SANJAY D. KAKADE,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,, AHMEDNAGAR

PER D. KARUNAKARA RAO, AM :

There are nine appeals under consideration. This includes six appeals filed by Sri Sanjay D. Kakade, individual and three appeals filed by M/s. Kakade Construction company, the firm. All these appeals relate to the levy of penalty u/s.271(1)(c) of the Act. Considering the commonality of

2 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

issues, arguments and the facts, all these appeals are adjudicated by this

composite order for the sake of convenience.

Facts in General:

individual and is a Proprietor or Partner or Director of various Group

concerns. M/s. Kakade Construction Company is one such firm where the

assessee is a partner. It is engaged in the construction business in Pune.

There was a search and seizure action u/s.132 of the Act on the group

concerns and individuals of the group on 11-02-2009. The search resulted

in seizure of incriminating loose papers, defective books of account etc. and

the same resulted in the declaration of additional income of Rs.40 crores.

During the search action, Sri Sanjay D. Kakade gave a statement on

12-02-2009 on behalf of the group concerns and himself offering to pay tax

on such an income within a 12 months (answer to Question No.5 of the

paper book of Page No.237). Subsequently, assessee filed written

submission vide his letter dated 12.06.2009 stating the following :

“We have in the course of search action u/s.132 of the I.T. Act, 1962, made a declaration of Rs.40 Crores of additional income, based on various papers, records, books of accounts etc. seized/found at the residence and business premises in the hands of the various members of our group. We once again confirm the said declaration and declare our sincere intention to adhere to the said declaration made in the course of search action vide the statement u/s.132(4) recorded on 12-02-2009. Out of the said total declaration, a sum of Rs.10,57,69,958/- (Rupees Ten Crores fifty Seven lacs, sixty nine thousand nine hundred fifty eight only) pertains to companies/firms etc. as per details in the statement enclosed herewith. In respect of the balance amount of declaration, the exact details are being worked out on the basis of seized records/papers/books etc. found and the concerned income will be offered to tax in the hands of respective entities of our group vide returns to be filed in response to notices u/s.153A/139 of I.T. Act, 1961.”

filed the returns in response to notices u/s.153A of the Act. Assessee

offered the said additional income in the returns and paid the taxes. The

3 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

search assessments in cases of both Sri Sanjay D. Kakade and M/s.

Kakade Construction Company reached finality with or without further

additions. The details relating to the issuance of statutory notices

u/s.153A of the Act, filing of the return of income etc. are discussed in the

respective assessment orders of the assessees. In the returns filed by the

assessee declared the additional income while filing the return of income

u/s.153A of the Act. Assessee claims that the additional income was suo

moto in the returns under various heads in order to make it up the said

additional income of Rs.40 crores involving various assessees and the

assessments of the group. Thus, all the assessments with the additional

income in cases of both the assessees for the AYs under consideration

became final without any litigation on quantum/assessed income. Further,

the penalty proceedings u/s.271(1)(c) of the Act for concealing the

particulars of income in the original returns was initiated.

Eventually, AO levied penalty u/s 271(1)(c) of the Act and the same is

confirmed by the CIT(A). Hence, in the present set of appeals in both of the

said assessees, the correctness of levy of penalty both legally and on merits

is the issue under litigation. Relevant facts are narrated in the succeeding

paragraphs.

proceedings u/s 153A rws 143(3) of the Act, AO initiated penalty

proceedings u/s.271(1)(c) of the Act and the details of the satisfaction of the

AO for such invitation and details of levy of penalty are appropriately

discussed in the subsequent paragraphs of this order. Eventually, AO

levied the penalty for all the years under consideration in the case of both

the assessees i.e. Sri Sanjay D. Kakade and M/s.Kakade Construction

Company. The CIT(A) confirmed the said penalty. Therefore, the assessees

4 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

filed the appeals before the Tribunal for all the six years involving A.Yrs.

2003-04 to 2008-09 in the case of Sri Sanjay D. Kakade and for the A.Yrs.

2006-07 to 2008-09 in the case of M/s.Kakade Construction Company.

Kakade, the individual for all the Six A.Yrs. from A.Y.2003-04 to 2008-09.

To start with, we shall take up the adjudication of penalty matters of the

appeal for AY 2003 - 04. Most of the issues, facts, the arguments and the

counter arguments are common for all the appeals under consideration. .

ITA No.12/PUN/2013 A.Y.2003-04 Sri Sanjay D. Kakade

The same reads as under :

“In the facts and circumstances of the case and in law, the Ld.CIT(A) has failed to appreciate that since there is no difference in the assessed income and income declared by the appellant in the return of income filed in response to notice issued by the Ld. AO u/s.153A of the I.T. Act, 1961, the penalty levied by the Ld. AO u/s.271(1)(c) of the I.T. Act, 1961 was bad in law, patently illegal, without jurisdiction and void ab-initio. The impugned penalty levied u/s.271(1)(c) of the I.T. Act, 1961 by the Ld. AO and as confirmed by the Ld.CIT(A) being bad in law the same may please be deleted.”

dates before us and the same are extracted as under:

A. Ist Set of Additional Grounds :

“1. The learned CIT(Appeals) has erred in confirming the penalty of Rs.3,60,000/-levied by the Assessing Officer u/s.271(c) of the Act.

2(a). Assessment Year 2003-04 under consideration is a closed Assessment Year and the assessment was not pending on the date of the search. As such the assessment for this year has not abated. Therefore the Assessing Officer could not have disturbed the closed assessment without there being any incriminating material found during the search.

(b) Since the taxation of the amount of Rs.8,10,000/- u/s. 153A of the Act itself does not have legal basis, the penalty u/s. 271(c) of the Act levied in respect of the said amount is bad in law.

5 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

(C). Penalty was not attracted in respect of income of Rs.8,10,000/- voluntarily included by the assessee in the return of income filed u/s. 153A of the Act, because the said income was declared before its detection by the department.

B. 2nd Set of Additional Grounds :

“1. The Ld. CIT(A) has failed to appreciate that the Assessing Officer has wrongly applied the provision of explanation 5A to Section 271(1) (c) of the Act whereas the said Explanation 5A cannot be applied to the assessee’s case.

C. 3rd Set of Additional Grounds :

“1. On the facts and in the circumstances of the case and in law, the order passed by the Assessing Officer levying the penalty u/s.271(1)(c) of the IT Act is without jurisdiction, ab-initio void, bad in law and unsustainable, since notice issued u/s. 274 r.w.s 271(1) (c) of the IT Act is not as per law.

Therefore, the penalty order passed by the Assessing Officer u/s. 271(1) (c) of the IT Act is ab-initio void, bad in law and is unsustainable.”

The above Additional grounds are found overlapping on certain

issues. However, they revolve around the legal issues; (1) the issues

relating to applicability of the pre-amended Explanation 5A to section

271(1)(c) of the Act. (2) unsustainability of the penalty proceedings when

the ambiguity in the mind of AO is obvious from the satisfaction recorded

in the search assessment orders; (3) taxation of certain income, as the

same is taxed having no legal basis and finally (4) the issues of the merits

6 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

of levy of penalty on the addition of Rs.8,10,000/- is sustainable in the

present case of a non-abated assessment; (5) if the items of income offered

by the assessees in the search proceedings constitutes a voluntary act and

in that case, the levy of penalty on such income is justified or not.

Sanjay D. Kakade includes that this is the case where the search u/s.132

of the Act conducted on 11-02-2009 and the notice u/s.153A of the Income

Tax Act was issued on 27-07-2009. Responding to the said notice,

assessee filed the return of income on 30-09-2010 (i.e. after 14 months)

declaring the income of Rs.12,25,900/-. Otherwise, assessee filed the

return of income for the A.Y. on 03-02-2004 originally u/s.139 of the Act

declaring total income of Rs.4,15,800/-. The difference in the return of

income of both the returns includes an additional income of Rs.8,10,000/-

suo moto disclosed by the assessee in the return u/s.153A of the Act as

‘income from other sources’. Further the Explanation 5A is brought into

the statute originally w.e.f. 01-06-2007. As per the same, the non-filing of

return of income before the date of search, attracts the penalty for

concealment of income. As per the language used therein, the mere filing of

return of income in time (with or without declaring the discovered item of

income during search) provides immunity from the said penalty.

Subsequently, the Explanation 5A was amended w.r.e.f. 01-06-2007 by the

Finance (No.2) Act, 2009 and it became the Act on 13-08-2009.

The present appeal relates to the penalty u/s.271(1)(c) of the Act and

the said penalty is directly relatable to the said additional income of

Rs.8,10,000/-.

7 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

Background facts of this income includes that the assessee earned

interest income from the deposits kept with the banks vide the bank

accounts opened with ‘M/s. The Shree Suvarna Sahakari Bank Ltd.’ (A/c.

