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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘A’
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.1562 and 1563/Ahd/2017 �नधा�रण वष�/Asstt. Year: 2008-09 and 2010-11
Shri Nitinbhai Tulsidas Chottani Vs. DCIT, Cent.Cir.1(3) Ahmedabad. D-21, Galaxy Tower Nr.TGB, Bodakdev Ahmedabad. PAN : AFAPC 0925 R
अपीलाथ�/ (Appellant) �त् यथ�/ (Respondent)
Assessee by : Shri P.M. Mehta, AR with Shri Biren Shah Revenue by : Shri S.K. Dev, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 31/01/2019 घोषणा क� तार�ख /Date of Pronouncement: 18 /02/2019 आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:
Present two appeals are directed at the instance of the assessee against separate orders of the ld.CIT(A)-11, Ahmedabad dated 15.3.2017 for the Asstt.Years 2008-09 and 2010-11.
Solitary grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of Rs.32,540/- and Rs.93,820/- for the Asstt.Years 2008-09 and 2010-11 imposed by the AO under section 271(1)(c) of the Act.
ITA No.1562 and 1563/Ahd/2017 2 3. Brief facts of the case are that in the Asstt.Year 2008-09, the assessee has filed his return of income under section 139 on 28.3.2009 declaring total income at Rs.7,73,820/-. A search under section 132 of the Act was conducted in the case of Sewani group on20.12.2011. The assessee was also covered under search operation and notice under section 153A was issued to the assessee, and in response to this notice, he filed return of income on 24.1.2013 declaring total income at Rs.7,73,820/-. Notice under section 143(2) was issued and served upon the assessee. Thereafter, the ld.AO passed assessment order on 24.3.2014 under section 143(3) r.w.s. 153A of the Act. He found that the assessee has shown short term capital gain at Rs.6,28,035/-. There was difference of opinion between the assessee vis-à-vis the AO qua cost of acquisition taken for this property. The assessee took cost of acquisition at Rs.44,38,650/- which has been scaled down by the AO at Rs.43,33,350/-. Accordingly, he made an addition of Rs.1,05,300/-. The discussion made by the AO in this aspect read as under: “5. During the course of assessment proceedings, it was noticed that the assessee has shown short term capital gain of Rs. 6,28,035/- on sale of flat. In the working of short term capital gain, the assessee has taken cost of acquisition at Rs. 44,38,650/-. However in the submission of the assessee, it was found that the assessee has incurred total expenses towards purchase of said flat of Rs. 43,33,350/-. Accordingly, the short term capital gain on the flat is worked out as under:
Sales consideration received on sale of flat: Rs. 50,66,685/- Less: Cost of acquisition as discussed above : Rs. 43,33,350/- Short Term Capital Gain : Rs. 7,33,335/-
The assessee vide this office order sheet entry dated 13/01/2014 was asked to show cause regarding difference in cost of acquisition as taken by the assessee in the working of
ITA No.1562 and 1563/Ahd/2017 3 STCG on sale of flat, in the return of income. The assessee has shown less short term capital gain on sale of said flat by Rs. 1,05,300/-.
The assessee, vide his reply received on 27/02/2014, has agreed to the addition to be made in respect of STCG of Rs.1,05,300/-. Accordingly Rs.1,05,300/- is added to the short term capital gain offered by the assessee. Penalty proceedings u/s 271(l)(c) r.w.s 274 is separately initiated for concealing the particulars of total income.”
In the assessment year 2010-11, originally the assessee has not filed return of income under section 139 of the Act. He filed return in response to the notice under section 153A declaring total income at Rs.6,85,480/-. This return was filed on 24.1.2013. The ld.AO did not make any addition to the income. He accepted the return and the discussion made by him reads as under: “3. The assessee has filed his return of income in response to the notice u/s. 153A of the I.T. Act, 1961 for A.Y.2010-11 on 24/01/2013, declaring total income of Rs.6,85,480/-. Notice u/s. 143(2) of the I.T. Act, 1961, dated 01/07/2013 was issued and served upon to the assessee. A notice u/s.!42(l) of the I.T. Act, 1961 along with detailed questionnaire was issued on 09/07/2013 and served upon the assessee. 4. In response to the notices, Shri Pareshbhai Parikh, Accountant from M/s.G.K. Chokshi & Co., C.As. and Authorized Representative of the assessee attended from time to time and filed the details. The details submitted by the assessee have been verified and kept on record. The assessee is an Individual and during the year, the assessee derived income profit and gains from business/profession, income from long term capital gain and income from other sources. 5. Subject to above and from the data made available, the total income of the assessee is determined as under:
I Income from profits and gains from ..... Rs.1,97,345/- business/profession as per return
II Income from long term capital gains as per .... Rs.3,31,162/- return ….. III Income from other sources Rs.1,56,970/-
ITA No.1562 and 1563/Ahd/2017 4 ..... Rs.6,85,477/- Total income as per return Rounded off ..... Rs.6,85,480/-
.... Rs.6,85,480/- Assessed Income
The AO has initiated penalty proceedings under section 271(1)(c) of the Act in both the assessment years.
With regard to Asstt.Year 2010-11, he observed that since the assessee has not filed return under section 139 of the Act, therefore, the income declared in response to the notice under section 153A is to be construed as representing concealed income. Hence, on the addition of Rs.6,85,480/- he considered that the assessee has concealed particulars of income. He imposed a penalty of Rs.93,829/-. Appeal to the ld.CIT(A) did not any relief to the assessee.
Similarly, he imposed penalty of Rs.35,540/- qua the addition made to the income of the assessee in the Asstt.Year 2008-09.
With the assistance of the ld.representatives, we have gone through the record carefully. Before dealing with the issue, whether penalty is imposable upon the assessee or not, we have to appraise ourselves as to how income in an assessment order passed under section 153A is required to be determined. Recently, there were jurisprudential developments in this area, and we would like to take into consideration the following decision on the point. i) CIT Vs. Kabul Charwala, 380 ITR 0183 (Del) ii) CIT Vs. Kurele Papers, 380 ITR 571 (Del)
ITA No.1562 and 1563/Ahd/2017 5 iii) CIT Vs. Lata Jain, 384 ITR 543 (Del)
Thus, it is clear from authoritative pronouncement of Hon’ble Delhi High Court as well as Hon’ble jurisdictional High Court that additions to the income of the assessee in an assessment under section 153A are to be made on the basis of incriminating material found during the course of search. We have extracted the assessment order passed in the case of the assessee in both years. The ld.AO has not made reference to any seized material. In the Asstt.Year 2010-11, he has accepted returned income submitted by the assessee. In the Asstt.Year 2008-09, he has disputed the cost of acquisition and scaled down to a lower figure. In this background of facts, let us evaluate whether the assessee deserves to be visited with penalty in both the assessment years or not. First we take Assessment year 2010-11. It is pertinent to observe that penalty for an assessment framed under section 153A is to be imposed either under section 271AAA or under section 271(1)(c) of the Act. Penalty under section271AAA could be imposable if the assessment year within the meaning of specific previous year provided in the Explanation appended to section 271AAA of the Act i.e. searched year or a year prior thereto. Admittedly, the AO has not treated assessment year 2010-11 as specified year, and he has not imposed penalty under section 271AAA of the Act. He has made penalty under section 271(1)(c) of the Act. This penalty can be imposed with help of Explanation 5A, because search in the case of assessee has been effected after 1.6.2007. Let us take note of Explanation 5A, which reads as under:
ITA No.1562 and 1563/Ahd/2017 6 “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.”
We have considered this aspect in the case of Shri Mansukhbhai R. Sorathia and others Vs. JCIT, Rajkot in ITA No.46/RJT/2012 and others. We deem it pertinent to take note of discussion made by the Tribunal on this issue in this order:
“8. A perusal of both these sections together would indicate that the immunity akin to Explanation 5 is available to the assessee under Explanation-5A also, if he fulfills the conditions narrated in section 271AAA. The Explanation appended to Section 271AAA provides the definition of undisclosed income and specified previous year. A perusal of the expression “specified previous year” would indicate that the year of search and immediately earlier year, if due date
ITA No.1562 and 1563/Ahd/2017 7 of filing of the return has not expired and income-tax return for such year has not been filed. Since the assessment years involved before us are the Asstt.Years 2008-09 and 2009-10, the due date for filing of the return for the Asstt.Year 2009-10 was expired before the search action. Thus, both these years do not fall within the ambit of “specified years”. Since the period of these two assessment years does not fall within the expression “specified year” provided in Section 271AAA, therefore, we do not deem it necessary to construe and explain the meaning of Explanation 5A within the scope of Section 271AAA. The assessees as such cannot claim immunity akin to one available in sub-clause (1) and (2) of the Explanation 5, more particularly, on the strength of the judgment of Hon’ble Gujarat High Court in the case of Kirit Dahyabhai Patel (supra). The ld.First Appellate Authority has dealt with these situation in an analytical manner and in right perspective. As far as the construction of meaning of Explanation 5A to section 271AAA by the ld.First Appellate Authority is concerned, we do not find any error.
At the cost of repetition, we would like to observe that as per Explanation 5A, if in the course of search initiated under section 132 on or after the 1st June, 2007, the assessee is found to be owner of any money, bullion, jewellery or other valuable article or things and the assessee claims such assets have been acquired by him by utilsing the whole or partly of his income from any previous year or any income based on any entry in any books of account or other documents or transactions found during the course of search, and the assessee claims that such entry in the books of account or other documents or transactions represents his income from any previous year, which has ended before the date of search, then, notwithstanding such income is declared by him in any return of income furnished on or after the date of search, he shall for the purpose of imposition of penalty under clause (c) of sub-section (1) of this Section be deemed to have been concealed particulars of income or furnished inaccurate particulars. The moot question for attracting this explanation is that in the course of search money, bullion, jewellery or income based on any entry in the books of accounts or other documents ought to have been found. In a given situation, no money or bullion or
ITA No.1562 and 1563/Ahd/2017 8 jewellery or income might have found from the assessees for the assessment years which were not part of “specified previous year” contemplated in section 271AAA or immunity available to the assessees under sub-clause (a) and (b) of Explanation 5A, then also, if in response to the notice under section 153A, the assessee disclosed some additional income voluntarily, would he be deemed to have concealed the income for visiting him with penalty under section 271(1)(c) of the Act ? The ld.Revenue authorities had drawn inference that since the assessee has not disclosed additional income in the original returns, meaning thereby, it is to be assumed that they have disclosed this amount only when some incriminating material was found. To our mind this assumption ought to be supported with reference of that incriminating material. Let us see the finding in the assessment order.”
In the light of the above, let us examine the facts of present case. We have extracted the assessment order. Nowhere the AO has made reference to any seized material. Meaning thereby, the assumption of the AO that the assessee has concealed the income amounting to Rs.6,85,480/- is misplaced. He assumed concealment of this figure while comparing with non-filing of the return under section 139. The assumption for considering it as concealed income could only be made if incriminating material qua that was found during the course of search. Explanation 5A could authorise him to visit the assessee with penalty. In the case of Shri Mansukhbhai R. Sorathia (supra), we have rejected assumption at the end of the Revenue that additional income in the return after search was filed because some incriminating material was found. The assumption of incriminating material cannot be entertained or construed. It should be in physical form. Therefore, the AO has erred in visiting the assessee with penalty by observing that since no return was filed under section 139, therefore it is to be assumed that assessee has concealed the
ITA No.1562 and 1563/Ahd/2017 9 income. This concealed income should be represented by some incriminating material during the course of search. In response to a notice under section 153A assessee furnishes a return disclosing higher income, it could be considered as concealed income only if some incriminating material representing that higher income was found during the course of search. In view of the above, discussion, we allow ITA No.1563/Ahd/2017 and delete penalty.
We now take up appeal of for the Asstt.Year 2008-09. In this year, only difference between the assessee and the AO was with regard to computation of acquisition cost. Nothing has been pointed out in the assessment order, how the reduced cost of acquisition has been determined. Again no incriminating material was found during the course of search. The assessee has returned the same income as was filed under section 139(1) of the Act. The AO has imposed penalty for concealing particulars of income, but there is no such concealment. The assessee has disclosed a capital gain on sale of flats. Only difference is the computation of cost of acquisition. Therefore, taking into consideration the facts and circumstances of the case, we are of the view that the assessee does not deserves to be visited with penalty in this year also.
In the result, both the appeals of the assessee are allowed. Order pronounced in the Court on 18th February, 2019.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 18/02/2019