Income Tax Appellate Tribunal - Ahmedabad
Rahul A.Gandhi, Ahmedabad vs Assessee on 13 September, 2011
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'ए
ए' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
सव[ौी ौी जी.डȣ.अमवाल, माननीय उपाÚय¢ एवं ौी मुकुल कुमार ौावत, Ûयाियक सदःय के सम¢ ।
BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT (AZ) AND
SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER
Sl. IT(ss)A No(s) Assessment Appeal(s) by
No(s). Year(s) Appellant vs. Respondent
Appellant (s) Respondent(s)
1. 152/Ahd/2009 2000-01 Rahul A.Gandhi The
6-B, Hindu Dy.CIT(OSD),
Colony Cir-10
Stadium Road Ahmedabad
Ahmedabad
PAN :ADNPG 1733 G
2. 153/Ahd/2009 2003-04 -do- -do-
3. 154/Ahd/2009 2004-05 -do- -do-
4. 155/Ahd/2009 2005-06 -do- -do-
Assessee by : Shri S.N.Divatia, A.R.
Revenue by : Shri R.K.Vohra, Sr.D.R.
सुनवाई कȧ तारȣख / Date of Hearing : 13/09/2011
घोषणा कȧ तारȣख /Date of Pronouncement : 30/ 9/2011
आदे श / O R D E R
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
These four appeals have been filed by the Assessee arising from a common order of the CIT(A)-XVI Ahmedabad dated 17/08/2009 for AYs 2000-01, 2003-04, 2004-05 & 2005-06.
2. Assessee has challenged the levy of penalty u/s.271(1)(c) in respect of returns filed in response to notice u/s.153A of the I.T. Act, ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -2- 1961. For all the years grounds are identically worded and for the sake of convenience, reproduced herein-below from the lead AY 2000-01:-
Grounds extracted from A.Y. 2000-01 1.1 The order passed u/s.250 of the Act on 17.08.2009 for A.Y. 2000- 01 by CIT(A)-XVI, A'bad by upholding the penalty levied u/s.271(1)(c) of the Act by AO is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld. CIT(A) has grievously erred in upholding the penalty levied u/s.271(1)(c) without considering fully and properly the explanation offered and evidence produced by the appellant.
2.1. The Ld. CIT(A) has grievously erred in law and/or on facts in upholding that the appellant had concealed income in the original return filed u/s.139(1) of the Act and as such penalty proceedings u/s.271(1)(c) were attracted inspite of assessment completed u/s.153 r.w.s. 143(3).
2.2. The Ld. CIT(A) has failed to appreciate that there was no concealment of income or furnishing inaccurate particulars in so far as return filed in response to notice u/s.153A so that no penalty u/s.271(1)(c) was leviable.
3.1. The Ld.CIT(A) has grievously erred in law and/or on facts in upholding the order of penalty by following the decision in case of Kirit Dahyabhai Patel though it was distinguished on facts and law by the appellant.
3.2. The Ld. CIT(A) has failed to appreciate that the receipts from the students by way of correspondence deposit was declared as additional income by the appellant, though the said receipt was not "income" chargeable to tax in the relevant year and as such there was no concealment of income furnishing inaccurate particulars.
ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -3- 4.1. The Ld.CIT(A) has failed to appreciate that the penalty proceedings were bad in law and illegal in as much as the AO had initiated the same for concealment and furnishing inaccurate particulars of income as evident from the assessment order.
2.1. For all the four years assessments were completed u/s.153A(b) r.w.s.143(3) of the I.T.Act, 1961 on 24/12/2007.
2.2. Facts in brief as emerged from these corresponding assessment orders were that a search was carried out u/s.132(1) of the I.T. Act on 10/02/2006. Residential premises was covered by the search action u/s.132(1) of the Act, whereas the business premises was covered by survey u/s.133A of the I.T. Act. The AO has also listed few lockers of Banks which were covered by search operation. A sum of Rs.1,97,900/- was found out of which Rs.1,70,000/- was seized. Few cash was also found in the lockers. Overall, seizure of cash was Rs.3,16,000/-. A jewellery of Rs.20,59,533/- was found out of which Rs.3,59,796/- was seized. The AO has also listed the documents which were found from the residential premises as well as from the business premises. About the nature of activity, it was noted that the assessee is one of the leading group of consultants for consultation in foreign education. As per AO, the flagship entity is known as Take Off Educational Consultants, a proprietary concern of Shri Rahul Gandhi. The business is of counselling the students for abroad education. In return, the assessee receives commission from foreign universities ranging from 10 to 15% of the annual fees paid by those students. It was also noted by the AO that wife of the assessee Smt. Nidhi Gandhi gives tuition to students to clear ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -4- the tests, like TOEFL, GMAT, GMRE, SAT, IELTS, etc. As far as the issue of levy of concealment penalty is concerned, we have been told that a notice u/s.153A of the Act were issued for all the years identically dated 23/03/2007. Year-wise date of filing of the return and the amount declared therein were as follows:-
Asst.Year Date of Return Income Assessed
disclosed (Rs.) income (Rs.)
-------------- -------------------- ------------------ ----------------
2000-01 04/05/2007 4,70,250/- 4,70,250/-
2003-04 -do- 74,84,110/- 74,84,110/-
2004-05 -do- 55,57,390/- 55,57,390/-
2005-06 -do- 61,56,760/- 61,56,760/-
2.3 In AY 2000-01, there was a discussion in respect of a sale of
Khas Bazar Property and it was found that a sale consideration of Rs.2.5 lacs in cash was received by Shri Rahul A.Gandhi.
In AY 2003-04, there is a discussion of certain registers marked as 'Annexure A-9 A-12 & A-13.' In those registers, it was found that the assessee has deposited "correspondence deposit"
received from the students. It was noted by the AO that those deposits were not reflected in the books of accounts of the assessee. Assessee has also accepted that those receipts were not offered for taxation while filing the original return of income, accordingly a sum of Rs.1,64,600/- was offered as undisclosed "correspondence deposit" for AY 2003-04.
In AY 2004-05, there was a discussion in the assessment order that the original return of income was filed on 26/10/2004 on income of Rs.54,01,960/-. Since register in respect of "correspondence deposit" was recovered and the deposits as noted in those registers were ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -5- not reflected in the books of accounts of the assessee therefore a sum of Rs.1,55,435/- was offered as undisclosed income for AY 2004-05.
Likewise, for AY 2005-06 originally a return was filed on 24/10/2005 at income of Rs.6,30,110/- and there was an offer of undisclosed income of "correspondence deposit" of Rs.1,26,650/- .
2.4 For all the years, penalty u/s.271(1)(c) of the Act was levied vide orders identically dated 30/06/2008.
For AY 2000-01, it was discussed by the AO that an amount of Rs.2,50,000/- was included in the return filed on 04/05/2007 in response to a notice u/s.153A(a) issued on 23/03/2007. It has also been noted by the AO that the said income of Rs.2,50,000/- was on the basis of material found in the course of survey u/s.133A of the Act at the business premises of the assessee's father at Dudheshwar Ahmedabad. While imposing the penalty the observation of the AO was that, quote "It is only upon detection by the department in the course of execution of section 133A that the said income has come to light and has been assessed to tax. The inclusion of that income in the assessed total income is not on account of any abstract or vague basis but rests on concrete and incontrovertible facts per leaf Nos.148 and 149 of the loose papers contained in the file annexurised as Annexure A-4 of the record of survey at the premises of the business(es) Mark Printing Inks/Shivram Enterprise/ India Aluminium Embossing in Mahalaxmi Compound, Kalpana Bhoomi Estate, Nr. Dudheshwar Water Tank, Dudheshwar, Ahmedabad These two documents evidence the receipt of Rs.2,50,000/-
ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -6- by the assessee that was undisclosed and unaccounted receipt by him from sale of a residential property at Khus Bazaar. Disclosure of that income in the return filed u/s.153A(a) on 04/5/2007 has followed such detection made 0/2/2006. Hence, I do not find any merit in assessee's contention contained in his letter dated 08/1/2008 to the effect that the said income having been declared in the return filed u/s.153A(a) does not attract the provisions of section 271(1)(c). In this regard, it may be observed that having filed original return of income on 28/8/2000, the assessee did not file any revised return in terms of sub-section (5) of Section 139. Therefore the concealment of income in the case relates back to the original return filed on 28-8-2000 and the assessee's omission to file revised return. The said income of Rs.2,50,000/- is clearly assessee's concealed income evident from the material found." unquote.
For 2003-04, by assigning same reasons AO has concluded that a sum of Rs.1,64,600/- was offered when material was found in the course of survey u/s.133A of the I.T.Act. The AO has held that he was satisfied that the said amount of Rs.1,64,400/- was concealed therefore he has levied a penalty of Rs.52,000/-.