Nos. 88 & 275). As per the assessee, the bank accounts were disclosed in

the books of accounts and however, the deposits and interest income

accrued on the deposits was not offered to tax in the original return of

income filed by the assessee on 03-02-2004 (supra). The search did not

yield any direct incriminating evidence. Assessee filed the return of income

u/s.153A and disclosed the same in the return of income. According to the

assessee, for penalty purpose, this interest income constitutes voluntary

disclosed income of the assessee as the search action did not result in any

seized papers unearthed by the Department to support the said deposits

and the interest income receipts. The assessment was completed u/s.153A

r.w.s. 143(3) of the Act on the returned income accepting the return of

income without making any additions. Thus, the search assessment

became final without any litigation. While making such assessment, the

Assessing Officer gave the satisfaction for initiating the penalty proceedings

by stating that the “the assessee has concealed particulars of his income in

the original return, penalty proceedings u/s.271 of the Act are initiated.”

Further, the AO vide his order dated 30-06-2011 levied the penalty of

Rs.3,60,000/- @ 150% of the tax sought to be evaded on the said additional

income of Rs 8.10 lakhs as per the discussion given in Para Nos. 16, 17 &

18 of the penalty order. While charging high rate of 150%, the AO

mentioned that the “concealment appears deliberate”. The CIT(A) confirmed

the said penalty rejecting the various legal precedents relied upon by the

assessee. However, the CIT(A) distinguished with the said judgments and

justified the levy of penalty @ 150%. Aggrieved with the same, assessee is

in appeal before us for the A.Y.2003-04.

8 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

BEFORE THE TRIBUNAL

Ld. Counsel for the Assessee and Ld. DR for the Revenue made various

arguments and counter arguments on various legal and other issues and

the same are detailed as follows.

Arguments by Ld. Counsel for the Assessee

against levy of the penalty and they include both legal and other than legal

arguments. Ld. Counsel for the assessee also filed written submissions

stating that the penalty is unsustainable both on law and as well as on

facts. The argument based submissions are elaborated in the subsequent

paragraphs of this order.

A. Non-abated /completes assessment – Sustainability of penalty linked to Additions of Rs 8.10 lakhs - Not based on any Incriminating material :

Elaborating the legal submissions, Ld Counsel for the assessee

submitted that it is a case of closed assessment and therefore a ‘non abated

assessment’ within the meaning of the 2nd proviso to section 153A of the

Act. Explaining the relevant facts, Ld. Counsel mentioned that the

assessee filed return of income for the A.Y. 2003-04 u/s.139 of the Act on

03-02-2004 declaring the total income of Rs.4,15,800/- and the

assessment became final. As evident from the fact, no notice was issued by

the Assessing Officer u/s.143(2) of the Act and the time for the issuance of

the same expired long back. Relying on various decisions, the Ld. Counsel

submitted that when the assessment became final and when there is no

time left for issue of notice u/s.143(2) of the Act, such assessment, being

abated, can only be reopened only when AO has any incriminating material

seized during the search action on the assessee. On these facts, there is no

9 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

need for the assessee to disclose the additional income, if any, in the return

of income filed by the assessee in response to notice u/s.153A of the Act.

Nevertheless, assessee disclosed the same to clean his accounts voluntarily.

According to Ld. Counsel for the assessee, such income does not attract

penalty u/s.271(1)(c) of the Act.

Taking us through the various documents and the paper books filed

before us, as well as assessment order, Ld Counsel submitted that the

addition of Rs 8.10 lakhs was not supported by any incriminating material

and stated that the said amount constitutes interest earned by the assessee

from the banks on the deposits. Further, Ld. Counsel submitted that the

Bank Accounts in question were already disclosed in the books of accounts

of the assessee and they are not concealed Bank Accounts. In that case,

there is no question of concealed income and it constitutes a case of

omission, which should not attract the provisions of 271(1)(c) of the Act.

Assessee, further, filed written submissions, putting forward various legal

submissions in this regard. For the sake of completeness, we proceed to

extract Para 3 to 3.3.

Assessee’s submissions -making addition in Non-abated assessment :

“3. It was a closed assessment year.

3.1 The regular return of income was filed on 03-02-2004 (2nd page of para 4 of the Assessment order) declaring income of Rs.4,15,800/-. As per section 153(1) of the I.T Act, the time for completing the regular assessment has expired on 31st December 2005. Assessment was not pending on the date of the search. The assessment has not abated. Thus it was a closed Assessment year.

3.2.1 When the time limit to complete the assessment has lapsed and no incriminating material was found during the search operation, the search assessment u/s. 153A is to made only as per the original assessment u/s.143(1) or u/s. 143(3) of the Act. Om shakti Agencies Pvt. Ltd. 66 taxmann.com 287 (Chennai) Yamini Agarwal 83 tammann.com 209 ( Kolkata)

3.2.2 Completed assessment can be disturbed u/s. 153A of the Act only on the basis of incriminating material found during the course of the search.

10 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

Murli Agro Products 49 taxmann.com 172 (Bombay) Continental Warehousing Corporation 374 ITR 645 (Bombay) Al Cargo Global Logistics Ltd. 137 ITD 287 (Mumbai)

In the case of Budhiya Marketing Pvt. Ltd 154 ITD 650 (Kolkata) it has been held that in search assessments u/s.153A of the Act total income shall be determined; in respect of Assessment Years for which original assessments have already been completed on the date of search, by restricting additions only to those items which flow from incriminating material found during the course of the search.

In the case of Mridul Commodities Pvt. Ltd. 78 taxmann.com 337 (Kolkata) it has been held that where pursuant to notice issued under section 153A, assessee company filed its returns for relevant years, since assessment for said years had already completed and no incriminating material had been found in course of search proceedings, impugned addition made by Assessing Officer under section 68 in respect of share application money received from non-existent subscribers, was to be set aside.

3.2.3 Since the taxation of the amount of Rs.8,10,000/- u/s.153A of the Act itself does not have legal basis, the penalty u/s.271(1)(c) of the Act levied in respect of this amount is bad in law.

3.3 While dealing with this question the Hon'ble Pune Bench of the Tribunal in the case of a group concern Kakade Construction Company, ITA No.99/PN/2013 (PB,99) from para 5 to para 7 of the Order, while deciding the issue of penalty in respect of disallowance of deduction u/s.80IB (10) of the I.T Act for A.Y.2005-06 in assessment u/s.153A of the Act, has held that since the deduction was not disallowed on account of any material found during the course of the search, in view of the judgment of the Nagpur Bench of the Hon'ble Bombay High Court in the case of M/s. Murli Agro Products Ltd. 49 taxmann.com 172 (Bombay) the initiation of proceedings u/s. 153A of the Act would not affect the assessment finalized prior to the date of the search. The Hon'ble Pune Bench of the Tribunal further held that the assessee can always argue his case afresh in the penalty proceedings on various issues which he had not argued during the quantum proceedings and that since the Assessing Officer could not have disturbed the assessment which was finalized before the date of the search the question of penalty does not arise.”

B. Voluntary Disclosure of Rs.8,10,000/- :

Further, Ld. Counsel for the assessee submitted the income of

Rs.8,10,000/- is voluntarily declared by the assessee before any detection

is done by the Department despite the action u/s.132 of the Act. Further,

it is the case where there is no incriminating material found during search

connecting to this item of income and the same is undisputed. Ld. Counsel

for the assessee submitted that the assessee on his own, disclosed to come

clean with reference to the cash deposits in the accounted bank accounts of

the assessee with The Shree Suvarna Sahakari Bank Ltd. As such, no

11 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

discussion of any kind or no enquiry of any kind or no recording of any

statement on oath of any kind by the Revenue on this income. Considering

these facts, the offer of income becomes a voluntary act and the penalty is

not leviable on such income.

C. Ambiguity in the mind of the AO with reference to the satisfaction at the time of initiating penalty proceedings – Limbs etc.

Ld. Counsel for the Assessee mentioned that the AO’s failure to

specify the satisfaction in an unambiguous expressions of the Act by

specifying the limb of the clause (c) of section 271(1) of the Act, the penalty

order becomes unsustainable in law. According to Ld. Counsel for the

assessee, the AO’s satisfaction invoking penalty proceedings suffers from

‘ambiguity’ in the mind of the AO. For this, he relied on various decisions

to support his case. Justifying the same, Ld. Counsel find a written

submissions on this issue and the contents of para 6.3.2 to 6.3.8 are

relevant as it contains the facts of the present case and the legal

proposition on the said subject. For the sake of completeness, said paras

are extracted here as under:

“6.3.2 I respectfully submit that, while levying penalty u/s.271(1) (c) of the Income Tax Act the Assessing Officer has demonstrated complete non- application of mind and casualness.

The Assessing Officer has used the words “deliberate”, “concealed the income”, “concealment penalty” etc. The word “deliberate” does not find place in section 271(1) (c) of the Act. Similarly the words “concealed the income” also do not find place in section 271(1) (c) of the Act.

