M/S. CONCORDE HOUSING CORPORATION PRIVATE LIMITED,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(4), BENGALURU

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

These two appeals by assessee are directed against different orders of CIT(A)-11, Bangalore for the assessment years 2014-15 & 2015-16, both are dated 30.11.2023, wherein he has confirmed the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (in short “The Act”) at Rs.10,50,340/- & Rs.1,70,08,720/- respectively for these two assessment years. 1.1 There was a short delay of 4 days in filing the appeals before this Tribunal. The ld. A.R. filed a condonation petition along with an affidavit for both the assessment years praying for condonation of delay. It was explained that due to the assessee’s counsel who has prepared the appeal papers was fell sick and it took extra 4 days in filing the appeals before this Tribunal.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 2 of 36 1.2 We find that there is a good and sufficient reason in filing the appeals for these assessment years belatedly by 4 days. Hence, we condone the delay for 4 days in both the appeals and admit the appeals for adjudication. ITA No.532/Bang/2024 (AY 2015-16): 2. Facts of the issue in this appeal are that the appellant, engaged in real estate project development in Bangalore and affiliated with various grot+ companies and firms, was subject to a search and seizure operation under Section 132 on 20.01.2016, encompassing both the appellant and its associated entities. During this operation, numerous incriminating documents pertinent to the company's financial affairs were discovered and seized. Additionally, the search extended to the residence of Shri Gopala Reddy Ramasagara, one of the company's directors, located at No. 195, 7th Main, 4th Block, Jayanagar, Bangalore - 560011. Consequent to search action, a notice under Section 153A was issued to a t on 24.10.2016. In response, the appellant company submitted its Corporation Private Limited A.M. 2015-16 return of income on 12.12.2016, declaring a total income of Rs. 23,94,26,383/-. Subsequently, on 10.1 1.2017, the company' revised its income computation, declaring a revised total income of Rs. 29,25,56,895/-. This revision included an admitted additional business income of Rs. 5,31,30,512/-, with Rs.30,90,148/- attributed to the AY 2014-15. The AO completed the assessment under Section 153A r.ws 143(3) r.w.s 153(1) of the Act on 27.12.2017. The final assessed income was Rs.28,94,66,747/-, which encompassed an addition of Rs.5,00,40,364/- for AY 2015-16. Income Overview Table:

Particulars Original ROI 153A ROI Revised (3011.2015) (12.12.2016) computation (10.11.2017) Business Rs.22,75,16,696/- Rs.23,56,46,839/- Rs.28,87,77,351/- income Income from Rs.37,79,544/- Rs.37,79,544/- Rs.37,79,544/- other sources Total income Rs.23,12,96,240/- Rs.23,94,26,383/- Rs.29,25,56,895/-

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 3 of 36

2.1 The revised computation dated 10.1 1.2017 includes an additional admitted business income of Rs.5,31,30,512/- (difference between Rs.28,87,77,351/- and Rs.23,56,46,839/-). As per the assessment order, in a letter dated 04.12.2017, the appellant indicated that out of this additional business income, an amount of Rs. 30,90,148/- was already offered in the Return of Income (ROI) for AY 2014-15 in response to the 153A notice. Income Details for AY 2014-15: Total income (Original ROI) Rs.16,00,63,710/- Total income (153A ROI) Rs.16,31,53,860/- Additional income offered Rs.30,90,148/-

2.2 Considering the above, the total income for AY 2015-16 was arrived as under: Particulars As per computation of total income of assessment order Business income 23,56,46,839/- Income from other sources 37,79,544/- Total income 23,94,26,383/- Addition made as per 5,00,40,364/- assessment order Assessed income as per 28,94,66,747/- assessment order Add: Additional income offered 30,90,148/- in AY 2014-15 Total income 29,25,56,895/- Total income as statement of 29,25,56,895/- income for AY 2015-16 Differential income Nil

2.3 The final total income, as per the Statement of Income for AY 2015-16, stands at Rs. 29,25,56,895/- with no differential income reported. Consequently, a penalty notice under Section 271(1)(c) of the Act was issued to the appellant on 27.12.2017. The AO concluded that the case of the assessee fell under explanation 5A to section 271(1)(c) of the Act, meeting all the necessary criteria specified in section 271(1)(c) to impose a penalty for the furnishing of inaccurate particulars of income. Consequently, a penalty of

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 4 of 36 Rs.1,70,08,720/-, equivalent to 100% of the tax sought to be evaded, was levied. 2.4 Against this assessee went in appeal before ld. CIT(A) who has confirmed levy of penalty u/s 271(1)(c) of the Act. Against this assessee is in appeal before us by way of following grounds: 1. The order passed by the Learned Assessing Officer (Ld. AO) under section 271(1)(c) of the Income Tax Act, 1961 '(Act)' to the extent which is against the Appellant is opposed to the law, contradictory, all perverse, weight of evidence, probabilities, submissions made, facts and circumstances of the Appellant's case. 2. The order confirmed by the Ld. Commissioner(Appeals) is incorrect in the scheme of Income Tax Act. 3. The Ld. AO erred in law and on facts in levying the penalty u/s 271(1)(c) read with Explanation 5A of the Act without satisfying the pre-conditions, as the addition was made on Adhoc basis, in the absence of incriminating material, reliance is also placed on the Article 265 of the Constitution. 4. The Ld. AO failed to appreciate that penalty is an independent proceeding, penalty is not leviable for the mere reason that appeal has not preferred against assessment order, not automatic, not continuation of the scrutiny proceedings, quasi-criminal in nature, completely different from assessment proceedings, penal provisions are serious invasion into the life and affairs of the Appellant Company, to be interpreted strictly and any noncompliance of the procedures precedent thereto makes the whole proceedings void ab initio. 5. The Ld. AO failed to discharge the burden of proof that the Appellant has furnished the inaccurate particulars of income by bringing single incriminating, unambiguous, cogent and positive evidences beyond any doubt than that of the Appellant's evidence, not brought out the satisfaction with tangible materials pertaining to the relevant assessment year as required by the scheme of the Act, allegations made in the penalty order are not borne out from the initial show cause notice and they are imaginary, without any basis, took different stands for levying penalty while levying penalty for two years, though there was no whisper of unexplained expenditure during the course of assessment while levying the penalty the introduced the same. 6. The Ld. AO erred in the order, though there is no iota of evidence of incriminating material on the record to show that the income of the Appellant during the year under appeal was more than the income returned by him, erred by non-application of mind, proceeded mechanically, without genuine satisfaction. 7. The Ld. AO erred by invoking on Explanation 5A of the S. 271(1)(c) of the Act, when on facts there was no ex-facie correlation; live link, nexus between the alleged infructuous receipt of 06.02.2013, pertaining to Assessment Year 2013-14 and the current year being AY 2015-16, levying penalty on such addition is incorrect in the scheme of the Act. 8. The Ld. AO erred in the penalty order when the search admission was due to apparent error in interpreting the terms of "Profit after tax And Profit Before Tax" by the Director, the very revision of returned income was not called for, addition was on Adhöc basis, consequently assessment is also bad, levying a penalty on such erroneous assessment order is equally bad in law, all perverse, had there any incriminating material, the addition should have been made by an amount equal to the amount

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 5 of 36 represented by such incriminating material, failed to appreciate that the Appellant's income was offered under Percentage of Completion Method [POC/PCM] any variation in the estimation cannot be termed as furnishing of inaccurate particulars, as all incomes will be automatically accounted before completion of the project, and any such difference can be termed as "timing difference", estimations made at two points of time will differ and hence penalty is not leviable, Appellant had explained the basis of revision of income, fully and correctly disclosed all the details of income and expenses, erred in the order by not proving the "men's rea". 9. The Ld. AO erred in the order when no money in cash was ever received by the Appellant from customer Mrs. Chandrakala, Appellant reconciled all the seized receipts from the books of accounts and there was no unclarified seized materials, hence seized materials are not incriminating, Ld. AO not rebutted by bringing in the additional evidence, not discharged the burden of proof before levying the penalty. 10. The Ld. AO erred in the order by not specifying under which limb of Explanation of Section 271(1)(c) the Appellant was subjected to the proceedings in the show cause notice, when there are 6 Explanations are provided u/s 271(1)(c) of the Act. 11. The Ld. AO erred in the penalty order by ignoring the jurisprudence laid by various Courts and CBDT Circulars. 12. The Appellant submits that each of the above grounds are mutually exclusive and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of objection at any time before or at the time of hearing before the Honourable Income Tax Appellate Tribunal ('Tribunal'), so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law. For these and other grounds that may be urged at the time of hearing of appeal, the Appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 6 of 36 During the relevant assessment year 2015-16, the assessee company derived income from 6 on-going projects and offered the same in the Original ITR. However, due to the non-fulfillment of the preconditions laid in Guidance note on Accounting for Real Estate Transactions (R' 2012) of ICAI, revenue is not recognized on those projects. Revenue is recognized when the outcome of a real estate project can be estimated reliably and the following conditions are met: a. All critical approvals necessary for commencement of the project have been obtained and; b. Upon achieving the threshold limit of 25% of construction cost and; c. 10% of total revenue realized as per the agreement of sale and; d. Atleast 25% of the saleable project area is secured by contracts or agreements with buyers and; e. When the significant risks and rewards of ownership have been transferred to the customer, which coincides with the entering into of a legally binding agreement, on percentage completion method. 3.1 Thus, he submitted that when the profit is estimated based on the percentage of completion method, the assessee is required to make an estimate of the total cost to be incurred to complete the project and also the estimated sales to arrive at the margin to be offered for the relevant year. These estimates are reviewed from time to time and finally, when the project is completed, these aspects are nullified. Obviously, when an assessee follows percentage of completion method, there bound to be some variations as these numbers are based on the projected cost and projected sales prevailed as on the date of estimation and the Assessee can get the correct profit only when the project is completed in 100% and sold out. Till then, any estimate is bound to be an estimate and cannot be a perfect figure.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 7 of 36 3.2 He submitted that assessee Company always computed the income from the entries recorded in books of accounts and had prepared a detailed statement showing the customer-wise sales value as per the agreement and was subject to statutory audit by the Company’s Statutory auditor and also had furnished the report as required under S. 44AB of the Act. 3.3 He submitted that for the relevant year, the Assessee filed the original return u/s 139(1) on 30.11.2015 declaring an income of Rs.23,12,96,240/-, wherein the revenue was based on the best estimations of project cost and project revenue as existed on the date of financials i.e. 31.03.2015. 3.4 Further, he submitted that a search action was conducted on 20.01.2016 and 21.01.2016 u/s 132 of the Act at the premises of Group Companies and as part of the said action, the Director of the Assessee Company’s house was also got searched. Even though search that lasted for two days, the search team did not find at the premises of the Company or its Director’s premises:  Any asset, cash, jewellery, or any other valuable, apart from the assets etc. which was already recorded in the financials of the Company, and hence there was no seizure of the same.  Any incriminating materials for the relevant year.  The search team did not find any income which is not recorded in the books of accounts.  The search team seized certain cash receipts relating to the AY 2012-13. 3.5 However, the Company’s Director Mr. B.S. Shivarama gave a voluntary statement as under in Q. no. 9 as under: (Emphasis supplied) “Q 09 From the audited Balance sheet and Profit and Loss account for F.Y 2014-15, it is seen that M/s Concorde Housing Corporation Pvt. Ltd. have declared Net Profit of 5.8%. Please Explain.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 8 of 36 Ans.- Yes Sir, I confirm that for F.Y. 2014-15, we have declared net profit of 5.8% for M/s Concorde Housing Corporation Pvt. Ltd. However to buy peace from the department, I hereby agree to declare the net profit at 10% for F.Y. 2014-15 which comes to Rs. 17,46,89,784/-.

3.6 He submitted that the Ld. AO took the case of relevant year i.e. AY 2015-16 and on 24.10.2016 issued the notice u/s 153A r.w.s 153C of the Act, requiring the Assessee to file a return of income. On a plain look at the audited financials, it is clear that the Assessee Company had earned a net profit after Income Tax, Deferred tax and appropriations @ 5.91% of the sales amounting to Rs. 10,31,57,999/-. For Income tax computation, triggering point is Profit Before Tax (PBT), however, the Assessee Company’s Director got confused and instead of using the terminology Profit Before Tax, he used Profit After Tax (PAT), while voluntarily offering the income before the search party. 3.7 The Assessee accordingly filed a return offering a total income of Rs. 23,94,26,383/- on 12.12.2016 in response to a notice issued u/s 153C of the Act. While filing the return of income, the Assessee Company revisited his statement recorded u/s 132 of the Act and offered net profit of 10% before tax (PBT). Notice dated 24.01.2017 u/s 143(2) and 142(1) was issued to scrutinize the Assessee’s above return of income filed in response to notice u/s 153C of the Act and the case was posted for hearing on 03.02.2017. 3.8 He submitted that during the scrutiny proceedings, the Ld. AO persisted, the Assessee needs to offer the profit at 10% after tax (PAT) and did not allow the Assessee Company to rectify the erroneous declaration made by the Director in calculations while making the statement recorded u/s 132(4) of the Act. The Company filed the return offering a profit (PBT) of 10% vide return made u/s 153C r.w.s 153A of the Act, vide return dated 12.12.2016 and substantiated the same vide written submission dated 10.11.2017, Para 4.D.II and summary thereunder. However, the Ld. AO urged that by profit it is

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 9 of 36 meant that Profit Before Tax (PBT) and not Profit After Tax (PAT). . Accordingly, the Assessee had to offer the income as agreed by the erroneous admission made by the Director in the statement recorded u/s 132(4) of the Act. However, the computer software was not allowing the Assessee to revise the return of income filed u/s 153C return filed on 12.12.2016. Hence, the Assessee approached the Ld. AO, explained the practical difficulties with the revised computation and filed the same on 14.11.2017 requesting to consider the same for assessment purposes. 3.9 The basis for all the above modification of the profit is the Percentage of Completion Method of the relevant year and based on certain project facts and project variables noticed that, certain adjustment needs to be done to the revenue for the FY 2014-15 too, applying the principles of consistency, Assessee Company voluntarily offered Rs. 5,81,70,504/-, though there was no incriminating material of whatsoever nature was found either in search or scrutiny proceedings. The summary of the additional income is as under:

