Income Tax Appellate Tribunal - Delhi
Dcit, Faridabad vs Mr. Navneet Jhamb, Faridabad on 19 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.3102/Del./2014
(ASSESSMENT YEAR : 2006-07)
Shri Navneet Jhanb, vs. ACIT, Central Circle 1,
House No.1260, Sector 14, Faridabad.
Faridabad.
(PAN : AAYPJ3980G)
ITA No.3787/Del./2014
(ASSESSMENT YEAR : 2006-07)
ACIT, Central Circle 1, vs. Shri Navneet Jhanb,
Faridabad. House No.1260, Sector 14,
Faridabad.
(PAN : AAYPJ3980G)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Dr. Rakesh Gupta, Advocate
REVENUE BY : Shri S.R. Senapati, Senior DR
Date of Hearing : 12.04.2018
Date of Order : 19.04.2018
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
Present cross appeals filed by the assessee as well as by the revenue are being disposed of by way of consolidated order to avoid repetition of discussion.
2 ITA No.3102/Del./2014
2. The appellant, Shri Navneet Jhanb (hereinafter referred to as 'the assessee') by filing the present appeal, sought to set aside the impugned order dated 30.04.2014 passed by Ld. CIT (Appeals), Gurgaon qua the assessment year 2006-07 on the grounds inter alia that :-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in upholding the action of the Ld. A.O. in sustaining penalty to the extent of Rs.11,54,240/- u/s 271(1)(c) and that too without giving an opportunity of being heard on the aspect.
2. That in any case and in any view of the matter action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned penalty is bad in law and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in imposing penalty without giving an adequate opportunity of being heard and by not observing the principles of natural justice.."
3. The appellant, Assistant Commissioner of Income-tax, Central Circle 1, Faridabad. (hereinafter referred to as 'the Revenue') by filing the present appeal, sought to set aside the impugned order dated 30.04.2014 passed by Ld. CIT (Appeals), Gurgaon qua the assessment year 2006-07 on the grounds inter alia that :-
"1. On the facts and in the circumstances of the case, Ld. CIT(A) has erred in law and on facts in reducing the quantum of penalty from 200% to 100% of tax 3 ITA No.3102/Del./2014 evaded without giving any cogent reasons whereas the Assessing Officer has given clear findings based on sound footing, that it is a rare case of concealment of income which deserves imposition of penalty at higher rate.
2. On the facts and in the circumstances of the case, Ld. CIT(A) has erred in law and on facts in reducing the quantum of penalty without appreciating the fact that in this case not only quantum addition stands confirmed in first appeal but also the action of the Assessing Officer imposing penalty has been confirmed hence the reduction of quantum of penalty, at too without any basis, is totally unwarranted.
3. On the facts and in the circumstances of the case, Ld. CIT(A) has erred in law and on facts in reducing the quantum of penalty in view of the provisions of section 249(4)(a) of the Income Tax Act, 1961 by virtue of which appeal was not maintainable, as the assessee did not pay tax on the returned income."
4. Briefly stated the facts necessary for adjudication of the controversy at hand are : During the search and seizure operation at the residential premises of the assessee, certain documents/loose papers were seized. An amount of Rs.25,00,000/- was surrendered by the assessee and an amount of Rs.39,00,000/- was seized on account of entries recorded in the documents seized from the residential premises. On the basis of completed assessment, AO initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act'). Disagreeing with the contentions raised by the assessee, AO proceeded to conclude that the assessee has concealed accurate particulars of his income by 4 ITA No.3102/Del./2014 not disclosing the income which was surrendered by him during the course of search and seizure and thereby levied a penalty of Rs.23,08,480/- @ 200% of the tax sought to be evaded.
5. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has restricted the penalty to Rs.11,54,240/- @ 100% of the tax sought to be evaded by partly allowing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
7. Undisputedly, during the search and seizure operation conducted on 04.08.2005, the assessee has surrendered an amount of Rs.25,00,000/- and Rs.39,00,000/-. It is also not in dispute that assessee had not disclosed the surrendered amount in the return of his income nor paid taxes thereon. It is also not in dispute that the assessee while recording his statement u/s 132 (4) has claimed immunity from the penalty while surrendering the aforesaid amount being unaccounted commission income. It is also not in dispute that the tax on the aforesaid surrendered amount of 5 ITA No.3102/Del./2014 Rs.25,00,000/- and Rs.39,00,000/- has been adjusted from the same.
8. In the backdrop of the aforesaid facts and circumstances of the case, grounds raised by the assessee company and the arguments addressed by the authorized representatives of the parties, the sole question arises for determination in this case is :-
"as to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income during assessment proceedings?"
9. Ld. AR for the assessee challenging the impugned order contended inter alia that the penalty order is not sustainable because the AO has issued a very vague and ambiguous notice u/s 271(1)(c) of the Act; that the assessee has made voluntary disclosure to buy peace and avoid litigation and relied upon the decisions cited as CIT vs. Radha Kishan Goel - (2005) 278 ITR 454 (All.) and CIT vs. Mahendra C. Shah - (2008) 299 ITR 305.
10. However, on the other hand, ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the assessee contended that as per Explanation (5) to section 271(1)(c) of the Act, the assessee is deemed to have concealed the income as he has surrendered the amount when cornered during the search and seizure operation; that notice initiating penalty proceedings u/s 6 ITA No.3102/Del./2014 271(1)(c) is just an intimation to attend the penalty proceedings and is not a satisfaction of the AO and that the inaccurate particulars in the quantum are sufficient to confirm the penalty.
11. The ld. AR for the assessee contended that in view of the categoric statement made by the assessee u/s 132 (4), his case falls under the exception provided under clause (2) of Explanation (5) to section 271(1)(c). Perusal of the copy of statement recorded u/s 132 (4), available at pages 4 to 11 of the paper book, shows that the assessee has surrendered the amount of Rs.25,00,000/- and Rs.39,00,000/- during search and seizure operation with clear intention to buy peace and avoid litigation with request not to impose any penalty and has also made a statement that the tax thereon be adjusted from the cash seized.
12. Hon'ble High Court of Allahabad in case cited as CIT vs. Radha Kishan Goel (supra) wile deciding the identical issue held as under :-
"From a perusal of Expln. 5 it is evident that in circumstances which otherwise did not attract the penalty provisions of s. 271(1){c), a deeming provision was introduced as to attract the penalty provisions to those cases as well. But an exception in cl.(2) of Expln. 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-so (4) of s. 132 that the money, bullion, jewellery, etc., found in his possession has been acquired out of his income which has not been disclosed so far in his return of income to be furnished 7 ITA No.3102/Del./2014 before the expiry of time specified in s. 139 and also specifies in the statement the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. The exception appears to be to provide an opportunity to the assessee to make a clean and fair confession and to surrender his income and also to deposit the tax and interest thereon which may result in an agreed assessment. The paramount intention appears to be that in the case of fair and clean confession and surrender of his income during the course of search further litigation may be avoided and the Revenue may get the tax and interest, etc., at an earliest and the assessee may be saved from further litigation. Under s. 132(4}, it is the authorised officer, who examines on oath any person, who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing, therefore, it is for the authorised officer to record the statement in his own way. Therefore, it is not expected from the person to state those things, which are not asked by the authorised officer. During the course of search person is so tortured, harassed and put to a mental agony that he loses his normal mental state Of mind and at that stage it cannot be expected from a person to preempt the statement required to be given in law as a part of his defence. Under s. 132(4}, unless the authorised officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Expln. 5(2). In case, there is nothing to the contrary in the statement recorded under s. 132 (4), in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources. The object of the provision is achieved by making the statement admitting the non-disclosure of money, bullion, jewellery, etc. Thus, much importance should not be attached to the statement about the manner in 8 ITA No.3102/Del./2014 which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make Expln. 5(2) inapplicable. For the reasons stated above, there is no error in the order of the Tribunal and the same is upheld."
13. Similarly, Hon'ble High Court of Gujarat in case of CIT vs. Mahendra C. Shah also held that in case tax on income declared in statement u/s 132 (4) was paid before assessment was completed Exception (2) to Explanation (5) is applicable. Operative part of the judgment in CIT vs. Mahendra C. Shah (supra) is reproduced for ready reference as under :-
"There is no prescription in Exception 2 of Expln. 5 of s. 271(1)(c) as to the point of time when the tax has to be paid qua the amount of income declared in the statement made under s. 132 (4). The Tribunal was justified in holding that there would be sufficient compliance of the provision if tax is shown to have been paid before the assessment was completed. The reasoning which has weighed with the Tribunal is that the search proceedings were conducted on 3rd July, 1987 when the statement under s. 132(4) was made. The last date for payment of advance tax qua the last instalment of advance tax was 15th Dec., 1987 in such a case, according to the Tribunal, and in the event, the assessee did not pay tax qua the income declared in the statement made under s. 132(4), the assessee became liable to pay interest in accordance with the relevant provisions because Exception No.2 itself specifies payment of tax, together with interest, if any, indicating that legislature did not stipulate any specified time limit for payment of tax. There is no infirmity in this reasoning. However, the outer limit has to be the point of time when the assessment proceedings are undertaken by the AO because the opening portion of s.9 ITA No.3102/Del./2014
271(1) requires the AO to record satisfaction in the course of such proceedings, and the satisfaction has to be as regards the concealment of particulars of income or furnishing inaccurate particulars of income. In other words, a satisfaction as to concealment can be arrived at the earliest point of time only in the course of assessment proceedings and for that purpose the AO is required to verify and ascertain whether the income has been declared and tax paid thereon. For the purposes of Expln. 5, which comes into play only in case of search and seizure proceedings, return of income per se would have no relevance if one reads entire Expln. 5, including the two Exceptions. The emphasis on disclosure in the return of income is relevant only for the purposes of avoiding the deeming fiction of concealment in relation to the previous year which has already ended before the date of search but return of income for such year had not been furnished, or where return has been filed such income has not been disclosed. Insofar as a previous year which is to end on or after the date of search return of income would have hardly any relevance because the Explanation itself stipulates that regardless of such income having been declared in any return of income furnished on or after the date of search the assessee would become liable to imposition of penalty, the only exception being a declaration at the time of search. In the present case, admittedly the assessment year being 1988-89 and the search having taken place on 3rd July, 1987 the return of income was not due before 31st July, 1988. Therefore, whether the income represented by the value of the asset was shown in the return of income or not became irrelevant once a declaration had been made about such income having not been disclosed till the date of search in the return of income to be furnished before the time specified in s. 139(1) as required by the earlier part of Exception No.2. In fact, at the cost of repetition, it is required to be stated that the legislative intent and the scheme that flows from a plain reading of the provision makes it clear that in relation to search and seizure proceedings, for becoming entitled to immunity from levy of penalty the basic requirement is in case of Exception No. 1 relevant entry in the books of 10 ITA No.3102/Del./2014 account or disclosure before the competent authority, and in relation to Exception No. 2 disclosure in the statement made under s. 132(4). Disclosure or otherwise in the return of income post the date of search would not absolve an assessee from the deeming provision, namely, 'deemed concealment' once an assessee is found in possession of a valuable asset at the time of search. Hence, the contention raised on behalf of the Revenue that penalty is leviable under the main provision for concealment vis-a-vis the return of income does not merit acceptance. Insofar as the alleged failure on the part of the assessee to specify in the statement under s. 132(4) regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Expln. 5 in entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Exception No.2 while making statement under s. 132(4). The view taken by the Tribunal to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under Exception No.2 in Expln. 5 is commendable. Hence, the Tribunal was justified in coming to the conclusion that insofar as the value of diamonds was concerned, the assessee having made a declaration under s. 132(4) and paid taxes thereon, had fulfilled all the conditions for availing the benefit of immunity from levy of penalty as provided under Expln. 5 to s. 271(1)(c). In absence of any infirmity in the 11 ITA No.3102/Del./2014 order of Tribunal on this count the question referred is answered in the affirmative i.e. in favour of the assessee and against the Revenue.-CIT vs. Radha Kishan Goel (2006) 200 CTR (All) 300 : (2005) 278 ITR 454 (All) relied on; Mahendra Chimanlal Shah vs. Asstt.CIT (1994) 49 TTJ (Ahd) 677 affirmed."
