DINESH KHANNA, MUMBAI V. DCIT CEN CIR 39, MUMBAI

ITA 4205/MUM/2010

• Counselvise Citation: 420519914 RSA 2010
• Duration Of Justice: 5 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 20-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2010
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Search and seizure; Bonafide belief; Deemed to accrue or arise in india; Block assessment; Revised return; Reassessment proceedings
• Section: 153A; 147; 132; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA N O S . 4200 - 4205 / MUM/20 1 0 ( / ASSESSMENT YEAR S : 2001 - 02 TO 2006 - 07 ) SHRI DINESH KHANNA, 501/502, ASHOK HOUSE, GANDHIGRAM ROAD, JUHU, MUMBAI - 400053 VS. THE DCIT, CC - 39, MUMBAI - 20 ./ ./ PAN/GIR NO. : A A FPK 8037 Q ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI VIJAY MEHTA /REVENUE BY : SHRI LOVE KUMAR / DATE OF HEARING : 13 /0 5 / 2015 / DATE OF PRONOUNCEMENT 29/07 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEAL S FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A ) , MUMBAI , FOR THE ASSESSMENT YEAR S 2001 - 02 TO 2006 - 07 , IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE I.T.ACT . 2. COMMON GROUNDS HA VE BEEN TAKEN IN ALL THE YEARS UNDER CONSIDERATION, THEREFORE, ALL THE APPEALS ARE HEARD TOGETHER AND ARE NOW DISPOSE DOFF BY THIS CONSOLIDATED ORDER. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT A SEARCH AND SEIZURE OP ERATION WAS CONDUCTED U/S. 132 OF THE I.T.ACT AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE KHANNA GROUP ON 22 - 2 - 2007 . DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, ITA NO S . 4200 - 4205/10 2 DOCUMENTS WERE FOUND WHICH INDICATE THAT THE ASSESSEE WAS MAINTAINING THE ACCOUNT IN UK AND GERMANY. IT WAS FURTHER OBSERVED THAT NO RBI APPROVAL WAS TAKEN. FOR THE ASSESSMENT YEAR 2001 - 02 , ASSESSEE FILED RETURN OF INCOME U/S. 139(1) OF THE ACT DECLARING TOTAL INCOME OF RS. 18,82, 575/ - . AFTER SEARCH THE AO ISSUED NOTICE U/S. 153A , IN COMPLIAN CE TO WHICH RETURN WAS FILED ON 4 - 4 - 2008 AT INCOME OF RS. 20,01,047/ - . THE RETURN FILED U/S.153A OF THE ACT WAS REVISED BY THE ASSESSE E AGAIN ON 29 - 12 - 2008 DECLARING INCOME OF RS. 25,16,210/ - . THE ASSESSEE ALSO DECLARED INTEREST INCOME FROM FOREIGN BANK AMOU NTING TO RS. 1,18,472/ - IN THE ORIGINAL RETURN UNDER SECTION 153A FILED ON 6 - 2 - 2008. THE AO FURTHER OBSERVED THAT THE ASSESSEE IS A DIRECTOR OF THE COMPANY M/S NINESH HOSPITALITY SERVICES PVT. LTD. (NHSPL) . THE SAID COMPANY HAS RESIDENTIAL FLAT AT JUHU, MUM BAI. THE AO OBSERVED THAT NHSPL HAS GIVEN THE FLAT INCLUDING FURNITURE AND FIXTURE TO SHRI DINESH KHANNA. HOWEVER, WHILE COMPLETING ASSESSMENT OF NHSPL, IT WAS FOUND THAT THE COMPANY HAS NOT CHARGED PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION GIVEN TO THE ASSESSEE. THE ASSESSEE FILED REVISED RETURN U/S.153A ON 29 - 12 - 2008, WHEREIN PERQUISITE VALUE AS PER THE PROVISIONS OF SECTION 1 7 (II ) OF THE ACT WAS DECLARED AS ADDITIONAL INCOME. FURTHERMORE, ACTUAL EXPENSES INCURRED BY NHSPL TOWARDS ELECTRICITY EXPEN SES WERE ALSO DECLARED AS ADDITIONAL INCOME OF THE ASSESSEE. THE AO ALSO OBSERVED THAT ASSESSEE HAS NOT OFFERED INTEREST ON THE DEPOSITS HELD IN FOREIGN COUNTRY AMOUNTING TO RS. 1,18,471/ - . IT WAS SUBMITTED THAT ASSESSEE WAS NOT RECEIVING ANY REMUNERATION F ROM NHSPL, THEREFORE, THE ASSESSEE WAS UNDER GENUINE ITA NO S . 4200 - 4205/10 3 AND BONAFIDE BELIEF THAT NO INCOME ACCRUES TO HIM FROM NHSPL IN THE FORM OF PERQUISITE, THEREFORE, RETURN OF INCOME U/S.153A WAS FILED WITHOUT INCLUDING ANY VALUE OF PERQUISITE. AS SOON AS THE ASSESSEE R EALIZED THE DEEMED INCOME AS ACCRUED IN THE FORM OF PERQUISITE IN RESPECT OF RENT FREE ACCOMMODATION, THE ASSESSEE HAS OFFERED THE SAME BY WAY OF REVISED RETURN. THE AO DID NOT ACCEPT ASSESSEES CONTENTION AND LEVIED PENALTY WITH RESPECT TO THESE TWO ADDIT IONS U/S. 271(1)(C) . 3. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE PENALTY SO LEVIED. SIMILARLY PENALTY WAS ALSO LEVIED IN OTHER ASSESSMENT YEARS AND THE SAME WAS CONFIRMED BY CIT(A) . AGAINST TH ESE ORDER S OF CIT(A) , ASSESSEE IS IN FURTHER APPEAL S BEFOR E US. 4. IT WAS CONTENDED BY LD. AR THAT ASSESSEE HAD VOLUNTARILY FILED REVISED RETURN ADDING THE DEEMED INCOME ON ACCOUNT OF PERQUISITE VALUE OF RENT FREE ACCOMMODATION. HOWEVER, INTEREST INCOME IN RESPECT OF FOREIGN ACCOUNTS WAS ALSO OFFERED IN THE ORIGI NAL RETURN FILED U/S.153A. 5 . LD. AR RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF VRIJLAL T. GALA (HUF), ITA NO.1479/MUM/2009, ORDER DATED 23 - 4 - 2013, WHEREIN IT WAS HELD THAT THE PROVISIONS OF EXPLANATION - 5 TO SECTION 271(1)(C) CONTEMPLATES A SITUATION WHERE IN THE CASES OF SEARCH CONCEALMENT PENALTY CANNOT BE LEVIED WITH REFERENCE TO A RETURN FURNISHED BEFORE THE DATE OF SEARCH. EXPLANATION - 5 TO SECTION 271(1)(C) IS REPRODUCED BELOW: EXPLANATION 5. - WHERE IN THE COURSE OF A {SEARCH INITIATED UNDER SECTION 132 BEFORE THE 1 ST DAY OF JUNE, 2007], THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PART) HIS INCOME, -- ITA NO S . 4200 - 4205/10 4 (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH, BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE OR, WHERE SUCH RETURN HAS BEEN FURNISHED BEFORE THE SAID DATE, SUCH INCOME HAS NOT BEEN DECLARED THEREIN ; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB - SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, [UNLESS, -- (1) SUCH INCOME IS, OR THE TRANSACTIONS RESULTING IN SUCH INCOME ARE RECORDED, -- (I) IN A CASE FALLING UNDER CLAUSE (A), BEFORE THE DATE OF THE SEA RCH ; AND (II) IN A CASE FALLING UNDER CLAUSE (B), ON OR BEFORE SUCH DATE, IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE [CHIEF COMMISSIONER OR COMMISSIONER] BEFORE THE SAID DATE ; OR (2) HE, IN THE COURSE OF THE SEARCH, MAKES A STATEMENT UNDER SUB - SECTION (4) OF SECTION 132 THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING 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 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 THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME.]' A PERUSAL OF THE ABOVE PROVISION WILL REVEAL THAT IN A CASE WHERE SEARCH IS INITIATED BEFORE FI RST DAY OF JUNE 2007 AND ASSESSEE IS FOUND TO BE OWNER OF ANY (I) MONEY (II) BULLION (III) JEWELLERY OR (IV) OTHER VALUABLE ARTICLE OR THINGS (THESE HAVE BEEN REFERRED AS 'ASSETS') AND ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING WHOLLY OR PARTLY HIS INCOME FOR ANY PREVIOUS YEAR WHICH EITHER HAS ENTERED BEFORE THE DATE OF THE SEARCH AND RETURN HAS NOT BEEN FURNISHED TILL THE DATE OF THE SEARCH OR IF RETURN IS FURNISHED BEFORE THE DATE OF THE SEARCH SAID INCOME IS NOT DECLARED IN T HE RETURN. IN SUCH CASES EVEN IF THE SAID INCOME IS DECLARED IN THE RETURN FILED AFTER THE DATE OF SEARCH THEN ALSO THE ASSESSEE SHALL BE DEEMED TO HAVE CONCEALED PARTICULARS OF HIS INCOME IN RESPECT OF THAT ASSETS SAVE AS PROVIDED THAT SUCH INCOME OR THE TRANSACTIONS RESULTING IN SUCH INCOME ARE RECORDED IN THE BOOKS OF ACCOUNTS, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS DISCLOSED TO THE CHIEF COMMISSIONER/COMMISSIONER BEFORE THE DATE OF SEARCH. 10.5 THUS A POSITION HAS BEEN EN VISAGED IN THIS EXPLANATION WHERE CONCEALMENT PENALTY IS IMPOSSIBLE NOTWITHSTANDING THE FACT THAT ASSESSEE HAS DECLARED THE INCOME IN THE RETURN FILED BY HIM ON OR AFTER THE DATE OF SEARCH WITH RESPECT TO AFOREMENTIONED FOUR ASSETS. EVEN LEVY OF PENALTY IN SUCH A SITUATION IS SAVED BY THE PROVISIONS OF CLAUSES (1) & (2) OF EXPLANATION - 5 AS INCOME RELATING TO SUCH 'ASSETS' OR 'TRANSACTIONS' IF RECORDED IN THE CASE FALLING UNDER CLAUSE(A) ON OR BEFORE THE DATE OF ITA NO S . 4200 - 4205/10 5 SEARCH AND IN CASE CLAUSE (B) ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY THE ASSESSEE AND IN A CASE WHERE HE MAKES A STATEMENT UNDER SECTION 132(4) OF THE ACT THAT IN SUCH ASSETS FOUND IN HIS CONTROL HAS BEEN ACQU IRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN THE RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB - SECTION (1) OF SECTION 139 AND ALSO SPECIFIES IN THE STATEMEN T THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. THEREFORE, IN THE CASE OF THE ASSESSEE EXPLANATION - 5 IS THE ONLY ENABLING PROVISION WHICH CAN DISCARD THE ACTION OF THE ASSESSEE TO I NCLUDE THE INCOME WHICH IS SUBJECT TO CONCEALMENT PENALTY IN THE RETURN FILED AFTER THE DATE OF SEARCH. IF THE CASE OF THE ASSESSEE FALLS WITHIN THE MISCHIEF OF EXPLANATION - 5 THEN ONLY THE DEPARTMENT CAN LINK THE LEVY OF CONCEALMENT PENALTY TO THE ACTION O F THE ASSESSEE FOR NOT DISCLOSING THE INCOME IN THE RETURN FILED U/S 139 OF THE ACT. ACCORDING TO THE FACTS OF THE CASE PROVISIONS OF EXPLANATION 5 CANNOT BE SAID TO BE APPLICABLE AS THE ASSESSEE HAS NOT BEEN FOUND TO BE OWNER OF ANY OF ASSET MENTIONED IN THE EXPLANATION. WHAT WAS FOUND WITH THE ASSESSEE WAS HIS CAPITAL ACCOUNT WHICH DOES NOT FALL WITHIN ANY CATEGORY OF THE FOUR ASSETS MENTIONED IN THE EXPLANATION WHICH ACCORDING TO WELL ESTABLISHED PRINCIPLES OF LAW IS TO BE STRICTLY CONSTRUED . 7. FROM TH E ORDER OF THE AO WE ALSO FOUND THAT IT IS NOT THE CASE OF AO THAT ASSESSEE FALLS WITHIN THE MISCHIEF OF EXPLANATION 5 AS THE SAID EXPLANATION HAS NOT BEEN INVOKED BY THE AO. SIMILARLY, THE CIT(A) HAS ALSO DID NOT REST HIS DECISION FOR THE SUSTAINING THE P ENALTY ON THE BASIS OF EXPLANATION 5. THE EXPLANATION 5 BEING DEEMED PROVISION IS TO BE CONSTRUCTED STRICTLY. IN THE CASE OF SHRI PREM ARORA VS. DCIT, 149 TTJ (DEL) 590, THE DELHI ITAT HAS RELIED UPON THE CASE OF DELHI HIGH COURT IN THE CASE OF M/S.S.A.S P HARMACEUTICALS, 244 CTR (DEL) 51. FOLLOWING OBSERVATIONS OF DELHI HIGH COURT ARE REPRODUCED BELOW: '15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE HAS TO BE IN THE INC OME TAX RETURN FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS COURT IN THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI - I VS. MOHAN DAS HASSA NAND , 141 ITR 203 IN RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), THE SUPREME COURT HAS CLINCHED THIS ASPECT, VIZ. THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE INCOME TAX RETURN FILED BY THE ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLANATION 4 AS WELL AS 5 AND 5A OF SECTION 271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT. 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING THE SURVEY. THIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FORM OF AMOUNT SURRENDERED BY THE ASSESSEE. PRESENTLY WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS TO WHETHER THIS WOULD ATTRACT PENALTY UPON THE ASSESSEE UNDER PROVISIONS OF SECTION 271(1)(C) OF THE ACT. OBVIOUSLY, NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING THE SURVEY, MAY BE, IT WOULD HAVE NOT ITA NO S . 4200 - 4205/10 6 DISCLOSE D THE INCOME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY ON SURMISES, ON CONJECTURES AND POSSIBILITIES. SECTION 271(1)(C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON - DISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. THERE IS NO CONCEALMENT OR NO - DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN THE INCOME TAX RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSE OF TAX.' 8. AS IT CAN BE SEEN FROM THE ABOVE OBSERVATION THAT THEIR LORDSHIP HAVE HELD THAT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE HAS TO BE TRACED IN THE INCOME TAX RETUR N FILED BY IT. THE ASSESSEE CAN FURNISH PARTICULARS OF INCOME IN IS RETURN AND EVERYTHING WOULD DEPEND ON THE INCOME TAX RETURN FILED BY THE ASSESSEE AND SUCH VIEW HAS BEEN ADOPTED BY HON'BLE HIGH COURT ON THE BASIS OF EXPLANATION - 4 ,5 & 5A OF UNDER SECTIO N 271(1)(C) OF THE ACT. IT WAS FURTHER OBSERVED THAT THE DISCREPANCIES WERE FOUND DURING THE COURSE OF SURVEY, ACCORDING TO WHICH SURRENDER WAS MADE BY THE ASSESSEE. THE QUESTION INVOLVED IS NOT RELATING TO QUANTUM OF ASSESSABLE INCOME BUT FOR LEVY OF PENA LTY. IT WAS OBSERVED THAT PENALTY CANNOT BE IMPOSED UNLESS THE CONDITION STIPULATED IN THE PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING THE SURVEY MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SUR VEY. HOWEVER, THERE CANNOT BE ANY PENALTY ON SURMISES, ON CONJECTURES AND POSSIBILITIES. SECTION 271(1)(C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. THERE WAS NO SUCH CONCEALMENT OR UNDISCLOSURE AS THE ASS ESSEE HAD MADE A COMPLETE DISCLOSURE IN THE INCOME TAX RETURN AND OFFERED TO SURRENDERED AMOUNT FOR THE PURPOSE OF TAX. 9. IF AFOREMENTIONED DECISION OF HON'BLE DELHI HIGH COURT IS APPLIED TO THE FACTS OF PRESENT CASE THEN ACCORDING TO STRICT INTERPRETATI ON OF EXPLANATION - 5 IT CANNOT BE SAID THAT ASSESSEE WAS FOUND OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHAT HAS BEEN MADE BASIS IS ENTRY IN THE CAPITAL ACCOUNT OF THE ASSESSEE WHICH WAS ALREADY PART OF THE ACCOUNTS MAINT AINED BY THE ASSESSEE. THEREFORE, EVEN ACCORDING TO THE PROVISIONS OF EXPLANATION - 5 CONCEALMENT PENALTY CANNOT BE LINKED TO THE RETURN FILED BY THE ASSESSEE UNDER SECTION 139 . 6 . LD. AR ALSO RELIED ON D ECISION OF T HE ITAT DELHI BENCH IN THE CASE OF PREM ARORA, 149 TTJ (DEL) 590, HELD AS UNDER : - '10. ON BARE READING OF SEC. 153A IT IS SEEN THAT THIS SECTION STARTS WITH A NON - OBSTANTE CLAUSE RELATING TO NORMAL ASSESSMENT PROCEDURE COVERED BY SECTIONS 139 , 147 , 148 , 149 , 151 AND 153 IN RESPECT OF SEARCHES MADE AFTER 31ST MAY, 2003. THE SECTIONS, SO EXCLUDED, RELATE TO FILING OF RETURN, ASSESSMENT AND RE - ASSESSMENT PROCEEDINGS. FURTHER SECTION 153A INTENDS TO ASSESS OR REASSESS TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. THUS THE LE GISLATIVE INTENTION IS NOT TO ASSESS ESCAPED INCOME AS IN SECTION 147 OR UNDISCLOSED INCOME AS WAS ASSESSED U/S. 158BC OF THE ACT. THE FIRST PROVISO TO SEC.153A MAKES IT CLEAR, THAT NOTICE UNDER SECTION 153A WILL BE FOR EACH SUCH SIX ASSESSMENT YEARS FOR ASSESSMENT OR RE - ASSESSMENT OF ITA NO S . 4200 - 4205/10 7 TOTAL INCOME. SECOND PROVISO TO SECTION 153A PROVIDES THAT SUCH NOTIC E WILL HAVE THE EFFECT OF ABATING ALL THE PENDING ASSESSMENT OR RE - ASSESSMENT PROCEEDINGS, SO AS TO AVOID MULTIPLICITY OF PROCEEDINGS, WHICH WAS A FEATURE OF BLOCK ASSESSMENT. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT (CENTRAL), KANPUR V. SHAILA AGAR WAL (2011) 16 TAXMANN.COM 232(ALL) HAS HELD THAT THE WORD 'ABATEMENT' IS REFERABLE TO SOMETHING, WHICH IS PENDING ALIVE, OR IS SUBJECT TO DEDUCTION. THE ABATEMENT REFERS TO SUSPENSION OR TERMINATION OF THE PROCEEDINGS EITHER OF THE MAIN ACTION, OR THE PROC EEDINGS ANCILLARY OR COLLATERAL TO IT. THE WORD IS COMMONLY USED IN THE LEGISLATIONS, WHICH PROVIDE FOR ABATEMENT OF ACTION/SUIT; ABATEMENT OF LEGACIES; ABATEMENT OF NUISANCE; AND ALL ACTIONS FOR SUCH NATURE, WHICH HAVE THE PENDENCY OR CONTINUANCE. THE PRO CEEDINGS, WHICH HAVE ALREADY TERMINATED ARE NOT LIABLE FOR ABATEMENT UNLESS STATUTE EXPRESSLY PROVIDES FOR SUCH CONSEQUENCE THEREOF. THE WORD 'PENDING' OCCURRING IN THE SECOND PROVISO TO SECTION 153A OF T HE ACT, IS ALSO SIGNIFICANT. IT IS QUALIFIED BY THE WORDS ' ON THE DATE OF INITIATION OF THE SEARCH', AND MAKES IT ABUNDANTLY CLEAR THAT ONLY SUCH ASSESSMENT OR REASSESSMENT PROCEEDINGS ARE LIABLE TO ABATE. THE PENDENCY OF AN APPEAL IN THE TRIBUNAL AGAINST THE ORDER OF ASSESSMENT AGAINST WHICH AN APPEAL HAS BEEN DECIDED BY COMMISSIONER (APPEALS) IS NOT A CONTINUATION OF THE PROCEEDINGS OF ASSESSMENT. 11. THUS WHILE SECTION 153A PRESCRIBES FOR ASSESSMENT O R REASSESSMENT OF TOTAL INCOME IN SEARCH CASES, SECTION 153B PRESCRIBES THE TIME LIMIT FOR COMPLETION OF ASSESSMENT UNDER SEC. 153A. SECTION 153C RELATES TO THE CASES WHERE BOOKS OF ACCOUNTS OR DOCUMENTS OR ASSETS SEIZED UNDER SEC. 132 OR REQUISITION MADE UNDER SEC. 132A BELONG TO A PERSON OTHER THAN A PERSON IN WHOSE CASE SEARCH UNDER SEC. 132 OR REQUISITION UNDER SEC. 132A WAS MADE. THUS PROVISIONS OF SECTIONS 153A , 153B AND 153C ARE COMPLETE CODE FOR SEARCH ASSESSMENT WHEREIN SEARCH HAS BEEN INITIATED AFTER 31ST MAY, 2003. THE EXISTENCE OF THE WORDS ' ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION' IN EXPLANATION (I) OF SECTION 153A MAKES IT CLEAR THAT IN SEARCH ASSESSMENTS, AMONGST OTHERS THE PROVISIONS RELATING TO PENALTY AND PROSECUTION WILL ALSO BE APPLICABLE. HOWEVER, WHEN NORMAL ASSESSMENT PROCEDURE COVERED BY SECTION 139 , 147 , 148 , 149 , 151 AND 153 HA S BEEN COMPLETELY EXCLUDED BY OPERATION OF NON - OBSTANTE CLAUSE 'NOTWITHSTANDING ANYTHING CONTAINED' THE SEARCH ASSESSMENT MADE U/S. 153 A OF THE ACT CANNOT BE TREATED AS CONTINUANCE OF NORMAL ASSESSMENT P ROCEEDINGS WHETHER ABATED OR NOT. THUS THERE IS COMPLETE DETACHMENT OF ASSESSMENT PROCEEDINGS U/S. 143 OR 147 FROM EACH PROCEEDINGS U/S. 153 A OF THE ACT . WHEN SCHEME OF SEARCH ASSESSMENT AS DESIGNED BY T HE LEGISLATURE DOES NOT PRESCRIBE TO TAKE INTO ACCOUNT THE EARLIER ASSESSMENT PROCEEDINGS WHETHER ABATED OR NOT, IT WILL NOT BE PROPER OR JUSTIFIED TO REFER TO RETURNED INCOME U/S. 139 FOR THE PURPOSE IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT. IT FOL LOWS THAT THE CONCEALMENT OF INCOME HAS TO BE SEEN WITH REFERENCE TO ADDITIONAL INCOME BROUGHT TO TAX OVER AND ABOVE RETURNED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED U/S. 153 A OF THE ACT . ACCORDINGL Y, IN OUR CONSIDERED OPINION FOR THE PURPOSE OF IMPOSITION OF PENALTY U/S. 271 (1)(C) RESULTING AS A RESULT OF SEARCH ASSESSMENTS MADE U/S. 153 A , THE ORIGINAL RETURN OF INCOME FILED U/S. 139 CANNOT BE CONSIDERED.' ITA NO S . 4200 - 4205/10 8 WHERE RETURNED INCOME DISCLOSED IN THE RE TURN FILED UNDER S.153A IS ACCEPTED BY THE AO, THERE IS NO CONCEALMENT AND CONSEQUENTLY PENALTY UNDER S. 271(1)(C) IS NOT LEVIABLE; THERE WAS NO PROVISION RELATING TO ENTRIES IN EXPLN.5 PRIOR TO INSERTION OF EXPLN. 5A IN S.271(1) W.E.F.1 ST JUNE, 2007 AND THEREFORE, PENALTY UNDER S.271(1)(C) CANNOT BE IMPOSED EVEN BY INVOKING EXPLN.5 IN ASST. YR. 2004 - 05 IN RESPECT OF THE UNACCOUNTED CASH FOUND DURING THE SEARCH ON 22 ND NOV., 2006 MERELY ON THE PRESUMPTION THAT THE ASSESSEE MIGHT HAVE BEEN IN POSSESSION OF SUCH CASH THROUGHOUT THE PERIOD COVERED BY THE SEARCH ASSESSMENTS. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND CONTENDED THAT PERQUISITE VALUE OF RENT FREE ACCOMMODATION WAS NOT OFFERED BY THE ASSESSEE IN THE RETURN FILED U/ S.153A 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS , CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT ASSESSEE HAS OPENED ACCOUNT IN FOREIGN BANKS DURING THE YEAR 1969 - 1977 WHEN ASSESSEE WAS A NON - RESIDENT INDIAN(NRI). H IS EARNING WHILE AS AN NRI WAS DEPOSITED IN THOSE ACCOUNTS. THEREAFTER IN THE YEAR 1977, ASSESSEE RETURNED BACK TO INDIA AND WAS INTENDED TO GO BACK FOR OVERSEAS. HOWEVER, DUE TO FAMILY COMPULSIONS, ASSESSEE HAS TO STAY BACK IN INDIA. DURING THIS PERIOD, I NADVERTENTLY THE FOREIGN BANKS ACCOUNTS CONTINUED TO REMAIN OPERATIONAL WITH THE OLD CREDIT BALANCES. THE INTEREST GOT ACCRUED IN THESE ACCOUNTS. HOWEVER, THERE WAS NO OTHER DEPOSITS AND WITHDRAWALS FROM THOSE BANKS EXCEPT THE INTEREST ACCRUED THEREON. AS SESSEE WAS UNDER GENUINE BELIEF THAT OVERSEAS BANK ACCOUNT OPENED DURING THE NRI PERIOD COULD REMAIN TO BE OPERATIONAL AND THAT INTEREST EARNED THEREON SHALL HAVE TO BE OFFERED TO TAXATION ONLY ON REMITTANCE OF SUCH AMOUNTS IN INDIA. HOWEVER, AFTER SEARCH AND SEIZURE OPERATION, THE INTEREST EARNED ON FOREIGN BANK ACCOUNT WAS OFFERED FOR TAXATION IN THE RETURN OF INCOME FILED U/S.153A. SIMILARLY IN RESPECT OF PROPERTY OWNED BY THE NHS P L, THE ITA NO S . 4200 - 4205/10 9 ASSESSEE WAS GIVEN PART OF THIS PROPERTY FOR RESIDENCE. SINCE THE A SSESSEE WAS NO RECEIVING ANY REMUNERATION FROM NHSPL , THE NHSPL UNDER A GENUINE AND BONAFIDE BELIEF THAT THERE WOULD BE NIL PERQUISITE VALUE ON RENT FREE ACCOMMODATION BECAUSE VALUE OF PERQUISITE IS BASED ON PER CENTAGE OF REMUNERATION PAID AND SINCE NO REM UNERATION WAS PAID, THE PERQUISITE VALUE WAS NIL. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT NO INCOME ACCRUED TO THE ASSESSEE, THEREFORE, RETURN OF INCOME U/S.153A WAS FILED WITHOUT ANY PERQUISITE VALUE IN RESPECT OF RENT FREE ACCOMMODATION. HOWEVER, T HE ASSESSEE SUO MOTU REVISED THE RETURN OF INCOME FILED IN RESPONS E TO NOTICE U/S.153A AND DISCLOSED THE INCOME FROM PERQUISITE IN THE RETURN OF INCOME. THE RETURN OF INCOME SO FILED WAS ACCEPTED BY THE DEPARTMENT. THE EXPLANATION OFFERED BY THE ASSESSEE W AS BONAFIDE AND ALL FACTS RELATING TO THE INCOME WAS FULLY DISCLOSED TO THE DEPARTMENT. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, NO PENALTY IS IMPOSABLE AS PER VERDICT OF HON BLE SUPREME COURT IN THE CASE OF SURESH CHANDRA MITTAL, (2001) 251 I TR 9 (SC). 9 . I N THE CASE OF PREM ARORA VS. DCIT (SUPRA), IN ALMOST SIMILAR CIRCUMSTANCES ON ANALYSIS OF SECTION 153A HAS HELD THAT CONCEALMENT INCOME IS TO BE SEEN WITH REFERENCE TO ADDITIONAL INCOME BR OUGHT TO TAX OVER AND ABOVE RETURNED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED UNDER SECTION 153A OF THE ACT AND RETURN FILED UNDER SECTION 139 CANNO T BE CONSIDERED. 10. IN THE INSTANT CASES BEFORE US, PENALTY HAS BEEN LEVIED BY THE AO WITH REFERENCE TO THE INCOME WHICH HAVE ALREADY BEEN DISCLOSED BY THE ITA NO S . 4200 - 4205/10 10 ASSESSEE EITHER IN THE ORIGINAL RETURN FILED U/S.153A OR IN THE REVISED RETURN FILED U/S.153A, WHI CH HAVE BEEN ACCEPTED BY THE AO. ACCORDINGLY, NO PENALTY CAN BE LEVIED FOR SUCH INCOME. 1 1 . IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY MERIT FOR IMPOSING PENALTY U/S. 271(1)(C) OF THE ACT IN ALL THE YEARS UNDER CONSIDERATION. 1 2 . IN THE RESULT, A LL APPEALS OF THE ASSESSEE ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 29/07 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 29/07 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / T HE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//