Income Tax Appellate Tribunal - Chandigarh
Sh. Rajnish Vohra, Panchkula vs Assessee on 23 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B' CHANDIGARH
BEFORE Ms.SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 516/CHD/2012
Assessment Year: 2007-08
Shri Rajnish Vohra, V DCIT, CC-1,
House No. 259, Sector 10, Chandigarh.
Panchkula.
PAN: AASPV-3155D
(Appellant) (Respondent)
Appellant by : Shri Ajay Jain
Respondent : Shri Akhilesh Gupta
Date of Hearing : 23.08.2012
Date of Pronouncement : 31.10.2012
ORDER
PER MEHAR SINGH, AM
The assessee filed appeal against the order of CIT(A) dated 16.04.2012, for the assessment year 2007-08, wherein penalty u/s 271(1)(c) of the Act, r.w. Explanation 5A thereunder levied by the AO at Rs.67,52,200/- vide order dated 30.6.2010, was upheld. The grounds of appeal, as raised by the assessee appellant are as under:
"1. That the order of Learned C.I.T. (A) is bad and against the facts & Law.
2. That the Learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty amounting to Rs 6752200/- under section 271(1)(c ) read with Explanation 5A on the declared Income in the return filed in the response to Notice under Section 153A of the Act after search & failed to appreciate the fact that there is no difference between assessed income & returned/ declared 2 income in response to notice U/S 153A of the Act. The learned commissioner of Income Tax (Central) appeal has also failed to appreciate the fact that assessing officer has not discussed the merit & reason for levying penalty & he has passed order mechanically without application of mind on the nature& circumstances of disclosure made during the coursed of search & in the return filed after search.
3. That the learned CIT(A) has erred in confirming the penalty U/S 271(1)(c) without appreciating the fact that the surrender / returned | Income has been disclosed during the course of search which was accepted subject to no penal action 271(1) (c ) & also failed to appreciate the fact that the appellant has not concealed any income or furnished inaccurate particulars of Income.
4. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty without appreciating the fact that the assessing officer has not recorded satisfaction for initiation of penalty in the assessment order & also failed to appreciate the fact that the assessing officer has not discussed the reason for levying penalty & merit of additional income on which penalty has levied.
5. That the learned Commissioner of Income Tax (Appeal ) has erred by confirming the action of Assessing Officer who has wrongly invoked the explanation 5A to Section 271(1)(c ) without appreciating the fact that the due date of filing of return has not been expired on the date of search & assessee has already filed the original return on due date & Provisions of Explanation 5A inserted by Finance Act 2007 are not applicable in case of appellant. In view of above both elements of Explanation 5A i.e. no return has been filed & due date has been expired on the date of search are not satisfied in appellant case & therefore the order of AO is bad & illegal.
6. That the Commissioner Of Income Tax (central) Appeal has wrongly confirmed the action of assessing officer of levying the penalty u/s 271(1)(c) despite of the fact that the assessee has filed an appeal before CIT(A) against Assessment Order passed u/s 143(3) read with 153A and the Assessing Officer instead of keeping it in abeyance has levied the penalty u/s 271(1)(c).3
7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off."
2. In the course of present appellate proceedings, before the Bench, ld. 'AR' contended that the penalty levied u/s 271(1)(c) of the Act, by the AO and upheld by the CI T(A), is not in consonance with the relevant provisions of Section 271(1)(c) of the Act. The assessee had disclosed an additional income of Rs.2,00,60,000/-, to buy peace of mind and to avoid the prolonged litigation. The assessee made disclosure of additional income, in the course of search operation, on the assurance given by the Department that no penalty u/s 271(1)(c) of the Act shall be levied. Further, the return of income filed by the appellant, in response to notice u/s 153A of the Act has been accepted, without any addition. Consequently, the return declaring an income of Rs.3,27,01,440/- has been accepted by the AO and no further addition has been made. Ld. 'AR' argued that in view of the decision of the Hon'ble Supreme Court in the case of Sudershan Silk & Sarees V CIT 300 ITR 205, penalty cannot be levied in such a case. The ld. 'AR' argues that there is no difference between the returned income and the assessed income, and, hence, the furnishing of inaccurate particulars of income does not arise.
2(i) It was, further, argued by the ld. 'AR' that without prejudice to the above contentions, the AO has failed to record satisfaction in the assessment order and to support his contention, he placed reliance on the decision of the Hon'ble Delhi High Court, in the case of Madhushree Gupta & British 4 Airways 317 ITR 107 (Del), wherein the Hon'ble Delhi High Court has explained the scope of amendment by way of insertion of sub-section (1B) to Section 271 of the Act, by the Finance Act, 2008 w.e.f. 1.4.1989, in the context of recording of satisfaction u/s 271(1)(c) of the Act. It was, further, argued that such satisfaction should be based on some material available on record. He argued that AO wrongly levied the penalty, on the wrong notion that the penalty u/s 271(1)(c) read with Explanation 5A is mandatory in nature, whereas the penalty u/s 271(1)(c) is discretionary in nature depending on the facts of each case.
2(iii) Ld. 'AR', further, argued that AO had invoked the Explanation 5A to Section 271(1)(c) of the Act, without proving the fact that the assessee failed to file the return, on or before due date of filing the return of income. The AO, levied penalty, on the basis of Explanation 5A inserted by Finance Act, 2007 w.e.f. 1.6.2007. This explanation does not refer to all the previous years ending before the date of search, as it restricts to that year, in respect of which, due date for filing of return has expired and the return has not been filed. Thus, if source of unaccounted asset relates to the previous year, in respect of which the return has already been filed, the provisions of Explanation would not apply. He argued that the provisions of Explanation 5A to Section 271(1)(c) of the Act, at the time of filing of the regular return, were not applicable, to the facts of this case. The appellant had filed regular return within the due date. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CI T V Omkar Saran 5 & Sons, 195 I TR 1 (S.C) and B.N.Sharma V CIT 226 ITR 442 (S.C). It was argued that search action u/s 132(1) of the Act was initiated, on 31.10.2007 and on that date itself, the original return of income was filed. Therefore, ld. 'AR' argued that the ingredients of Explanation 5A, to Section 271(1)(c) of the Act were not satisfied. The appellant filed the return of income for the relevant assessment year i.e. 2007-08, on 31.10.2007, i.e. the date on which search action was initiated and a hard copy of the same was filed, on 14.11.2007. The appellant filed return by e-mail, on 31.10.2007, on due date i.e. 31.10.2007 and, hence, the due date has not expired. Therefore, ld. 'AR' contended that provision of Section 271(1)(c) read with Explanation 5A thereunder are not applicable to the facts of the present case. 2(iv) Ld. 'AR', further, argued that the return was revised, on 23.07.2009, declaring surrendered amount, which replaces the original return filed in normal course. Ld. 'AR' narrated the factual matrix of the case, as that the return of income, for assessment year 2007-08, was filed, on 31.10.2007, and acknowledgement of the same was deposited, on 14.11.2007. Hence, the date of filing the return should be taken as 31.10.2007. However, the AO has taken the date of filing return as 14.11.2007 and wrongly levied the penalty, on wrong premise and facts. The search was conducted, on 31.10.2007 and on that date of search, due date for filing the return has not expired. It was, further, argued that the assessee had made conditional surrender, subject to no-penalty u/s 271(1)(c) of the Act and to support his contentions, reliance was placed on the decision of the jurisdictional High Court in CIT V Jaswant Rai 6 142 CTR 49 (P&H). He argued that no addition has been made, to the returned income filed by the assessee, in response to notice u/s 153A of the Act, consequently, levy of penalty u/s 271(1)(c) does not arise. Ld. 'AR' was of the opinion that there is an Agreement between the assessee and the Department, at the time of making the impugned surrender and, hence, penalty cannot be levied. He placed reliance on the decision of the jurisdictional High Court, in the case of CI T V Smt. Sudershan Gupta (L/H), 10 DTR 184 (P&H). Ld. 'AR' also placed reliance on the decision in the case of CI T V Suresh Chander Mittal (2001) 251 ITR 9 (S.C) and the decision of the Hon'ble Supreme Court in Ram Nath Jagan Nath V State of Maharashtra (1984) 57 STC 51 (Bom) wherein penalty was cancelled in view of the conditional surrender made by the assessee. Ld. 'AR' placed reliance on certain other decisions and stated that same have been considered by the CIT(A).
2(v) It was, further, contended by the ld. 'AR' that the addition of Rs.1,03,60,000/-, on account of unaccounted investment, in respect of land measuring 30K 16M, on the basis of the statement of the appellant. Similarly, an addition of Rs.20 lacs had been made, on account of unaccounted investment, and addition on account of undisclosed income of M/s 21 s t Century Resorts, without establishing the same as unaccounted income of the appellant. In a nutshell, it was contended by ld. 'AR' that additions had been made by the AO, without bringing any cogent and corroborative evidences on record.
72(vi) Ld. 'AR' referred to page 2, 19, 28 to 37 of the Paper Book and relevant provisions of the Act. On merit, ld. 'AR' referred to para 2 of the assessment order and contended that no concealment has been established by the AO within the meaning of provisions of Section 271(1)(c) read with Explanation 5A thereunder. Ld. 'AR' also referred to the submissions filed before the CIT(A), to support his contentions.
3. Ld. 'DR', on the other hand, after narrating factual matrix of the case, supported the findings of ld. CIT(A), as contained in para 5.2, 5.3, 6.1 and 6.2 of the order. Ld. 'DR', further, contended that Explanation 5A to Section 271(1)(c) of the Act, as inserted by the Finance Act, 2009, with retrospective effect, from 1.6.2007, is applicable to the facts of the present case, in view of the legislative intent contained therein, for its operation. Thus, the Ld. 'DR' supported the findings of the AO, as well as that of the CI T(A), in the matter.
4. We have carefully perused the rival submissions, facts of the case, Paper Book and the case laws cited by the parties. The brief facts of the case, as culled out from the relevant records are that a search & seizure operation u/s 132(1) of the Act, was conducted on 31.10.2007, at the residential and business premises of the assessee, Shri Rajesh Vohra, who is also Proprietor of M/s 21 s t Century Builders & Engineers. The AO observed, in para 4 of the asstt. Order passed u/s 153A r.w.s. 143(3) of the Act that the assessee filed return of income, on 14.11.2007, for the Assessment Year 2007-08, declaring income at Rs.1,26,41,440/-. The AO, issued notice u/s 153A 8 of the Act, on 27.1.2009 and consequently, the assessee filed return of income, on 23.7.2009, declaring income of Rs.3,27,01,440/- (inclusive of surrender of Rs.2,00,60,000/-). The assessee declared income under the head 'Income from salary, business or profession' and income declared in the statement recorded u/s 132(4) of the Act. on 31.10.2007, in the course of search operation at Rs.2,00,60,000/-. In the course of search operation, the assessee made a declaration in the statement recorded u/s 132(4) of the Act, as per the following details :
(a) Difference between registered value and agreement to sell for Rs. 1,03,60,000/-
land purchased in Village Sundran, Tehsil Dera Bassi
(b) Payment in cash for land at Manali Rs. 20,00,000/-
(c) Undisclosed income of 21st Century Builders & Engineers Rs. 77,00,000/-
for F.Y, 2006-07
Total Rs. 2,00,60,000/-
4(i) Assessment order was passed by the ACIT, CC-1,
Chandigarh, with the prior approval of the Addl.CIT, Range, Central Chandigarh, vide his order dated 30.12.2009, as contemplated u/s 153D of the Act. In the impugned assessment order, the AO recorded, satisfaction for initiation of penalty proceedings within the meaning of Section 271(1)(c) r.w.s. 271(IB) of the Act, at the end of each addition made by him as also in the concluding para of the Asstt. Order.
5. The AO levied penalty u/s 271(1)(c) read with Explanation 5A to Section 271(1)(c) of the Act, at Rs.67,52,200/- @ 100% of the tax, sought to be evaded, vide order dated 30.6.2010. The relevant part of the penalty order passed by the AO is 9 reproduced hereunder :
"2. Brief facts of the case are that a search &. seizure operation u/s 132(1) of the Income Tax Act, 1961 was conducted at the residential and business premises of Shri Rajneesh Vohra & his family on 31.10.2007. During the course of action u/s 132 of the I.T. Act, 1961, some incriminating documents were found and seized from the residence and business premises of the assessee. These documents were confronted while recording his statement u/s 132(4) of the IT. Act, 1961. The assessee surrendered a sum of Rs. 2,00,60,000/-.The details of surrender made by the assessee is as under:
( a ) Difference between registered value and Rs. 1,03,60,000/-
agreement to sell for land purchased in Village Sundran, Tehsil Dera Bassi ( b ) Payment in cash for land at Manali Rs. 20,00 ,000/-
( c ) Undisclosed income of 21st Century Builders & Rs. 77,00,000/-
Engineers for F.Y. 2006-07
Total : Rs. 2,00,60,000/-
The assessee filed return u/s 153A of the Income Tax Act, 1961, on 23.07.2009 declaring the total income at Rs.3,27,01,440/-. The retuned income of the assessee also included undisclosed income of Rs. 2,0060,000/-surrendered u/s 132(4) during the course of search operation. It was found that there was unaccounted investment of Rs. 1.03 crores in purchase of land at Village Sundran. Further it was found that amount of Rs.20 lacs was paid in cash towards purchase of land at Manali. The assessee had surrendered these amounts in his statement recorded during the search. Further additions amounting to Rs.65, 51,791/- were made during the course of assessment. The assessee explained that he had already disclosed Rs 77,00,000/- during the course of search on account of undisclosed income of his proprietorship concern i.e. M/s 21st Century Builders & Engineers; therefore in view of the above, the returned income of the assessee was accepted.
3. In its reply dated 22.1.2010 in response to the notice u/s 271(l)(c), the assessee contended that no penalty should be levied as the return declaring income of Rs 3,27,01,440 was accepted and no addition had been made.
