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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri S.S.Godara & Dr. A.L. Saini
O R D E R
PER S.S.Godara, Judicial Member:
- This Revenue’s appeal for assessment year 2013-14 challenges the Commissioner of Income Tax (Appeals)-20, Kolkata’s order dated 08.11.2016, passed in case No.1136/CIT(A)-20/CC-2(3)/15-16, reversing Assessing Officer’s action imposing penalty of ₹85,97,925/- in his order dated 29.09.2015, involving proceedings u/s. 271(1)(c) of the Income Tax Act, 1961; in short ‘the Act’.
Heard Learned CIT Departmental Representative vehemently contending that the CIT(A) has erred in law as well as on facts in deleting the impugned imposed penalty by the Assessing Officer thereby invoking section 271(1)(c) Explanation 5A of the Act. Case file perused.
ACIT, CC-2(3), Kol. Vs. M/s Badrinath Infrastructure Pvt. Ltd. Page 2 3. We advert to the relevant facts. There is no dispute about the impugned search dated 13.02.2013 carried out in assessee’s case i.e. M/s Agarwal Gourisaria Group. He appears to have made his disclosure of ₹2,65,00,000/- during the course thereof in his search statement recorded u/s 132(4) of the Act. The Assessing Officer framed his assessment on 31.03.2015 accepting the above undisclosed income. He further levied the impugned penalty of ₹85,97,925/- in his order dated. 29.09.2015 after holdings that the above undisclosed income attracted section 271(1)(c) Explanation 5A of the Act containing the deeming fiction of concealment of particulars as well as furnishing of inaccurate particulars of income qua the above undisclosed income.
The CIT(A) reverses the Assessing Officer’s action imposing the impugned penalty as follows:- “The AO in the assessment order has levied penalty u/s. 271(1)(c) by giving his findings as under:- The assessee attracts the conditions contained in Explnation-5 to the section 271(1)(c)of the Income Tax Act, 1961 for imposition of penalty. It is seen from records that the same has been taken into account by the assessee in the profit and loss account under the head ‘other business income’. Hence, it is fit case for imposing penalty u/s.271(1)(c) During the appellate proceedings the AR has made oral submissions and also filed written submissions which are as under: ‘We re-iterate that such offering of Rs.2,65,00,000/- was made suo moto and to buy peace and as such no penalty u/s. 271(1)(c) should be imposed. The similar view has also been expressed by the Hon'ble High Court of Gujarat in the case of Girish Devchand Rajani [2013] 33 taxmann.com 174(Gujarat) where it had been held that where assessee to buy peace and to avoid protracted litigation filed revised return disclosing additional income, imposition of penalty under section 271(1)(c) upon assessee on plea that he had furnished inaccurate particulars of income was not justified. Further, in the case of Punjab Tyres [1986] 162 ITR 517 (Madhya Pradesh), the Hon'ble High Court of Madhya Pradesh also held that when surrender is made to purchase peace or for other similar reason, surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings. We also rely on the judgemeknt of the Supreme Court of India in the case of Dilip N. Shroff v.Jt. CIT [2007] 291 ITR 519 ()SC) wherein it was held that imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature, but such discretion is required to be ACIT, CC-2(3), Kol. Vs. M/s Badrinath Infrastructure Pvt. Ltd. Page 3 exercised on the part of the Assessing Officer, keeping the relevant factors in mind. In this regard, we would like to state that assessment has been completed based on the explanations given and documents produced during the course of assessment without making any further addition on the ground of disclosure. We had been a co-operative assessee during the course of assessment proceedings.’ I have considered the findings of the AO and the written submissions oral submission as well as various case laws brought on record by the AR. I find that during the search operation no evidence, documents/papers regarding concealed income were found. But in order to buy peace of mind the assessee voluntarily offered Rs.265000000/-. During the pos search investigation or during the assessment proceeding the department could not bring/find any evidence or prove of concealed income other than the statement of the assessee in which the assessee volu9ntarily offered Rs.26500000/- in order to buy peace of mind. But the AO has treated this amount as concealed income and levied penalty thereon though no evidence/incriminating documents have been found or brought on record by the AO. Further the AO has referred to Explanation-5A to section 271(1)(c). Explanation 5A to section 271(1)(c) reads as under:- Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is foudu8nd to be the owner of- i) 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 utilizing (wholly or in part) his income for any previous year; or ii) Any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and- a) Where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or b) The due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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 It is clear from the plain reading of Explanation 5A to section 271(1)(c) that two pre-requisites are essential 1) For any previous year money, bullion, jewellery or other valuable things should be claimed as income by the assessee.
ACIT, CC-2(3), Kol. Vs. M/s Badrinath Infrastructure Pvt. Ltd. Page 4 2) Any income based any entry in books of account should be claimed/represent income of the assessee. Here in this case during the search no money, bullion, jewellery or any income based on entry in the books of account was found during search operation u/s. 132 of the IT Act, so the application of Explanation 5A to section 271(1)(c) is not applicable here. Further the AR has brought on record the case law of Sudharsan Silk and Sarees, 300 ITR 30 (Supreme Court) in this case, the Hon'ble Supreme Court has held that if the appellant offers any amount for taxation for the purpose of purchasing peace and assessment has been made based upon the aforesaid offerings, even if no assurance in writing is given by the searching party, it may be clearly inferred that such an inducement must have been given by the searching party. When only partial evidence or no evidence in support of concealment was detected during the search, why would a person go to offer a higher mount unless he was promised some reciprocal benefits like not being visited by penalty. Thus, it was held that where additions have been made based on assessee’s own offerings, penalty provision shall not lie. I have considered findings of the AO in the penalty order and the legal position as well as various case laws brought on record by the AR. I think the AO in the penalty order and the legal position as well as various case laws brought on record by the AR. I think the AO has not applied. Explanation 5A to section 271(1)(c) appropriately here in this case. Further the ratio decided by the Hon'ble Supreme Court in the case of Sudharsana Silk and Saaries (supra) that on the amount offered by the assessee to purchase peace of mind, penalty cannot be levied, clearly makes it a case where the action of the AO of levying penalty u/s. 271(1)((c) cannot be justified. Accordingly, assessee’s appeal on grounds no 1, 2 and 3 are allowed.”
We have heard the Learned Departmental Representative vehemently seeking to revive the impugned penalty. He relies to rely upon the assessee’s search statement so as to invoke to u/s 271(1)(c) Explanation 5A of the Act on the ground that the said undisclosed income is a clear-cut case of application of deeming fiction therein. We find no substance in Revenue’s instant argument. We make it clear that we are dealing with a penalty provision in tax statute liable to be strictly construed. The Revenue has got no material or evidence apart from assessee’s search statement qua his undisclosed income. Legislature has made it clear in section 271(1)(c) Explanation- 5A(1)(iii) that the same is applicable in case an assessee is found to be owner of money, bullion, jewellery or other valuable article or thing acquired by utilizing such an income or any entry in books of account or documents only and not otherwise. There is no material in the case file indicating the said ACIT, CC-2(3), Kol. Vs. M/s Badrinath Infrastructure Pvt. Ltd. Page 5 crucial conditions to have been satisfied at the Revenue’s behest whilst invoking the impugned penalty provision. This forms the sole reason for the CIT(A) to reverse the Assessing Officer’s action imposing the penalty in question. We do not interfere with the CIT(A)’s well reasoned findings therefore. The Revenue fails in its sole substantive ground raised in the instant appeal.