THE DCIT, CENTRAL CIRCLE-2, VADODARA vs. DR. PUSHPABEN N. PATEL, BARODA

“On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the penalty of Rs.22,23,090/- u/s.271(l)(c) of the Act without appreciating the fact that had there been no search action, foreign bank account and the income of Rs.72,35,974/- derived from it would have remained undetected and whole amount would have escaped from the gaze of tax. Further, assessee’s intention to avoid disclosing such bank account and income earned thereon is clear from the fact that the assessee had not filed her return of income for A.Y. 2013-14 within the due date but filed the return in response to the notice u/s.142(l) of the Act issued to her and the assessee had never shown such income from any foreign bank account prior to the search action.”

Dr. Vandanaben U. 77,49,800/- 27.11.2013 58,14,365/- Patel The return of income of the assessee for A.Y.2013-14 was due on 31.07.2013. But the assessees did not file her return of income for A.Y.2013-14 within due date i.e. 31.07.2013. Hence notice u/s 142(1) was issued on 11.11.2013 to the assessee to file the income tax return for A.Y.2013-14. Thus, the assessee has filed her Income Tax Return on 27.11.2013 which is only after issue of notice u/s 142(1) and the assessee has disclosed the above mentioned balance distributed from HSBC, Geneva in her return of income for A.Y.2013-14. But the income shown by assessee out of the HSBC, foreign bank account in A.Y. 2013-14 cannot be treated as voluntary disclosure on its part as the above disclosure had been done only after search action. Assessee has never before search shown in her return of income the existence of any such foreign bank account or income there from voluntarily. Assessee never intended to disclose the foreign bank account and income earned thereon in her return of income. It was only when the search had taken place in the Doctor Group of cases and they were confronted with the information of having the HSBC foreign AY : 2013-14 bank account in Geneva, they had no option but to disclose the above fact during the search proceedings. Had they intended to show the foreign bank income in their return of income, interim withdrawals would have been shown. But the fact that even interim withdrawals made by two assessees of the group were not shown in their return of income emphasizes the assessees' willful act of concealment of income.”

“7. I have perused the relevant orders and the Authorities relied upon by the AR and have given careful consideration to the material available on record in the context of the issue to be adjudicated. The relevant facts, as already noted, are not in dispute. The appellant filed a regular return of income u/s 139 for an assessment year falling subsequent to search- relevant assessment year. The income as returned by the appellant came to be accepted by the AO after scrutiny in an order of assessment u/s 143(3). Obviously and clearly there is no "addition" made by the AO to the income returned by the appellant. Thus, clearly, at least prima facie, it is evident that there is neither any concealment of income nor any inaccurate furnishing of particulars of income noticed or brought out by the AO during the course of assessment proceedings, as indeed there cannot be any, when the income returned by the assessee is accepted as such. The AO however, while initiating penal proceedings u/s 271(1)(c) conjectures and baselessly presumes that "but for the search action the income now offered would not have been disclosed by the assessee". Such an observation of the AO is not only wholly unfounded, irrelevant and uncalled for, even if true, in my considered opinion, the fact as to why and how-come and with what motivation the assessee has returned any amount as his income in the return of income is a wholly irrelevant consideration for initiating and levying penalty u/s 271(1)(c) while completing assessment without making any addition/disallowance on regular return of income. This is more so when AO has not invoked Explanation 5A, which of course is not invokable also. As such, in a series of Decisions, including Apex Court's, it has been categorically ruled, and which indeed is express law, that for both, initiation and levy, of penalty u/s 271(l)(c), the onus of bringing the case strictly within the express language of penal provisions is on the AO. The fact of "concealing the income" or "furnishing of inaccurate particulars of income" by the appellant must be established on record rather than merely conjectured by the AO. As has clearly been laid down in Reliance Petroproducts and Dr. Satish Gupta, (supra), the reference and initial point for AO towards this endeavor has to be the return filed by the appellant, and the "concealment" or "inaccuracy" has to be demonstrated to be there in the return filed and certainly not in the conjectural hypothesis as attempted by the AO. The legislature, in its own wisdom, has clearly carved out an express and only exception where "notwithstanding the fact that such amount is disclosed by the assessee in any return filed subsequent to the search" then also, a component of Income already returned can still be subject matter of penalty u/s 271(1)(c) in the present proceeding. This has AY : 2013-14 been provided in deeming fiction of Explanation 5A. Not only Explanation 5A has not been invoked by the AO, it is clearly not so invokable too. For Explanation 5A to apply, as rightly submitted by the Ld. AR, there must be (i) warrant executed in case of the assessee, (ii) assessment must have been framed u/s 1S3A/153C, and (iii) Assessment Year must be that for which the return was already filed or was due to be filed before the date of the search.”