Particulars Original ITR Remarks Revised ITR-1 Remarks Revision -2 Remarks Turnover 1,74,68,97,845 1,75,50,27,988 8130143 1,80,50,68,352 5004036 4 Profit Before Tax 16,76,61,145 9.60% 17,57,91,288 10.02% 22,58,31,652 12.51% (PBT) Income Tax & 6,45,03,146 6,74,88,967 6,74,88,967 Deferred tax Profit After Tax 10,31,57,999 5.91% 10,83,02,321 6.17% 15,83,42,685 8.77% (PAT) Refer Note 1 Below Total income / 23,12,96,239 23,94,26,383 28,94,66,747 Assessed income

Note-1:

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 10 of 36 Profit after tax @10% of the turnover 18,05,06,835 10.00% should have been

Less: Double counting of cash 2,19,16,087 receipts as the same is recorded in our normal books needs to be reduced 15,85,90,748 Total income actually offered as 15,83,42,685 above

3.10 He submitted that the Assessee had filed detailed submission vide submission dated 10.11.2017 and 04.12.2017 in response to the notice issued u/s 142(1) of the Act. As far as Ld. AO’s specific query of the copy of the cash receipts that got seized by the search party, the Assessee vide submission dated 10.11.2017, Para 4.B. thereof and also through detailed reconciliation statement clearly brought out that how all the receipts issued to the customers wherein the Assessee Company had received the money was recorded in the normal books of accounts and the same was considered for taxation of the relevant years taxable income particularly AY 2013-14. Thus, the Assessee provided exhaustive submission and clarification in connection with the accounting of cash receipts seized by the search party. 3.11 He submitted that since no incriminating material was seized u/s 132 proceeding, from the records of the Assessee Company for the relevant year, the Ld. AO did not confront any copy of the purported incriminating materials alleged to be seized during the course of search to the Assessee Company. After verifying the above details, the Ld. AO accepted the returned income as such and an order was passed u/s 153C r.w.s 143(2) on 27.12.2017. However, while passing the scrutiny order the Ld. AO attributed revision of profit of Rs. 5,00,40,364/- towards unexplained expenditure, cash receipts. (Para 6.2 of the scrutiny order). However, all the cash receipts clearly pertained to AY 2013-14 and not to relevant AY 2015- 16 for which the scrutiny assessment was open. Further, all the

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 11 of 36 receipts were accounted during the AY 2013-14. However, the Ld. AO tried to link these receipt’s amount towards voluntarily admitted as additional income by the Assessee Company in a return filed u/s 153C and the continued proceedings thereunder, though there is not even remote nexus between the admitted income and the cash receipts. Similarly, allegation was made on the Assessee that it had claimed unexplained expenditures and on that basis the penalty was levied (Para 6.2 of the scrutiny order and Para 9 of the Penalty order). However, no incriminating material not even scribbling paper was ever seized by the search party to indicate that assessee had claimed unexplained expenditure. Further, the Ld. AO was not in possession of any such materials and there could be none, which demonstrate the Assessee had claimed unexplained expenditure nor such incriminating materials were confronted based on which it can be alleged that the Assessee had furnished inaccurate particulars either in scrutiny or penalty proceedings. Yet, the Ld. AO proposed to initiate the penalty proceedings u/s 271(1)(c ) of the Act vide notice dated 27.12.2017. The notice was in preprinted format and the words “furnished inaccurate particulars of such income” and no reference to any of the limbs of the Explanation was provided in the show cause notice. He submitted that the Assessee in addition to the submissions made in the scrutiny proceedings, in response to the initial penalty proposition substantiated the merits of the case vide written submission dated 18.01.2018, under the following grounds: a. No incriminating materials was seized by the search party in search proceeding that lasted for two days and nothing was brought out in the statement recorded u/s 132(4); b. The basis for revision of income was clearly brought out in the Q. 9 of the statement recorded u/s 132(4) which itself was based on adhoc basis at the rate of 10% of sales after tax, when no real income was accrued to the Assessee, mere estimation of profit at a particular percentage is arbitrary and not due to seizure of any incriminating material and the same is well brought out in the scrutiny submissions made by the Appellant and was clearly explained in the initial penalty reply and it was also submitted that such revision is tax neutral, not called for, the same is

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 12 of 36 voluntary, in good faith and not due to the action of search team or Ld. AO. c. The income has been accepted as such and the Appellant had disclosed all the particulars during the scrutiny proceedings. d. The penalty proceedings are not automatic but independent proceedings than that of assessment proceedings; burden of proof was not discharged by the Ld. AO and no independent enquiry was made. e. Tangible materials were not brought to record during the scrutiny proceedings and more importantly in the penalty proceedings to hold that the Appellant had concealed the particulars of income of the relevant assessment year; f. Thus the particulars of income was furnished in the return of income filed u/s 153C of the Act for the relevant assessment year which was selected for scrutiny was not inaccurate; and there is not even remote link between the materials seized and the additional income that was voluntarily offered by the Appellant Company.

3.12 In view of the written submissions and merits of the case, the Assessee requested for the dropping of the penalty proposition under the principles of natural justice. Meanwhile there was a change at the office of the assessing officer and the new officer took charge on 19.06.2018 and the notice dated 19.06.2018 was issued and case is posted for hearing on 20.06.2018. The Assessee attended the hearing before the new Assessing Officer and reiterated the submission made vide Written Submission. However, the Ld. AO without considering the facts of the case and without appreciating the merits of the case, proceeded mechanically and levied the penalty of Rs. 1,70,08,720/- being 100% of the of the tax sought to be evaded for the year u/s 271(1)(c ), Explanation 5A, sub clause ii, thereunder without satisfying the conditions thereto and issued the demand notice. 3.13 Further, it was submitted that the ld. AO invoked the provisions of explanation (5A) to section 271(1)(c) of the Act, which has no application as the addition of Rs.5,00,40,364/- was not declared in any return of income after the date of search. The above addition was made by ld. AO on the basis of re-computation of income filed before ld. AO on 10.11.2017. According to him, the

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 13 of 36 explanation 5A to section 271(1)(c) of the Act will be applicable only when there is money, bullion, jewellery found at the time of search, which is claimed to have been acquired out of income of any previous year, or, there must be income based on any entry in the books of accounts or other documents or transaction which is claimed to represent income for any previous year, which is ended before the date of search and such income is not declared in the return filed before the date of search. Thereafter, even if such income is declared in the return of income filed after the date of search, it shall be recorded that there was concealment of income or furnishing inaccurate particulars of income with regard to such income declared. According to him, in the present case, assessee declared income u/s 153A of the Act at Rs.23,94,26,383/- and the additional income declared was Rs.81,30,143/-. 3.14 According to the ld. A.R., no penalty could be levied with reference to the additional income by invoking the provisions of explanation 5A to section 271(1)(c) of the Act. The additional income offered by the assessee through revised computation of income filed by assessee before the ld. AO on which penalty was levied which won’t fall under the purview of explanation 5A to section 271(1)(c) of the Act. Further, it was submitted that the ld. AO levied penalty due to inadmissible expenditure claimed by assessee, which was surrendered by assessee by filing revised computation of income before the ld. AO and there was no incriminating material found with reference to any receipt of income or payment of expenditure out of the books. Even this is evident from the remand report sent by him. According to him, this addition was of Rs.5,00,40,364/- is not based on any seized material and this is solely based on the admission made by assessee in its revised computation of income filed by the assessee before ld. AO at the time of assessment and nothing to do with the inadmissible expenditure or unaccounted investment or income. This is also supported by the statement of Shri Sivarama

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 14 of 36 and submission made by him vide dated 10.11.2017. According to him, the entire addition was made on the basis of surrender made by assessee in revised computation of income and that is also only on estimate basis on which penalty cannot be levied by invoking the provisions of explanation (5A) to section 271(1)(c) of the Act. For this purpose he relied on the following judgements: a) Decision of Jaipur Tribunal in the case of Ajay Traders in ITA No.296/JP/2014 dated 6.5.2016 b) Decision of Jaipur Tribunal in the case of Indira Agarwal in ITA No.144/JP/2018 dated 22.3.2019. 3.15 Thus, he submitted that penalty to be deleted which was levied u/s 271(1)(c) of the Act. 4. On the other hand, ld. D.R. submitted that the penalty levied on the basis of tangible evidence found during the course of search action. She submitted that the claim that no incriminating material was brought to the assessment records for AY 2015-16 is not substantiated. The AO's report and the remand report confirm that there were incriminating documents related to cash transactions, which are relevant to the assessment and penalty in question. 4.1 She submitted that the applicability of Explanation 5A of Section 271(l)(c) in the assessee's case is both warranted and substantiated by the evidence presented. This explanation is pertinent to cases where assets or financial resources are discovered during a search operation, as in Section 132, and the assessee fails to satisfactorily explain their nature and source. In the assessee's situation, the search revealed transactions and financial activities that necessitated revised income declarations. The assessee's inability to provide a clear and satisfactory explanation for these dealings, particularly regarding cash transactions and undisclosed income, is in direct alignment with the conditions of Explanation 5A.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 15 of 36 4.2 In further addressing the assessee's concerns regarding the Assessing Officer's (AO) clarification of the specific provision under Section 271(1 it becomes apparent from the order that the initiation of the penalty, following the discussion of the assessee's admission of additional income by way of a letter dated 04.12.2017, is grounded solely on the basis of furnishing of inaccurate particulars of income. The assessee's contention regarding the Assessing Officer's (AO) failure to specify the applicable limb of Explanation under Section 271(1)(c) of the Income Tax Act, 1961, is without basis as the penalty proceedings were initiated in the assessment order only due to furnishing of inaccurate particulars of income ana the penalty notice also clearly states that it was initiated due to the furnishing of inaccurate particulars of income. Therefore, the assessee's contention that the AO failed to specify the basis applicable limb, for the penalty initiation is unfounded and the ld. CIT(A) dismissed the same. 4.3 Moreover, the AO's decision to impose the penalty, which relied on Explanation 5A, is apt and well-founded. The unrecorded cash receipts and the assessee's consequent income revision, revealed during the search operation, perfectly align with the circumstances outlined in Explanation 5A. This clause designed to address instances of undeclared income identified following a search operation. The application of these penalty provisions acts as a vital deterrent against tax non-compliance and upholds the integrity of the tax system. 4.4 It is crucial to note that the assessee's act of disclosing income during the search operation does not exempt them from penalties. To consider such disclosures as grounds for exemption would be inequitable and would diminish the principle of deterrence, creating a disparity with those taxpayers who consistently comply with tax regulations. Therefore, levy of the penalty under Explanation 5A of Section 271(1)(c) is both justified and necessary to ensure fairness

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 16 of 36 and adherence to the tax laws. As a result, the assessee's arguments against the penalty lack substantial merit, and the penalty imposed by the AO is affirmed as a lawful and appropriate measure for the Assessment Year 2015-16, in accordance with the provisions of the Act. 4.5 She submitted that in the case of Dr. Nitin Laxmikant Lad vs. Assistant Commissioner of Income Tax [TS-5003-HC-2019 (Bombay)-O], (2019) 174 DTR 341 (Bombay) (2019) 307 CTR vide ITA No 4081, 1090, 1092 and 1292/2016 dated 09.01.2019, the Hon'ble High Court of Bombay upheld the penalty under Section 271(l)(c) of the Income Tax Act, 1961, despite the fact that the concealed income was fully disclosed and accepted in the assessment. This decision was based on the interpretation of Explanation 5A to Section 271(l)(c), which states that if any income is discovered during a search operation and the assessee claims this income in any return filed after the date of the search, they are still deemed to have concealed the particulars of their income. The Court found that the imposition of the penalty was justified even no additional income was assessed in the assessment in response to the notice under Section 153A of the Act. The Court dismissed the Income Tax Appeals, affirming the Tribunal's decision that the penalty was correctly levied, regardless of the acceptance of the declared income in the return filed post search.

4.6 She further submitted that in the case of Spaze Towers Pvt Ltd vs. Deputy Commissioner of Income Tax (2018) 172 DTR 261 (Delhi), (2018) 68 ITR 58 (Delhi) with ITA Nos 2558/2012 and 2044 and 2045/2014 dated 20.11.2018, the ITAT dismissed the appeals of Spaze Towers Pvt Ltd, thereby upholding the penalties imposed under Section 271(1)(c) of the Income Tax Act, 1961, for non- disclosure of income. These penalties were based on the company's failure to declare certain income in its returns, as revealed through seized documents.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 17 of 36 4.7 She submitted that in light of the judicial precedents set in the cases of Space Towers Pvt Ltd vs. Deputy Commissioner of Income Tax and Dr. Nitin Laxmikant Lad vs. Assistant Commissioner of Income Tax, it is evident that the principles underlying Explanation 5A of Section 271(l)(c) of the Income Tax Act, 1961, are directly applicable to the assessee’s case. These rulings collectively emphasize the non-exemption from penalties for income disclosed during a search operation, underscoring the importance of declaring income accurately and timely. In the case of the assessee, the failure to offer a satisfactory explanation for undisclosed income, despite later disclosure, aligns with the rationale that mere post-search disclosure does not negate the initial concealment. Consequently, the imposition of the penalty under Explanation 5A for the Assessment Year 2015-16 is deemed appropriate and consistent the judicial interpretations of similar cases. 4.8 With regard to legal Precedents and their Implications she submitted that in the landmark case of MAK Data (P.) Ltd. v. Commissioner of Income-tax — Il, [2013] 38 taxmann.com 448 (SC)/[2013] 358 ITR 593 (SC), the Hon’ble Supreme court upheld the penalty imposed by the Income Tax Department. This crucial judgment established that an assessee's voluntary disclosure of income does not serve as a shield against penalties under section 271(l)(c) of the Income Tax Act, particularly in instances of income concealment or the provision of inaccurate income details. This Supreme Court ruling reinforced the High Court's verdict, dismissing the appeal by MAK Data (P.) Ltd. and affirming the necessity of the penalty for income concealment. 4.9 She submitted that in a parallel case, Shreeji Traders v. Deputy Commissioner of Income tax, Central Circle-I, Thane, [2012] 21 taxmann.com 541 (Mum.), the Hon'ble ITAT solidified the penalty mandated by the Assessing Officer under section 271(l)(c) for income concealment. Despite the assessee's claim of declaring additional

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 18 of 36 income in; the return filed post-search, the Tribunal determined this did not warrant immunity from the penalty. The Tribunal's judgment was anchored in the principle that income declarations made post- search do not negate penalty liabilities if the income was not declared before the deadline under section 139(1). Hence, she submitted that the Tribunal overruled the assessee's objections and endorsed the penalties issued by the Assessing Officer. 4.10 Similarly, she submitted that in the case of Deputy Commissioner of Income-tax, Central Circle-1, Kolkata v. Sushma Devi Agarwal, 16 taxmann.com 68 (Kol.) (TM), the Hon'ble ITAT ratified the penalty imposed by the Assessing Officer under section 271 (l)(c) for concealing income. The Tribunal's decision was based on the finding that the revised return, declaring additional income, was submitted not out of voluntary compliance and good faith, but rather as a reaction to the concealment being detected by the Assessing Officer. As a result, the Tribunal sided with the revenue, validating the penalties for income Sushma Devi Agarwal. 4.11 According to ld. D.R., the actions of the Assessing Officer (AO), including the issuance of the notice under Section 153A and the imposition of the penalty under Section 271(l)(c), are fully justified and in compliance with the provisions of the Income Tax Act. The additional income acknowledged by the assessee and the subsequent revision of their income tax returns post the search operation under Section 132, substantiate the addition of Rs. 5,00,40,364/- to the assessee's income for Assessment Year 2015-16. These observed inconsistencies require correction in accordance with the appropriate sections of the Income Tax Act and its rules. Additionally, the application of Explanation 5A to Section 271(1)(c) by the AO is found to be correct in imposing the penalty. This strict adherence to the Act and the principles set forth in judicial precedents lead to the conclusion that the assessee's arguments are unfounded. This decision underscores the importance of rigorous compliance with tax

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 19 of 36 laws and highlights the consequences of any deviations, thereby upholding the integrity of the taxation system.

5.1 As per explanation (5A) to section 271(1)(c) of the Act, there must be either money, bullion, jewellery found at the time of search, which is claimed to have been acquired out of income of any previous year, or there must be income based on any entry in the books of accounts or other documents or transactions, which is claimed to represent income for any previous year which is ended before the date of search and such income is not declared in the return filed before the date of search. Even if, such income is declared in the return of income filed after the date of search, it shall be recorded that there was concealment of income or furnishing inaccurate

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 20 of 36 particulars of income with regard to such income declared. In the present case, assessee declared in the return of income filed u/s 153A of the Act, consequent to search action on 20.1.2016 at Rs.23,94,26,383/-. Thereafter, the ld. AO passed assessment order u/s 143(3) r.w.s. 153A of the Act on 27.12.2017 assessee’s income at Rs.28,94,66,744/-. Thus, there was an addition of income at Rs.5,00,40,364/-, which was on the basis of revised computation filed by the assessee on 10.11.2017. 5.2 Later, the ld. AO invoked the penalty proceedings u/s 271(1)(c) of the Act and issued a notice u/s 274 of the Act on 27.12.2017 and finally after hearing the assessee, the ld. AO levied penalty at Rs.1,10,08,720/- by invoking the provisions of explanation (5A) to section 271(1)(c) of the Act. The ld. AO in the assessment order mentioned that the assessee declared income of Rs.23,56,46,839/- under the head “income from business and profession” on the turnover of Rs.175,50,27,988/- which worked out at net profit rate of 10.01% of the turnover for the assessment year 2015-16 and according to him income chargeable under head from business to be computed at 13.42% of the turnover. Accordingly, the assessee agreeing with the ld. AO declared further additional income of Rs.5,31,30,512/- for the assessment year 2015-16. Later, vide letter dated 4.12.2017, assessee stated that out of Rs.5,31,30,512/-, an amount of Rs.30,90,142/- has been already offered by the assessee in assessment year 2014-15 in response to notice u/s 153A of the Act for that assessment year. 5.3 Hence, the additional income offered by the assessee was to the tune of Rs.5,00,40,364/-. The same has been added to the income of the assessee. The ld. AO in his assessment order also discussed the fact that in para 6 of the assessment order that the search proceedings u/s 132 of the Act at the premises of the assessee company, certain material evidences and information relating to certain cash receipts, unexplained expenditure and payments for

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 21 of 36 acquisition of land from land owners was found. Shri B.S. Shivarama, Director of the assessee company was confronted with the evidences and asked for explanation. In response to the same, Shri B.S. Shivarama admitted an amount of Rs.6.85 Crores as additional income from the admission given on account of low net profit in response to question No.12 in the statement recorded u/s 132(4) of the Act, during the course of search proceedings on 21.1.2016. The same was confirmed by Shri Gopal Reddy Ramsagara vide his statement u/s 131 of the Act on 25.1.2016. However, the same was not reflected in the return filed in response to notice u/s 153A of the Act. 5.4 Later, the assessee could establish the evidence in the books of accounts only to the extent of Rs.2,19,16,087/-. However, on later stage, assessee offered additional income of Rs.5,31,30,512/-. The same was reduced to Rs.5,00,40,362/- while making addition for the assessment year 2015-16 by ld. AO. As seen from the above, neither ld. AO nor ld. CIT(A) could establish the nexus of this addition to any seized material, which shows unaccounted income or expenditure or unaccounted investment and this addition is nothing to do with any sized material found during the course of search action and it is only based on the revised computation of income filed by the assessee on 10.11.2017 and another letter dated 4.12.2017. Even the ld. D.R. is not able show any revised return filed by assessee on 10.11.2017 inspite of letter having reference no.CHCPL/142(1)/2016-17/07 dated 10.11.2017 filed by the assessee before DCIT, Circle-1(4), Bangalore sent by Chairman of the assessee company. Being so, in these circumstances, we are of the opinion that explanation (5A) to section 271(1)(c) of the Act is not applicable to the facts of the present case as the assessee itself had made a declaration of additional income in the revised computation of income filed by assessee on various dates and this case is not a fit case for imposing penalty under explanation (5A) to section 271(1)(c) of the Act.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 22 of 36 5.5 It is necessary to be found incriminating documents to make an addition and the addition should be based on that incriminating material found during the course of search action without any seized material, this explanation cannot be invoked for offering of additional income during the course of assessment, which is not based on any seized material and this view of ours supported by the order of Tribunal in the case of Ajay Traders Vs. DCIT in ITA No.296/JP/2014 dated 6.5.2016, wherein held that

“Held that it was undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs.15 lacs and requested not to impose penalty under section 271(l)(c). The Assessing Officer imposed the penalty by invoking the Explanation 5A to section 271(l)(c). For imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271 (l)(c) is not applicable. Accordingly, the penalty was to be deleted.”

5.6 This was also supported by the order of the Jaipur Bench in the case of Smt. Indira Agarwal in ITA No.1444/JP/2018 dated 22.3.2019 wherein held as under: 6. We have considered the rival submissions as well as relevant material on record. The question arises whether a surrender and disclosure made by the assessee U/s 132(4) of the Act in absence of any incriminating material found during the search and seizure action would lead to the conclusion that the assessee has concealed the particulars of income or furnishing inaccurate particulars of income. In the case of the assessee, there is no dispute that the assessee filed return of income U/s 139(1) of the Act on 16/10/2013 and declared the long term capital gain of Rs. 2,79,87,900/- and claimed exempted U/s 10(38) of the Act. It is also not in dispute that the transactions of purchase and sale of equity shares of listed companies were duly recorded in the books of account and capital gain arising from the sale of shares were reflected in the books of account regularly maintained by the assessee. The assessee has also shown the shares in question in the balance sheet as on 31/3/2012 and the Assessing Officer has not doubted or disturbed the holding of the shares by the assessee and shown in the balance sheet at the end of the preceding financial year. Once the transactions are duly recorded in the books of account and also disclosed in the original return of income filed U/s 139(1) of the Act then the documents found during the search containing the details of the long term capital

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 23 of 36 gain already recorded in the books of account would not amount to incriminating material disclosing any undisclosed income. Even the said details as recorded in the seized material AS-1 itself does not reveal the nature of transaction being genuine or bogus. These are only the computation of long term capital gain from sale of shares. Therefore, the documents which were found and seized during the course of search and seizure action containing details of long term capital gain would not be regarded as incriminating material disclosing any income not recorded in the books of account. Apart from the fact that these transactions were duly recorded in the books of account and also disclosed in the return of income filed U/s 139(1) of the Act, the assessee has also produced relevant documents, the details of which are as under: (A ) IN RELATION TO SHARES PURCHASE: Summary of shares purchased during the FY 2010-11 (page No. 79 of paper book) Copies of purchase bills in respect of share purchased (Page No. 8081 of paper book) Copy of ledger Account from the books of share brokers through whom the shares were purchased (Page No. 82 of paper book) Copy of bank statement showing the payment made against purchases of shares (Page No. 83-84 of paper book) Acknowledgement of ITR filed on 11.11.2011 u/s 139(1) of Income Tax Act, 1961 along with computation sheet of total Income of the A.Y. 2011-12. (Page No. 85-86 of paper book) Acknowledgement of ITR filed on 09.09.2016 u/s 153A of Income Tax Act, 1961 along with computation sheet of total Income of the A.Y. 2011-12. (Page No. 87-89 of paper book) Copy of Balance Sheet & Capital Account of Assessment Year 2011- 12. (Page No. 90 of paper book) Copy of Assessment Order dated 07.12.2017 u/s 143(3) r.w.s. 153A passed by Deputy Commissioner of Income Tax, Central Circle Kota (Raj.) for the Assessment Year 2011-12. (Page No. 91-93 of paper book) (B) IN RELATION TO SHARES SALES: Summary of shares sale during the year under consideration (Page No. 94 of paper book) Copy of sales bills/contract notes of shares (Page No. 95-103 of paper book) Copy of ledger Account of assessee in books of accounts of share brokers through whom the shares were sold (Page No. 104-105 of paper book) Copy of bank statement showing the entry of payment received against sales of shares (Page No. 106-107 of paper book)

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 24 of 36 (C) DEMAT ACCOUNT STATEMENTS OF FOLLOWING BROKERS: Suresh Rathi Securities Private Limited Religare Securities Limited (Page No. 108-109 of paper book)

Thus, the purchase bill for purchase of shares alongwith ledger account in the books of the share broker clearly reveals the date of purchase and also the payment of purchase consideration through banking channel as revealed in the bank account statement of the assessee. All these documents are independently verifiable. The revenue has not disputed the filing of original return of income by the assessee for these years as well as for the A.Y. 2011-12. Further the Assessing officer while passing the assessment U/s 153A of the Act for the A.Y. 2011-12 has not disturbed the holding of shares shown in the balance sheet as on 31/3/2012. These transactions were also carried out through the capital account of the assessee which was also part of the record of the A.Y. 2011-12 but the Assessing Officer has accepted all these details without any adverse finding or comments while passing the assessment order U/s 153A of the Act for the A.Y. 2011-12. The assessee also produced sale bills/contract notes regarding sale of shares, copy of ledger account of the assessee in the books of share brokers in respect of sale transactions, bank statement showing the receipt of sale consideration and DEMAT accounts having the entries of credit of the shares at the time of purchase and debit of the shares from the DEMAT account at the time of sale. Further the equity shares of the companies listed in the Stock Exchange were purchased and sold by the assessee through Stock Exchange. Therefore, the transaction of purchase and sales are not off market but at the floor of the Stock Exchange which can be duly verified from independent source without any influence of the assessee. Hence, the documents produced by the assessee are the evidence which cannot be manipulated and also can be verified from the independent sources. Once the assessee has produced all these documents to establish the genuineness of purchase and sale of transactions of shares through Stock Exchange than the mere disclosure and surrender of income would not lead to the conclusion that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. If the transactions are accepted as genuine and are already declared in the return of income filed U/s 139 as well as duly recorded in the books of account then long term capital gain arising from the sale of listed shares is exempted U/s 10(38) of the Act. The withdrawal of claim of exemption by the assessee in the statement U/s 132(4) of the Act, ignoring the supporting evidence of genuineness of the claim, would not ipso facto amount to concealment of income or furnishing inaccurate particulars of income. Explanation 5A to Section 271(1)(c) of the Act has set out the conditions for income declared in the return of income furnished after the date of search is deemed to have been concealed the particulars of income or furnished inaccurate particulars of income. For ready reference, we reproduce Explanation 5A to Section 271(1)(c) of the Act as under: Section 271(1)(c) [Explanation 5A.— Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of—

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 25 of 36 (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 utilising (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 date17 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.] Therefore, clause (a) and (b) clearly set out the conditions and situation under which the income declared in the return filed subsequent to the search can be deemed as concealment of particulars of income or furnishing inaccurate particulars of income. In the case in hand when the assessee already furnished return of income before the date of search and also declared long term capital gain then none of the conditions as prescribed under clause (a) & (b) are satisfied so as to bring the case of the assessee in the mischief of Explanation 5A to Section 271(1)(c) of the Act. In the case of Commissioner of Income Tax v. Harjeev Aggarwal (supra), the Hon’ble Delhi High Court while considering the definition of undisclosed income as per Section 158B(b) read with Section 158BB has held in para 20 to 23 as under:

“20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 26 of 36 explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. 22. In CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman 300, a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant passage from the aforesaid judgment is quoted below:— "A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 27 of 36 such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. In the subsequent decision in the case of Principal Commissioner of Income Tax, Delhi Vs. Best Infrastructure (India) Pvt. Ltd. (supra), the Hon’ble Delhi High Court has again held in para 38 as under: “38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta(supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.” Therefore, the statement recorded U/s 132(4) dehors any incriminating material would not by themselves constitute incriminating material. In the case of Ajay Traders V. Deputy Commissioner of Income Tax, Central Circle, Alwar (supra), the Coordinate bench of this Tribunal while considering the applicability of

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 28 of 36 Explanation 5A to Section 271(1)(c) of the Act without any incriminating material found during the search has held in para 4.1 to 4.3 as under: “4.1 The ld. A/R for the assessee submitted that there was a search under section 132 of the IT Act on the assessee firm along with other group entities, HUFs, Individuals etc. on 17.09.2008. In order to buy peach and to cooperate with the department, total amount of Rs. 3 crores for the entire group was offered as additional income u/s 132(4) of the IT Act. The assessee has disclosed additional income under the head 'Income from other sources'. Return for A.Y. 2007-08 was filed by declaring an income of Rs. 82,88,590/- on 30.04.2010 which was accepted by the AO and no further addition was made by him. It is fact that assessee has enhanced the income by Rs. 15 lacs to the income declared in the original return of income. The AO invoked provisions of Explanation5A to section 271(1)(c). During the course of search, no incriminating documents were found which is evident from the assessment order that no addition had been made by the AO. He accepted the returned income. The ld. CIT (A) also confirmed the penalty by mis-placing the Hon'ble Supreme Court decision in the case of MAK Data (P.) Ltd. v. CIT [2013] 358 ITR 593/38 taxmann.com 448. The surrender of income in the revised return was voluntary and suo moto. Additional income disclosed under section 153A in the return does not lead to the conclusion that the assessee firm was having undisclosed income or had concealed the particulars of income. The surrender was made on the basis of statement recorded u/s 132(4) of the IT Act. He further argued that under similar facts and circumstances which came before the Hon'ble Delhi High Court in the case of CIT v. Raj Pal Bhatia [2011] 333 ITR 315/10 taxmann.com 191/202 Taxman 140 (Mag.)wherein the Hon'ble Court held that statement could not be construed as material found during the course of search operations for the purpose of Chapter XIVB. The case law applied by the ld. CIT (A) has mis-placed the fact that in that case certain documents pertaining to share applications were found during the course of survey, whereas in assessee's case no incriminating documents were found. Therefore, case law relied upon by the ld. CIT (A) is not applicable. He further argued that ITAT Mumbai in the case of Financial Technologies (I) Ltd. v. Asstt. CIT [2015] 61 taxmann.com 406 held that Explanation-5A has been used by the legislature where any money, bullion, jewellery or other valuable article or thing found during the course of search which has not been disclosed by the assessee and additions were made on account of unaccounted money, bullion etc. In this case as such revenue has not brought on record any material to prove that unaccounted money, jewellery or incriminating documents were found. He further has drawn our attention to ITAT Jaipur Bench decision in the case of Radhey Shyam Mittal, ITA No. 1013, 1014 & 1015/JP/2013 deleting penalty imposed by the Assessing Officer by invoking Explanation 5A to section 271(1)(c), wherein the Tribunal held that penalty under Explanation 5A to sec. 271(1)(c) has to be made where any incriminating documents are found during the course of search. In the case of assessee, no incriminating documents were found, therefore, the coordinate Bench had deleted the

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 29 of 36 addition. The ld. A/R of the assessee requested to delete the penalty confirmed by ld. CIT (A).

4.2 At the outset, the ld. D/R vehemently supported the order of ld. CIT (A). 4.3 We have heard rival contentions and perused the material on record. It is undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs. 15 lacs and requested not to impose penalty u/s 271(1)(c) of the IT Act. The ld. AO imposed the penalty by invoking the Explanation 5A to section 271(1)(c) of the Act, which has been confirmed by ld. CIT (A) by considering the judgment of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. (supra). But for imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A of the Act. The issue has been considered by various High Courts as well as by ITAT as relied upon by the assessee, which are squarely applicable to the case of the assessee. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT (A).”

Thus, the Tribunal has held that the penalty U/s 271(1)(c) read with Explanation 5A of the Act can be levied only when some incriminating material is found during the course of search. Even otherwise the penalty proceedings are separate and independent from the assessment order and particularly in case where the Assessing Officer has not made any addition but the assessee itself has surrendered an additional income then the explanation of the assessee against the levy of penalty has to be considered in the proceedings U/s 271(1)(c) of the Act. It is settled proposition of law though the assessment order is a relevant material for the purpose of levy of penalty U/s 271(1)(c) of the Act, however, it cannot be a sole basis of levy of penalty and the Assessing Officer has to consider all the relevant material facts as well as explanation furnished by the assessee. Therefore, in the case of the assessee, the income was assessed only because the assessee surrendered the same but it would not have otherwise sustained the test of the legal requirement of the assessment of the income without any incriminating material. There are binding precedents on the issue that in the proceedings U/s 153A of the Act, the Assessing Officer cannot reassess the income in absence of any incriminating material found and seized during the course of search or post search enquiry. In the case in hand, we find that the entire basis of the additional income assessed to tax in the proceedings U/s 153A of the Act is the statement of the assessee U/s 132(4) of the Act and subsequent surrender of the said income to tax without any incriminating material found or seized. Since the income and transaction relating to the income are already part of the books of account not only for the year under consideration but also for the preceding years and therefore, except surrender made by the assessee, the addition if any made by the Assessing officer of this income based on the statement would not have survived or sustained. The Hon’ble Jurisdictional

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 30 of 36 High Court in the case of Jai Steel (India) Vs ACIT (2013) 259 CTR (Raj) 281 has laid down the proposition that the addition made in absence of incriminating material in the proceedings U/s 153A where the assessment was not pending on the date of search is not sustainable. A similar view has been taken by the Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla 380 ITR 573 (Del) as well as in the case of Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia [2017] 395 ITR 526 and held that unless there is an incriminating material for the addition sought to be made pursuant to the search and seizure operation, the addition cannot be made in respect of the assessment year which was not pending as on the date of search. Therefore, once the assessee has raised all these contentions and explained during the penalty proceedings that the transactions of purchase and sale of shares and consequential long term capital gain are genuine based on the documentary evidence and further all these were part of the books of account and disclosed in the return of income filed U/s 139 consequently the addition itself would not have survived had the assessee not surrendered the income then this explanation of the assessee would certainly lead to the conclusion that the penalty is not leviable U/s 271(1)(c) of the Act. The ld. CIT(A) after considering all the relevant material as well as the case laws on the point has held in para 4 to 4.5 as under: 4. I have considered the facts of the case, gone through the relevant assessment orders, penalty orders and the paper-book & submission of the appellant and the various case laws.

4.1 It is found that the appellant has advanced arguments from multiple perspectives, starting from technicalities of imposing the penalty by treating the additional income as concealment of income, penalty only on the basis of statements recorded in search, additional income surrendered dehors the seized material, finding in assessment alone not sufficient to establishing of the mensrea etc. From examination of documents and submission the following facts emerges by which the penalty u/s 271(1)(c) cannot be held as validly imposable in the instant case: -

i) During the course of search the appellant admitted the long term capital gain shown in his ITR as his undisclosed income but such undisclosed income in not based on any documents found as a result of search or evidences. During the course of search & seizure operations, no incriminating material, evidence or documents whatsoever were found. ii) Such long term capital gain was already declared in the ITR filed under Section-139(1) of the Act though the same shown as exempted u/s 10(38) of the Act. iii) During the course of assessment proceedings the appellant submitted documents from acquisition to sales of documents to prove the genuineness of capital gain earned by him. The transaction was carried out in recognized stock exchange and was through proper banking channel. The documentary evidence were remained uncontroverted by the AO during the assessment proceedings as well as penalty proceedings.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 31 of 36 iv) During the course of assessment proceedings as well as penalty proceedings the appellant repeatedly submitted that the long term capital gain earned by him is genuine one and duly verifiable. The admission of the same was only to metal peace. However no inquiry was made at the end of the AO to controvert the submission of the applicant or no document was adduced in this regard. v) The penalty was imposed solely for the reason that the appellant has filed returns u/s 153A of the Act disclosing higher income than in the original return, and only on the basis of income offered by applicant in his statement. vi) For imposing the penalty the AO held that the appellant has suppressed his income by way of not disclosing his correct income in his regular return however no evidence in this regard was adduced/relied in the assessment order as well as penalty order. 4.2 Thus in the assessment proceedings as well as penalty proceedings the applicant repeatedly submitted the capital gain earned was as genuine but no heed was given thereon and without carrying any independent inquiry the penalty was imposed solely relying on the statement of applicant. For the purpose of levying penalty u/s 271(1)(c) of the Act, the concealment of income has to be independently established by the other evidences and not on the basis of the statement of the appellant alone. For proving any additional income declared in the return filed u/s 153A of the Act as concealed income, there must be deliberate act of the Assessee duly corroborated with the evidences. However, it seems the appellants submissions of factual matrix and decisions of Hon’ble Jaipur ITAT reproduced above are good enough to decide the matter. 4.3 It is undisputed fact that the income surrendered during the search u/s 132(4) was duly included/ offered for tax while filing return of income u/s 153A and due taxes thereon was paid. The income surrendered and included/ offered for tax while filing return of income was accepted as such by the AO. 4.4 In above factual situation, the penalty u/s 271(1)(c) cannot be levied as the matter is covered one. Apart from the consideration given on the several case laws cited by the applicant it is worth to place the reliance on the decision Hon’ble ITAT, Jaipur Bench, Jaipur in the case of Ajay traders V/s DCIT, Central Circle, Alwar (ITA No. 296/ JP/2014) pronounced on 06.05.2016 as follows: -

“4.3. We have heard rival contentions and perused the material on record. It is undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs. 15 lacs and requested not to impose penalty u/s 271(1)(c) of the IT Act. The ld. AO imposed the penalty by invoking the Explanation 5A to section 271(1)(c) of the Act, which has been confirmed by ld. CIT (A) by considering the judgment of Hon’ble Supreme Court in the case of MAK Data Pvt. Ltd. (supra). But for imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 32 of 36 incriminating documents and is to be considered at the time of assessment framed under section 153A of the Act. The issue has been considered by various High Courts as well as by ITAT as relied upon by the assessee, which are squarely applicable to the case of the assessee. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT (A).”

It is undisputed fact that, the no incriminating documents were found during the course of search to prove the concealment of income and the penalty was imposed merely on the basis of income surrendered by the appellant in his statement and shown in the ITR filed u/s 153A of the Act. The income so surrender by the appellant was reported in the return filed u/s 153A which has been accepted without further addition. No incriminating documents are not used to alter the income reported by the appellant or prove the income so surrender by the applicant as real undisclosed income. Therefore, issue is squarely covered with the above citation.

4.5 In view of the above discussions and considering the overall facts and attending circumstances of the appellant’s case and with regards to the various juridical pronouncements discussed herein above, I found that it is undisputed fact in this case that the impugned income subjected to the assessment is only income which is surrendered by the appellant during the search and also disclosed in return of income filed under section 153A. There is no corroborative evidence/material /document in support of income so surrendered and offered for taxation and the same is only on the basis of the statement of the assessee recorded during search. The declared income is also finally assessed as such. Following, the decisions discussed in paras 4.4 the penalty levied on this account under section 271(1)(c) of the Income Tax Act is not sustainable and accordingly the same stands as cancelled. Accordingly, this ground of appeal 1 to 6 is allowed.”

In view of the facts and circumstances of the case and a detailed discussion in the foregoing paras of this order, we do not find any error or illegality in the impugned order of the ld. CIT(A) in deleting the penalty U/s 271(1)(c) of the Act. 7. In the result, appeal of the revenue is dismissed.”

5.7 Since order of the Tribunal in the case of Indira Agarwal cited (supra) has already been considered, we are not considering the various judgements relied by ld. D.R. 6. In the result, appeal of the assessee in ITA No.532/Bang/2024 is allowed.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 33 of 36 ITA No.531/Bang/2024 (AY 2014-15): 7. Facts of the case are that the assessee, engaged in real estate development in Bangalore and linked with various other group entities and firms, was subjected to a search and seizure operation under Section 132 of the Act on 20.01.2016. This action encompassed the assessee and its associated group concerns. During the search, several incriminating documents pertinent to the company's financial affairs were discovered and confiscated. Notably, the residence of Shri Gopala Reddy Ramasagara, a director of the company, located at No. 195, 7th Main, 4th Block, Jayanagar, Bangalore - 560011, was also searched. From the said premise, a cash receipt of Rs. 25,50,500/- issued by Mrs. Chandrakala Shashidhar was retrieved and seized. This amount was not recorded in the company's official accounts. Subsequently, the assessee submitted a revised income tax return, declaring an additional income of Rs. 30,90, 148/- for taxation. 7.1 The assessee filed its original return of income u/s. 139(1) on 30.11.2014 by declaring total income of Rs.16,00,63,710/-. Consequent to search action u/s. 132 dated 20.01 .2016. A notice under Section 153A of the Income Tax Act sue and served to the assessee on 24.10.2016, for the assessment year 2014-15. In response, the assessee filed return of income on 10.12.2016, reporting an income of Rs.16,31,53,860/-. The assessment order passed on 27.12.2017, u/s Section 153A rws 143(3) rws 153D, acknowledged and accept the return filed u/s. 153A submitted by the assessee. In this order, penalty proceedings were initiated under Section 271(1)(c) due to the assessee's failure of furnishing inaccurate particulars of income. 7.2 During the penalty proceedings, the AO concluded that the - case of the assessee fell under explanation 5A to section 271(1)(c) of the Act, meeting all the necessary criteria specified in section 271(1)(c) to impose a penalty for furnishing inaccurate particulars of

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 34 of 36 income. Consequently, a penalty of Rs.10,50,340/- equivalent to 100% of the tax sought to be evaded, was levied. 8. The back ground of levy of penalty in this assessment year is as follows: i. The issue involved in the present appeal pertains to assessment year 2014-15.

ii. On 21.01.2016, a search action was took place on the Assessee Company and as part of the same residential premises of the Company's director Mr. Gopala Reddy Ramanasagara's house was also got searched and certain receipts of the Company's customers were seized by the Search party.

iii. That apart no unaccounted money or unrecorded assets Vis a Vis the books of accounts was found.

iv. The Appellant could not surrender any income or no admission of income made by the Appellant for the relevant assessment year 2014-15 before the search party in a statement recorded u/s 132(4) of the Act. V. During the course of assessment proceedings the Appellant provided clarification to all the cash receipts seized by the search party except one voucher of Rs.25.50 lakhs which was in the name of Smt. Chandrakala. vi. For the AY 2015-16. the Ld AO revised the estimated cost and estimated income and revised the revenue for the A Y 2015-16 and as part of this action a small revenue of Rs. 30,9(), 148/-has to be offered in the A Y 201415.

vii. The Ld. AO concluded the assessment merely based on the additional income of Rs. 30, 90,148/- added to the returned income, though there was no information to initiate the proceedings us 132 of the Income Tax Act and though there was no incriminating materials 10 initiate the proceedings u/s 153A of the Act.

The Ld. AO also initiated the penalty proceedings us 271 (l)(c) and levied viii. the penalty of Rs. 10,50,340/- for furnishing the inaccurate particulars with respect 10 cash receipts of the business and taking this receipt of Chandrakala as evidence. stated that this cash receipt was not accounted in the books of the Company. [Para 9, 10]

The Appellant has produced its cash book and party's ledger [Copy enclosed as per Annexure no. 2] during the course of assessment proceedings 2014-15 and never agreed that the purported cash receipt is Ille incriminating material during the assessment or penalty proceedings and in fact negated all the allegations in the penalty proceedings.

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 35 of 36 relevant point of time, confirmation could not be obtained and produced during the relevant point of time.

i. Affidavit dated 21.08.2018 - Annexure no. 3 i. Confirmation dated 04.03.2022 -Annexure no. 4

Sd/- Sd/- (Prakash Chand Yadav) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 29th July, 2024. VG/SPS

ITA No.531 & 532/Bang/2024 M/s. Concorde Housing Corporation Private Limited, Bangalore Page 36 of 36 Copy to:

Asst. Registrar, ITAT, Bangalore.