Income Tax Appellate Tribunal - Rajkot
Shri Pankaj Jaysukhlal Shah,, Jamnagar vs The Deputy Commissioner Of Income Tax, ... on 30 November, 2018
Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 1 of 18
INCOM TAX APPELLATE TRIBUNAL-RAJKOT-BENCH-RAJKOT
BEFORE C .M. GARG, JUDICIAL MEMBER
AND O. P. MEENA, ACCOUNTANT MEMBER
I.T(SS)A No.103/RJT/2012 Assessment Year:2007-08
Appellant V. Respondent
Shri Pankaj Jaysukhlal Shah Deputy Commissioner of
C/o Meena Agency Ltd. P,N. Income-Tax,
Marg Jamnagar Central Circle - 2 Rajkot
PAN: AHSPS 6038D
Assessee by Shri D.M. Rindani, CA
Revenue by Shri Jitender Kumar, CIT(D.R.)
Date of hearing 29.11.2018
Date of pronouncement 30.11.2018
ORDER
PER O. P. MEENA, AM
1. This appeal at the instance of the Assessee is directed against an order of learned Commissioner of Income tax (Appeals)-IV, Ahmedabad [in short CIT(A)] dated 01.09.2012 for the Assessment Year 2007-08
2. Ground no. 1 to 3 relates to confirming of penalty of Rs. 39,63,000 levied in respect of short-term capital gains of Rs. 76,16,000 and Rs. 61,85,514 long-term capital gain offered in return of income filed in response to notice under section 153A of the Act. The penalty levied may be deleted.
Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 2 of 18
3. Briefly stated facts are that the assessee has filed return of income on 08.09.2010 declaring total income of Rs.1,43,55,142 which was assessed under section 143 (3) read with section 153A at Rs.1,43,55,142. The AO noticed that the assessee had shown short- term capital gains of Rs. 76,16,000 and long-term capital gain of Rs. 61,85,514 which was not shown in original return of income hence, the AO held that same represent unaccounted income of the assessee . Accordingly, penalty under section 271(1)(c) of the Act was initiated. In reply to show-cause notice under section 274 read with section 271(1)(c), it was explained by the assessee that there was mistake at the time of filing of original return of income and accordingly, short-term capital gains and long-term capital gain was omitted. Therefore, the same was shown in the return of income under section 153A of the Act. It was also stated that as soon proceeding under section 153A are initiated, the original return becomes null and void and return filed against notice under section 153A should be considered as return in which the assessee has shown correct income from capital gains earned by him Therefore, the assessee has not furnished any inaccurate particulars of income. However, the AO was not satisfied with reply and invoked Explain Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 3 of 18 5A as it was applicable from 01.06.2007 as the search in the case of the assessee was carried on 29.01.2009. According to the AO, such income declared after date of search, the assessee shall be, for the purpose of imposition of penalty under section 271(1)(c) , be deemed to have concealed the particulars of income or furnished inaccurate particulars of income. Accordingly, the AO levied a penalty of Rs. 39,63,000 being 100% of tax sought to be evaded.
4. Being aggrieved, the assessee filed an appeal before the ld. CIT (A). Wherein it was submitted that when the assessee has filed return in response to notice under section 153A, the original return becomes null and void and the return filed in response to notice under section 153A is considered as final return of the assessee. The returned income has been assessed as such and no has been addition made therefore, question of levy of penalty under section 271(1)(c) does not arise. It was contended that during the course of search, voluntary disclosure made assessee group is not related to represent any money, bullion, jewellery or other valuable article of thing or any income based on any entry in any books of accounts or other documents or transactions, hence, Explanation 5A to section 271(1)(c) is not applicable in this case. However, CIT (A) observed Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 4 of 18 that income has been offered based on seized material only. Therefore, the contention of the assessee that disclosure was voluntary is contrary to evidence on record. The CIT (A) further, observed that in this case search initiated after 01.06.2007 hence, provisions of Explanation 5A to section 271(1)(c) are applicable. Therefore, the appellant is deemed to have concealed the income. Accordingly, penalty so levied by the AO was confirmed.
5. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted there is no specific charge levied by the AO for levy of penalty. The capital gains shown by the assessee in the return of income filed under section 153A was not based on any specific finding during search and no statement under section 132(4) was recorded on this issue nor any question was put in the statement recorded under section 132(4) of the Act. Income surrendered by other group during search has been accepted for another years. It was contended that the assessee was not found to be the owner of any money, bullion, jewellery or other valuable articles or thing during search hence, provisions of explanation 5A are not attracted. The assessee has shown capital gains in the return of income which has been duly Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 5 of 18 disclosed and reflected in return of income filed in response to notice under section 153A and it has been duly accepted by the AO. The additional income offered in return under section 153A has been accepted entry without any addition. Where all necessary particular are declared by the assessee in the return of income, it cannot be said that the assessee has concealed the income or furnished inaccurate particulars of income. The learned counsel for the assessee also placed reliance in the case of Ajit Kumar Surana v. ACIT [2014] 39 CCH 138 (Kol) , Smt. Pramila D Ashtekar v. ITO [2013] 154 TTJ 46 Pune) CIT v. D& H Sheraron Electrodes Ltd. [2008] 296 ITR 193, Ajay Traders v. DCIT [2016] 47 CCH 300 Jaipur- Trib, Parag Sanghvi v. DCIT [2015] 45 CCH 253 Mum Trib, and the judgement of Hon'ble Gujarat High Court in the case of Pr. CIT -3 Ahmedabad v. Shree Ram Corporation Tax Appeal No. 77 of 2016 dtd. 19.06.2018 ( copy filed PB-56). The learned counsel for the assessee contended that there was no seized material in the case of the assessee nor the AO has pointed out any seized material during the course of assessment proceedings. Therefore, no penalty can be imposed under section 271(1)(c) of the Act.
Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 6 of 18
6. Au contraire, the Ld. CIT (DR) supported the order of lower authorities. He has contended that the explanation 5A is deeming provision which is applicable in cases where search has taken place after 01.06.2007. Since in the case of the assessee search took place on 29.01.2009 hence, explanation 5A to section 271(1)(c) is very much applicable. Further, the capital gains has been disclosed on the basis of seized material found during search hence, the income shown by the assessee is not voluntary. Had there been no search the assessee has never disclosed this income for tax. Therefore, the AO and CIT (A) were justified in levy of penalty under section 271(1)(c) of the Act . The case law of Smt. Primila D Ashtekar is related to period prior to 01.06.2007 hence, is not applicable to the present case. The disclosure of long-term capital gain and short-term capital gains was made on the basis incriminating material found during the search proceeding. Further the assessee has furnished his original return of income before the date of search where no such undisclosed income has been disclosed.
7. We have heard the rival submissions of both the parties and have perused the material available on record. We find that a Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 7 of 18 search and seizure operation under section 132(1) was conducted on 29.01.2009 in the case of the assessee. Consequently, the assessee was served a notice under Section 153A to file fresh return of his income. Thereafter, the assessee filed return under Section 153A which was accepted as such by the A.O. without any addition. We note that the AO was of the opinion that inasmuch that the income disclosed by the assessee under Section 153A was higher than the income in the original return filed under Section 139(1) and since in his view, such disclosure of income was a consequence of the search conducted on the assessee, there was concealment of income which attracted Section 271(1)(c) of the Act. However, we find that there is no finding of search that any incriminating material was found during search. Therefore, the question that needs to be answered is whether penalty is to be levied automatically whenever the assessee declares a higher income in his return filed under Section 153A has been brought on record in comparison to the original return filed under Section 139(1). A perusal of the penalty order reveals that the AO has accepted the returned income of Rs.1,43,55,142, but rejected the claim of the assessee on the basis that the disclosure in return was not voluntary and made on the Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 8 of 18 basis of finding and seized material. However, before us no such seized material relating to such disclosure of capital gains of Rs. 1.38 lakhs disclosed in return under section 153A. The perusal of the assessment order reveals that the AO has accepted the income of Rs. 1.43 Lakh as disclosed in the return of income filed under section 153A of the Act. The learned counsel for the assessee has referred to the statement recorded u/s. 132(4) which clearly indicate that there was no seizure of assets like cash etc. or any incriminating material was found or identified, therefore, the provisions of Explanation-5A are not applicable. We observe that conditions u/s. 271(1)(c) were not applicable in the case of the assessee as these proceedings u/s. 153A are independent and has no relation to other assessment proceedings. Further, it was submitted that invoking Explanation-5A, there should be a finding that assessee is the owner of any money, bullion, jewellery or other article or thing or any income based on any entry in any Books of Account or other documents or transactions. We find that Explanation-5A of Section 271(1)(c) is specifically made applicable for all the searches initiated u/s. 132 on or after 01 day of June, 2007. The search in the Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 9 of 18 impugned case was initiated on 29.01.2009; consequently, whether Explanation-5A is applicable to the facts of this case is to be considered. Explanation 5 has been amended by the Finance Act, 2007 to restrict the application of that explanation to searches initiated before 01-06-2007. A new explanation 5A was introduced by Finance Act 2009, with retrospective effect from 01-06-2007 to cover searches initiated after 01-06-2007 which read 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 (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 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 Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 10 of 18 by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.]
