SH. MUNISH JAIN,LUDHIANA vs. DCIT, LUDHIANA

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.

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.

(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.

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.

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:

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.

decision of various Tribunals in this context which were

referred before the Ld.CIT(Appeals) also.

the Ld.CIT(Appeals).

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).

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.

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).

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