ACIT CEN CIR 5(4), MUMBAI vs. MAN EQUIPMENT CO P.LTD, NAVI MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

ITA No. 5612/M/2015 A.Y.2009-10

2. "Whether on the facts and circumstances of the case and in law, the Ld CIT{A) was justified in getting drawn into the technicalities as to the correct section or sub-action under which penalty could be initiate by the AO and not rebutting the false claim of the assesse before the C1T (A) that the manner in which undisclosed income had been earned had been disclosed in the statement which in the face of records available clearly found untrue as admittedly in. assesses letter dated 11.03.2013 the disclosure had been made to avoid penalty and litigation and buy peace of which are not the criteria for non-imposition of penalty?" 3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in mistaking the intention of the assesses which lied in buying peace from the department rather than the requirement of admitting undisclosed income and specifying the manner it which such income had been derived?'1 4- "Whether on the facts and in the circumstances of the case and in lair the view of the Ld- CIT (A) that the penalty proceedings are not legally sustainable in terms of Explanation 5A to Section 27l(l){c) and whether such views are in conformity with the provisions of section 292B read with those of section 292BB, the assessee, not having at all raised the issue before the AO during the proceedings.?" 5 "Whether on the facts and in the circumstances of the case and in lawr the Ld. CIT(A) was Justified in cancelling the penalty even white his statutory role is coterminus with that of the AO?"

ISSUE Nos. 1 to 5:- 5. All the issues are in connection with the deletion of penalty by CIT(A). The Ld. Representative of the Department has argued that the CIT(A) has wrongly deleted the penalty, therefore, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.:-

4.3.1. I have considered the submissions of the appellant and perused the materials available on record including copies of judicial decisions relied upon by the appellant. The issue for adjudication is whether the A.O, was Justified In levying penalty of Rs,l ,22,36,4007- on the appellant u/s.271(l)(c) of the Act in respect of undisclosed income of Rs.3.60 crores admitted by it/ its Director in the statement u/s. 13214) recorded during the course of search, in this connection, It deserves to be noted that search action in case of the appellant was initiated on 13.02- 2009 and therefore, the previous year relevant to the A.Y. under consideration is one in which the search was conducted. It is noticed that while imposing the penalty u/s. 271(1)(c) of the Act, the A.O. has invoked the provisions of Explanation 5A and held that in search cases, the penalty has to be levied even if the assessee honours the disclosure in the return of Income filed. Upon perusal of the relevant provision, it is found dial the view taken by the A.O. is not based on correct appreciation of Explanation 5A to Section 271(1)(c). It deserves to be noted that ITA No. 5612/M/2015 A.Y.2009-10

Explanation 5A gets triggered and the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income under the following circumstances: -  In the course of a search initiated u/s. 132 on or after 01.06.2007. The assessee is found to be the owner of any undisclosed assets or undisclosed income based on entries in books of accounts etc. and the assessee claims that such assets have been acquired by utilizing his Income for any previous year or that such entries in books of accounts etc. represent his Income for any previous year which has ended before the date of search and  The return of income for such previous year has been furnished before the date of search but such income has not been disclosed therein or the due ate for filing the return of income for such previous year has expired but the assessee has not filed the return. In such event, the deeming fiction of explanation 5A comes into play notwithstanding that such income is declared by the assessee in any return furnished on or after the date of search. 4.3.2 In the present case, it is a matter of record that the appellant has been found to be the owner of undisclosed income to the tune of Rs.3.60 crores based on entries in its books of account etc. and the same has been offered as undisclosed income of the appellant for the previous year 2008-09 which has ended after the date of search carried out on 13.02.2009. It is also observed that the return for such previous year relevant to the A.Y. under appeal has been furnished on 30.09.2009 after the date of search and the undisclosed income of Rs.3.60 crores admitted by the appellant / its Director in the statement recorded u/s.132(4) has been reflected therein. In these circumstances, there is no hesitation in holding that Explanation 5A to Section 271(1)(c) is not at all attracted in the present case and the A.O. has not invoked the correct provisions of law for imposing the penalty. On the peculiar facts of the instant case as brought out above, no penalty u/s.271(1)(c) r.w. Explanation

ITA No. 5612/M/2015 A.Y.2009-10 5A cab be levied, because the requisite conditions or circumstances mentioned above for attracting the legal fiction of Explanation 5A are conspicuous by their absence. Therefore, in view of the above discussion, it is held that the action of the A.O. in imposing penalty of Rs.1,22,36,400/- on the appellant u/s.271(1)(c) r.w..s. Explanation 5A is legally unsustainable and the penalty so levied by the A.O. is directed to be cancelled. Grounds bearing Nos. 1 to 7 taken up by the appellant are allowed.”

ITA No. 5612/M/2015 A.Y.2009-10