DCIT, CENTRAL CIRCLE-2, JAIPUR, CENTRAL CIRCLE-2 JAIPUR vs. SHRI PRAKASH CHAND SHARMA, C-42, GOKUL PATH VAISHALI NAGAR, JAIPUR, JAIPUR

PER VIJAY PAL RAO, J.M. These three appeals by the revenue are directed against the composite order of ld. CIT (A)-4, Jaipur dated 27.03.2019 arising from the penalty orders passed under section 271(1)(c) of the IT Act for the assessment years 2010-11 to 12-13 respectively. The revenue has raised common grounds except the quantum of penalty deleted by the ld. CIT (A) in these appeals. The grounds raised for the assessment year 2010-11 are as under :-

“ 1. Whether on the facts and the circumstances of the case ld IT (A), was right in deleting the penalty of Rs. 53,78,285/- imposed u/s 271(1)(c) of the Act ignoring the fact that the assessee himself declared additional income in the ROI filed u/s 153A of the Act and the assessee has duly understood as to what was

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the purport and import of the notice and furnished his reply before AO on the charge of concealment of income.

The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

the business of financing and is a Director in M/s. Shubhdeep Finance Co. Pvt. Ltd.

and M/s. Prakash Deep Finance Co. Ltd. A search and seizure operation was carried

out under section 132 of the IT Act in the case of the assessee as well as group concern on 31st July, 2012. During the course of search and seizure action certain

documents were found revealing the nature of finance activities carried out by the

assessee known as 100 days financing scheme. In the statement recorded under

section 132(4) of the IT Act, the assessee surrendered an income of Rs. 10 crores

which was spread over to various assessment years and offered to tax in the returns

of income filed in response to notices issued under section 153A of the IT Act. The

AO while completing the assessment under section 143(3) read with section 153A of

the Act made the additions to the total income declared by the assessee on account

of undisclosed interest income, on account of disallowance of expenses and on

account of deposits made in the bank accounts of the employees of the assessee.

The details of the income declared by the assessee and additions made by the AO

for the assessment years 2010-11 to 2012-13 are as under :-

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A.Y. Income declared Addition made by the AO 2010-11 1,30,94,390 26,84,725 + 29,75,859 2011-12 3,20,29,420 82,59,551 69,54,913 2012-13 3,00,06,860

On further appeal in the quantum proceedings, the ld. CIT (A) partly deleted the

additions made by the AO and consequently the matter was carried to this Tribunal

in cross appeals by the revenue as well as by the assessee. This Tribunal vide composite order dated 30th July, 2018 in ITA Nos. 922, 923 & 924/JP/2016 and ITA

Nos. 935, 936 & 937/JP/2016 deleted the additions made by the AO and sustained

by the ld. CIT (A) on account of undisclosed interest income as well as on account of

deposits made in the bank accounts of the employees of the assessee whereas the

additions made by the AO on account of disallowance of expenditure was set aside

to the record of the AO for fresh adjudication. In the meantime, the AO initiated the

proceedings for levy of penalty under section 271(1)(c) and levied the penalty of Rs.

53,78,285/-, Rs. 1,31,42,199/- and Rs. 1,20,43,429/- for the assessment years

2010-11, 11-12 and 12-13 respectively. The assessee challenged the levy of penalty

before the ld. CIT (A) and raised a ground of validity of initiation of penalty as the

AO has not specified the default against which the penalty proceedings were

initiated by the AO. The ld. CIT (A) deleted the penalty levied by the AO for all

these years on this legal issue of validity of initiation of penalty proceedings.

Aggrieved by the order of the ld. CIT (A), the revenue has filed these appeals.

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by the assessee was based on the incriminating material found and seized during the

course of search and seizure action and further the AO has also made the additions

during the assessment proceedings based on the seizure material itself. Therefore,

the issue of validity of initiation of proceedings under section 271(1)(c) does not

arise when the assessee himself has surrendered the income being undisclosed

income. The ld. D/R has further contended that the ld. CIT (A) has admitted an

additional ground regarding validity of initiation of penalty proceedings without

giving an opportunity of hearing to the AO. Since the ld. CIT (A) has not

adjudicated the matter on merits but deleted the penalty only on the legal issue and

that too without giving an opportunity to the AO, therefore, there is a violation of

principles of natural justice and Rule 46A of the IT Rules. Thus the ld. CIT/DR has

contended that the matter may be remanded to the record of the ld. CIT (A) to

decide the same afresh after granting an opportunity of hearing to the AO. The ld.

D/R has further contended that even otherwise when the assessee has not raised

this issue before the AO, then the same cannot be raised before the ld. CIT (A). In

support of his contention, he has relied upon the decision of Delhi Benches of the

Tribunal in case of Vijay Aggarwal vs. DCIT, 109 taxmann.com 175 (Delhi Trib.) as

well as the decision of Hon’ble Madras High Court in case of Sundaram Finance Ltd.

vs. ACIT, 403 ITR 407 (Madras). Thus the ld. D/R has submitted that the Delhi

Benches of the Tribunal in case of Vijay Aggarwal vs. DCIT (supra) after following

the decision of Hon’ble Madras High Court in case of Sundaram Finance Ltd. (supra)

has held that the question whether correct limb has been applied is a question of

fact and not a question of law and, therefore, the said question cannot be raised

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first time before the Appellate Authority. The ld. D/R has then relied upon the decision dated 22nd May, 2019 of Chennai Benches of the Tribunal in case of ITO vs.

Shri Rajan Kalimuthu in ITA No. 2900/Chny/2018 and submitted that the Tribunal

has decided the issue of validity of initiation of penalty proceedings in favour of the

revenue after considering the decision of Hon’ble Karnataka High Court in case of

CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Kar.). Thus relying

upon the above said decision, the ld. D/R has contended that once the AO has

issued the show cause notice to the assessee and the assessee has duly responded

to the show cause notice, then there is no violation of principles of natural justice so

far as the opportunity of hearing was given to the assessee. The assessee was very

much aware and knew about the default as the entire addition and disclosure of

income is based on the search and seizure action under section 132 of the Act.

Therefore, it cannot be a case of illegality in the show cause notice issued by the

AO. As regards the merits of the case, the ld. D/R has submitted that since it is a

case of search and seizure action carried out under section 132 of the Act,

consequently the Explanation 5A to section 271(1)(c) is applicable in the case of the

assessee. The AO has applied the Explanation 5A in the case of the assessee. He

has relied upon the penalty order passed under section 271(1)(c) by the AO.

issued identical show cause notices dated 13.03.2015 which are very vague and

showing a number of alleged defaults for not furnishing return of income, not

complying with the notice issued under section 22(4)/23(2), 142(1)/143(2) of the

Act as well as the concealment of particulars of income or furnishing inaccurate

particulars of income. Thus the AO has issued show cause notice under section 274

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read with section 271 of the IT Act for various defaults without striking off the

irrelevant part of the said notice. Thus the AO was not sure about the charges for

which the penalty proceedings were proposed to be initiated. He has further

contended that neither in the show cause notice the AO has shown about the

charges for levy of penalty nor in the penalty order passed under section 271(1)(c)

the AO has given a definite finding. He has referred to the concluding para of the

order dated 11.08.2017 passed under section 271(1)(c) of the Act and submitted

that the AO has again stated that the penalty is levied under section 271(1)(c) for

concealment of particulars of income or furnishing inaccurate particulars of such

income to the extent of the respective amounts for each year. Therefore, the AO

has given an identical finding for all these years whereby it is clear that the AO was

not sure even at the time of passing the penalty order what default the assessee has

committed. The ld. A/R has relied upon the decision of Hon’ble Jurisdictional High Court dated 6th December, 2016 in case of Sheveta Construction Co. Pvt. Ltd. vs.

ITO in DB IT Appeal No. 534/2008. He has also relied upon the decision of Third

Member decision of Amritsar Bench of the Tribunal in case of HPCL Mittal Energy

Ltd. vs. ACIT, 169 DTR 1 and submitted that the Tribunal has held that even if the

AO was not sure at the stage of initiation of penalty proceedings of the precise

charge as to ‘concealment of particulars of income’ or ‘furnishing of inaccurate

particulars of income’, the AO is required to give a definite finding and a conclusive

default at the time of passing the penalty order. In the absence of such definite

finding of the AO in the penalty order, the same is invalid. Hence the ld. A/R has

submitted that the initiation of penalty proceedings itself is very vague and in

uncertain terms, even does not specify under which sub-section of section 271 of

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the IT Act the AO proposed to initiate the penalty proceedings. Hence he has

supported the findings of the ld. CIT (A) on this account.

4.1. As regards the merits of the issue, the ld. A/R has submitted that the Tribunal

has already deleted the additions made by the AO on account of undisclosed interest

income as well as deposits made in the bank accounts of the employees of the

assessee, therefore, the penalty levied by the AO in respect of such additions is not

sustainable. Further, the Tribunal has also set aside the issue of disallowance of

expenditure and consequently the penalty levied by the AO in respect of the said

addition would also not survive.

4.2. As regards the penalty levied against income surrendered by the assessee

and offered to tax in the returns of income, the AO has applied Explanation 5A to

section 271(1)(c). However, in the absence of making any reference to the seized

material disclosing such undisclosed income, the Explanation 5A is not applicable in

the case of the assessee. Once the Explanation 5A to section 271(1)(c) is not

attracted to the case of the assessee, then the penalty under section 271(1)(c)

cannot be levied when the assessee has declared the said income in the return of

income filed in response to notice issued under section 153A of the IT Act.

record. Though the ld. CIT (A) has not dealt with the merits of the levy of penalty

but deleted the same on the ground of validity of initiation of penalty proceedings as

the AO has not specified a default/charge in the show cause notice issued under

section 274 read with section 271 of the Act and further no definite finding is given

