TRIPAT KAUR,NEW DELHI vs. ACIT, NEW DELHI

There was a search carried out at the premises of the assessee on 28.07.2011, no incriminating material was found during the course of search. Pursuant to the notice dated 21.11.2012 u/s 153A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) the assessee filed her return of income, adding some amounts by way of abundant caution, and explained the same to the Assessing Officer. Ld. Assessing Officer (for short as the “Ld. AO”) accepted the written an amount u/s 153A return of income and passed the order u/s 143(3) of the Act read with section 153A of the Act. However, Ld. AO initiated the penalty proceedings and concluded them by levying the penalty in respect of the amount which was added by the assessee by way of abundant caution and in the absence of any incriminating material, as follows: A.Y. Amount on which penalty Amount of Penalty is levied 2006-07 10,00,000/- 3,09,000/- 2007-08 23,17,680/- 7,16,163/- 2008-09 10,00,000/- 3,09,000/- 2009-10 20,00,000/- 6,18,000/- 2010-11 10,00,000/- 3,09,000/- 3. Appeals preferred by the assessee were dismissed by the Ld. CIT(A). Hence, these appeals by the assessee.

Assessee is challenging the penalty in these appeals mainly on two grounds firstly, contending that when the assessee filed revised return and the return filed by the assessee u/s 153A of the Act was accepted as such by the Ld. AO and that income disclosed by the assessee u/s 153A of the Act was higher than the income in the original return filed u/s 139(1) of the Act, then in view of the decision of the Hon’ble jurisdictional High Court in PCIT Vs Neeraj Jindal (2017) 393 ITR 1 (DEL) such disclosure of additional income will not automatically lead to the penalty. The next point urged on behalf of the assessee is that inasmuch as the notice issued u/s 274 read with section 271 of the Act has not specified as to under which limb of the Act, the penalty is proposed to be levied, in view of the decision of the Hon’ble Karnataka High court in the case of CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors. [2013] 359 ITR 565 and CIT vs. M/s SSA’s Emerald Meadows, the proceedings are contrary to the law and are liable to be quashed.

Ld. DR placed reliance on the decisions relied upon by the Ld. CIT (A) in his order and more particularly Mak Data Pvt. Ltd. 352 ITR 1 (Del.).

We have gone through the record in the light of the submissions on either side. There is no dispute as to the facts submitted by the assessee to the effect that in the search that was conducted on 28.07.2011 nothing incriminatory could be found against the assessee. It is also an admitted fact that when the assessee added certain amounts stating it to be by way of abundant caution, the authorities below have not identified the nature of income that was added by the assessee by way of abundant caution. Ld. AO did not raise any question or query and accepted the same while passing the order u/s 153A/143(3) of the Act.

Hon’ble Jurisdictional High Court in PCIT Vs Neeraj Jindal (2017) 393 ITR 1 (DEL) held as follows: 13. At the outset, it must be noted that p ursuant to the search and seizure operation conducted under Section 132(4) of the Act, the assessee was given notice under Section 153A to file fresh return of his income. Thereafter, the assessee filed revised returns and the return filed by the assessee under Section 153A was accepted as such by the A.O. However, the A.O. was of the opinion that inasmuch that the income disclosed by the assessee under Section 153A was higher than the income in the original return filed under Section 139(1) and since in hi s view, such disclosure of income was a consequence of the search conducted on the assessee, there was concealment of income which attracted Section 271(1)(c) of the Act. Therefore, the question that needs to be answered is whether penalty is to be levied automatically whenever the assessee declares a higher income in his return filed under Section 153A in comparison to the original return filed under Section 139(1). xxx xxx xxx xxx xxx xxx 17. In this case, the A.O. in his order noted that the disclosure of higher income in the return filed by the assessee was a consequence of the search conducted and hence, such disclosure cannot be said to be “voluntary”. Hence, in the A.O.’s opinion, the asse ssee had “concealed” his income. However, the mere fact that the assessee has filed revised returns disclosing higher income than in the original return, in the absence of any other incriminating evidence, does not show that the assessee has “concealed” his income for the relevant assessment years. On this point, several High Courts have also opined that the mere increase in the amount of income shown in the revised return is not sufficient to justify a levy of penalty. xxx xxx xxx xxx xxx xxx 20. Therefore, the position that emerges from the above - mentioned provision is that once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be treated as the original return filed under Section 139. On similar lines, the Gujarat High Court in the case of Kirit Dahyabhai Patel v. Ass istant Commissioner of Income Tax, (2015) 280 CTR (Guj) 216 , held that: “ In view of specific provision of s. 153A of the I.T. Act. the return of income filed in response to notice under s. 153A of the I.T. Act is to be considered as return filed under s. 1 39 of the Act, as the AO has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under s. 271(1)(c) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income ret urned under s. 153A, if any.” 8. The above decision of the Hon’ble Jurisdictional High Court is applicable to the facts of the case on all force.

Now coming to the second contention of the assessee that the notice issued u/s 274 read with section 271 of the Act is bad under law in the case of CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors. (supra), we have carefully perused the material papers on record in the light of the statements made on behalf of the assessee including the judgment relied upon by him. In this case page No 8 of the Paper book is the copy of the notice issued under section 274 of the Act and it does not specify under which limb of section 271(1)(c) of the Act, penalty is proposed.

In the case of CIT vs Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar), Vide paragraph 60, the Hon’ble Karnataka High Court has held that :-

“60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.”

In ITA 380/2015 the Hon’ble Karnataka High Court Considered the question of law as to,-

And the Hon’be High Court ruled answered the same in favour of the assessee observing that:

The Special Leave Petition filed by the Revenue challenging the aforesaid judgement of the High Court was dismissed by the Hon’ble Supreme Court holding :

In the result, the appeal of the assessee is allowed.