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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeals at the instance of assessee arise from the respective orders of the CIT(A) against respective penalty orders for different assessment years as tabulated below:
ITA Nos. 159 to 163/Ahd/17 [ Mahesh Alamchandani vs. AC IT] - 2 –
ITA Nos. Name of AY CIT(A)’s AO’s AO’s order assessee order penalty under Section dated order dated 159/Ahd/17 Mahesh 2010-11 16.11.2016 25.08.2015 271(1)(c) of the Alamchandani Income Tax Act, 1961 160/Ahd/15 -Do- -Do- 2011-12 -Do- -Do- 161/Ahd/15 -Do- -Do- -Do- -Do- 2009-10 162/Ahd/15 -Do- -Do- -Do- -Do- 2010-11 163/Ahd/15 -Do- -Do- -Do- -Do- 2011-12
The captioned bunch of appeals involves identical issue on similar facts. Accordingly, all the matters have been heard together and a consolidated order being passed hereunder.
For the sake of convenience, we shall first take up ITA No. 159/Ahd/2017 concerning AY 2010-11 to appreciate the facts in perspective, issues involved and decision thereon.
ITA No. 159/Ahd/2017 – AY 2010-11
Briefly stated, the assessee filed return of income originally under s.139(1) of the Act at Rs.2,31,560/-. Thereafter, a search was conducted under s.132 of the Act in the case of Dhanjimama group of cases on 03.07.2012 which included the assessee as well. Consequent to the search action, incriminating materials were found and a statement was recorded under s.132(4) of the Act wherein the assessee admitted certain additional income based on documents found during the course of search. A proceeding under s.153A was initiated as a consequence. The assessee filed return of income under s.153A of the Act at Rs.10,10,310/- in compliance of the notice and incorporated disclosure of Rs.7,78,750/- in the return of income filed in response to such notice under s.153A of the Act. The assessment was completed
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under s.153A of the Act and the income declared in the said return was assessed as such. The AO however, imposed penalty of Rs.2,18,740/- (100% of the tax sought to be evaded) on the additional income of Rs.7,78,750/- declared in pursuance of the search by invoking provisions of Section 271(1)(c) of the Act r.w. Explanation 5A thereto.
Aggrieved by the levy of penalty under s. 271(1)(c) of the Act by the AO, the assessee preferred appeal before the CIT(A).
The CIT(A) however sustained the action of the AO towards imposition of penalty.
Further aggrieved, the assessee preferred appeal before the Tribunal.
In the course of hearing, the learned AR for the assessee at the outset submitted that in all the captioned appeals, the penalty has been imposed only on account of difference between the income declared in the return originally filed prior to search qua the return filed subsequently in compliance of notice under s.153A of the Act in pursuance of search action. The AO has accepted the return of income filed under s.153A of the Act without any additions or variations and therefore, in the absence of any addition/disallowance to the income returned under s.153A of the act, no penalty under s. 271(1)(c) of the Act is exigible in the absence of any concealment qua the return of income filed under s.153A of the Act. The learned AR quipped that once the return has been filed under s.153A of the Act, the earlier return filed under s.139 of the Act becomes non est and stand replaced by the subsequent return filed pursuant to a statutory notice in this regard. The learned AR thus submitted that the applicability of
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Section 271(1)(c) of the Act is required to be seen only with reference to the subsequent return. The learned AR reasoned that in the absence of any upward adjustment to the return of income filed in the subsequent return, the provisions of Section 271(1)(c) of the Act is a complete non-starter. Thus, disclosure made under s.132(4) of the Act in the search proceedings has no effect for the purposes of penalty once incorporated in the subsequent return filed under s.153A of the Act. In this context, the learned AR referred to the judgment of Hon’ble Jurisdictional High Court in the case of Kirit Dahyabhai Patel (2017) 80 taxmann.com 162 (Guj) to canvass the proposition that income returned in response to notice under s.153A of the Act is required to be considered for the purposes of imposition of penalty under s. 271(1)(c) of the Act and penalty can be possibly levied only on the income assessed over and above the income returned under s.153A of the Act, if any. The learned AR for the assessee accordingly emphasized that imposition of penalty under s. 271(1)(c) of the Act towards additional income offered in the return filed under s.153A of the Act is not sustainable in law. The learned AR also relied upon the decision of the co-ordinate bench in the case of Dr. Naman A. Shastri vs. ACIT & Ors. IT(SS)A No. 561/Ahd/2011 order dated 29.09.2015; Shree Ram Corporation vs. DCIT ITA No. 726/Ahd/2015 order dated 09.06.2015 and Arvindbhai V. Bhanusali vs. ACIT IT(SS)A No. 271/Ahd/2013 & Ors. order dated 06.04.2017 to contend that Revenue is not entitled to impose penalty on income declared by the assessee himself under s.153A of the Act. It was thus submitted that the order of the CIT(A) sustaining the penalty under s. 271(1)(c) of the Act on unaccounted income suo moto included in the return filed under s.153A of the Act is not justified.
