SHRI VITTHALBHAI GORDHANBHAI PRAJAPATI,,AHMEDABAD vs. DCIT, CENTRAL CIRCLE-1(2),, AHMEDABAD

आदेश/O R D E R

PER WASEEM AHMED ACCOUNTANT MEMBER:

First, we take up the assessee’s appeal in for AY 2008- 09 as the lead case.

The assessee has raised the following common ground of appeal:

1. The learned CIT(A) has erred in law and on facts in upholding penalty of Rs.1,54,070/- levied u/s271(1)(c) without properly appreciating the facts of the assessee.

2. The levy of penalty is submitted in bad in law as the penalty notice dated 25/02/2015 issued is defective without specifying the nature of default for initiating penalty by simply mentioning ‘’ Have concealed the particulars of your income or furnished inaccurate particulars of income.’’ 3. The learned CIT(appeals) has erred in law and on facts in not considering the subsimmion dated 18/08/2015 and the decision of ITAT Delhi relied upon by the assessee in the case of Prem Arora and Pawerkumar Gupta and ignoring the fact that return income in response to notice u/s.153A is the assessed income u/s.153A(1)(b). 4. On the facts no such penalty u/s.271(1)(c) ought to have been levied. The appellant craves leave to add to alter and/or to modify any ground of appeal.

The first issue raised by the assessee is that the Ld. CIT (A) erred in confirming the penalty imposed by the AO on account of the difference in the income declared in return filed u/s 139 of the Act, and income disclosed in return filed u/s 153A of the Act.

2.1 Subsequently, the AO initiated the penalty proceedings on the difference of the income of Rs. 5,56,110.00 disclosed in the income tax return filed under section 139(1) and declared in return filed under section 153A of the Act by issuing a notice under section 274/271(1)(c) of the Act to the assessee on account of concealment of income vide dated 25-02-2015. 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 provision of section 271(1)(c) r.w.s. 153A of the Act for imposing of penalty, the return filed u/s 139 of the Act, has not to be considered. As such the return filed u/s 153A of the Act needs to be considered. 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.

4) The provisions of section 153A of the Act exclude the assessment procedure covered under section 139,147,148,149,151 and 153 of the Act. Thus for penalty proceedings, the return filed u/s 153A of the Act should be considered and not the return filed u/s 139 of the Act. 2.3 However, the AO rejected the contention of the Assessee by observing that had the search not taken place, the income disclosed by the assessee would have remained untouched.

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. 1,54,070/- only being 100% of the amount of tax sought to be evaded.

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

6. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case arises whether there will be any penalty under section 271(1)(c) of the Act on the income declared by the assessee in return filed under section 153A of the Act.

6.1 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.

6.2 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 assessee disclosed the income based on the statement furnished under section 132(4) of the Act.

6.3 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 (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) 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.

6.4 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 the 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 of any incriminating materials found 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. 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. Hence the ground of appeal of the assessee is allowed.

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

Coming to the other appeals filed by the assessee bearing ITA 5/AHD/2018 and 6/AHD/2018:

In the result, the appeals of the assessee are allowed