income as per the provisions of section115BBE of the Act. A cumulative reading of section 271(1)(c) read with section115 BBE and 271AAC, would reveal that it is not barred under the Act for an assessee to declare an income in his return as an unexplained income. It mayotherwise be detected or found by the Assessing officer also during the assessment proceedings. Prior to 1.4.2013, the tax on such unexplained income either declared by the assessee or detected by the Assessing officer was payable at anormal rates applicable. H....
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....shing of inaccurate particulars of income of such income by the assessee. Hence, if there is no amount of tax sought to be evaded by reason of concealment of particulars of income or inaccurate particulars of income, the penalty cannot be computed or to say that the penalty under the provisions will be 'Nil'. It is pertinent to mention here that Explanation-1to section 271(1)(c) of the Act also provides that if a person fails to offer an explanation or explanation offered is found to be false by the Income-tax Authority or he fails to substantiate such explanation, and that fails to prove the such explanation is bonafide, then the amount added or disallowed in computing the total income of such person as a result thereof, shall for the purpose of clause (c) be deemed to represent the income in respect of which particulars have been concealed. It becomes clear from the reading of Explanation -1 that there must be some addition or disallowance in computing the total income of such person in respect to which it is deemed that he has evaded the payment of tax for computing the penalty so leviable. . However, if there is no addition to the income of the assessee either by way of the pos....
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....f section 271(1)(c) of the Act, there must be an overt act on the part of the assessee of concealment of income or furnishing of inaccurate particulars of income. Since the explanation given by the assessees has not been proved to be false or otherwise disapproved by the Assessing officer, hence, under the circumstances, it cannot be said that the assessees have concealed the particulars of income or furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act.The assesses, themselves, declared income in question and paid the due taxes.There was no difference between the offered income and the taxed income.The Hon'ble Calcutta High Court in the case of 'Commissioner of Income Tax Kolkata-II Vs. Palani Investment & Industries Corporation Ltd.', (2016) 67 taxman.com 60 has held that the disclosure and concealment cannot coexist. That when a finding is recorded that the assessee has indeed disclosed, then the conclusion as regards concealment is bad. Even it cannot be said that the assessee furnished inaccurate particulars of income. There was no material on record to indicate that the particulars furnished by the assessee were factual....