6.3.3 It is trite law that the Assessing Officer while levying penalty u/s. 271(1)(c) of the Act, has to seriously apply his mind on the question whether the particulars offence committed by the assessee falls under the charge “concealed the particulars of income” or under the charge “furnished inaccurate particulars of income”. The Assessing Officer cannot adopt a casual approach in use of the words while levying penalty. The penalty has to be levied for the precise offence committed by the assessee.

6.3.4 In the case of Sh. Kishory Mohan Bera Vs. the State of West Bengal, AIR 1972 SC 1749 the Hon'ble Supreme Court has vacated the detention order passed by the Distt. Magistrate of Hooghly district, because the Distt. Magistrate has not seriously applied his mind in choosing the particular offence for which he has passed the detention order. In para 5 of the

12 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

judgment the Hon'ble Supreme Court has held that, if the power is excised on a ground not enumerated in the section or in respect of the offence which is not germane to any of the charges enumerated in the section, such excise of power would be beyond the jurisdiction of the Distt. Magistrate and therefore invalid.

In para 10 of the judgment the Hon'ble Supreme Court held that before the authority invokes its power, it must be satisfied and must expressly say in his order that alleged offence of the person concerned was such that it precisely fell in one of the charges enumerated in the section under which the order is passed. If it is not done and the language in which the order is passed demonstrates an element of casualness in making the order, the order cannot be upheld.

In para 11 of the judgment the Hon'ble Supreme Court has held that an extraneous ground on which the order is passed vitiates the order.

6.3.5 In para 8 of the judgment in the case of Smt. Kaushallya 75 Taxmann 549 (BOM) the Hon'ble Bombay High Court has held that all depends on; if the lapse on the part of the officer demonstrate non application of mind. The Hon'ble Jurisdictional High Court in para 10 of the judgment further held that use of the word “deliberately” which did not exist in section 271(1) (c) of the Act has invalidated the proceedings because it has demonstrated non- application of mind.

6.3.6 Similarly use of the words “ that assessee is liable for levy of penalty for concealment” does not establish that the penalty has been levied for the charge/limb “ concealed the particulars of income”. A reference in this regards can be made to para 26 of the judgment of Hon'ble ‘A’ Bench of the Pune Tribunal in the case of Kanhaiyalal D. Jain ITA No.1201 to 1205/PN/2014, where in it has been held that the satisfaction recorded by the Assessing Officer against the assessee that “it is liable for levy of penalty for concealment” does not establish the case of the revenue as to for which particular limb the assessee is liable. i.e. whether it is for concealment of the particulars of income or for furnishing the inaccurate particulars of income.

Thus even the Hon'ble Pune Bench of the Tribunal is of the view that use of such words does not meet the requirement of section 271(1) (c) of the Act.

6.3.7 In view of the above discussion it is submitted that use of the loose words like “concealed the income”, “concealment penalty” and “deliberate concealment” does not amount to levying the penalty for the charge/limb of “concealed the particulars of income”. Moreover, use of these words which are extraneous to section 271(1) (c) of the Act shows casualness and non application of mind by the Assessing Officer, which has rendered the penalty order as invalid.

6.3.8. It is further submitted that once the Assessing Officer has displayed non-application of mind while levying the penalty, there is no question of trying to find out what was in the mind of the Assessing Officer while levying the penalty.”

D. Ambiguity with reference to the satisfaction at the time of initiation – Limbs of the Explanation 5A etc.

Regarding the argument on the existence on the ‘ambiguity’, Ld.

Counsel for the assessee submitted that the ‘satisfaction of the AO’ in the

13 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

assessment order does not refer to the Explanation 5A of the Act in general

and the ‘post-amended Explanation 5A’, in particular. AO’s mind is

obviously full of confusion and ambiguity as there is no reference to

limbs/charge whatsoever of the said Explanation 5A of section 271(1)(c) of

the Act. Further, relying on the Coordinate Bench decision of Pune in the

case of Kanhaiyalal D. Jain Vs. ACIT (ITA Nos. 1201 to 1205/PN/2014

dated 30-11-2016) he relied on the contents of Para 23 and 24 of the

Tribunal’s order. Ld. Counsel for the assessee submitted that the

‘ambiguity’ linked to the requirement of specifying the limbs even in cases

of Explanation 5A will make the penalty proceedings illegal and therefore,

the penalty orders become void.

E. Amended Explanation 5A vs Pre-amended Explanation 5A :

inapplicability of amended Explanation-5A of section 271 (1)(c) Act to the

facts of the present case. Explaining the provisions of the said Explanation

to the case of the assessee, Ld. Counsel submitted that this is the case

where assessee filed the return of income u/s.139 of the Act in normal

course and therefore, the pre-amendment of Explanation 5, as it exists as

at the relevant point of time, should apply to the present case. In that case,

as per the pre-amended Explanation 5A, assessee needs to fulfil the

requirement of filing of return of income u/s.139 of the Act in order to

escape the rigours of the penalty. Referring to the amendments made to

the said Explanation 5A with retrospective effect from 01.06.2007 by the

Finance (No. 2) Act 2009, Ld. Counsel submitted that, although it is

unsustainable, the said amended Explanation-5A is now made applicable

retrospectively even to those cases where return of income was already filed

before the search was conducted. The disclosure of the discovered income

14 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

in search action if any is the essential condition for fulfillment if assessee

wants to escape the rigours of section 271(1)(c) of the Act. He brought our

attention to various favourable decisions to support the interpretation in

favour of the Assessee.

Questioning the correctness of such retrospective amendment, Ld

Counsel submitted that applying the said amended Explanation 5A

retrospectively will tantamount to the violation of Article 20 of the

Constitution of India.

According to the said Article 20, “no person shall be affected of any

offence except in the violation of law enforce at the time of the commission of

the Act charge as an offence, nor be subjected to a penalty greater than that

which might have been invoked under the law in force at the time the

commission of the offence.” The fact of upholding the said Article 20 of the

Constitution of India by the Supreme Court in the case of M/s. Star India

(Private) Limited - 280 ITR 321 and jurisdiction High Court judgment in the

case of J.S.W Energy Limited 16 Taxmann.com 303 was brought to our

notice. According to the Ld.AR, the judgment in the case of M/s Star India

Private Limited (supra) was delivered in the context of liability of payment of

service tax by retrospective amendment whereby the broadcasting

companies are required to pay the Service Tax retrospectively. Further, the

judgment of jurisdictional High Court in the case of J. S.W. Energy Limited

(supra) was delivered in the context of applicability of provisions of section

234B of the Act to the MAT companies. These judgments were decided in

favour of the taxpayers. However, no direct judgment from the higher

judiciary was brought to our notice involving the amendment to

15 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

Explanation-5A to section 271(1)(c) of the Act and in favour of the

assessee’s contention.

Retrospectivity not Approved - latest decisions of Tribunal:

the public domain i.e. the case of M/s Chhoriya Land Developers and

Construction Company, in ITA No.1389 & 1390/PUN/2012 and order in

the case of Rajneesh Vohra Vs. DCIT in ITA No.516/Chandigarh/2012,

Ld. Counsel submitted that in the case of Rajneesh Ora (supra), where the

facts includes that the AO applied the unamended Explanation-5A and the

CIT(A) applied the amended Explanation-5A, the Tribunal held that the

amended Explanation 5A apply to that assessee. Therefore, as per Ld AR,

this case is distinguishable on facts and the issue. On these facts, the

Hon'ble Tribunal held that the powers of the CIT(A) are co-terminus with

that of the AO and the CIT(A) is competent to apply the amended

Explanation-5A. Keeping the issue on retrospectively of the amendment

open, the Tribunal further held the retrospectivity of the amended

Explanation-A cannot be adjudicated at the level of the Tribunal as it falls

in the original jurisdiction of the competent Hon'ble High Courts and

Supreme Court. Further referring to the another order of the Tribunal in

the case of Chhoriya Land Developers and Construction Company

(supra), Ld. Counsel for the assessee submitted that the facts of that case

are also distinguishable. Applicability of Apex court’s judgment in the case

of Brij Mohan (supra) is the core is and Tribunal decided against the

Assessee and confirmed Penalty in this case. Ld AR for Assessee is critical

of this decision as it never dealt with the aforementioned Article 20 or the

decisions of the High court.

16 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

Hyderabad & Vishakhapatnam Bench of the Tribunal in cases of Nukala

Ramakrishna (382/Vizag/2014 dt 16/9/2016) and Dhanekula Rama

Rao (supra), Ld. Counsel submitted that these decisions are relevant for

the following conclusions namely,- (1). Amended Explanation 5A does not

apply across all cases where search is initiated after 1/7/2007 and before

13/8/2009 (dt of the assent); (2). Retrospectivity is not approved in view of

Article 20 and other judgmental law; (3). The event of filing the return of

income u/s 139(1) of the Act prior to the initiation of search provides

immunity; (4). The law as exists at the date of search action applies and

therefore, the pre-amended Explanation 5A is applicable to the case on

hand. Further, on the issue of judicial discipline, Ld Counsel relied heavily

on the ratio laid down on the Apex court’s judgment in case of Vegetable

Products 188 ITR 192 . Further, he also brought our attention to the

recent decision of the Mumbai Bench dt 03-01-2018 in the group cases of

Reliance Communication Ltd (4672/M/2017 & others) for the proposition

that failure to follow an existing favourable decision of the Tribunal

amounts to violating the said Apex court’s judgment.

