S.K.ENTERPRISE,AHMEDABAD vs. THE ACIT, CENT. CIRCLE 1(3), AHMEDABAD

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ITSSA 267/AHD/2013Status: DisposedITAT Ahmedabad18 January 2023AY 2008-098 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty under section 271(1)(c) could not be levied. Firstly, the income disclosed voluntarily during the search and declared in the return filed under section 153A was accepted by the AO without any variation in the assessment proceedings. The Tribunal relied on precedents like PCIT v. Rajkumar Gulab Badgujar (SC), Salasar Stock Broking Ltd. (Kolkata - Trib.), Muninaga Reddy (Bangalore - Trib.), Neeraj Jindal (Delhi HC), and Atlanta Electricals (P.) Ltd. (Ahmedabad - Trib.), which held that penalty cannot be imposed when the returned income is accepted without addition. Secondly, the Tribunal found that the amended Explanation 5A to section 271(1)(c) was not applicable. The amended Explanation was introduced by the Finance Act, 2009, with retrospective effect from 01-06-2007. However, at the time of filing the original return of income (17-09-2008) and the return in response to the section 153A notice, the amended provision was not in force. The Tribunal followed the principle that the law prevailing at the time of filing the return should be the basis for penalty levy, not subsequent amendments, even if retrospective. Therefore, the penalty levied was not sustainable. The Tribunal allowed the appeals and directed the deletion of the penalty.

What were the facts?

The assessee, S.K. Enterprise, filed its original return of income for AY 2008-09 on 17-09-2008, declaring Rs. 2,20,730. Search proceedings under section 132 were conducted on 07-10-2009. Following a notice under section 153A, the assessee filed a revised return declaring Rs. 79,19,730, which included Rs. 74,45,000 disclosed during the search. The assessment was completed under section 143(3) r.w.s. 153A(1)(b) accepting the revised return without any variation. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) and levied a penalty of Rs. 22,33,500 by invoking Explanation 5A. The CIT(A) upheld the AO's order. The assessee appealed to the ITAT against the confirmed penalty for AY 2008-09 and AY 2009-10.

What were the issues?

1. Whether penalty under section 271(1)(c) can be levied on income disclosed voluntarily during search proceedings and accepted in the return filed under section 153A without any variation in assessment. Assessee's contentions: - The disclosure of Rs. 74,45,000 was voluntary, made to "buy peace of mind" and cooperate with the department, without any incriminating documents found. - The assessment order did not mention any corroborative or incriminating documents to conclude concealment. - The AO mechanically initiated penalty proceedings. - Since the return filed under section 153A was accepted without variation, there was no concealment, and thus no penalty could be levied. - The AO erred in applying Explanation 5A as amended by the Finance Act, 2009, retrospectively from 01-06-2007. The erstwhile Explanation 5A, applicable for AY 2008-09, required the due date for filing the return to have expired and the assessee not to have filed it, which was not the case as the original return was filed on 17-09-2008. The law applicable for penalty imposition should be as enforceable at the time of the offence. Revenue's contentions: - The ld. Departmental Representative placed reliance on the order passed by the ld. CIT(A).

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 143(3),Section 271(1)(c),Section 139(1),Section 133A,Section 271AAA(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH

Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal

For Appellant: Shri Bhavin Marfatia, A.R
For Respondent: Shri Vijay Kumar Jaiswal, CIT-D.R

आदेश/ORDER

PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-

These appeals are arising out of orders passed by ld. CIT(A)-1, Ahmedabad for assessment years 2008-09 and 2009-10 both dated 13-05- 2013. Since identical issue is involved for both the years under consideration, both the years are being heard together.

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 2 S.K. Enterprise vs. ACIT

2.

We shall first take up assessment year 2008-09 and the observations for this year shall apply to assessment year 2009-10 as well.

3.

The brief facts of the case are that the assessee had filed return of income on 17-09-2008 declaring total income of Rs. 2,20,730/-. Search proceedings u/s. 132 of the Act was carried on 07-10-2009. In pursuance to notice issued u/s. 153A of the Act, the assessee filed return of income declaring total of Rs. 79,19,730/- including Rs. 74,45,000/- disclosed during the course of search operation. The assessment was completed u/s. 143(3) r.w.s. 153A(1)(b) of the Act accepting the return of income filed u/s. 153A of the Act and without any variation being made by the Assessing Officer during the course of assessment proceedings. The ld. Assessing Officer passed the penalty order u/s. 271(1)(c) of the Act and levied the penalty of Rs. 22,33,500/- by invoking Explanation 5A to section 271(1)(c) of the Act. In appeal, the ld. CIT(A) upheld the order of Assessing Officer and confirmed the penalty.

4.

The assessee is in appeal against the order passed by ld. CIT(A) confirming the penalty against the assessee.

5.

The counsel for the assessee submitted that the assessee had disclosed voluntary disclosure of Rs. 74,45,000/- purely on estimated basis during the search proceedings to buy peace of mind and to cooperate with the Department. Further, in the assessment order, there is no whisper of any alleged corroborative and incriminating documents on the basis of which it can be concluded that the assessee had concealed the particulars of income.

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 3 S.K. Enterprise vs. ACIT

The Assessing Officer had mechanically initiated penalty proceedings u/s. 271(1)(c) of the Act. Against the levy of penalty, the counsel for the assessee submitted firstly that the assessment has been framed in pursuance of return furnished declaring additional income of Rs. 74,45,000/-, in pursuance of notice issued u/s. 153A of the Act and in absence of any variation to such return in the assessment proceedings, there cannot be said to be concealment of income and accordingly, no penalty can be levied on alleged concealment of income of Rs. 74,45,000/-. The counsel for the assessee placed on record certain judicial precedents in support of the above contention. The second argument of the counsel for the assessee is that the ld. Assessing Officer has erred in applying Explanation 5A as amended by the Finance Act, 2009 with retrospective effect from 01-06-2007 as against the then applicable Explanation 5A of the Act for the year ending on 31-03- 2009. The counsel for the assessee submitted that the erstwhile Explanation 5A, which existed prior to the present provisions, can be invoked only for the previous year, which has ended before the date of search and “ the due date for filing of return of income for such year has expired and the assessee has not filed the return” of income. However, in the present case, since the assessee has already filed return of income on 17-09-2008, therefore, the penalty could not have been levied as per the then applicable Explanation 5A to section 271(1)(c) of the Act. The counsel for the assessee submitted that the law applicable for imposition of penalty would be the law as enforceable at the time of commission of offence and not the law as it stands on the date of which return in response of notice u/s. 153A is filed. The counsel for the assessee submitted that for the assessment year 2008-09 and 2009-10 new Explanation 5A was not in existence and therefore the then

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 4 S.K. Enterprise vs. ACIT

applicable Explanation 5A would be applicable according to which no penalty can be levied in the present case since the return of income was already filed before expiry of the due date.

6.

In response ld. Departmental Representative placed reliance on the order passed by ld. CIT(A).

7.

Before proceeding further, it would be useful to analyse some judicial precedents on the subject. In the case of PCIT v. Rajkumar Gulab Badgujar [2019] 111 taxmann.com 257 (SC), for relevant assessment years 2008-09 to 2010-11, a search and seizure was carried out in case of 'S' Group in course of which certain incriminating documents pertaining to assessee were seized. Thereupon, assessee filed its return declaring certain taxable income prior to issue of notice under section 153C. The Assessing Officer completed assessment under section 153C wherein no addition was made over and above declared income. He, however, passed a penalty order under section 271(1)(c). The Tribunal held that since there was no addition to returned income of assessee, penalty could not have been imposed. The High Court upheld Tribunal's order. The SC while dismissing the SLP filed against High Court's order held that where High Court upheld Tribunal order holding that in absence of any addition made to assessee's income over and above declared income while completing assessment under section 153C, penalty could not be imposed under section 271(1)(c), SLP filed against said order was to be dismissed. In the case of Salasar Stock Broking Ltd. [2017] 82 taxmann.com 343 (Kolkata - Trib.), following a search proceedings, the assessee disclosed an additional income in return filed

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 5 S.K. Enterprise vs. ACIT

under section 153A. The Assessing Officer, however, levied penalty under section 271AAA on the ground that such additional income was not offered in return filed under section 139(1). The ITAT held that the offer of Rs. 2 crores has been made voluntarily by the assessee in the disclosure petition under section 132(4) followed by filing of the return under section 153A. It is also pertinent to note that this offer has been voluntarily made by the assessee without any incriminating materials found during the course of search. Hence, it goes to prove beyond doubt that the offer of undisclosed income of Rs. 2 crores was made voluntarily by the assessee without any detection by the department and, accordingly, the argument of the departmental representative that but for the search, this income would not have been offered does not hold any water and deserves to be dismissed. Thus, the assessee is entitled for immunity from levy of penalty under section 271AAA(2) and, accordingly, the penalty levied by the Assessing Officer is cancelled. In the case of Muninaga Reddy [2013] 37 taxmann.com 440 (Bangalore - Trib.), for assessment year 2008-09, where assessee consequent to survey conducted under section 133A had declared income from business at Rs. 81 lakhs and further in return of income filed also declared said income, which was accepted and brought to tax, Assessing Officer was wrong in imposing penalty under section 271(1)(c) of the Act. In the case of Neeraj Jindal [2017] 79 taxmann.com 96 (Delhi), the High Court held that when an assessee has filed revised return after search has been conducted, and such revised return has been accepted by Assessing Officer, then merely by virtue of fact that such return showed a higher income, penalty under section 271(1)(c) cannot be automatically imposed. In the case of Prem Arora [2012]

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 6 S.K. Enterprise vs. ACIT

24 taxmann.com 260 (Delhi), the ITAT held that no penalty can be levied under section 271(1)(c) once income returned under section 153A is accepted by Assessing Officer. Further, notably in the case of Atlanta Electricals (P.) Ltd. [2019] 111 taxmann.com 351 (Ahmedabad - Trib.), the Ahmedabad ITAT held that Explanation 5A to section 271(1)(c), prior to amendment by Finance (No. 2) Act, 2009, would not apply to those assessees who had already filed their returns under section 139 prior to search; it would apply only to non-filer assessees. Further, in the case of Santosh Kumar Agarwal ITA No. 665/Hyd/2015, the ITAT observed as under:

“Therefore the law prevailing as on the date of filing of return should be the basis of levy of penalty and not on the subsequent amendment, even if the amendment is retrospective. …… 13. Considering all these aspects and the fact that the assessee has a good case on merits and that the provisions of Explanation 5A are not applicable on the date of filing of the original return, we are of the opinion that Explanation 5A as it stood on the date of filing the return in response to notice under S.153A by the assessee would not cover the case of the assessee, so as to warrant levy penalty under S.271(1)(c). Since the assessee bona-fidely declared the additional income in the course of search and filed return and paid taxes thereon, we are of the opinion that penalty levied on such amount cannot be sustained. Accordingly, we allow the appeal of the assessee and delete the penalty of Rs.12,84,177 sustained by the CIT(A).

14.

In the result, assessee's appeal is allowed.”

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 7 S.K. Enterprise vs. ACIT

7.1 In the light of the above judicial precedents, we are of the considered view that penalty cannot be levied in the instant facts since firstly, in the return of income filed pursuant to notice u/s 153A of the Act, the aforesaid returned income was accepted in the assessment proceedings, and secondly, the amended provisions of Explanation 5A to section 271(1)(c) of the Act would also not apply since the same was not in force during the FY 2007-08 and 2008-09 as it stood then and was only introduced by Finance Act 2009 w.r.e.f. 01-06-2007. However, at the time of fling of original return of income, the amended provision was not effective. Accordingly, in view of the above, we are of the considered view that penalty is not liable to be levied.

8.

In the result, we are hereby allowing the appeal of the assessee and direct that penalty levied u/s 271(1)(c) of the Act may be deleted.

9.

In the result, appeal of the assessee is allowed for assessment year 2008-09.

ITA No. 268/Ahd/2013 A.Y. 2013

10.

Since the observations made by us for assessment year 2008-09 are applicable for assessment year 2009-10 as well since the facts before us and the issue for consideration are identical for both the assessment years, we are hereby allowing the assessee’s appeals.

I.T(SS).A No. 267 & 268/Ahd/2013 A.Y. 2008-09 & 2009-10 Page No. 8 S.K. Enterprise vs. ACIT

11.

In the combined result, the appeals of the assessee are allowed for both the assessment years 2008-09 and 2009-10.

Order pronounced in the open court on 18-01-2023

Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 18/01/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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