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by the AO in the penalty order passed under section 271(1)(c). However, so far as

the penalty levied by the AO in respect of the additions made to the total income of the assessee, this Tribunal in the quantum appeal vide order dated 30th July, 2018

has either deleted the said addition made by the AO or set aside the same to the

record of the AO. The relevant findings of the Tribunal in ITA Nos. 922, 923 &

924/JP/2016 and ITA Nos. 935, 936 & 937/JP/2016 are in para 9, 22, 35 and 39 are

as under :-

“9. We have considered the rival submissions as well as relevant material on record. There is no dispute that prior to 19/6/2009, no evidence was found during the search and seizure action regarding any income on account of interest from 100 days finance scheme. Though, the assessee has not disputed the fact that the assessee has been carrying out this activity since long time and also shown the income in the books of account, however, the income shown in the books of account is not matching with the entries found in the seized material. The Assessing Officer has estimated the income by taking the opening balance of capital at Rs. 8.00 crores as on 01/4/2006, which was not disputed by the assessee. However, the assessee contended that due to ill health of the assessee during the said period, as the assessee was suffering from Tuberculosis and therefore, was not able to do any business activity. Hence, the assessee’s claim that the income declared by the assessee of Rs. 13,36,237/- for the year under consideration is justified and even the total income declared by the assessee for the three assessment years i.e. A.Y. 2007- 08 to 2009-10 and part of the A.Y. 2010-11 up to 17/6/2009 is matching with the application of income. The assessee has produced fund flow statement showing the income and application of income for all these years. The ld. CIT(A) has annexed the fund flow chart to the impugned order. It is pertinent to note that the assessment framed by the Assessing Officer U/s 143(3) read with Section 153A for the A.Y. 2007- 08 to 2009-10 are falling in the category of reassessment as original assessment as on the date of search were not pending and therefore, in absence of abetment of assessments the orders passed by the Assessing Officer are in the nature of reassessment pursuant to the search and seizure action U/s 132 of the Act. It is

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settled proposition of law that in the reassessment proceedings U/s 153A of the Act, the Assessing Officer can assessee an income based on seized material. In absence of any seized material regarding the interest income for the year under consideration, no addition can be made on estimated basis. It is an undisputed fact that the material found during the search and seizure action contains the entries w.e.f. 19/6/2009 and therefore, prior to the said period, no record or material was found to disclose or indicate any income on account of interest on the scheme. Only fact which can be ascertained from the documents is that the assessee was engaged in the business activity of finance under the scheme known as 100 days scheme. However, in absence of any seized material, the Assessing Officer cannot make an addition on estimate basis. The assessee already declared and surrendered an amount of Rs. 10 crores on account of cash, investment and interest income. Hence, having regard to the facts and circumstances of the case when the Assessing Officer as well as the ld. CIT(A) has accepted the fact that the assessee was suffering from the ailment and was undergoing the treatment of Tuberculosis during the period under consideration then the estimation made by the Assessing Officer as well as the confirmed by the ld. CIT(A) without any proper and reasonable basis and particularly in the reassessment proceedings U/s 153A is not permitted. Even the Assessing Officer has not worked out the income on basis of the funds available with the assessee and employed in the business activity by considering the corresponding application of income which was found during the course of search and seizure action as well as recorded in the books of account of the assessee. Therefore, when the Assessing Officer has not found any significant discrepancy in the income offered by the assessee and corresponding application of income then there is no reason for not accepting the income offered by the assessee. Accordingly, in facts and circumstances of the case when the addition was made by the Assessing Officer purely on ad hoc estimation and without any tangible material, the same is not sustainable and consequently is liable to be deleted. Hence we delete the addition made by the Assessing Officer and sustained by the ld. CIT(A) on this account. Accordingly, ground No. 1 of the assessee’s appeal is allowed and ground No. 1 of the revenue’s appeal is dismissed.” “22. We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has made addition of Rs. 13,26,600/- on account of cash deposits in the bank account of three persons namely Shri Rajendra Jain, Shri

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Ashok Sharma and Shri Mahaveer Prasad Sharma. The Assessing Officer treated the deposits made in the bank accounts of these persons as undisclosed income of the assessee on the basis of signed cheques of these persons were found during the search and seizure action at the place of the assessee. Though, the signed cheque book found with the assessee can be a ground for further investigation and inquiry regarding any undisclosed income of the assessee by using the accounts of these persons, however, the cheque book itself cannot be considered as an evidence for undisclosed income. The Assessing Officer has picked up the entries in the bank accounts of these persons where the cash was deposited. All other entries in these bank accounts were accepted by the Assessing Officer as carried out by these persons and not by the assessee, therefore, it is not a case of the Assessing Officer that these accounts were fully operated by the assessee. The assessee has contended that the cheque books were taken from these persons to protect the assessee’s interest as these persons were working with the assessee and handling the cash and therefore, in order to protect any loss due to misappropriation of fund by these persons, the assessee has taken signed cheques of these persons. We further note that the assessee produced return of income of all these three persons wherein the incomes were declared for the A.Y. 2007-08 and 2008-09. The ld. CIT(A) while rejecting the contention of the assessee has observed that the income declared by these persons is only equal to the amount deposit in the bank and therefore, it cannot be accepted that those deposits were made from the declared income of these persons as there must be some household expenses by these persons. Thus, the explanation and supporting evidence produced by the assessee was not accepted by the authorities below on the ground that the income declared by these persons in their return of income is only matching with the deposits and therefore, the entire source of deposit is not explained. It is pertinent to note that the assessment under consideration is reassessment U/s 153A of the Act and therefore, the addition of income can be made only on the basis of seized material. The cheque books found during the search and seizure action is not an evidence to disclose any undisclosed income of the assessee in the form of deposits of cash in the bank accounts of these persons. Only inference which can be drawn from the availability of cheque books with the assessee is that the assessee might have used the bank accounts of these persons. However, in absence of any documentary evidence of operating of the bank accounts by the assessee, the mere availability of

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cheque books with the assessee cannot be an evidence for making addition of the cash deposits in the accounts of these persons specifically when all these persons are regularly assessed to income tax. The assessee filed the return of income in support of explanation. Further the statement of one of these persons namely Shri Mahaveer Prasad Sharma was recorded by the search party U/s 132(4) of the Act and no such question was asked from the said person regarding the deposits in the bank account. Therefore, when the assessee has discharged its onus by producing the return of income of these persons wherein the declared income was sufficient to cover the deposits made in the bank accounts, then in the absence of any direct evidence or tangible material to disclose the fact that the cash deposit in the bank accounts of these persons belongs to the assessee, the addition made by A.O. is not sustainable. The said deposit is subject matter of assessment in the hands of these persons, accordingly, in the facts and circumstances of the case, we delete the addition made by the Assessing Officer on this account.” “35. We have heard the rival submissions and perused the relevant material available on the record. There is no dispute that the amount of expenditure as claimed by the assessee against the undisclosed income for these three assessment years i.e. 2010-11 to 2012-13 were found recorded in the seized material. The undisclosed income offered by the assessee is also based on the same seized material and therefore, once the income and expenditure both are recorded in the same material, which is found and seized during the course of search and seizure action then the entire record and entries found in the seized material has to be taken into consideration and not a part of the seized material is accepted and part can be rejected. Thus, the seized material cannot be considered or accepted in piecemeal but the evidence which is the basis of undisclosed income has to be considered as a whole. However, the question arises whether the expenses found recorded in the seized material is already taken into account as part of the expenses recorded in the books of account or not. Neither the Assessing Officer nor the ld. CIT(A) has examined the relevant record and details to find out this fact that the expenditure which is found recorded in the seized material is also part of the expenditure claimed in the regular books of account. On the direction of the Bench, the assessee has filed a complete and comparative details of all the expenditure found recorded in the books of account as well as the expenditure which is recorded in the seized material. The year wise comparative statement shows that the some of

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the expenditure found recorded under common head in both i.e. the books of account as well as seized material. However, many items which were recorded in the seized material are not claimed in regular books of account. Therefore, it is evident from the comparative details of the expenditure that the entire expenditure which is recorded in the seized material has not been claimed in the books of account. We find that about 50% of the items which are recorded in the seized materials are not recorded in the books of account. However, the remaining items which are recorded in both seized material as well as books of account are under common heads, therefore it requires the verification and examination of further details of each and every sub-head of expenditure under a particular head. Hence, we find that the disallowance of the entire claim of the expenditure by the authorities below is contrary to the record and therefore uncalled for, though the possibility of some of the expenditure found in the seized material may also be claimed in the regular books of account cannot be ruled out. Therefore, to the extent of the expenditure, which is not claimed in the books of account and found recorded in the seized material, the same is an allowable claim and cannot be denied. Remaining claim of expenditure which is recorded under common heads is required further examination and verification. Accordingly in the facts and circumstances, we set aside this issue to the record of Assessing Officer for conducting a proper enquiry of the details of the expenditure and to find out whether any part of the expenditure which is found in the seized material has been claimed in the books of account and then only to that extent the claim of the assessee can be disallowed. Needless to say that the assessee to be given an appropriate opportunity of hearing before deciding this issue.” “39. We have considered the rival submissions as well as relevant material on record. There is no dispute that the sale bills of jewellery was found during the course of search and seizure action and seized as Annexure-AS-39, therefore, it is a seized material and cannot be held as a bogus claim or document manipulated or manufactured by the assessee being afterthought cooked story. Therefore, when the sale of jewellery is found as per the bills seized during the search then the transaction of sale cannot be disputed by the department. The sale proceeds of the jewellery was also undisputedly received by cheque and credited in the bank account of mother in law of the assessee. The only doubt which is raised by the Assessing Officer is that it is beyond human probability that she would not give

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anything to other daughters and son and had given entire her belongings to the assessee. Even if, this apprehension of the Assessing Officer is turned out to be correct the issue is only whether the assessee has mischievously taken the entire amount of his mother in law from the bank account by using the signed cheque book with the assessee. Thus, this itself will not change the character of income and source of that amount which was found credited in the bank account of mother in law as a sale proceeds of jewellery. The mother in law of the assessee already expired on 18/8/2009 and even if she had never filed return of income or wealth tax, the same would not impute the tax liability in the hands of the assessee when this is not the income of the assessee but only the amount which was transferred from the bank account of the mother in law to the account of the assessee. The nonsharing of this amount with other daughters and son can be a family dispute and can be settled mutually between themselves and has no bearing on the taxability of the income in the hands of the recipients. Therefore, once the amount was found duly credited in the bank account of Smt. Saraswati Devi Sharma and subsequently it was transferred in the account of the assessee then the transaction cannot be doubted. Even the source of credit in the account of mother in law is found during the search and seizure action. The assessee explained that during the last days of her life, she was residing with the assessee and her daughter Smt. Kalawati Sharma, wife of assessee and thus it is natural that all her belongings and valuables would be at the place of assessee. Accordingly, in view of the above facts and circumstances of the case, we are of the considered opinion that when the seized material itself shows the source of amount deposited in the bank account of Smt. Saraswati Devi Sharma by cheque and subsequent transfer from her account to the account of assessee, the same cannot be treated as undisclosed income of the assessee. Accordinlgy, we delete the addition made by the Assessing Officer on this account.”

In view of the order of the Tribunal in quantum appeals, the additions made by the

AO on account of undisclosed interest income and deposits made in the bank

account of the employees stand deleted. Therefore, the penalty levied by the AO in

respect of such additions is not sustainable and liable to be deleted.

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5.1. As regards the addition made by the AO on account of disallowance of certain

expenses, since this issue has been set aside by the Tribunal to the record of the

AO, therefore the addition itself is no more in existence and consequently the

penalty levied under section 271(1)(c) in respect of such addition would not survive.

Therefore, the penalty levied by the AO against the additions made to the total

income is otherwise liable to be deleted.

5.2. Now we take up the issue of validity of initiation of proceedings for levy of

penalty. At the outset, we note that the AO has issued show cause notices dated

13.03.2015 for these three years which are identical in nature and reproduced as

under :-

“NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT, 1961.

PIN – AGMPS 2776 H OFFICE OF THE ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. Date : 13-03-2015. To, Shri Prakash Chand Sharma C-42, Gokul Path, Vaishali Nagar, Jaipur.

Whereas in the course of proceedings before me for the assessment year 2010-11 it appears to me that you :-

*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income-tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148/143(3) of the Income-tax Act, 1961, No._____ dated _____ or have without reasonable cause failed to furnish it within the time allowed and to the manner required by the said section 139(1) or such notice.

*have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under

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section 142(1)/143(2) of the Income-tax Act, 1961 No._____ dated 06.06.2012.

*have concealed the particulars of your income or______ furnished inaccurate particulars or such income. Penalty u/s 271(1)(c) initiate for undisclosed income of the specified previous year.

You are hereby requested to appear before me at 11.00 AM on 15-05-2015 and show cause why an order imposing penalty on you should not be made under section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through your authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271.

Sd/- (Praveen Kumar Mittal) Asstt. Commissioner of Income-tax, Central Circle-2, Jaipur.”

“NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT, 1961.

PIN – AGMPS 2776 H OFFICE OF THE ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. Date : 13-03-2015. To, Shri Prakash Chand Sharma C-42, Gokul Path, Vaishali Nagar, Jaipur.

Whereas in the course of proceedings before me for the assessment year 2011-12 it appears to me that you :-

*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income-tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148/143(3) of the Income-tax Act, 1961, No._____ dated _____ or have without reasonable cause failed to furnish it within the time allowed and to the manner required by the said section 139(1) or such notice.

*have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under

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section 142(1)/143(2) of the Income-tax Act, 1961 No._____ dated 06.06.2012.

*have concealed the particulars of your income or______ furnished inaccurate particulars or such income. Penalty u/s 271(1)(c) initiate for undisclosed income of the specified previous year.

You are hereby requested to appear before me at 11.00 AM on 15-05-2015 and show cause why an order imposing penalty on you should not be made under section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through your authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271.

Sd/- (Praveen Kumar Mittal) Asstt. Commissioner of Income-tax, Central Circle-2, Jaipur.”

“NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT, 1961.

PIN – AGMPS 2776 H OFFICE OF THE ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. Date : 13-03-2015. To, Shri Prakash Chand Sharma C-42, Gokul Path, Vaishali Nagar, Jaipur.

Whereas in the course of proceedings before me for the assessment year 2012-13 it appears to me that you :-

*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income-tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148/143(3) of the Income-tax Act, 1961, No._____ dated _____ or have without reasonable cause failed to furnish it within the time allowed and to the manner required by the said section 139(1) or such notice.

*have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under

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section 142(1)/143(2) of the Income-tax Act, 1961 No._____ dated 06.06.2012.

*have concealed the particulars of your income or______ furnished inaccurate particulars or such income. Penalty u/s 271(1)(c) initiate for undisclosed income of the specified previous year.

You are hereby requested to appear before me at 11.00 AM on 15-05-2015 and show cause why an order imposing penalty on you should not be made under section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through your authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271.

Sd/- (Praveen Kumar Mittal) Asstt. Commissioner of Income-tax, Central Circle-2, Jaipur.”

In the said show cause notice the AO has mentioned in the caption as ‘Notice

under section 274 read with section 271 of the Income-Tax Act, 1961’.

Further, in the body of the said notice the AO has alleged various defaults for not

filing the return of income, not complying the notice issued under section

22(4)/23(2), 142(1)/143(2) of the IT Act and the concealment of particulars of

income or furnishing inaccurate particulars of such income. The AO has also given

the date of the notices issued under section 142(1)/143(2) as 06.06.2012. It is

manifest from these show cause notices that this date of 06.06.2012 has no

connection with the assessment proceedings of the assessee when notice under

section 153A itself was issued on 10.03.2013. A bare reading of the show cause

notice clearly shows that it was issued by the AO without application of mind and

even without striking off the irrelevant part of said show cause notice. Although the

show cause notice was not in the printed proforma but it was taken as a print out

18 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

specifically in the name of the assessee. Thus giving the particulars of the assessee

along with the PAN of the assessee in the show cause notice clearly shows that this

notice was specifically issued to the assessee, however, the AO has grossly failed to

even indicate for what default the show cause notice was issued to the assessee.

Therefore, the show cause notice itself suffers from illegality of not specifying the

default/charges for which the penalty proceedings were proposed to be initiated by

the AO. Once the AO has not indicated the default/breach of the assessee and the

initiation of the proceedings under which of the sub-section of section 271 of the IT

Act, then in our considered view the show cause notice suffers from patent illegality

and not irregularity. We further note that even in the penalty order, the AO has

levied the penalty in respect of the amount surrendered by the assessee as well as

additions made by the AO in the assessment proceedings and thereby concluded as

under :-

“ In view of the above, a penalty of Rs. 53,78,285/- is hereby levied u/s 271(1)(c) of the I.T. Act, 1961 for concealment of particulars of income or furnished inaccurate particulars of such income to the extent of Rs. 1,58,23,140/-.”

Thus even in the concluding part the AO was not sure about the charge and default

of the assessee for which the penalty was levied under section 271(1)(c) of the Act.

In case of surrender of the income, there cannot be any uncertainty and the AO

ought to have given a specific charge for levy of penalty. Similarly, when the AO

has made the additions to the total income of the assessee, then the AO was under

obligation to specify the charge and make the assessee known for what default the

19 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

penalty was to be levied and has been levied. The AO has failed on both the counts

as neither at the time of initiation of penalty proceedings nor at the time of passing

the penalty order has specified the charge. The Hon’ble Jurisdictional High Court in

case of Sheveta Construction Co. Pvt. Ltd. vs. ITO (supra) while considering an

identical issue has held in para 5 to 10 as under :-

“ 5. Counsel for the appellant relied upon the decision of Andhra Pradesh High Court in case of Chennakesava Pharmaceuticals vs. Commissioner of Income Tax reported in (2012) 349 ITR 196, wherein it has been held as under :-

“ In Reliance Petro Products Pvt. Ltd.’s case (1 supra), the Supreme Court also held that imposition of penalty is unwarranted when there is no finding in the assessment order that details supplied by the assessee were found to be false. This indicates that the view taken by the Delhi High Court in Ram Commercial Enterprises Ltd.’s case (6 supra) which has been approved in Dilip N. Shroff’s case (10 supra) continues to be valid and this part of the judgment in Dilip N. Shroff’s case (10 supra) has not been over ruled and continues to be good law. Moreover the decision of the Delhi High Court in Ram Commercial Enterprises (6 supra) was also followed by the same High Court in Commissioner of Income Tax v. M.K. Sharma (9supra) and SLP (c) No. 17591 of 2008 filed against the said decision was dismissed by the Supreme Court on 18.7.2008.

Applying the above principle that the assessing officer should record in the assessment order his satisfaction that the assessee had either concealed the income or furnished inaccurate particulars of income in his return before imposing penalty, we noticed that in the assessment orders passed by the assessing officer for the assessment year 198283 (which is the subject matter of I.T.T.A. No.29 of 2000) and for the assessment year 198384 (which is subject matter of I.T.T.A. No. 33 of 2000), no such satisfaction is recorded.”

20 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

“ It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations.

The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice.

The Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal. In the facts and circumstances of the case, there are enough material to show that the action on the part of the appellant may not be said to be such which would attract the peal provision under s. 271(1)(c). For the reasons aforementioned, the impugned judgment cannot be sustained.”

7.1. However, Mr. Singhi appearing for the department submits that a perusal of the order of penalty makes it amply clear that both the things are fulfilled. In that view of the matter the view taken by the Tribunal is required to be accepted.

21 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order.

Thus it is mandatory requirement that the AO has to specify the default/charge

whether he propose to initiate the proceedings for concealment of income or

furnishing inaccurate particulars of income. Even in the standard proforma used by

the AO, the AO is required to delete the irrelevant and inappropriate word in the

paragraph. Similarly, the Third Member decision of Amritsar Bench of the Tribunal in

case of HPCL Mittal Energy Ltd. vs. ACIT (supra) has considered this issue and given

the concluding finding in para 21 as under :-

“21. Apart from the above three situations in which the AO has clear-cut satisfaction, there can be another fourth situation as well. It may be when it is definitely a case of under-reporting of income by the assessee for which an addition/disallowance has been made, but the AO is not sure at the stage of initiation of penalty proceedings of the precise charge as to ‘concealment of particulars of income’ or ‘furnishing of inaccurate particulars of income’. In such circumstances, he may use slash between the two expressions at the time of initiation of penalty proceedings. However, during the penalty proceedings, he must get decisive, which should be reflected in the penalty order, as to whether the assessee is guilty of ‘concealment of particulars of income’ or ‘furnishing of inaccurate particulars of such income’. Uncertain charge at the time of initiation of penalty, must necessarily be substituted with a conclusive default at the time of passing the penalty order. If the penalty is initiated with doubt

22 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

and also concluded with a doubt as to the concealment of particulars of income or furnishing of inaccurate particulars of such income etc., the penalty order is vitiated. If on the other hand, if the penalty is initiated with an uncertain charge of ‘concealment of particulars of income/furnishing of inaccurate particulars of income’ etc., but the assessee is ultimately found to be guilty of a specific charge of either ‘concealment of particulars of income’ or ‘furnishing of inaccurate particulars of income’, then no fault can be found in the penalty order.”

Therefore, uncertain charge at the time of initiation of penalty proceedings must

necessarily be substituted with a conclusive default at the time of passing the

penalty order. If the AO has initiated the penalty with doubt and also concluded

with a doubt, then the penalty order suffers from illegality and liable to be quashed.

The ld. CIT (A) has decided this issue by following various decisions as held in para

5.5 to 6 as under :-

“5.5 Thus, perusal of the notices indicates that the limb under which penalty u/s 271(1)(c) is proposed to be imposed is not categorical. In other word the notice is not specific in making a charge against the appellant for which penalty u/s 271(1)(c) is proposed to be imposed. As indicated earlier, even the assessment order is also not specific in pointing out that under which limb of section u/s 271(1)(c) the penalty is initiated [i.e. whether penalty initiated for concealment t of income or furnishing inaccurate particulars of income.]

5.6 Hon'ble Rajasthan High Court in the judgment of Sweta Construction (ITA 534/2008) has made observ

23 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order.

In this regard, I have perused the said paras 59 to 61 of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) and the same read as under:

"NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature.

In either event, the person who is accused of the conditions mentioned in Section271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form „here all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee.

24 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts arid materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.

25 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

5.7 Further, the Hon'ble Karnataka High Court in the case of CIT Vs. SSA Emerald Meadows (ITA no. 380/2015) has followed the aforesaid decision holding that the notice issued by the AO under section 274 r.w.s. u/s 271(1)(c) to be bad in law as it does not specify which limb of section u/s 271(1)(c) of the act under which it is initiated. The Hon'ble Supreme Court in CIT Vs. SSA's Emerald Meadows has dismissed the SLP (73 Taxmann.com 248).

5.8 Further, similar view has been adopted by various courts wherein relief has been granted to the appellant in case the penalty notice u/s 271(1)(c) is vague and not specific in pointing out the limb under which penalty I proposed to be imposed. Some of the such decisions, including those by the Hon'ble ITAT Jaipur are :

Sh Samson Perincherry Vs. CIT (ITA no 1154 of 2014)(M m) 1)

Shankar Lal KhandelwalVs DCIT [ITA 878/_IP/2013] 2)

3) Shri Murari Lal Mittal [334/JP/2015]

Narayana Heights & Powers Vs ITO [ ITA No. 1033/JP/2016] 4)

5) Sai Venkata Construction Vs. Addl CIT ( ITA 994 & 995/2013)( Pune)

6) Sanjog Tarachand Lodha Vs. ITO (ITA no 688 & 689 of 2014)( Pune)

7) Sanghavi Savala Commodities Brokers Vs. ACIT (ITA 1746/Mum/2011)

8) Deepak umar Patwari Vs. ACIT (ITA 616 to 618/kol/2013)

Considering the facts and circumstances of the case and respectfully following the binding decision of Hon'ble Rajasthan High Court and jurisdictional Hon'ble ITAT there cannot be other view to take but to hold that penalty imposed u/s 271(1)(c) is bad in law. The appellant thus succeed on legal ground/contention raised. The penalty is therefore directed to be deleted. No adjudication on merit of imposition of penalty U/s 271(1)(c) is considered necessary.”

26 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

In view of the facts and circumstances of the case as discussed above as well as

various binding precedents, we do not find any error or illegality in the impugned

order of the ld. CIT (A).

5.3. As regards the decision relied upon by the ld. D/R, we find that the Tribunal

in case of Vijay Aggarwal vs. DCIT (supra) has held in para 16 and 17 as under :-

“16. Coming to the plea taken for the first time before us that the penalty notice did not specify under which limb of the section the penalty proceedings have been initiated. In our considered opinion this issue was never raised before the first appellate authority and has been raised for the first time before the Tribunal. We agree with the DR that the question whether correct limb has been applied is a question of fact and not a question of law. For this proposition we draw support from the decision of the Hon'ble Madras High Court in the case of Sundaram Finance Ltd. v. Asstt. CIT [2018] 93 taxmann.com 250/403 ITR 407 wherein the Hon'ble High Court, interalia held as under :— "(ii) That on the facts, even assuming that there was a defect in the notices, it had caused no prejudice to the assessee, which had understood the purport and import of the notices issued under section 274 read with section 271. In the notices the relevant columns had been marked, more particularly, when the case against the assessee was that they had concealed particulars and had furnished inaccurate particulars of income. The issue was not a question of fact. The assessee had, at no earlier point of time, raised the plea before the authorities that on account of the defect in the notices it was put to prejudice. All violations did not result in nullifying the orders passed by the statutory authorities." 17. The Hon'ble High Court while holding the above has considered the decision of the Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250/218 Taxman 423/359 ITR 565 and the decision of Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows [2016] 73 taxmann.com 248/242 Taxman 180. Considering the judicial decisions (supra) we do not find any merit in the fresh claim of the assessee. Moreover neither the assessee has moved any application for raising any additional ground nor he has been able to bring out any question of law which can be raised before the appellate authority for the first time.”

It is clear that this plea was raised by the assessee first time before the Tribunal

even without raising any additional ground and, therefore, the Tribunal by following

27 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

the decision of Hon’ble Madras High Court in case of Sundaram Finance Ltd. vs.

ACIT (supra) has not entertained such plea. We further note that the Hon’ble

Madras High Court in case of Sundaram Finance Ltd. vs. ACIT (supra) has observed

in para 16 as under :-

“16. We have perused the notices and we find that the relevant columns have been marked, more particularly, when the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee's case, as it is purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage.”

The Hon’ble High Court has held that since it is a question of fact and was never

raised before the authorities below and first time it was raised before the Hon’ble

High Court, therefore, the same plea was not entertained by the Hon’ble High Court

on account of belated stage. Accordingly, these decisions are not applicable in the

facts of the present case when the assessee has challenged the penalty order before

the ld. CIT (A) and raised this issue. So far as the violation of principles of natural

justice as raised by the ld. D/R, we find that no such ground has been raised by the

28 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

AO in these appeals and, therefore, the AO was not aggrieved by the proceedings of

the ld. CIT (A) admitting the ground of validity of initiation of penalty proceedings.

Further it is also undisputed fact that the AO always receive the notice of the appeal

proceedings pending before the ld. CIT (A) and, therefore, it is at the discretion of

the AO whether to appear and object the appeals before the ld. CIT (A) or not.

Accordingly, when the order itself is questioned before the ld. CIT (A), then the

assessee is free to take all the grounds before the ld. CIT (A) and there is no legal

bar for raising the issue before the ld. CIT (A) as the ld. CIT (A) is having the

coterminous power of the AO.

5.4. As regards the merits of the issue of levy of penalty under section 271(1)(c)

against the additional income offered by the assessee to tax, we find that the AO

has applied Explanation 5A to section 271(1)(c) and given his finding in para 3 to 12

as under :-

“3. I have considerd the submissions of the A/R of the assessee and found not acceptable in view of the facts of the case and also in view of the provisions of section 271(1)(c) of the I.T. Act.

29 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

which was not declared in the return of income u/s 139 has been declared in the ROI u/s 153A. Had the additional income been declared simply to buy peace of mind and to avoid litigation, such additional income would not have been backed up by specific and quantified difference in specific heads of income. The very fact that such additional income was related to specific heads in a quantified manner proves that the additional income declared in the return of income u/s 153A was based on particulars of income concealed in the ROI u/s 139. This fact also proves that the additional income declared u/s 153A was not to buy peace of mind and to avoid litigation. The fundamental contention raised by the assessee, therefore, fails. Consequently, the case laws cited and relied upon by the assessee, also do not find application in the instant case. 6. Now, So far as the legal position of proceedings u/s 271(1)(c) of the Act are concerned, let us first examine the relevant statues by way of which, penalty u/s 271(1)(c) in this case can be imposed.

Explain 5A to section 271(a)(c) is clear & categorical in this regard.

For the sake of immediate reference, the contents of explanation 5A are reproduced as under:-

[Explanation to section 271(1)(c)- Where, in the course of search initiated under section 132 on or after the ft 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 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 return of income for such previous year has been furnished before the said date but such income has not been declared therein; or

30 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

(b) the due date of 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 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.]

31 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

limb to it as contained in clause (ii). According to clause (ii) of Explanation 5A to section 271(1)(c), in cases of search conducted after 01-06-2007,

'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 party) 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 but such income has not been declared therein 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 particulars of his income or furnished inaccurate particulars of such income'.

The assessee has duly objected before the AO regarding applicability of Explanation

5A and pleaded that since there is no incriminating document found as a result of

search indicating any undisclosed income nor any evidence was brought on record

32 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur.

during the course of assessment from which it could be alleged that the assessee

was having undisclosed income. The AO while countering these contentions of the

assessee has just referred to clause (ii) of Explanation 5A to section 271(1)(c).

Therefore, the AO has not disputed these factual contentions of the assessee and

also not referred to any incriminating material either in the assessment order or in

the penalty proceedings so far as the additional income offered by the assessee in

the return of income. It is pertinent to note that the Explanation 5A to section

271(1)(c) is deeming fiction which cannot be extended beyond the scope of the said

provision. It is clear from the Explanation 5A that once any money, bullion,

jewellery or other valuable article or thing or any income based on any entry in the

books of account or other documents or transactions but the assessee has not

declared the said income in the return of income filed prior to the date of search,

then even if such income is declared in the return of income filed post search, the

assessee would be deemed to have concealed the particulars of his income or

furnished inaccurate particulars of income. Therefore, only when the conditions

prescribed under Explanation 5A and particularly the income disclosed by the

assessee representing the money, bullion, jewellery or other valuable article or thing

or income based on any entry in any books of account or other record, the same

would attract the said Explanation 5A and assessee cannot escape from the mischief

of the penalty provision under section 271(1)(c) merely because the said income is

declared in the return of income filed after search. In the case in hand, the AO has

even not made any reference to any incriminating material so as to bring the income

declared by the assessee in the return of income filed in response to notice under

section 153A in the ambit of the Explanation 5A to section 271(1)(c) of the Act.

33 ITA Nos. 776, 777 & 778/JP/2019 Shri Prakash Chand Sharma, Jaipur. Accordingly, when the AO has failed to even make any reference to any incriminating material representing the undisclosed material or the income declared by the assessee, the Explanation 5A to section 271(1)(c) would not be applied in the case of the assessee. Hence in the facts and circumstances of the case, we do not find any reason to interfere with the impugned order of the ld. CIT (A). 6. In the result, appeals of the revenue are dismissed.

Order pronounced in the open court on 03/02/2020. Sd/- Sd/- ¼ fot; iky jkWo ½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

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