F. To sum up, it is the argument on Ld. Counsel for Assessee that the

amended Explanation-5A to section 271(1)(c) will not apply retrospectively

to all the cases where the events of (a) the initiation of search happened

prior to the amendment to the said Explanation 5A; or (b) the filing of the

return of income originally u/s 139 (1) of the Act happened prior to the

amendment to the said Explanation 5A ; (c) filing of returns u/s 153A of the

Act became due prior to the amendment to the said Explanation 5A; (d) in

principle, the rigour of the amended Explanation 5A is already read down

by the subsequent decisions of the Tribunal by not applying them to all the

17 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

cases of initiation of searches after 1.7.2007 etc. (e) the principles of

natural justice qua adverse effects of retrospective amendments are

considered upheld. (f)Apex court’s judgment in case of Vegetable Products

188 ITR 192 and the recent decision of the Mumbai Bench dt 3/1/2018 in

the group cases of Reliance Communication Ltd (supra) helps the Assessee.

G. Penalty @150% :

Further, referring to the higher rate of 150% as applied by the AO in

levying the penalty, Ld. Counsel submitted that it is not a fit case for levy of

penalty at such a high rate of 150%. Giving the justification, Ld. Counsel

for the assessee submitted that the assessee in effect complied strictly with

the disclosure of Rs.40 crores, made the payment of taxes as per the

provisions of the Act, etc. The fact of personal problems together with

requirement of attending to various procedures with regard to the

maintenance of books of accounts led to the delay in payment of taxes. Ld.

Counsel for the assessee also mentioned that the total demand raised on

the assessee works out to around 18.06 crores and against this, assessee

already paid total amount of Rs.18.30 crores i.e. more than the demand

raised by the AO. Assessee made the entire payment by 25-10-2011.

Therefore, there is no default on part of the assessee in paying taxes.

Referring to the retraction of the disclosure, Ld. Counsel for the assessee

submitted that ultimately, the assessee filed the return of income declaring

the additional income and paid the taxes by 25-10-2011. Relying on the

order of the Tribunal, Chennai Bench in the case of A.N.Annamalai Swamy,

HUF 35 CCH 305, Ld. Counsel submitted that the penalty is not leviable

u/s.271(1)(c) of the Act when the assessee filed revised returns before

completion of assessment in which additional income was disclosed during

the search. Ld. Counsel prayed for deleting the penalty.

18 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

Arguments by Ld. Departmental Representative for the Revenue

10A. Ld. DR for the Revenue narrated the fact of disclosure of Rs. 40

crores, subsequent retractions, assessee’s failure to pay the tax within the

time frame given by the assessee during the search action etc. Referring to

the argument relating to the non-abated assessment (no addition can be

made by the AO in case of a non-abated assessment except with the basis

of incriminating material seized during the search action), Ld.DR for the

Revenue submitted that the notice issued by the AO u/s.153A of the Act

relates to search and seizure provisions. Therefore, the undisclosed income

declared by the assessee in the said returns constitutes unexplained

income of the assessee. For this, there is no requirement of incriminating

material. Thus, since the additional income offered in the return of income

u/s.153A of the Act by the assessee is more than the income disclosed by

the assessee in the original return of income filed u/s.139 of the Act, the

same constitutes a concealed income attracting the provisions u/s.271(1)(c)

of the Act.

B. The returned income u/s.153A of the Act cannot be described as

voluntary act as the return is filed after search action u/s.132 of the Act.

The offer of cash deposits and the interest accruals are not to be construed

as superfluous income without any legal basis.

C. Referring to the argument relating to the ambiguity in the mind of AO

that reference to 1) satisfaction of AO at the time of initiation of time of

penalty and 2) the fact of mentioning the appropriate limb even when

Explanation-5A to section 271(1)(c) is invoked, Ld.DR for the Revenue

submitted that AO has given satisfaction at the time of initiation as a case

of ‘concealment in particulars of income’. Ld. DR for the Revenue admitted

19 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

that the satisfaction is not mentioned in the exact expressions as specified

in the relevant provisions of the 271(1)(c) of Act.

D. Referring to the applicability of the amended Explanation-5A of the

271(1)(c) to the present case where search was initiated on 11-02-2009 and

the return of income was filed u/s.139 of the Act before the said search was

initiated, Ld.DR submitted that mere filing return of income in normal

course does not grant immunity to the assessee from the penalty when the

said additional income was not declared originally in the return of income

filed u/s.139 of the Act. Ld. DR fairly submitted that, though it is in

different context, the amendment to the Explanation 5A are held to be

retrospective and clarificatory in nature. For this proposition, Ld.DR relied

heavily on the decision of CIT(A) in the case Rajneesh Vohra and the Pune

Bench decision in the case of M/s Chhoriya Land Developers and

Construction Company (supra).

Referring to the afore-mentioned latest decisions of Vizag bench in

the cases of Nukala Rama Rao (supra) and Dhanikula Rama rao (supra), Ld

DR submitted that these judgments are distinguishable on facts. In these

cases, the Returns of income u/s 153A of the Act were filed before the

amendments were made to said Explanation 5A. Further, the Assessees

under consideration were not comparable in matters of compliance to the

departmental proceedings, filing of returns of income u/s 153A of the Act

and the payment of relevant taxes on the disclosed sum of additional

concealed income of Rs 40 crores. Ld DR prayed for confirming the penalty

levied by the AO.

20 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

DECISION OF THE TRIBUNAL ON LEGAL ISSUES

as well as the various decisions cited by both the parties on the issue of

levy of penalty for the A.Y. 2003-04 in respect of additional income of

Rs.8,10,000/- suo moto disclosed by the assessee in the return of income

filed in response to section 153A of the Act. There are various aspects

which are required to be attended by us and the list include : (a). Non-

abated (completed) assessment or not; (b). Fate of additions made in the Non-

abated (completed) assessment qua the existence of any incriminating

material; (c) Ambiguity in the mind of the AO - all AYs; (d) Pre-amended

Explanation 5A Vs. Post-amended Explanation 5A to section 271(1)(c) of the

Act – Specifying the limb at the time of initiation of penalty proceedings.

We shall take up each of the issues and the issue-wise elaboration is

discussed in the succeeding paragraphs of this composite order.

A. Non-abated (completed) Assessment or Not : Assessee filed the

return of income u/s.139 of the Act for the A.Y. 2003-04 on 03-02-2003.

There is no information regarding the completion of the assessment

u/s.143(3) of the Act. Ld. DR also could not demonstrate that there was

scrutiny u/s.143(3) of the Act. Considering the fact that return was filed in

the year 2004 it is an obvious inference that time for issue of statutory

notice u/s.143(2) of the Act expired long back. When the time for issue of

notice u/s.143(2) has expired, the same constitutes a ‘non-abated

assessment’ within the meaning of the provisions of the 2nd proviso to

section 153A of the Act. The decisions in the case of Om Shakti Agencies

Pvt. Ltd. 66 taxmann.com 287 (Chennai) and in the case of Yamini Agarwal

83 taxmann.com 209 (Kolkata) are relevant in this regard. Therefore, in

21 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

our view, the assessment constitutes a non-abated assessment and

consequently, the additions, if any, to be made under the assessment

u/s.143 r.w.s. 153A of the Act have to be done only based on the

incriminating documents found during the search and seizure action

u/s.132 of the Act. This is the settled legal position as the judgmental law

stands today.

B. The fate of additions made in the Non-abated (completed)

Assessment qua the existence of any incriminating material linked to

the additional income of Rs.8.10 lakhs declared by the assessee in the

return filed in response to section 153A of the Act.

The relevant facts include that the assessee deposited amounts in

Bank Account Nos. 88 and 275 maintained with ‘The Shree Suvarna

Sahakari Bank Ltd.’. These accounts are declared in the financial

statements originally maintained by the assessee. AO did not dispute the

same. The cash deposits and the interest income accrued to the assessee

on the said deposits was not offered to tax in the return of income filed

u/s.139 of the Act. On finding the said omission, the assessee made use of

the notice u/s.153A of the Act and offered the interest income of

Rs.8,10,000/- to tax through the return filed u/s.153A of the Act. As such,

the bank pass book is not the books of accounts of the assessee.

Otherwise, the Revenue has not discovered any incriminating information

directly or indirectly linked to the said Rs.8,10,000/-. As such, there is

reference to the transactions in the Questions and Answers in the

statements too, recorded during the search and seizure proceedings. It is

purely the decision of the assessee to offer the said income voluntarily to

come clean on the issue of undisclosed income for the assessment years.

For all these arguments, Ld. Counsel for the assessee relied on the binding

22 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

judgment in the case of Murli Agro Products reported in 49 taxdmann.com

173, M/s Continental Warehousing Corporation reported in 374 ITR 645

(Bombay) and M/s All Cargo Global Logistics Ltd. reported in 137 ITD 287

etc.

