M/S. GURUPRASAD INFRASTRUCTURE PVT. LTD.,,BARODA vs. THE DCIT, CENTRAL CIRCLE-1,, BARODA

PER WASEEM AHMED, ACCOUNTANT MEMBER:

First, we take up the assessee’s appeal in AY 2010-11 as the lead case.

The assessee has raised the following common ground of appeal:

1. Ld. CIT (A) erred in law and on facts confirming penalty levied by AO of Rs. 67,98,000/- invoking provisions of section 271(1 )(c)of the Act. Ld. CIT (A) ought to have deleted penalty levied on income returned & accepted by AO in order passed u/s 153 A r w s 143 (3) of the Act.

2. Ld, CIT (A) erred in law and on facts confirming levy of penalty by AO under the provisions of Sec. 271 (l)(c) read with explanation 5 A of the Act accepting disclosure of Rs. 2,00,00,000/- without pacing reliance on any seized documents or assets.

3. Ld. CfT (AJ erred in law and on facts in holding the additional income offered in return filed u/s I53A to buy peace as 'undisclosed income' without drauing any inference of availability of money/bull ion or assets embedded in the entries.

4. Ld. CIT (A) erred in law and on facts in holding admission of additional income & its inclusion in returns is covered under deeming fiction of Explanation 5A even when there is no reference to any money, bullion, jewellery or asset found during search.

5. Ld. CIT (A) erred in law and on facts confirming penalty relying upon Kolkatta High Court Judgment but not following binding judgment and decision of Hon’ble Jurisdictional High Court /ITAT rendered on identical facts submitted by the appellant.

6. Ld.CIT(A) erred in law and on facts confirming penalty levied by AO on additional income offered in return filed u/s.153A while appeal filed against other additions was still pending for adjudication. Ld.CIT(A) ought to have quashed order levying penalty in piecemeal manner. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any grounds of appeal at the time of or before the hearing of the appeal. -1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 3

The effective issue raised by the assessee is that the Ld. CIT (A) erred in confirming the penalty imposed by the AO on account of on the income declared in return u/s 153A of the Act.

2.1 Subsequently, the AO initiated the penalty proceedings by issuing a notice under section 274/271(1)(c) of the Act dated 20-03-2015 to the assessee on account of the disclosure made in the income tax return filed under section 153A of the Act. The assessee in response to the notice submitted as under:

1) He has disclosed the income in return filed u/s 153A of the Act voluntarily. 2) As per the provision of section 271(1)(c) r.w.s. 153A of the Act for imposing the penalty, the return filed u/s 139 of the Act, needs not to be considered. As such the return filed u/s 153A of the Act needs to be considered.

-1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 4

3) To impose the penalty, there should be additional income over and above the income declared in return filed u/s 153A of the Act which should be considered as concealment of income.

2.3 However, the AO rejected the contention of the Assessee by observing that If the search had not taken place, the income disclosed by the assessee would have remained untouched. As such, the AO observed that the penalty is based on the incriminating documents.

2.4 Accordingly, the AO levied penalty on account of the concealment of income u/s 271(1)(c) of the Act amounting to Rs. 67,98,000/- only being 100% of the amount of tax sought to be evaded.

6.1 Thus, whole admission, and inclusion in returns of income, of Rs.2,00,00,000/- and Rs.79,69,675/- respectively by the appellant is clearly and unambiguously based on document/assets found during search and now positively claimed by the appellant to be representing his income. The amounts of Rs.2,00,00,000/- and Rs.79,69,675/- respectively additionally disclosed by the appellant for the year under reference by way of filling the returns u/s.153A, is clearly thus evidenced by seized documents, and therefore, clearly comes within the purview of amount ''deemed to have been concealed" within the meaning of Explanation 5A, It is also not in dispute that such amount of &und is closed income" came to be offered by the appellant additionally only in the returns of income filed u/s 153A after the date of search. Before the AO as also before me, the appellant has relied exclusively on a single fact that the quantum of "income" sought to be made the subject matter of penalty is already forming part of the income returned in the returns of income filed u/s 153A after the search, and therefore no penalty can be levied. This submission of the Ld. AR to the effect that no penalty is leviable ''once income is disclosed in the return filed u/s 153A after the search" is misconceived. As discussed earlier, in view of absence of conditional immunity of clause (2) to old Explanation 5 available in Explanation 5A section 271(1)(c) r.w. Explanation 5A is now applicable precisely to the situation and the assessments where the income based on seized documents/seized assets is either shown by the -1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 5 appellant in "any return of income filed after the date of the search" or is assessed by the AO for an assessment year for which the time limit u/s 139 for filing the return had expired before the date of the search. In my considered opinion, the only requirement for Explanation 5A to be applicable Is that the showing in the return of income filed after the date of search or having been additionally brought to tax by the AO has a direct bearing with the documents/assets seized as mentioned in clause (i) and clause (ii) of Explanation 5A. That this requirement of Explanation 5A is satisfied is only mildly disputed by the Ld, AR without substantiating the same. Therefore, the argument based on the relevant income having been disclosed in the return of income after the date of search has clearly no merit and deserves to be rejected. The appellant's reliance on Gujarat HC decision of Kirit Dahyabhai IB I, J182 & I]85/Ahd/2QlI for the proposition that penalty is not sustainable when the "income is already disclosed in the return filed u/s 153A" is also misplaced firstly because the decision was rendered in the context of Explanation 5, which has now been replaced by Explanation 5A w.c.f. l/4/2007h and secondly because, Kolkatta High Court decision in Prasanna Dugar 159 taxmann.com (Cal), involving facts identical la those in the present appeal, upholding the levy of penalty, is now approved by the Apex Court by rejecting SLP, as reported In 70 ttnmann.com 175 (SCJ f2G!6/. As such, in my considered opinion, the facts of appellant's case with regard to penalty u/s 271(1)(c) r.w. Explanation 5A are squarely covered by now SC-approved Kolkatta High Court Judgment in Prasanna Dugar 59 taxmann.com 99 (Cal) (2015), may quote: ".......3. A search was conducted on February 3, 2009. During the search, the assessee disclosed certain facts which have been recorded in the order of the appellate authority which reads as follows: The facts of the case are that a search under section 132 was conducted at the premises of the assessee on February 3, 2009. In course of search, the assessee made voluntary disclosure under section 132(4) disclosing a sum of Rs.6 crores even though no incriminating document suggesting any such undisclosed income was found. The said disclosure, as per the said deposition of the assessee recorded under section 131 was bifurcated into 3 persons i.e of Rs.3,50,00,000/- was disclosed in the name of the assessee Rs.2,25,00,000/- was disclosed in the name of the assessee’s wife Smt. Rajshree Dugor, and Rs.25,00,000/- was disclosed in the name of the limited company viz.. Indian Gem and Jewellery Put. Ltd, in which the assesses had substantial interest. It may be repeated that no concealed income was established from any of the papers and documents found in the course of search in the punchnama of the assesses or in other panchnamas. The entire disclosure was made voluntarily and in good faith which is apparent from question and answer no. 22 in the statement recorded under section 131 wherein the assessee categorically slates that he is voluntarily disclosing the income even though no incriminating documents have been found and nil the purchases and sales are correctly recorded and the disclosure was made just to cover the papers and documents which he may not BE able to explain. The assessee bifurcated his own disclosure of Rs. 3.50 lakhs in two parts. i.e., Rs. 70, 00,000 for the assessment year 2008-09 and Rs 2.80 lakhs for the assessment year 2009-10."

-1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 6

these decisions are not applicable. In view of the discussion as above, I am of the considered view that the Ld, AO is right in initiating and in levying penalty u/s 271(l)c) r.w. Explanation 5A. Thus, I find no reason to interfere with the orders levying penalty passed by the AO. Accordingly, I uphold the penalties levied by the AO as under and consequently dismiss the appeal filed by the appellant; A.Y Penalty upheld A..Y. 2010-11 Rs.67,98,000/- A.Y. 2011-12 Rs.25,55,330/- In the result, appeals for both the assessment years are dismissed.

Being aggrieved by the order of the Ld. CIT (A) the assessee is in appeal before us.

7.1 From the preceding discussion and on perusal of the order of the authorities below, we note that there was no reference made to any incriminating document found during the search. Therefore, we are of the view that the addition of undisclosed income was based on the statement furnished under section 132(4) of the Act.

7.2 At the time of the hearing, a query was raised to the Ld. DR whether the assessee disclosed the income in pursuance to the search based on the incriminating document, but he failed to bring any material on record. Therefore, in the absence of any documentary evidence, we infer that the income disclosed by the assessee was not based on the incriminating materials.

7.3 In the case on hand, the penalty provisions are governed under the explanation 5A of section 271(1)(c) the of the Act which reads as under:

“[Explanation 5A.—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 -1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 9

(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 (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 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 above provision reveals that the penalty under Explanation 5A to section 271 (1)(c), the of the Act can be attracted if the assessee was found to be the owner of any money, bullion, jewellery or other valuable article or thing or any income based on any entry in any books of account or other documents or transactions.

7.4 But, in the case on hand, there was no such allegation against the assessee either in the assessment or penalty or the CIT (A) order referring to any specific incriminating documents. Thus the issue arises whether the penalty can be levied under section 271 (1) (c) r.w. explanation 5A of the Act merely based on the statement furnished under section 132(4) of the Act and without having found any incriminating document in search. In this regard, we are inclined to refer to the order of ITAT in the case of Ajay Traders Vs. DCIT reported in 81 taxmann.com 463 wherein it was held as under:

“The assessee disclosed an additional income on account of unaccounted sales. Based on said disclosures, the Assessing Officer imposed penalty under section 271(1)(c) by invoking Explanation 5A to said section.

-1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 10

Held that it was undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs.15 lacs and requested not to impose penalty under section 271(1)(c). The Assessing Officer imposed the penalty by invoking the Explanation 5A to section 271(1)(c). For imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, the penalty was to be deleted.”

From the above order, it is clear that there cannot be any penalty under explanation 5A to section 271(1)© of the Act until and unless the quantum addition is based on some incriminating document. Accordingly, we hold that there cannot be any penalty under section 271(1)© of the Act in the given facts and circumstances.

7.5 The facts of the case law, i.e. CIT Vs. Prasanna Dugar ( 59 taxmann.com 99) referred by the ld. DR is distinguishable from the facts of the present case. As such, there was no discussion of whether the addition was based on the incriminating materials found during the search. Accordingly, we are reluctant to place our reliance on the judgment above.

In view of the above, we delete the penalty imposed by the AO which was subsequently confirmed by the ld. CIT-A. Hence the ground of appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.

Coming to the other appeal filed by the assessee for the AY 2011-12 -1659/AHD/2017 Asstt. Years 2010-11 & 2011-12 11

In the result, the appeals of the assessee are allowed

Order pronounced in the Court on 19/07/2019 at Ahmedabad.