LATE SHRI BABANLAL BHIKULAL AGRAWAL,,JALGAON vs. INCOME-TAX OFFICER,,

This appeal filed by the assessee is against the order of the CIT(A)-2, Nashik dated 28.10.2014 for the assessment year 2003-04.

The grounds raised by the assessee are as under :- “1] The Ld.CIT(A) has grossly erred in law and on facts in confirming penalty imposed of Rs. 10,12,126/- u/s.271(1)(c) on account of alleged addition made at Rs.32,13,100/(inclusive of enhanced income), without establishing any alleged facts/thing and bringing any corroborative evidence on record, even in penalty proceedings and hence, penalty be deleted 2] On the facts and in the prevailing circumstances of the case, the learned CIT(A) has grossly erred in confirming the penalty u/s.271(1)(c) of the I T Act, without rebutting any contention of the appellant filed before him. Therefore, penalty be deleted. 3] On the facts and in the prevailing circumstances of the case and in law the learned CIT(A) has grossly erred in confirming the penalty imposed by A.O without having jurisdiction to him to imposed such penalty on enhanced income to Rs.32,13,100/-, hence, it is bad in law and it may please be deleted. 4] On the facts and in the prevailing circumstances of the case, the learned CIT(A) has grossly erred in confirming the penalty u/s.271 (1)(c) of the I T Act, even though A.O has not given any clear finding , as to whether it is imposed for “furnishing inaccurate particulars of income”, or “ for concealment of income” and hence, in absence of clear finding, penalty imposed cannot be sustained and it is bad in law ab initio. Thus, penalty may please be deleted. 5] The Appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”

Briefly stated the relevant facts include that the assessee is in the status of HUF and earned income from unexplained deposits and interest thereon. The assessee filed the return of income declaring total income of Rs.3,34,950/-. In the assessment made u/s 144 r.w.s. 148 of the Act, the Assessing Officer assessed the total income at Rs.21,86,950/- against the returned income. During the assessment proceedings, the Assessing Officer noticed that there was an escapement of income to the tune of Rs.18,52,000/-. The Assessing Officer recorded the reason to belief of the said escapement of income and issued notice to the assessee u/s 148 of the Act. However, there was no compliance from the side of the assessee to the said notice u/s 148 of the Act. The Assessing Officer issued various notices again and again but the assessee did not response to any of them. Therefore, the Assessing Officer passed the ex-parte assessment and computed the unexplained deposits and interest thereon to the tune of Rs.18,52,000/- and added the same to the retuned income of the assessee. Further, the Assessing Officer initiated the penalty proceedings u/s 271(1)(c) of the Act.

Against the said action of the Assessing Officer, the assessee carried the matter before the CIT(A). The CIT(A), after detailed discussion in his order on this issue, enhanced the unexplained investments of Rs.23,13,100/- and interest thereon of Rs.75,000/- for 12 months i.e. Rs.9,00,000/ totalling to Rs.32,13,100/-. Further, the CIT(A) directed the Assessing Officer to initiate the penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income in relating to the enhanced income also. Following the said decision of the CIT(A), the Assessing Officer initiated the penalty proceedings u/s 271(1)(c) of the Act and levied minimum penalty of Rs.10,12,126/- vide penalty order dated 11.03.2013. It is equivalent to 100% of the tax sought to be evaded on the concealed income of Rs.32,13,100/-.

Against the above said penalty order of the Assessing Officer, the assessee filed a further appeal before the CIT(A). The CIT(A) without establishing any alleged facts/thing and bringing any corroborative evidence on record confirmed the penalty as levied by the Assessing Officer. 6. Before us, ld. Counsel for the assessee submitted that the assessee carried the litigation on addition in quantum appeal to the Tribunal and got relief in favour of the assessee. Further, ld. Counsel for the assessee, by making a reference to the grounds, mentioned that the addition was deleted by the Pune Bench of the Tribunal in assessee’s own case vide dated 05.09.2019. In this regard, ld. AR brought our attention to the contents of para 4 and 5 of the order of the Tribunal (supra) for demonstrating the reasons for granting relief to the assessee. The ld. AR for the assessee further mentioned that the Tribunal granted relief to the assessee on the issue of penalties giving the reason that the penalty does not survive when the quantum addition is deleted. Thus, the ld. AR fairly mentioned that the Tribunal may take a view on the issue of penalty u/s 271(1)(c) of the Act and prayed for reversing the order of the lower authorities.

On the other hand, ld. DR for the Revenue relied heavily on the orders of the Assessing Officer and the CIT(A). Otherwise, ld. DR fairly admitted that if the quantum addition is deleted at the level of the Tribunal or the CIT(A) the impugned penalty does not survive.

We have heard both the sides and perused the orders of the revenue authorities and the decision of the Tribunal in assessee’s own case (supra). We have also gone through the contents of para 4 and 5 of the order of the Tribunal in assessee’s own case (supra) and find it relevant to extract the same and the said para 4 and 5 are extracted hereunder :- “4. We heard both the sides on this legal issue and perused the orders of the revenue authorities along with the orders of the Tribunal in the cases of (i) Jayant Hemraj Choudhari (supra) and (ii) Shri V.L. Khandge (supra). For the sake of completeness, the contents of para 7 to 10 of the order of the Tribunal in the case of Jayant Hemraj Choudhari (supra) are extracted hereunder :- “7. Before me, at the outset, ld. Counsel for the assessee brought my attention to the above extracted additional ground no.1 and submitted that this a case of issuing notice u/s 153C of the Act as the information relating to the assessee was found from the documents seized belonging to Sinhagad Technical Education Society (STES). Further, bringing my attention to the amended provisions of section 153C by the Finance Act, 2015 w.r.e.f. 01.06.2003 (A.Y. 2004-05), ld. Counsel submitted that the amended provisions are in existence at the time of issue of notice u/s 148 of the Act dated 21.04.2016 whereby the law makers have widen scope of provisions of section 153C of the Act for taxing such income of Rs.15 lakhs in this case. The ld. Counsel submitted that this is a clear case of information “pertaining” to the assessee emanating from the documents “belonging” to Sinhagad Technical Education Society (STES). Both these expressions fall in the scope of the amended section 153C of the Act. Therefore, the Assessing Officer erroneously assumed jurisdiction u/s 147 of the Act with reference to the provisions of section 153C of the Act. Consequently, the order made by the Assessing Officer u/s 147 r.w.s. 143(3) of the Act is unsustainable in law. For this proposition, ld. Counsel relied on the various decisions including the decision of the Pune Bench of the Tribunal in the case of Shri V. L. Khandge vs. ITO in for the assessment year 2006-07 dated 24.04.2018 and submitted that this appeal also pertains to the period post-assessment year 2004-05 and the provisions of section 153C of the Act are applicable to the said case. On these facts, the Tribunal did not approve the Assessing Officer action in resorting to section 147 of the Act in reference to the provisions of section 153C of the Act. He also mentioned that the contents of para 7 to 11 of the said order of the Tribunal (supra) are relevant in this regard.

On hearing both the sides on this issue, I find the contents of para 7 to 11 of the order of the Tribunal (supra) are relevant to extract. For the sake of completeness of this order, the said para 7 to 11 of the order of the Tribunal (supra) are extracted hereunder :- “7. Briefly, in the facts of the case, the assessee had furnished return of income in time which was processed under section 143(1) of the Act. The Assessing Officer in the case, had received information from the Office of the Deputy Director of Income Tax (Inv), Unit – II(1), Pune vide letter dated 30.03.2013. Based on the above said information, the Assessing Officer made proposal for initiating proceedings under section 147 of the Act. Information in this regard was received from the Addl.CIT, Range-8, Pune vide letter dated 30.03.2013. The Assessing Officer thereafter, issued notice under section 148 of the Act, dated 30.03.2013. The reasons recorded by the Assessing Officer for issue of notice under section 148 of the Act are reproduced at pages 2 to 8 of the assessment order. The said reasons clearly note that search and seizure action under section 132 of the Act and survey action under section 133A of the Act were carried out at the residential premises of Shri Ganesh Khandge on 12.02.2013. During the course of search proceedings, it was found that Shri Vasant Laxman Khandge i.e. assessee before us, father of Shri Ganesh Khandge, along with his brother Shri Dattatreya Laxman Khandge had sold land situated at Talegaon to Namrata Developers. The transaction related to assessment year 2006-07. The Assessing Officer while recording reasons for reopening the assessment mentioned that the assessee had declared income from long term capital gains on the sale of said land in the return of income. Secondly, from the evidences seized / impounded, it was observed that the assessee and his brother had entered into Joint Venture Agreement with Namrata Developers to evade tax on sale of land, since on the said land Namrata Developers developed 80IB(10) project and claimed deduction on the entire project. Thereafter, the Assessing Officer has raised various issues in respect of suppression and short computation of long term capital gains by increasing cost of acquisition and / or suppression the sale consideration. Reference is also made to the statement of Shri Ganesh Khandge, the person searched, which was recorded under section 131 of the Act on 12.02.2013. The Assessing Officer thus, held that there was reason to believe that income chargeable to tax had escaped assessment and notice under section 148 of the Act was issued to the assessee. The assessee in reply, submitted that return of income earlier filed may be treated as filed under section 148 of the Act and raised objections to the notice issued under section 148 of the Act.

Section 153C of the Act very clearly lays down that notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153 of the Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing seized or requisitioned, belongs to; or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, such books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other person in accordance with provisions of section 153A of the Act. Section thus, very clearly lays down the procedure to be followed when during the course of search on a person any money, bullion, jewellery or valuable article or thing, or any books of account or documents or any information contained therein pertains to or relate / relates to other than the person searched; then first, all the said assets or information is to be handed over to the Assessing Officer, who is incharge of the person other than the person searched and then the Assessing Officer has to proceed and determine the income of the other person in accordance with provisions of section 153C of the Act. The said section very clearly also lays down that the provisions of section 153C of the Act are to be applied notwithstanding anything contained in sections 139, 147, 148, 151 and 153 of the Act. Applying the said provisions to the facts of the present case, wherein certain documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm i.e. one of the assessees before us, then for making aforesaid addition, recourse which was open to the Assessing Officer was to initiate proceedings under section 153C of the Act. Where the provisions of said section are to be applied, then no proceedings can be initiated under section 147, 148, 151 and 153 of the Act. Accordingly, we hold that when during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms, in which he was partner, on the basis of such documents found during the course of search, then for making addition in the hands of partners, provisions of section 153C of the Act are attracted. Once the said provisions are so attracted, then there is no question of initiating any proceedings under section 147 / 148 of the Act. Accordingly, we hold that proceedings initiated under section 147 / 148 of the Act are thus, not correctly initiated.”