Further, As per the Ld. Counsel, the taxation of such income of

Rs.8,10,000/- which constitutes superfluous one u/s.153A of the Act, the

same constitutes taxation of income without any legal basis and therefore,

the penalty relatable to such income has no legal stand to survive.

We have so far discussed the facts relating to the arguments relating

to (1) non-abated assessment qua no incriminating material and (2)

superfluous income does not attract levy of penalty. After hearing both the

parties on this issue of interest income, we are of the opinion that the

assessment for the A.Y. 2013-14 certainly constitutes a non-abated

assessment and there are no two views on this issue. We have no doubt on

this aspect. Having held so, the taxation income of Rs.8,10,000/- is not

attributable to the any particular material information found during the

search action. Further, we find mere happening of the search action does

not imply discovery of any incriminating material or information on this

income of Rs.8,10,000/-. These are the penalty proceedings and they are

to be finalised independent of the assessment proceedings. Thus, legally

speaking, the addition of Rs.8,10,000/- is not otherwise sustainable in

this non-abated assessment for A.Y. 2003-04 but for the concessions

made by the assessee. Considering the otherwise unsustainable nature of

the addition, we are of the opinion, the penalty is not sustainable for this

assessment year on the addition of Rs.8,10,000/-. Accordingly, relevant

arguments of the assessee’s counsel are allowed.

23 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

C. Ambiguity linked to the Limbs of Explanation 5A / Clause (c) of

section 271(1) of Act & for all AYs upto 2008-09 :

Further, on the issue relating to allegation of ‘ambiguity’ in the mind

of the AO, we examined the facts from the Assessment and Penalty orders

of the AO. Further, from the Assessment order, we find the AO initiated the

penalty in the A.Y. 2003-04 stating the following in Para 6 of the

Assessment order :

Extracts from the Assessment order : (para 6)

“6. . . . .the assessee had concealed particulars of this income in the original return, penalty proceedings u/s.271(1)(c) of the Income Tax Act are initiated.”

Extracts from Penalty order : (Para Nos. 16, 17 & 18) :

“16. Even under these circumstances the assessee claims that there is no concealment on his part and penalty u/s.271(1)(c) cannot be levied in his case. In case penalty u/s.271(1)(c) cannot be levied, penalty u/s. 271(1)(c) may not be leviable in any other case. This I think may not be intention of legislature. Intention of legislature in this regard is clear from explanation (5A) to section 271(1)(c).

For the sake of completeness of this composite order for A.Y. 2003-04

to 2008-09, we compiled in tabular form here the ‘ambiguity’ linked to the

quality of ‘satisfaction’ for all the six assessment years :

ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

A.Y. Assessment Order Penalty order 2003-04 As the assessee had 16. Even under these circumstances ........ In case concealed particulars of penalty u/s.271(1)(c) cannot be levied in this case, this income in the penalty u/s.271(1)(c) may not be leviable in any other original return, penalty case. This I think may not be intention of legislature. u/s.271(1)(c) of the Intention of legislature in this regard is clear from Income Tax Act are explanation (5A) to section 271(1)(c). initiated 17. From the facts of the case brought out above is a fittest case for levy of penalty u/s.271(1)(c). Under these circumstances, I treat the assessee in default u/s.271(1)(c) of the Income tax Act 18. . . . . . . . .Besides this, the concealment appears deliberate. Therefore, it is not at all a fit case for levy of minimum penalty.. . . . . . . . .” 2004-05 The assessee has 14. . . . . . However, the fact that there was a shown this income as deliberate concealment of income or furnishing additional income in the inaccurate particulars of such income on the part of the returns filed u/s.153A. assessee is apparent. As the assessee had concealed particulars of Para 15 –do- this income in the Para 16 –do- original return, penalty Para 17 –do- proceedings u/s.271(1)© of the Income Tax Act are initiated As the assessee had 2005-06 Para 16 –do- concealed particulars of Para 17 –do- this income in the Para 18 –do- original return, penalty u/s.271(1)(c) of the Income Tax Act are initiated 2006-07 The assessee has Para 16 –do- shown this income as Para 17 –do- additional income in the Para 18 –do- returns filed u/s.153A. As the assessee had concealed particulars of this income in the original return, penalty proceedings u/s.271(1)© of the Income Tax Act are initiated -do- 2007-08 Para 16 to Para 18 2008-09 As the assessee had Para 13. As far as the contention that no penalty concealed particulars of u/s.271(1)(c) can be levied as the assessee has not this income in the filed original return of income is concerned, the same original return, penalty cannot be accepted in view of explanation (5A) to u/s.271(1)(c) of the section 271(1)(c) of I.T. Act, 1961. Income Tax Act are …........ Intention of legislature in this regard is clear initiated. from explanation (5A) to section 271(1)(c). Para 14. From the facts of the case brought out above is a fittest case for levy of penalty u/s.271(1)(c). . . . . . . Para 15. Under these circumstances, I treat the assessee in default u/s.271(1)(c) of the Income Tax Act. . . . . . .

25 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

From the above, the ‘ambiguity’ in the mind of the AO at the time of

initiation was alleged by the Assessee. According to Assessee, the following

deficiencies leading to the creation of ambiguity in the mind of AO are

enlist,- (a) in the assessment order, AO did not refer to any Explanation

5A of the two Finance Acts i.e. pre or post amendment. He merely referred

to the ‘concealed particulars of this income in the ‘original return’. This

reference is made in general context and not in the context of clause (c) or

Explanation 5A of section 271(1) of the Act. (b) AO made reference to

“original return”.

On considering the above list of items, we find that the same

constitutes the outcome of the microscopic and hyper technical approach of

the Assessee. In our view, the AO rightly used the legal expressions such as

‘concealment of particulars of income’ which reflects the intention of the AO

and the same is with reference to the limb relating to the concealment of

particulars of income. We also find from the AO and the PO that the AO

eventually levied penalty for the same limb of concealment of particulars of

income. This is the pattern in all the nine assessment years under

consideration. Therefore, it is a settled legal proposition that the allegation

of ambiguity is unsustainable on the strength of the aforementioned facts.

Therefore, we dismiss the arguments of the Assessee’s AR. Accordingly, the

grounds/additional grounds raised by the assessee are dismissed.

D. Pre-amended Explanation 5A Vs. Post-amended Explanation 5A to section 271(1) of the Act – Specifying the limb at the time of initiation of penalty proceedings – Ambiguity in the mind of the AO.

We shall now take up the arguments relating to the applicability of

amended Explanation 5A to section 271(1) of the Act with restrospectivity.

Relevant facts include that (1) the assessment years involved are

26 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

A.Yrs.2003-04 to 2008-09 (2) Date of search is 11-02-2009. All the original

returns were filed before the due date specified u/s.139 of the Act and also

before the date of search. Returns u/s 153A of the Act were filed on 30-09-

2010 in response to notices u/s 153A dated 27-07-2009.

Background of Explanation 5A: The Explanation 5A to section 271(1)

of the Act was originally inserted by the Finance Act, 2007 w.e.f. 01-06-

2007. As per the same, the non-filing of return of income before the date of

search, attracts the penalty for concealment of income. As per the

language used therein, the mere filing of return of income in time (with or

without declaring the discovered item of income during search) provides

immunity from the said penalty.

The said Explanation 5A was amended w.r.e.f. 01-06-2007 by the

Finance (No.2) Act, 2009. Therefore, as per the amended Explanation 5A to

section 271(1) of the Act, mere filing the return of income does not provide

immunity from penalty unless the item of income discovered during the

search action is duly declared in the said return of income. Accordingly,

when the same is not declared in the return of income filed u/s.139 of the

Act filed before the search, the said item of income shall be deemed either

as the ‘concealment of particulars of income or the case of furnishing of

inaccurate particulars of such income’, as the case may be. The Pre and

post amended Explanation 5A contains reference to both the limbs common

to the limbs specified in clause (c) of section 271(1) of the Act.

Assessee’s case – Pre-amended Explanation applies :

Justifying the application of Pre-amended Explanation 5A to his case, the

assessee claims that the provisions of pre-amended Explanation 5A to

27 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

section 271(1) of the Act apply to the facts of the case as the same was

existing (1) at the time of filing the return of income u/s.139 of the Act; (2)

the amended Explanation 5A became law only after the initiation of search

on 11-2-2009; (3) the return of income filed u/s.153A of the Act relates to

the search held on 11-02-2009, i.e. search initiated in the period post 01-

06-2007 (3) amended Explanation 5A with retrospective application to this

AY adds more troubles to the taxpayer and the same against the principles

of natural justice on one side and the provisions of the Article 20 of the

Constitution of India as well as the other binding judgments in force.

Revenue’s case: Per Contra, Ld DR submitted that the retrospective

amendment to Explanation 5A to section 271(1) of the Act is clarificatory.

Without conceding to the fact of AO’s failure to refer to the Explanation 5A,

amended Explanation, limbs etc in the AO, Ld. DR for the Revenue

submitted that the penalty levied in all the assessment years under

consideration are required to be confirmed. In this regard, Ld. DR

submitted that, on similar facts, the Pune Bench confirmed the penalty in

the case of M/s Chhoriya Land Developers and Construction Company

(supra).

counter arguments and views of the rival parties, various case laws etc on

the issue of retrospective application of the amended Explanation 5A. We

shall give our decision on the issues raised by the parties.

(1) On the Retrospective Law of Explanation 5A: the Assessee relies on

orders of the Tribunal in the case of Nukala Ramakrishna (supra) where

Dhanekula Rama Rao case, supra apart from many others against the

retrospective interpretation. Per Contra, Ld. DR rely on the coordinate

28 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

bench decision in the case of Chhoriya Land Developers and Construction

Company (supra) which is favour of the retrospective application of the

amended Explanation 5A of the Act.

The operational paras from the order of the Tribunal in case of

Nukala Ramakrishna (supra) read as under :

“16. . . . . . .A similar issue has been come up before this bench, in the case of Dhanekula Rama Rao Vs. DCIT central circle, in ITA No.665 to 669 of 2013. The coordinate bench of this Tribunal, after considering the provisions of section 271 (1)(c) of the Act, Explanation 5A prior to the amendment and amended provisions Explanation 5A by the Finance Act, 2009, held that the provisions of Explanation 5A as it stood as on the date of search or filing return of income in response to notice u/s 153A of the Act is applicable for levy of penalty, . . . . . . . . . . . . .

17.. . . . . . . . . Therefore, we are of the view that the amended provisions of explanation 5A of section 271(1)(c) of the Act is not applicable in the instant case. Accordingly, we direct the A.O. to delete the penalty levied u/s.271(1)(c) of the Act, for the assessment year 2005-06, 2006-07 & 2007- 08.”

The operational Para No. 10 in favour of the Revenue from the

decision of the Tribunal in the case of Chhoriya Land Developers and

Construction Company (supra) is extracted as under:-

“10. . . . . . . . . . . . . In Other words, Explanation 5A is available to the Assessing Officer in all cases, where a search has been initiated u/s 132 of the Act on or after the 1st day of June, 2007, and it is wrong on the part of the respondent-assessee to canvass that it is Explanation 5 and not Explanation 5A which would apply to years for which assessee has filed returns u/s 139 of the Act prior to the search and before 01.06.2007. We have also perused the judgment of the Hon'ble Supreme Court in the case of Brij Mohan (supra) which has been relied upon by the assessee for the proposition that for levying penalty for concealment, it is the law in force on the date of filing of return u/s 139 of the Act, which is relevant and not

29 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

Explanation 5A, which was not on the statute as on the date of filing of return u/s 139 of the Act before the date of search.. . . . . . . . . . . . . . . . . . . . . . . . . .The plea of the assessee was that the penalty was liable to be considered on the basis of the law as it stood during the assessment year relevant to the previous year in which the income was earned, which was prior to coming into force of the amended clause (iii) to section 271(1) inserted by the Finance Act, 1968. . . . . . . . . . . . . . . . . . . . In our considered opinion, the aforesaid judgment of the Hon'ble Supreme Court cannot be straightaway applied in the present case to say that the law as on the date of the filing of return u/s 139 of the Act before the date of search is to be applied. The unambiguous phraseology of the Explanation 5A, which we have already elucidated earlier, clearly makes out that the legislative intent depicts that Explanation 5A is applicable where a search has been initiated u/s 132 of the Act on or after 01.06.2007 and it covers (a) any precious year which has ended before the date of search and where the return of income for such previous year has been furnished before the said date but such income has not been declared; and, (b) any previous year whose due date of filing of the return of income has expired but assessee has not filed the return till the date of search, if other conditions prescribed therein are satisfied. Therefore, the aforesaid plea of the assessee, in our view, does not merit indulgence and is rejected accordingly.

(2). TWO views on Retrospectivity of Explanation 5A : we have

considered both views on the issue and analyses the relevant facts which

led the Tribunal Benches to the said views. While the Pune Bench took the

strict interpretation of amended Explanation 5A, per contra, the Vizag Bench

took the line in favour of liberal interpretation of the said provisions, i.e. in

favour of prospective application of The amended Explanation 5A of the Act

with conditions attached. Therefore, in our view, it is not correct to say if

there exists divergent view on retrospectivity on common facts. The

conditions set by the Tribunal - Vizag bench include the date of search or

date of filing return of income in response to notice u/s 153A of the Act. If

the date of both events of search and filing of return u/s.153A of the Act

are prior to the date of amendment to Explanation 5A to section 271(1)(c) of

the Act the amended provisions apply prospectively only. In fact, Tribunal

reiterated the position that date of filing of returns u/s 153A of the Act

becomes a relevant event as the concealment of income is always with

reference to the returns of income. From that point of view, linked to the

facts, in our view, it is not the case existence of divergent views. Therefore,

30 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

the arguments of the Ld AR for the Assessee relying on the judgments in

cases of Vegetable Products (supra) and Reliance Communication Ltd

(supra) are unsustainable. In the instant case, the assessee filed the

returns in response to notice u/s.153A of the Act much after the

amendment by the Finance Act (No.2), 2009 is brought into the statute.

Hence, the decision of the Tribunal – Vizag Bench does not help the

assessee.

Therefore, we are of the view that decision of the coordinate bench of

Pune Bench of the Tribunal becomes binding on us and the same in favour

of retrospective interpretation. Relevant paragraphs are already extracted in

the preceding paragraphs of this order. Accordingly, we hold the legal

issues raised in the grounds/additional grounds have to be decided against

the Assessee and they stand dismissed.

MERITS LINKED GROUNDS FOR AY 2003-04

penalty on the additional income of Rs 8.10 lakhs relating to bank deposits

and interest accrued thereon suo motto offered by the Assessee in the AY

2003-04.

In the preceding paragraphs of this order, on this issue, we have

concluded that it is case of ‘non abated assessment’ and addition if any

made by the AO on account of deposit and interest becomes unsustainable

as they are never to be done on the strength of the incriminating material.

Further we have held that the said sum of Rs 8.10 lakhs constitutes offer of

income using the opportunity of proceedings u/s 153A of the Act despite

non- discovery of any incriminating materials during the search action on

31 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

the Assessee. From that point of view, the same additional income if AO

were to make in assessment, the same needs to be deleted. Consequently,

the penalty levied on the said sum of Rs.8,10,000/- by the AO becomes

unsustainable too. Hence, on merits too, the penalty requires to be

deleted.

In the result, the appeal of assessee for A.Y. 2003-04 is partly

allowed.

We shall now take up the legal and merits linked issues pertaining to

AY 2004-05

ITA No. 13/PUN/2013 - A.Yr. 2004-05 Sri Sanjay D. Kakade

various legal additional grounds in three instalments. Both the parties

submitted that they are similar to the ones relatable to AY 2003-04. This

appeal emanates from the non-abated assessment. It is their submission

that the facts being similar, the arguments are commonly applicable to this

AY too.

On considering the same, (1) legal issues (i.e. ambiguity issues,

satisfaction issue and the retrospectivity of the amended Explanation 5A of

section 271(1)(c) of the Act), we find the conclusions drawn by us apply to

this A.Y. 2004-05 with equal force. We direct the AO accordingly. In effect,

none of the arguments of Ld. Counsel on these legal issues survives.

Accordingly, relevant additional grounds relating to the legal issues stand

dismissed.

32 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

(2) On the merits linked issues, we find penalty is levied on two

additions, i.e. the addition of Rs.45,27,817/- on account of bank deposits

and the interest thereon and the negative cash balance of Rs.25 lakhs.

Regarding the first addition as held by us, it is a case of additional income

offered suo motu by the assessee in the return of income without support of

any incriminating material. Therefore, like in the A.Y. 2003-04, we find for

the same reasons narrated in the relevant appeal, we direct the AO to delete

the penalty. Assessee thus gets relief.

Regarding the penalty levied on the said sum of Rs.25 lakhs of

additional income on account of negative cash balance, we find that the

source of this discrepancy is faulty cash book seized by the Department

during the search and seizure action u/s.132 of the Act. Therefore, the

addition of Rs.25 lakhs and other similar additional income is attributable

undisputedly to the discoveries of the search action. Therefore, we hold the

AO is justified in levying the penalty u/s.271(1)(c) r.w. Explanation 5A of

the Act. The judgment of Supreme Court in the case of Prasanna Dugar Vs.

CIT supports our view. Accordingly, relevant penalty is confirmed. AO is

directed to work out the penalty as per the discussion above. Accordingly,

relevant grounds on merits are partly allowed and the additional ground on

legal issues are dismissed.

In the result, the appeal of the Assessee is partly allowed.

ITA Nos.14 to 17/PUN/2013 - A.Yrs. 2005-06 to 2008-09 Sri Sanjay D. Kakade

years of Abated assessments and the additions are allowed to be made with

or without the strength of the incriminating documents in such

ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

assessments. Further, Ld. Counsel for the assessee brought our attention

to the grounds filed by the assessee for the said assessment years and

compared the same with that of the grounds/additional grounds raised for

the A.Y. 2003-04 and mentioned that the additional grounds are identical

on legal issues.

LEGAL ISSUES

Before us, on the legal issues raised in the said additional grounds,

both the parties submitted that the legal issues are similar to the ones

relatable to AY 2003-04. It is their submission that the facts being broadly

similar, the arguments are commonly applicable to this AY too. Further, Ld.

Counsel submitted that the conclusion drawn by the Tribunal for A.Y.

2003-04 apply to these years under consideration. On hearing them and

also considering the commonality of the issues, we are of the opinion that

our adjudication given in the preceding paragraphs of this order for the A.Y.

2003-04 becomes applicable to the A.Yrs. 2005-06 to 2007-08 mutatis

mutandis. Accordingly, the legal and additional grounds grounds raised by

the assessee in the above assessment years are dismissed as in the appeal

for A.Y. 2003-04 and 2004-05 above.

MERIT LINKED ISSUES

which the penalties u/s.271(1)(c) of the Act are levied in the case of Sri

Sanjay D. Kakade. They are extracted here as under :

Penalties levied in the case of Sri Sanjay D. Kakade :

Sr. Particulars AY AY AY AY AY AY No. 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 1 Deposits in 8,10,000 45,27,817 27,76,510 29,43,867 42,86,000 1,27,440 Banks (Including (Including interest interest 38,317) 19,540)

ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

2 Negative cash - 25,00,000 2,44,00,000 7,20,00,000 5,36,00,000 - 3 Supervision - - - 7,17,000 - - charges 4 Amount - - - - - 5,00,000 disclosed as negative cash in M/s. Kakade Jewellers (Firm)

The AO levied the penalties u/s.271(1)(c) of the Act for all the 6

assessment years in the case of Sri Sanjay D. Kakade from A.Y. 2003-04 to

2008-09. Details of additions are provided in the above table. As seen from

the above table, there are four kinds of additions made by the AO in the

assessments which attracted penalty proceedings which includes (1) the

addition on account of deposits in the banks (2) addition on account of

negative cash (3) addition on account of transportation charges and finally

(4) addition on account of negative cash of in the name of firm, M/s.

Kakade Jewellers owned up by the assessee individually.

We shall take up each of these additions in the following paragraphs.

discussed in the preceding paragraphs of this order. In brief, the facts are

that assessee owns deposits in the bank accounts and the same were not

detected by the Department during search action on the assessee. No

incriminating evidences were also made out by the Revenue. As such, no

seized paper was referred to in the orders of the assessment as well as the

penalty orders. In filing returns, in response to notice u/s.153A of the Act,

assessee made use of the same, to come out clean of all the discrepancies

in the accounts, assessee came forward and suo motu offered these deposits

along with interest in the banks for all the 5 assessment years. Thus, it is

the case of the assessee before us before the assessee’s voluntary disclosure

of income the Revenue would not have added these deposits as income of

35 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

the assessee. To that extent, the same does not constitute concealed

income attracting the provisions of section 271(1)(c) of the Act r.w.

Explanation 5A of the said section. Thus, on the ground of voluntary

offering, the assessee desires deletion of penalty on these additions.

Per Contra, Ld. DR for the Revenue submitted that the deposits are

found in the bank account of the assessee which were of course disclosed

bank accounts. Nevertheless, this income in all the 5 years are attributable

to the discoveries made by the Department during the search and seizure

action. From this point of view, the income on account of deposits in bank

and interest thereon constitutes the concealed income and the penalty is

validly levied on the same. He also relied on various decisions to support

the contention that in cases of search and seizure action, there is voluntary

offer of income (brought to tax u/s.153A of the Act) and all the additional

income constitutes ‘concluded income’ attracting the penal provisions of

section 271(1)(c) of the Act.

income by way of deposits in the bank and interest thereon and find that

the additions made in all the 5 assessment years from A.Y. 2003-04 to

2008-09 requires to be decided in the following lines.

So far as the addition for A.Y. 2003-04 (Rs.8,10,000/-), A.Y. 2004-05

(R.45,27,817 – including interest segment of Rs.38,317), we have already

held that these are the closed assessments (Non-abated assessments) and

the additions, if any, has to be made strictly based on the incriminating

evidences discovered during the search and seizure action. In the above

paragraphs of this order, we have already held that the additions even if the

same are not offered voluntarily by the assessee in the return of income

36 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

u/s.153A of the Act, AO would not have been allowed to make such

additions in the non-abated assessments when the additions are not

permitted to be added in the absence of any incriminating evidences. In

effect, the additions would not have been validly made and approved by the

appellate authorities. From this point of view, the penalties would not have

successfully levied. Therefore, the penalties levied on these invalid

additions in the A.Y. 2003-04 and 2004-05 requires to be deleted.

Accordingly, we order the same and direct the AO to delete the penalty on

the addition on account of deposits in bank for these two assessment years.

2005-06 to 2007-08, we have considered the assessee’s stand that these

are the voluntary offer of income suo motu offered by the assessee in the

return of income filed in response to notice u/s.153A of the Act. We have

also considered the fact of the Revenue that in such matters there is

nothing voluntary about the disclosure of income. For this proposition, we

take strength from the judgment of Supreme Court in the case of Prasanna

Dugar Vs. CIT (2016) 70 taxmann.com 175 (SC) which is relevant for the

legal proposition that, when the assessee voluntarily issued a statement

offering the additional income in the return of income filed u/s.153A of the

Act, the penalty levied is valid and sustainable. As per the said Supreme

Court judgment, clause (a) and (b) of Explanation 5A to section 271(1) was

explained and held that the expression ‘voluntary’ is in the context of the

statement made by the assessee which conveys the absence of extortion

from him by applying force. It is in that context the voluntary disclosure

which did not clarified by the assessee by stating that he had not given any

statement under pressure and he did not want to rectify or modify the

statement made by him. On this legal proposition, the penalty levied by the

37 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

AO on the additional income disclosed by the assessee is sustainable. In

this judgment the Supreme Court confirms the judgment of Hon’ble

Calcutta High Court in the case of CIT Vs. Prasanna Dugar (2015) 371 ITR

19 (Cal.). Considering the same, we are of the view that the penalties levied

by way of deposits in the bank for the above three assessment years stand

confirmed. Accordingly, we order.

on this account, i.e. (1) the negative cash from the books of account of the

assessee (works out to Rs.15 crores for 3 A.Yrs. from 2005-06 to 2007-08)

and (2) the negative cash of Rs.5 lakhs from the books of account of the

firm of the assessee named M/s. Kakade Jewellers.

Regarding the negative cash from the books of account of the

assessee, the case of the assessee is that the negative cash is worked out

from the books of account of the assessee found during search and seizure

action and the negative cash was segregated the assessment year-wise.

The break-up for the same is provided in the table mentioned above against

Sl.No.2 (Negative cash). This exercise was done by the assessee at the time

of filing the return of income in response to notice u/s.153A of the Act and

offered the same in the returns of income filed after search action and paid

the taxes. Therefore, according to Ld. Counsel, it constitutes voluntary

offer of income and the penalty should not be levied when the income is

offered voluntarily. He fairly submitted that the absence of any dispute

about the facts and figures of the negative cash in the books of account.

Per Contra, the case of the Revenue is that the cash balance

particulars provided by the assessee have emanated from the books of

account. Therefore, it is a clear case of concealment of income for all the 4

38 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

assessment years, i.e. A.Y. 2004-05 – Rs.25 lakhs, A.Y. 2005-06 –

Rs.2,44,000/-, A.Y. 2006-07 – Rs.7,20,00,000/- and A.Y. 2007-08 -

Rs.5,36,00,000/-.

the inaccuracy of the cash books maintained by the assessee and the

existence of the negative cash balances for all the assessment years under

consideration. The source of this negative cash is unknown and

unexplained by the assessee. However, assessee offered the same to tax

and paid taxes too. Assessee desires to win the appeal on the ground of

voluntary disclosure of additional income. However, the judgment of

Supreme Court in the case of Prasanna Dugar Vs. CIT(supra) does not

permit the same. The relevant assessments attained the finality. From this

point of view, there is a clear case of concealment of particulars of income

within the meaning of the Explanation 5A to section 271(1) of the Act.

Further, there is no dispute on the merits of offer of the said income in all

the assessment years. Therefore, we are of the opinion that the additions

by way of negative cash attracts concealment of income under the penalty

proceedings u/s.271(1)(c) r.w. Explanation 5A of the Act. The concealment

penalty for all the assessment years is accordingly confirmed.

Regarding the negative cash of Rs.5 lakhs from the books of account

of M/s. Kakade Jewellers, offer of Rs.5,00,000/- was made in the hands of

Sri Sanjay D. Kakade, although undisputedly the relevant discrepancies

are noticed in the books of the firm. It is not the case of the AO that the

said additional income taxed in the hands of the firm as well. The details

which led the assessee to accept the said discrepancy in the assessee’s

income were not available on record.

39 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

On hearing both the sides, on the concealment of offer of

Rs.5,00,000/- we find there is no dispute about the existence of

discrepancy in the books of account of the firm and not the assessee.

Legally speaking, the should have been validly made in the hands of the

firm. Thus, the penalty u/s.271(1)(c) of the Act should have been

accordingly levied in the hands of the firm only. On considering the

peculiar facts of this additional income, we are of the view that it is unfair

to fix the concealment liability on the individual, the partner of the firm on

this part of the additional income. Accordingly, we direct the AO to delete

the penalty in the hands of the assessee-individual. Accordingly, the

assessee is entitled to relief in this A.Y. 2008-09.

In the result, the appeals filed by the assessee for A.Yrs. 2005-06 to

2008-09 are partly allowed.

Construction Company.

ITA Nos. 100 to 102/PUN/2013 – A.Yrs. 2006-07 to 2008-09 – M/s. Kakade Construction Company

LEGAL ISSUES

At the outset, Ld. Counsel submitted that the assessee firm in these

three appeals raising both legal as well as the merit related grounds asked

for deletion of the penalty levied by the AO u/s.271(1)(c) of the Act.

On the legal issues, both the parties submitted that the legal issues

are similar to the ones relatable to the appeal of the assessee for the AY

2003-04. It is their submission that the facts being similar, the arguments

ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

of the representatives become commonly applicable to the assessment years

under consideration.

Considering the commonality of the issues, arguments and counter

arguments of the parties, we are of the opinion that our adjudication given

in the preceding paragraphs of this order for the A.Y. 2003-04 are

applicable to the A.Yrs. 2006-07 to 2008-09 mutatis mutandis. Accordingly,

the legal grounds raised by the assessee relating to (1) existence of

ambiguity in the mind of the AO qua the AO’s failure to specify the

applicable limb of clause (c) of section 271(1) of the Act, (2) applicability of

amended Explanation 5A qua the date of event of the search action

u/s.132 of the Act as well as the date of filing of the returns of income

u/s.153A of the Act before the amendment etc. in the above assessment

years stand dismissed.

ON MERITS OF PENALTY

penalty on the additional income/additions made by the AO in the

assessments. For the sake of convenience, Ld. Counsel furnished a table

grouping the issue-wise and assessment year-wise additions/additional

income, the details of the additional income/ additions in all the 3

assessment years under consideration, i.e. A.Y. 2006-07 to 2008-09 are

extracted here as under :

Sr. Particulars A.Y. 2006-07 A.Y. 2007-08 A.Y. 2008-09 No. 1 Amount on the basis of entries in the note 2,77,50,000 - - book containing 19 pages seized, as Bundle No.2 from the residence of Sri Sanjay D. Kakade on 08-04-2009 2 Amount paid by Sri Sanjay D. Kakade to Sri - 46,00,000 - Pushkar S. Jog as per Page Nos. 11 and 12 of yellow coloured Delux Cobra file seized

ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

from the residence of Sri Sanjay D. Kakade on 08-04-2009 3 Amount received from “Sanjay Sir” as per - 50,00,000 - page No.21 of Bundle No.1 seized from the residence of Sri Sanjay D. Kakade on 08-04- 2009 4 Amount as per Page No.19 of Bundle No.2 - 30,00,000 - seized from the residence of Sri Sanjay D. Kakade on 08-04-2009 5 Amount as per Page No.23 of Bundle No.1 - - 18,00,000 seized from the residence of Sri Sanjay D. Kakade on 08-04-2009, regarding cash payment in February 2008 for environmental clearance 6 Amount paid to M/s D& M Hotel Pvt. Ltd. on - - 50,00,000 23-03-2008, as per Page No.24 of Bundle No.1 seized from the residence of Sri Sanjay D. Kakade on 08-04-2009

Ld. Counsel for the assessee brought our attention to the above table

and submitted that the figures of additional income mentioned at Sl.No.1 to

4 of the chart constitute “double additions” offered by the assessee both the

in the hands of the assessee-firm as well as in the individual capacity – Sri

Sanjay D. Kakade. Relying on seized material already referred to in the

table above, Ld. Counsel submitted that the above narrated income was

required to be offered in both the hands in order to make up the said gross

declaration of Rs.40 crores. Therefore, the said incomes were offered both

in his hands as well as in the hands of the firm in order to make up the

gross disclosure of Rs.40 crores given by the assessee during the search

action and seizure action. Offering of income in both the hands of the

assessee as well as the partners was the requirement in order to meet the

sanctity of Rs.40 crores of additional income offered by the assessee in the

search and seizure action. According to the Ld. Counsel, the assessee has

the good intention of complying with the disclosures.

However, submitted that the concealment penalty proceedings are

totally different from that of assessment proceedings, Ld. Counsel for the

assessee submitted that it is a matter of fact that the base-seized material

42 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

is one and the same and the same is verifiable. Assessee desires that

subject to verification of the same by the authorities below, the penalty

proceedings on the same income in both the hands should not be

sustained. For example, referring to the offer of additional income of

Rs.2,77,50,000/- in A.Y. 2006-07, Ld. Counsel for the assessee

demonstrated before us that the said income is part of Rs.7.20 crores

offered by the assessee for A.Y. 2006-07 in the case of Sri Sanjay D.

Kakade. Similarly, Rs. 40 lakhs, Rs. 50 lakhs and Rs. 30 lakhs offered by

the assessee in the A.Y. 2007-08 are the part of Rs. 5.36 crores offered by

the assessee in the hands of Sri Sanjay D. Kakade. Considering the fact of

double addition, when the same is found true by the AO in set-aside

proceedings, the penalty in the hands of the firm needs to be deleted in the

fairness of the penalty proceedings.

Per Contra, Ld. DR for the Revenue opposed vehemently and

submitted that the offer of income of Rs.40 crores as a whole attracts the

penalty proceedings u/s.271(1)(c) of the Act, without prejudice to the

nature of individual additions in whose hands, the same is offered and

taxed. In this regard, Ld. DR for the Revenue relied on various decisions

including the Supreme Court judgment in the case of Prasanna Dugar Vs.

CIT (supra)

On hearing both the parties, prima-facie, we find there appears to be

a case of double taxation of additional income, both in the hands of the

assessee as well as the partner of the assessee Sri Sanjay D. Kakade.

Concerned base incriminating documents are one and the same seized

during the search action. It is alto claimed that the same are written by the

spouse of Sri Sanjay S. Kakade. Therefore, as requested by the Ld. Counsel

43 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

for the assessee, the issue of penalty proceedings in all these assessment

years should re-visit the file of the AO for fresh examination of facts relating

to the claim of allegation of double taxation of the additional incomes.

Therefore, we remand the issue to the file of AO and direct the AO to

examine the correctness of levying penalty twice on the same income, (1)

once in the hands of the assessee and (2) in the hands of his firm. AO shall

grant reasonable opportunity of being heard to the assessee in accordance

with the set principles of natural justice. Accordingly, grounds relating to

A.Yrs. 2006-07 to 2007-08 are allowed for statistical purposes.

assessee-firm amounting to Rs.18 lakhs and Rs.50 lakhs in the A.Y. 2008-

09, assessee submitted that the base documents were seized from the

residential premises of Sri Sanjay Kakade and not the business premises of

the assessee. The payment involves primarily of Sri Sanjay Kakade and not

the assessee-firm. Therefore, it is the prayer of Ld. Counsel that the matter

needs to revisit the file of the AO for fresh adjudication. We find these are

the cases of payment of cash admittedly by Sri Sanjay Kakade and not the

firm. There is need for studying the material (Pages 23 and 24 of Bundle

No.1) seized from the residence of Sri Sanjay Kakade on 08-04-2009.

Considering these undisputed facts, we are of the opinion that the penalty

levied by the AO on this additional income required to be remanded for

fresh adjudication. AO shall grant reasonable opportunity of being heard to

the assessee as per the set principles of natural justice. Accordingly,

relevant grounds are allowed for statistical purposes.

In the result, all the appeals of the assessee for A.Yrs. 2006-07 to

2008-09 are partly allowed for statistical purposes.

44 ITA Nos.12 to 17/PUN/2013 Sanjay Dattatraya Kakade ITA Nos.100 to 102/PUN/2013 M/s. Kakade Construction Company

04 to 2008-09 are partly allowed and the appeals filed by M/s. Kakade

Construction Company are partly allowed for statistical purposes.

Order pronounced in the open court on this 28th day of February, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य पुणे Pune; �दनांक Dated : 28th February, 2018. सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A) Central, Pune 4. CIT(A) Central, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A 5. Bench” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER,स स�यािपत स�यािपत �ित स�यािपत स�यािपत �ित �ित //True Copy// �ित

//True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune