SURESH CHAND BANSAL,HARYANA vs. ACIT, CENTRAL CIRCLE-16 , DELHI

PER S.RIFAUR RAHMAN,AM: 1. These three appeals have been filed by the two Assessees

against the orders of Learned Commissioner of Income Tax

(Appeals), 26, New Delhi [“Ld. CIT(A)”, for short], dated

07/11/2023 for Assessment Years 2014-15 & 2015-16

respectively.

issues. All these appeals are heard together and disposed off by

this common order. We are taking ITA No.3664/Del/2023 as a

lead case.

penalty levied in the case of the assessee are, in penalty order u/s

271(1)(c) dated 25/03/2022, in which the Assessing Officer

observed that assessee had filed his return of income for Asst.

Year 2014-15 declaring total income of Rs.25,38,700/- and

subsequent to assessment initiated u/s 153A r.w.sec 143(3), the

total income was assessed to tax at Rs.44,57,610/-.

3 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

the assessee u/s 153A of the Act, revealed that assessee had

declared additional income of Rs.19,18,910/- on account of Short

Term Capital Gain arisen on sale of shares of M/s Sapbelle

Tradelinks Pvt. Ltd. He further observed that during the

assessment proceedings, the assessee had submitted narrated

copy of the bank statement and from the narration of the

transactions, it was noticed that there were credit and debit

entries relating to sale and purchase of shares of the above said

company. It was observed by the Assessing Officer that assessee

had not declared capital gain in respect of above sale of shares.

Only on the basis of initiation of search proceedings, the assessee

has declared the above additional income, he observed that in case

there was no search on the assessee, there would not have any

discloser on additional income by the assessee. Accordingly, he

issued the show cause notice u/s 274 r.w. section 271(1)(c) of the

Act and served on the assessee. The submissions made by the

assessee are not found to be satisfactory and not voluntary

disclosure, the Assessing Officer rejected the same and proceeded

4 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

to levy the penalty of Rs.5,75,673/- which is 100% of tax sought

to be evaded by the assessee during the current assessment year.

appeal before the Ld. CIT(A) and filed a detailed submissions.

Ld. CIT(A) dismissed the grounds raised by the assessee and

sustained the findings of the Assessing Officer in this regard.

before us raising following grounds of appeal:-

“1. That the impugned assessment order is bad in law and on facts and in circumstance of the case.

5 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

Prayer It is therefore prayed

That Penalty Levy by the learned Commissioner of Income Tax (Appeals) may kindly be deleted

-That grounds of appeal related to time barred assessment shall be allowed -That other grounds of appeal which are not adjudicated by the by Ld. CIT(A) shall be adjudicated and shall not be sustained.”

that in search proceedings, no incriminating material was found

by the Department relating to or in connection with the additional

income declared by the assessee. The assessee has declared the

above said additional income voluntarily and filed the revised

return of income before the Assessing Officer, the Assessing

Officer has accepted the above revised return of income and

completed the assessment based on the above revised return of

income in which assessee has declared additional income relating

to Short Term Capital Gain. He submitted that the Assessing

Officer cannot mechanically proceed to impugned penalty when he

completed the assessment only based on revised return of income

filed by the assessee. He submitted that in the similar facts on

6 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

record, the Hon’ble Delhi High Court in the case of PCIT vs. Neeraj

Jindal [2017] 79 taxmann.com 96 (Delhi) held in favour of the

assessee. He brought to our notice the copy of the above said

decision placed at page 108 of PB.

authorities and submitted that revised return of income was filed

by the assessee only upon search proceedings and also declaration

of additional income is not voluntary. He submitted that the case

of the assessee is falls under Explanation 5 to section 271 (1) (c) of

the Act. He further submitted that he relies on the written

submissions filed by him. For the sake of clarity it is reproduced

below:-

“In the above case in additional to my reliance on the facts, arguments and case laws discussed in the orders of the AO and that of the Ld. CIT[A], it is humbly submitted that the following decisions may kindly be considered with regard to levy of penalty u/s 271(1)(c) of 1.T.Act:

7 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

be entitled to claim benefit of exception, carved out in Explanation 5 to section 271(1)(c).

8 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

original return must be due to bona fide inadvertence or bona fide mistake on part of assessee and even if assessee agreed to addition with a condition that penalty could not be imposed, department is not precluded from initiating penalty proceedings. 7. The Hon'ble Supreme Court in the case of CIT Vs Atul Mohan Bindal [2009] 317 ITR [SC] 1 has held that penalty u/s 271[1][c] is neither criminal nor quasi criminal but a civil liability, albeit a strict liability. Such liability being civil in nature, mens-rea is hot essential.”

record, we observed that the search operation was conducted in

the group concerns of Kawatra Tent Group and various business

and residential premises. The case of the assessee also covered in

the above said search operation. Accordingly, Section 153A

proceedings were initiated in the case of the assessee. As per

records submitted before us shows that there was no

incriminating material found during the search in relation to

additions made by the Assessing Officer. During the search

assessment proceedings, the Assessee had filed revised return of

income claiming additional income and additional deductions.

However, the Assessing Officer has accepted the above said revised

return of income to the extent of additional income declared by the

assessee and proceeded to complete the assessment.

9 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

Subsequently, he proceeded to impose the penalty u/s 271(1) (c)

observing that the assessee had declared the additional income

only because of initiation of search proceedings. We observed that

the Assessing Officer has found the credit and debit entries in the

bank statement submitted by the assessee only during the

assessment proceedings, therefore, there is no link to the material

found during the search. Therefore, in the similar facts on record,

the Hon’ble Delhi High Court in the case of Neeraj Jinda (supra)

held as under:-

“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. 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

10 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

"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.

11 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

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, 1538 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"

12 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

Issue II

(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, where 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 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, -

13 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

(1) such income is, or the transactions resulting in such income are recorded,-

(i) in a case falling under clause (a), before the 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 or such income is otherwise disclosed to the Principal Chief 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, jewellery or other valuable article or 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

14 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

found in his possession during the search. Put differently, if not for the search, the Legislature deems that the assessee would not have disclosed such income in the return filed subsequently. Explanation 5 also contains two exceptions, where the assessee would not be deemed to have concealed his income and would gain immunity from levy of penalty-first, if such income is or the transactions resulting in such income are recorded in the books of account maintained by the assessee for any source of income or such income was otherwise disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of the search; second, in the course of the search, the assessee makes a statement under Section 132(4) that the assets found in his possession have 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 the time specified in Section 139(1), 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. 24. The purpose of inserting Explanation-5 in the statute books was explained by the Supreme Court in K.P. Madhusudan v. CIT [20011 251 ITR 99/118 Taxman 324, wherein the Court held-

"Learned Counsel for the assessee then drew our attention to the judgement of this Court in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705. He submitted that the assessee had agreed to the additions to his Income referred to hereinabove to buy peace and it did not follow therefrom that the amount that was agreed to he added was concealed income. That it did not follow that the amount agreed to be added was concealed income is undoubtedly what was laid down by this Court in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 and that therefore, the Revenue was required to prove the mens rea of a quasi-criminal offence. But it was because of the view taken in this and other judgments that the Explanation to Section 271 was added."

15 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

deeming fiction by virtue of which such additional income is considered as concealment. If such additions in the income in the return filed consequent to a search, were to automatically evidence concealment under Section 271(1)(c), there would be no need for Parliament to enact a deeming fiction in the form of Explanation 5; such a reading would render Explanation 5 otiose and without any purpose. This is also consonant with the view arrived at in the earlier part of this decision, i.e. mere increase of income in the return filed pursuant to Section 153A would not be sufficient to show concealment under Section 271 (1)(c).

"We may consider the things from yet another aspect, viz., that under the set up of IT Act, in whatever eventuality the assessment may have to be made, i.e. whether a regular assessment, or assessment consequent upon escapement of income, or assessment of a block period, but in either case, the assessment has to be, with respect to the particular assessment year, relating to the concerned previous year, and the Income derived, or found by the Department to have been derived, or earned, by the assessee, during particular

16 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

previous year, has to be assessed during the relevant assessment year only. and assessment of such income cannot be shifted to any other past or future years, so much so that there may be cases, where the right of the Department to assessment may have been lost on account of passage of limitation also"

Thus, it is clear that the Revenue has to establish that the assets seized during the search conducted on the assessee, related to the Income of the assessee for the relevant assessment years le. AY 2005-06 and AY 2006- 07.

"From above discussion it is clear that the provisions of Explanation 5 are applicable in the cases where during the course of search initiated on or before 1.6.2007 any money. bullion, jewellery or other valuable article or thing is found in the possession or under control of the assessee. In the case of the assessee the search was conducted on 22.11.2006 and cash of Rs. 1,11,45,350/- was found from the possession of the assessee. The assessee had undisclosed commission income as well as purchases and sales as seen from the statement of affairs made by the assessee based on seized material. The assessee had drawn cash flow statement for the entire period of six years in order to determine undisclosed income based on seized material for each of six assessment years. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment year 2004-05 merely on presumption that the assessee might have been in possession of cash throughout the period covered by search assessments. The income offered to tax u/s 153A for assessment year 2004-05 is based on entries recorded in the seized material. Unlike provisions of Explanation 5A, the provisions of Explanation 5 cannot be invoked in assessment year 2004-05 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2004-05 is based on presumptions, surmises and conjectures. It is settled law that suspicion howsoever strong, it cannot take place of actual evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of six assessment years has to be rejected. In view of above discussion we are of the considered opinion that even the amended provisions of Explanation 5 cannot be applied in assessment year 2004-05. Consequently penalty u/s 271(c) cannot be imposed by invoking Explanation 5 of the Act in assessment year 2004-05 in

17 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

respect of cash found in previous year relevant to assessment year 2007-08."

"The income offered to tax u/s 153A for assessment years 2005-06 and 2006-07 cannot be said to be based on assets seized, because from the assessment order, it is clear that search was on 11.01.2007 (l.e AY 2007-08), the cash seized during search was only to the tune of Rs.5,26,530/- and it is not emerging from the records that the assessee has claimed during search that the cash seized (on 11.0 1.2007), belonged to him and that was owned by him in the relevant assessment years i.e. AYs 2005-06 and 2006- 07. Unless there is a clear finding in this respect, Explanation 5 of Section 271(1)(c) cannot be of any help to the department. As rightly pointed out by the Coordinate Bench in Prem Arora (supra), the provisions of Explanation 5 cannot be invoked in assessment years 2005-06 and 2006-07 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2005- 06 & 2006-07 is based on assumptions and presumptions. It is settled law that suspicion howsoever strong, cannot take the place of evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of assessment years under consideration has to be rejected."

It is difficult to see any infirmity in the decision of the learned ITAT in the present case. Levy of penalty under Section 271(1)(c) cannot be on the basis of surmises and conjectures. Thus, Explanation 5 cannot assist the claim of the revenue in the present case for the relevant assessment years

18 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

under consideration before this Court for the simple reason that for the relevant assessment years, 2005-06 & 2006-07, no material was recovered during the search. Rather, the assessee added Rs.21,65,932/- in the return filed pursuant to notice under section 153A. That amount was not relatable to any sum recovered or article seized. Therefore, the question of adding or not adding amounts after the search and falling within the mischief of Explanation 5 to Section 271 (1) (c) cannot arise in the facts and circumstances of this case. 29. Based on the above discussion, this Court is of the opinion that Explanation 5 cannot be relied upon by the Revenue in the relevant assessment years under consideration before this Court, and in the absence of recourse to Explanation 5, there is no incriminating evidence to show that the assessee has concealed the particulars of his income, within the meaning of Section 271(1)(c) of the Act. In conclusion, this Court is of the view that there is no illegality in the order of the learned ITAT in the present case. In all four appeals, the question of law involved is thus answered in favour of the assessee. The revenue's appeals are therefore dismissed.”

the facts in the present case are exactly similar to the above facts,

therefore, respectfully following the above decision, we are inclined

to delete the penalty imposed by the Assessing Officer.

considering the case laws relied by him, we found that the facts

are distinguishable to the facts in the present case.

19 ITA Nos.3664 to 3666/Del/2023 Amit Bansal and Suresh Chand Bansal vs. ACIT

Assessment Year 2015-16 and appeal filed by Sh. Suresh Chand

Bansal for Assessment Year 2014-15 are exactly, similar the

findings given in Assessment Year 2014-15 in the case of Amit

Bansal are applicable mutatis mutandis. 15. In the result, the appeal filed by the assessee in Appeal

Nos.3665 /Del/2023 and 3666/Del/2023 are allowed. 16. In the result, all the appeals are filed by both the assessees

are allowed.

Order pronounced on 26th June, 2024.

Sd/- Sd/- (SUDHIR PAREEK) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26/06/2024 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT, NEW DELHI