Assessee placed reliance on 300 ITR 205 (SC) in the case of Sudershan Silk & 10 Sarees Vs CIT and 142 CTR 49 (PAH) in the case of CIT Vs Jaswant Rai. Reliance was also placed on other case laws contending that no penalty should be levied when the assessee agrees to addition subject to no penalty. Further, vide letter dated 10.6.10, the assessee requested that the penalty proceedings should be kept in abeyance as the assessee has filed an appeal before the worthy CIT(Appeals) -I, Ludhiana. From the perusal of the acknowledgement filed by the assessee, it is noticed that the assessee has filed appeal before worthy CIT(Appeals) -I, Ludhiana on 21.5.10 whereas the assessment order alongwith the demand notice was served on the assessee on 30-12-2009. Also, it was found ,that the search was conducted in the premises of the assessee on 31-10-2007 and the assessee had made disclosure of Rs.2,00,60,000/- for the assessment year 2007-08, therefore provisions of Explanation 5A to section 271(l)(c) were applicable. Vide this office letter dated 21/06/10, the assessee was issued the following show cause notice:
"To Shri Rajneesh Vohra, # 259, Sector 10, Panchkula Sir, Sub.: Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08 -Regarding-
************ Please refer to this office letter dated 30.12.2009, your reply dated 22.01.2010 and also your letters dated 01.06.2010, 10.06.2010 and 19.06.2010 also refer to this office letter dated 02.06.2010 and 17.06.2010.
It has been stated by you in your letter dated 01.06.2010, 10.06.2010 & 19.06.2010 that you have filed appeal before the Worthy CIT(Appeals)-!, Ludhiana and that penalty proceedings initiated against you may be kept in abeyance. On going through the records, it is seen that the assessment order was passed on 30.12.2009 and the same alongwith demand notice was served upon you on 50.12.2009. As per provisions of section 249(2) (b) appeal should have been filed within 30 days from the date of service of demand notice to you, whereas you have filed appeal before the Worthy CIT (Appeals)-!, Ludhiana on 21.05.2010. Therefore your request that the penalty proceedings may be kept in abeyance cannot be accepted and is hereby rejected.11
Further, as per your letter dated 22.01.2010, you have contented that no penalty should be levied in view of second proviso to explanation 5 of the section 271(1)(c) of the Income Tax Act and also that the additions made are less than the surrendered amount. It is further contented by you that the returned income has been accepted. In this regard, your attention is invited to explanation 5A to the section 271(1) (c) of the Income Tax Act, 1961, which reads as follows:-
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 (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (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 the search and the due date for filing the return of income for such year has expired and 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 the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.
On going through the facts of your case, it is seen that your case is squarely covered by provisions of explanation 5A to Section 271(1)(c) of the Income Tax. You are therefore requested to please explain as to why penalty u/s 271(1)(c) should not be imposed on you.
Your reply should reach this office by 25.06.2010. In case no reply is received it will be presumed that you have nothing to say in the matter. Also please note that minimum penalty leviable u/s 271(1) (c) of the Income Tax Act, 1961 is 100% of the Income Tax Act, sought to be evaded and maximum penalty is 300% of the tax sought to be evaded."
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4. In response to this office show cause notice dated 21/06/10, the assessee himself alongwith his counsel Sh Ajay Jain, attended the proceedings before the undersigned and vide letter dated 22.06.2010 filed written submission on 25.06.2010. It was again contended vide written submission dated 22.06.10 that the assessment order is subject matter of appeal. It was stated that under the provisions of section 249(3) the Commissioner of Income-tax (Appeals) may admit an appeal after the expiration of 30 days, if he is satisfied that the appellant has sufficient cause for not presenting the appeal within the prescribed period. It was requested that in view of specific provisions of section 249(3) and 275(l)(a), the penalty proceedings should be kept in abeyance. On merits, it was submitted that the assessee had agreed to the additions subject to no penalty. It was further contended that the explanation 5A to section 271(l)(c) should be considered in the light of agreement between the department and the appellant. It was also contended that the assessee filed original return on 31-10-2007 and search was conducted on 31-10-2007 A surrender was made during the course of search subject to no penalty. It was also stated that the assessment was completed under section 143(3) and no addition was made. In its written submissions dated 22-06-10 the assessee placed reliance on 300 ITR 205 (SC) in the case of Sudershan Silk & Sarees Vs CIT and 142 CTR 49 (PAH) in the case of CIT Vs Jaswant Rai.
4.1 The reply of the assessee has been duly considered. As stated above, the assessee filed appeal before the worthy CIT(Appeals) -I, Ludhiana on 21-5- 10, which is belated. Therefore, the order of assessment cannot be stated to be subject matter of appeal unless the same is admitted by the Commissioner of Income Tax (Appeals). The assessee has not filed any order of the CIT(A) that the delay has been condoned and the appeal is admitted by the Worthy CIT(A). Therefore, the request of the assessee for the penalty proceedings be kept in abeyance can not be acceded to. 4.2 The reliance placed by the assessee on 300 ITR 205 (SC) in the case of Sudershan Silk & Sarees Vs CIT and 142 CTR 49 (P&H) in the case of CIT Vs Jaswant Rai is misplaced. The judgment in 300 ITR 205 (SC) in the case of Sudershan Silk & Sarees Vs CIT was rendered in relation to explanation 5 of section 271(l)(c) also the facts of the case are totally different. In 142 CTR 49 (P&H) in the case of CIT Vs Jaswant Rai the issue related to 'agreed additions' whereas in the present case the issue relates to disclosure made by 13 the assessee u/s i32(4) of the Income Tax Act,1961. Under any circumstances, considering the facts of the case, after insertion of Explanation 5A of the section 271(l)(c) of the Income Tax Act, 1961, with effect from 1st June, 2007 the case laws cited by the assessee can not be relied upon.
5. In the show cause notice dated 21/06/10, the specific attention of the assessee was drawn to the provisions of Explanation 5A to Section 271(l)(c) which have been inserted w.e.f 1st day June, 2007, reads as under: 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 (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any pre via us 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 the search and the due date for filing the return of income for such year has expired and 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 the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub- section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 5.1 Statement of Shri Rajneesh Vohra (the assessee) was recorded u/s 132(4) of the Income Tax /Act, 1961 on 31.10.2007 during the course of search. The relevant extracts regarding surrender made by the assessee are reproduced below:-
"Q. / am showing you annexure A-1 of the documents seized from your office premises at SCO 8, Sector 5, Panchkula. Please explain Pages 83-88.
Ans. This is an agreement to purchase land at Manali. I have paid40lakhs, through DDs and 20 lakhs by cash.
Q. Please explain the source for these amounts.
Ans. I would like to surrender 20 lakhs as undisclosed income from my business Twenty First Century Builders and Developers. Q. / am showing you pages 80-82 of annexure A-1. Please describe the same.14
Ans. This is an agreement to purchase land in Village Sundran, Tehsil Dera Bass/ in the name of me and my brother. I wish to surrender Rs. 1,03,60,000/- being the amount which is in excess of the amount for which the land has been registered (i.e. Rs.35,00,000/-). The pages 70 to 74, 80 the annexure is one copy of the registered deed. Q. Do you have anything else to say. Ans. I would like to surrender an additional amount of Rs. 77 lakhs being the undisclosed income of the concern 21st Century Builders & Engineers for the F. Y. 2006-07. This is in addition to the surrender of Rs.1,23,60,000/- on account of account of the properties discussed above. This surrender is subject to no penalty u/s 271(1)(c) r.w.s. 132(4) explanation 5. This surrender is also subject to the verification pending in respect of stock in trade, sales receipt, galvanization charges & purchases in 20th Century Steel Structures Pvt. Ltd. and the surrender is not conditional on these enquiries."
5.2 Search in the case of the assessee was conducted on 31-10-2007. The original return was filed by the assessee on 14/ll/2007(wrongly mentioned as 31/10/07 by the assessee in his written submission dated 22/06/10) declaring total income of Rs. 1,26,41,440/-. Thereafter, in response to notice u/s 153A of the Income-tax Act, 1961, the return of income was filed on 23/07/09 declaring total income of Rs. 3,27,01,440/- (inclusive of surrender of Rs. 2,00,60,000/- ). Therefore, from the above facts, it is clear that the undisclosed assets and income pertained to the previous year which ended before the date of search, the due date for filing the return of income had expired and the assessee did not file the return disclosing the above 'undisclosed income' . Even, in the return filed on 14/11/2007 the assessee did not disclose the above 'undisclosed income'. As per the provisions of Explanation 5A, the assessee will deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income if the case of the assessee falls with in the preview of Explanation 5A to Section 271(l)(c) of the Income Tax Act, 1961.
6. From the above facts, it is clear that the case of the assessee squarely falls within the preview of Explanation 5A to section 271(l)(c) and the assessee has willfully and intentionally concealed the particulars of the income. Therefore, penalty u/s 271(1)(c)of the Income-tax Act is hereby imposed at Rs.67,62,200/- which is @ 100% on the tax sought to be evaded. As per the provisions of the Act." 15
6. Ld. CIT(A), interalia, dismissed the appeal of the assessee and upheld the order of the AO, in the matter. The ld. CIT(Central), by referring to the provisions of Section 271(1)(c) read with Explanation 5A held that the provisions of Explanation 5A to Section 271(1)(c) of the Act are applicable to the assessee's case. The relevant findings of the CIT(A), as recorded in paras 5 to 6.5 are reproduced hereunder :
"5. At the very outset, I will adjudicate on the Ground of Appeal No. 3, wherein the assessee has contended that the provisions of Explanation 5A to section 271(1) (c ) were wrongly invoked without appreciating the fact that the assessee has filed the return on or before due date of filing of return.
5.1 I have considered the impugned order of the Id. AO and the submissions made by the assessee. In order to adjudicate on the issue, I shall refer to the provisions of Section 271 (1)( c) r/w Explanation 5A, which is reproduced below:
271. failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner of (Appeals) or the Commissioner in the course of any proceedings under this act, is satisfied that any person -
(a) ......
(b) .......
(c)has concealed the particulars of his income or furnished inaccurate particulars of such income, or
(d).......
Explanation 5 A. - Where, in the course of a search initiated under section 132 on or after the 1 st I 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 16 represents his income (wholly in part) for any previous year, which has ended before the date of search
(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 date for filing the return of income for such 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 purpose of imposition of a penalty under clause (c ) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.
5.2. In this case it is an undisputed fact that the search operation took place after 1 st June, 2007. The search and seizure operation u/s 132 was conducted on 31.10.2007. In this case, the assessee has claimed that the original return for A.Y 2007-08 was filed 31.10.2007 through E-Filing facility and the signed acknowledgment was deposited on 14.11.2007 whereas the Id. AO had taken the date of filing of return as 14.11.2007. That in such a scenario the provisions of Explanation of section 5A were not applicable as the date of search and date of filing of the return were on the same date i.e. 31.10.2007, and consequently, the due date for filing of return had not expired. 5.3 Be that as it is, it is a undisputed fact that as the search and seizure operation u/s 132 was conducted after 1.6.2007, the provisions of Explanation 5A of Section 271(1) (c) are applicable in this case at hand. As for the dispute in the date of filing of return, the rationale behind the said provisions to my mind covers both situations where the due date for filing of return had expired on or before the date of search and the disclosure of income is included in the return filed after search,, as well as where the return was furnished without showing the undisclosed income which was declared subsequently in the return filed after search or in response to notice u/s 153A. In other words, penalty for concealment of income for search operations conducted after 1.6.2007 which are otherwise not covered u/s 271AAA are sought to be covered u/s 271(1)( c). Hence the invoking of the said provisions by the Ld. AO is upheld accordingly the ground of appeal no. 3 is dismissed".
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6. I shall now take up ground no. 2 and 4 for adjudication in a consolidated manner. In Ground of appeal No. 2 the assessee has contended that the penalty u/s 271 (1) (c ) had been wrongly levied as the disclosure of the additional income of Rs. 2,00,60,000/- was subject to no penalty and that the income declared in the return filed u/s 153A was accepted by the Assessing Officer. Reliance was placed on the judgement of the Hon'ble Supreme Court in the case of Sudarshan Silk Sarees vs. CIT, 300 ITR 205. it was also averred that the Id. AO had not recorded satisfaction in assessment order and penalty order. That the penalty u/s 271 (1) (c) r.w. Explanation 5A was not mandatory where surrendered was bona-fide.
Similarly in Ground of appeal No. 4 the assessee is aggrieved that penalty was levied conditional surrender of no penalty u/s 271(1) (c j. Reliance was placed in the cases of CIT Vs. Jaswant Rai, 142 CTR 49 (P & H), CIT Vs. Smt. Sudarshan Gupta through L/H, 10 DTR 184 {P& H), Bhagat & Co. Vs. ACIT 101 TTJ 553 (Mum), CIT vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC), CIT Vs. S.I. Paripushpam (2001) 249 ITR 550 (Mad), CIT Vs. India Sea foods ( 1996) 218 ITR 629 (Ker), CIT vs. Saran Khandsari Sugar Works ( 2000) 246 ITR 216 ( All).
6.1 On a perusal of the impugned penalty order, it is seen at para 5.1 that the assessee u/s 132(4) had made the surrenders against documents seized in the course of search which had been admitted in the statement. The source of the undisclosed income/ investment is stated to be arising from undisclosed income of his proprietary concern. The Ld. AO further stated that even in the return filed on 14.11,2007 (as against assessee's claim of 31.10.2007) the assessee did not disclose the above undisclosed income thereby falling within the ambit of section 271{ll (c) r.w. Explanation 5A.
6.2. I have carefully gone through the assessee's submission and the impugned penalty order. It is a fact that the undisclosed income was not declared in the return filed u/s 139(1). It was only disclosed in the return filed in response to notice u/s 153A. The return u/s 153 (1) (A) has been accepted by the department. However needless to say, the levy of penalty u/s 271 (1) (c) would depend on the facts and circumstances of each case. If the concealment is apparent from the records there is no reason for not levying penalty. Therefore, the nature of evidence available becomes the deciding factor as to whether there is any concealment. Assessee's contention that the addition was on agreed basis on assurance 18 that no penalty would be levied does not hold any water as the surrender was consequent to search and seizure operation wherein specific documents regarding property transaction were found and seized. The Hon'ble Judicial High Court in the case of Careers Education & Infotech Pvt. Ltd (336 ITR 257 of 2011) vide its decision dated 31.03.2011 has held that no doubt even voluntary surrender of concealed income may not exonerate the assessee of its liability to pay penalty if it can be held that there was concealment of income or furnishing of inaccurate particulars. In the case at hand, the surrender in the statement u/s 132(4) cannot be said to be voluntary as specific documents had been found on the basis of which the surrender was made and importantly the undisclosed income had it been shown in the return filed by the assessee u/s 139(1). The reasons for not having included the additional income in the return filed u/s 139 have not been elucidated by the assessee. Hence it is apparent that had it not been for the search operation and questions raised during recording of the statement, there would have been no disclosure of additional income by the assessee. Furthermore in the statement u/s 132(4) there is no indication that the tax liabilities arising thereof have been sought to be paid within stipulated due dates. Hence I am in the opinion that the assessee has not sufficiently covered himself with the immunity conferred u/s 271 (1) (c).
6. 3. The cases relied upon also do not come to the rescue of the assessee as the facts and circumstances are found to be distinguishable. In the cited case of Sudharshan Silks (supra) the Hon'ble Apex Court did not enter into any discussion regarding perversity if any of the finding of fact of the Tribunal which had upheld the action of the C1T{A) in deleting the penalty. The CIT(A) had noted that the assessments were made on the basis of estimated income disclosed in the revised returns rather than on the basis of incriminating materials found during, search. Hence it was held that the revised returns were filed in good faith. Similarly, in the case of Jaswant (supra), certain additions were agreed upon to be made in one assessment year, though only part of the income related to the concerned year, thereby subjected himself to higher tax leading to a natural assumption that an agreement was conveyed during the assessment proceedings. Likewise in the case of Sudarsban Gupta {supra} it was also inter-alia held that not enough materials were there to sustain the addition.
6.4. Another contention of the assessee is that the Ld. AO has mechanically levied the penalty, without recording satisfaction in the 19 assessment order and penalty order. This plea is not acceptable as it is discernable from the impugned assessment order that the penalty under Section 271 (1)( c) r/w Explanation 5A, had been initiated for non- declaration of income in the original return of income. Additionally, the impugned penalty order is found to speak for itself. 6.5. Thus, in view of the aforesaid paras, the grounds of appeal no 2 and 4 are dismissed."
7. The appellant contended that recording of satisfaction u/s 271(1)(c) of the Act is mandatory in character, even after the amendment by the legislature by way of insertion of Section 271(IB) in Finance Act, 2008 w.e.f. 1.4.1999, in view of the decision of the Hon'ble Delhi High, Court in the case of Madhu Shree Gupta and British Airways, 317 ITR 107 (Del). The relevant provisions of Section 271(IB) are reproduced hereunder, for the purpose of proper appreciation of the legislative intent embodied therein.
"271(1B)-Where any amount is added or disallo wed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction f or initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisf action of the Assessing Off icer f or initiation of the penalty proceedings under the said clause(c)."
7(i) The AO, in the impugned assessment order passed u/s 153A of the Act as a consequence of search operation, at the business and residential premises of the assessee appellant, has recorded satisfaction in the form of direction for the purpose of initiation of penalty proceedings u/s 271(1)(c) of 20 the Act , at the end of each addition made in the asstt. order in question as "Penal ty proceedings u/s 271(1)(c) are initiated separately" and also in the concluding para as "Issue notice u/s 271(1)(c) of the Act." In our considered view, the AO has complied with the legislative intent, as enshrined in the amended provisions of Section 271(IB), as reproduced above. There is no prescribed format under the Act or the Rules, for recording of satisfaction, in assessment order, for the purpose of initiating penalty proceedings u/s 271(1)(c) of the Act. It is a search case, where the assessee has made huge surrender, in view of the search operations. The AO, while passing the impugned assessment order, in such a search case, has issued direction for the purpose of initiation of penalty proceedings u/s 271(1)(c) of the Act, after applying his mind to the facts of the case. Therefore, the directions issued by the AO, in the matter, is fully covered by the amended provisions, as reproduced above.
8. We have also carefully perused and considered the decision relied upon by the ld. 'AR' in Madhu Shree Gupta and British Airways (supra) and found that the case of the revenue is supported by the said decision, as the AO, has recorded prima-facie satisfaction, in the body of the impugned assessment order, as discussed above, for the purpose of initiation of penalty proceedings u/s 271(1)(c) of the Act. A bare reading of the impugned assessment order reveals that the AO is well within his statutory jurisdiction, to initiate penalty proceedings u/s 271(1)(c) of the Act, in the light of the discussions made by him, in respect of incriminating 21 documents and consequent surrender made thereto by the assessee appellant.
9. Having regard to the above legal and factual discussions, the contentions raised by the appellant, in the matter of recording of satisfaction by the AO is not legally tenable as the same is found to have been recorded, in consonance with the amended provisions of Section 271(IB) of the Act. In view of this, such contention of the appellant is not found legally and factually tenable.
10. Ld. 'AR' placed reliance on the decision of Hon'ble Supreme Court, in the case of B.N.Sharma V CI T (1997) 226 ITR 442 (S.C), wherein it has been held that amount of interest for concealment of income should be worked out, on the basis of law in force at the time of filing the return, whether original and/or revised, which contain the alleged concealment or misstatement. Ld. 'AR', further, placed reliance on the decision of the Hon'ble Supreme Court in the case of CI T V Omkar Saran & Sons (1992) 195 ITR 1, wherein Hon'ble Supreme Court has held that penalty is to be based, on law, as on the date when original return was filed.
11. We feel it pertinent to discuss the nature of addition made by the AO, on appreciation of incriminating documents, seized in the course of search operation. The AO, made an addition of Rs.1.03 crores, on account of difference between the registered value and agreement to sell, for land purchased in village Sundran, Distt.Dera Bassi. The CIT(A) has discussed this issue in para 5 to 6.5 of the impugned 22 appellate order, wherein it has been concluded that unaccounted investment of Rs.1.03 crores has been made by the assessee appellant, in purchase of land at village Sundran. The assessee has admitted this factum, in the course of statement recorded u/s 132(4) of the Act, in the course of search operations. In the course of assessment proceedings, AO confronted such documents to the assessee and he failed to furnish any source of undisclosed investment, except stating that the impugned amount has been included in the surrender made in the course of search operation. The AO, also initiated penalty proceedings u/s 271(1)(c), in respect of such additions made by him. The last sentence of para 5, whereby penalty proceedings u/s 271(1)(c) were initiated reads as, "penal ty proceedings u/s 271(1)(c) are initiated separately". 11(i) In the course of search operation, certain documents, in the form of copies of agreement form of Sale Deed dated 10.02.2006, between Shri Shamsher Singh, Village Rangri, P.O.Manali and M/s 21 s t Century Resorts, for the land measuring 00.45.035 hectares at Manali, for Rs.1.55 Cr. Documents clearly show that a sum of Rs.40 lacs had been paid through DD and Rs.20 lacs in cash. In the course of assessment proceedings, the AO confronted such documents, to the assessee and the assessee merely stated that such amount has been surrendered in the course of search operation. The AO, accordingly, made an addition of Rs.20 lacs, as an undisclosed income of the assessee. The AO, further, initiated penalty proceedings by recording as, 23 "Penalty proceedings u/s 271(1)(c) are separately initiated on this issue."
11(ii) The AO, further, made an addition of Rs.77 lacs as undisclosed income of 21 s t Century Builders & Engineers for the financial year 2006-07. The AO, has discussed in the impugned assessment order that such addition has been made on account of incriminating documents, found at the time of search operation. Further, the AO has initiated penalty proceedings u/s 271(1)(c) of the Act, while making such additions at the end of the relevant para of the assessment order.
12. In view of the above discussions, it cannot be said that AO has not applied his mind while initiating penalty proceedings u/s 271(1)(c) of the Act as the AO has duly recorded satisfaction in the matter. Accordingly, the contentions raised by the assessee cannot be legally and factually sustained in the matter.
13. Ld. 'AR' stated that no addition has been made by the AO except in respect of the amount surrendered in the course of search operations. The assessee filed return of income in response to notice u/s 153A of the Act, declaring income at Rs.3,27,01,440/- including the surrender made at Rs.2,00,60,000/-. Ld. 'AR' contended that return filed in response to notice u/s 153A declaring additional income therein has been accepted by the AO. In view of this, provisions of Section 271(1)(c) of the Act are not applicable to the assessee's case and the decision of the Hon'ble Supreme 24 Court, in the case of Sudershan Silk & Sarees V CIT (2008) 300 I TR 205 (S.C), has been cited to support his contentions.
14. We have perused the said decision and found that the same is not applicable to the present case. The Hon'ble Supreme Court has rendered the decision, in the case of Sudershan Silk & Sarees (supra), for assessment year 1984-85 to 1987-88, in the context of the facts obtaining in that case. The findings of the Tribunal were upheld by the Hon'ble Supreme Court. In this case, Hon'ble Tribunal upheld the findings of the CIT(A) and recorded that although there was nothing on record to show that assessee was given assurance that no penalty would be levied, the facts clearly suggested that such an inducement must have been given by the searching party, that only partial evidence in respect of concealment for a very limited period was detected, there was no reason why any person would go to offer much higher amount for a large number of years. In opinion of the Tribunal, it was found not a fit case, for levy of penalty u/s 271(1)(c) of the Act. In the present case, facts are clearly different and distinguishable. Assessee has declared the income, in the return filed, in response to Section 153A of the Act. Declaration of additional income, in the course of deposition u/s 132(4) of the Act is not relevant in the present case, in view of the explanation 5A to Section 271(1)(c) of the Act inserted by the Finance (No.2) Act 2009, with retrospective effect from 1.6.2007, as the search was conducted in this case, on 31.10.2007. Therefore, declaration made in the statement u/s 132(4) is not relevant, in the context of 25 Explanation 5A to Section 271(1)(c) of the Act. In view of this, it cannot be said that any inducement or promise was made or extended by the revenue, to the assessee, for non-levy of penalty u/s 271(1)(c) of the Act, at the time the appellant filed his return of income, in response to notice issued u/s 153A of the Act. In the case, relied upon by the assessee, the CIT(A), has given categorical finding that Explanation 5 to Section 271(1)(c) read with provisions of Section 132(4) are not applicable in that case. In view of this, the Hon'ble Supreme Court adjudicated the issue in question on the basis of relevant and operative penal provisions of the Act, as applicable at that time. Accordingly, the reliance placed by the assessee appellant, on the ratio of the decision of the Hon'ble Supreme Court is not applicable to the facts of the present case, being factually different and distinguishable.
15. Similarly, reliance placed by the assessee, in the case of CIT V Dodsal Ltd. (supra) and in the case of CIT V Harkaran Dass Vedpal (supra) decided in the context of Section 158BFA(2) of the Act, are not applicable to the fact-situation of the present case. The Hon'ble Bombay High Court, in the case of CIT V Dodsal Ltd. (supra) has adjudicated the issue involved in that appeal, in the context of Block Assessment provisions, as contained u/s 158BFA(2) of the Act. The provisions of Section 158BFA(2) applicable to the Block Assessments, within the contemplation of Chapter XIVB of the Act, are not the same, as the provisions of Section 153A read with the provisions of Section 271(1)(c) of the Act and Explanation 5A thereunder. Therefore, the reliance placed by the assessee, to support his contention is of no avail, 26 as the statutory provisions and facts of the case, are different and distinguishable. Similarly, reliance placed by ld. 'AR', on the decision in the case of CIT V Harkaran Das Vedpal (supra) is misplaced, having regard to the fact-situation obtaining in the case-law relied upon vis-à-vis the fact-situation of the present case. The decision relied upon by the appellant has been rendered by the Hon'ble Delhi High Court in the context of Section 158BFA(2) of the Act. Consequently, ratio laid down in the said decision is patently inapplicable to the facts and statutory provisions applicable to the present case. In view of this, ratio of the said decision is not applicable to the facts of the present case.
16. Ld. 'AR', further, placed reliance on the decision in the case of CIT V Jaswant Rai 142 CTR 49 (P&H). The jurisdictional High Court, in this case, held that the assessee agreed to addition, on the assurance that no penalty would be levied, is a finding of fact and does not give rise to any question of law. The Hon'ble jurisdictional High Court has applied its decision, in the case of Banta Singh Kartar Singh V CIT (1980) 125 ITR 239 while adjudicating the case relied upon by the assessee. The Hon'ble jurisdictional High Court held that where there is an agreement between the assessee and the Income tax authorities, it would be appropriate that an order, based on an agreement, would give rise to grievance and could be agitated in appeal. The assessee agreed to certain addition, in the course of assessment proceedings, in the case relied upon by the assessee. In this case, search & seizure operations were conducted at the premises of the 27 assessee, on 28.05.1984 and the decision was rendered by the jurisdictional High Court, in the light of the then relevant provisions of the Act. At that relevant point of time, even Explanation 5 to Section 271(1)(c) was not on Statute, which was inserted by Taxation Laws (Amendment) Act, 1984 w.e.f. 1.10.1984. In the facts of the present case, it is evident that there is no agreement between the assessee and the Department, to the effect of granting immunity from the levy of penalty u/s 271(1)(c) of the Act, by the revenue authorities. Further, Income tax authorities are not competent, to enter into such kind of agreement and, hence, the relevant penal provisions would hold the field, while initiating and levy of penalty. The assessee cannot take shelter under the self- conceived concept of agreement, while making a declaration u/s 132(4) of the Act, which is not in the context of, and in consonance with the relevant provisions of Explanation 5A, to Section 271(1)(c) of the Act, inserted by the Finance Act (No.2) 2009. The assessee also declared additional income, in the return of income, filed in response to notice u/s 153A of the Act, which is after a long gap of time and, hence, the question of promises, and assurance, is not factually tenable. Accordingly, decision relied upon by the assessee is inapplicable to the fact-situation of the present case. 16(i) Similarly, ld. 'AR' placed reliance in the case of CIT V Smt.Sudershan Gupta through L/H 10 DTR 184 (P&H) which is akin to the ratio of the decision of Hon'ble High Court, in the case discussed above. Therefore, we find that the decision 28 is not applicable to the facts of the present case, being factually different and distinguishable.
16(ii) The appellant, further, relied upon the decision of Mumbai Bench, in the case of Bhagat & Co., V ACIT 101 TTJ
553. We have carefully perused the decision of the Mumbai Bench and found that same is not applicable to the facts of the present case, being factually different and distinguishable. 16(iii). Ld. 'AR' placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT V Suresh Chander Mittal, 251 I TR 9 to support his contention that penalty cannot be levied in case of higher income shown in the revised return of income.
17. We have perused the ratio laid down by the Hon'ble Supreme Court in the case relied upon by the ld. 'AR' and found that in that case, the assessee had originally filed returns showing meager income. However, after action u/s 132 of the Act, a notice u/s 148 was served on him and the assessee filed revised return showing higher income. Eventually, assessment orders were passed and the returns submitted regularized u/s 148 of the Act. It is under such circumstances, the Hon'ble Apex Court held that Department had not discharged its burden of proving concealment and simply rested its conclusion on the act of voluntary surrender made by the assessee in good faith and hence, penalty could not be levied. In the present case, the assessee has filed return of income, in response to notice u/s 153A of the Act. The appellant has not revised such return of income and, 29 hence, it is not a case of revised return of income. The assessee had already admitted undisclosed income in the course of search operation in the statement recorded u/s 132(4) of the Act, which was later on returned, in response to notice u/s 153A of the Act. In this context, it is pertinent to mention here that Hon'ble jurisdictional High Court in the case of Rajesh Chawla V CI T 154 Taxman 364 has held that it is not possible to hold that in every case, mere surrender of income will foreclose any action for concealment of income. It was, further, held that the decision of Hon'ble Supreme Court, in Sri Shadi Lal and CI T V Suresh Chandra Mittal 251 ITR 9 (S.C) have rightly been distinguished by the Tribunal. Relevant part of the decision is reproduced hereunder :
"4. The above discussion by the Tribunal clearly shows that it was not a case of bonafide voluntary disclosure but only to avoid consequences of law. It is not possible to hold that in every case, mere surrender of income will foreclose any action for concealment of income. Judgments of the Hon'ble Supreme Court in Sri Shadi Lal and CIT vs. Suresh Chandra Mittal (2001) 170 CTR (S.C) 182 (2001) 251 ITR 9 (S.C) have rightly been distinguished by the Tribunal. Findings recorded by the Tribunal cannot be held to be perverse in any manner, the same being based on relevant material. The assessees have been held to be members of the same family and it has also been found that revised returns were filed on coming to know about detection of concealment. A Division Bench of this Court in Padam Kumar Garg vs. ITO & Anr. (2005) 26 IT Rep 26 (P&H), held that assessee could not escape penalty merely on the ground that he had surrendered the amount. Similar view has been taken in P.C. Joseph & Bros. vs. CIT (2000) 158 CTR (Ker) 104 : (2000) 240 ITR 818 (Ker) and CIT vs. Sudharshan Silks & Sarees (2001) 171 CTR (Kar) 256 : (2002) 253 ITR 145 (Kar).
Accordingly, no substantial question of law arises. The appeals are dismissed."
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18. Further, the Hon'ble Supreme Court, in the case of G.C.Aggarwal V CIT (1990) 186 I TR 571 (S.C) has held that penalty is exigible in case of revised returns filed by the assessee as the same does not fall under the provision of Section 139(5) of the Act. The relevant part of the decision is reproduced hereunder:
"Penalty-Explanation to Section 271(1)(c)-Presumption-Burden of proof-Assessee filing revised returns showing much larger income-Not able to establish inadvertent mistake or omission in original returns-Decision of Tribunal on facts that penalty was justified-Quantum-Difference between tax assessed in first returns and the tax on the incomes assessed should be taken as the tax which would have been evaded-Income-tax Act,1961 ss. 139(5), 271(1)(c), Expl.
From the decision of the Gauhati High Court in F.C.Agarwal v. CIT (1976) 102 ITR 408 to the effect that the Appellate Tribunal was correct in holding on the facts, (i) that penalties under Section 271(1)(c) of the Income-tax Act,1961, read with the Explanation thereto, were justified in respect of the assessment years in question, since the assessee had filed revised returns disclosing much larger incomes than those disclosed in the original returns but was unable to discharge the burden of proof under the Explanation and (ii) that for the purpose of calculation of penalty the difference between the tax on the incomes shown in the first returns and the tax on the incomes assessed should be taken as the amount of tax that would have been evaded, the appellant preferred appeals to the Supreme Court. The Supreme Court dismissed the appeals holding that there was no error of law in the order of the High Court.
Decision of the Gauhati High Court in F.C. Agarwal v. CIT (1976) 102 ITR 408 affirmed."31
18(i) The relevant part of the decision of Hon'ble Gauhati High Court in F.C.Agarwal V CIT 102 I TR 408 is reproduced hereunder :
"Penalty-Burden of proof-Assessee filing revised return-Showing much larger income-Assessee not able to establish inadvertent mistake or omission in original return-Penalty based on original return-Validity- Revised return filed for earlier year after coming into force of Expl. To Section 271(1)(c)-Applicability of Expl.-Effect of revised return under Section. 139(5)-Revised return filed before advertisement by Board that revised return would excuse false original return-Applicability of advertisement-Income-tax Act,1961, ss. 119, 139(5), 271(1)(c). Held, that considering the materials on record and the staggering differences between the original returns and the revised returns and that no particular item of income had been pointed out to explain that the revised returns were merely the result of inadvertent mistakes or omissions, the Tribunal had come to the conclusion that the assessee had submitted inaccurate particulars of his income and had also concealed the particulars of his income while filing the original returns. This was a finding of fact arrived at by the Tribunal after considering the materials on record and the entirety of circumstances in the case and this finding of fact could not be said to be in any way bad or perverse in law.."
19. In the present case, as discussed earlier, the appellant has not filed any revised return of income. Having regard to the above discussions, it is evident that even filing of revised return of income must be within the purview of Section 139(5) of the Act. It is pertinent to highlight that filing of revised return after discovery of omission or wrong statement is not by itself sufficient to bring the revised return within the ambit of Section 139(5) of the Act. A further requirement is that this omission or wrong statement in the original return must be due to bonafide inadvertence or mistake, on the part of the assessee. It is evident that bonafide omission or mistake must 32 be discovered by the assessee. In the present case, a search operation led to discovery of undisclosed income which the assessee admitted in the deposition made u/s 132(4) of the Act, before authorized officer. Further, the surrendered undisclosed amount was returned, in the return of income filed, in response to notice u/s 153A of the Act. Therefore, the case law relied upon by the assessee is not applicable to the facts of the present case.
20. It is, further, submitted that Hon'ble Allahabad High Court defined 'detection' in Mool Chand Mahesh Chand V CIT (1978) 115 ITR 1 (All) and held that even in a case where I TO starts investigation, what was lying concealed, or hidden or what continue to elude observation, would also be covered in a case of detection. Detection is anterior to 'profit' or 'established' is anterior.
21. The Hon'ble jurisdictional High Court in the case of Prem Pal Gandhi V CIT (2001) 335 I TR 23 (P&H) upheld the similar view that where revised return, showing higher income is filed after detection of concealed income, by the Deptt., imposition of penalty would be justified. It is pertinent to mention here that Hon'ble High Court has considered the decision of the Hon'ble Supreme Court in CIT V Suresh Chandra Mittal (supra) & Agarwal F.C. V CIT (supra); Agarwal (G.C.) V CI T (supra); Madhu Sudan K.P. V CIT 251 I TR 91 and Rajesh Chawla v CI T (supra).
22. In view of the above discussion, the case law relied upon by the assessee, does not support the contention raised by the 33 assessee. The assessee further placed reliance on the decision of the Hon'ble Karnataka High Court, in the case of CIT V Jewels Paradise 101 I TR 265 (Kar).
23. We have perused the facts of the case and ratio laid down by the Hon'ble Karnataka High Court and found that the Hon'ble Karnataka High Court has adjudicated the issue of cash seized as a result of search action on different set of facts and circumstances. Therefore, the case law relied upon by the assessee is factually and distinguishable.
