R G Patil & Company, Haveri V. Deputy Commissioner of Income Tax, Central Circle, Belagavi

ITA 352/BANG/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0670 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Period of limitation; Bogus loan; Condonation of delay; Set aside
• Section: 131; 132; 271(1)(c); 139; 143(3); 133A; 153A; 250; 274; 139(1); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA Nos.352 to 357/Bang/2021 Assessment year : 2010-11, 2011-12, 2013-14, 2014-15 & 2015-16 M/s RG Patil & Company, APMC Yard, Byadgi, Haveri District. PAN – AAFFR 0921 G Vs. The Dy. Commissioner of Income- tax, Central Circle, Belagavi. APPELLANT RESPONDENT Assessee by : Shri S.V Ravishankar, Advocate Revenue by : Shri Sankar Ganesh K, JCIT (DR) Date of hearing : 19.05.2022 ate of Pronouncement : 31.05.2022 O R D E R Per Bench All these 6 appeals by the assessee are directed against the order of the CIT(A)-2, Panaji dated 16.8.2017, 17.8.2017 & 18.8.2017 respectively for the asst. years 2010-11, 2011-12, 2013-14, 2014-15 & 2015-16. ITA Nos.352 - 357/Bang/2021 Page 2 of 30 ITA No.352 to 355/Bang/2021 2. The issues involved in the above 4 appeals are identical and arise under identical facts and circumstances. These appeals were heard together. We deem it convenient to pass a common order. For the sake of convenience, we take up the order in ITA No.352/Bang/2021 and the decision in this appeal shall apply mutatis mutandis in other 3 appeals also. 3. The grounds raised in all these appeals are common except for the figures. Hence, the grounds raised in ITA No.352/Bang/2021 is reproduced as under:- “1. The order of the learned Commissioner of Income Tax (Appeals) in so far as it is against the appellant are opposed to law, equity and weight of evidence, natural justice, facts and circumstances of the case. 2. The appellant denies itself liable to a penalty of Rs. 3,090/- under section 271(1)(c) of the Act on the facts and circumstances of the case. 3. The authorities below failed to appreciate that the ingredients as envisaged in the provisions of section 271(1)(c) of the Act was absent and there was no concealment of income and consequently the order of penalty U/s 271(1)(c) of the Act deserves to be cancelled on the facts and circumstances of the case. 4. The authorities below failed to appreciate the fact that the additional income offered by the appellant has been accepted ITA Nos.352 - 357/Bang/2021 Page 3 of 30 by the AO, which does not constitute concealed income as per the scheme of the Act, on the facts and circumstances of the case. 5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 271(1)(c) of the Act are not applicable on the facts and circumstances of the case. 6. The learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the income offered by the appellant was on account of buying peace with the department and the penalty ought not to have been levied on the facts and circumstances of the case. 7. Without prejudice, the penalty levied is highly excessive and is to be reduced substantially on the facts and circumstances of the case. 8. The appellant craves leave of this Hon'ble Tribunal, to add, alter, delete, amed or substitute any or all of the above grounds of appeal at the time of hearing 9. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.” 4. The assessee filed petition for admitting additional grounds and placed reliance on the judgment of Hon’ble Supreme Court in the case of National Thermal Power Company Ltd., Vs. CIT, 229 ITR 383 (SC) and also on the ratio of the decision of the Hon’ble High Court of Karnataka in the case of Gundur Thimmappa & Sons Vs. CIT reported in 70 ITR 70and prayed that the additional grounds may be admitted, as these grounds do not involve any investigation of facts, otherwise ITA Nos.352 - 357/Bang/2021 Page 4 of 30 on the records of the department and are also pure questions of law, which goes into the very root of the matter of jurisdiction and validity of impugned addition and, therefore, the assessee prayed that additional grounds may be admitted and adjudicated on merits, which are as under:- “1. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the notice issued under section 271(1)(c) of the Act bad in law on the facts and circumstances of the case. 2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the levy of penalty is not automatic and that there is a discretionary power imbedded in the provisions of section 271(1)(c) of the Act, not to levy penalty and the assessing officer ought to have exercised his discretion judiciously and ought not to have imposed penalty in a mechanical manner, on the facts and circumstances of the case. 3. Without prejudice, the authorities below failed to appreciate that the returned income was accepted and there were no additions or disallowances in the order passed and hence no penalty could have been levied as proposed in the not issued, on the facts and circumstances of the case. 4. The appellant craves leave of this Hon'ble Tribunal, to add, alter, delete, amend oi substitute any or all of the above grounds of appeal as may be necessary at th€ time of hearing. 5. For these and other grounds that may be urged at the time of hearing of appeal the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.” ITA Nos.352 - 357/Bang/2021 Page 5 of 30 5. On the other hand, the ld.DR objected for the admission of additional grounds. 6. After considering the rival submissions and perused the materials on record on the admissions of additional grounds. In our opinion, the issue raised by the assessee which being legal issue and it does not require any investigation of facts and all the facts are already on record. Accordingly, this additional ground is admitted for adjudication. 7. It was noticed that there was delay of 1374 days in filing the appeal before the Tribunal. The assessee has filed condonation petition accompanied by an affidavit stating that prosecution notices were issued by the assessee on or about 10-05-2021 i.e during the pandemic period. The partners of the assessees have consulted their family members who are all in their old age and by considering the various points put forth by their counsels chosen not to prefer an appeal against the penalty order of the CIT(A) and the penalty was entirely paid off. The ld.AR of the assessee was informed to the assessee that the prosecution was initiated since the assessee has chosen not to contest the penalty proceedings and the assessee has a very good prima facie case on legal issues as well as on the merits of the matter. The ld.AR advised the assessee to file an appeal before us u/s 250 of the Act and in the event if assessee gets relief, the ITA Nos.352 - 357/Bang/2021 Page 6 of 30 prosecution would be dropped. Hence, the assessee is before us now, seeking condonation of delay in filing the appeal belatedly. 8. The ld.AR relied on the decision of the ITAT, Cochin Bench in the case M/s Midas Polymer Compounds Pvt. Ltd., in ITA No.288/Coch/2017 vide dated 25/06/2018, wherein some of following decisions of the Hon’ble Supreme Court and also decisions of other benches have been considered. 1. Judgment of the Supreme Court in the case of N.Balakrishnan vs. M. Krishnamurthy (AIR 1998 SC 3222) 2. Hon 'ble Apex Court in the case of Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others, reported in (1979) 118 ITR 507(5C) 3. Hon'ble Supreme Court in the case of N. Balakrishnan Vs. Krishnamurthy, reported in AIR 1998 SC 3222. T 4. Mumbai Benches of the Tribunal in the case of Y.P. Trivedi vs. JCIT in ITA No. 5994/Mum/2010 dated 11/07/2012 5. ITAT, Delhi Benches in the case of Vishu Impex Pvt. Ltd. vs. Department of Income Tax in ITA No. 2765 and 3703/Del/2011 dated 31/12/2015 9. The Supreme Court observed that when the delay was of short duration, a liberal view should be taken. "It does not mean that when the delay was for longer period, the delay should not be condoned even though there was sufficient cause. The Apex Court did not say that longer period of delay should not be condoned. Condonation of delay is the discretion of the Court/Tribunal. Therefore, it would depend upon the facts of each case. In our opinion, when there is sufficient ITA Nos.352 - 357/Bang/2021 Page 7 of 30 cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/period. 10. Hon’ble Bombay High Court has condoned the delay in similar issue in the case of Anatek Services Pvt. Ltd., Vs. ACIT-10(1) in ITA No.102 of 2018 vide order dated 11 th Feb, 2022, which is placed on record. 11. Considering to the facts of the case and case law cited by the assessee (Supra), we condone the delay and admit the appeal for adjudication. 12. The brief facts of the case are that the assessee is engaged in the business of processing of dry chillies and trading in chilly powder. The assessee filed return of income u/s 139(1) on 23/9/2010 declaring income of Rs.7,14,440/-. Consequent upon search and seizure action the assessee filed return in pursuance of notice u/s 153A on 30/1/2015 declaring income of Rs.7,24,440/- including the amount of Rs.10,000/- on account of unaccounted hand loans, which was found during the course of search & seizure action. Subsequently, the asst. was framed u/s 143(3) r.w.s 153A on 30/9/2016. 13. Consequent upon the search on 20/5/2014 at the common residence of Shri Shivana Gowda R Patil and Shri Kumargouda R Patil at Byadgi certain loose sheets containing the details of amount lent ITA Nos.352 - 357/Bang/2021 Page 8 of 30 were found and same were seized. It was mentioned as A/A1/01. The loose sheets contain details of amount advanced to various persons and the total amount advanced was Rs.21,40,000/- the details are as under for 4 assessment years. 14. During the course of search and consequent u/s survey u/s 133A of the Act one of the partner Shri Kumar Gowda R Patil admitted that the loan was given to the parties and the source of the amount cannot be explained and accordingly offered the same for taxation. During the course of search proceedings, the statements were recorded u/s 132(4) on 19/6/2014 stating that the above loans were not reflected in their books of account and, therefore, offered the same for taxation on behalf of the partnership firm M/s RG Patil and Co. and it was observed by the AO that the said amount was not incorporated while filing the return of income u/s 139(1) of the Act in his financial statements and it has been offered as income consequent upon the search. Accordingly, the penalty proceedings u/s 271(1)(c) was initiated in this regard. The assessee submitted detailed written Assessment year Amount of unexplained advances 2010-11 10,000/- 2011-12 4,20,000/- 2013-14 8,50,000/- 2014-15 8,60,000/- Total 21,40,000/- ITA Nos.352 - 357/Bang/2021 Page 9 of 30 submission which has been considered by the AO in his order and passed a penalty order as under:- 4. I have carefully considered the submissions of the assessee and also gone through the records. The assessee has contended that the hand loans given to various parties was offered as income to purely to buy peace with the department and under the bonafide belief that no penalty would he levied. The assessee has also contended that mere advancing of loans does not amount to income. 4.1 The above contention of the assessee is not acceptable. As noted in the assessment order, the details of the amounts lent to various persons was found in the loose paper bundle "A/A1/01" Page No.68 to 82 at the common residence of Shivanagouda R. Patil and Kumargouda. R. Patil, but to accept the same as the "undisclosed income" of the firm. It was only because of their inability to prove the genuineness of the above said loans, the partner of the firm was left with no choice but to accept the unaccounted loans as undisclosed income. As regards the assessee's contention that mere advancing of loans does not amount to income, it was only due to the fact that the assessee could not explain the source of the loans given which were outside the books of accounts, the' partners of the firm themselves in their statements made voluntarily have accepted the fact that tlic. unaccounted loans were offered as undisclosed income in the hands of the firm. Thus, the assessee's argument now does not have any credence. 4.2 The assessee has argued that provisions of explanation 5A to section 271(1)(e) is notattracted in the case of the assessee. This argument of the assessee is not correct. The provisions of explanation -5A are extracted in the submissions of the assessee reproduced above. The assessee's case is covered by clause (ii) of explanation 5A i.e. the income of Rs.8,50,000/- was declared based on entries in page No.68 to 82 of seized material marked as "A/A1/01". The assessee accepted that the entries in the ITA Nos.352 - 357/Bang/2021 Page 10 of 30 documents represent its income for the year. Further, as on the date of search the assessee had filed return for the year but had not disclosed this additional income represented in such documents. The assessee had filed return of income u/s 139 on 26.09.2013 declaring income of Rs.27,12,000/. Consequent to the search u/s 132 on 20.05.2014, the assessee filed return u/s 153A on 27.02.2015 declaring income of Rs.35,62,000/-. The additional income of Rs.8,50,000/- on account of unaccounted loans came to be declared by the assessee in the return u/s 153A only as a consequence of finding of incriminating documents in Page No.68 to 82 of seized material marked as "A/A1/01" containing the details of unaccounted loans. 4.3 Therefore, in the above facts and circumstances of the assessee's case, provisions ofExplanation-5A to section 271(1)(c) are clearly attracted which provides no immunity to the assessee from penalty in respect of undisclosed income found during the course of search operation. The language of Explanation-5A to section 271(1)(c) is so clear that itprovides no escape route from levy of penalty. This provision is strictly applicable even if the assessee discloses the additional unaccounted income as admitted in statement under section 132(4) by paying appropriate tax in the return of income filed under section 153A/153C of the I.T. Act, and the assessment is made without any deviation from the returned income. In view of the legal and factual position and having regard to the express statutory provisions of section 271(1)(c) readwith Explanation 5A there-under, as discussed above, the assessee is liable for penalty under section 271(1)(c) on the undisclosed income of Rs.8,50,000/- offered in the return of income filed under section 153C. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Prasanna Dugar v. CIT 373 ITR 681 (SC) wherein, decision of Hon'ble Calcutta High Court 371 ITR 19 (Cal), was upheld by the Hon'ble Supreme Court. In this case, the assessee filing return but riot disclosing amount surrendered voluntarily in search action. The Hon'ble High Court held that penalty is leviable in view of Explanation-5A to section 271(1)(c) and the said decision was upheld by the Hon'ble Supreme Court. Thus, even if amount is which was not declared in regular return filed prior to search, is declared in the return u/s.153A, the assessee is liable for penalty under section 271(1)(c) of the I.T. Act, 1961. ITA Nos.352 - 357/Bang/2021 Page 11 of 30 4.4 The assessee has not offered any cogent explanation as to why the income representing the undisclosed hand loans was not declared in the original return of income filed u/s 139. The assessee's argument that it is not proved that the loans were paid by the firm or were unaccounted is also not acceptable. As noted above, the incriminating documents in Page No.68 to 82 of seized material marked as "AJA1/01" containing the details of unaccounted loans were found and confronted to the assessee during search. Once confronted with the evidence, the partners had no choice but to accept the same as the "undisclosed income" of the firm. 1t was only because of their inability to prove the genuineness of the above said loans, the partner of the firm was left with no choice but to accept the unaccounted loans as undisclosed income. 4.5The Assessee has contended that it has filed the returns in accordance with the declaration made u/s.132(4) to buy peace with the department and the declarations are generally made with an assurance of immunity from penalty. The argument of the assessee is not acceptable as the law does not provide for such immunity from penalty. The immunity provided in clause 2 of explanation 5 to sec 271(1)(c) is no longer available to cases where search isinitiated after June 2007. Therefore, the contention of the assessee is also not acceptable. 4.6In view of the facts and circumstances and above discussion, the assessee is liable forpenalty under section 271(1)(c) on the income concealed on. account of unaccounted hand loans of Rs.8,50,000/- offered in the return of income filed under section 153A, but which was not shown in the return of income u/s 139 in view of explanation 5A to section 271(1)(c). Taking into consideration the facts of the case and the assessee's conduct in discharging tax liability and finalization of ITA Nos.352 - 357/Bang/2021 Page 12 of 30 assessment proceedings, 1 hereby levy minimum penalty @ 100% of the amount of tax sought to be evaded by reason of the concealment of assessee's income. 4.7 The total income in respect of which particulars are concealed for the purpose of penalty leviable under section 271(1)(c) works out to Rs.8,50,000/-. The tax sought to be evaded is Rs.2,62,650/-. In view of the above, penalty @ 100% works out to Rs.2,62,650/-. Therefore, I am satisfied that the assessee is liable for penalty u/s.271(1)(c) rws 274 of the Act for concealing the particulars of income as noted above and I hereby levy penalty u/s. 271(1)(c) of Rs.2,62,650/- at 100% of the tax sought to be evaded. The working of the penalty is as under: [ (A) Ina - 4z= in respect of which the particulars are concealed Rs. 8,50 000/- (13) Tax on total income including concealed income of Rs.35,62,000 /- Rs. 11,00,65 8/- (C) Tax on total income excluding concealed income of Rs.27,12,000/- Rs. 8,38,008/ - (D) Tax sought to have been evaded (A)-(B) Rs. 2,62,650/ - p Minimum Penalty leviable @ 100% Rs. 2,62,650/ - (F) Maximum penalty leviable @ 300% Rs. 7,87,950/ - (G) Penalty levied at 100% Rs. 2,62,650/ - 15. The ld.AR reiterated the submissions before the lower authorities and filed a written synopsis, which is placed on record. He also trying to make out that there was no malafide intention by the assessee to conceal the income. The payment was made by the partner for the payment of trading goods and it was for the purpose of business of the assessee. During the course of arguments, the ld.AR also raised the legal issue regarding notice issued by the AO. The undisclosed income disclosed during the course of search and seizure procedure was offered as income and the assessee for the purchase of peace of mind, he paid tax but did not file any appeal, whereas the assessee has ITA Nos.352 - 357/Bang/2021 Page 13 of 30 prime facie case. Merely on the basis of the statement the penalty cannot be imposed. 16. On the other hand, ld.DR relied on the order of the lower authorities. He submitted that the assessee was unable to prove the source of income which was found during the course of search proceedings and he has also accepted before the lower authorities that it was income which was not recorded in the books of account. If not the search carried out u/s 132A of the Act, the assessee would have escaped and the amount was discovered by the department on revival of the document and it was marked as Annexure A/A1/01 and it was not shown in the regular return filed by the assessee and the total amount was Rs.21.40 lakhs for the 4 asst. years which was undisclosed income of the assessee. 17. After hearing both sides and perusing the entire materials on record and orders of the authorities below, we observe from the order of the lower authorities that during the course of search loose sheets were found and bundled loos sheet folders was marked as A/A1/01. An amount of Rs.21,40,000/- was admitted as loans given to the parties and consequent upon search enquiry, it was offered as income. We found substance on the finding recorded by the lower authorities as well as submission made by the ld.DR that the assessee is liable for penalty u/s 271(1)(c) r.w Explanation 5A of the Act. The CIT(A) done good reasoned order and it does not require any interference in his ITA Nos.352 - 357/Bang/2021 Page 14 of 30 order. For the sake of convenience, we are reproducing the same as under:- 5. Ground no.3 and 4 for all the 3 assessment years are on the issue of that the appellant voluntarily declared amount during the course of search which cannot be called as undisclosed income. The second argument is that once the return is filed u/s. 153A. the same cannot be compared with the return filed u/s. 139 'for levy of penalty as the income declared u/s. 153A has been accepted by the AO in the assessment and no further additions were made and hence, there is no question of levy of concealment penalty. 5.1. The facts of the case as discussed by the AO in the assessment order as well as the penalty order are that the appellant had extended unaccounted hand loans to various persons. During the course of search u/s. 132 on 20.05.2014 at the common residence of Shivan Gowda R. Patil and Shri. Kumar Gowda R. Patil at Byadgi. certain loose sheets containing the details of amount lent were found which were seized and marked as A/A1/01. The loose sheets contained details of total amount advanced to various persons were totaling to Rs.21,40,000/-. The partners of the appellant firm present during the course of search admitted that the source of loans given to various parties could not be explained and accordingly, offered the same for taxation for various assessment years which is as under: 5.2. In the returns of income filed by the appellant in response to notices u/s. 153A, the appellant included the above unexplained/undisclosed hand loans in the returns filed for respective assessment years. During penalty proceedings, the AO held that the said undisclosed income was declared as the same was found during the course of search u/s. 132 ITA Nos.352 - 357/Bang/2021 Page 15 of 30 and the said amount was not disclosed in the original returns filed u/s. 139 and therefore, held that the undisclosed hand loan disclosed in the returns filed amounted to concealment and accordingly, levied the penalty Ws. 271(1)(c). 5.3. During the penalty proceedings before the AO, the appellant submitted that the amounts declared during the course of search were to buy peace with the department and to avoid litigation. It was further argued that mere act of declaring the advances does not attract penalty as such advances could be from income exempt and these facts were not brought out in the assessment order and hence. it was requested to drop the penalty. However, the AO did not accept the arguments canvassed by the appellant. The AO held that the appellant was unable to prove the sources of the hand loans given and he . Fe, were left with no alternative but to accept the unaccounted loans as undisclosed income. The AO also held that the provisions of clause (ii) of Explanation 5A to section 271(1)(c) are attracted in the case of the appellant. It was further held by the AO that the appellant accepted the entries in the seized document that they represented its income for each of the 3 assessment years 5.4The information and incriminating material relating to the undisclosed hand loans given by the appellant was found in the search premises in the premises of the appellant. Therefore, the AO has applied the provisions of Explanation 5A to section 271(1)(c). In this regard, the opening line of Explanation 5A to section 271(1)(c) which reads as "where, in the course of search initiated u/s. 132 on or after the first day of June, 2007, the assessee is found to be the owner of "needs to be analyzed. The said provision says that in the course of search initiated u/s. 132 and if the assessee is found to be the owner of certain assets then, notwithstanding that such income is declared by him in any return of ITA Nos.352 - 357/Bang/2021 Page 16 of 30 income furnished on or after the date of search, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. Therefore, initiation of the search in the case of the assessee where the income based on entry in any document found during the course of search is important. In the case of the appellant, there is no dispute that the evidence of undisclosed hand loans given to various persons was found during the course of search. As the documents/incriminating material containing entries of hand loans given which were outside the books of accounts were found during the course of search which was belonging to the appellant, the provisions of Explanation 5A is applicable to the facts of the appellant's case. The appellant also admitted that the hand loans given were outside the books of accounts and offered the same in the returns filed in response to notices u/s. 153A for all the 3 assessment years, which was accepted by the AO and reached finality. 5.5. The declaration made by the appellant even though, it is i ncorporat ed i n the return filed in response to notice u/s. 153A. the said action of the appellant is not voluntary or bonafide, which is supported by the fact that the income was not offered by the appellant firm in the returns u/s. 139 filed prior to the date of search. Reliance is placed on the decision of Hon'ble Jharkhand High Court in the case of CIT Vs Mahabir Prasad Bajaj 298 ITR 109 and Hon'ble Mumbai ITAT in the case of Ajit B. Zota Vs ACIT 40 SOT 543. Further, the information about the undisclosed hand loans found during the course of search was unexplained and the said information was not reflected in the books of accounts or the appellant even could not explain ITA Nos.352 - 357/Bang/2021 Page 17 of 30 the source for extending the said hand loans. Thus, in absence of a search, the said undisclosed income in the form of unexplained loans would have escaped the assessment and revenue to the exchequer. Reliance is placed on the decision of Hon'ble Bombay High Court in the case of Mahesh N. Thakkar Vs ACIT 59 Taxmann.com 272. Further, disclosure after action by the department cannot be termed as voluntary and hence, it raises a presumption of concealment as decided by the Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. Vs CIT 358 ITR 593. Thus, considering all these judicial pronouncements referred to above and after examining the facts of the case, the provisions of Explanation 5A to section 271(1)(c) are applicable to the appellant's case, it is held that the appellant concealed the particulars of income relating to undisclosed hand loans for all the 3 assessment years. Thus, the action of the AO in applying the provisions of Explanation 5A to the case of the appellant is upheld. 5.6. The other basic contention of the appellant is that section 153A is a provision similar to section 139 as the said section starts with non-obstante clause "Notwithstanding anything contained" and the search assessments made u/s. 153A of the Act cannot be treated as continuance of normal assessment proceedings whether abated or not. The AR of the appellant pleaded during appellate proceedings that the appellant has filed the return disclosing entire income accepted during the course of search and the same was accepted in the assessment completed by the AO and therefore, there is no concealment of income and ITA Nos.352 - 357/Bang/2021 Page 18 of 30 hence, penalty should not have been levied by the AO. 5.7. It is true that the provision of section 153A starts with non-obstante clause "Notwi thstanding anyt hi ng cont ai ned" but t he said cl ause is necessary f or issue of noti ce u/s. 153A i n t he cases where undisclosed assets or incrimi nating documents relati ng t o t he assessee are f ound which are subjected t o search u/ s. 132 of t he I. T. Act. Basically, t he provisi ons of section 153A will override t he provisions of other sections like 139, 147, 148 etc for issue of notice and for abatement of pending proceedings if any, under those sections. I have already given a finding above that the appellant has not satisfactorily explained the sources of hand loans given, the evidence of which was found during the course of search. Hence, the deemed concealment as provided in Explanation 5A to section 271(1)(c) is proved. But for the search, the undisclosed hand loans would have totally gone untaxed. Hence, though the income is declared in the return filed u/s. 153A which is after the date of search, the said declaration is found to be not voluntary absolving the appellant from the provisions of penalty. Further, the provisions of penalty are independent and is to be levied wherever the conditions stipulated in the penalty provisions are satisfied. In the instant case, the deeming provisions of Explanation 5A to section 271(1)(c) are attracted which has been elaborated above. Therefore, the appellant does not get any immunity from levy of penalty u/s. 271(1)(c) and therefore, the penalty levied by the AO for all the 3 assessment year in appeal is upheld. ITA Nos.352 - 357/Bang/2021 Page 19 of 30 5.8. Hence. I am of the considered view that the AO has rightly considered the material on record. The penalty proceedings are in accordance with law. There is no error committed by the AO that calls for any interference. For the aforesaid reasons the penalty levied by the AO u/s. 271(1)(c) amounting to Rs.3,090/-, Rs1,29,780 and Rs.2,62,650/- for assessment years 2010-11, 2011- 12 and 2013-14 respectively is upheld. Consequently. ground no. 3 and 4 are dismissed. 6. Ground no.5 is relating to the fact that the declaration of undisclosed income made by the appellant during the course of search was conditional on non-levy of penalty. With reference to this ground, no evidence was filed during the appellate proceedings that the declaration made was conditional. Further, there is no provision in the I.T. Act, wherein, the assessee can make a conditional declaration. Therefore, this ground does not survive. Ground no.5 is dismissed. 18. Considering the above finding recorded by the CIT(A), we do not find any perversity for confirming the action of AO for imposing penalty. Further, we also reject the arguments of the ld.AR that the declaration made on conditional basis for non levy of penalty because the assessee was unable to show any such documents. We also reject the arguments of the ld.AR regarding challenging of the notice because the assessee was unable to show the copy of the notice as well as this was a search case and Explanation 5A of 271(1)(c) is applicable. We rely on the judgment of Hon’ble Calcutta High Court in the case of ITA Nos.352 - 357/Bang/2021 Page 20 of 30 CIT Vs. Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta) , wherein it has been held as under:- ■■ “3. A search was conducted on February 3, 2009. During the search, the assessee disclosed certain facts which have been recorded in the order of the appellate authority, which reads as follows : "The facts of the case are that a search under section 132 was conducted at the premises of the assessee on February 3, 2009. In course of search, the assessee made voluntary disclosure under section 132(4) disclosing a sum of Rs. 6 crores even though no incriminating document suggesting any such undisclosed income was found. The said disclosure, as per the said deposition of the assessee recorded under section 131 was bifurcated into 3 persons, i.e., of Rs. 3,50,00,000 was disclosed in the name of the assessee, Rs. 2,25,00,000 was disclosed in the name of the assessee's wife, Smt. Rajshree Dugor, and Rs. 25,00,000 was disclosed in the name of the limited company, viz., Indian Gem and Jewellery (Imperial) Pvt. Ltd. in which the assessee had substantial interest. It may be repeated that no concealed income was established from any of the papers and documents found in the course of search in the panchnama of the assessee or in other panchnamas. The entire disclosure was made voluntarily and in good faith which is apparent from question and answer No. 22 in the statement recorded under section 131 wherein the assessee categorically states that he is voluntarily disclosing the income even though no incriminating documents have been found and all the purchases and sales are correctly recorded and the disclosure was made just to cover the papers and documents which he may not be able to explain. The assessee bifurcated his own disclosure of Rs. 3.50 lakhs in two parts, i.e., Rs. 70,00,000 for the assessment year 2008-09 and Rs. 2.80 lakhs for the assessment year 2009-10." 4. On the basis of the disclosure, the assessee filed a return on March 31, 2010, offering a sum of Rs. 70,00,000 for taxation earned during the assessment year 2008-09. It is not in dispute that for the assessment year 2008-09, the assessee had earlier filed his return in which the ITA Nos.352 - 357/Bang/2021 Page 21 of 30 aforesaid sum of Rs. 70,00,000 was not disclosed. The case of the assessee, as such, came squarely within the provision of section 271(1)(c) of the Income-tax Act. 5. The Assessing Officer passed an order of penalty, as indicated earlier, which was affirmed by the appellate authority. The Tribunal interfered with the order of the appellate authority on the basis of a judgment of the Appellate Tribunal, Mumbai, in the case of ITO (Central) v. Gope M. Rochalani [IT Appeal No. 7737 (Mum.) of 2011, dated 24-5-2013]. The aforesaid judgment, Mr. Khaitan submitted, has to be read in conjunction with clause (b) of Explanation 5A to section 271(1), which provides as follows : "(b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return ;" 6. The aforesaid clause, we are inclined to think, is not applicable to the case of the assessee for the simple reason that it is not the case of the assessee that he had not filed return for the assessment year 2008- 09. clause (b) quoted above, according to us, shall not apply to those cases where the assessee had filed a return but did not disclose the income, as in this case. His case shall be covered by clause (a), which provides as follows : "(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 ;" 7. The Tribunal, as such, fell into an error in proceeding on the basis that the assessee is entitled to get the benefit/immunity under clause (b) quoted above. The Tribunal also appears to have, for the purpose of interfering with the order of the appellate authority, relied upon its own judgment in the case of Ajit Kumar Surana v. Asstt. CIT [IT Appeal Nos. 835 & 836 (Kol.) of 2013, dated 19-6-2013] which, even Mr. Khaitan did not dispute, has no manner of application to the facts and circumstances of the instant case. In the case of Ajit Kumar Surana, there was no search and seizure. In the case before us there was, in fact, a search and seizure on February 3, 2009. During the search and seizure, the disclosure was made on February 3, 2009. During the search and seizure, the assessee made a statement which ITA Nos.352 - 357/Bang/2021 Page 22 of 30 was recorded by the officers of the Revenue. Stress was laid by the Tribunal on the expression "voluntary" but the Tribunal failed to understand that the meaning of the expression "voluntary" in the context is that the statement made by him was not extorted from him by applying force. It is in that sense a voluntary disclosure which has been clarified by the assessee by stating in answer to question No. 23 that he had not given any statement under pressure and he did not want to rectify or modify the statement made by him. 8. For the aforesaid reasons, we are of the opinion that the order of the Tribunal is unsustainable in law and, therefore, is set aside. The order of the appellate authority is, therefore, restored. 19. Considering the above facts of the case and also relying case laws, we confirm the order of the CIT(A). 20. In the result, appeals filed by the assessee in ITA Nos.352 to 355/Bang/2021 are dismissed. 356 to 357/Bang/2021 21. The issues involved in these 2 appeals are identical and arises under identical facts and circumstances. These appeals were heard together. We deem it convenient to pass a common order. For the sake of convenience we take up the order in ITA No.356/Bang/2021 and the decision in this appeal will apply mutatis mutandis in other appeal also. ITA Nos.352 - 357/Bang/2021 Page 23 of 30 22. The grounds raised in these two appeals are common except for the figures. Hence, the grounds raised in ITA No.356/Bang/2021 are reproduced as under:- 1. “The order of the learned Commissioner of Income Tax (Appeals) in so far as it is against the appellant are opposed to law, equity and weight of evidence, natural justice, facts and circumstances of the case. 2. The appellant denies itself liable to a penalty of Rs. 10,00,050/- under section 271AAB of the Act on the facts and circumstances of the case. 3. The authorities below failed to appreciate that the ingredients as envisaged in the provisions of section 271AAB of the Act was absent and there was no undisclosed income and consequently the order of penalty U/s 271AAB of the Act deserves to be cancelled on the facts and circumstances of the case. 4. The authorities below failed to appreciate the fact that the additional income offered by the appellant on an adhoc basis has been accepted by the AO, which does not constitute undisclosed income as per the scheme of the Act, on the facts and circumstances of the case. 5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 271AAB of the Act are not applicable on the facts and circumstances of the case. 6. The learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the income offered by the appellant was on account of buying peace with the department and the penalty ought not to have been levied on the facts and circumstances of the case. ITA Nos.352 - 357/Bang/2021 Page 24 of 30 7. Without prejudice, the penalty levied is highly excessive and is to be reduced substantially on the facts and circumstances of the case. 8. The appellant craves leave of this Hon’ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal at the time of hearing. 9. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.” Without prejudice, the penalty levied is highly excessive and is to be reduced substantially on the facts and circumstances of the case. 23. The assessee also filed additional grounds of appeal, which is as under:- 1. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the notice issued under section 271AAB of the Act is bad in law on the facts and circumstances of the case. 2. The authorities below failed to appreciate that the notice under section 271AAB could not be issued for the AY 2015-16, on a plain reading of the definition of "specified previous year" under section 271AAB of thq, Act, on the facts and circumstances of the case. 3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the levy of penalty is not automatic and that there is a discretionary power imbedded in the provisions of section 271AAB of the Act, not to levy penalty and the assessing officer ought to have exercised his discretion judiciously ITA Nos.352 - 357/Bang/2021 Page 25 of 30 7 and ought not to have imposed penalty in a mechanical manner, on the facts and circumstances of the case. 4. Without prejudice, the authorities below failed to appreciate that the returned income was accepted and there were no additions or disallowances in the order passed and hence no penalty could have been levied as proposed in the notice issued, on the facts and circumstances of the case. 5. The appellant craves leave of this Hon'ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing. 6. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity. . 24. The additional grounds are dealt in paragraphs 6 & 7 above, which are legal issue in nature. Accordingly, the same are admitted for adjudication. 25. Consequent upon a search conducted 20/5/2014 various incriminating documents and cash were found and seized. Accordingly, the assessee filed return of income electronically on 30/9/2015 declaring the income of Rs.1,83,850/- and other statutory notices were issued to the assessee. 26. The assessee group is operating two cold storage by the names M/s Sri Marulasiddeshwar Cold Storage Pvt. Ltd., and M/s RGP Cold ITA Nos.352 - 357/Bang/2021 Page 26 of 30 Storage Pvt. Ltd. During the course of search in the premises of assessee and its sister concern M/s R.G Patil & Co., excess stock of 117,136 bags of chillies and chilly seeds were found. In the return of income filed u/s 153A, the assessee has included the unexplained investment in excess stock of Rs.1,59,99,600/-. The AO observed that these amount has been declared by the assessee only consequent upon the search conducted by the Income-tax authorities. Accordingly, he completed the asst. and imposed penalty u/s 271AAB. The assessee did not file any appeal against the order of assessment. The AO initiated the penalty proceedings u/s 271AAB and passed order on 30/3/2017 by levying penalty u/s 271AAB(1)(a) of the Act @ 10% of undisclosed income of Rs.1,59,99,600/-. 27. Aggrieved from the order of the AO, the assessee filed appeal before the CIT(A), who confirmed the order of the AO. 28. Aggrieved from the order of the CIT(A), the assessee is in appeal before us. 29. The AR filed written submission which are as under:- 10. The penalty notice issued for AY 2015-16 was bad in law (ITA 356 —357/Bang/2o21) a. The appellant submits that the notices issued for AY 2015-16 in respect of the appellant at Hayed and Hubli in ITA no. 356 & 357/Bang/2021, is bad in law, for the reason that the notices under section 271AAB of the Act, ought to have been issued only for the AY 2014-15. ITA Nos.352 - 357/Bang/2021 Page 27 of 30 b. The appellant places reliance upon the definition of specified previous year as defined in section 271AAB of the Act, which is extracted for your Honours perusal and appreciation; (b) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 129 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; c. The appellant submits that the conditions prescribed for issue of notice is the previous year which has ended before the date of search, i. but the date of furnishing the return of income under subsection (i) of section 134 for such year has not expired before the date of search ii. and the assessee has not furnished the return of income for the previous year before the date of search iii. OR iv. in which search was conducted d. The above definition if applied to the present situation would require the revenue to issue the notice U/s 271AAB of the Act, for AY 2014-15, since on the date of search, i.e. 20/05/2014, the due date for filing return of the previous year had not expired, as specified under section 139(1) nor had the appellant filed its return of income. e. The appellant submits that the correct course of action for the revenue, would have been to issue a notice for AY 2014-15 alone and not AY 2015-16 f. Hence, the second limb of the section, being the year of search would not come into play and thus the notices issued for AY ITA Nos.352 - 357/Bang/2021 Page 28 of 30 2015-16, were without jurisdiction and were required to be quashed as being void ab initio. 30. In addition to the above, the assessee submitted that search was conducted on 20/5/2014 and the due date of filing of return was not expired as specified u/s 139(1) of the Act. The assessee filed return of income on 30/9/2015 within the due date, therefore, the penalty under this provision cannot be levied. 31. The ld.DR supported the order of the lower authorities. 32. After hearing both sides and perusing the entire materials on record and orders of the authorities below, we observe that the search was conducted on 20/5/2014 and on carefully reading of sec. 271AAB of the Act, it is clear that on the date of search, the due date of filing of the return was not expired, as specified in the provisions and the assessee has filed its return of income. Therefore, the penalty u/s 271AAB cannot be levied for this assessment year and the assessee has filed his return of income on 30/9/2015 after including the excess stock found. Therefore, the penalty u/s 271AAB cannot be levied. Thus, the penalty imposed u/s 271AAB is without jurisdiction, therefore, this appeal is allowed. 33. In the result, these 2 appeals of the assessee in ITA Nos.356 & 357/Bang/2021 are allowed. ITA Nos.352 - 357/Bang/2021 Page 29 of 30 34. In the combined result, the 4 appeals in ITA No.352 to 354/Bang/2021 are dismissed and 2 appeals in ITA No.356 and 357/Bang/2021 are allowed. Order pronounced in court on 31 st day of May, 2022 Sd/- Sd/- (GEORGE GEORGE K) (LAXMI PRASAD SAHU) Judicial Member Accountant Member Bangalore, Dated, 31 May, 2022 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore. ITA Nos.352 - 357/Bang/2021 Page 30 of 30 1. Date of Dictation .......................................... 2. Date on which the typed draft is placed before the dictating Member ......................... 3. Date on which the approved draft comes to Sr.P.S ................................... 4. Date on which the fair order is placed before the dictating Member .................... 5. Date on which the fair order comes back to the Sr. P.S. ....................... 6. Date of uploading the order on website................................... 7. If not uploaded, furnish the reason for doing so ................................ 8. Date on which the file goes to the Bench Clerk ....................... 9. Date on which order goes for Xerox & endorsement.......................................... 10. Date on which the file goes to the Head Clerk ......................... 11. The date on which the file goes to the Assistant Registrar for signature on the order ..................................... 12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order ............................... 13. Date of Despatch of Order. .....................................................