14. Aforesaid cases, CIT vs. Radha Kishan Goel and CIT vs. Mahendra C. Shah (supra), relied upon by the assessee are squarely applicable to the facts and circumstances of the case as the assessee has paid tax on the income surrendered as per statement recorded u/s 132 (4) at the time of search and seizure operation together with interest before the completion of assessment.
15. Moreover, the assessee has categorically mentioned in his statement u/s 132 (4) that the surrendered amount has been invested by him in cash out of unaccounted income generated as well as unaccounted commission income which may be generated out of the papers and documents found and seized in his residence.
16. So, when the assessee has come up with voluntary confession in order to buy peace and avoid litigation, he is entitled to the benefit of Exception (2) to Explanation 5 (2) to section 271(1)(c) and as such, the deeming provisions contained under Explanation 5 (2) are not applicable. Furthermore, the AO has initiated the penalty proceedings half-heartedly without satisfying himself, "as to whether the assessee has concealed the particulars 12 ITA No.3102/Del./2014 of his income or has furnished inaccurate particulars of such income". Because perusal of the assessment order, available at pages 12 to 14 of the paper book, relevant pages 14 & 15, show that the AO while recording his satisfaction has merely recorded that I am satisfied that, "this clearly attracts the provisions of section 271(1)(c)". Till this time, the AO was not clear enough as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income.
17. In the identical circumstances, penalty imposed on the assessee in AY 2001-02 was deleted, copy of order is available at pages 75 to 78 of the paper book.
18. The contention raised by the ld. DR for the Revenue that the assessee has not paid any tax is not sustainable in the face of the findings returned by the ld. CIT (A) at page 4 of the impugned order that, "During the remand proceedings, the AO has certified that documents filed by the assessee viz. copy of computation of income and acknowledgement of return filed, the SARAL form. In other words the aggregate amount of Rs.64,00,000/- was offered for tax and the cash seized was adjusted. Surrender of Rs.25 lakhs has been apparently made in reply to question no.10 of Statement recorded on 1.9.2005 with request for adjustment against tax." 13 ITA No.3102/Del./2014
19. So, when the assessee has offered aggregate amount of Rs.64,00,000/- which includes the cash seized and adjusted in accordance with the question no.10 of statement recorded u/s 132 (4) and this amount finds mention in the computation of income, the provisions contained under Explanation (5) to section
271)(1)(c) are not attracted. So, the question framed is answered in the negative.
20. In view of what has been discussed above, AO has failed to make out the case of concealment of income or furnishing of inaccurate particulars of such income by the assessee so as to attract the provisions contained u/s 271(1)(c) of the Act, hence penalty levied by the AO and restricted by the ld. CIT (A) is hereby deleted. In the given circumstances, appeal filed by the Revenue challenging the reduction in the penalty from 200% to 100% by the ld. CIT (A) is not maintainable having been become infructuous. Consequently, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed. Order pronounced in open court on this 19th day of April, 2018.
Sd/- sd/-
(R.K. PANDA) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 19th day of April, 2018
TS
14 ITA No.3102/Del./2014
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-18, New Delhi.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.