AI Drafter 
TaxTMI 
TaxTMI 
2019 (3) TMI 2008
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....in Ajay traders Vs DCIT Central Circle, Alwar and in ignoring the later decision dated 24/05/2017 in ITA No. 141/JP/2016 in Shri Shri Radha Govind Lashkari Jaipur Vs ACIT, Central Circle-2, Jaipur." 2. The assessee is individual and belongs to M/s Kota Dall Mill Group. The assessee filed her return of income U/s 139(1) of the Act on 16/10/2013 declaring total income of Rs. 15,64,790/- alongwith agricultural income of Rs. 16,74,181/-. The assessee has also filed long term capital gain on sale of shares amounting to Rs. 2,79,87,900/- and claimed exempt it U/s 10(38) of the Act. Apart from the dividend income on equity shares, which was also claimed exempted. Thereafter a search and seizure action U/s 132 of the Act was carried out in the case of M/s Kota Dall Mill Group to whom the assessee belongs on 02/07/2015. During the course of search and seizure proceedings, certain documents marked as Annexure AS-1 were found containing the details of long term capital gain earned by the assessee and his family members during the various years. In the statement recorded U/s 132(4) of the Act, the assessee declared and surrendered the said long term capital gain on sale of shares as undiscl....
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....0(38) of the Act, however, during the course of search and seizure action, it was discovered that the said claim was bogus and consequently the assessee declared the said income and surrendered to tax. Therefore, the wrong facts declared by the assessee in the return of income filed U/s 139(1) of the Act would not amount to declare the income in the original return. The ld CIT-DR has thus submitted that apart from the long term capital gain, which was surrendered as undisclosed income, the assessee has also surrendered the amount of Rs. 9,000/- as undisclosed commission paid on the transactions of taking the bogus entry of capital gain. He has further contended that the surrender is based on the incriminating material found and seized during the search and therefore, the ld. CIT(A) has committed an error by holding that the Assessing Officer has treated the income as concealment only on the basis of the statement dehors any seized material. The assessee in his statement recorded U/s 132(4) of the Act has clearly admitted the bogus claim of long term capital gain and therefore, disclosed the undisclosed income. Hence, Explanation 5A of Section 271(1)(c) of the Act is applicable in t....
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....mpanies through recognized Stock Exchange which includes contract note with STT paid bills, depository statement, registered stock brokers ledger account and bank statements evidencing receipt of sale consideration through proper banking channel. All these documents duly substantiated the genuineness of the long term capital gain earned during the year under consideration, the documents produced by the assessee were not doubted or controverted by the Assessing Officer in the course of assessment proceedings. During the course of search and seizure operation, no incriminating material, evidence or documents whatsoever was found, calculation of long term capital gain cannot be said to be incriminating material when all these documents are duly recorded in the books of account. The ld AR has further submitted that the penalty proceedings are separate from assessment proceedings and finding in the assessment proceedings does not lead to the conclusion that the assessee has concealed the income. The penalty U/s 271(1)(c) of the Act is not automatic. No positive material has been brought on record by the Assessing Officer to show that the income is based on any entries recorded in the se....
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....TR 158 (SC) and submitted that even if the claim of exemption U/s 10(38) of the Act is found to be not allowable, the same would not amount to concealment of income or furnishing inaccurate particulars of income. 6. We have considered the rival submissions as well as relevant material on record. The question arises whether a surrender and disclosure made by the assessee U/s 132(4) of the Act in absence of any incriminating material found during the search and seizure action would lead to the conclusion that the assessee has concealed the particulars of income or furnishing inaccurate particulars of income. In the case of the assessee, there is no dispute that the assessee filed return of income U/s 139(1) of the Act on 16/10/2013 and declared the long term capital gain of Rs. 2,79,87,900/- and claimed exempted U/s 10(38) of the Act. It is also not in dispute that the transactions of purchase and sale of equity shares of listed companies were duly recorded in the books of account and capital gain arising from the sale of shares were reflected in the books of account regularly maintained by the assessee. The assessee has also shown the shares in question in the balance sheet as on....
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....essment Year 2011-12. (Page No. 91-93 of paper book) (B) IN RELATION TO SHARES SALES: Summary of shares sale during the year under consideration (Page No. 94 of paper book) • Copy of sales bills/contract notes of shares (Page No. 95-103 of paper book) • Copy of ledger Account of assessee in books of accounts of share brokers through whom the shares were sold (Page No. 104-105 of paper book) • Copy of bank statement showing the entry of payment received against sales of shares (Page No. 106-107 of paper book) (C) DEMAT ACCOUNT STATEMENTS OF FOLLOWING BROKERS: • Suresh Rathi Securities Private Limited • Religare Securities Limited (Page No. 108-109 of paper book) Thus, the purchase bill for purchase of shares alongwith ledger account in the books of the share broker clearly reveals the date of purchase and also the payment of purchase consideration through banking channel as revealed in the bank account statement of the assessee. All these documents are independently verifiable. The revenue has not disputed the filing of original return of income by the assessee for these years as well as for the A.Y. 2011-1....
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....ncealed the particulars of income or furnished inaccurate particulars of income. For ready reference, we reproduce Explanation 5A to Section 271(1)(c) of the Act as under: Section 271(1)(c) [Explanation 5A. - Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of- (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (ii) any 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 of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date17 for filing the return of income for such previous year has expired but the a....
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....he explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incrimin....
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....course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a ....
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.... income by Rs. 15 lacs to the income declared in the original return of income. The AO invoked provisions of Explanation5A to section 271(1)(c). During the course of search, no incriminating documents were found which is evident from the assessment order that no addition had been made by the AO. He accepted the returned income. The ld. CIT (A) also confirmed the penalty by mis-placing the Hon'ble Supreme Court decision in the case of MAK Data (P.) Ltd. v. CIT [2013] 358 ITR 593/38 taxmann.com 448. The surrender of income in the revised return was voluntary and suo moto. Additional income disclosed under section 153A in the return does not lead to the conclusion that the assessee firm was having undisclosed income or had concealed the particulars of income. The surrender was made on the basis of statement recorded u/s 132(4) of the IT Act. He further argued that under similar facts and circumstances which came before the Hon'ble Delhi High Court in the case of CIT v. Raj Pal Bhatia [2011] 333 ITR 315/10 taxmann.com 191/202 Taxman 140 (Mag.)wherein the Hon'ble Court held that statement could not be construed as material found during the course of search operations for the....
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....he Act. The issue has been considered by various High Courts as well as by ITAT as relied upon by the assessee, which are squarely applicable to the case of the assessee. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT (A)." Thus, the Tribunal has held that the penalty U/s 271(1)(c) read with Explanation 5A of the Act can be levied only when some incriminating material is found during the course of search. Even otherwise the penalty proceedings are separate and independent from the assessment order and particularly in case where the Assessing Officer has not made any addition but the assessee itself has surrendered an additional income then the explanation of the assessee against the levy of penalty has to be considered in the proceedings U/s 271(1)(c) of the Act. It is settled proposition of law though the assessment order is a relevant material for the purpose of levy of penalty U/s 271(1)(c) of the Act, however, it cannot be a sole basis of levy of penalty and the Assessing Officer has to consider all the relevant material facts as we....
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....not surrendered the income then this explanation of the assessee would certainly lead to the conclusion that the penalty is not leviable U/s 271(1)(c) of the Act. The ld. CIT(A) after considering all the relevant material as well as the case laws on the point has held in para 4 to 4.5 as under: 4. I have considered the facts of the case, gone through the relevant assessment orders, penalty orders and the paper-book & submission of the appellant and the various case laws. 4.1 It is found that the appellant has advanced arguments from multiple perspectives, starting from technicalities of imposing the penalty by treating the additional income as concealment of income, penalty only on the basis of statements recorded in search, additional income surrendered dehors the seized material, finding in assessment alone not sufficient to establishing of the mensrea etc. From examination of documents and submission the following facts emerges by which the penalty u/s 271(1)(c) cannot be held as validly imposable in the instant case: - i) During the course of search the appellant admitted the long term capital gain shown in his ITR as his undisclosed income but such u....
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....t seems the appellants submissions of factual matrix and decisions of Hon'ble Jaipur ITAT reproduced above are good enough to decide the matter. 4.3 It is undisputed fact that the income surrendered during the search u/s 132(4) was duly included/ offered for tax while filing return of income u/s 153A and due taxes thereon was paid. The income surrendered and included/ offered for tax while filing return of income was accepted as such by the AO. 4.4 In above factual situation, the penalty u/s 271(1)(c) cannot be levied as the matter is covered one. Apart from the consideration given on the several case laws cited by the applicant it is worth to place the reliance on the decision Hon'ble ITAT, Jaipur Bench, Jaipur in the case of Ajay traders V/s DCIT, Central Circle, Alwar (ITA No. 296/ JP/2014) pronounced on 06.05.2016 as follows: - "4.3. We have heard rival contentions and perused the material on record. It is undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs. 15 lacs and requested not to impose penalty u/s 271(1)(c) of the IT Act. T....