SAI SAMARTH ENTERPRISES,MUMBAI vs. DCIT , CC- 1 , THANE

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. No. 3718/Mum/2018 (निर्धारण वर्ा / Assessment Year: 2012-13) & आयकर अपील सं/ I.T.A. No. 3720/Mum/2018 (निर्धारण वर्ा / Assessment Year: 2011-12) & आयकर अपील सं/ I.T.A. No. 3721/Mum/2018 (निर्धारण वर्ा / Assessment Year: 2010-11) बिधम/ M/s. Sai Samarth Enterprises DCIT-Central Circle-1, 107, Patel Building, Parel, Thane. Vs. Mumbai. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ABUFS9008B (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee by: Shri Suchek Anchaliya Revenue by: Shri T. S. Khalsa (Sr. AR) सुनवाई की तारीख / Date of Hearing: 04/03/2021 घोषणा की तारीख /Date of Pronouncement: 24/05/2021 आदेश / O R D E R PER AMARJIT SINGH, (JM): The assessee has filed the above mentioned appeals against the order dated 29.03.2018 passed by the Commissioner of Income Tax (Appeals)- 11, Pune [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys. 2010-11, 2011-12, 2012-13 in which the penalty levied by the AO has been ordered to be confirmed. ITA. NO.3718/Mum/2018

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 2. The assessee has filed the present appeal against the order dated 29.03.2018 passed by the Commissioner of Income Tax (Appeals)-11, Pune [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2012-13 in which the penalty levied by the AO has been ordered to be confirmed.

“1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in levying a penalty of Rs.3,51,546/- u/s.271(1)(c) of the Income Tax Act 1961, ® 100% of the tax sought to be evaded, without considering the facts and circumstances of the case. 2) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in levying a penalty of Rs.3,51,546/- on the grounds that the assessee had not filed the return of income u/s. 139(1), and that the undisclosed income had been offered by the assessee due to search action u/s. 132 of the Income Tax Act,1961 and also that the appellant had furnished inaccurate particulars of income, without considering the facts and circumstances of the case. 3) The appellant craves leave to add, amend, alter or delete the said ground of appeal." 4. The brief facts of the case are that the search and seizure action u/s 132 of the I. T. Act, 1961 was carried out upon Valuable Group of cases and its associate concerns on 10.04.2013 which were engaged in the business of Media Technology & Infrastructure Development Shri Sanjay Gaikwad of Thane alongwith Narendra Hete of Mumbai and his son Ameya Hete who were the main promoters of the Valuable group. Accordingly, the business and residential premises of Shri Narendra Hete & Shri Sanjay Gaikwad were covered during the search action u/s 132of the I. T. Act, 1961. The assessee did not file the return of income u/s 139(1). Notice u/s 153C of the Act was issued on 01.10.2015 which was served upon the

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 assessee. In view of the notice, the assessee filed its return of income on 15.12.2015 declaring total income to the tune of Rs.11,37,690/-. The notice u/s 153A r.w.s 153C of the Act was issued. The penalty proceeding was initiated u/s 274 r.w.s. 271(1)(c). Thereafter, the necessary notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. Thereafter, the assessment was completed by assessing the total income to the tune of Rs.11,37,690/-. The penalty notice was issued and after the reply of the assessee, the penalty in sum of Rs.3,51,546/- was levied. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the penalty, therefore, the assessee has filed the present appeal before us. 5. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. All the issues are in connection with the confirmation of the penalty levied by the AO. At the very outset, the Ld. Representative of the assessee has argued that the penalty notice nowhere speaks about specific limb to levy the penalty because the particular charge was not tick off in the notice, therefore, in the said circumstances, the penalty is not liable to be sustainable in the eyes of law, hence the order of the CIT(A) confirming the penalty order of the AO is wrong against law and facts and is liable to be set aside. In support of these contentions the Ld. Representative of the assessee has placed reliance upon the law settled in ITA. No.1154/M/2014 in the case of CIT-11 Vs. Samson Perinchery and the order of the ITAT, Mumbai Bench in ITA. No.2555/M/2012 vide order dated 28.04.2017 titled as Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, Circle-4(2). However, on the other hand, the Ld. Representative of the Department has refuted the said contentions. The

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 copy of notice dated 28.03.2016 is on the file in which the Assessing Officer nowhere specify any limb to levy the penalty because none of the charge was tick off in the notice. It is not in dispute that the penalty u/s 271(c) of the Act is leviable on account of the concealment of particular of income and on account of furnishing the inaccurate particulars of income. Both have different connotations. In this regard, the Hon’ble Supreme Court has appreciated the distinction between both the limb in the case Dilip N. Shroff 161 taxman 218 (SC). As per the record, the assessment order speaks about levying the penalty on account of taken the action in view of provisions u/s 274 r.w.s. 271 (1)(c) of the Act but the notice nowhere specify any limb to levy the penalty. The notice is not justifiable in view of the law settled by the Bombay High Court in the case of CIT-11 Vs. Samson Perinchery. At the time of argument, the Ld. Representative of the assessee has also placed reliance upon the finding of the Hon’ble ITAT in ITA. No. 2555/M/2012 titled as Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, Circle-4(2). The relevant para is hereby reproduced below:

“8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. It is also a well accepted proposition that „concealment of the particulars of income‟ and „furnishing of inaccurate particulars of income‟ referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T. Ashok Pai, 292 ITR 11 (SC). Therefore, if the two expressions, namely „concealment of the particulars of income‟ and „furnishing of inaccurate particulars of income‟ have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee, which is based on the manner in which the notice u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 has been issued to the assessee-company. A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- “83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718]”

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of non-application of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon'ble Karnataka High Court in the case of M/s. SSA‟s Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt of the ld. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by the Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, 953, 1097 & 1126 of 2014 dated 5.1.2017 (supra) and the decision of the Tribunal holding levy of penalty in such circumstances being bad, has been approved. 11. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s 271(1)(c) of the Act. We have carefully considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under :- “12. A combined reading of the decision rendered by Hon‟ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon‟ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon‟ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon‟ble Kerala High Court has struck down the penalty imposed in the case of N. N. Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon‟ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya (supra) and observed as under:- “...The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified.”

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 In the instant case also, we are of the view that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the assessee.” 12. The aforesaid discussion clearly brings out as to the reasons why the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) is to prevail. Following the decision of our coordinate Bench in the case of Dr. Sarita Milind Davare (supra), we hereby reject the aforesaid argument of the ld. CIT-DR. 13. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struck-off. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s 271(1)(c), which has to be met by him. As noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non- compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. 14. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c)

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 of the Act dated 10.12.2010 is untenable as it suffers from the vice of non-application of mind having regard to the ratio of the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted. We hold so. Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with.” 6. In view of the above facts and circumstances, it is quite clear that the penalty is not leviable in accordance with law. Further, we noticed that the penalty was levied on account of filing the return of income in pursuance of notice u/s 153 r.w.s 153C of the Act. In the case of Kirit Dahyabhai Patel Vs. ACIT (2017) 80 taxmann.com 162 (Guj). The following finding has been given as under.:-

“8. We have heard learned advocates for the parties and perused the material on record. Before dealing with the contentions, it would be relevant to reproduce Explanation 5 to Section 271 (1) (c) of the Income Tax Act, which reads as under:- "Explanation 5. Wherein in the course of a [search initiated under section 132 before the 1st day of June, 2007], the assessee is found to be the owner of 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- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, wherein such return has been furnished before the said date, such income has not been declared therein; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or

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after the date of the 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, unless, - (1) Such income is, or the transactions resulting in such income are recorded,- (i) in a case falling under clause (a), before date of the search; and (ii) in a case falling under clause (b), on or before such date; in the books of account, if any, maintained by him for any source of income of such income is otherwise disclosed to the [principal Chief Commissioner or Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] before the said date; or (2) he in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewelery or other valuable article of thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub section (1) of Section 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income." 9. The High Court of Madras in the case of S.D.V. Chandru (supra) held that in a case where the assessee had not disclosed his income in the returns filed for the previous year which have ended prior to the date of the search and, in the statement given under Section 132(4) the assessee admitted the

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 receipt of undisclosed income for those years and also specified the manner in which such income had been derived and thereafter pays the tax on that undisclosed income with interest, then such undisclosed income would get immunised from the levy of penalty. 10. Looking to the facts and circumstances of the case, it would be relevant to refer the decision relied upon by learned senior advocate for the appellant in the case of Gebilal Kanbhaialal (HUF) (supra), wherein the Apex Court in paragraph No. 6 has observed as under:- "6. Explanation 5 is a deeming provision. It provides that where, in the course of search under Section 132, the assessee is found to be the owner of unaccounted assets and the assessee claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous Year which has ended before the date of search or which is to end on or after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purpose of imposition of penalty under Section 271(1) (C). The only exceptions to such a deeming provision or to such a presumption of concealment are given in sub-clauses (1) and (2) of Explanation 5. In this case, we are concerned with interpretation of clause (2) of Explanation 5, which has quoted above. Three conditions have got to be satisfied by the assessee for claiming immunity from payment of penalty under clause (2) of Explanation 5 to Section 271(1(C). The first condition was that the assessee must make a statement under Section 132(4) in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1). Such statement was made by the Karta during the search which concluded on August 1, 1987. It is not in dispute that condition No.1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(C) was that the assessee should specify, in his statement under Section 132(4), the manner in which income stood derived. Admittedly, the second condition, in the present case also stood satisfied. According to the department, the assessee was not entitled to immunity under Clause (2) as he did not satisfy the condition for availing the benefit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on 31st July, 1987 and

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 pay tax thereon particularly when the assessee concealed on August 1, 1987 that there was concealment of income. The third condition under clause (2) was that the assessee had to pay the tax together with interest, if any, in respect of such undisclosed income. However, no time limit for payment of such tax stood prescribed under clause (2). The only requirement stipulated in the third condition was for the assessee to "pay tax together with interest". In the present case, the third condition also stood fulfilled. The assessee has paid tax with interest upto the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income upto the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4)." 11. Even, the High Court of Chattisgarh in the case of Abdul Rashid (supra) has held that in order to get the benefit of immunity under clause(2) of explanation-5 to Section 271(1)(c) of the Income Tax Act, it is not necessary to file the return before the due date provided that the assessee had made a statement, during the search and explained the manner in which the surrendered amount was derived, and paid tax as well as interest on the surrendered amount. 12. At this stage, it is required to be noted that the Apex Court in the case of CIT v. Vegetable Products Ltd. (supra), has held that if the Court finds that the language of a taxing provision is ambiguous or capable of more meaning than one, then the Court has to adopt the interpretation which favours the assesee, more particularly so where the provision relates to the imposition of a penalty. 13. Considering the facts and circumstances of the case and also considering the decisions relied upon by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT (A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under Section 139 of the Act, as the

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under Section 271(1)(c ) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under Section 153A, if any. 14. Further, in the present case, it appears from the record that the assessees had satisfied all the conditions which are required for claiming immunity from payment of penalty under Section 271(1) of the Act. The provision does not specify any time limit during which the aforesaid amount i.e. the amount of penalty with interest has to be paid. Admittedly when the assessees herein have paid the entire amount with interest, the Assessing Officer ought to have granted them immunity available under Section 271(1)(C ) of the Income Tax Act. 15. The decision relied upon by learned advocate for the respondent will not apply to the facts of the present case. 16. In view of the aforesaid facts of the case and also the principle laid down in the decisions relied upon by the learned senior counsel for the appellant more particularly the principle laid down in the case of Gebilal Kanhailal (supra) and Abdul Rashid (supra), we are of the considered opinion that the penalty under Section 271(1)(C) of the Income Tax Act cannot be levied on the income shown in the return filed under Section 153 of the I.T. Act. 17. Considering the facts and circumstances of the case and also considering the decision of the Madras High Court in the case of S.D.V. Chandu (supra), we are of the opinion that the appellant is entitled to the benefit of the provisions of Explanation 5(2) to Section 271(1)(c) of the Income Tax Act. 18. For the foregoing reasons, the present appeals stand allowed. The order of the Tribunal is quashed and set aside. Consequently, the order of the CIT (A) is restored. The question of law involved in this appeals is answered in favour of the assessee and against the revenue.” In the case of titled as PCIT Vs. Neeraj Jindal (2017) 79 taxmann.com 96 (Del). The following finding has been given as under.:-

“9. Counsel for the revenue submitted that in the original return, the assessee had not declared the income which came to be detected by the

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 Department during the course of survey. It is only after the search that the assessee filed the revised returns, which itself would go to show that amount offered during the search is concealed income. There is no finding by the Tribunal that there was cessation of liability of these amounts during the relevant financial year. Hence, the Revenue contends that the levy of penalty is required to be sustained. For imposition of penalty mens rea is not a requirement. Once the conditions mentioned in section 271(1)(c) are held to have been established, the imposition of penalty is automatic and no discretion is left in the authorities. 10. It is moreover contended that the levy of penalty cannot be denied for the reason that the assessee cannot be given benefit of Explanation 5 to Section 271(1)(c) of the Act as clause (ii) of Explanation 5 to Section 271(1)(c) exempts only that part of the income from the penal provision, which is covered by statement under Section 132(4), where the assets have been acquired by the assessee out of his income which is not disclosed in the return of income to be furnished before the expiry of the time prescribed in section 139(1) and the assessee specifies in the statement in the manner in which such income has been derived. The penalty was levied because the assessee had not indicated in the return the income which was sought to be brought to taxation as a result of the search. The disclosure in the return after the search did not in any way, diminish its responsibility to do so. 11. Counsel for the assessee argues that the findings of the ITAT are sound and do not call for interference. It is urged that the appellant disclosed the amounts seized in respect of which specifics as to the years they were attributable to, were furnished. Since there was no variation between the statement made during the search proceeding and the sums disclosed during the returns (as all the amounts shown in the return under Section 153A coincided or tallied with the amount found) the revenue's invocation of Section 271(1)(c) of the Act by relying on Explanation 5, was unfounded. 12. The first question involves interpretation of Section 271(1)(c) of the Act. For convenience, the relevant provision of the Act is reproduced below: "Section 271 (1) If the Assessing Officer or the Principal Commissioner or Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person - ** ** (c) has concealed the particulars of his income or furnished

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inaccurate particulars of such income, he may direct that such person shall pay by way of penalty- ** ** (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits." 13. At the outset, it must be noted that pursuant to the search and seizure operation conducted under Section 132(4) of the Act, the assessee was given notice under Section 153A to file fresh return of his income. Thereafter, the assessee filed revised returns and the return filed by the assessee under Section 153A was accepted as such by the A.O. However, the A.O. was of the opinion that inasmuch that the income disclosed by the assessee under Section 153A was higher than the income in the original return filed under Section 139(1) and since in his view, such disclosure of income was a consequence of the search conducted on the assessee, there was concealment of income which attracted Section 271(1)(c) of the Act. Therefore, the question that needs to be answered is whether penalty is to be levied automatically whenever the assessee declares a higher income in his return filed under Section 153A in comparison to the original return filed under Section 139(1). 14. The Supreme Court held, in T. Ashok Pai v. CIT [2007] 292 ITR 11/161 Taxman 340, that penalty under Section 271(1)(c) is not to be mandatorily imposed. In other words, the levy of penalty under this provision is not automatic. This view has been reiterated in Union of India v. Rajasthan Spg. and Wvg. [2009] 180 Taxman 609 to say that for there to be a levy of penalty under Section 271(1)(c), the conditions laid out therein have to be specifically fulfilled. Section 271(1)(c) of the Act, being in the nature of a penal provision, requires a strict construction. While considering the interpretation of this provision, this CIT v. SAS Pharmaceuticals [2011] 335 ITR 259/199 Taxman 255/11 taxmann.com 207 (Delhi), stated that: "It is to be kept in mind that Section 271(1)(c) of the Act is a penal provision and such a provision has to be strictly construed. Unless the case falls within the four-corners of the said provision, penalty cannot be imposed. Subsection (1) of Section 271 stipulates certain contingencies on

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 the happening whereof the AO or the Commissioner (Appeals) may direct payment of penalty by the Assessee." Thus, what is required to be judged is whether there has been a "concealment" of income in the return filed by the assessee. 15. Earlier decisions indicated a conflict of opinion as to whether Section 271(1)(c) required the revenue to specifically prove mens rea on the part of the assessee to conceal his income. In order to remove the element of mensrea, the Finance Act, 1964 deleted the word "deliberately" that preceded the words "concealed the particulars of his income" in Section 271(1)(c). Nonetheless, even post the amendment, the Apex Court in KC. Builders v. Asstt. CIT [2004] 265 ITR 562/135 Taxman 461 held that: "The word 'concealment' inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non- disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income." 16. Thus, despite the fact that there is no requirement of proving mens rea specifically, it is clear that the word "conceal" inherently carries with it the requirement of establishing that there was a conscious act or omission on the part of the assessee to hide his true income. This was also the conclusion of the Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218. In a later decision in Union of India v. Dharmendra Textile Processors [2008] 13 SCC 369, the Supreme Court overruled its decision in Dilip N. Shroff (supra). Thereafter, in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) the Court clarified that Dilip N. Shroff (supra) stood overruled only to the extent that it imposed the requirement of mens rea in Section 271(1)(c); however, no fault was found with the meaning of "conceal" laid down in Dilip N. Shroff's case (supra). Thus, as the law stands, the word "conceal" in Section 271(1)(c), would require the A.O. to prove that specifically there was some conduct on part of the assessee which would show that the assessee consciously intended to hide his income.

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 17. In this case, the A.O. in his order noted that the disclosure of higher income in the return filed by the assessee was a consequence of the search conducted and hence, such disclosure cannot be said to be "voluntary". Hence, in the A.O.'s opinion, the assessee had "concealed" his income. However, the mere fact that the assessee has filed revised returns disclosing higher income than in the original return, in the absence of any other incriminating evidence, does not show that the assessee has "concealed" his income for the relevant assessment years. On this point, several High Courts have also opined that the mere increase in the amount of income shown in the revised return is not sufficient to justify a levy of penalty. 18. The Punjab & Haryana High Court in CIT v. Suraj Bhan [2007] 294 ITR 481/159 Taxman 26, held that when an assessee files a revised return showing higher income, penalty cannot be imposed merely on account of such higher income filed in the revised return. Similarly, the Karnataka High Court in the case of Bhadra Advancing (P.) Ltd v. Asstt. CIT [2008] 175 Taxman 551, held that merely because the assessee has filed a revised return and withdrawn some claim of depreciation penalty is not leviable. The additions in assessment proceedings will not automatically lead to inference of levying penalty. The Calcutta High Court in the case of CIT v. Suresh Chand Bansal [2010] 329 ITR 330 held that where there was an offer of additional income in the revised return filed by the assessee and such offer is in consequence of a search action, then if the assessment order accepts the offer of the assessee, levy of penalty on such offer is not justified without detailed discussion of the documents and their explanation which compelled the offer of additional income. The Madras High Court in the case of S.M.J. Housing v. CIT [2013] 357 ITR 698/38 taxmann.com 203 held that where after a search was conducted, the assessee filed the return of his income and the Department had accepted such return, then levy of penalty under Section 271(1)(c) was not justified. From the above cases it would be clear that when an assessee has filed revised returns after search has been conducted, and such revised return has been accepted by the A.O., then merely by virtue of the fact that such return showed a higher income, penalty under Section 271(1)(c) cannot be automatically imposed. 19. The whole matter can be examined from a different perspective as well. Section 153A provides the procedure for completion of assessment where a search is initiated under Section 132 or books of account, or other documents or any assets are requisitioned under Section 132A after 31.05.2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under

ITA. Nos.3718, 3720 & 3721/Mum/2018 A.Y. 2012-13, 2011-12 & 2010-11 Section 132A. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or requisition under Section 132A, as the case may be, shall abate. [Ref to Memorandum accompanying the Finance Bill, 2003] Section 153A opens with a non-obstante clause relating to normal assessment procedure covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after May 31, 2003. The sections, so excluded, relate to returns, assessment and reassessment provisions. However, the provisions that are saved are those under Section 153B and 153C, so that these three Sections 153A, 153B and 153C are intended to be a complete code for post- search assessments. Considering that the non-obstante clause under Section 153A excludes the application of, inter alia, Section 139, it is clear that the revised return filed under Section 153A takes the place of the original return under Section 139, for the purposes of all other provisions of the Act. This is further buttressed by Section 153A (1)(a) which reads: "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139." 7. Taking into account all the facts and circumstances, it is quite clear that the no penalty is leviable in the said circumstances, therefore, we delete the penalty.

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Order pronounced in the open court on 24/05/2021 Sd/- Sd/- (SHAMIM YAHYA) (AMARJIT SINGH) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 24/05/2021 Vijay Pal Singh/Sr. PS आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. आयकर आयुक्त(अपील) / The CIT(A)- 3. 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदध, आयकर अपीलीय अदधकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधिक िंजीकधर /(Dy./Asstt. Registrar) आिकर अिीलीि अनर्करण, मुंबई / ITAT, Mumbai