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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
O R D E R
PER RAJESH KUMAR, AM
This is an appeal filed by the assessee challenging the order dated 3.07.2012 passed by the ld.CIT(A)-41, Mumbai upholding the penalty imposed u/s 271 (1)(c) r.w.s274 of the Income Tax Act, 1961 which pertains to assessment year 2004-05.
The issue raised is against the upholding the penalty on an income of Rs.18,50,000/- by the ld.CIT(A) as imposed by the Assessing Officer u/s 271(1)
2 (c) r.w.s.274 of the Act by ignoring the fact that the assessee disclosed in the return of income filed in response to the notice issued u/s 153A of the Act. The issue raised in second ground is with regard to non-recording the satisfaction by the AO as to concealment or furnishing in accurate particulars of income with reference to the said addition.
Facts of the case are that a search and seizure operation u/s 132 of the Act was carried out at the residential and business premises of the assessee on 11.4.2007, a group with which he is connected. In response to the notice issued u/s 153A, the assessee filed return declaring total income of Rs.8,14,95,450/- including the undisclosed income of Rs.28,71,601/-. During the course of search and seizure operation, since incriminating documents and papers were seized and assessee surrendered in his hands a sum of Rs.1,07,73,825/- over different assessment years. The assessee filed return of income for the instant assessment year u/s 153A of the Act declaring undisclosed income of Rs.28,71,601/- comprising an amount of Rs.37,900/- on account of withdrawal of depreciation, Rs.18,50,000/- on account of seized paper annexure A-2 page -17 and Rs.9,83,701/- being @1% of gross sales on account of M/s Etco Profiles Ltd. The undisclosed income of Rs.18,50,000/- based on the seized paper as annexure A/2 page 16 and 17 which related to cash payments made to Bajrang and M/s M M Industries during current financial year. The assessment was framed u/s 143(3) was completed on 27.11.2006 assessing the total income at 3 Rs.8,14,95,450/-. After the search the assessment was completed u/s 143(3) r.w.s. 153A of the Act vide order dated 31.12.2009 assessing the total income at Rs.8,18,70,760/- and accordingly, the AO initialed penalty proceedings under section 271(1)(c) of the Act. The AO, thereafter imposed penalty of Rs.9,71,319/- at the rate of 100% of the tax sought to be evaded on Rs.28,71,601/- by rejecting the submissions and arguments of the assessee as made during the course penalty proceedings and passing the vide order dated 17.2.2012 under section 271(1)(c) r.w.s 274 of the Act.
Thereafter, the assessee carried the matter before the ld. CIT(A) who partly allowed the appeal of the assessee by deleting the penalty on two items of additions of Rs.37,900/- and Rs.9,83,701/- by sustaining and upholding the penalty on Rs.18,50,000/- which was surrendered and declared by the assessee in the return of income declared in the return filed u/s 153A of the Act on the basis of seized material-Annexure-2 at pages 16 and 17 by observing and holding as under : “Keeping in view the facts and circumstances and the decisions of Hon’ble Tribunal, it is held that the assessee has concealed its income as per the seized page 17 of annexure A-2 which was not declared in the original return filed, therefore, it is held that the assessee has concealed the income to the tune of Rs.18,50,000/-. Therefore, penalty levied u/s 271(1)(c) is upheld.”
5. The ld. AR vehemently, submitted before us that the penalty u/s 271(1) of the Act was not imposable on the amount of income surrendered by the 4 assessee during the search and seizure operation while recording the statement recording u/s 132(4) of the Act. The ld. AR submitted that some documents were found and seized as annexure A-2 at pages 16 and 17 which contained cash payment of Rs.18,50,000/- which was admitted by the assessee as undisclosed income and declared in the return filed in response to notice issued under section 153A of the Act and accordingly the taxes were paid thereon. The ld. AR vehemently submitted that it was a case of non disclosure of income but the disclosure was made during the statement under section 132(4) of the Act and this amount was disclosed in the return of income filed in response to notice issued u/s 153A and due taxes were paid and therefore penalty was not leviable. The ld. AR submitted that the ld. CIT(A) has erred in law and on facts by holding that the assessee was not entitled for immunity as per Explanation -5 to section 271 (1)( c ) and wrongly relied on the decision in the case of Ajit B Zota V/s ACIT (40 SOT 543). In defence the ld. AR strongly relied on the following decisions : A) Prem Arora V/s DCIT (Delhi Tribunal) (2012) 24 Taxmann.com 260; B) Vrajlal T Gala (HUF) V/s ACIT (2013) 33 taxmann.com 620; C) Yogesh Parikh V/s ACIT in dated 25.7.2012 and D) Unimark Remedies Ltd V/s ACIT in ITA No. 409/Mum/2008 dated 26.9.2012 (Mum Tribunal)
Finally, the ld.AR prayed that since the assessee has declared an income in the return of income filed in response to the notice issued u/s 153A and paid due 5 taxes, the penalty deserved to be deleted in view of the ratio laid down in the above said decisions.
The ld. DR heavily supported the orders of authorities below and submitted that the assessee has not declared income in the original return filed by him and during the course of search and seizure proceedings surrendered undisclosed income and declared the same in the return of income u/s 153A of the Act and paid due taxes thereon, which amounted to concealment of income for which the penalty has been levied by the AO and rightly upheld by the ld.CIT(A).
We have considered the rival submissions, perused the materials placed on record including the orders of authorities below in the light of various decisions referred to and relied upon by the rival parties. In the case before us, we find that the assessee has declared undisclosed income in the return of income filed in response to the notice u/s 153A of the Act which was admitted by the assessee in the statement recorded u/s 132(4) of the Act which was recorded during the search operation on the assessee.
Now, the issue before us is whether the income which is declared by the assessee in the return of income u/s 153A on which due taxes have been paid is liable for penal action u/s 271(1)( c ) of the Act or not.
The AO, in this case, has imposed the penalty on the ground that the assessee has concealed income by filing inaccurate particulars of income in 6 respect of an amount of Rs.18,50,000/- being undisclosed income as per seized material titled as Annexure A/2 pages, 16 and 17 which is related to payment made to Bajrang and M/s M M Industries during current financial year i.e 2003- 04 relevant to the assessment year 2004-05. The First Appellate Authority upheld the penalty on undisclosed income of Rs.18,50,000/- by holding that the said income was not disclosed by the assessee in the return filed u/s 139(1) of the Act and therefore held that same to be concealed income on the part of the assessee. The submissions of the ld. AR primarily were on the point that since the income has been shown in the return of income filed u/s 153A of the Act and due taxes were paid thereon has been accepted by the AO during the assessment proceedings and therefore once, there is no difference between the returned income and the assessed income no penalty u/s 271(1)( c ) could be invoked. In the case of Prem Arora (supra), the Delhi bench of the Tribunal has held as under :
Section 271(1)(c), read with section 153A, of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 2004-05 - Whether for purpose of imposition of penalty under section 271(1)(c) resulting as a result of search assessments made under section 153A, original return of income filed under section 139 cannot be considered - Held, yes - Whether concealment of income has to be seen with reference to additional income brought to tax over and above income returned by assessee in response to notice issued under section 153A and, therefore, once returned income under section 153A is accepted by Assessing Officer, it can neither be a case of concealment of income nor furnishing of inaccurate particulars of such income - Held, yes - Search was conducted on 22-11-2006 and cash was found from possession of assessee - 7 Assessee had drawn cash flow statement for entire period of six years in order to determine undisclosed income based on seized material for each of six assessment years - Whether penalty under section 271(1)(c) cannot be imposed by invoking Explanation 5 in assessment year 2004-05 in respect of cash found in previous year relevant to assessment year 2007- 08, merely on presumption that assessee might have been in possession of cash throughout period covered by search assessments - Held, yes [In favour of assessee] Words and Phrases : Word 'pending' occurring in the second proviso to section 153A and words 'all other provisions of this Act shall apply to the assessment made under this section' as occurring in Explanation (i) to section 153A of the Income-tax Act, 1961 In the case of Vrajlal T Gala(supra) Mumbai Bench of the Tribunal has held as under : “Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Explanation 5] - Assessment year 2002-03 - Assessee received two gifts which were credited to its capital account - Said gifts were not included in return filed under section 139 but in return filed in response to notice under section 153C - Assessing Officer levied penalty under section 271(1)(c) on ground of non-disclosure of said gifts in return filed under section 139 - Whether if case of assessee falls within mischief of Explanation 5, then only department can link levy of concealment penalty to action of assessee of not disclosing income in return filed under section 139 - Held, yes - Whether Explanation 5 could not be applicable to assessee's case as it had not been found to be owner of any of asset mentioned in Explanation - Held, yes - Whether, therefore, penalty levied by Assessing Officer was to be deleted - Held, yes [Para 10.5][In favour of assessee]”.
The above mentioned case laws has been discussed in the cases of Yogesh Parikh (supra) and Unimark Remedies Ltd (supra) also and finding thereof have been followed by the Tribunal in these cases also and decided the issue in favour of the assessee.
8 9. The Hon’ble Gujarat High Court in the cast of Kirit Dahyabhai Patel V/s ACIT in Income Tax Appeal No.1181 of 2010 along with Tax Appeals Nos. 1182 of 2010 and 1185 of 2010, order dated 3.12.2014 has held that for all practical purposes return filed in response to notice u/s 153A of the Act has to be as return furnished u/s 139(1) of the Act and therefore, if, any undisclosed income as admitted by the assessee in the statement recorded under section 132(4) of the Act during the course of search operation is offered in the said return and due taxes were paid which were duly accepted by the AO then no penalty could be imposed u/s 271(1)(c ) of the Act. In view of the above discussion and ratio laid down in the various decision of the Tribunal and also the Hon’ble Gujarat High Court, we are in agreement with the arguments advanced by the ld.AR that the penalty as imposed by the AO and upheld by the ld. CIT(A) was wrong and against the provisions of law. Accordingly, we set aside the order of ld. CIT(A) and delete the penalty.
In the result, the appeal of the assessee is allowed.