M/s. Atlanta Electricals Pvt.Ltd., Anand V. The ACIT.,Cent.Circle-1, Baroda

ITSSA 551/AHD/2012

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9400 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-09-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 07-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T C MEENA
• Assessee Lawyers: J P SHAH
• Keywords: Income from undisclosed sources; Document seized; Retrospective amendment; Initiation of penalty proceedings; Assessment record; Revised return; Documents seized; Set aside
• Section: 271(1)(c); 153A; 274; 132

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER () ./ I.T(SS).A. NOS. 551 & 552/AHD/2012 & 282 & 283/AHD/2014 ( ASSESSMENT YEARS : 2005-06, 2006-07, 2004-05 & 2007-08) M/S. ATLANTA ELECTRICALS PVT. LTD. 1503/4, GIDC ESTATE, VITHAL UDHYOG NAGAR, ANAND 388121 / VS. ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1, BARODA & DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, AAYKAR BHAVAN, RACE COURSE CIRCLE, VADODARA-390007 ./ ./ PAN/GIR NO. : AABCA6647B ( APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI J. P. SHAH, SR. ADVOCATE / REVENUE BY : SHRI T. C. MEENA, SR.D.R. !' DATE OF HEARING 28/08/2019 #$%& !' / DATE OF PRONOUNCEMENT 26/09/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS AT THE INSTANCE OF ASSESSEE A RISE FROM THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -2 - (CIT(A)) AGAINST RESPECTIVE PENALTY ORDERS FOR DI FFERENT ASSESSMENT YEARS AS TABULATED BELOW: IT(SS)A NOS. NAME OF ASSESSEE AY CIT(A)S ORDER DATED AOS ORDER DATED AOS ORDER UNDER SECTION 551/AHD/12 M/S. ATLANTA ELECTRICALS PVT. LTD. 2005-06 18.09.2012 28.06.2011 271(1)(C) R.W.S. 274 OF THE INCOME TAX ACT, 1961 (THE ACT) 552/AHD/12 -DO- 2006-07 -DO- 30.06.2011 -DO- 282/AHD/14 -DO- 2004-05 16-04-14 25.03.2013 -DO- 283/AHD/14 -DO- 2007-08 -DO- -DO- -DO- 2. IN ALL THE FOUR CAPTIONED APPEALS, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE REVENUE TOWARDS IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT. THE FACTS BEING BROADLY COMMON, ALL THE A PPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THE COMMON OR DER. 3. WE SHALL FIRST TAKE UP ASSESSEES APPEAL IN IT(S S)A NOS. 551 & 552/AHD/2012 & 283/AHD/2014 CONCERNING AYS. 2005-06 , 2006-07 & 2007-08 RESPECTIVELY ARISING OUT OF A COMMON ORDER OF THE CIT(A) FOR APPRECIATING THE FACTS IN PERSPECTIVE. 4. THE ASSESSEE HAS CHALLENGED IMPOSITION OF PENALT Y OF RS.25,20,000/- EACH FOR ASSESSMENT YEARS I.E. 2005- 06 & 2006-07 AND RS.27,72,000/- FOR AY 2007-08. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING, MAINTENANCE AND R EPAIRING OF ELECTRICAL TRANSFORMERS. A SEARCH ACTION UNDER S.132 OF THE ACT WAS CARRIED OUT IN THE AMOD GROUP OF CASES INCLUDING THE DIRECTOR OF T HE ASSESSEE COMPANY (SHRI HARSHAD MEHTA) ON 11.02.2009. SIMULTANEOUSLY , SURVEY PROCEEDINGS UNDER S.133A OF THE ACT WERE ALSO CARRI ED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY. CONSEQU ENT UPON SEARCH, THE DIRECTOR OF THE ASSESSEE ADMITTED CERTAIN EXCES S STOCK OF GOODS PERTAINING TO THE ASSESSEE COMPANY AND SAME WAS OFF ERED TO TAX IN EQUAL PROPORTION OF EXACT RS.84LAKHS THE AY 2005-06, 2006 -07 & 2007-08. IN RESPONSE TO THE NOTICE ISSUED UNDER S.153C OF THE A CT, THE ASSESSEE FILED RETURN OF INCOME FOR RESPECTIVE ASSESSMENT YEARS IN QUESTION AND IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -3 - DECLARED THE ALLEGED UNACCOUNTED INCOME OF RS.84LAK HS ON ACCOUNT OF PURPORTED EXCESS STOCK IN EACH ASSESSMENT YEAR. TH E RETURNS WERE FILED ORIGINALLY UNDER S.139(1) OF THE ACT PRIOR TO ISSUA NCE OF NOTICE UNDER S.153C OF THE ACT WHERE, OSTENSIBLY, SUCH ALLEGED U NDISCLOSED INCOME TOWARDS EXCESS STOCK WAS NOT INCLUDED IN THE RETURN OF INCOME. THE ASSESSMENT UNDER S.153C R.W.S. 153A OF THE ACT WAS FINALIZED BY THE AO FOR AYS. 2005-06, 2006-07 & 2007-08 WHEREIN THE UNA CCOUNTED INCOME OF RS.84 LAKHS EACH WAS INTER ALIA ASSESSED. PENALTY PROCEEDINGS UNDER S. 271(1)(C) OF THE ACT WERE ALSO INITIATED IN RESP ECT OF UNDISCLOSED INCOME OF RS.84LAKHS OF EACH ASSESSMENT YEAR ON ACC OUNT OF EXCESS STOCK AND THE AO IMPOSED PENALTY @ 100% OF TAX SOUG HT TO BE EVADED BY EVOKING S. 271(1)(C) OF THE ACT FOR EACH ASSESSMENT YEAR FOR CONCEALMENT OF PARTICULARS OF ITS INCOME AS WELL AS FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) HOWEVER DECLINED TO INTERFERE WITH THE RESPE CTIVE PENALTY ORDERS PASSED BY THE AO FOR AYS. 2005-06, 2006-07 & 2007-0 8. 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE MR. J. P. S HAH ASSAILED THE ACTION OF THE REVENUE AUTHORITIES ON MULTIPLE GROUN DS AND SUBMITTED THAT PENALTY ORDER PASSED BY THE AO AND APPELLATE ORDER OF THE CIT(A) IS BASED ON MISINTERPRETATION OF LAW AND FACTS. 7.1 IT WAS FIRSTLY CONTENDED THAT REVENUE AUTHORITI ES HAVE CHANGED BASIS OF IMPOSITION OF PENALTY ABRUPTLY WHICH ACTIO N IS NOT SUSTAINABLE. TO SUPPORT THE CONTENTION, THE LEARNED COUNSEL ADVE RTED TO THE ASSESSMENT ORDER FOR AY 2005-06 AND SUBMITTED IT WA S ALLEGED BY THE AO THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS IN THE RETURN FILED UNDER S.139 OF THE ACT LEADING TO CONCEALMENT OF RS .84 LAKHS. THE AO HOWEVER WHILE PASSING THE PENALTY ORDER HAS EXPANDE D THE CHARGE AND IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -4 - ALLEGED BOTH CONCEALMENT OF PARTICULARS OF INCOME A S WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE CIT(A) HO WEVER HAS VALIDATED THE IMPOSITION OF PENALTY FOR CONCEALING THE PARTI CULARS OF INCOME IN RESPECT OF ADDITIONAL INCOME DISCLOSED IN THE RETUR N FILED IN RESPONSE TO NOTICE UNDER S.153C OF THE ACT. IT WAS THUS SUBMIT TED THAT WHILE THE INITIAL SATISFACTION IN THE COURSE OF THE ASSESSM ENT WAS FORMED TOWARDS FURNISHING OF INACCURATE PARTICULARS OF INCOME QUA THE ORIGINAL RETURN FILED UNDER S.139 OF THE ACT, THE CIT(A) HOWEVER HA S CONFIRMED THE PENALTY FOR A DIFFERENT OFFENCE NAMELY CONCEALMENT OF PARTICULARS OF INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE THUS POINTED OUT THAT WHILE THE PERSON ISSUING DIRECTION TO IMPOSE PENALT Y WAS SATISFIED ABOUT THE OFFENCE TOWARDS FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE CIT(A), IN FIRST APPEAL, HAS TOTALLY C HANGED THE COMPLEXION OF THE OFFENCE AND CONFIRMED THE PENALTY FOR A DIFF ERENT OFFENCE I.E. CONCEALMENT OF PARTICULARS OF INCOME. THE LEARNE D COUNSEL SUBMITTED THAT LAW IN THIS REGARD IS WELL SETTLED AND REFERRE D TO THE DECISION OF THE CO-ORDINATE BENCH OF TRIBUNAL IN SHRI KANTIBHAI NARANBHAI PRAJAPATI VS. ITO ITA NO. 2880/AHD/2014 ORDER DATED 15/02/2018 WHICH SPECIFICALLY DWELLS UPON SUCH FACT SITUATION. THE LEARNED COUNS EL THUS CONTENDED THAT THE PENALTY SO IMPOSED ON A ALTOGETHER DIFFERENT ED IFICE IS LIABLE TO STRUCK DOWN AT THRESHOLD ON THIS GROUND ALONE. 7.2 THE LEARNED COUNSEL NEXT SUBMITTED THAT THE ACT ION OF THE AO TOWARDS IMPOSITION OF PENALTY EMANATES FROM PROCEED INGS UNDER S.153C OF THE ACT AND JURISDICTION TO INVOKE PROCEEDINGS U NDER S.153C OF THE ACT INDISPENSABLY DEPENDS UPON A VALID SATISFACTIO N DRAWN BY THE AO OF THE SEARCHED PERSON THAT UNDISCLOSED INCOME BY W AY OF MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES OR TH INGS OR DOCUMENTS SEIZED ETC. BELONGS TO THE PERSON OTHER THAN THE PE RSON REFERRED TO IN SECTION 153A OF THE ACT IN TERMS OF ERSTWHILE PROVI SION OF SECTION 153C OF THE ACT AS APPLICABLE TO THE ASSESSMENT YEAR IN QUESTION. THE LEARNED COUNSEL THUS SUBMITTED THAT MERE INCLUSION OF THE I NCOME IN THE RETURN ON THE PART OF THE ASSESSEE WITHOUT SUCH INCOME BASED ON ALLEGED DOCUMENTS IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -5 - BELONGING TO ASSESSEE HEREIN WOULD NOT VALIDATE THE LEGAL REQUIREMENT ENJOINED FOR INITIATION OF PROCEEDINGS UNDER S.153C OF THE ACT. IT WAS CONTENDED THAT IMPOSITION OF PENALTY EVEN WHERE THE TAX LIABILITY IS ADMITTED, IS NOT AUTOMATIC AND FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN PENALTY PROCEEDINGS AND IT IS OPEN TO THE ASSESSEE TO CONTE ST THE SAME PROCEEDINGS ON MERITS. A REFERENCE WAS MADE TO THE DECISION OF HONBLE KARNATAKA HIGH COURT CIT VS MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565 (KARNATAKA). IT WAS THUS SUBMITTED THAT IN THE ABSENCE OF SATISFACTION AS CONTEMPLATED UNDER ERS TWHILE SECTION 153C OF THE ACT, IT IS NOT PERMISSIBLE FOR THE REVENUE T O ASSESS THE ADDITIONAL INCOME, FAR LESS EXTENDING ITS ARM FOR IMPOSITION O F ONEROUS PENALTY UNDER S. 271(1)(C) OF THE ACT. 7.3 THE LEARNED COUNSEL FURTHER CONTENDED THAT APAR T FROM LACK OF REQUISITE SATISFACTION UNDER S.153C OF THE ACT AS W ELL AS VARYING STAND OF THE AO AND THE CIT(A) TOWARDS SATISFACTION FOR SPEC IFIC OFFENCE CONTEMPLATED UNDER S. 271(1)(C) R.W.S. 271(1B) OF T HE ACT, THE PENALTY IS ALSO NOT IMPOSABLE AS THE DISCLOSURE SO MADE IS BAS ED ON A VAGUE ESTIMATE OF EXCESS STOCK BASED ON A SINGLE SHEET WI THOUT ANY ATTENDANT WORKING AND WHICH HAS BEEN CURSORILY DIVIDED EQUALL Y IN VARIOUS ASSESSMENT YEARS DE HORS GROUND REALITIES AS PER DICTATE OF THE REVENUE OFFICERS. THE EXCESS STOCK IS NOT SHOWN TO RESONAT E WITH THE ACTUAL PHYSICAL STOCK EITHER. NO EXCESS PHYSICAL QUANTITY WAS FOUND AT THE TIME OF SEARCH AS POINTED OUT AT THE FIRST INSTANCE BEFO RE THE AO AS CAN BE SEEN FROM PARA 4 OF THE PENALTY ORDER DATED 28.06.2 011 CONCERNING AY 2005-06. THUS, A HYPOTHETICAL ESTIMATION AND EQUAL DISTRIBUTION THEREOF AS ADDITIONAL INCOME OFFERED IN THE RETURN FILED UN DER S.153C OF THE ACT TO BUY PEACE AND TO WARD OFF LITIGATION (BEREFT OF SUCH PHYSICAL STOCK) OUGHT NOT TO HAVE ATTRACTED PENALTY UNDER S.271(1)( C) OF THE ACT. THE LEARNED COUNSEL ACCORDINGLY SUBMITTED IN CONCLUSION THAT IMPOSITION OF PENALTY UNDER S. 271(1)(C) OF THE ACT IS THUS WITHO UT SANCTION OF LAW AND IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -6 - THEREFORE PENALTY SO IMPOSED BY DIFFERENT PENALTY O RDERS APPEALED AGAINST, ARE REQUIRED TO BE STRUCK DOWN AND THE PEN ALTIES IMPOSED FOR VARIOUS ASSESSMENT YEARS REQUIRES TO BE CANCELLED. 8. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED IN FURTHERANCE THAT SPECIFIC INCRIMINATING DOCUMENTS SHOWING NOTINGS TOWARDS EXCESS STOCK WAS FOUND FROM THE RESIDENTIAL PREMISES OF THE DIRECTOR AND AS A SEQUE L THERETO, THE ASSESSEE COMPANY HAS OFFERED THE ADDITIONAL INCOME TOWARDS E XCESSIVE STOCK APPORTIONED IN THREE YEARS I.E. AYS. 2005-06, 2006- 07 & 2007-08. IN SUCH CIRCUMSTANCES, WHERE THE ASSESSEE HIMSELF HAS ADMITTED THE EXISTENCE OF UNDISCLOSED STOCK RELATABLE TO THE ASS ESSMENT YEARS IN QUESTION, NO INDULGENCE WAS REQUIRED BY THE AO AND THE PENALTY UNDER S.271(1)(C) OF THE ACT, BEING A CIVIL LIABILITY AND A REMEDY FOR POSSIBLE LOSS OF REVENUE, WAS REQUIRED TO BE IMPOSED BY THE AO AS DONE BY HIM. IT WAS CONTENDED THAT DEEMING PROVISION OF CONCEALM ENT WOULD APPLY WITH EQUAL FORCE NOTWITHSTANDING THAT THE SAID INCO ME IS ULTIMATELY OFFERED TO TAX BY FILING RETURN OF INCOME AFTER THE DATE OF SEARCH ACTION. THE ACTION OF THE AO THUS CANNOT BE FAULTED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE S OLITARY ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE AO WAS JUST IFIED IN IMPOSING PENALTY UNDER S. 271(1)(C) OF THE ACT TOWARDS ADDIT IONAL INCOME DECLARED IN THE REVISED RETURN FILED UNDER S.153C OF THE ACT PURSUANT TO SEARCH IN CONNECTED GROUPS CASES, IN THE CONTEXT OF THE FACTS AND CIRCUMSTANCES EXISTING IN THE CASE. 9.1 MULTIPLE OBJECTIONS HAVE BEEN RAISED ON BEHALF OF THE ASSESSEE FOR IMPOSITION OF PENALTY. THE FIRST AND FOREMOST OBJEC TION ON BEHALF OF THE ASSESSEE IS THAT THE ALLEGATION FOR DEFAULT IN ORDE R OF THE AO IN QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS VIS--VIS THE APPELLATE ORDER IN PENALTY PROCEEDINGS ARE INCONSISTENT. IT IS THE CA SE OF THE ASSESSEE THAT THE AO IN THE QUANTUM PROCEEDINGS HAS ALLEGED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN THE RETURN FILED UNDER IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -7 - S.139 OF THE ACT LEADING TO CONCEALMENT OF INCOME O N ACCOUNT OF EXCESS STOCK. IN THE PENALTY ORDER, HOWEVER, THE AO HAS A LLEGED BOTH FURNISHING OF INACCURATE PARTICULARS OF INCOME AS WELL AS CONC EALMENT OF PARTICULARS OF INCOME. THE CIT(A) IN THE APPELLATE ORDER AGAIN ST THE IMPOSITION OF PENALTY HAS HOWEVER ALLEGED CONCEALMENT OF PARTICUL ARS OF INCOME. THUS, THE TEXTURE OF SATISFACTION CONSTITUTED BY THE AO UNDER S.271(1B) OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS UN DER CLAUSE (C) TO SECTION 271(1) OF THE ACT WAS MODIFIED ALTOGETHER B Y THE CIT(A). SUCH COURSE OF ACTION WAS HELD TO BE VITIATED BY SERIES OF JUDICIAL PRECEDENTS. FOR READY REFERENCE, IT MAY BE PERTINENT TO REFER T HE OBSERVATIONS OF THE CO-ORDINATE BENCH IN KANTIBHAI NARANBHAI PRAJAPATI VS. ITO ITA NO. 2880/AHD/2014 ORDER DATED 15.02.2018 WHICH SQUARELY DWELLS UPON THE AFORESAID OBJECTION OF THE ASSESSEE: 8. WE STRAIGHT AWAY FIND THAT THE AO VIDE PENALTY ORDER DATED 25/11/2013 UNDER S.271(1)(C) OF THE ACT IMPOSED P ENALTY ON ADDITIONS MADE ALLEGING CONCEALMENT OF PARTICULARS OF INC OME. HOWEVER, THE CIT(A), ON THE OTHER HAND, HAS CONFIRMED THE PENALT Y ON THE GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME. APPA RENTLY, THE BASIS AND FOUNDATION FOR IMPOSITION OF PENALTY HAS BEEN ALTER ED BY THE CIT(A). IT IS THUS OSTENSIBLE THAT FINDINGS RECORDED BY THE CIT(A ) SHOW THAT PENALTY HAS BEEN CONFIRMED ON A DIFFERENT PREMISE AND THE ORIGI NAL SATISFACTION FOR IMPOSITION OF PENALTY HAS BEEN ALTERED OR MODIFIED BY THE APPELLATE AUTHORITY. IN SUCH CIRCUMSTANCES, WHERE THE ORIGIN AL BASIS OF IMPOSITION OF PENALTY HAS BEEN ALTERED IN A SIGNIFICANT WAY BY THE FIRST APPELLATE AUTHORITY, THE VERY BASIS FOR SUSTAINING THE PENALT Y IS RENDERED NON- EXISTENT. NEEDLESS TO SAY, THE IMPOSITION OF PENALT Y IS SOLELY DEPENDENT UPON THE SATISFACTION OF THE AO [UNLESS INITIATED BY CIT(A)] AND NON- ELSE. THE GROUND FOR ACTION BY AO WAS ALLEGATION OF CONCEALMENT. THIS GROUND HAS BEEN SUBSTITUTED BY CIT(A) TO FURNISHIN G INACCURATE PARTICULARS OF INCOME WHILE CONFIRMING THE PENALTY QUANTIFIED BY THE AO. THUS, IN THE ABSENCE OF CONTINUITY IN THE FINDINGS OF THE AO AND THE CIT(A), THE ORDER OF THE PENALTY PASSED BY THE AO I S LIABLE TO BE STRUCK DOWN ON THIS GROUND ALONE. FOR SUCH A VIEW, WE USE FULLY REFER TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF NEW SORATHIA ENGINEERING COMPANY VS. CIT (2006) 282 ITR 642 (GUJ .) AND CIT VS. MANU ENGINEERING WORKS (1980) 122 ITR 306 (GUJ.). SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN GIAN CHAND BATIA VS. DCIT 61 ITD 24(ALL.). THEREFORE, WHERE CONCURR ENT I.T.AUTHORITIES ARE NOT SURE ABOUT NATURE OF DEFAULT, THE PENAL ACTION UNDER S.271(1)(C) OF THE ACT IS NOT SUSTAINABLE IN LAW. IN THE LIGHT OF THE AFORESAID OBSERVATIONS OF THE C O-ORDINATE BENCH SQUARELY APPLICABLE TO THE PRESENT FACTS, IT IS DIF FICULT TO UPHOLD THE IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -8 - ACTION OF THE REVENUE AUTHORITIES FOR IMPOSITION OF PENALTY ON THIS GROUND ALONE. 9.2 WE HOWEVER ALSO ADVERT TO ANOTHER PLEA RAISED O N BEHALF OF THE ASSESSEE WHILE ASSAILING IMPOSITION OF PENALTY. A PLEA HAS BEEN INTER ALIA RAISED ON BEHALF OF THE ASSESSEE TOWARDS NON-FULFI LLMENT OF PRE- REQUISITES BEFORE INVOCATION OF PROVISIONS OF SECTI ON 153C OF THE ACT. IT IS THE CASE OF THE ASSESSEE THAT IN THE ABSENCE OF JURISDICTION UNDER S.153C OF THE ACT, THE QUANTUM PROCEEDINGS UNDER S. 153C OF THE ACT ITSELF IS NON EST AND CONSEQUENTLY, PENALTY UNDER S.271(1)(C) OF THE ACT COULD NOT HAVE BEEN IMPOSED. ON APPRAISAL, WE FIND FORCE IN THE AFORESAID PLEA TOO. THE ERSTWHILE PROVISION OF SEC TION 153C OF THE ACT PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2015 W.E.F. 01.06.2015 PROVIDED THAT THE AO WAS REQUIRED TO BE SATISFIED THAT BOTH UNDISCLOSED ASSETS AS WELL AS DOCUMENTS SEIZED ETC. MUST BELONG TO A PE RSON OTHER THAN THE PERSON IN WHOSE HANDS SEARCH WAS CONDUCTED AND PROC EEDINGS UNDER S.153A OF THE ACT WAS INITIATED. THE EXPRESSION B ELONG TO WAS EXPLAINED BY THE HONBLE DELHI HIGH COURT IN THE CA SE OF PEPSICO INDIA HOLDINGS PRIVATE LIMITED VS. ACIT [2015] 370 ITR 29 5 (DELHI). IT WAS OBSERVED BY THE HONBLE DELHI HIGH COURT THAT SECTI ON 153C OF THE ACT CANNOT BE INVOKED UNLESS THE AO OF THE SEARCHED PER SON IS SATISFIED FOR COGENT REASONS THAT SEIZED DOCUMENTS DO NOT BELONG TO THE SEARCHED PERSON. THE DISTINCTION BETWEEN EXPRESSION BELONG S TO AND RELATES TO OR REFERS TO MUST BE BORNE IN MIND BY AO. IT WAS OBSERVED BY THE HONBLE COURT THAT AO SHOULD NOT CONFUSE THE EXPRES SION BELONGS TO WITH EXPRESSION RELATES TO OR REFERS TO. THE H ON'BLE COURT WENT ON TO EXPLAIN THE PURPORT OF THE EXPRESSION BY GIVING ILL USTRATION OF A REGISTERED SALE DEED WHICH ESSENTIALLY IMPLIED SOME THING MORE THAN A CASUAL CONNECTION. IN THE WAKE OF THE AFORESAID JU DGMENT, MERELY BECAUSE A DOCUMENT/LOOSE PAPER WAS FOUND IN THE POS SESSION OF A SEARCHED PERSON SHOWING REFERENCE TO CERTAIN ENTRIE S RELATABLE TO A THIRD PERSON, THE SAID DOCUMENTS/LOOSE PAPER BY ITSELF WO ULD NOT TANTAMOUNT TO BE BELONGING TO THE THIRD PERSON. SIMILAR VIEW HAS BEEN EXPRESSED IN THE IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -9 - CASE OF RENU CONSTRUCTIONS PVT. LTD. (DELHI) 399 ITR 262 (D EL.) AND KAMLESHBHAI DHARAMSHIBHAI PATEL 263 CTR 362 (GUJ). THE CO-ORDINATE BENCH TRIBUNAL IN SHAILESH S PATEL VS. ITO (2018) 97 TAXMANN.COM 570 (AHMEDABAD TRIB.) HAS ALSO REITERATED THE AFORESAID PRE-REQUISITE FO R FORMATION OF SATISFACTION FOR THE PURPOSES OF SEC TION 153C OF THE ACT. NO AVERMENT IS FOUND FROM THE CASE RECORDS THAT THE DOCUMENTS SEIZED TOWARDS EXCESS STOCK DID BELONG TO AND WAS THE PROP ERTY OF THE COMPANY AND NOT OF THE DIRECTOR FROM WHOSE CUSTODY IT WAS F OUND. THEREFORE, IN SUCH NON-DESCRIPT AND INNOCUOUS SITUATION, WHERE TH E QUANTUM ASSESSMENT ITSELF IS SUSCEPTIBLE, THE CONSEQUENCES IN FORM OF PENALTY UNDER S.271(1)(C) OF THE ACT WOULD NOT, IN OUR VIEW , BE JUSTIFIED. 9.3 PERTINENTLY, IT IS SEEN FROM THE CASE RECORDS B EFORE US THAT THE ASSESSEE HAS CHALLENGED THE FORMATION OF SATISFACT ION RECORDED BY THE AO OF THE SEARCHED PERSON (MR. HARSHAD MEHTA) IN EA RLIER LISTINGS. IT WAS NOTED BY THE TRIBUNAL AS PER ORDER SHEET ENTRY DATED 20.01.2016 THAT NO MATERIAL WAS PLACED ON RECORD TO DEMONSTRATE SA TISFACTION NOTE. ACCORDINGLY, SPECIFIC DIRECTION WAS GIVEN TO THE RE VENUE AS RECORDED VIDE ORDER SHEET ENTRY DATED 06.09.2017 FOR PRODUCT ION OF ASSESSMENT RECORDS AND SATISFACTION NOTE FOR INVOKING EXTRAO RDINARY JURISDICTION. THE RESPONSIBILITY OWED TO SUCH DIRECTION CONTINUED TO REMAIN UNDISCHARGED DESPITE SEVERAL LISTINGS THEREAFTER. THE NON-PRODUCTION OF RECORDED SATISFACTION ALSO CONSTRAINS US TO ADMIT THE AFORESAID PLEA OF THE ASSESSEE IN ITS FAVOUR. 9.4 WE WOULD ALSO LIKE TO ADDRESS OURSELVES ON ANOT HER RELATED ASPECT. THE AO WHILE IMPOSING PENALTY HAS INVOKED EXPLANATI ON 1 BELOW THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. THE CI T(A), ON THE OTHER HAND, HAS VINDICATED THE IMPOSITION OF PENALTY BY I NVOKING EXPLANATION 5A TO S.271(1)(C). THIS IS YET ANOTHER INSTANCE OF SUBSTANTIAL SHIFT IN THE APPLICATION OF LAW AGAINST THE ASSESSEE. SUCH INCO NSISTENT COURSE OF ACTION IN OUR VIEW IS NOT PERMISSIBLE. THE ACTION OF THE CIT(A) ADVERSE TO THE ASSESSEE, THUS, CANNOT BE SUSTAINED ON THIS SCORE TOO. WE MAY, IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -10 - HOWEVER, HASTEN TO ADD HERE THAT IN VIEW OF INCONSI STENT STAND OF AO AND CIT(A) ON APPLICATION OF APPROPRIATE EXPLANATION, W E DO NOT CONSIDER EXPEDIENT TO EVALUATE THE TENETS OF LAW ON APPLICAB ILITY OF PROPER EXPLANATION WITH REFERENCE TO S.153C CASES. 9.5 SHORN OF CONTENTIONS NOTED ABOVE, WE MAY ALSO T AKE A LOOK AT THE ISSUE FROM A DIFFERENT ANGLE. WE NOTICE THAT THE S EARCH UNDER S.132 OF THE ACT WAS CONDUCTED IN AMOD GROUP OF CASES ON 11. 02.2009 AS A CONSEQUENCE OF WHICH PROCEEDINGS UNDER S.153C OF TH E ACT WAS UNDERTAKEN IN THE CASE OF ASSESSEE COMPANY HEREIN. THE CIT(A) HAS INVOKED EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT AND CONFIRMED THE IMPOSITION OF PENALTY. THE AO LEVIED PENALTY F OR THE RESPECTIVE ASSESSMENT YEARS IN APPEAL UNDER S. 271(1)(C) OF TH E ACT ON THE GROUND THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCO ME OR FURNISHED INACCURATE PARTICULARS OF INCOME WHICH IS EVIDENCED FROM THE FACT THAT THE ASSESSEE DID NOT OFFER TRUE AND CORRECT INCOME IN THE REGULAR RETURNS ALREADY FILED FOR THE RESPECTIVE ASSESSMENT YEARS I N QUESTION PRIOR TO SEARCH. IN THIS BACKGROUND, WE NOTICE THAT PRE-AME NDED AND ERSTWHILE EXPLANATION 5A AS IT STOOD AT THE TIME OF SEARCH AP PLIED ONLY TO NON-FILE ASSESSEES WHO WERE SEARCHED UNDER S.132 OF THE ACT AT THE RELEVANT TIME OF SEARCH. TO PUT IT DIFFERENTLY, EXPLANATION 5A WA S STRANGELY NOT APPLICABLE TO THOSE ASSESSEE WHO HAD ALREADY FILED THEIR RETURNS UNDER S.139 OF THE ACT PRIOR TO SEARCH HOWSOEVER MAY BE T HE EXTENT OF WRONG DOING OR CONCEALMENT. TO BRING HOME THIS POINT, IT MAY BE RELEVANT TO REPRODUCE PRE-AMENDED EXPLANATION 5A, AS INSERTED BY THE FINANCE ACT, 2007, W.E.F. 1.6.2002 WHICH READ AS UNDER: EXPLANATION 5A.