24. Ld. 'AR' contended that provisions of Explanation 5A to Section 271(1)(c) of the Act, relevant at the time of filing the return of income, for the asstt. year in question, are not applicable to the facts of this case, as return of income was filed within the due date. Ld. 'AR' placed reliance on the decision of the Hon'ble Supreme Court, in CI T V Omkar Saran & Sons 195 I TR 1 (S.C) and B.N.Sharma V CI T 226 I TR 442 (S.C). Ld. 'AR' contended that AO levied penalty on the foundation of Explanation 5A inserted by Finance Act, 2007 w.e.f. 1.6.2007. A perusal of the impugned penalty order, dated 30.06.2010, for the A.Y. 2007-08, reveals that the AO has invoked the provisions of Explanation 5A to Section 271(1)(c) of the Act, as reproduced in para 3 of his penalty order. Ld CI T(Appeals) upheld the impugned penalty order by invoking the provisions of Explanation 5A to Section 271(1)(c), inserted by the Finance Act (2) 2009, with retrospective effect from 01.06.2007, which has been duly reproduced by him, in para 5.1 of his order. However, for the 34 sake of ready reference, the same is reproduced hereunder :
"Explanation 5A. - Where, in the course of a search initiated under section 132 on of after the lst day of June, 20Q7, 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 assesses 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 represents his income (wholly in part) for any previous year, which has ended before the dote 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 date for filing the return of income for such 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 purpose of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income."
25. In this context, it is pertinent to mention here that powers of the first appellate authority are co-terminus, with those of the AO. The CIT(Appeals) can do what the AO could do and can also direct the latter to do what the latter failed to do. It is settled legal proposition that first appellate authority is vested with all the plenary powers which the AO has in the matter. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision, the appeal is preferred, to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by the Statute. It is also settled legal proposition that first appellate authority is competent and duty bound to consider a matter before him in all its aspects. Therefore, having regard to the facts of the present case, ld CIT(Appeals) has invoked the 35 correct Explanation 5A, as reproduced above, which was made effective retrospectively w.e.f. 1.6.2007, as introduced by the Finance (No.2) Act of 2009. In the present case, the search operations were conducted u/s 132(1) of the Act, on 31.10.2007 and consequently, the latest Explanation 5A, as invoked by the CIT(Appeals), is applicable to the facts of the present case.
26. The validity of newly inserted Explanation 5A, to Section 271(1)(c) of the Act, vide Finance Act (2) of 2009, with retrospective effect, from 1.6.2007, cannot be adjudicated at the level of the Tribunal and the Tribunal is bound by statutory obligation, to give effect, to the relevant and operative penal provisions applicable, to the facts of the present case. The validity of retrospectivity of the said Explanation 5A to Section 271(1)(c) is to be considered and examined by the Hon'ble competent High Court and Hon'ble Supreme Court, this being a legally settled proposition.
27. In view of the above legal and factual position, CIT(Appeals) is competent to apply correct Explanation 5A, even in the face where AO has invoked Explanation 5A, inserted by Finance Act, 2007 w.e.f. 1.6.2007. In this context, it is pertinent to mention here that the appellant filed return of income, in response to notice u/s 153A, on 23.7.2009, at the time of filing the return of income, in response to Section 153A of the Act, the newly inserted Explanation 5A to Section 271(1)(c) of the Act, vide Finance (No.2) Act 2009, was available on the Statute and hence, the same is applicable to the facts of the present case.
36
28. The assessee placed reliance, on the decision of Hon'ble Supreme Court, in the case of CIT V Omkar Saran & Sons and in the case of B.N.Sharma V CI T (supra). On a careful perusal of the same, it was found that the ratio laid down in this case is not applicable to the facts of the present case. The Hon'ble Supreme Court, in the case of CIT V Omkar Saran & Sons (supra) held that even in a case where a return, filed in response to the notice u/s 148 involve an element of concealment, the law applicable would be the law, as it stood at the time when the original return was filed, for the assessment year in question and not the law as it stood on the date, on which the return was filed in response to the notice u/s 148 of the Act. The Hon'ble Supreme Court, by following this decision in B.N.Sharma V CIT (supra), laid down similar ratio. The facts of the case in Omkar Saran &Sons (supra) are that the assessee is a HUF family. For the assessment year 1961-62 and 1962-63, it filed return of income, showing total income of Rs.18,935/- and Rs.24,943/- respectively. The exact dates of these returns are not available on record. Assessments were made on the assessee for determining its total income at Rs.28,513/- for the assessment year 1961-62 and Rs.28,463/- for the assessment year 1962-63. The assessment orders are dated 30.3.1962 and 28.11.1963 respectively. Subsequently, the AO issued notice on 09.03.1965 u/s 148 of the Act. The assessee filed its return of income on 27.2.1969, disclosing the same income as in the original return. The Finance Act, 1968, amended Section 37 271(1)(c) w.e.f. 1.4.1968. The ratio laid down by the Hon'ble Apex Court was based on such factual matrix of the case.
29. In the present case, the normal return of income, for the assessment year 2007-08 was filed by the assessee, on 31.3.2007 i.e. the date of search itself. However, the assessee filed his return of income in response to notice dated 27.1.2009 issued u/s 153A of the Act, on 23.7.2009, declaring income of Rs.3,27,01,440/-, including the additional amount of Rs.2,00,60,000/-, declared by the assessee, in the statement recorded u/s 132(4) of the Act. The assessee filed return of income, in response to the said notice u/s 153A of the Act, on 23.7.2009 and on the date of filing the return, the Explanation 5A inserted by the Finance (No.2) Act of 2009, with retrospective effect from 1.6.2007, was on the Statute. In the present case, return of income was filed in response to notice u/s 153A of the Act, which is covered by Explanation 5A to Section 271(1)(c) of the Act, inserted by Finance (No.2) Act of 2009. The facts of present case, are not similar to the facts, as obtaining, in the case law, relied upon by the assessee, as discussed above.
30. Further, the provisions of Section 153A are specifically brought on the Statute book, for assessment, in case of search u/s 132(1) or requisition of books of account u/s 132A of the Act. The opening sentence of Section 153A of the Act, over- rides the provisions of Section 139, 147, 148, 149, 151 and 153 of the Act. The assessee has declared undisclosed income, in the return filed, in response to notice u/s 153A of the Act and the CIT(Appeals), having regard to the facts of the 38 case, invoked the currently applicable Explanation 5A Section 271(1)(c) of the Act and upheld the penalty, levied by the AO. In such a fact-situation, the CIT(Appeals) has acted in accordance with the currently operative and relevant penal provisions, with reference to the return of income, filed in response to Section 153A of the Act.
31. In view of the above legal and factual discussions, and having regard to the express statutory provisions of Section 271(1)(c) of the Act read with Explanation 5A thereunder, as inserted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.06.2007, we do not find any infirmity, in the findings of ld CIT(Appeals). Therefore, the findings of the CIT(Appeals) are upheld and, consequently, the grounds of appeal of the assessee are dismissed.
32. In the result, appeal of the assessee is dismissed.
Order pronounced in the Open Court on 31 s t Oct.,2012.
Sd/- Sd/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31 s t Oct.,2012. 'Poonam' Copy to:
The Appellant, The Respondent, The CI T(A), The CI T,DR Assistant Registrar, I TAT Chandigarh