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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R. C. SHARMA & SHRI AMARJIT SINGH
O R D E R Per R. C. Sharma, A. M.: This is an appeal filed by the Revenue against the order by the ld. CIT(A) for the assessment year (A.Y.) 2006-07, in the matter of penalty imposed u/s. 271(1)(c) of the Act.
The grievance of the Revenue pertains to the deletion of the penalty imposed u/s. 271(1)(c) of the Act. The precise grounds raised by the Revenue read as under:
(A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the Assessing Officer to delete the penalty u/s. 271(1)(c) of the Act in respect of the disclosure of Rs.3,86,45,000/- with regard to the investment in shares.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not appreciating the fact that the assessee is not entitled to benefit of Explanation 5(2) to section 271(1)(c) of the I.T. Act for the earlier assessment years for which the due date for filing the return of income is over.
Rival contentions have been heard and record perused. Facts in brief are that the assessee is an individual deriving income from house property, short term capital gains and income from other sources. There was a search and seizure action u/ s.132(1) carried out in the case of Ankur Group on 26.4.07 and on subsequent dates. The assessee is a member of Ankur Group and was covered under the search action u/s.132(1) on the Ankur Group. In response to notice issued u/s.153A on 16.01.08, the assessee filed her return of income on 13.02.09 declaring total income of Rs.4,61,32,465/-. Original return of income was filed by the assessee u/s.139(1) on 31.03.07 declaring total income of Rs.42,43,546/-. The assessee is wife of Shri Purnandu Jain, who is Managing Director of M/s. Ankur Drugs & Pharma Ltd. which is the main concern of the group. In the return of income filed u/s. 153A, the assessee had offered Rs.4,18,50,000/- as additional undisclosed income, details of which were as under:
(A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain (i) Construction on agriculture land Rs.32,05,000 (ii) Shares of Vaibhav Healthcare P. Ltd. Rs.3,86,45,000 Rs.4,18,50,000
In the assessment order the A.O. observed that the surrender on account of construction at Agriculture land at Eklara had been made considering the loose papers in Annexure A-1 and Page No. 142 to 157 of Annexure A-3 seized from the residence of the assessee at 201/204, Minoo Minar, Veera Desai Road, Andheri (W), Mumbai - 53. Further the A.O. observed that the assessee had been allotted shares of Vaibhav amounting to Rs.4,00,00,000/-. The A.O. noted that the assessee had invested Rs.13,55,000/- from her books which was reflected in her balance sheet. The balance amount of Rs.3,86,45,000/- (4,00,00,000 - 13,55,000) had been offered for levy of tax in the relevant year.
The A.O. observed that these two incomes were not declared by the assessee in her original return of income filed on 31.3.07. In view of this, the A.O. initiated penalty proceedings. The notice u/s.271(1)(c) r.w.s. 274 was served on the assessee and was asked by the A.O to show cause as to why the penalty should not be levied under section 271(1)(c) for submitting inaccurate particulars of income/concealment of taxable income.
6. Being not satisfied with the asseessee’s reply, the A.O. levied penalty u/s. 271(1)(c), which was deleted by the ld. CIT(A) after observing as under:
(A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain „8.1.11 In the appellant's case, the appellant has disclosed the impugned income u/s.132(4) of the LT. Act and has admitted in the return of income filed consequent to search and paid the taxes. In view of this I hold that the appellant is entitled to the benefits conferred under Explanation 5(2) to section 271(1)(c) of the LT. Act. However it is seen that in this case the appellant has disclosed two amounts u/s. 132(4) : (i) Construction on agricultural land Rs.32,05,000 (ii) Shares of Vaibhav Healthcare P. Ltd. Rs. 3,86,45,000 The Explanation 5 to section 271(1)(c) of the I.T. Act refers to only money, bullion, jewellery or other valuable articles or things. So the Explanation 5 refers to only movable assets. But in this case the appellant has disclosed Rs.32,05,000/- with regard to construction of an immovable property. So the benefits conferred under Explanation 5(2) to section 271(1)(c) is not applicable in the appellant's case. In this regard reference is invited to the following decisions: 1. South Indian Finance vs. ITO 39 ITD 370 (Cochin) 2. DCIT vs. Mahadik Brothers 84 ITD 1 (Pune) Further there are seized material to prove the appellant had unaccounted income and used in the construction of the building and the unaccounted income and investment in property was not disclosed in the original return of income filed by the appellant. So, I hold that the appellant has concealed the particulars of income to the extent of Rs.32,05,000/- (for which there was no benefit of immunity available under Explanation 5(2) to section 271(1)(c) of the IT Act) and I hold that penalty is leviable u/s.271(1)(c) with regard to this concealment of Rs.32,05,000/-. Since the investment in shares are movable assets, I hold that the benefits conferred under Explanation 5(2) to section 271(1)(c) is available with regard to the investment in shares of Rs.3,86,45,000/- and I hold that the penalty is not leviable with regard to the disclosure of Rs.3,86,45,000/-. The A.O. is directed to rework the penalty u/s.271(1)(c) of the I.T. Act.‟ 7. Against the above order of the ld. CIT(A), the Revenue raised further appeal before us.
8. The ld. AR placed on record the order of the Tribunal in case of husband of the assessee for the very same year in and 1680/Mum/2012 order dated 23.09.2013, wherein the deletion of penalty for the very same reasoning was upheld by the tribunal after observing as under:
We have heard both the parties and their contentions have carefully been considered. Before proceeding further it will be relevant to reproduce the provision of Explanation -5 to section 271(1)(c) of the Act.
(A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain Explanation 5.--Where 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, 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,-- (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 [Chief 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 respect of such income.] The issue arising in the present appeal is that where or not the benefit of clause (2) of the aforementioned explanation (hereinafter referred to as exception-2 for the sake of convenience) can be given to the assessee in respect of the years in respect of which return of income have already been filed under section 139(1) in addition to the assessment year for which the period for filing return under section 139(1) has not been expired. This issue was considered by Hon'ble Madras High Court of aforementioned decision in the case of CIT vs. SDV Chandru (supra). In the said case search was conducted at the premises of the assessee on 13/2/1990 and the issue was involving in respect of assessment year 1985-86 and 1986-87. The statement of the assessee under section 132(4) was recorded. Thereafter the assessee filed his return for earlier assessment years i.e. 1985-86 and 1986-87 and admitted larger income and also paid the tax together with interest. The AO had construed the clause (2) of Explanation-5 of section 271(1)(c) as being limited to the year of search and not applicable to earlier years. The Tribunal granted the relief to the assessee. Their Lordships after considering the aforementioned provisions have come to the conclusion that while clauses (a) and (b) make a clear distinction between previous year which is ended before the date of the search, and the previous year which is to end on or after the date of search, para-2 in Explanation-5 does not make any such distinction. It refers to the statement given by the assessee at the time of the search under section 132(4) with regard to assets found at (A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain the time of search being the statement to the effect that such assets have been acquired out his undisclosed income and specification by the assessee in such statement with regard to the manner in which such income had been derived, and the subsequent payment by the assessee of the tax on such undisclosed income together with interest. It is further observed that the words in para-2 "has been acquired out his income which has not been disclosed in the return of income to be furnished before the expiry of time specified in sub-section(1) of section 139" are not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of search. The words used are "income which has not been so far disclosed in his return of income". The additional words are referred to the time specified in section 139(1) are only a reiteration of the legal requirement regarding the time within which return should normally been filed. In cases where the assessee had not disclosed his income in the return filed for previous year which have ended prior to the date of search, and in the statement given under section 132(4), the assessee admit a receipt of undisclosed income for those years and also specifies the manner in which such income had been derived, and thereafter pays the tax on that undisclosed income with interest, such undisclosed income would get immunized from the levy of penalty. It is in this manner Hon'ble High Court has upheld the order of the Tribunal. The aforementioned decision has been followed in a number of decisions rendered by this Tribunal, copies of which have been field by Ld. AR in the paper book. These are DCIT vs. Avinash CH Gupta, 44 SOT 85 (Kol), Shyam Beedi Works Pvt. Ltd. vs ACIT, 70 TTJ 830, ACIT vs. Neptune Constructions , order dated 30/4/2010 in and 3169/Mum/2008. 6.1 The construction of the provisions of Explanation -5 put-forth by Ld. DR on the basis of aforementioned Instruction No.1882 are totally contrary to the aforementioned decision of Hon'ble Madras High Court and the aforementioned decisions other Benches of ITAT. These instructions are issued by CBDT on 5/6/1991 when the decision rendered by Hon'ble Madras High Court is dated 9/12/2003. During the course of hearing Ld.CIT DR was required to place on record any decision of any Court in which the view conveyed by the CBDT in aforementioned Instruction No.1882 is adopted, he was unable to cite any such decision. It was only argued that instructions issued by CBDT are in the nature of contemporanea expositio . and for such purpose reliance was mainly placed on the decision of Hon'ble Supreme Court in the case of K.P.Varghese (supra). We have carefully considered such submissions of Ld. CIT DR and we found that such contention of Ld. DR has no force as the law regarding bindingness of circulars issued by CBDT has been later on explained by Larger Bench of Hon'ble Supreme Court in the case of CIT vs. Ratan Melting & Wire Industries (the decision rendered by five judges of Hon'ble Supreme Court),220 CTR 98 (SC) wherein it has been held that it is for the Court to declare what the particular provision of statue states and it is not for executive; a circular cannot be given effect to in preference to the view expressed in a decision of the Hon'ble Supreme Court or the High Court; a circular which is contrary to the statutory provisions has really no existence in law. It has been clarified that the clarifications/ circulars issued by the Central Government and of the State Government represent merely understanding of the statutory provision. They are not binding upon the Court. It is for the Court to declare what the particular provision of the statute says and it is not for the executive . Thus the law on this issue is very much clear that wherever question regarding interpretation of a provision is applicable the interpretation adopted by the Court will have a preference over the interpretation given by the CBDT. Therefore, this contention of Ld. CIT DR has to be rejected particularly in the view of the fact that Ld. CIT DR could not cite any decision of any Court by which the (A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain aforementioned view of CBDT is supported. Moreover, we are considering the provision regarding levy of penalty. Where two interpretations are possible, levy of concealment penalty is not justified. Even according to law of precedence, the decision rendered by Madras High Court, in absence of decision of Jurisdictional High Court on the issue will have persuasive value and view has been taken after considering the relevant provisions. Accordingly, we hold that Ld. CIT(A) did not commit any error in deleting the penalty by following the aforementioned decision of Hon'ble Madras High Court and penalty cannot be sustained on the interpretation of provisions adopted by CBDT. 6.2 Before parting with the appeals of the revenue, for the sake of completeness we may mention here that even though it is not the case of AO that assessee did not specify in the statement made u/s. 132 (4) the manner in which the additional income was derived, but during the course of hearing of the appeal it was clarified by Ld. AR that assessee was never asked to describe the manner in which he has derived such additional income and it was submitted that during the course of hearing before Ld. CIT(A) assessee had placed reliance on various decision in which it was held that where assessee has not been asked with such question that in what manner such income has been derived and the income has been offered and taxes have been paid then it will be sufficient compliance of Explanation -5 to section 271(1)(c). He in this regard referred to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah, 299 ITR 305 and the decision of Allahabad High Court in the case of CIT vs. Radha. Kishan Goel, 278 ITR 454(All). Thus immunity provided by Explanation -5 is available to the assessee even though assessee has not specified the manner in which the undisclosed income is earned by him. 6.3 In view of the above discussion we decline to interfere in the order passed by Ld. CIT(A) and appeals filed by the revenue are dismissed.
In the result, both the appeals filed by the revenue are dismissed.
The tribunal’s order in case of HUF of the assessee in (Shri Purnandu Jain, order dated 18.06.2014) was also placed before us, wherein similar penalty deleted by the ld. CIT(A) was upheld by the tribunal after observing as under: 6. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 7. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited order of the Tribunal and the judgments of the High Courts. The core issue for adjudication relates to the availability of immunity under the provisions of Explanation 5(2) to section 271(1)(c) of the Act in respect of additional income disclosed and relatable to the earlier assessment years. Admittedly, this is the case where no inquiry was made into the manner of deriving of the income which is a subject matter of penalty. These aspects are analyzed by the Tribunal in the assessee's own case in the later assessment years and the issue was decided in favour of the assessee. For the sake of completeness of this order, we reproduce the said paras 6.1 to 6.3 of the said order of the Tribunal (supra) dated 23.9.2013, which read as under:
(A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain "6.1 The construction of the provisions of Explanation 5 put-forth by Ld. DR on the basis of aforementioned instruction no.1882 are totally contrary to the aforementioned decision of Hon'ble Madras High court and the aforementioned decisions of other Benches of ITAT. These instructions are issued by CBDT on 5.6.1991 when the decision rendered by Hon'ble Madras High Court is dated 9.12.2003. During the course of hearing Ld CIT DR was required to place on record any decision of any court in which the view conveyed by the CBDT in aforementioned Instruction No.1882 is adopted, he was unable to cite any such decision. It was only argued that instructions issued by CBDT are in the nature of contemporanea exposition and for such purpose reliance was mainly placed on the decision of Hon'ble Supreme Court in the case of K.P. Varghese (supra). We have carefully considered such submissions of Ld. CIT DR and we found that such contention of Ld DR has no force as the law regarding bindingness of circulars issued by CBDT has been later on explained by Larger Bench of Hon'ble Supreme Court in the case of' CCE vs. Ratan Melling & Wire Industries (the decision rendered by five Judges of Hon'ble Supreme Court), [2008] 17 STT 103 wherein it has been held that it is for the Court to declare what the particular provision of statute states and it is flat for executive/ a circular cannot be given effect to in preference to the view expressed in a decision of the Hon'ble Supreme Court or the High Court; a circular which is contrary to the statutory provisions has really no existence in law. It has been clarified that the clarifications/circulars issued by the Central Government and of the State Government represent merely understanding of the statutory provision. They are not binding upon the court. It is for the Court to declare what the particular provision of the statute says and it is not for the executive. Thus, the law on this issue is very much clear that wherever question regarding interpretation of a provision is applicable the interpretation adopted by the Court will have a preference over the interpretation give by the CBDT Therefore, this contention of Ld CIT DR has to be rejected particularly in the view of the fact that Ld CIT DR could not cite any decision of any Court by which the aforementioned view of the CBDT is supported. Moreover, we are considering the provision regarding levy of penalty. Where two interpretations are possible, levy of concealment penalty is not justified. Even according to law of precedence, the decision rendered by Madras High Court, in absence of decision of jurisdictional High Court on the issue will have persuasive value and view ties been taken after considering the relevant provisions. Accordingly, we hold that Ld. CIT(A) did not commit any error in deleting the penalty by following the aforementioned decision of Hon‟ble Madras High Court and penalty cannot be sustained on the interpretation of provisions adopted by the CBDT. 6.2 Before, parting with the appeals of the Revenue, for the sake of completeness we may mentioned here that even though it is not the case of AO that assessee did not specify in the statement made u/s 132(4) the manner in which the additional income was derived, but during the course of hearing of the appeal it was clarified by ld. AR that assessee was never asked to describe the manner in which he has derived such additional income and it was submitted that during the course of hearing before Ld CIT(A) assessee had placed reliance on various decision in which it was held that where assessee has not been asked with such question that in what manner such income has been derived and the income has been offered and taxes have been paid then it will be sufficient compliance of Explanation 5 to section 271(1)(c). He in this regard referred to the (A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain decision of Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C Shah [2008] 299 ITR 305/ 172 Taxman 58 and the decision of Allahabad High Court in the case of CIT vs. Radha, Kishan Goesl [2005) 278 ITR 454/[2006) 152 Taxman 290. Thus, immunity provided by Explanation 5 is available to the assessee even though assessee has not specified the manner in which the undisclosed income is earned by him. 6.3. In view of the above discussion, we decline to interfere in the order passed by Ld CIT (A) and appeals filed by the Revenue are dismissed."
Considering the above settled nature of the issue, the penalty levied by the AO is deleted. Accordingly, grounds raised
by the assessee are allowed.
9. In the result, appeal of the assessee is allowed. (AY:2006-2007) (By Revenue)
10. This appeal filed by the Revenue on 10.2.2012 is against the order of the CIT(A)-39, Mumbai dated 30.11.2011 for the assessment year 2006-2007. In this appeal, Revenue raised the following grounds which read as under:
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to delete the penalty of Rs.1,04,68,443/- u/s 271(1)(c) of the Act.
2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in not appreciating the fact that the assessee is not entitled to benefit of Explanation 5(2) to section 271(1)(c) of the Act for the earlier assessment years for which due date for filing the return of income is over."
11. Briefly stated the specific facts relating to this appeal include that the assessee filed the return of income u/s 153C of the Act disclosing the total income of Rs.3,40,50,927/- against the total income of Rs.22,89,937/- disclosed originally u/s 139(1) of the Act. It is an undisputed fact that the assessee for the allotment of shares of Vaibhav Health Care of Rs.5 Crs and disclosed investment of Rs.1.8 Crs only in the books of account. After search action u/s 132, the balance of investment of Rs.3.2 Crs in shares was disclosed as additional income u/s 139(4) of the Act. Assessment was completed on the returned income. However, AO levied penalty of Rs.1,04,68,443/- u/s 271(1)(c) of the Act. This time, the CIT(A) deleted the penalty as per the discussion given pare 8 onwards of his order. In this regard the decision of the CIT (A) is given in 8.1.10 to 8.1.11 of the impugned order which read as under: "8.1.10. From the above decisions, it is very clear that the Hon‟ble Madras High Courts decision, Hon'bIe Rajasthan High Court‟s decision and Hon‟ble Karnataka High Court‟s decision are in favour of the appellant. Further, as pointed out by the Kolkata Tribunal the Hon'ble Bombay High Court‟s decision in the case of Sheraton (supra) is not on this issue. There appears to be no High Court's decision in support of the AO's view. When the decision of higher Forum i.e. High (A.Y. 2006-07) Asst. CIT vs. Smt. Anupama P. Jain Courts decisions are available on an issue, the decisions of the Hon'ble High Courts have to be followed rather than hon‟ble Tribunal‟s decision. In this regard, reference is invited to the Hon'ble Mumbai‟s ITAT decision in the case of ITO vs. Ranisati Fabric Mills Pvt Ltd. 118 ITD 293 (Mum.). 7.1.10. Further, the words used in Explanation 5(2) to section 271(1)(c) of the Act is "has been acquired out of his income which has not been disclosed in the return of income to be furnished before the expiry of time specified in sub-section (1) of section 139”. The words “so far not disclosed in the return of income" makes it clear that as on the date of search returns were filed but the income is not disclosed in the return. If Explanation 5(2) is applicable only for the current year and the year for which the due date for filing the return is not over as on the date of search then there is no need to use the words “so far not disclosed in the return” in Explanation 5(2) to section 271(1)(c) of the Act. In view of this, I am of the humble opinion that the interpretation given by the Hon‟ble Madras High Court in the case of S.D.V. Chandru is the correct interpretation. I respectfully follow the Hon‟ble Madras High Court‟s decision. 8.1.11. In the appellant‟s case, the appellant has disclosed the impugned income u/s. 132(4) of the IT Act and has submitted in the return of income filed consequent to search and paid the taxes. In view of this I hold that the appellant is entitled to the benefits conferred under Explanation 5(2) to section 271(1)(c) of the Act. I hold that penalty u/s. 271(1)(c) cannot be levied in this case. I direct the A.O. to delete the penalty u/s. 271(1)(c) of the IT Act.”
Considering the above, we are of the opinion that the CIT CA) has rightly adjudicated the issue and deleted the penalty levied by the AO. Therefore, we find no infirmity from the order of the CIT(A) and it does not call for any interference. Accordingly, the grounds raised
by the Revenue are dismissed.
10. We have carefully gone through the order of the tribunal as stated above wherein the deletion of penalty was confirmed by the tribunal. As the facts and circumstances during the year under consideration in the case of present assessee are same, respectfully following the above orders of the tribunal, we do not find any infirmity in the order of the ld. CIT(A) deleting the penalty so imposed u/s. 271(1)(c).