8. On a plain reading of the aforesaid Explanation, it is apparent that following conditions are essential for levy of penalty under section 271(1)(c):-
(i) this Explanation is applicable to an assessee in whose case search has been initiated under section 132 on/or after 1st June 2007; further,
(ii) during the course of search, the assessee should be found to be the owner of -
(a) any money, bullion, jewellery, for other valuable article or thing and the assessee claims to have acquired such assets by utilizing his income for any previous year; or
(b) any income which is based on any entry in any books of account or other documents or transactions and claims that these represents income for any previous year which is ended before the date of search; and further,
(iii) if such asset or income which represents the income of any previous year, firstly, has not been shown in the return of income which has been furnished before the date of search i.e., such income has not been declared therein and secondly, the due date for filing the return of income had expired i.e., the assessee has not shown this income in the return of income filed on or before the due date;
(iv) then on such income declared by him in the return of income furnished on or after the date of search, he is liable for Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 11 of 18 penalty under section 271(1)(c) and he is deemed to have concealed the particulars of his income or furnish inaccurate particulars of income.
9. There are two saving clause in the aforesaid Explanation wherein penalty cannot be held to be leviable under section 271(1)(c), firstly, the assessee had shown such asset as mentioned in clause (i) or income as mentioned in clause (ii) in the return of income furnished before the date of search and, secondly, such asset and the income has been shown in the return of income filed on the due date. Thus, if any assessee falls under these saving clauses, Explanation 5A cannot be invoked.
10. For the purpose of the instant case, we have to see whether or not the assessee has shown the income in the return of income filed on the "due date". Provisions of section 139(1) provides for various types of assessees to file return of income before the due date and such due date has been provided in the Explanation-2, which varies from year-to-year. Whereas, provisions of section 139(4) provides for extension of period of "due date" in the circumstances mentioned therein and it enlarges the time-limit provided in section 139(1). The operating line of sub-section 4 of section 139 provides that "any person who has not furnished the return within the time allowed", here the time allowed means under section 139(1), then in such a case, the time-limit has been extended. Wherever the legislature has specified the "due date" or has specified the date for any compliance, the same has been categorically specified in the Act. For e.g., under section 44AB Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 12 of 18 where the assessee is required to get his accounts audited before the specified date and furnish by that date, the specified date has been specifically mentioned as the date provided in section 139(1). Similarly, in section 43B also, the "due date" has been specifically provided as the date mentioned in sub-section (1) of section 139. In the aforesaid Explanation 5A, the legislature has not specified the due date as provided in section 139(1) but has merely envisaged the words "due date". This "due date" can be very well inferred as due date of the filing of return of income filed under section 139, which includes section 139(4). Where the legislature has provided the consequences of filing of the return of income under section 139(4), then the same has also been specifically provided. For e.g., section 139(3), provides that for the purpose of carry forward losses under sections 72 to 74A, the return of income should be filed within the time-limit provided under section 139(1), otherwise losses cannot be set-off. In absence of such a restriction, the limitation of time of "due date" cannot be strictly reckoned with section 139(1). Thus, the meaning of the words "due date", sans any limitation or restriction as given in clause (b) of Explanation 5A, cannot be read as "due date" as provided in section 139(1). The words "due date"
therefore, can also mean date of filing of the return of income under section 139(4).
11. This proposition has been explained by the various High Courts also wherein in the context of sections 54F and 54(2), it has been interpreted that the due date of section 139 can be inferred as due date under section 139(4) also. In CIT v. Jagriti Aggarwal [2011] 339 Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 13 of 18 ITR 610/203 Taxman 203/15 taxmann.com 146 (P&H) , wherein it has been observed and held as under: "6. Sec. 54 of the Act contemplates that the capital gain arises from the transfer of a long-term capital asset, but if the assessee within a period of one year before or two years after the date on which the transfer took place purchases residential house, then instead of the capital gain, the income would be charged in terms of provisions of sub-s. (1) of s. 54. As per sub-s. (2), if the amount of capital gains is not appropriated by the assessee towards the purchase of new asset within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139, the amount shall be deposited by him before furnishing such return not later than due date applicable in the case of assessee for furnishing the return of income under sub-s. (1) of s. 139 in an account in any such bank or institution as may be specified. Relevant sub-s. (2) of S. 54 of the Act.
12. The question, which arises, is; whether the return filed by the assessee before the expiry of the year ending with the assessment year is valid under s. 139(4) of the Act. However, despite the fact that there is no requirement of proving mens-rea specifically, but still were are of the view that the word "conceal" inherently carries with it the requirement of establishing that there was a conscious act or omission on the part of the assessee to hide his true income. Section 153A provides the procedure for completion of assessment Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 14 of 18 where a search is initiated under Section 132 or books of account, or other documents or any assets are requisitioned under Section 132A after 31.05.2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or requisition under Section 132A, as the case may be, shall abate. [Ref to Memorandum accompanying the Finance Bill, 2003] Section 153A opens with a non-obstante clause relating to normal assessment procedure covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after May 31, 2003. The sections, so excluded, relate to returns, assessment and reassessment provisions. However, the provisions that are saved are those under Section 153B and 153C, so that these three Sections 153A, 153B and 153C are intended to be a complete code for post-search assessments. Considering that the non- obstante clause under Section 153A excludes the application of, inter alia, Section 139, it is clear that revised return filed under Section 153A takes the place of the original return under Section 139, for the purposes of all other provisions of the Act. This is Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 15 of 18 further buttressed by Section 153A (1)(a) which reads:
"Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall-a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.
13. Therefore, the position that emerges from the above- mentioned provision is that once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be treated as the original return filed under Section 139. On similar lines, the Hon`ble jurisdictional High Court of Gujarat in the case of Pr. CIT v. Shree Ram Corporation [Tax Appeal No. 77 of 2016 dtd. 19.07.2016] in para 5 and 6 observed as under:
"5. For the assessment year 2011-12, the assessee has filed return of income declaring total income of Rs. 2.74 crores. The Assessing Officer while accepting such income without any additions, decided to initiate penalty proceedings under section 271(1)(c) of the Act on the Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 16 of 18 ground that the assessee failed to submit accurate particulars of the income. It was is this background the Tribunal quashed the penalty observing that when the return Income was accepted as it is , there was no question of thereafter, , imposing the penalty.
6. In view of above noted facts that the assessee itself was never objected to search or survey . Revenue could also have relied on explanation 5 or 5A as the case may be of s271 to levy of penalty. Even though the income has been disclosed in the return filed subsequently , section 271(1)(c) would not permit the Assessing Officer to levy penalty equal to or not exceeding three times the amount of tax sought to be evaded by reason of concealment of particulars of income or furnished inaccurate particulars of such income. In the present case, when the assessee had declared certain income which was accepted by the Assessing Officer. It would not be even the case of the Revenue that any income sought to be evaded. The Tribunal therefore, in the facts of the case, committed no error."
14. Thus, it is clear that when the A.O. has accepted the revised return filed by the assessee under Section 153A, no occasion arises to refer to the previous return filed under Section 139 of the Act. Therefore, applying the ratio of above judgement of Hon'ble Gujarat High Court no penalty under section 271(1)(c) is leviable. Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 17 of 18 We may observe that for all purposes, including for the purpose of levying penalty under Section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. In fact, the second proviso to Section 153A(1) provides that "assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate." What is clear from this is that Section 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the A.O. accepts the revised return filed under Section 153A, the original return under Section 139 abates and becomes non-est. Now, it is trite to say that the "concealment" has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139.
15. No doubt, the un-amended provisions as applicable between 01-06-2007 and 01-04-2009 of Explanation-5A is applicable, provided the conditions as specified in Item Nos. 1 & 2 are satisfied. As already stated above, assessee is not found to be the owner of either any money/bullion/jewellery or other valuable article or thing or any income based on any entry in Books of Account or other documents or transactions. Pankaj Jaysukhlal Shah v. DCIT-CC-2 Rajkot /I.T.A. No.1031/RJT/2012/A.Y.07-08 Page 18 of 18 Thus, Explanation- 5A either pre-amendment or post- amendment is not applicable to the facts of the case. Therefore, CIT(A)'s order confirming the penalty in the case of the assessee is not found to be sustainable in law as the conditions of Explanation-5A are not satisfy. We further find that no incriminating documents were found and seized during search, therefore, Explanation 5A is not applicable. It is the case of the assessee that returned income was accepted by the AO without making any addition. Proceeding u/s. 153A are separate and have no relevance to earlier assessment proceedings. There is no variation between income returned and income assessed. Consequently, it cannot be said that there is any concealment of income so as to attract penalty provisions under section 271(1) (c) of the Act. We are therefore, of the opinion that levy of penalty under section 271(1)(c) is not warranted. In view of above backdrop and facts and law, we direct the AO to delete the penalty of Rs. 39,63,000. Accordingly, all above grounds of appeal of the assessee are allowed.
16. In the result, the appeal of the assessee stands allowed.
17. The order pronounced in the open Court on 30.11.2018.
Sd/- Sd/-
(C.M. GARG) (O. P. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Rajkot: Dated:30 November 2018
Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT.
By order / / TRUE COPY / / Assistant Registrar, Rajkot