SUNIL KUMAR AGARWAL,KOLKATA V. A.C.I.T., CENTRAL CIRCLE-3(2), KOLKATA

ITA 2685/KOL/2024

AI Insights

The case involves appeals by Sunil Kumar Agarwal against the penalties levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act for the assessment years 2015-16 and 2016-17. The penalties were imposed following a search and seizure operation under Section 132 of the Act, where Agarwal, a key person in the Health Care Group, was compelled to make a disclosure of undisclosed income. This disclosure was later retracted, and no incriminating documents were found during the search. The Tribunal examined whether the penalties were justified under the provisions of the Act, particularly focusing on the applicability of explanation 5A to Section 271(1)(c).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772203 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Other Referred Cases: CIT Vs. Raj Pal Bhatia, Beni Prasad Lahoti Vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVEEN KISHORE
• Assessee Lawyers: S. K. TULSIYAN; POOJA SOMANI; ARS
• Keywords: Set aside; Retraction; Search and seizure
• Section: 147; 148; 143(3); 271(1)(c); 132; 153A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA Nos.2685& 2686/KOL/2024 (Assessment Years:2015-16& 2016-17) Sunil Kumar Agarwal CF-246, Sector-1, Salt Lake, Kolkata-700064, West Bengal Vs. ACIT, Central Circle 3(2) 110, Shantipally, Aayakar Bhavan Poorva, Kolkata-700107, West Bengal (Appellant) (Respondent) PAN No. ACKPA8798J Assessee by : Shri S.K. Tulsiyan, & Ms. Pooja Somani, ARs Revenue by : Shri Praveen Kishore, CIT DR Date of hearing: 30.07.2025 Date of pronouncement: 28.08.2025 O R D E R Per Rajesh Kumar, AM: These are appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals)(hereinafter referred to as the “Ld. CIT(A)”]even dated 26.11.2024 for the AYs2015-16& 2016-17. The penalties were levied u/s 271(1)(c) of the Act by the ld. AO for A.Y. 2015-16 and 2016-17. 2. Since both the appeals related to the same assessee and are involving common issue, therefore these are being clubbed and decided together for the sake of convenience and brevity. We take the lead case as ITA No. 2685/KOL/2024 for A.Y. 2015-16 and the facts are extracted under. Printed from counselvise.com Page | 2 ITA Nos. 2685& 2686/KOL/2024 Sunil Kumar Agarwal; A.Y. 2015-16 & 2016-17 3. The only issue raised by the assessee in the grounds of appeal is against the order of ld. CIT (A) confirming the order of ld. AO passed under Section 271(1)(c) of the Act confirming the penalty of ₹47,90,999/- by wrongly invoking the explanation 5A to Section 271(1)(c) of the Act. 4. The facts in brief are that the search and seizure action under Section 132 was conducted against Health Care Group on 05-02-2021.The assessee was the key person of the group and was also covered in the search. The original return was filed by the assessee on 30.10.2015, declaring total income of₹ 21,03,680/-. The notice under Section 153A of the Act was issued to the assessee which was complied with by the assessee by filing the return of income on 31-01-2022 declaring total income at ₹1,61,03,680/- including the additional income disclosed under Section 132(4) of the Act of ₹1,40,000,000/-. The assessment was accordingly framed vide order dated 19-03-2022 passed under Section 153A/143(3) of the Act accepting the returned income. It is pertinent to state that during the course of search the assessee was forced to admit on behalf of the entire ESKAG group which was retracted by way of an affidavit dated 18-02-2021 and retraction was filed before the ld. AO on 30-02-2022. So, the penalty proceedings were accordingly initiated under Section 271(1)(c) of the Act for concealment of income and finally, the AO passed order under Section 271(1)(c) of the Act on 29-09-2022 imposing a penalty of ₹47,90,999/-. The penalty was imposed in respect of voluntary disclosure of ₹1,40,000,000/- made by the assessee during the course of search for which no incriminating documents were seized. 5. In the appellate proceedings, the order was confirmed by ld. CIT (A), thereby confirming the penalty levied. Printed from counselvise.com Page | 3 ITA Nos. 2685& 2686/KOL/2024 Sunil Kumar Agarwal; A.Y. 2015-16 & 2016-17 6. After hearing the arrival condition and perusing the materials available on record, we note that during the course of search, the assessee was forced to make disclosure of ₹20 crore on behalf of ESKAG group, which was retracted subsequently by way of an affidavit dated 18-02- 2021. However, while filing the return in response to Notice under Section 153A of the Act, the assessee disclosed Rs.1,40,00,000/- over and above the income disclosed in the regular return of income.We note that the retraction affidavit was also duly accepted by the ld. AO. We also note that the additional income of ₹ 1,40,00,000/- was not the result of discovery of any incriminating material during search or any material brought on record by the ld. AO during the assessment proceedings.The assessment was completed under Section 153A/ 143(3) of the Act, vide order dated 19-03-2022, accepting the returned income under Section 153A of the Act. Therefore, the explanation 5A to Section 271(1)(c) of the Act is not applicable. For the sake of ready reference, the said explanation is extracted below: - “\"Explanation SA.- Where, in the course of a search initiated under section 132 on or after the 1st 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 utilising (wholly or in part) his income for any previous year; or (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 part) for any previous year,which has ended before the date of search and,- (a) where the retion of income for such previous year has been furnished before the said date but such income has not been declared therein, or (b) the due date for filing the return of income for 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 Printed from counselvise.com Page | 4 ITA Nos. 2685& 2686/KOL/2024 Sunil Kumar Agarwal; A.Y. 2015-16 & 2016-17 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.” 6.1. A perusal of the above explanation reveals that where the assessee found to be the owner of any money, billion or jewelry or other valuable article or thing and the assessee claimed that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year or any income based on any entry in any books of account or other documents or transactions and he claimed that such entry in the books of account or other account or other documents or transactions represented his income for any previous year, which has ended before the date of search and where the return of income for such previous year has been furnished before the said date of search but such income has not been declared therein, or the due date for filing the return of income for such previous has expired and the assessee has not filed the return, then, the income declared by the assessee in the return furnished on or after the date of search shall be deemed to be a concealed income or an income qua which the assessee furnished the particulars. Therefore this is not the fact in the instant case before us. The additional income was disclosed by the assessee voluntarily for which there was no seizure of any incriminating material during the search nor any money, bullion or jewellery or thing which was not recorded in the return of income nor any income based on the entry in any books of account was found. Therefore, explanation 5A to Section 271(1)(c) of the Act is not applicable.The case of the assessee finds support from the decision of Delhi High Court in the case of CIT Vs. Raj Pal Bhatia (2011) 333 ITR 315, wherein the appeal of the Revenue is dismissed by holding as under: - Printed from counselvise.com Page | 5 ITA Nos. 2685& 2686/KOL/2024 Sunil Kumar Agarwal; A.Y. 2015-16 & 2016-17 “13. The Tribunal has held that this statement could not be treated \"books of account or other documents or assets\" which only could be the basis for invoking the provision of section 158BD of the Act. Admittedly, statement of Mrs. Charla is neither books of account' or 'assets. The question, therefore, is as to whether this statement can be treated as other documents' Prima facie, it is difficult to accept this proposition. Statement was not the document which was found during search. In fact this was the document which came to be created during the search as the statement was recorded at the time of search. Therefore, it cannot be said that the statement was 'seized during the search and thus, would not qualify the expression \"document\" having been seized during the search. In such a scenario, proper course of action was reassessment under section 147 read with section 148 of the Act. has held that that statement could not be construed as material found during the course of search operations for the purpose of Chapter XIV-B.\" Thus, the statement of the assessee cannot be said to be an incriminating material found during the course of search. Moreover, the same was retracted and the retraction affidavit was accepted as such by the learned AO.” 6.2. Moreover, the statement of the assessee cannot be said to be an incriminating material found during the course of search when the same was retracted and retraction affidavit was accepted by the ld. AO.The case of the assessee was also squarely covered by the decision of Beni Prasad Lahoti Vs. DCIT in ITA No. 301 and 305/Kol/2022 vide order dated 12.12.2022, wherein in identical facts the tribunal held as under: - \"13. No doubt, disclosure or admission made under section 132(4) of the Act during the course of search proceedings is admissible evidence, but not conclusive one. This presumption of admissibility of evidence is a rebuttable one, and if an assessee is able to demonstrate with the help of some material that such admission was either mistaken, untrue or based on misconception of facts, then, solely on the basis of such admission, no addition is required to be made. It is true that admission being declaration against an interest are good evidence, but they are notconclusive, and a party is always at liberty to withdraw the admission by demonstrating that they are either mistaken or untrue. In law, the retracted confession even may form the legal basis of admission, if the AO is satisfied that it was true and was voluntarily made. But then basing the addition on a retracted declaration solely would not be safe. It is not a strict rule of law, but only a matter of prudence. As a general rule, it is unsafe to rely upon a retracted confession without corroborative evidence. Due to this grey situation, CBDT issued Circular No.286/2/2003 prohibiting the departmental officials from taking confession in the search. The board is of the view that often the officials used to obtain confessions from the assessee and stop further recovery of the material. Such confessions have been retracted and then the addition could not withstand the scrutiny of the higher appellate authority, because no material was found, supporting such addition.” Printed from counselvise.com Page | 6 ITA Nos. 2685& 2686/KOL/2024 Sunil Kumar Agarwal; A.Y. 2015-16 & 2016-17 6.3. Considering these facts and circumstances of the case in the light of the aforesaid decisions, we are inclined to set aside the order of ld. CIT (A) and direct the AO to delete the penalty. The appeal of the assessee is allowed. 7. The issue raised in ITA No. 2686/KOL/2024 is similar to one as decided by us in ITA No. 2685/KOL/2024 for A.Y. 2015-16. Accordingly, our decision would, mutatis mutandis, apply to this appeal of assessee in ITA No.2686/KOL/2024 as well. Hence, the appeal of assessee in ITA No. 2686/KOL/2024 is allowed. 8. In the result, the both the appeals of the assessee are allowed. Order pronounced in the open court on 28.08.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.08.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "