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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
This bunch of seven appeals filed by different assessee are against respective orders of CIT(A)-13, Pune, all dated 23.10.2015 relating to respective assessment years 2009-10 & 2010-11 against penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’).
This bunch of seven appeals relating to different assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience.
The assessee in ITA Nos.95 & 96/PUN/2016 is the sole proprietor of the business carried on by her; whereas the assessee in ITA Nos.99 & 100/PUN/2016, 102/PUN/2016, 105 & 106/PUN/2016 are three different partnership firms, relating to assessment years 2009-10 and 2010-11, except in the case of ITA No.102/PUN/2016 which only relates to assessment year 2010- 11.
The issue which is raised in the present appeals is against penalty levied under section 271(1)(c) of the Act by invoking provisions of Explanation 5A of the Act.
First, we shall take up the appeals of assessee in ITA Nos.95 & 96/PUN/2016, relating to assessment years 2009-10 & 2010-11. In order to adjudicate the issue, reference is being made to the facts in ITA No.95/PUN/2016, relating to assessment year 2009-10.
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The assessee in ITA No.95/PUN/2016, relating to assessment year 2009-10 has raised the following grounds of appeal:- 1. The ld. CIT(A) erred in confirming the levy of penalty of Rs.2,52,604/- u/s. 271(1)(c) of the Act. 2. The ld. CIT(A) failed to appreciate that the additional income declared by the assessee was based on estimates and there was no concrete evidence found during the course of search that the assessee had generated the undisclosed income declared during the course of search and hence, the levy of penalty on the additional income declared by the assessee was not justified at all. 3. The ld. CIT(A) ought to have appreciated that the additional income was declared by the assessee in order to co-operate and buy peace with the dept. and therefore, no penalty was leviable in respect of the additional income declared by the assessee which was based on estimations and surmises. 4. The order of Ld. CIT(Appeals) passed u/s 250 of the Income Tax Act, 1961 in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities, and fact and circumstances in the appellant case. 5 The order of penalty is bad in law for the reason that the notice for initiation of penalty as to whether it is concealment of income or furnishing of inaccurate particulars of income is discernable from the notice issued and consequently the order of penalty passed u/s 271(1)(c) of the Act on invalid notice does not have any legs to stand and penalty levied u/s 271(1)(c) of the Act deserves to be deleted under the facts and circumstance of the case. 6. The Id CIT (Appeals) was not justified in ignoring the action of Assessing officer who in assessment order has stated that assessee has conceals the particulars of income however notice were issued for concealment of income and furnishing the particulars of income The notice issued is ambiguous on the charge and hence bad in law. 7. The Ld CIT(Appeals) failed to appreciate that the appellant has neither concealed the particulars of income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore penalty levied u/s 271(1)( c) of the Act, requires to be cancelled. 8. The ld. CIT(A) erred in not appreciating that the assessee that the time limit for filing revise return had not expired at the time of the search being conducted on the assessee and therefore, the provisions of explanation 5A were not applicable to the facts of the case of the assessee and accordingly, the penalty levied may kindly be deleted.
Briefly, in the facts of the case, search and seizure action under section 132 of the Act was initiated against the assessee on 20.01.2011. Simultaneously, Survey action under section 133 of the Act was carried out at
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the business outlets of assessee and partnership firms in which assessee and her husband were associated as partners. In response to notice issued under section 153A(a) of the Act, the assessee filed the return of income declaring total income of ₹ 13,01,560/- as against original return of income filed declaring income of ₹ 5,71,560/-. The assessee derived income from business of proprietary concern in the name of Gauri Mastani at Sadashiv Peth, Pune. She was also partner in five partnership firms and was drawing remuneration from these firms. The assessee in the case of proprietary concern, during the course of search proceedings along with her husband and associated firm had jointly declared additional income of ₹ 1 crore for assessment year 2009-10 for the group; out of which, the assessee declared sum of 7,30,000/- as her undisclosed income. The same was included in the return of income. The assessee explained that the said amount was utilized partly for renovation of outlet and partly for deposits made in Pat Sansthas. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act for concealing the particulars of income. In the order levying penalty under section 271(1)(c) of the Act, the assessee claimed that where additional income was offered by the assessee and was accepted as such and where the declaration was made on estimation basis and no seized documents were found to establish specific amount of income not disclosed by the assessee, the assessee stressed that no penal action is to be taken against the assessee. The Assessing Officer noted that contention of assessee that disclosure was made voluntarily and no incriminating documents were found during the course of search, was not true. He further observed that number of pages were found and seized during the course of search from where it was found that the assessee had unaccounted sales. The annexure giving details of papers/books/documents seized was enclosed as Annexure-A to the penalty order. Apart from the same, the
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husband of assessee in his statement recorded on oath under section 132(4) of the Act on 20.01.2011 had accepted that the said papers have been found and seized from his place. When confronted with the evidence regarding suppressed sales, he accepted that the said papers pertained to unaccounted sales. Moreover, the assessee’s husband in reply to question No.4 of his statement recorded under section 132(4) of the Act on 11.03.2011 accepted that on the basis of copies of said seized papers, assessment year-wise details of disclosure was worked out. He also disclosed the ways in which unaccounted income has been utilized by him or his wife. The Assessing Officer also noted that search was initiated in the case on 20.01.2011 and while recording statement on 11.03.2011, the disclosure was made. The Assessing Officer noted that the assessee had sufficient time to consult and think about the disclosure of undisclosed income. Thus, the contention of assessee during the course of penalty proceedings was held to be an afterthought. The Assessing Officer further noted that search was initiated after 01.06.2007 and provisions of Explanation 5A to section 271(1)(c) of the Act were applicable. The Assessing Officer held the assessee to have concealed the particulars of her income within meaning of section 271(1)(c) read with Explanation 5A of the Act. In view thereof, the assessee was held to be liable for levy of penalty under section 271(1)(c) of the Act and the same was levied at 100% of the tax sought to be evaded amounting to ₹ 2,52,604/-.
The CIT(A) held that the addition was made in the hands of assessee on the basis of documents seized during the course of search, hence provisions of Explanation 5A to section 271(1)(c) of the Act were attracted. The CIT(A) held that the provisions of Explanation 5A were clearly applicable. Further, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in MAK Data
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P. Ltd. Vs. CIT (2013) 358 ITR 593 (SC). Another aspect which was covered by CIT(A) was that once the assessee admits that certain amount represents her income, no further evidence would be necessary to show that it was amount which represented her income or that it represented her concealed income. Reliance in this regard was placed on various decisions of different High Courts. The CIT(A) thus, confirmed the penalty.
For the year 2010-11, the assessee and her husband and associated firms have jointly declared additional income at ₹ 1,54,00,000/-, out of which the assessee declared sum of ₹ 17,50,000/- as her income. In response to notice issued under section 153A of the Act, the assessee furnished the return of income. The declaration of additional income was linked to the amount incurred on the renovation of residence of ₹ 2.50 lakhs, deposits made in credit society in third party of ₹ 2 lakhs; renovation expenses incurred on the outlets of ₹ 3 lakhs and accounting for the jewellery found during the course of search of ₹ 10 lakhs. The CIT(A) also held the assessee liable for penalty under Explanation 5A to section 271(1)(c) of the Act on the aforesaid additional income declared at ₹ 17,50,000/-.
The assessee is in appeal against both the orders of CIT(A) relating to assessment years 2009-10 and 2010-11.
The learned Authorized Representative for the assessee pointed out that original return of income was filed prior to search and additional income on suppression of sales was offered in the return of income filed subsequent to search and the assessment made on the additional income offered by the assessee. The learned Authorized Representative for the assessee pointed
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out that search under section 132 of the Act was carried out at the residential premises of assessee and her husband. Simultaneously, Survey was also carried out on the partnership firms on different places. The assessee has filed the details of year-wise declaration made at page 26 of Paper Book. Declaration of ₹ 3 lakhs was made in financial year 2009-10 in the hands of assessee of Gauri Mastani and ₹ 14,50,000/- of Joshi Wadewale, F.C. Road. Further, declaration of ₹ 32 lakhs was made in financial year 2010-11 on account of Joshi Wadewale, F.C. Road. He further pointed out that returns of income in the case of individuals were filed under section 153A of the Act. However, the returns of income filed by partnership firms were filed in response to notice under section 148 r.w.s. 143(3) of the Act. In the aforesaid returns of income, additional income was offered. In respect of partnership firms, the learned Authorized Representative for the assessee pointed out that seized documents were found at the premises of assessee and her husband. The learned Authorized Representative for the assessee pointed out that statement of Shailesh Joshi was recorded on 20.01.2011 and reference was made to the copy of statement placed at page 12 of Paper Book. Our attention was drawn to question No.8 which related to the papers found from the residence and assessee admitted that there was suppression of sales. In reply to question No.10 placed at page 11 of Paper Book, the assessee pointed out that additional income was offered for all the concerns and the total additional income offered in the group was ₹ 5 crores. The learned Authorized Representative for the assessee again referred to page 26 of Paper Book and declaration of additional income offered in different hands. He further stated that penalty under section 271(1)(c) of the Act was initiated and levied for concealment of income, though notice issued under section 274 of the Act was vague. He further pointed out that once the additional income have been
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offered suo moto by the assessee, there was no merit in holding the assessee to be in default.
The learned Departmental Representative for the Revenue pointed out that the issue stands covered by the ratio laid down by Pune Bench of Tribunal in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (2015) 174 TTJ 516 (Pune).
In respect of partnership firms, the learned Authorized Representative for the assessee referred to additional grounds of appeal raised before the Tribunal. He stressed that where the facts were on record and the facts of search were on record, then the additional grounds of appeal can be admitted. He stressed that where papers were found from the residence of assessee and her husband and the statement was also made by the said persons in respect of additional income offered in the hands of partnership firm, then proceedings cannot be initiated under section 148 of the Act and the correct section to be applied is section 153C of the Act. He further pointed out that legal issue raised in the present appeal is without investigation of facts, needs to be admitted and adjudicated as held by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). He further referred to the ratio laid down by Pune Bench of Tribunal in ITO Vs. Shri Shailendra B. Agrawal in ITA Nos.1825 to 1828/PN/2012, relating to assessment years 2004- 05 to 2007-08, order dated 09.12.2014 and in bunch of appeals with lead order in ACIT Vs. Shamsundar Laxman Jagtap in ITA No.1278/PN/2013, relating to assessment year 2006-07, order dated 21.08.2015. He stressed that where search was on ‘X’ and from whom papers were found and assessments were made under section 148 of the Act and penalty was levied under section 271(1)(c) of the Act, the Tribunal allowed the assessee to raise jurisdictional
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legal issue as to section under which the proceedings could take places. He further pointed out that merits of the cases of partnership firms were identical to the individual except no search on partnership firms were carried out. It was the year of search, where prior to Survey, the assessee had already furnished the returns of income and after Survey, additional income was offered.
The learned Departmental Representative for the Revenue on the other hand, pointed out that question which arises is whether quantum proceedings can be challenged in the appeal filed against levy of penalty under section 271(1)(c) of the Act, especially in a case where the assessee has accepted the quantum order and is challenging the levy of penalty against such quantum additions made on the basis of incriminating documents found during the course of search. For completeness, it may be pointed out that search was carried out at the residence of partners and no search was carried out at the premises of different concerns. After close of the hearing, the learned Departmental Representative for the Revenue filed notes saying that with regard to the issue raised regarding the proceedings initiated and completed under section 147 of the Act instead of section 153C of the Act, reliance was placed on the decision of the Hon’ble High Court of Karnataka in Gudwill Housing Ltd. Vs. ITO (2014) 45 taxmann.com 144 (Kar), wherein it has been held that Chpter XIV-B does not preclude the Assessing Officer to proceed against the assessee by issuing notice under section 148 of the Act. He thus, stressed that after search proceedings carried out in the case of another person, it was open to the Assessing Officer either to proceed under Chapter XIV-B or under section 148 of the Act, copy of the decision was filed.
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The learned Authorized Representative for the assessee also submitted written note pointing out that the decision of the Hon’ble High Court of Karnataka was not applicable to the facts of the present case, since in the case before the Hon’ble High Court, the issue involved was whether Assessing Officer can issue notice under section 148 or 158BD of the Act. He further pointed out that section 158BD of the Act was part of Chapter XIV-B. Referring to section 153C of the Act, it was pointed out that the said section starts with non obstante clause and it specifically excludes the provisions of sections 147 / 148 of the Act. The Assessing Officer thus, submitted that in view of provisions of section 153C of the Act, the Assessing Officer could not issue notice under section 148 of the Act and complete the assessment under section 147 of the Act. Since non obstante clause was missing in section 158BD of the Act, he stressed that the decision of the Hon’ble High Court of Karnataka was not applicable for deciding the issue in the context of applicability of section 147 or 153C of the Act. He further reiterated that section 153C of the Act was specific provision relating to assessment of income of third party on the basis of evidence found with the person searched; whereas provisions of section 147 and 148 of the Act were general.
We have heard the rival contentions and perused the record. In the facts of appeals in ITA Nos.95 & 96/PUN/2016, the assessee along with her husband were carrying on the business at different places. The assessee was sole proprietor of Gauri Mastani and was also partner in different partnership firms. The assessee for the years under appeal had originally filed the return of income in time. Thereafter, search and seizure operations were carried out at the premises of assessee on 20.01.2011. During the course of search, various incriminating documents were found, which suggested suppression of sales
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and also investment in renovation to the outlets run by the assessee and other assets. The statement under section 132(4) of the Act was recorded of the husband of assessee first during the course of search and thereafter also. In the said statement, when confronted with the seized documents, the assessee very categorically admitted to have suppressed sales and earned profits thereon, which was not reflected in the books of account. The assessee also explained the nature of investments made from year to year from such undisclosed income. In response to notice issued under section 153A of the Act, the assessee on her own motion had offered additional income on account of suppressed sales and its investments in various assets. The husband of assessee Shri Shailesh Joshi had admitted the additional income, in reply to questions while recording statement under section 132(4) of the Act, offered additional income for all the concerns. The total additional income offered by the assessee and the group was ₹ 1 crore in assessment year 2009-10, ₹ 1.5 crores in assessment year 2010-11 and ₹ 2.5 crores in assessment year 2011- 12. The tabulated details of declaration made under section 132(4) of the Act in the hands of different persons are available at page 26 of Paper Book. The assessee Mrs. Vasundhara S. Joshi had offered ₹ 7,30,000/- as additional income in financial year year 2009-10 and ₹ 14,50,000/- plus ₹ 3 lakhs in financial year 2010-11. The said additional income was declared by the assessee in the returns of income filed in response to notice issued under section 153A of the Act.
The issue which is raised in the present appeals before us is whether the assessee is exigible to levy of penalty under section 271(1)(c) of the Act read with Explanation 5A. Before going into merits of levy of penalty, it may be pointed out that satisfaction was recorded by the Assessing Officer that the
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assessee had concealed its income and penalty was also levied on the same account under Explanation 5A to section 271(1)(c) of the Act. The learned Authorized Representative for the assessee before us has stressed that in the notice issued under section 274 of the Act, there is no striking of inappropriate limb. We find that this issue has already been adjudicated at length by us in the case of Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08, dated 30.11.2016. Applying the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom), we have held that where recording of satisfaction by the Assessing Officer while initiating penalty is clear and not ambiguous, then merely because one of the limbs has not been struck off the notice, does not make the proceedings invalid. In view of the same, we find no merit in the plea of assessee and the same is dismissed.
Now, coming to the issue of levy of penalty under section 271(1)(c) of the Act. Explanation 5A to section 271(1)(c) of the Act has been invoked for levying the said penalty. We have already decided the issue of levy of penalty under Explanation 5A to section 271(1)(c) of the Act in the case of Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (supra) and it was held as under:- ―13. We have heard the rival contentions and perused the record. Search and seizure action was carried out against the assessee on 09.12.2009. While travelling from Pune to Delhi by air, the assessee was found to be in possession of cash of Rs.1,60,76,800/-. The assessee was searched by the Investigation Wing under section 132 of the Act on 09.12.2009 and residence was also searched and cash of Rs.1.60 crores was seized during the search proceedings. In the course of recording of statement during the search proceedings, the assessee admitted that she had sold her ancestral property at Delhi for Rs.3.40 crores, for which the Agreement was made for Rs.1.70 crores and the balance amount was received in cash. The claim of the assessee was that though she had 50% share in the impugned property and the balance 50% share was owned by her sister Mrs. Tripta Kaur, but she had received the entire cash consideration and the cheque consideration was divided 50 : 50. In response to notice issued under section 153A of the Act, the assessee offered 50% of the Agreement value i.e. Rs.85 lakhs and 100% of the cash element i.e. Rs.1.70 crores in her hand and computed the income from capital gains and
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declared total income of Rs.2,04,91,850/- on 13.09.2010. Against the income from capital gains computed at Rs.2,41,17,168/-, the assessee also claimed exemption under section 54 of the Act at Rs.38,40,098/-, on account of investment in Mega Polis property. The Assessing Officer while completing assessment, noted that the assessee had not declared the sale consideration of Rs.2.55 crores in the original return of income filed and subsequently after the search, the declaration was made on account of total amount of capital gains. The Assessing Officer recorded satisfaction in the body of the assessment order to the extent that the assessee had concealed the particulars of income and penalty proceedings under section 271(1)(c) of the Act were initiated. Beside the above said, there was another aspect of sale of property, wherein the assessee had claimed that it had sold fittings and fixtures of the said bungalow for Rs.10 lakhs. However, in the absence of list of furniture or personal effects sold, the Assessing Officer was of the view that the fittings and fixtures attached to the property were inextricably linked to the building and consideration received thereon, was to be treated as capital gains. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act with regard to the said addition. Consequent thereto, the Assessing Officer rejecting the claim of the assessee that it had suo motu offered the income from long term capital gains, and no malafide intention could be attributed to the said disclosure, hence, there was no merit in levy of penalty, held the assessee exigible to levy of penalty under section 271(1)(c) of the Act and levied penalty of Rs.47,11,104/-. The CIT(A) elaborately considered the issue and upheld the levy of penalty. The assessee is in appeal against the order of CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act. 14. The first aspect of the issue raised by the assessee before us is that where no satisfaction has been recorded by the Assessing Officer, since in the hands of assessee, there was no addition whatsoever, as the income offered by the assessee was accepted in toto, no penalty under section 271(1)(c) of the Act could be levied. From the perusal of assessment order, it is clear that the Assessing Officer after considering the facts of the case and also the return of income filed by the assessee pursuant to issue of notice under section 153A of the Act vide para 3.2 noted that the total sale consideration of the ancestral property was Rs.3.40 crores, out of which Rs.1.70 crores was received in cash and Rs.1.70 crores was received in cheque. The cheque amount was shared by the co-owner. However, the entire cash amount was claimed to be received by the assessee. The Assessing Officer further considered that the assessee had offered the cheque amount and cash amount aggregating to Rs.2.55 crores for taxation under the head ‗long term capital gains‘. The Assessing Officer further observed that since the assessee had not declared this amount of capital gains in her original return and subsequently, after search has declared the total amount of capital gains and thus, concealed the particulars of income and consequently, penalty proceedings under section 271(1)(c) of the Act were initiated separately by the Assessing Officer. The above said finding of the Assessing Officer is the deemed satisfaction recorded by the Assessing Officer before initiating penalty proceedings under section 271(1)(c) of the Act and in view thereof, we find no merit in the plea of the assessee in this regard. 15. Now, coming to the issue that where the assessee had offered the income in the return of income filed after surrendering the additional income, can the assessee be held to have concealed its income vis-à-vis original return of income filed by the assessee. Section 271(1) of the Act makes provision for levying penalties on assessee in different eventualities, one such eventuality is for concealment of income or furnishing of inaccurate particulars of income. Only on fulfillment of the conditions stipulated in section 271(1)(c) of the Act, there arises a question of exercising power under the said provision to impose
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penalty. The said section lays down that where the Assessing Officer or the CIT(A) in the course of any proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty stipulated in the aforesaid provision. The Explanation/s under section 271(1)(c) of the Act set out the circumstances, which justifies the levy of penalty. For searches initiated under section 132 of the Act before first day of June, 2007, Explanation 5 was introduced by the Finance Act, 2007 with retrospective effect from 01.04.2003. Under the said section, where the assessee was found to be owner of any money, bullion, jewellery or other valuable articles or things and the assessee claims that such assets have been acquired by him by utilizing, wholly or in part his income, for any previous year, which had ended before the date of search, but the return of income for such year had not been furnished before the said date, or where the return of income had been furnished but such income had not been declared therein or for any previous year which is to end on or after the date of search, then notwithstanding that such income was declared by him in the return of income, he was deemed to have concealed particulars of his income or furnished inaccurate particulars of income, unless the income or the transactions were recorded in the books of account or the person in the course of search makes a statement under section 132(4) of the Act that the said money, bullion, jewellery, valuable articles or things, has been acquired by him out of his income, which has not been so far disclosed, but specifies the manner in which the said income has been derived and pays the taxes together with interest. Under Explanation 5, an exemption was provided to the person who was searched and was found in possession of money, bullion, jewellery, valuable articles or things, then in case he declared the same under the statement recorded under section 132(4) of the Act and thereafter, pays the taxes on the same, no penalty under section 271(1)(c) of the Act was levied on such person. 16. However, for searches initiated under section 132 of the Act on or after first day of June, 2007, another Explanation 5A was applicable, which was introduced by the Finance Act, 2007 w.e.f. 01.06.2007. The original Explanation 5A provided that where in the course of search, the assessee was found to be the owner of any money, bullion, jewellery, valuable articles or things and the assessee claims that such asset had been acquired by him by utilizing wholly or in part his income for any previous year or any income is based on any entry in books of account or other documents or transactions and he claims that the same represents his income for any previous year, then where the period has ended before the date of search and the due date for filing the return of income for such year has expired and the assessee has not filed the return of income, 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 purpose of imposition of penalty under section 271(1)(c) of the Act, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of income. The said Explanation 5A was substituted by the Finance (No.2) Act, 2009 with retrospective effect from 01.06.2007 with the amendment that where the return of income for such previous year had been furnished before the date of search, but such income had not been declared therein or where the due date of filing the return of income for other previous year has expired, but the assessee had not filed the return of income, then notwithstanding the fact that the said income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of his income. 17. The deeming provisions of Explanation 5A under section 271(1)(c) of the Act are applicable to all the searches initiated under section 132 of the Act
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on or after first day of June, 2007. The conditions laid down in the Explanation 5A is where during the course of search, the assessee is found to be in possession of any money, bullion, jewellery, valuable articles or things and the assessee claims that such assets have been acquired by him by utilizing wholly or in part his income, for any previous year on any income based on any entries in books of account, or other documents or transactions and he claims that such entries in the books of account or other documents or transactions represent his income for any previous year, then in cases where the return of income for such previous year had been furnished by the assessee prior to the date of search, but the said income had not been declared in the said return of income or the due date for filing the return of income had expired for such previous year and the assessee had not filed the return of income, it is further laid down that notwithstanding the fact that such income which has been discovered due to the search proceedings, is declared by him in any return furnished on or after the date of search, but irrespective of the same, he would be deemed to have concealed the particulars of income or furnished inaccurate particulars of income. Reading the above said provisions of the Explanation 5A to section 271(1)(c) of the Act, it is noted that the person is deemed to have concealed particulars of his income or furnished inaccurate particulars of such income, which is equivalent to the value of money, bullion, jewellery, valuable articles or things from the possession of the assessee during the course of search conducted on or after first day of June, 2007. Further, where any income is based on any entry in any books of account or other documents or transactions and he claims that all the above said represents his income for any previous year, then the Explanation lays down to that extent, the person would be deemed to have concealed his particulars of income or furnished inaccurate particulars of income. 18. Now, coming to the main provisions which constitute two portions i.e. what is concealment and quantum of penalty to be levied. The question is quantum of income on which penalty is to be levied. The said issue was before the Pune Bench of Tribunal in ACIT Vs. Mulay Construction P. Ltd. & Ors. in ITA Nos.116 to 119/PN/2012 & Ors. and it was held as under:- ―16. The next limb of argument of the Ld. counsel is that Explanation 5A(ii) contemplates ―income‖ and not the ―expenditure‖. In this case, it is undisputed fact that the assessee came forward and declared ―income‖ which was pertaining to the amount covered by the unrecorded expenditure but the fact remains that the assessee did not declare any ‗expenditure‘ but it is only the income. The Ld. Counsel referred to the definition of the income given in sec. 2(24) of the Act. The scope of the said definition has been explained by the Hon‘ble Supreme Court in the case of EMIL Webber (supra) which has been relied upon by the Ld. Counsel The relevant portion is in para no 7 which reads as under: ―7. The definition of 'income' in clause (24) of Section 2 of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account the expression 'income' does not lose its natural connotation. Indeed, it is repeatedly said that it is difficult to define the expression 'income' in precise terms. Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is
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nothing but a tax upon the salary received by the assessee. By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax. The said payment is, therefore, for and on behalf of the assessee. It is not a gratuitous payment. But for the said agreement and but for the said payment, the said tax amount would have been liable to be paid by the assessee himself He could not have received the salary which he did but for the said payment of tax. The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context. It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee. We are, therefore, of the opinion that the High Court and the authorities under the Act were right in holding that the said tax amount is liable to be included in the income of the assessee during the said two assessment years.‖ 17. As per interpretation made by the Hon'ble‘ Supreme Court of sec. 2(24) of the Act, it is clear that it is an ‗inclusive‘ definition and it covers all income come under charging provisions of the Act. If the argument of the learned counsel is to be accepted then no income can be taxed u/s. 68, 69, 69A, 69B, 69C & 69D. 18. It is necessary to refer to Explanation 5A which reads as under: ―Explanation 5A – Where, in the course of a search initiated under section 132 on or before the 1st day of June 2007, the assessee is found to be the owner of (i) Any money, bullion, jeweler or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii) Any other income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.‖
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So far as the present assessee is concerned, clause (ii) to Explanation 5A is applicable. Admittedly, the expenditure which was not recorded has been found by way of entries in the seized documents. While explaining the scope of Explanation 5A in the case of Chandan K. Shewani (supra) the Tribunal has held that to patch out the lacuna due to the judicial interpretation of Expl. 5 of Sec. 271(1)(c) which was on the statute book upto 31-5-2007, Explanation 5A has been substituted for Expl. 5 by the Finance Act, 2007 w.e.f 1-6-2007. The said explanation was further amended by the Finance(No.2) Act, 2009 with retrospective effect from 01-07-2007 which is reproduced hereinabove. The Ld. Counsel has raised an important legal question whether the income declared by the assessee which is pertaining to the unrecorded expenditure can said to be the income which is contemplated in Explanation 5A(ii)? The answer to this question is in sec. 69-C which reads as under:- ―Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year;‖ 20. So far as the Expl.- 5 which was on the statute book, the Courts have taken a view that it was having a limited application only to the extend of the money, bullion, jewellery or any valuable assets or things which were found during the course of seach and seizer operation and owned by the assessee. But the other income which was found recorded by any entry in the document seized or otherwise was not covered. It is pertinent to note that sec. 69C provides that if any unrecorded expenditure is found and the assessee fails to explain the source of the said expenditure or explanation of the assessee is not satisfactory, then to the extent of the amount covered by such expenditure is treated as income. Ultimately what is taxed under Sec. 69 C of the Act is not the expenditure but it is basically the undisclosed income which has been applied for incurring the unrecorded expenditure. In our view, there is no merit in the argument of the Ld. Counsel that the assessee has only declared the amount expenditure. We therefore, hold that to the extent of the income offered by the assessee pertaining to the expenditure in the returns filed in response to notice u/s 153A, Explanation-5A is applicable and as there is a legal presumption against the assessee in respect of the said income detected during the course of search and seizure operation, the assessee case is squarely covered by Explanation- 5(ii) as the assessee himself has admitted the said undisclosed income.‖ 19. Applying the said proposition to the facts of the present case, we hold that the income offered by the assessee pertaining to the cash seized from the assessee and the declaration of the assessee that the said cash relates to the unaccounted cash received vide the sale transaction entered into by the assessee, which in turn, was declared by the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act, is the income detected during the course of search and seizure operation. The case of the assessee is squarely covered by the provisions of Explanation 5A to section 271(1)(c) of the Act and the assessee is exigible to levy of penalty on such income which was detected during the course of search and seizure operation, which in turn has been offered by the assessee in return of income filed
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pursuant to notice issued under section 153A of the Act. The learned Authorized Representative for the assessee on the other hand has placed reliance on the ratio laid down in DCIT Vs. Purti Sakhar Karkhana (supra), which is a decision of Nagpur Bench of Tribunal and Hyderabad Bench of Tribunal in Shri PV Ramana Reddy Vs. ITO (supra). In view of binding precedent of Pune Bench on the said issue, we find no merit in the reliances placed upon by the learned Authorized Representative for the assessee on DCIT Vs. Purti Sakhar Karkhana (supra) and Shri PV Ramana Reddy Vs. ITO (supra). The other reliance placed upon by the learned Authorized Representative for the assessee on the decision of Pune Bench of Tribunal in Smt. Pramila D. Ashtekar Vs. ITO (2013) 39 taxmann.com 103 (Pune – Trib.), it may be pointed out that the said order of Pune Bench of Tribunal has been recalled in MA No.112/PN/2013, order dated 21.06.2013 and has no binding effect for deciding the present issue. Further reference was made to the decision of CIT Vs. Continental Warehousing Corporation (NHAVA Sheva) Ltd. & Anr. (supra), where the Hon‘ble Bombay High Court has deliberated upon the scope of 153A provisions and has no relevance to the issue before us. 20. Another aspect of the issue of levy of penalty us 271(1)(c) of the Act is the wrong claim of deduction made by the assessee under section 54 and 54F of the Act. The CIT(A) vide para 3.10 to 3.11 has deliberated upon the factual aspects of the issue, which are being referred, but not being reproduced for the sake of brevity. 21. The assessee having made a wrong claim in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. The learned Authorized Representative for the assessee in a written Note had furnished the break-up of income on which penalty was levied, which is as under:- Particulars Amount (Rs.) Unaccounted sale proceeds on sale of property 1,70,00,000 Withdrawal of exemption claimed u/s.54 of the Act 32,77,070 22. We uphold the order of CIT(A) in confirming the levy of penalty on the above said two accounts. Dismissing the grounds of appeal raised by the assessee, we uphold the order of CIT(A).‖
The issue raised in the present appeals i.e. ITA Nos.95 & 96/PUN/2016 is identical to the issue raised in Mrs.Sarita Kaur Manjeet Singh Chopra Vs. ITO (supra) and following the same parity of reasoning, we uphold the levy of penalty under section 271(1)(c) of the Act. Thus, the grounds of appeal in ITA Nos.95 & 96/PUN/2016 are dismissed.
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Now, coming to the appeals of assessee in the case of partnership firms. The individual assessee have raised additional grounds of appeal in each of the appeals which read as under:- ―1] The assessee submits that the learned A.O. had no jurisdiction to issue notice u/s. 148 to the assessee and accordingly, the assessment order passed u/s. 147 was invalid in law and therefore, the penalty levied u/s. 271(1)(c) on the basis of an invalid assessment order was null and void. 2] The assessee submits that in the course of search on Shri Shailesh Joshi and Smt. Vasundhara Joshi, incriminating documents belonging to the assessee firm were found and therefore, the learned A.O. ought to have issued notice u/s. 153C for assessing the undisclosed income in the hands of the assessee firm as against notice u/s. 148 issued by him and therefore, the assessment order passed u/s. 147 is bad in law and accordingly, the penalty levied u/s. 271(1)(c) on the basis of an invalid assessment order was null and void.‖
In order to adjudicate the issues, we are referring to the facts and issues in ITA No.105/PUN/2016. The facts of present appeal are slightly at variance i.e. simultaneously to the search and seizure action under section 132 of the Act initiated against partners of assessee on 20.01.2011, Survey action under section 133 of the Act was carried out at the business outlet of assessee firm. The partners of assessee firm during the course of search and Survey proceedings had declared undisclosed income in various assessment years. The assessee had originally filed return of income before the date of search in both the years. For the years under consideration, notice under section 148 of the Act was issued to the assessee. In response thereto, the assessee filed revised return of income declaring total income at ₹ 10,52,620/- for assessment year 2009-10. The assessee was running snacks outlet at Hadapsar, Pune- Solapur Highway. The assessee declared ₹ 10 lakhs as its income from undisclosed sources out of total declaration of additional income of ₹ 1 crore for assessment year 2009-10. The assessee also explained that the amount has been withdrawn by partners for purchase of jewellery and construction of farm house. The Assessing Officer initiated penalty proceedings under section
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271(1)(c) of the Act for concealing the particulars of income and notice under section 274 of the Act was issued. During the course of penalty proceedings, the main contention of assessee was that the disclosure was made voluntarily and no incriminating papers / documents were found. However, this plea of assessee was rejected by Assessing Officer as number of papers were found which were seized / impounded during both search and Survey operations. The calculation of unaccounted sales was also from the said documents. Further, one of partners Shailesh Joshi had accepted in his statement recorded under section 132(4) of the Act on 20.01.2011 that the said papers have been found and seized / impounded from his place. Further, in reply to question No.4 of statement recorded under section 132(4) of the Act on 11.03.2011, he admitted that on the basis of copies of seized / impounded papers, he had worked out year-wise details of additional income to be disclosed in the respective hands. As pointed out that the said details are also available at page 26 of Paper Book filed in ITA No.95/PUN/2016. The Assessing Officer in such circumstances, where as against search on 20.01.2011, declaration was made on 11.03.2011 held that such statement had great evidentiary value especially where the assessee had ample time and expert advice of his consultant in the intervening period. In such circumstances, the Assessing Officer held that revised return of income filed by the assessee declaring additional income was neither voluntary nor bonafide and had been filed after detection of concealment on search / Survey. The Assessing Officer thus, held the assessee to have concealed particulars of income within meaning of section 271(1)(c) of the Act and held the assessee liable for levy of penalty at ₹ 3,09,000/-. The CIT(A) upheld the penalty levied under section 271(1)(c) of the Act.
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In the original grounds of appeal filed, the assessee has challenged the levy of penalty of ₹ 3,09,000/- under section 271(1)(c) of the Act. Various grounds of appeal have been raised in this regard. Further, during the course of hearing, the assessee has filed additional grounds of appeal challenging jurisdiction of Assessing Officer in issuing notice under section 148 of the Act and consequent assessment order passed under section 147 of the Act being invalid in law and therefore, penalty levied under section 271(1)(c) of the Act on the basis of assessment order, to be null and void. The assessee by way of additional ground of appeal No.2 has further challenged the aforesaid proceedings initiated under section 148 of the Act and has alleged that the Assessing Officer ought to have issued notice under section 153C of the Act for assessing undisclosed income in the case of assessee firm.
The first issue which arises is the legal issue raised by assessee by way of additional grounds of appeal. Since the issue is purely legal and does not involve investigation of facts, the same is admitted for adjudication and we first decide the same. The assessee filed copy of statement recorded under section 132(4) of the Act of Mr. Shailesh Joshi, which is placed at pages 9 to 18 of the Paper Book. The assessee in reply to question No.3 admitted to the carrying on of business Fast Food manufacturing and sales and had eleven different outlets in and around Pune. The assessee enlisted the names of said concerns in answer to question No.3, which are incorporated at pages 9 to 11 of Paper Book. The assessee also admitted that return of income for all the cases had been filed till assessment year 2010-11. The question No.5 dealt with search and Survey operations carried out at the residential and business premises, wherein evidences establishing suppression of total group turnover substantially, were found. In the statements deposed under oath by various
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entities such as Managers at outlets, supplier of Bread (Pav), etc. have provided actual figures of sale / consumption of Wada Pav and other allied products. It was thus, alleged that Joshi Wadewale group as a whole was indulging in suppression of actual turnover in order to show reduced profits. In reply, parner Shri Shailesh Joshi pointed out that Though I have not gone through all the loose papers and documents seized and impounded from various premises and have also not gone through the statements deposed by the related entities, I hereby confirm that there is suppression of actual turnover to certain extent as far as different concerns of the group are concerned. Question No.8 talked about loose paper bundle No.1 seized from the residence. Question No9 talked about loose paper bundle No.3 seized from the residence and question No.10 talked about loose paper bundle Nos.6, 7, 8 and 9 seized from another residence.
Question No.10 was as under:- Q10. I am showing you loose paper bundles numbers 6, 7, 8 & 9 seized from the residence at 64 & 65, Durga Apartments, Mahalaxmi Nagar, Bibwewadi, Pune during the course of search operation. Please explain the contents of the same. A 10 I confirm that these are seized from my residence at 64 & 65, Durga Apartments, Mahalaxmi Nagar, Bibwewadi, Pune. These pages are the daily receipt and expenses account from different outlets. The total made on these pages represent the gross sales on that day of that outlet. ‗Ghari‘, ‗Cash‘ represent the net amount of cash handed over to me by the relevant person from the outlet. I admit that the sales as appearing on these pages are substantially more than the sales as per the sales recorded for filing the returns of income. I admit that all the sales have not been reflected in the regular books of account.
Question No.11 was as under:- ―Q11 During the course of search and survey operations carried out at the residential and business premises the parties have come across the evidences which establish that the total group turnover has been suppressed substantially when compared to the turnover disclosed in the return of income. In the statements deposed under oath by various entities such as the managers at the outlets, the supplier of Bread (Pav), etc. have provided the actual figures of
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sale (consumption) of Wada Pav and other allied products. All this goes to establish that Joshi Wadewale group as a whole is indulging in suppression of actual turnover in order to show reduced profits thereby minimizing the tax burden. Please offer your comments in view of the different papers shown to you.‖ A11 I have gone through various loose papers and documents seized and impounded from various premises and have also gone through some of the statements deposed by the related persons. I hereby confirm that there is suppression of actual turnover to certain extent as far as different concerns of the group are concerned. As explained earlier, in the earlier years the quantum of turnover was lower. In the FY 2002-03 to FY 2007-08 there was no suppression of turnover since most of the outlets were new and limited sale used to take place. However, from FY 2008-09 to FY 2010-11, the turnover had increased. The same has not been fully reflected in the returns of income of the different entities of Joshi Wadewale Group. I accept that some papers related to these FYs show that there is suppression of turnover. I have not gone through all the papers, documents, statements of different persons etc. However, as per the best of my knowledge, I accept that there has been suppression of turnover for FY 2008-09 to FY 2010-11. At this stage I am not able to work out the exact suppressed turnover (unaccounted sales) since there are various factors and various documents to be seen to arrive at the exact figure. However, since I am actually looking after the business and the net receipts, I am able to arrive at the total unaccounted income for the above financial years. The same are as below AY 2009-10 Rs.1 Crore AY 2010-11 Rs.1.5 Crores AY 2011-12 Rs.2.5 Crores The above unaccounted income is over and above the regular income shown by the different entities of the group in the IT returns for AY 2009-10 and AY 2010-11. As regards AY 2011-12 the above unaccounted income is over and above the net income that will be worked out on the basis of the gross turnover as explained in answer to question number 7. I promise to pay the taxes and interest thereon as per law on the above unaccounted income. I request that no penalty and prosecution may be launched against me or any other group entities for the same.‖
The perusal of above said queries raised by search parties and answers given by the assessee establishes that residence of assessee was at two different places. Certain documents were found from his residence at Ameya Apartments, Shaniwar Peth, Pune. Thereafter, loose paper bundles Nos.6, 7, 8 and 9 were seized from the residence at Durga Apartments, Mahalaxmi Nagar, Bibwewadi, Pune. The explanation of assessee in respect of said bundles was
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that these were daily receipts and expenses account from different outlets. He also explained that total made on the said pages represented the gross sales on that day of that outlet. ‘Ghari’, ‘Cash’ represented the net amount of cash handed over to Shailesh Joshi by the relevant person from the outlet. He also referred to the sales appearing on the said pages and admitted that these were substantially more than sales as per sales recorded for filing return of income. In response to next query raised and in view of loose papers and documents seized and impounded from his different residences and some of the statements of related persons, he confirmed that there was suppression of actual turnover in the financial years 2008-09 to 2010-11 and accordingly, offered unaccounted income for the said years. For assessment year 2009-10, additional income of ₹ 1 crore of the group was offered; for assessment year 2010-11, ₹ 1.50 crores and for assessment year 2011-12, ₹ 2.50 crores was offered. The said additional income was then bifurcated amongst the entities year-wise as per the details placed at page 23 of Paper Book. In other words, the documents were seized during the course of search at the residence of assessee, which depicted sales and expenses outside the books of account from different outlets. The evidence of gross sales and cash received was also found from the residence of persons searched. The disclosure was also made on account of sales not reflected in regular books of account and as such, related to the evidence found from the residence of Shailesh Joshi at Durga Apartments, Bibwewadi. In this regard, the plea which has been raised by the learned Authorized Representative for the assessee is that where evidence of unaccounted income had been found from the premises of searched person and the same relates to an entity other than the searched person, then proceedings if any, had to be started against the person, other than the searched person, then provisions to be applied is section 153C of the Act.
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Before proceedings further, it may be pointed out that additional income assessed in the hands of partnership firms was based on additional income surrendered by the partner of different partnership firms before us, while his statement was being recorded under section 132(4) of the Act on 20.01.2011 i.e. on the date of search. Shri Shailesh Joshi, the person searched and the partner of various concerns before us had offered additional income and had also given bifurcation of the additional income in the hands of various persons on year-wise basis. The said offer of income has been assessed in the respective hands as such and no variation has been made by the Assessing Officer. The persons searched i.e. Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi had furnished return of income in response to notice issued under section 153A of the Act and assessment was made under section 153A r.w.s. 143(3) of the Act. However, in the case of partnership firms, notices were issued under section 148 of the Act and assessments were completed vide order passed under section 143(3) r.w.s. 148 of the Act and the additional income was included in the respective hands in the respective years. The said assessment order has been accepted as such by the assessee. However, in the present appeal filed against levy of penalty under section 271(1)(c) of the Act, the assessee has raised jurisdictional issue against the assessment completed in the case of assessee. The case of assessee is that assessment in the respective years should have been completed by invoking provisions of section 153C of the Act and not under section 148 of the Act.
The first issue which arises is whether the assessment in such circumstances was to be made under section 153C or 148 of the Act and connected issue is whether such an issue of assessment being completed under a particular section was valid or not, can be raised while deciding the
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issue of levy of penalty under section 271(1)(c) of the Act against the income assessed in the hands of assessee. In this regard, the learned Authorized Representative for the assessee has pointed out that the issue stands covered by the ratio laid down in ITO Vs. Shri Shailendra B. Agrawal (supra) and in bunch of appeals with lead order in ACIT Vs. Shamsundar Laxman Jagtap (supra). The relevant provisions of the Act to which reference is being made is section 153C of the Act which provides as under:- ―153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. ….. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.‖
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Section 153C of the Act very clearly lays down that notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153 of the Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing seized or requisitioned, belongs to; or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, such books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other person in accordance with provisions of section 153A of the Act. Section thus, very clearly lays down the procedure to be followed when during the course of search on a person any money, bullion, jewellery or valuable article or thing, or any books of account or documents or any information contained therein pertains to or relate / relates to other than the person searched; then first, all the said assets or information is to be handed over to the Assessing Officer, who is incharge of the person other than the person searched and then the Assessing Officer has to proceed and determine the income of the other person in accordance with provisions of section 153C of the Act. The said section very clearly also lays down that the provisions of section 153C of the Act are to be applied notwithstanding anything contained in sections 139, 147, 148, 151 and 153 of the Act. Applying the said provisions to the facts of the present case, wherein certain documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm i.e. one of the assessees before us, then for making aforesaid addition, recourse which was open to the Assessing Officer was to initiate proceedings
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under section 153C of the Act. Where the provisions of said section are to be applied, then no proceedings can be initiated under section 147, 148, 151 and 153 of the Act. Accordingly, we hold that when during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms, in which he was partner, on the basis of such documents found during the course of search, then for making addition in the hands of partners, provisions of section 153C of the Act are attracted. Once the said provisions are so attracted, then there is no question of initiating any proceedings under section 147 / 148 of the Act. Accordingly, we hold that proceedings initiated under section 147 / 148 of the Act are thus, not correctly initiated.
The next aspect of the issue is that where the assessee has also accepted additional income offered in the return of income filed under section 148 of the Act, then while arguing levy of penalty under section 271(1)(c) of the Act, can the assessee raise such jurisdictional issue and plead that since the assessment completed in the hands of assessee is invalid, hence no penalty for concealment is to be levied against the assessee.
The Hon’ble Bombay High Court in B.R. Bamasi Vs. CIT (1972) 83 ITR 223 (Bom) had laid down the proposition that the Tribunal can permit the assessee to take new ground before the Tribunal during arguments in answer to an appeal filed by the Revenue. The factual aspect before the Hon’ble High Court was as under:-
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―In the reference for the assessment year 1947-48, he assessee filed a voluntary return on March 28, 1952. Nonetheless, the Income-tax Officer issued a notice to the assessee under section 34(1)(a) on July 9, 1952, and then proceeded to assess the assessee under that section. The assessee raised before the Tribunal a contention that the notice under section 34(1)(a) having been issued in spite of the assessee having file a return in proper time it was invalid and that the appeal filed by the department before the Tribunal should be dismissed. The Tribunal did not allow the assessee to raise the contention on the ground that it had been only raised at the time of the arguments in the appeal before the Tribunal as a fresh ground and that if the ground was allowed to be urged and it succeeded, the result would be that the entire assessment proceedings would have to be held invalid and even the assessment on the undisputed amount of the income against which the assessee had not appealed would thereupon go y the board.‖
The Hon’ble High Court held as under:- ―Held, (i) that when the assessee had filed a voluntary return for the year 1947- 48, the notice under section 34(1)(a) was wrongly issued and the proceedings in pursuance thereof were invalid; and (ii) that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded, the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings. If the ground succeeds, the only result would be that the appeal would fail. The acceptance of the ground would show that the entire assessment proceedings were invalid, but yet the Tribunal which hears the appeal would have no power to disturb or to set aside the order in favour of the appellant. That order would stand and would have full effect in so far as it is against the respondent. The ground would serve only as a weapon of defence against the appeal. Hence, the refusal of the Tribunal to allow the assessee to challenge for the first time before it the validity of the notice and assessment under section 34 while considering the appeal filed by the department against the order of the Appellate Assistant Commissioner was not in accordance with law.‖
The Hon’ble Bombay High Court in CIT Vs. M/s. Pruthvi Brokers & Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bom) on the issue of admissibility of new issue before the Tribunal had observed as under:- ―18. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part, viz., "if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made . . ." clearly relate to cases where the ground was available when the return was filed and the assessment order was made but "could not have been raised" at that stage. The words are "could not have been raised" and not "were not in existence". Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category, viz., where "the ground became available on account of change of circumstances or law". 19.…...
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20…… 21…… 22…… 23…… 24. In the case before us, the CIT(A) and the Tribunal have held the omission to claim the deduction of Rs.40,00,000/- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,000/- paid after the end of the year in question. We see no reason to interfere with this finding. We see less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the respondent ought not be prejudiced. 25. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corporation Limited. This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal. 26. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs.40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs.40,00,000/- under section 43B of the Act.‖
Further, the Pune Bench of Tribunal had already decided similar issue in ITO Vs. Shri Shailendra B. Agrawal (supra) and ACIT Vs. Shamsundar Laxman Jagtap (supra).
We may also consider the said plea of assessee from another angle that the Hon'ble Supreme Court in CIT Vs. Khoday Eswarsa and Others (1972) 83 ITR 369 (SC) has laid down that findings given in assessment proceedings could not be considered as conclusive for the purpose of levy of penalty under section 271(1)(c) of the Act. The Hon’ble Apex Court held that no doubt the findings in assessment proceedings may have some significance in the penalty proceedings but the same were not decisive or determinative. Applying the said principle to the issue before us, we hold that where assessment
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proceedings and penalty proceedings under section 271(1)(c) of the Act were independent and distinct, then while arguing appeal against levy of penalty under section 271(1)(c) of the Act, the assessee is not precluded from raising jurisdictional issue of framing of assessment in the hands of case i.e. whether the same is to be framed under section 153C of the Act or section 143(3) of the Act. However, it may be clarified herein itself that the income offered in returns of income filed under section 148 of the Act and assessed under section 143(3) r.w.s. 147 of the Act are not to be disturbed.
The learned Departmental Representative for the Revenue placed strong reliance on the decision of the Hon’ble High Court of Karnataka in Gudwill Housing Ltd. Vs. ITO (supra), wherein it was held that provisions of Chapter XIV-B of the Act do not preclude the Assessing Officer to proceed against the assessee by issuing notice under section 148 of the Act. In this regard, the learned Departmental Representative for the Revenue further stressed that once search proceedings had been carried out in the case of another person, then it was open to Assessing Officer either to proceed under Chapter XIV-B or under section 148 of the Act. It may be pointed out herein itself that Chapter XIV-B of the Act consisting of sections 158B to 158BH of the Act provided special procedure for assessment of search cases i.e. search initiated under section 132 of the Act on or after 30.06.1995 upto 31.05.2003. Thereafter, in cases of searches conducted after 31.05.2003, the assessment in the case of search or requisition case is to be carried out under section 153A to 153C of the Act. The said provisions fall within Chapter XIV of the Act i.e. by insertion of sections 153A to 153D of the Act by the Finance Act, 2003 w.e.f. 01.06.2003, procedure of assessment has undergone change. The provisions of section 153C of the Act are at variance to the provisions of section 158BD of
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the Act, which was the issue before the Hon’ble High Court of Karnataka (supra). The ratio which has been laid down in relation to section 158BD of the Act by the Hon’ble High Court of Karnataka cannot be relied upon for deciding the issue in the context of applicability of section 153C of the Act vis-à-vis 147 / 148 of the Act. Accordingly, we find no merit in the reliance placed upon by the learned Departmental Representative for the Revenue. We hold that in view of non obstante clause in section 153C of the Act, in case where the conditions laid down in section 153C of the Act are clearly attracted i.e. in case of search and consequent documents found during the course of search, relating to other person, then assessment, if any, has to be completed under section 153C r.w.s. 143(3) of the Act and no assessment in such case could be completed under section 148 of the Act. We hold so. The assessee before us has challenged the said proceedings during levy of penalty for concealment. The assessment made in the hands of assessee under section 143(3) r.w.s. 147 of the Act has not been challenged by the assessee and hence, stands completed. The income so assessed in the hands of assessee stands assessed. However, in view of our decision in the paras hereinabove that in the given circumstances, proceedings under section 153C of the Act were required to be initiated and not proceedings under section 148 of the Act, though the assessee had participated in assessment proceedings but the same does not preclude the assessee from raising this jurisdictional issue while arguing the appeal relating to levy of penalty for concealment under section 271(1)(c) of the Act. We hold that in such circumstances, the initiation of penalty proceedings under section 271(1)(c) of the Act is invalid and bad in law. Consequently, penalty order passed under section 271(1)(c) of the Act does not survive. Accordingly, we direct the Assessing Officer to delete penalty levied
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under section 271(1)(c) of the Act. The additional grounds of appeal raised by the assessee are thus, allowed.
The issue in ITA Nos.99 & 100/PUN/2016, 102/PUN/2016 and 106/PUN/2016 are identical to the issue in ITA No.105/PUN/2016 and our decision in 105/PUN/2016 shall apply mutatis mutandis to ITA Nos.99 & 100/PUN/2016, 102/PUN/2016 and 106/PUN/2016.
In the result, appeals in the case of Mrs. Vasundhara Shailesh Joshi are dismissed and appeals in the case of different assessee being partnership firms are allowed.
Order pronounced on this 27th day of March, 2018.
Sd/- Sd/- (D.KARUNAKARA RAO) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 27th March, 2018. GCVSR आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to : अऩीऱाथी / The Appellant; 1. प्रत्यथी / The Respondent; 2. आयकर आयुक्त(अऩीऱ) / The CIT(A)-13, Pune; 3. The Pr. CIT (Central), Pune; 4. ववबागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “फी” / DR 5. ‘B’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune