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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 18, Chennai, dated 19.02.2016 and pertains to assessment year 2007-08, confirming the penalty under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act').
Shri Lakshmichand Nahata, the Ld. representative for the assessee, submitted that there was search in the premises of the assessee on 13.03.2009. A notice under Section 153C of the Act was issued. The assessee filed return of income admitting total income of `56,37,130/-. The assessment was completed on 30.12.2010. According to the Ld. representative, the return filed by the assessee was admitted by the Assessing Officer without making any further addition. The return filed consequent to the notice issued under Section 153C of the Act, on 26.11.2010 is the first return filed by the assessee. According to the Ld. representative, the assessee explained before the Assessing Officer that he disclosed entire income in the return of income and the same was accepted without any further addition, therefore, there cannot be any levy of penalty under Section 271(1)(c) of the Act. However, the Assessing Officer rejected the explanation of the assessee and levied penalty on the ground that the assessee did not file any return of income either under Section 139(1) or within the extended period under Section 139(5) of the Act. Therefore, according to the Ld. representative, the return filed by the assessee cannot be treated as the return filed voluntarily. The CIT(Appeals) has confirmed the order of the Assessing Officer after referring to Explanation 5A to Section 271(1)(c) of the Act.
Referring to Explanation 5A to Section 271(1)(c) of the Act, the Ld. representative for the assessee submitted that there is no mandate to apply automatically. The Ld. representative placed his reliance on the decision of this Bench of the Tribunal in Shri A.V.
Elango v. ITO in to 1770/Mds/2012 dated 26.11.2012. According to the Ld. representative, the return filed consequent to the notice issued under Section 153C of the Act has to be construed as filed under Section 139(1) of the Act. Therefore, there is no question of levy of penalty under Section 271(1)(c) of the Act. The Ld. representative placed his reliance on the decision of this Bench in Tirupathy Construction Company v. DCIT in I.T.A.
Nos.1203 & 1204/Mds/2013 dated 23.08.2013. The Ld. representative has also placed his reliance on the decision of Cuttack Bench of this Tribunal in Sarat Chandra Sahoo v. DCIT (2015) 152 ITD 326 and submitted that when the assessee has not filed return earlier and the return was filed only consequent to the notice under Section 153C of the Act, the return filed by the assessee has to be construed as return filed under Section 139(1) of the Act for the first time, therefore, there cannot be any levy of penalty. The Ld. representative has also placed his reliance on the decision of this Tribunal in S.M.J. Foundation v. DCIT in I.T.A.
No.549/Mds/2011 dated 24.06.2011. The Ld. representative has also placed his reliance on the decision of Kolkata Bench of this Tribunal in DCIT v. Pratap Properties Pvt. Ltd. in to 1388/Kol/2010 dated 10.02.2016.
On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that the assessee has not filed any return of income. There was search conducted under Section 132 of the Act on 13.03.2009 in the case of Shri Kushal Raj Bokadia, father of the assessee. During the course of search operation, it was found that the assessee has purchased a land to the extent of 6.42 acres at Hosur. Since the assessee could not explain the source of investment to the extent of `59,78,930/- for purchase of 6.42 acres of land, the assessee admitted as income in the return filed consequent to the issue of notice under Section 153C of the Act.
Referring to Explanation 5A to Section 271(1)(c) of the Act, the Ld. Departmental Representative submitted that when the due date for filing of return of income was expired and the assessee has not filed the return of income, then notwithstanding that such income is declared in the return of income furnished after the date of search, for the purpose of Section 271(1)(c) of the Act, it has to be deemed that the assessee has concealed the particulars or furnished inaccurate particulars of income. Therefore, according to the Ld. D.R., the CIT(Appeals) after referring to Explanation 5A to Section 271(1)(c) of the Act, found that the assessee is liable to pay penalty in respect of the income detected during the course of search and seizure operation. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the penalty levied under Section 271(1)(c) of the Act.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, there was search operation in the case of the assessee’s father Shri Kushal Raj Bokadia on 13.03.2009. On the basis of incriminating material found during the course of search operation, a notice was issued under Section 153C of the Act calling for the assessee to file the return of income. The assessee, in fact, filed the return of income on 26.11.2010 disclosing a sum of `59,78,930/- being the investment made in the purchase of landed property at Hosur. The question arises for consideration is whether the assessee has filed inaccurate particulars or concealed any part of income so as to attract penalty under Section 271(1)(c) of the Act?
6. We have carefully gone through Explanation 5A to Section 271(1)(c) of the Act, which reads as follows:-
“Explanation 5A.— Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of-- (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year ; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,— (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein ; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.”
In view of the above explanation, a deeming fiction was created for the purpose of levy of penalty under Section 271(1)(c) of the Act. In other words, if the return was not filed before the due date, then there was a deemed concealment of income in respect of the income.
We have carefully gone through the provisions of Section 271AAA which reads as follows:-
“271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent. of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee - (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived ; (ii) substantiates the manner in which the undisclosed income was derived ; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.
Explanation For the purposes of this section,- (a) “undisclosed income” means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has? (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year ; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of the search ; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted ; (b) “specified previous year” means the previous year— (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date ; or (ii) in which search was conducted.” In view of sub-section 3 of Section 271AAA of the Act, no penalty under Section 271(1)(c) of the Act shall be imposed in a case where search was initiated on or after 1.6.2007 but before 1.7.2012. In the case before us, the search was admittedly initiated on 13.03.2009.
Therefore, no penalty could be imposed under Section 271(1)(c) of the Act. Moreover, a co-ordinate Bench of this Tribunal in Tirupathy Construction Company (supra) found that the return filed consequent to the notice under Section 153C of the Act has to be construed as return filed under Section 139(1) of the Act. The Tribunal ultimately found that there cannot be any levy of penalty under Section 271(1)(c) of the Act.
In view of the above, this Tribunal is unable to uphold the orders of the authorities below and accordingly the same are set aside and the penalty levied is deleted.
In the result, the appeal filed by the assessee is allowed.