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Income Tax Appellate Tribunal, DIVISION BENCH ‘B’, CHANDIGARH
Before: SHRI SANJAY GARG & MS. ANNAPURNA GUPTA
per the Hon'ble High Court, reference to the order in the
notice which contains clear satisfaction of the authority of
the existence of any of the grounds would be sufficient
compliance of the aforesaid condition. The Hon’ble High
Court further held that in situation where the order of the
authority is not clear vis-a-vis ground for which it is
initiated, as in cases where there is deemed concealment
as per Explanation-1 to section 271(1)(c) of the Act and
deemed satisfaction of the authority of concealment as per
section 271(1)(b) of the Act, then, the Hon'ble High Court
has held, that the notice should clearly reflect the exact
ground for which penalty is levied. The Hon’ble High Court
has in very clear words explained that the proceedings
being penal in nature the assessee should be made aware of
the grounds on which penalty is being levied so that he can
adequately defend himself. The crux of the judgment
therefore is that the notice u/s 274 should clearly bring out
the charge against the person who is being penalized either
by referring to the assessment order where the AO has
clearly recorded his satisfaction of the existence of ground
warranting levy of penalty or where the same is absent ,by
way of striking off the irrelevant ground which finds
mention in the standard performa used by the Revenue
while issuing notice u/s 274 of the Act. At this juncture, it
is relevant to point out that the penalty u/s 271(1)(c) of the
Act is levied for concealing and/or for furnishing inaccurate
particulars of income. The Hon'ble High Court has clarified
that there may be circumstances whether the charges are
overlapping and both the conditions exist. The facts,
therefore, should clearly point out the existence on either
or both the grounds as is applicable in each cases.
Having said so we shall proceed to apply the aforesaid
ratio to the facts of the present case. The notice issued to
the assessee u/s 274 of the Act states that during the
course of proceedings for the impugned year it appeared
that the assessee had concealed particulars of his income
and (emphasis supplied by us) furnished inaccurate
particulars of income. The relevant notice produced before
us is as under:
NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961. PAN: ABNPJ4747M Office of the Dy. Commissioner of Income Tax, Central Circle-Ill, Dandi Swami Chowk, Civil Lines, Ludhiana. Dated, Ludhiana the 29/11/2013.
To
Sh. Munish Jain, B- 121,PushapVihar, Canal Road, Ludhiana.
Whereas in the course of proceedings before me for the assessment year 2010-11 it appears to me that you:-
have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section of the Income Tax Act, 1961, dated____________________ .
have without reasonable cause failed to comply with the notice u/s -------- --------------- issued on ---------------------- fixing the case for hearing on which was served on
have concealed the particulars of your income and for
furnishing inaccurate particulars of such income.
You are hereby requested to appear before me at 11.30AM on 26.12.2013 and show cause why an order imposing a penalty on you should not be made under section 274 read with section 271 of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1 )(c) of the I.T.Act,1961.
(SUKHJIT SINGH) Dy. Commissioner of Income Tax, Central Circle-Ill, Ludhiana.
The charge against the assessee is therefore on both
Courts which as pointed out above by us has been held to
be plausible as the same can be overlapping in certain
circumstances.
There is, therefore, no infirmity in the notice and the
ground for which penalty was initiated on the assessee has
been clearly and unambiguously brought out in the said
notice. The assessee has also, we find, responded to the
notice and was given full opportunity to defend himself
against the said charges which was duly availed of also by
the assessee. Necessary and requisite reply defending
himself from the charges was filed before the Assessing
Officer. It is not the case of the assessee that due
opportunity was not given to the assessee. Under the
aforesaid circumstances we find that there is no violation of
the principles of natural justice in the present case when
the assessee having been aware of the specific charge for
which penalty was initiated and also having been given due
opportunity to defend himself from the said charge. We,
therefore, cannot agree with the contention of the Ld.
counsel for assessee that the notice issued to it u/s 274 of
the Act suffered from infirmity. Moreover, we find that the
decisions relied upon by the Ld. counsel for assessee are of
no assistance since they are all distinguishable on facts as
in all the said cases the ground on account of which penalty
was initiated was not clear with the notice being in a
standard format mentioning both the charges alternatively
without striking of the incorrect charge which is different
from the facts of the present case. In view of the above, we
dismiss the additional ground of appeal raised by the
assessee.
Now coming to the ground raised challenging the levy
of penalty as per Explanation 5A to section 271(1)© of the
Act, before us the Ld. counsel for assessee relied upon the
submissions made before the Ld.CIT(Appeals) reproduced in
the order of the Ld.CIT(Appeals) at para-2 and which briefly
stated are as under:
Since no incriminating material was discovered
and no valuable article was found by the Revenue
during search, no penalty was leviable as per
Explanation-5A to section 271(1)(c) of the Act.
2) When return of income filed u/s 153A is accepted
by the Assessing Officer, there will be no concealment
of income and consequently penalty u/s 271(1)(c) of
the Act cannot be imposed.
The Ld. counsel for assessee also relied upon the
decision of various Tribunals in this context which were
referred before the Ld.CIT(Appeals) also.
The Ld. DR, on the other hand, supported the order of
the Ld.CIT(Appeals).
We have heard the rival contentions. The relevant
finding of the Ld.CIT(Appeals) while upholding the levy of
penalty after dealing with the above contentions of the
assessee before him is as under:
“To decide the issue, it is relevant to note here that there was an amendment in section 271(1} by Finance Act 2007 and a new explanation 'Explanation 5A' was inserted w.e.f. 01.06.2007, which is applicable to cases where search u/s 132 was initiated on or after 1st day of June 2007. Further 'Explanation 5' has been made applicable to cases where search was initiated before 1st day of June 2007. In the present case under consideration search action u/s 132 was initiated on 30.06.2009, therefore, this case is covered by the provisions of 'Explanation 5A' which is reproduced as under:
“[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 utilizing (wholly or in part) his income for any previous year; or (ii) any income based on any entry in any books of account of 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]” A plain reading of the above explanation shows that if the income declared by the assessee after search, in response to notice u/s 153A, which was not declared by the assessee earlier for any previous year which has ended before the date of search, then the assessee shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. The undisputed fact in this case are that the income declared for the year under consideration in the return filed in response to notice u/s 153A (after the search) was more than the income declared in the return filed u/s 139 before the search i.e. the surrendered/extra income was not forming part of income in the return filed before the date f search). The case of the assessee is thus covered u/s 271(1)(c) by the deeming fiction created by ‘Explanation 5A’ which has been inserted by Finance Act, 2007 w.e.f. 01.06.2007. Further, the case laws quoted by the Ld. Counsel for assessee relates to cases where the search u/s 132 was conducted before 1st June 2007 and in those cases 'Explanation 5’ was applicable and hence these are not applicable to the present case. This view find support from the judgment of the Hon'ble ITAT Chandigarh Bench in ITA No. 516/CHP/2012, Sh. Rajnish Vohra Vs. DCIT, CC-I,
Chandigarh dated 31.10.2012. The relevant para of the judgment dated 31.10.2012 are reproduced below: "29. In the present case, the normal return of income for the assessment year 2007-08 was filed by the assessee, on 31.3,2007 i.e. the date of search itself. However, the assessee filed his return of income in response to notice dated 27.1.2009 issued u/s 153A of the Act, on 23.7.2009, declaring income of Rs.3,27,01,440/-, including the additional amount of Rs.2,00,60,000/-,declared by the assessee, in the statement recorded u/s 132(4) of the Act. The assessee filed return of income, in response to the said notice u/s 153A of the Act, on 23.7.2009 and on the date of filing the return, the Explanation 5A inserted by the Finance (No.2)Act of 2009, with retrospective effect from 1.6.2007, was on the Statute. In the present case, return of income was filed in response to notice u/s 153A of the Act, which is covered by Explanation 5A to Section 271(1) (c) of the Act, inserted by Finance (No.2) Act of 2009. The facts of present case, are not similar to the facts, as obtaining, in the case law, relied upon by the assessee, as discussed above. 30. Further, the provisions of Section 153A are specifically are brought on the Statute book, for assessment, in case of search u/s 132(1) of requisition of books of account u/s 132A of the Act. The opening sentence of Section 153A of the Act, overrides the provisions of Section 139, 147, 148, 149, 151 and 153 of the Act. The assessee has declared undisclosed income, in the return filed- in response to notice u/s 153A of the Act and the CIT(Appeals), having regard to the facts of the case, invoked the currently applicable Explanation 5A Section 271(1) (c) of the Act and upheld the penalty, levied by the AO. In such a fact-situation, the CIT(Appeals) has acted in accordance with the currently operative and relevant penal provisions, with reference to the return of income, filed in response to Section 153A of the Act. 31. In view of the above legal and factual discussions, and having regard to the express statutory provisions of Section 271(1) (c) of the Act read with Explanation 5A there under, as inserted by the Finance. (No. 2) Act, 2009, with retrospective effect from 01.06.2007, we do not find any infirmity, in the findings of ld CIT(Appeals). Therefore, the findings of the CIT(Appeals) are upheld and, consequently, the grounds of appeal of the assesses are dismissed. 32. In the result appeal of the assessee is dismissed. " In the present case the provisions of Explanation-5A to Section 271(l)(c) are attracted. During the appellate proceedings, the main argument of the AR was that no incriminating document was found and the income returned in response to notice u/s!53A has been accepted. However, perusal of the assessment
order shows that the additional income has been declared by the assessee after the search. The extra income offered/assessed u/s 153A represent concealed income which was not declared in the return filed before the search and had there been no search this extra income would never have been brought to tax. Therefore, in view of the facts and circumstances of the case and in the light of the above judgment of the Hon'ble ITAT, Chandigarh Bench passed in ITANo.516/CHD/2012 dated 31.10.2012, the penalty imposed by the AO in this is found as per law in view of Explanation-5A to section 271(l)(c) and therefore upheld.” 20. As is evident from the above, the Ld.CIT(Appeals) has
held that since search in the present case was initiated on
or after 1s t day of June, 2007, the present case is covered
by the provisions of Explanation-5A to section 271(1)(c) of
the Act. At this juncture it is relevant to reproduce the
provisions of Explanation 5A to section 271(1)© since the
challenge of the assessee is to the applicability of the said
Explanation in the facts of the present case:
“[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 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; (b) the 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.]” 21. There is no dispute vis-à-vis the finding of the CIT(A)
that since search in the present case was initiated after 1 s t
day of June 2007 Explanation 5A to section 271(1)(c) was
applicable. Ld.Counsel for the assessee has made no
arguments challenging this finding of the CIT(A).
Further we find no infirmity in the interpretation of
the Ld.CIT(A) of Explanation 5A to section 271(1)(c) since
the language of Explanation 5A is very clear and
unambiguous, that the assessee will be deemed to have
concealed particulars of his income vis a vis income
declared in the return filed in response to notice u/s 153A
after search, which was not declared in the original return
of income filed. Therefore, we hold, that the Ld.CIT(A) has
rightly dismissed the contention of the assessee that where
income returned u/s 153A is accepted no penalty is
leviable. Ld.CIT(A) has, we find, distinguished the case laws
relied upon by the assessee in support of its aforesaid
contention, as not having been rendered in the context of
Explanation 5A to section 271(1)(c) and hence not
applicable in the facts of the present case. Ld Counsel for
the assessee was unable to controvert this. Therefore we
find no reason to interfere in this finding of the CIT(A) also.
As for the contention of the assessee that the
Explanation-5A to section 271(1)(c) of the Act is attracted
only when some incriminating material is found during the
course of search in the form of money, bullion, jewellery or
any income based on an entry in the books of account and
since no such incriminating material was found during the
course of search in the present case, no penalty as per
Explanation-5A to section 271(1)(c) of the Act is leviable,
we find no merit in the same. The facts on record point
otherwise. Undoubtedly it was the assessee who had
surrendered Rs.28 lacs during search. The surrender was
never retracted by the assessee. Nothing to this effect is
recorded in the orders of the authorities below nor has been
brought to our notice during the course of hearing before
us. Thus as per the assessees own admission, he had not
disclosed income to the tune of Rs.28lacs earned during the
year. Then subsequently during assessment proceedings
the assessee claims /admits to have invested this income in
two properties. What this tantamounts to is that the
surrender made by the assessee was on account of
undisclosed income for the year, invested in assets. And
since the assessee had suo moto made the surrender it
tantmounted to the assessee himself coming clean before
the Revenue about the fact of earning such income and
investing it in assets. Thus at the point of time when the
surrender was made by the assessee during search the
Revenue for all purposes had found the assessee to be the
owner of assets acquired out of earlier undisclosed income
during search. After the suo moto disclosure by the
assessee no requirement remained for the Revenue to make
any further discovery at all. The requirement of Explanation
5A of the assessee being found during search to be the
owner of assets acquired out of earlier undisclosed income
is therefore met. The contention of the assessee that no
incriminating material was found during search, we hold,
has been rightly dismissed by the CIT(A).
In view of the above we uphold the order of the CIT(A)
Act, confirming the levy of penalty of Rs.7,66,320/- u/s
271(1)(c) of the Act.
Ground of appeal No.1 is therefore dismissed
In the result, both the appeals of the assessee are dismissed.
Order pronounced in the open court.
Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 19th March, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A)s 4. The CIT 5. The DR Assistant Registrar, ITAT, Chandigarh