Shri. Gopal B. Sarda, Nagpur V. Assistant Commissioner of Income Tax- Central Circle1(3), Nagpur

ITA 65/NAG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3131 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Search and seizure
• Section: 153A; 32; 27; 132

Judgement Text

1 ITA NOS. 65, 66 & 67/NAG/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NOS. 65, 66 & 67/NAG/2012 ASSESSMENT YEAR : 2005 - 06, 2006 - 07 & 2007 - 08. SHRI GOPAL B. SARDA, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CENTRAL CIRCLE - 1(3), NAGPUR. PAN AENPS2466K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.J. THAKAR. RESPONDENT : SHRI NARENDRA KANE. DATE OF HEARING : 14 - 01 - 2016 DATE OF PRONOUNCEMENT : 5 TH FEBRUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THESE ARE THREE APPEALS FILED BY THE ASSESSEE ARISING FROM THE SEPARATE ORDERS OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 28 - 11 - 2011. THE APPELLANT HAS CHALLENGED THE CONFIRMATION OF PENALTY LEVIED U/S 271(1)(C) BY RAISING IDENTICALLY WORDED GROUNDS AS REPRODUCED BELOW FROM ASSESSMENT YEAR 2005 - 06: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE THERETO AND PROPER INTERPRETATION OF PROVISIONS OF SECTION 271(1)(C) AND EXPLANATION 5 AND MATERIAL ON RECORD LEARNED CIT(A) ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) OF THE ACT. 2. THE ORDER CONFIRMING THE PENALTY U/S 271(1)(C) IS CONTRARY TO FACTS, MATERIAL ON RECORD AND LAW APPLICABLE THERETO AND HENCE PENALTY IS LIABLE TO BE CANCELLED. 2. FACTS IN BRIEF AS EMERGED FROM THE ASSESSMENT ORDER PASSED U/S 153A DATED 31 - 12 - 2008 AND THE PENALTY ORDER U/S 271(1)(C) DATED 22 - 06 - 2009 OF ASSESSMENT YEAR 2005 - 06 WERE THA T A SEARCH U/S 132 WAS CARRIED OUT ON 19 - 09 - 2 ITA NOS. 65, 66 & 67/NAG/2012 2006. AS PER THE ASSESSMENT ORDER THE ASSESSEE HAD FILED INCOME - TAX RETURN AT RS.4,71,983/ - IN WHICH THE ASSESSEE HAD INCLUDED AN AMOUNT OF RS.2,75,000/ - WHICH WAS SURRENDERED AT THE TIME OF SEARCH ACTION. IT HAS ALSO BEEN NOTED BY THE AO THAT EARLIER THE ASSESSEE HAD FILED A ORIGINAL INCOME - TAX RETURN ON 29 - 10 - 2005 DECLARING AN INCOME OF RS.1,96,983/ - . ALL THESE FIGURES ARE REFERRED FROM THE IMPUGNED ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 2005 - 06. FINALLY TH E ASSESSMENT WAS COMPLETED ON THE TOTAL INCOME OF RS.5,21,983/ - WHEREIN A SUM OF RS.50,000/ - ON LUMPSUM BASIS WAS TAXED ON THE PRESUMPTION THAT IN THE ABSENCE OF BOOKS OF ACCOUNTS OF DIAMOND BUSINESS THE EXPENDITURE COULD NOT BE VERIFIABLE. HENCE THERE WA S A POSSIBILITY OF UNACCOUNTED INCOME WHICH WAS ESTIMATED AT RS.50,000/ - . DURING PENALTY PROCEEDINGS IT WAS PLEADED THAT THE AMOUNT WHICH WAS SURRENDERED WAS DULY OFFERED AND TAX WAS PAID. HENCE NO PENALTY WAS REQUIRED TO BE LEVIED U/S 271(1)(C) OF I.T. A CT. IN SUPPORT, FEW CASE LAWS HAVE ALSO BEEN CITED. HOWEVER, THE AO HAS HELD THAT THE IMPUGNED AMOUNT W A S NOT OFFERED VOLUNTARILY BUT ONLY WHEN SEARCH WAS CONDUCTED , H ENCE THE ASSESSEE SHOULD BE PENALIZED FOR CONCEALMENT OF INCOME. 