-WHERE IN THE COURSE OF A SEARCH IN ITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSE SSEE IS FOUND TO BE THE OWNER OF,- (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREINAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PREVIOUS YEAR; OR IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -11 - (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCOME (WHOLLY OR IN PA RT) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH AND T HE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH YEAR HAS EXPIRED AND THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH I NCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE D ATE 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 CONC EALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF S UCH INCOME.' 9.6 AS A MEASURE OF RATIONALIZATION, AN AMENDMENT W AS HOWEVER BROUGHT OUT BY FINANCE (NO.2) ACT, 2009 WITH RETROS PECTIVE EFFECT AS APPLICABLE TO SEARCH ACTION ON OR AFTER 01.06.2007 SEEKING TO SUBSTITUTE ERSTWHILE EXPLANATION 5A AS INSERTED BY FINANCE ACT , 2007 IN THIS REGARD. THE SUBSTITUTED EXPLANATION 5A IS ALSO REPR ODUCED FOR SAKE OF CONVENIENCE: EXPLANATION 5A,-- WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF- (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PREVIOUS YEAR; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCOME (WHOLLY OR IN PA RT) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND,- (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS DECLARED T HEREIN, OR (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FO R SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULAR S OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -12 - 9.7 THUS, AS CAN BE OBSERVED, THE APPLICATION OF PR E-AMENDED EXPLANATION WAS LIMITED TO NON-FILER ASSESSEE WHERE AS THIS ANOMALY WAS CORRECTED IN SUBSTITUTED EXPLANATION. TO ELABORATE , WHILE THE ORIGINAL EXPLANATION 5A INTRODUCED BY THE FINANCE ACT, 2007 W.E.F. 01.06.2007 HELD THE PERSONS GUILTY OF CONCEALMENT WHERE THE RE TURN WAS NOT FILED ONLY, THE SUBSTITUTED EXPLANATION 5A ROPED IN WITH RETROSPECTIVE EFFECT FROM 01.06.2007 BY FINANCE (NO.2) ACT, 2009 ATTEMPT ED TO COVER BOTH FILERS OF RETURN OF INCOME AS WELL AS NON-FILERS FO R THE PURPOSES OF PENALTY ON UNDISCLOSED INCOME FOUND. THUS, WHEN VI EWED THE LAW AS EXISTING ON THE DATE OF INITIATION OF SEARCH, EXPLA NATION 5A WAS ATTRACTED ONLY WHERE THE ASSESSEE FAILED TO FILE RETURN OF IN COME ALTOGETHER. HENCE, WHEN SEEN WITH REFERENCE TO DATE OF SEARCH 1 1.02.2009 IN THE PRESENT CASE, THE PROVISIONS OF ERSTWHILE EXPLANATI ON 5A WERE NOT ATTRACTED TO THE ASSESSEE AS THE RETURN OF INCOME W AS ALREADY FILED PRIOR TO SEARCH AND PUT ON RECORD. THE APPLICATION OF A MENDED PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT WHIC H CAME INTO FORCE BY AN AMENDMENT SUBSEQUENT TO SEARCH ALBEIT WITH RETROSPECTIVE EFFECT THUS CANNOT BE APPLIED WHEN SEEN WITH REFERENCE TO CAUSE OF ACTION I.E. DATE OF SEARCH. IT IS TO BE BORNE IN MIND THAT EXPLANAT ION 5A APPENDED TO S.271(1)(C) OF THE ACT IS A LEGAL FICTION FOR DEEMI NG CONCEALMENT AGAINST THE ASSESSEE IN SEARCH CASES. BOTH ORIGINAL RETURN UNDER S.139 OF THE ACT AS WELL AS REVISED RETURN UNDER S.153C OF THE ACT H AD BEEN FILED BEFORE THE AMENDED PROVISIONS WERE BROUGHT INTO FORCE. HE NCE, WE ARE OF THE VIEW THAT SHELTER OF SUBSTITUTED PROVISIONS OF EXPL ANATION 5A TO SECTION 271(1)(C) OF THE ACT COULD NOT BE TAKEN TO THE INST ANT CASE FOR FASTENING CONCEALMENT PENALTY. THE ASSESSEE HAVING FILED THE RETURN UNDER S.139 OF THE ACT PRIOR TO SEARCH AS WELL AS RETURN UNDER S.1 53C OF THE ACT PRIOR TO SUBSTITUTED EXPLANATION COMING INTO FORCE, WOULD BE GOVERNED BY PRE- AMENDED EXPLANATION 5A AND THUS WOULD ESCAPE THE CL UTCHES OF PENALTY UNDER S.271(1)(C) OF THE ACT DUE TO NON-FULFILLMENT OF CONDITIONS OF PRE- AMENDED EXPLANATION. IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -13 - 9.8 THUS, SEEN FROM ANY ANGLE, ALL OF THE BROAD CON TOURS COMPLEMENT THE PLEA OF ASSESSEE FOR DELETION OF PENALTY. THE IMPOSITION OF PENALTY WITH THE AID OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS THUS NOT FOUND TO BE OBJECTIVELY JUSTIFIABLE IN THE CAPT IONED APPEALS. RESULTANTLY, THE APPELLATE ORDER OF THE CIT(A) FOR AYS. 2005-06, 2006- 07 & 2007-08 ARE SET ASIDE AND THE AO IS DIRECTED T O CANCEL THE PENALTY UNDER S. 271(1)(C) OF THE ACT IN ALL THESE YEARS. 10. IN THE RESULT, APPEALS OF THE ASSESSEE IN IT(SS )A NOS. 551 & 552/AHD/2012 & 283/AHD/2014 FOR AYS. 2005-06, 2006- 07 & 2007-08 RESPECTIVELY; ARE ALLOWED. IT(SS)A NO. 282/AHD/2014 - AY 2004-05 11. THE AO HAS IMPOSED PENALTY OF RS.5,26,000/- UND ER S. 271(1)(C) OF THE ACT ALLEGING INCORRECT SET OFF EARLIER LOSSES A MOUNTING TO RS.3,02,530/- AND AS WELL AS SALES OUTSIDE BOOKS AM OUNTING TO RS.11,63,394/-. IN THIS REGARD, WE FIRSTLY NOTICE THAT PENALTY HAS BEEN IMPOSED AS A CONSEQUENCE OF ORDER PASSED UNDER S.15 3C R.W.S. 153A OF THE ACT. SIMILAR TO AYS. 2005-06, 2006-07 & 2007-0 8, WE OBSERVE THAT THE AO HAS RECORDED MIXED SATISFACTION TOWARDS FU RNISHING OF INACCURATE PARTICULARS OF INCOME LEADING TO CONCEAL MENT WHILE FRAMING ASSESSMENT. THE AO HOWEVER HAS IMPOSED PENALTY UND ER S. 271(1)(C) OF THE ACT ALLEGING INACCURATE PARTICULARS OF INCOME F URNISHED. THE CIT(A), IN FIRST APPEAL, HAS CONFIRMED THE PENALTY ON BOTH GROUNDS; NAMELY CONCEALMENT OF PARTICULARS OF INCOME AS WELL AS FURNISHING INACCURATE PARTICULARS OF INCOME. THUS, THE SATIS FACTION RECORDED IN THE ASSESSMENT ORDER HAS UNDERGONE SUBSTANTIAL CHANGE W HICH IS NOT IN SYNC WITH JUDICIAL PRECEDENTS RECORDED ON THE POINT. TH IS APART, THE PENALTY IS NOT SUSTAINABLE ALSO FOR THE FACT THAT IT COULD NOT BE SUCCESSFULLY DEMONSTRATED THAT SATISFACTION AS MANDATED UNDER S.153C OF THE ACT WAS PROPERLY RECORDED. THIRDLY, THE DOCUMENTS SEIZ ED FROM THE SEARCHED PERSON WERE REQUIRED TO BE BELONGING TO THE ASSESSE E HEREIN AND NOT IT(SS)A NOS. 551/AHD/12 & 3 ORS. [M/S. ATLANTA ELECTRICALS PVT. LTD.] -14 - MERELY RELATABLE TO THE ASSESSEE. THE ONUS PLACED ON REVENUE IN THIS REGARD IS NOT DISCHARGED. 12. WE OBSERVE THAT THE CIT(A) HIMSELF HAS RIGHTLY ACKNOWLEDGED THAT PENALTY CANNOT BE IMPOSED TOWARDS INCORRECT CLAIM O F SET-OFF OF EARLIER YEAR LOSSES. IN PARITY WITH THE OBSERVATIONS MADE FOR OTHER ASSESSMENT YEARS, WE FIND MERIT IN THE PLEA OF THE ASSESSEE FO R DELETION OF PENALTY ON REMAINING POINTS ON GROUNDS NOTED ABOVE. THE ORDER OF THE CIT(A) IS THUS SET ASIDE AND THE AO IS DIRECTED TO DELETE THE PENALTY OF RS.5,26,000/- CONCERNING AY 2004-05. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A Y 2004-05 IN ITA(SS)A NO.282/AHD/2014 IS ALLOWED. 14. IN THE COMBINED RESULT, ALL THE APPEALS FILED B Y THE ASSESSEE ARE ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 26/09/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- ). / REVENUE 2. / ASSESSEE +. ,-.! /! / CONCERNED CIT 4. /!- / CIT (A) 2. 345 6!6-.7 ' -.&7 89, / DR, ITAT, AHMEDABAD :. 5;< = / GUARD FILE. BY ORDER / 7 /8 ' -.&7 89, THIS ORDER PRONOUNCED IN OPEN COURT ON 26/09/2019