For AY 2004-05, again by assigning those very reasons it was held a sum of Rs.1,55,440/- was concealed by the assessee which was detected consequence upon the survey operation and therefore a penalty of Rs.52,000/- was levied.
For AY 2005-06, a sum of Rs.1,26,650/- was held as concealed income which was shown by the assessee in the return filed in response to notice u/s.153A(a) of the I.T. Act and a penalty of Rs.43,000/- was imposed. The matter was carried before the first appellate authority.
ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -7-
3. Before ld.CIT(A), it was argued that in respect of search cases a separate code was inserted in IT Act with effect from 31/05/2003 by virtue of insertion of sections 153A, 153B, etc. An assessee is required to file a return of income u/s.153A of the I.T. Act. It was argued that if an assessee discloses additional income which was not disclosed earlier in the return of income filed u/s.139(1) of the I.T.Act and that return is accepted by the AO, then penalty should not be levied. It was further argued that a penalty must not be levied because there was no concealment of income as far as the return filed u/s.153A of the I.T.Act. It was pleaded that the provisions of concealment are with reference to the return of income. In the present case, there was no addition in the return of income filed u/s.153A therefore it could not be said that the appellant has concealed the income or filed the inaccurate particulars of income. Ld.CIT(A) was not impressed by that argument and held that undisputedly unaccounted income was detected which was not shown by the assessee in his original returns of income. Ld.CIT(A) has discussed a decision of ACIT vs. Shri Kirit Dahyabhai Patel reported at 121 ITD 159(Ahd.)[TM]. Before him a decision of Hon'ble Madras High Court cited from the side of the assessee, viz.CIT vs. S.D.V. Chandru 266 ITR 175(Mad.), CIT vs. Kanaiyalal 299 ITR 19 (Raj.) and Shereton Apparels 256 ITR 20 (Bom). However, ld.CIT(A) was not convinced and concluded his judgement that the decision of the Respected Third Member was binding on him. Therefore he had to follow an order of the Jurisdictional Tribunal. Since the proof of unaccounted income was found at the time of search in the case of the ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -8- assessee, therefore the levy of penalty was affirmed. Being aggrieved now the assessee is further in appeals.
4. From the side of the assessee, Ld.AR Mr. S.N.Divatia appeared. After narrating the facts of the case, ld.AR has mainly pleaded that the amount of income which was declared as per the return u/s.153A of the Act was accepted by the AO without any change. Since the same income was assessed, therefore there was no element of concealment. His next plant of argument was that the factum of "refundable deposit" was duly disclosed by the assessee as is evident from the replies to question Nos.32, 36 and 43 recorded at the time of search, quoted below:-
Reply to Q.32 : Application for admission has been received but correspondence deposit is outstanding, hence, not seen in the books.
Reply to Q.36 : These are correspondence deposits received from the student. Since, it is refundable deposits it is not accounted for.
Reply to Q.43 : Since, this amount was correspondence deposit of TEC, it was not deposited in bank account. It was deposited in this locker as it is very close to office.
4.1. Therefore, ld.AR has contested that once the assessee has disclosed the impugned income as per the statement recorded and that income was incorporated in the return of income which was accepted as such without any change, therefore, the penalty should not be attracted.
Reliance placed on Bhanwar Lal Mahedra Kumar Soni 138 TTJ 381 (Jd.). The ld.AR has also cited New Sorathia Engg. Co. vs. CIT (282 ITR 642) [Guj.] for the proposition that a taxpayer must not be penalised at a time twice in respect of the same income. To avoid litigation and to ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06 -9- earn mental peace the assessee has offered the amount of the impugned deposits therefore his intention was not mala fide to conceal the amount. For this proposition, reliance were placed on G.Ramkumar 137 TTJ 121, Dilip Yeshwant Oak vs. ACIT 138 TTJ 559 (Pune), CIT vs. Hukam Chand Hari Prakash 172 CTR 271 (P&H) and Alka Luthra vs. ACIT 37 SOT 282 (Del).
5. From the side of the Revenue, Mr. R.K.Vohra, Sr.D.R. appeared and argued that the concealment was detected at the time of search and survey operation. The Register in which the refundable deposits were recorded have been unearthed consequence upon the search. He has submitted that though the income offered as per the return filed u/s.153A of the I.T. Act was accepted as such but it did not mean that the assessee had any intention paying the tax voluntarily on that amount. The assessee had already filed the original returns, wherein the impugned 'refundable deposits' were not disclosed. Ld.DR has placed reliance on ACIT vs. Kirit Dahyabhai Patel 121 ITD 159 (Ahd)(TM) and of Prempal Gandhi vs. CIT 335 ITR 23 (P&H). Ld A.R. has also pleaded that the said register can be said to be part of the accounts, hence the impugned amount deserve to be treated as disclosed amount.
6. We have heard both the parties at length. Relevant orders of the Revenue authorities have been carefully perused. We have also examined the compilation filed before us, specially the statements recorded during the course of search. In the light of the above discussion, it has emerged that the assessee is in the profession of dispensing consultancy for ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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foreign education. A search u/s.132(1) of the Act was carried out on 10/2/2006. We are concerned with the concealment penalty proceedings which were initiated in respect of all the four years. At the outset, we have enquired that why there was a gap in the assessment years involved because for A.Ys. 2001-02 & 2002-03 no appeals are before us. Ld.AR has clarified that only in respect of these four assessment years the penalty was imposed because of the disclosure of the excess amount, however, in respect of in-between two years there was no such disclosure hence there was no occasion of levy of penalty. Undisputedly, facts of the case have revealed that the additional income disclosed by the assessee for these A.Ys. 2000-01, 2003-04, 2004-05 & 2005-06 respectively were Rs.2,50,000/- Rs.1,64,600/-, Rs.1,55,440/- & Rs.1,26,650/-. It is also not in dispute that the amounts which were declared as per the returns u/s.153A of the Act were as such accepted and finally assessed vide assessment orders now before us. This is the main reason of the controversy as raked up by ld.AR Mr.S.N.Divatia. His main point of argument is that once a returned income was accepted without any alteration or addition, then there was no question of concealment. At the outset, we can express that we are not in agreement with the said pleadings of ld.AR. We are of the view that this is a case of search u/s.132(1) of the Act and consequent thereupon notices u/s.153A of the Act were issued by the Revenue Department. In compliance to those notices, assessee has furnished returns u/s.153A of the Act and disclosed the impugned amounts. Therefore the said disclosure cannot be said to be a voluntary disclosure. Rather, facts of the case have revealed that the respective amounts offered by the assessee were based upon the ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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figures found recorded in one of a seized material. A register inventorised as A-9, A-12 & 13 were recovered. It was informed by the assessee during his statement recorded that the said register has depicted deposits received from the students but that deposit was a refundable deposit. At that juncture, it has been clarified by the ld.AR that the surplus amount which was recorded in the said register was offered to tax in the returns of income filed in response to notices issued u/s.153A of the Act for these four years. Assessee has also narrated the nature of the said deposit. He has informed that a sum of Rs.3,500/- was received from each student by way of security at the time of preparation of course study while accepting the admission application to apply for admission to various foreign universities. However, it was informed that the said amount of deposit was a refundable amount to be returned back to the students on the occasion of grant of student visa. The assessee's main argument was that the said amount did not belong to him and he had held the said amount merely as a custodian to be returned to the students. Therefore, the argument was that the refundable deposit was not an income to be taxed in his hands. It was pleaded that for the said "refundable correspondence deposits" a separate register was maintained and it was never recorded in the regular books of accounts. The assessee has never treated the amount as his income.
6.1. We have examined the said explanation of the assessee in the light of the facts borne out from the records. On page No.17 of the compilation vide Annexure-"D", an year-wise deposit found recorded in the Register so impounded was placed on record in a tabulated form. Through this chart, we have noticed that for A.Y. 2002-03 assessee has ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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suo motu recorded a sum of Rs.19,560/- as a deposit. Through this tabulation, it is evident that the exact amount of Rs.19,560/- was refunded and duly recorded in the books of accounts. Through this chart, it is also an admitted factual position that in respect of rest of the years, i.e. for A.Y. 2003-04, 2004-05 & 2005-06; in that order, amounts recorded in the regular books were Rs.44,680/-, Rs.35,600/- and Rs.59,000/-. The exact amount was refunded and duly recorded in the regular books of accounts. This is one part of the admitted facts. The other side of the fact as found by the Revenue Department was that the impugned deposit found recorded in the impounded register was Rs.61,850/-,Rs.2,15,200/-,Rs.1,68,200/- & Rs.1,29,775/- correspondingly for these four years. However, amount refunded was paltry as found recorded in the impounded register, i.e. Rs.1,700/-, 18,700/-, Rs.21,265/- & Rs.11,625/-. Hence, the result of this observation is that the additional income so disclosed vide returns filed u/s.153A of the Act were not merely on adhoc basis but the said disclosure was very much based upon a seized material, i.e. the register impounded during the course of search. Hence the very basic and the moot question is that such an income which was unearthed consequence upon a search and admittedly it was not recorded in the regular books of accounts, whether constitute concealment? At present, we are not concerned about the merits of the quantum addition as touched by ld.AR during his arguments that the impugned income did not at all belong to the assessee and that the assessee happened to be merely a custodian therefore should not at all be taxed in his hands. Right now we are dealing with the concealment proceedings and therefore confine ourselves to the fundamental fact that ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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a register was detected and therein an income was found recorded which was not disclosed in the regular books of accounts and that income was offered as additional income while returns were filed u/s.153A of the Act and whether such type of income shall fall within the ambits of the provisions of section 271(1)(c) of the I.T. Act. Almost on identical facts, a view has been taken by Respected Third Member and that case law along with other case law shall be discussed hereunder:
6.2. The decision of Respected Third Member pronounced in the case of ACIT vs. Kirit Dahyabhai Patel reported as 121 ITD 159 (Ahd)[TM] states that the assessee was engaged in the business of land development. A search was conducted u/s.132 of the Act. Assessee was regularly filing returns of income originally. Certain incriminating documents were found during the course of search. Thereafter, a notice u/s.153A of the Act was issued. In compliance, return of income was filed in terms of the provisions of section 153A(1)(a) of the Act. That assessee has disclosed additional income over and above the income which was returned in the original returns. Facts of that case have revealed that the returns filed in pursuance to notice u/s.153A of the Act were accepted by the AO. However, simultaneously penalty proceedings u/s.271(1)(c) of the Act was also initiated. In that case also, the argument of the assessee was that since a confession was made u/s.132(4) of the Act and that the manner in which the income was earned has also been explained and, moreover, that amount was disclosed as per the return and taxes were paid, therefore there was no occasion to impose penalty u/s.271(1)(c) of the Act. For this proposition, it was ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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argued that the assessee had immunity as prescribed in Explanation-5(2) to section 271(1)(c). There is a reference of Circular No.469 reported in 162 ITR 21 (St.) explaining the amendment. That the benefit of immunity conferred by Explanation-5(2) as amended by the Taxation Laws, 1986 w.e.f. 10/09/1986 is confined to the return for the year in respect of which the previous year is yet to end or even though the year has ended but the time for filing the return u/s.139(1) is yet to expire. It was found that in respect of all the earlier years the due dates for filing of return u/s.139(1) had ended much earlier. Returns were filed u/s.153A of the Act after the search. Therefore, it was held that the additional income declared in those returns did not fall under the category of the return mentioned in Explanation-5(2) of Section 271(1)(c) I.T.Act. For this legal proposition, a decision of Hon'ble Madras High Court pronounced in the case of CIT vs. S.D.V.Chandru 266 ITR 175 (Mad.) was followed. Relevant portions from the order of the Kirit Dahyabhai Patel(TM)[supra] are reproduced below:
"11. I have considered the arguments. Since the learned counsel for the assessee has not disputed the position that s. 271 (1)(c) is applicable to an assessment made under s. 153A, it is not necessary for me to examine that position. The main question before me, which was debated at length, was whether the immunity under Expln. 5(2) to s. 271(1)(c) is available to the assessees. No judgment of the Hon ' ble Gujarat High Court on this question was brought to my notice by either side. The Madras High Court in S.D.V. Chandru ' s case (supra) has held that the words in Expln. 5(2) ".....has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in sub- s. (1) of s. 139" are not to be read as referring to income so far not disclosed in respect of the previous ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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year which is to end after the date of the search and that the words which refer to the time-limit under s. 139(1) are "only a reiteration of the legal requirement regarding the time within which returns should normally be filed". In this view of the matter it was held that no penalty can be imposed on the basis of the returns filed after the date of the search, pursuant to declaration under s. 132(4), in which additional income was shown by the assessee though such returns related to earlier assessment years. To the same effect is the judgment of the Rajasthan High Court in CIT vs. Kanhaiyalal (supra). In fact, in this case the High Court has observed that it is not merely the right of the assessee to file returns for the earlier assessment years after the date of the search pursuant to declarations made under s. 132(4) but it is his obligation to do so and the immunity conferred by Expln. 5(2) cannot be taken away or watered down. The view taken by the Madras High Court in S.D.V. Chandru ' s case (supra) has been noticed by the Ahmedabad Bench of the Tribunal in the group case of Rupesh Bholidas Patel (supra) but the Bench has preferred to follow the judgment of the Bombay High Court in the case of Sheraton Apparels (supra), a decision which has also been followed by the learned AM in the present appeals. The learned AM has also referred to the order of the Tribunal in the group case of Rupesh Bholidas Patel (supra) and in para 13 of his order has held that since it is a case of the same group and the facts and circumstances of the assessees ' cases are similar to those in the case before the Tribunal, he would draw support for his view from the said order. The learned JM does not appear to have referred to the order of the Tribunal in the case of Rupesh Bholidas Patel (supra). Since a view has already been taken as to the availability of the immunity under Expln. 5(2) to s. 271(1)(c) by an order of the Ahmedabad Bench, that too in a case belonging to the same group and after referring to the judgment of the Madras High Court in S.D.V. Chandru ' s case (supra), judicial discipline requires that I should not deviate from that view, I accordingly uphold the view of the learned AM that the immunity under the above explanation is not available to the present assessees.
ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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12. The Statement of Objects and Reasons to the Taxation Laws (Amendment and Miscellaneous Provisions) Bill, [(1986) 161 ITR (St) 63], and the Circular No. 469, [(1987) 59 CTR (St) 9 : (1986) 162 ITR (St) 21] to which my attention was drawn do not advance the case of the assessees. The Statement of Objects and Reasons says that the amendment was being made "to remove an anomaly in the existing provisions in respect of cases where penalty is imposable for concealment of income even if the taxpayer has no intention to fabricate evidence or to conceal his undisclosed income after search and seizure". The anomaly and the remedial amendment made are explained by the above circular in the following words :
"As per the existing Expln. 5 to s. 271(1) of the IT Act, if at the time of search, assets which are not recorded in the books of account are found, a taxpayer is liable to penalty for concealment even if he declares the full value of those assets as his income in the return filed after the search. This provision has been found to operate even in cases where the assessee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have been acquired out of his income which has not been disclosed so far in his return income to be furnished before the expiry of time prescribed in cl. (a) or (b) of s. 139(1) and specifies in the statement the manner in which such income has been derived, and pays the taxes that are due thereon, no penalty shall be leviable." [pp. 38 and 39 of 162 ITR (St.)] The above circular explaining the amendment shows that the benefit of immunity conferred by the Expln. 5(2), as amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 w.e.f. 10th Sept., 1986, is confined to the return for the year in respect of which the previous year is yet to end or even though ended, the time for filing the return under s. 139(1) is yet to expire. In the present case, the search took place on 4th Sept., 2003. In respect of the asst. yr. 2003-04, for which the previous year would have ended on 31st March, 2003, the return under s.
ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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139(1) would be due latest by 31st Oct., 2003. In respect of all the earlier years, needless to add, the due dates for filing returns under s. 139(1) would have ended much earlier. Returns were filed by the assessees after the search, in response to notices issued under s. 153A, on 31st May, 2004. The addtional income declared in these returns do not fall under the category of the return mentioned in Expln. 5(2) to s. 271(1)(c). Therefore, the assessees are not entitled to the immunity from penalty."
6.3. Since a decision of Hon'ble Madras High Court has been cited therefore it is rational to discuss that order as well cited as S.D.V. Chandru 266 ITR 175 (Mad.). The Hon'ble Court has discussed about the exception as prescribed under Explanation-5 to section 271(1)(c). Clauses (a) and (b) made a clear distinction between the previous year which has ended before the date of search and a previous year which is to end on or after the date of search. Sub section (2) to Explanation-5 prescribes that a statement given by the assessee at the time of search u/s.132(4) with regard to the assets found at the time of search, and being a statement to the effect that such assets have been acquired out of his undisclosed income, and that a specification by the assessee in such statement with regard to the manner in which such income had been derived, and that subsequent payment by the assessee of the tax on such undisclosed income together with interest, thus provides an immunity. The Hon'ble Court has clarified that the words which refer to the time specified in section 139(1) of the Act are only a reiteration of the legal requirement regarding the time within which returns should normally be filed. In cases, where the assessee had not disclosed his income in the returns filed for the previous year which had ended prior to the date of the search and in the statement given u/s.132(4), the assessee admits the ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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receipt of undisclosed income for those years and also specifies the manner in which such income had been derived, and thereafter pays the tax on undisclosed income with interest, such undisclosed income would get immunized from the levy of penalty.
6.4. The Respected Third Member has not only cited the aforementioned order of the Hon'ble Madras High Court, but also cited a decision of ITAT Ahmedabad pronounced in the case of ACIT vs. Rupesh Bholidas Patel (2009)309 ITR 217 [AT] (Ahd). Facts of that case were that the assessee had originally filed its return of income u/s.139(1) of I.T. Act on 27/10/1998 declaring total income at Rs.79,830/-. Thereafter, the Department had conducted a search u/s.132(1) at the residential as well as business premises of that assessee on 4/09/2003. A huge investment was found to be made in the business of construction. The assessee admitted having made investment and to cover up such undisclosed investment he made a surrender of Rs.5 lacs during the course of search. The assessment was made u/s.153A(b) and vide that assessment the return of income as disclosed by the assessee of an amount of Rs.5 lacs was accepted. However, the Respected Co- ordinate Bench has categorically commented that the said income which was assessed u/s.153A(b) was over and above what was disclosed in the original return. The AO had levied the penalty u/s.271(1)(c) for concealment of income. The CIT(A) has deleted the penalty on two premises; (i) by making applicability of Explanation-5(2) to section 271(1)(c) and (ii) penalty on returned income u/s.153A by considering the return filed u/s.139 of the Act and as abated and non est in the eyes ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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of law. The Tribunal, in the case of Rupesh Bholidas Patel, has finally concluded as under:-
"24. In view of the above facts and circumstances, we are not in agreement with the view of the Commissioner of Income-tax (Appeals) that the original return filed by the assessee as on October 27, 1998, will abate and the return filed in response to section 153A(a) of the Act is to be considered as return filed under section 139 of the Act as the original return. The assessee in the present case has already filed the original return as on October 27, 1998, and no action whatsoever is pending and the return of income was accepted as it is. Subsequently, during the course of search the assessee has disclosed a sum of Rs.5,00,000 in his return of income filed under section 153A(a) of the Act as declared under section 132(4) of the Act and accepted the assessment also. As regards to this legal issue, we are of the view, that the Commissioner of Income-tax (Appeals) has erred in ignoring the return filed originally on October 27, 1998, in view of the second proviso to section 153A of the Act. Another aspect on which the Commissioner of Income-tax (Appeals) has given his finding, that, the introduction of section 271AAA of the Act nowhere puts bar for levy of penalty under section 271(1)(c) of the Act on or before June 1, 2007, as introduced by the Finance Act, 2007. Even by the Finance Act, 2007, with effect from June 1, 2007 there is amendment in Explanation 5 and the words substituted for "search under section 132" are "search initiated under section 132 before the 1st June 2007". By this Finance Bill, 2007, it was proposed said Explanation 5 so as to provide that provision of said Explanation shall be applicable in a case where search initiated under section 132 before the 1st June 2007. Further it has been clarified by the memo explaining the provisions in the Finance Bill, 2007, clause 67 as under source (2007) 289 ITR (St) 329:
"It has been proposed to amend the said Explanation 5 so as to provide that provisions of the said Explanation shall be ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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applicable only in a case where search under section 132 was initiated before 1st June, 2007."
25. In view of the introduction of these words, which clarifies these penalty provisions are applicable even in the case where search under section 132 was initiated before June 1, 2007. Accordingly, the reasoning given by the Commissioner of Income- tax (Appeals) that by introduction of section 271AAA of the Act itself shows that no penalty under section 271(1)(c) is imposable on the income returned under section 153A of the Act, is clearly a wrong interpretation of this Explanation. In view of this, on this legal issue also we confirm the penalty and reverse the order of Commissioner of Income-tax (Appeals)."
7. It is worth to mention an order of Hon'ble Rajasthan High Court pronounced in the case of CIT vs. Kanhaiyalal 299 ITR 19(Raj.), wherein the observation were that, quote "Explanation 5 to section 271(1)(c) of the Income-tax Act, 1961, provides that where in the course of a search initiated under section 132, the assessee is found to be the owner of any assets mentioned therein, and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income, for any previous year, which has ended before the date of the search, but the return of income for the said year has not been furnished before the said date, or where such return had been furnished before the said date, such income has not been declared therein, 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 purpose of imposition of a penalty under sub-section (1)(c) be deemed to have concealed the particulars of his income, or furnished inaccurate ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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particulars of income. Significantly, such concealed income could be for any previous years, and could be required to be disclosed in such particular previous years. It is to this language of Explanation 5, that two exceptions are carved out, by using the word "unless". Sub-clause (2) provides that it would not be treated as undisclosed or concealed income, if the assessee, in the course of the search, makes a statement under section 132(4), that any asset found in his possession or under his control has been acquired out of his income, which has not been disclosed so far in his return of income to be furnished before the expiry of the time specified in sub-section (1) of section 139, and also specifies in the statement, the manner, in which such income has been derived, and pays tax, together with interest, if any, in respect of such income. Sub-clause (2) does not provide any eventuality in which the immunity conferred by this clause may be taken away, or may be lost, except where the assessee fails to pay tax, together with interest, if any, in respect of such income. Sub-clause (2) does not contemplate the requirement of the assessee paying tax, together with interest, if any, in respect of such income, in any particular assessment year only. In the language of section 132(4) read with sub-clause (2) of Explanation 5, there is nowhere the requirement, that the assessee should undertake to show that asset, in a return of any particular assessment year, to be entitled to claim the immunity. When the parent provision contemplates the income to be permissible in any previous years, obviously sub-clauses (1) and (2), which are in the nature of proviso to this Explanation, have to be read in line therewith, and, therefore, if the disclosure of the asset has been made, then the assessee cannot be prohibited from showing that the ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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income related to any one or more of the previous years before the date of the search, at the pain of the immunity conferred by sub-clause (2) of Explanation 5 being taken away." unquote. Therefore, the provisions of Explanation-5 have certain restrictions and it is wrong to presume that a blanket immunity has been granted to those cases covered u/s.132(4) of I.T.Act, if consequence there upon a return has been filed offering therein an undisclosed income.
7.1. One of the argument of ld.AR before us is that the Register recovered from the assessee was part of the books therefore the receipts recorded therein should be treated as the receipts recorded in the books of accounts. In this context, a decision of Hon'ble Bombay High Court pronounced in the case of Sheraton Apparels vs. Asst.CIT 256 ITR 20(Bom) is worth mentioning wherein it was mentioned that section 34 of the Evidence Act, 1982 that, quote" Section 34 of the Evidence Act, 19872, refers to the words "entries in books o0f account". The accounts under section 34 means accounts which are maintained in the regular course of business. Income-tax legislation has been using the term "book" or "books of account" right from its inception. But these terms are defined in the Act for the first time by the Finance Act, 2001, with effect from June 1, 2001. Section 2(12A) defines the said term as including "ledgers, day-books, cash books, account books and other books whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electromagnetic data storage device". The above definition appears to have been framed by the ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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Legislature keeping in view the development of computer technology. Accounting is called a language of business. Its aim is to communicate financial information about the financial results. Therefore, when books of account are tendered for claiming the benefit of Explanation 5 to section 271(1)(c) of the Act, they must be shown to be books, those books must be books of account, any they must be maintained for the purpose of drawing the source of income under the Income-act Act. The essential requirements must be carefully observed while implementing tax legislation. Private diaries may have been most regularly maintained, they may have been exhibiting record of the facts, contemporaneously made but they are never maintained for the purpose of the Income-tax Act to draw the source of income or for the computation of total income and to offer income calculated therefrom for the purpose of taxation. Such books or diaries can hardly be designed or accepted as books of account for the purpose of Explanation 5 to section 271(1)(c) of the Act so as to afford immunity from penalty." unquote. Following this decision, we hereby hold that the Register so kept by the assessee was not meant for the purpose of Income-tax Act. The refundable deposit noted therein was the conceal amount therefore subject to imposition of penalty.
7.2. Under the totality of the facts and circumstances of the case, we hereby hold that the amount recorded in +the register seized during the course of search was the amount which was concealed by the assessee, although it was offered in the return of income filed u/s.153A of I.T. Act, but rightly held that the exceptions provided in Explanation-5 were not ITA Nos.152,153,154 & 155/Ahd/2009 Rahul A.Gandhi vs. The Dy.CIT(OSD) Asst.Years - 2000-01,03-04, 04-05 & 05-06
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applicable and, therefore, subject to levy of penalty u/s.271(1)(c) of I.T. Act. The action of the authorities below is hereby confirmed.
8. In the result, all the appeals filed by the assessee are dismissed.
Order signed, dated and pronounced in the Court on 30/ 09 /2011.
Sd/- Sd/-
( G.D. AGARWAL ) ( MUKUL Kr. SHRAWAT )
VICE PRESIDENT (AZ) JUDICIAL MEMBER
Ahmedabad; Dated 30/ 9 /2011
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-XVI, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation....................... 20.09.2011
2. Date on which the typed draft is placed before the Dictating Member 21.09.2011.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S...30.9.11
6. Date on which the file goes to the Bench Clerk............... 30.9.11
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................