3. EVEN LEARNED CIT(AP PEALS) WAS OF THE VIEW THAT ONLY AFTER THE SEARCH THE AMOUNT WAS SURRENDERED , H ENCE PENALTY WAS RIGHTLY IMPOSED. THE OBSERVATION OF THE LEARNED CIT(APPEALS) IS REPRODUCED BELOW : IT IS SEEN THAT IN THE ASSESSEES CASE THE CONDITIONS CONTEMPLATED IN THE PROVISIONS ARE NOT FULFILLED. IT IS NOT POINTED OUT THAT IN THE STATEMENT U/S 132(4) MADE BY ASSESSEES FATHER SHRI BANWARLAL SARDA ANY AMOUNT HAS SPECIFICALLY BEEN DISCLOSED FOR A.Y. 2005 - 06 IN THE APPELLANTS CASE AND THE MODE OF EARNING SUCH INCOME HAS BEEN DISCLOSED. THE A.Y. IN QUESTION IS 2005 - 06. THE TIME FOR FURNISHING OF ROL U/S 139(1) HAS ALREADY EXPIRED AND SUCH TIME IS NOT AVAILABLE TO THE ASSESSEE. FURTHER, THE ORIGINAL ROL OF INCOME FURNISHED FOR A.Y. 2005 - 06 DE CLARING INCOME OF R. 1,96,983/ - . THEREFORE, THE LUMP SUM DECLARATION U/S 132(4) DOES NOT CONFER ASSESSEE IMMUNITY FROM PENALTY. FURTHER THE OBSERVATION OF THE AO, THAT BUT FOR THE FACT THAT A SEARCH AND SEIZURE OPERATION HAS BEEN CONDUCTED NO SURRENDER OF INCOME WOULD HAVE BEEN MADE IS CORRECT AND 3 ITA NOS. 65, 66 & 67/NAG/2012 RELEVANT. I THEREFORE AM OF THE CONSIDERED VIEW THAT PENALTY U/S 271(1)(C) IS REQUIRED TO BE LEVIED. THE ORDER OF THE AO IS UPHELD. 4. IN THE LIGHT OF THE ABOVE FACTUAL BACKGROUND WE HAVE HEARD BOTH THE SIDES. AT THE OUTSET WE HAVE BEEN INFORMED THAT ON IDENTICAL FACTS AND CIRCUMSTANCES THE ITAT, NAGPUR BENCH IN THE GROUP CASES OF THIS ASSESSEE VIDE AN ORDER DATED 12 - 09 - 2014 HAS DIRECTED TO DELETE THE CONCEALMENT INCOME AFTER FOLLOWING THE DECISION OF SDV CHANDRU 266 ITR 175 (MAD.) AND A LSO A DECISION OF DCIT VS. PURNANDU JAIN (ITA NO. 1679/MUM/2012). THE DECISION CITED BEFORE US PASSED BY ITAT, NAGPUR BENCH WAS PRONOUNCED IN THE CASE OF RADHESHYAM SARDA (AT SR.NO.1) IN ITA NO. 119/NAG/2011 ASSESSMENT YEAR 2006 - 07, ORDER DATED 12 - 09 - 2014, RELEVANT PORTION IS REPRODUCED BELOW : 8. THE AR ALSO RELIED ON THE DECISION OF CIT VS SDV CHANDRU REPORTED IN 266 ITR 175 (MAD), WHEREIN IT WAS HELD, WHILE CLS (A)(B) OF EXPLN 5 TO S. 271(1)(C) M A KE A CLEAR DISTINCTION BETWEEN THE PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DUE DATE OF THE SEARCH, AND THE PREVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH, PARA (2) IN EXPLN. 5 DOES NOT MAKE ANY SUCH DISTINCTION. IT REFERS TO THE STATEMENT GIVEN BY THE ASSESSEE AT T HE TIME OF THE SEARCH UNDER S. 132(4) WITH REGARD TO THE ASSETS FOUND AT THE TIME O F SEARCH BEING STATEMENT TO THE EFFECT THAT SUCH ASSETS HAVE BEEN ACQUIRED OUT OF HIS UNDISCLOSED INCOME AND THE SPECIFICATION BY THE ASSESSEE IN SUCH STATEMENT WITH REGA RD TO THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED, AND THE SUBSEQUENT PAYMENT BY THE ASSESSEE OF THE TAX ON SUCH UNDISCLOSED INCOME TOGETHER WITH INTEREST. THE WORDS IN PARA (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 JAR NOT DISCLOSED IN RESPECT OF THE PREVIOUS YEAR WHICH IS TO END AFTER DATE OF THE SEARCH THE WORDS USED ARE 'INCOME WHICH HAS NOT BEEN SO FAR DISCLOSED IN HIS RETURN O F INCOME'. THE ADDITIONAL WORDS WHICH RE FER TO THE TIME SPECIFIED IN S. 139(1) 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 HAVE ENDED PRIOR TO THE DATE O F THE SEARCH AND, IN THE STATEMENT GIVEN UNDER S. 132(4), THE ASSESSEE ADMITS THE RECEIPT OF UNDISCLOSED INCOME FOR THOSE YEAR AND ALSO SPECIFIES THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED, AND THEREAFTER, PAYS THE TAX ON THAT UNDISCLOSED INCOME WITH INTEREST, SUCH UNDISCLOSED INCOME WOULD GET IMMUNIZED FROM THE LEVY OF PENALTY. THE TRIBU NAL, THEREFORE, WAS RIGHT IN HOLDING THAT THE PENALTY WAS NOT LEVIABLE'. 9. IN THE DECISION OF THE CIT VS. KANHAIYALAL, REPORTED IN 299 ITR 19 (GUJ), WAS HELD, ' IMMUNITY UNDER EXPLN . 5 O F S . 27 1 ( 1)( C ) I S NOT TAKEN AWAY FOR THE S I M P L E REASON TH A T INCOME D I S CL OSED BY ASSE S SE E IN HI S S T ATEM E N T UN D ER S . 1 32 (4) F OR A PART IC ULAR YEAR WAS SPREAD O V ER I N T H E R E T U RN S 4 ITA NOS. 65, 66 & 67/NAG/2012 OF SE V ER A L Y E AR S , MORE SO , WHEN A O HAD ALSO MADE ASSESSMENT I N A S SESSMENT YEARS A S RE TURNED BY ASSESSEE, THOUGH AFTER MAKING SOME QUANTUM RESHUFFLING ' . 1 0. IN THE DECISION OF ACIT VS GEBILAL KANHAIALAL HUF, REPORTED IN 348 ITR 561 (SC), IT WAS HELD, EXPLANATION 5, IS DEEMING PROVISION WHICH PROVIDES, IN COURSE OF SEARCH U/S 132, ASSESSEE IS FOUND TO BE O WNER OF UNACCOUNTED ASSETS AND ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING, WHOLLY OR PARTLY, HIS INCOME FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE DATE OF SEARCH OR WHICH IS TO END ON OR AFTER THE DATE OF SEARCH, THEN, IN SUCH A SI TUATION, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER DATE OF SEARCH, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME FOR THE PURPOSES OF IMPOSITION OF PENALTY U/S 271(1)(C). ONLY EXCE PTIONS TO SUCH A DEEMING PROVISION OR TO SUCH A PRESUMPTION OF CONCEALMENT ARE GIVEN IN SUB - CLAUSES (1) AND (2) OF EXPLANATION 5. THREE CONDITIONS HAVE GOT TO BE SATISFIED BY ASSESSEE, FOR CLAIMING IMMUNITY FROM PAYMENT NOF PENALTY UNDER CL. (2) TO EXPL. 5 OF S. 271(1)(C), I.E. CONDITION NO. 1 , ASSESSEE MUST MAKE A STATEMENT U/S 132(4) IN COURSE OF SEARCH STATING THAT UNACCOUNTED ASSETS AND INCRIMINATING DOCUMENTS FOUND FROM HIS POSSESSION DURING THE SEARCH HAVE BEEN ACQUIRED OUT OF HIS INCOME, WHICH HAS NO T BEEN DISCLOSED IN RETURN OF INCOME TO BE FURNISHED BEFORE EXPIRY OF TIME SPECIFIED IN S. 139(1) SUCH STATEMENT WAS MADE BY KARTA DURING SEARCH WHICH CONCLUDED ON AUGUST 1, 1987. CONDITION NO. 1 WAS FULFILLED. CONDITION NO. 2. ASSESSEE SHOULD SPECIFY, IN HIS STATEMENT U/S 132(4), MANNER IN WHICH SUCH INCOME STOOD DERIVED. CONDITION NO. 2 ALSO SATISFIED. CONDITION NO. 3 . ASSESSEE HAD TO PAY TAX TOGETHER WITH INTERESTS, IF ANY, IN RESPECT OF SUCH UNDISCLOSED INCOME. HOWEVER, AS NO TIME LIMIT FOR PAYMENT OF S UCH TAX STOOD PRESCRIBED UNDER CLAUSE (2), THIRD CONDITION ALSO STOOD FULFILLED. ASSESSEE HAS PAID TAX WITH INTEREST UPTO DATE OF PAYMENT. THEREFORE, ASSESSEE WAS ENTITLED TO IMMUNITY UNDER CL. (2) OF EXPL. 5 TO S. 271(1)(C). 11. THE AR ALSO REFERRE D TO A FEW OTHER DECISIONS, WHICH WE HAVE TAKEN INTO ACCOUNT AND PRAYED THAT THE PENALTY AS LEVIED DESERVES TO BE DELETED. 12. THE DR VEHEMENTLY ARGUED IN FAVOUR OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THE PENALTY WAS CORRECTLY LEVIED. 13 . WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE FACTS LEADING TO THE LEVY OF PENALTY AS WELL AS THE CASE LAWS CITED BY THE AR, BEFORE US. 1 4. THE RATIO AND CRUX OF THE DECISIONS AS CITED BY THE AR ARE THAT 5 ITA NOS. 65, 66 & 67/NAG/2012 WHETHER EXPLANATION 5 WOULD BE OPER ATIVE ON AMOUNT SURRENDERED IN THE PRECEDING YEAR(S). 1 5. THE ANSWER GIVEN BY THE FORA IS IN THE NEGATIVE. SINCE, THE BASIS OF LEVY OF PENALTY IS INVOCATION OF EXPLANATION 5, WHICH, ITSELF HAS BEEN HELD TO BE WRONG. IN SUCH A CIRCUMSTANCE, WE, RESPECTFULLY FOLLOWING THE DECISIONS OF SDV CHANDRU (SUPRA) AND PURNANDU JAIN (SUPRA), HOLD THAT THE LEVY OF PENALTY WAS BAD IN LAW AND THUS DESERVES TO BE QUASHED. 16. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. 5. SINCE ON IDENTICAL FACTS IN THE GROUP CASES OF THIS ASSESSEE A VIEW HAS ALREADY BEEN EXPRESSED IN FAVOUR OF THE ASSESSEE, THEREFORE, AT THIS JUN CTURE WE HAD NO OCCASION TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE VIEW ALREADY TAKEN BY THE RESPECTED COORDINATE BENCH. FOLLOWING THE AFORESAID DECISION AND THE CASE LAWS REFERRED THEREIN, WE HEREBY DIRECT TO DELETE THE PENALTY IN RESPECT OF ALL THE THREE YEARS APPEALED BEFORE US. 6. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 5 TH FEBRUARY, 2016. 6 ITA NOS. 65, 66 & 67/NAG/2012 COPY FORWARDED TO : 1. SHRI GOPAL B. SARDA, C/O SARDA COMMERCIAL COMPANY, MASKASATH, NAGPUR. 2. A .C.I.T., CENTRAL CIRCLE - 1( 3 ), NAGPUR. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR