SANJEEV JAIN,NEW DELHI vs. DCIT, CENTRAL CIRCLE, GHAZIABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘G’, NEW DELHI Before Shri H. S. Sidhu, Judicial Member and Dr. B. R. R. Kumar, Accountant Member ITA Nos. 6880 & 6881/Del/2018 Assessment Years: 2011-12 & 2013-14 Rishabh Buildwell P. Ltd., vs. DCIT, Central Circle 196, Ram Vihar, New Delhi. Ghaziabad. PAN: AACCR9776R (Appellant) (Respondent) ITA Nos. 6882, 6883, 6884, 6885, 6886 & 7139/Del/2018 Assessment Years: 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 & 2014-15 Sanjeev Jain, 196, Ram vs. DCIT, Central Circle Vihar, New Delhi. Ghaziabad. PAN: ACFPJ3817P (Appellant) (Respondent) Appellants by Sh. Kapil Goel, Advocate Respondent by Sh. S.S. Rana, CIT(DR)

Date of Hearing 10.06.2019 Date of Pronouncement 03.07.2019 ORDER Per B. R. R. Kumar, Accountant Member: The assessee has taken the following grounds of appeal: “1. That the Ld. CIT(Appeals)-4, Kanpur has erred in law and on facts in confirming the penalty amounting to Rs. 61,80,000/- u/s 271(1 )(c) of the Income Tax Act, 1961, on erroneous understanding of facts and provisions of law.

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Rs.120,91,500/-, for A.Y. 2012-13, penalty was for Rs.352,50,500/- and for the A.Y. 2013-14, the amount was Rs.7,50,000/-

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iii) The contention of the appellant is that there is no variation in the income filed by the appellant u/s. 153A of the Act and the assessment of income u/s. 153A of the Act, hence, there is no concealment of income. 5.5 The undersigned has carefully considered the contention of the appellant and the factual matrix of the case, it is undisputed fact that the appellant has not disclosed the income in the original return of income filed u/s. 139(1) of the Act. The disclosure of additional income is on account of conduct of search u/s. 132(1) of the Act and issue of notice u/s. 153A of the Act. Disclosure of additional income u/s. 153A of the Act consequent to the search action cannot be treated as voluntary on the part of the appellant. Had there been no search, appellant would not have disclosed the additional income because there would not be any occasion to issue notice u/s. 153A of the Act. Hence, penalty u/s. 271(1)(c) of the Act is clearly attracted for furnishing the concealment of income. 5.6 Perusal of explanation 5A to 271(1)(c) of the Act makes it abundantly clear that if the appellant has not disclosed additional income in the original returned income filed prior to the search and if the same is disclosed consequent to the search or enquiry conducted by the department, then the additional income disclosed is deemed to have furnishes inaccurate particulars of income. In view of the specific deeming provisions in explanation 5A of the 271(1)(c) of the Act appellant is not entitled to take any benefit from exemption of penalty u/s. 271(1)(c) of the Act. The same is correctly levied by the Assessing Officer for furnishing the inaccurate particulars of income and concealment of income. It may be mentioned here that application of explanation 5A to section 271(1)(c) is automatic, due to its nature of specific deeming provisions applicable to provision u/s 271(1)(c) of the Act. 5.7 It is settled preposition of law that if the additional income offered by the appellant is consequent to the search action then the same constitutes concealment of income u/s 271(l)(c) of the Act. It is observed from the factual matrix of the case that the appellant has not only committed default within the meaning of provisions of 271(l)(c) of the Act, but also failed to produce the reasonable cause for committing such default, albeit, appellant has not produced any satisfactory explanation in the present facts of the case. 5.8 In this regard, reliance is also placed on following judgement of High Court wherein penalty u/s. 271(1)(c) of the Act is held as leviable, if appellant has surrendered the additional income consequent to detection of the same by the department. � CIT Vs. Sreenivasa Rai (Kerala) 242 ITR 29

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� LMP Precision Engg. Vs. DCIT (Guj) 330 ITR � CIT Vs. Rakesh Suri (All.) 331 ITR 458 � Biiand Ram Hargan Das (All) 171 ITR 390 � Ravi and Co. Vs. ACIT (Mad.) 271 ITR 286 � Dayabhai Giridharbhai Vs, CIT (Bom) 32 ITR 677 � Mahavir Metal Work Vs. CIT (PAH) 92 ITR 513 5.9 In the latest judgement of Supreme Court in the case of Balrampur Chini Mills Ltd. Vs CIT (2017)(SC) 246 taxmann 373 (SC) it was held by the Apex court that additional income detected by the department and declared by the appellant, consequent to search action would attract penalty provisions u/S. 271(1)(c) of the Act. 5.10 Therefore, in view of the detailed discussion and case laws cited here-in-above, undersigned finds no reason to interfere with the levy of penalty by the Assessing Officer. The same is therefore, confirmed and grounds of appeal of the appellant is dismissed.” 5. Before us during the argument, the ld. AR argued that the AO did not specifically invoke Explanation 5A to section 271(1)(c) of the Act either in the assessment order or in any of the notices issued prior to passing of the penalty order. He argued that no specific charge / default for which the penalty was initiated, was never clearly stated in either the notice or in the assessment order. His main argument revolved around two points, (a) since the returned income filed in response to notice u/s. 153A of the Act and the assessed income determined in such proceedings is exactly the same, hence, no penalty u/s. 271(1)(c) is attracted. (b) the absence of specific charge in the penalty notice for which he relied on the judgments of the Hon’ble Supreme Court in the case of SSA Emrald Meadows, 73 Taxman 248 (SC).

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then, the difference of income between the two returns (u/s. 139(1) and 153A) should be treated as concealed income and the assessee is liable for penalty. He relied upon the following case laws in support of his arguments and filed his arguments in written form which have been duly perused:

� Sundaram Finance Ltd. 99 Taxman 152 (SC) � CIT Vs Smt. Kaushalya 216 ITR 660 � Ultra Tech Cement Ltd. TIOL 785 HC Mum. With regard to 271AAB of the Act

� Sandeep Chandak Vs Pr. CIT 255 Taxman 367 � CIT Vs Amit Agarwal 88 Taxman 288 � Ritu Singhal Vs CIT 403 ITR 97 � Mac Data Vs CIT 358 ITR 593 7. Heard the arguments of both the parties and perused the material before us and also the case laws relied upon by both the parties. 8. Primarily, we find that the Assessing Officer has not brought anything on record to assess any income over and above the returned income filed by the assessee. The AO in the assessment order could not bring into fore as to how the seized material has been analyzed and to prove as to how the concealment or furnishing of inaccurate particulars of income has arisen. The entire part of the assessment order with regard to the penalty is reproduced below to verify whether or not the Revenue has brought out any concealed income or made a case for levy of the penalty u/s 271(1)(c) of the Act as under:

“4.1 During the assessment proceeding assessee were required to explain the document as page no. 68, 76, 78, 80, 87, 96, 116, 117 and 118 of LP- 2(A-2) SEIZED FROM PREMISE OF 195-Ram Vihar Delhi. Which is related to cash payment to cash received. The assessee has submitted that ‘the following amount was received in cash from resident of society towards maintenance and summary of the cash movement and cash payment made by Sh. Sanjeev Jain between different companies are on behalf of the companies by Sh. Sanjeev Jain, to summaries it is submitted that the net result of the above documents off Rs.1,05,83,000/- already declared in the return of income in A.Y. 2014-15’. The reply of the assessee is considered and Rs.1,05,83,000/- will be added in the hands of

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Sh. Sanjeev Jain in A.Y. 2014-15. Penalty proceeding u/s 271AAB of the I.T. Act also initiated separately. Addition: Rs.1,05,83,000/- (A.Y.2014-15) 4.2 During the assessment proceeding assessee were required to explain the document as page no. 33-51 of LP-3(A-3) seized from premise of 195- Ram Vihar Delhi. The assessee is required to explain the above documents and a show cause given to assessee that why may not be treated as unexplained and added in your income? The assessee has submitted that ‘These documents are related to Angel Mall and not recorded in the books of accounts; as per memory of the Sanjeev Jain, it is cash received and cash paid on the behalf of companies, but due to avoid litigation, we have surrendered Rs.80,00,000/- in A.Y. 2009-10, Rs.72,95,000/- in A.Y. 2010-11 and Rs.4,03,05,000/- in A.Y. 2011-12’. The reply of the assessee is considered and Rs.80,00,000/- in A,Y. 2009- 10, Rs.72,95,000/- in A.Y. 2010-11 and Rs.4,03,05,000/- in A.Y. 2011-12 will be added in the hands of Sh. Sanjeev Jain in A.Y. 2014-15. Penalty proceeding u/s 271(1)(c) of the I.T. Act also initiated separately for furnishing inaccurate of particulars of income and concealment of income. Addition: Rs.80,00,000/- in A.Y. 2009-10, Addition: Rs.72,95,000/- in A.Y. 2010-11 Addition: Rs.4,03,05,000/- in A.Y. 2011-12” 9. From the reading of the above assessment order we find that though the assessing officer has mentioned the word “Addition” it does not represent any adding up of the income but narration of the income returned by the assessee in response to notice u/s 153A of the Act. Now, in the absence of any addition made by the assessing officer whether any penalty u/s 271(1)(c) of the Act is leviable or not is examined with reference to the facts of the case and the established judgments. 10. The penalty u/s 271(1)(c) of the Act is leviable in case of financing of inaccurate particulars of income or concealment of income. The Revenues has to show whether the assessee indeed has concealed income or furnished inaccurate particulars of income. There has to be a finding with regard to the addition made in the assessment order. Whereas in instant case, there was no addition made by the AO. There is no deeming fiction for the levy of penalty the provisions applicable whether it is an assessment u/s 153A of the Act or assessment u/s 143(3) of the Act or u/s 148 of the

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Act the provision essentially remain the same. In the instant case, the assessee has filed return of income declaring additional income which was accepted by the AO. Hence, they cannot be treated as the assessee has concealed income as concealment as to be dealt by the Revenue by way of unearthing sum of the income which has been kept away from the eye of the Revenue. Furnishing of inaccurate of particulars refers to filing of material which is not in conformity with the facts or truths. They deal in with correct detail about income so that a part of the income could be covered up by the assessee. None of these two conditions are applicable to the instant case. The AO proceeded to treat the assessee’s additional income so offered as concealment and furnishing of inaccurate particulars of income. The provisions of the explanation 5A to Section 271(1)(c) of the Act and 271AAB of the Act have to be interpreted strictly. Unless, there is an actual concealment or non-discloser of the particular of the income the penalty cannot be imposed. Further, when the revised income is accepted and the income is assessed as per the revised income there is no scope of penalty. In the case of Kirit Dahyabhai Patel Vs ACIT (2017) 80 Taxmann.com 162 (Guj.), the Hon’ble High Court held that in view of specific provision of Section 153A, the return of income filed in response to notice u/s 153A is to be considered as return filed u/s 139, as the AO has made assessment on the said return and, therefore, the return has to be considered for the purpose of penalty u/s 271(1)(c) of the Act and the penalty is to be levied on the income assessed over and above the income returned u/s 153A, if any, admittedly, in this matter both the returned income and the assessed income are same. Whereas the Revenue was of the opinion that in as much 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.

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automatic. This view has been reiterated in Union of India v. Rajasthan Spinning and Weaving Mills, (2009) 13 SCC 448 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. 12. 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. 13. The Punjab & Haryana High Court in Commissioner of Income Tax v. Suraj Bhan, (2007) 294 ITR 481 (P & H), 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 Pvt. Limited v. Assistant Commissioner of Income Tax, (2008) 219 CTR 447, 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 Commissioner of Income Tax v. Suresh Chand Bansal, (2010) 329 ITR 330 (Cal) 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. Commissioner of Income Tax, (2013) 357 ITR 698 held that where after a search was conducted, the assessee filed the return of his

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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. 14. 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 speciied 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 section139

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that assessment under the Act is with respect to a particular assessment year and the penalty imposed under Section 271(1)(c) would also be for concealing income in that particular assessment year, which concealment was revealed by the discovery of certain assets in the assessee’s possession during the search conducted under Section 132. {Refer PR. Commissioner of Income Tax Vs Shri Neeraj Jindal (Delhi High Court)}

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