The learned DR for the Revenue, on the other hand, relied upon the orders of the revenue authorities and also relied upon the decision
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of the Hon’ble High Court of Calcutta in the case of CIT vs. Prasanna Dugar 371 ITR 19 (Cal) in justification of the action of the Revenue. The learned DR further submitted that SLP against the aforesaid judgment of the Calcutta high Court also stands dismissed by the Hon’ble Supreme Court as reported in 373 ITR 681 (SC).
We have carefully considered the rival submissions. In terms of the plea raised, the central question that emerges for determination is whether penalty under s. 271(1)(c) of the Act can be imposed on additional income declared in the return filed by the assessee under s.153A of the Act vis-à-vis the income declared in the return filed under s.139(1) of the Act? The identical issue has been squarely considered by the co-ordinate bench in the case of same combination in Vijay K. Shah vs. ITO in IT(SS)A Nos.54 to 57/Ahd/2014 for AYs 2003-04 to 2006-07, order dated 13/04/2017 as pointed out in the course of hearing. It will be apt to reproduce the relevant para dealing with contentions raised on behalf of the assessee:
“9. Notwithstanding that the issue is affirmed in favour of the assessee in the given facts of the case, we are equally inclined to dwell upon the cardinal plea raised on behalf of the assessee for the proposition that as soon as return is filed under s.153A, the imposition of penalty or otherwise has to be seen only with reference to the return filed under s.153A and return filed earlier under s.139 prior to search showing lesser quantum of income fades into insignificance in all circumstances. For this proposition, the decision of the Hon’ble Gujarat High Court in Kirit Dahyabhai Patel vs. ACIT (2015) 280 CTR 216 (Guj.) was heavily relied upon in the course of hearing. In essence thus, it is the case of the assessee that income discovered as a result of search and included in the return filed under s.153A in post search proceedings are not susceptible to penalty under s.271(1)(c) of the Act at all notwithstanding Explanation-5 subsisting in statute at the relevant time.
9.1. We straight away reckon that such sweeping proposition does not find any semblance of acceptability. As noted earlier, Explanation-5 to section 271(1)(c) specifically addresses the aforesaid situation where it is specifically provided that notwithstanding the fact that undisclosed income found as a result of search was declared in the return of income furnished after the date of search, the assessee shall be deemed to fall within the sweep of section 271(1)(c) unless the assessee is covered by ‘exit route’ provided in the Explanation-5 itself. Thus, the aforesaid
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proposition canvassed by the assessee that once the return is filed by the assessee after the search in response to notice issued under s.153A including undisclosed income discovered in the course of search, the assessee gets indefeasible right to shun away penalty proceedings on such undisclosed income is squarely at loggerheads with deeming fiction created under Explanation-5 for this purpose. Needless to say, this generic proposition towards non-applicability of penalty on undisclosed income, if seen in affirmative, will render the legislative fiat under Explanation-5 relatable to search cases as otiose and infructuous. As can be seen, the benefit of immunity provided under Explanation-5 is well defined and structured. As provided, it is available only in respect of such year where the due date of filing of the return has not expired before the date of search subject to fulfillment of conditions as contemplated in the said Explanation.
9.2. We shall now advert to the decision in the case of Kirit Dahyabhai Patel (supra) referred to and extensively relied upon on behalf of the assessee. We notice that in that case, the ‘substantial question of law’ framed for decision before the Hon’ble Gujarat High Court was confined to availability of immunity under clause(2) to Explanation-5 of Section 271(1)(c) in the facts of the case. For ready reference, it is reproduced hereunder:-
“Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in restoring the penalty imposed under Section 271(1)(c) of the Act holding that benefit under explanation 5 to Section 271(1)(c) of the Act would be available only for period where due date for filing the return under Section 139(1) of the Act had not expired?”
In the context of above question posed, the Hon’ble Gujarat High Court after referring to series of decisions of various Courts found that the assessee has broadly satisfied all the conditions required for claiming immunity from payment of penalty under s.271(1)(c) of the Act.
9.3. Significantly, the assessee himself after having raised the general proposition towards claiming immunity towards undisclosed income included in S.153A return, in exercise of its wisdom, paused and went on to withdraw the same at a later stage before the Ld.Third Member in the ITAT proceedings in Kirit Dahyabhai Patel vs. ACIT reported in (2009) 121 ITD 159 (TM) which decision was subject matter of appeal before the Hon’ble Gujarat High Court. Thus, apparently, the Assessee himself while in appeal before Hon’ble High Court, was no longer aggrieved by the proposition that return under s.153A is amenable to penalty provisions under s.271(1)(c) of the Act. To elaborate, the Ld.Third Member clearly recorded a finding that the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under s.153A. The substantive question that emerged before the Ld.Third Member of ITAT on account of difference of opinion was whether immunity granted under Explanation-5(2) to section 271(1)(c) is available to the assessee. Thus, on nuanced and contextual analysis of the judgement rendered by the Hon’ble Gujarat High Court in appeal under s.260A of the Act, it is difficult to reckon the case made out by the assessee that additional income declared in the post search returns would be entitled to immunity from
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penalty in a sweeping manner regardless of the satisfaction of conditions as provided for its non-applicability as enumerated under clause(2) of Explanation-5. 9.4. Needless to say, sentences used while rendering a judgment cannot be read in isolation and their purport and contents are derived from their context. As noted, the law is codified for applicability of penalty in search cases. The legislature has made conscious distinction between the cases where the return of income has already been filed prior to search qua the cases where the return is yet to be filed and has put them on a different pedestal. It is trite law that a judgement cannot be read out of context in which the question arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of a Court divorced from the context of the question in consideration and to treat it to be the complete law declared by the Court. A judgment must be read as a whole and the observations from the judgment have to be considered in the light of questions which were presented before the Court. A decision of the Court takes its colour from its question in which it is rendered as enumerated in CIT vs. Sun Engineering works Pvt. Ltd. (1992) 198 ITR 297 (SC). Thus, context holds the key and the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows there from. A stray sentence cannot be allowed to be put into service to draw a meaning which was never probably meant by the author himself. A judgment is not to be read as statute. Thus, in the light of question framed for decision by Hon’ble Gujarat High Court, we are inclined to hold that the abstract proposition of non-applicability of penalty proceedings in all circumstances (wherever undisclosed income has been included in the return filed post-search) is singularly misplaced and is not supported by the factual context in which the decision in Kirit Dahyabhai Patel(supra) was rendered.”
In view of the aforesaid findings, we do not find any merit in the plea of the assessee for imposition of penalty with reference to revised return (post search) alone. While the issue already has been dealt with in great length in the case of Vijay K. Shah (supra), we must observe that as per the scheme of the Section 271(1)(c) of the Act governs imposition of penalty in the event of concealment of particulars of income etc. by the assessee. Erstwhile Explanation 5/ Explanation 5A has been specifically annexed to Section 271(1)(c) of the Act for imposition of penalty in search cases. Section 271AAA of the Act was inserted for penalty in search cases in respect of specifies previous year which was later replaced by Section 271AAB of the Act. We presently concerned with Section 271AAA (specified year) and Explanation 5A to Section 271(1)(c) (non specified year) of the Act
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owing to the fact that search has been initiated in the instant case on or after 01.06.2007. A bare reading of the Explanation 5A would show that it provides for exception to the general rule that concealment is committed vis-à-vis return of income filed. The Explanation 5A to Section 271(1)(c) of the Act deems act of concealment even before the return is filed. Thus, having regard to the statutory presumption of concealment in search cases under Explanation 5A, we do not subscribe to the fundamental plea on behalf of the assessee that penalty under s. 271(1)(c) of the Act can be invoked only with reference to return of income filed after search and where there was no addition over and above the income declared by the assessee in the return filed under s.153A of the Act (notwithstanding the fact that such return filed after search includes additional nature based on incriminating material and oral evidence under s.132(4) of the Act).
Pertinently, the plea raised on behalf of the assessee, if admitted, would render provisions of Section 271AAA/271AAB of the Act otiose and infructuous as noted in the case of Vijay K. Shah (supra).
We also take note of the plea raised on behalf of the assessee that Section 153A of the Act opens with a non obstante clause which seeks to exclude the application of, inter alia, Section 139 of the Act and thus, in effect, the revised return filed under s.153A of the Act takes place of the original return under s.139 of the Act for the purposes of all other provisions of the Act. It is consequently the claim of the assessee that once the assessee files a revised return under s.153A of the Act, the revised return will be treated as the original return filed under s.139 of the Act in so far all other provisions of the Act are concerned. As noted earlier, Section
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271AAA and Explanation 5A to Section 271(1)(c) of the Act deems culpability in appropriate cases even before the return is filed in search cases. Therefore, substitution of return originally filed under s.139 of the Act by subsequent return under s.153A of the Act has no impact on the legal fiction towards concealment enjoined by Explanation 5A of the Act. Therefore, the non obstante provision in Section 153A of the Act does not come in the way of penalty proceedings in search cases at all. Thus, the plea of the assessee for applicability of penalty provisions qua the return of income which may hold good under the normal provisions will not apply to special provisions enacted in search cases.
Ostensibly, Explanation 5A of the Act has been inserted to specifically address the situation were consequent to a search, assets and valuables or undisclosed income in the form of entry in books, documents etc. is found and thereafter the assessee files return of income in consequence of search. In such cases, owing to deeming fiction, the additional income declared in the return would be deemed to be concealed income. Thus, by virtue of Explanation Section 271AAA of the Act and Explanation 5A to Section 271(1)(c) of the Act, it is presumed by the statute that the assessee would not have disclosed such unrecorded in come in the return filed subsequently in the absence of search. Thus, while as a matter of general proposition, there can presumably be no concealment of income till filing of return as per the normal provisions of Section 271(1)(c) of the Act, a presumption of concealment of income can be attributed under Explanation 5A /271AAA/271AAB of the Act much before return of income is filed unlike the normal situation where concealment of income can be attributed only with reference to the return filed. In view of the special provisions enacted for imposition of penalty in search cases, the default under s.271(1)(c) of the Act gets triggered
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towards undisclosed income immediately on search action pending filing of return under s.139/s.153A of the Act albeit subject to escape roots as provided in Section 271AAA/271AAB/Explanation 5A to Section 271(1)(c) of the Act etc.
The decision cited on behalf of the Revenue in Prasanna Dugar (supra) also affirms the aforesaid view.
We shall now turn to the decisions of the co-ordinate bench cited on behalf of the assessee. We note that in Arvindbhai V. Bhanusali, the emphasis was placed by the co-ordinate bench on presence of incriminating materials to support the disclosure of additional income. Thus, the aforesaid decision is clearly distinguishable in view of the presence of incriminating materials which fact has not been rebutted in the course of hearing. All other decisions of co-ordinate bench have also been pursued but found to be of no significance for dealing with legal proposition in hand and facts in issue.
In view of the aforesaid findings, we do not find any merit in the plea of the assessee. No other plea has been raised on merits to absolve the assessee from imposition of penalty. Consequently, the appeal of the assessee in ITA No.159/Ahd/2017 for AY 2010-11 is dismissed.
All other captioned appeals also concern imposition of penalty under s.271(1)(c) of the Act on the income understated in the original income of return filed under s.139 of the Act prior to search qua the return of income filed under s.153A of the Act consequent to search. Thus, in parity with the legal issue discussed in ITA No. 159/Ahd/2017 (supra), we do not subscribe to the plea of the assessee for reversal of the action of the CIT(A). We thus decline to interfere
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with the action of the Revenue. Consequently, all the appeals in ITA Nos. 159 to 163/Ahd/2017 are dismissed.
In the combined result, all the appeals of the assessee are dismissed.
This Order pronounced in Open Court on 28/02/2019
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 28/02/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।