ACIT CEN CIR-33, MUMBAI v. KUNAL ASSETS & EXIM LTD, MUMBAI

ITA 1541/MUM/2009 | 2005-2006
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 154119914 RSA 2009
Bench Mumbai
Appeal Number ITA 1541/MUM/2009
Duration Of Justice 2 year(s) 21 day(s)
Appellant ACIT CEN CIR-33, MUMBAI
Respondent KUNAL ASSETS & EXIM LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 25-03-2011
Assessment Year 2005-2006
Appeal Filed On 06-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NO. 1541/MUM/2009 ASSESSMENT YEAR- 2005-06 THE ACIT CENTRAL CIRCLE - 33 AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. KUNAL ASSETS & EXIM LTD. 218 PREM BAUG FLAT NO. 6 1 ST FLOOR SIR BHALCHAND ROAD MATUNGA MUMBAI-400 019 PAN-AAACK 6056H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIJAY SHANKAR RESPONDENT BY: SHRI VIPUL JOSHI O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY UNDER SECTION 271(1 )(C) IMPOSED IN RESPECT OF THE SUM OF RS.79 08 620/- DISCLOSED IN THE RETUR N FILED IN RESPONSE TO NOTICE U/S.153A. 2. THE ASSESSING OFFICER IN HIS PENALTY ORDER HAS OBSERVED AS FOLLOWS: IN THIS CASE ORIGINAL RETURN OF INCOME WAS FILED ON 27.10.2005 DECLARING TOTAL INCOME OF RS 2 77 878/-. THEREAFTER A SEARCH AND SEIZURE OPERATION UNDER SEC 132 OF THE I NCOME TAX ACT 1961 WAS CONDUCTED ON 14.2.2006 AT THE BUSINESS PRE MISES OF THE ASSESSEE AT 218 PREM BAUG SRI BHALCHANDRA ROAD M ATUNGA MUMBAI 19. THE MAIN ISSUE WAS THAT ASSESSEE AVAILIN G OF ACCOMMODATION BILLS BY WAY OF BOGUS BACK DATED PURC HASE BILLS OF PENNY STOCK ITEMS IN THE BOMBAY STOCK EXCHANGE RECE IVING THESE SHARES IN PHYSICAL FORM AND SELLING THE SAME AFTER ONE YEAR IN ORDER ITA NO. 1541/M/09 2 TO CLAIM LONG TERM CAPITAL GAIN WHICH WAS OFFERED F OR TAXATION AT A LOWER RATE. THE SEARCH ACTION REVEALED THAT THE AS SESSEE HAD OBTAINED BOGUS CAPITAL GAINS WITH RESPECT TO THE SC RIP M/S FAST TRACK ENTERTAINMENT LTD IN THE STATEMENT OF SHRI MA HENDRA CHHEDA DIRECTOR OF THE ASSESSEE COMPANY RECORDED UNDER SEC 133(4) DURING THE SEARCH AND SEIZURE OPERATION ON 14.2.2006 IT WA S ADMITTED THAT A SUM OF RS 81 65 320/- WAS GIVEN IN CASH IN LIEU O F SALE BILL OF THE SAID SCRIP. SINCE THE SAID CASH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THE SAME WAS OFFERED FOR TAXATION IN TH E HANDS OF THE ASSESSEE COMPANY FROM UNDISCLOSED SOURCES. IN RESPONSE TO THE NOTICE ISSUED UNDER SEC 153A DAT ED 24.1.2007 THE ASSESSEE FILED RETURN OF INCOME ON 5. 6.2007 DECLARING TOTAL INCOME OF RS 81 86 500/- IN THE ORIGINAL RETU RN FILED ON 27.10.2005 THE LONG TERM CAPITAL GAIN OF RS 79 08 6 20/- WAS SET OFF AGAINST BROUGHT FORWARD LONG TERM CAPITAL LOSS OF R S 65 59 105/- AND THE BALANCE OF RS 13 49 515/- WAS OFFERED FOR T AXATION AS LONG TERM CAPITAL GAIN WHICH IS TAXABLE @ 10% HOWEVER IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SEC 153A THE ASSESSEE HAS FURNISHED TOTAL BUSINESS INCOME OF RS 81 86 500/- WHICH IS IN CLUSIVE OF THE SUM OF RS 79 08 620/- BEING THE LONG TERM CAPITAL G AIN DECLARED IN RESPECT OF SALE OF THE SAID SCRIP IN THE ORIGINAL R ETURN. THE ASSESSMENT WAS COMPLETED UNDER SEC 143(3) R.W.S. 15 3A ON 30.11.2007 DETERMINING TOTAL INCOME OF RS 88 51 460 /- WHICH INCLUDES THE SUM OF RS 79 08 620/- OFFERED FOR TAXA TION DURING THE COURSE OF SEARCH ACTION AND RS 4 08 266/- ON ACCOUN T OF UNEXPLAINED EXPENDITURE INCURRED FOR OBTAINING THE BOGUS CAPITAL GAIN. PENALTY PROCEEDINGS WAS INITIATED UNDER SEC. 271(1)(C) AND A SHOW CAUSE NOTICE WAS SERVED ON THE ASSESSEE ON 30. 11.2007. THE ASSESSEE HAS NOT FILED ANY REPLY THEREFORE AGAIN A NOTHER SHOW CAUSE NOTICE DATED 6.5.2008 WAS ISSUED AND FIXED TH E DATE OF HEARING ON 15.5.2008. BUT THE ASSESSEE HAS NOT FILE D ANY REPLY BUT FILED AN ADJOURNMENT APPLICATION ON 27.5.2008 ON TH E GROUND THAT THE CHARTERED ACCOUNTANT IS ON LEAVE. THE ASSESSING OFFICER HAS NOT ALLOWED FURTHER TIME AS THE PENALTY IS GOING TO BE BARRED BY LIMITATION ON 31.5.2008. THE ASSESSEE HAS DISCLOSED UNACCOUNTED INCOME OF RS 81 65 320/- DURING STATEMENT UNDER SEC 132(4) RECOR DED ON 14.2.2006 WHICH IS REPRODUCED AT PAGE 3 OF THE PENA LTY ORDER. HOWEVER IN THE RETURN OF INCOME FILED IN RESPONSE T O NOTICE UNDER SEC 153A THE ASSESSEE HAS OFFERED PROFIT OF RS 79 08 62 0/- ON THE ALLEGED SALE OF SHARES OF THE SAID SCRIP FOR TAXATI ON THE ASSESSEE HAS CLAIMED THAT IT HAS PURCHASED SHARES OF THE SAI D COMPANY AND PAID RS 256 700/- AND CLAIMED DEDUCTION OUT OF SALE OF SHARES AMOUNTING TO RS 81 65 320/- THE ASSESSING OFFICER H AS NOT ALLOWED ITA NO. 1541/M/09 3 THIS DEDUCTION AS THE PURCHASE OF SHARES ITSELF WAS IN DOUBT AND TRANSACTION WAS ENTERED TO DISCLOSE THE UNACCOUNTED CASH. THE ENTIRE UNACCOUNTED CASH OF RS 81 65 320/- AS ADMITT ED BY THE ASSESSEE WAS UNEARTHED ONLY AS A RESULT OF THE SEAR CH ACTION AND HAD THE SEARCH NOT BEEN CONDUCTED THE ASSESSEE WOUL D HAVE SUCCEEDED IN BRINGING SUCH UNACCOUNTED CASH INTO IT S BOOKS BY MERELY PAYING TAX @ 10% ON RS 13 49 515/- BEING THE BALANCE LONG TERM CAPITAL LEFT AFTER CLAIMING SET OFF OF LONG TE RM CAPITAL LOSS OF RS 65 59 105/- FROM THE ALLEGED LONG TERM CAPITAL GAIN OF RS 79 08 620/- ON SALE OF SHARES OF THE SAID SCRIP. 3. THE AO FURTHER HELD AS FOLLOWS: THE MODUS OPERANDI FOLLOWED BY THE ASSESSEE IN THE ENTIRE TRANSACTION FALLS WITHIN THE AMBIT OF THE TERM COLO URABLE DEVICES DISCUSSED IN THE JUDGMENT OF HONOURABLE SUPREME COU RT IN THE CASE OF MC DOWELL AND CO.LTD VS CTO (154 ITR 148). THE A SSESSEE HAS ENTERED INTO BOGUS TRANSACTION OF RS 81 65 320/- WH ICH HAS BEEN RECEIVED AS SALE PROCEED OF PURCHASE OF SHARES IN A SSESSMENT YEAR 2004-05. THE PERSONS ENGAGING IN SUCH BOGUS TRANSA CTION NORMALLY MAKE PAYMENT OF 5% OF THE AMOUNT OF THE ARTIFICIAL CAPITAL GAIN AS COMMISSION OR SERVICE CHARGES. SUCH COMMISSION CHA RGES FOR OBVIOUS REASONS ARE PAID IN CASH. THE ASSESSE HAS I TSELF ADMITTED BOGUS TRANSACTION IN ITS STATEMENT THEREFORE 5% OF THE TOTAL AMOUNT OF RS 81 65 320/- WHICH COMES TO RS 408 266/- WAS A LSO ADDED BACK TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UN EXPLAINED EXPENDITURE FOR OBTAINING BOGUS CAPITAL GAIN. BY N OT ACCOUNTING FOR SUCH EXPENSES THE ASSESSEE HAS CONCEALED AS WELL AS FILED INACCURATE PARTICULARS OF ITS INCOME. THE ASSESSIN G OFFICER HAS LEVIED PENALTY OF RS 30 75 770/- ON THE CONCEALED INCOME OF RS 85 73 58/- WHICH IS 100% OF THE TAX SOUGHT TO BE EVADED. 4. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE EX PLAINED THAT IN THIS CASE THE ASSESSEE FILED ITS RETURN OF INCOME DECLAR ING A LONG TERM CAPITAL GAIN OF RS 79 08 620/- THE CAPITAL GAIN HAD ARISEN OUT OF SALE IN SHARES OF FAST TRACK ENTERTAINMENT LTD LATER DURING THE SEARC H OPERATION WHEN THE STATEMENT OF THE DIRECTOR OF THE APPELLANT COMP ANY WAS RECORDED HE ADMITTED TO OFFER SUCH AMOUNT AS BUSINESS INCOME AS AGAINST CAPITAL GAIN SO CLAIMED ASSUMING THE TRANSACTIONS TO BE ME RE PAPER TRANSACTIONS AND ACCORDINGLY THE RETURN WAS LATER O N REVISED AS BUSINESS PROFIT TO COME CLEAN AND AVOID VEXATIOUS LITIGATION . IT IS IN THIS REGARD A ITA NO. 1541/M/09 4 VOLUNTARY DECLARATION WAS MADE DURING THE SEARCH PR OCEEDINGS AND WAS AGREED TO OFFER SUCH GAINS AS BUSINESS PROFIT. 5. THE ASSESSEE SUBMITTED THAT THERE WAS NOTHING FO UND ON RECORD BARRING THE ADMISSION MADE BY THE DIRECTOR TO SUGGE ST THAT AT ANY TIME CASH HAD EXCHANGED HANDS IN EARNING SUCH INCOME IN TERMS OF CAPITAL GAINS. IT WAS ONLY ON ACCOUNT OF SOME STATEMENT REC ORDED BY THIRD PARTY THE SEARCH WAS CARRIED OUT AT THE PREMISES OF THE A PPELLANT COMPANY. HOWEVER AT NO TIME EITHER DURING THE COURSE OF SEAR CH ON THE APPELLANT OR OTHERWISE ANY MATERIAL WAS FOUND WHICH COULD SUBSTA NTIALLY PROVE THAT THERE WAS A CASH TRANSACTION EFFECTED BY THE APPELL ANT COMPANY. IN THE ABSENCE OF ANY DOCUMENTS IT IS SUBMITTED THAT ASSES SEE HAS DISCLOSED INCOME TO AVOID THE PROTRACTED LITIGATION AND TO CO OPERATE WITH THE DEPARTMENT THEREFORE PENALTY UNDER SEC 272(1)(C) H AS WRONGLY BEEN LEVIED BY THE ASSESSING OFFICER. IT IS WELL SETTLE D THAT MERELY ADMISSION ON THE PART OF THE ASSESSEE COULD NOT BE THE GROUND OF LEVYING THE PENALTY SINCE THERE COULD BE ONE HUNDRED AND ONE REASONS FO R THE ASSESSEE TO AGREE FOR ANY ADDITION AND FILING REVISED RETURN IN CLUDING SUCH INCOME WOULD NOT BE THE GROUND FOR LEVYING PENALTY. THE A SSESSEE HAS RELIED ON THE FOLLOWING DECISIONS: 1. MP HIGH COURT IN HE CASE OF SURESCHANDRA MITTAL 24 1 ITR 124 2. SIR SHADILAL SUGAR AND GENERAL MILLS LTD VS COMMISS IONER OF INCOME TAX 168 ITR 705 3. KC BUILDERS 266 ITR 562 6. IT IS ALSO ADMITTED THAT IN THE INSTANT CASE THE ASSESSEE HAS DISCLOSED ITS INCOME DURING SEARCH AND SEIZURE OPER ATION UNDER SEC 132(4) THEREFORE PROVISIONS OF SUB-CLAUSE TO EXPLA NATION 5 OF SEC 271(1) IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAS ALSO DISCLOSED THE INCOME OF RS 79 08 620/- IN RESPONSE TO NOTICE UNDER SEC 153A IN THE RETURN OF INCOME AND PAID TAX THEREON T HEREFORE THE ASSESSEE ITA NO. 1541/M/09 5 IS ENTITLED TO THE IMMUNITY AS PER PROVISIONS OF EX PLANATION 5 TO SEC 271(1)(C) OF THE IT ACT. 7. THE APPELLANT HAS FURTHER SUBMITTED THAT IT HAS DECLARED INCOME UNDER SEC 132(4) OF THE IT ACT R.W. EXPLANATION 5 T O SEC 271(1)(C) OF THE I.T ACT 1961 AND ELIGIBLE FOR IMMUNITY FOR PENALTY UNDER SEC 271(1)(C) OF THE I.T ACT 1961 AND THE DECLARATION UNDER SEC 132 (4) CAN BE MADE FOR EARLIER YEARS INCOME ALSO FOR WHICH THE RETURN OF I NCOME ARE ALREADY FILED. THE ASSESSEE HAS RELIED ON THE FOLLOWING DECISIONS. 1. CIT VS SDV CHANDRU 266 ITR 175(MAD) 2. CIT VS KANHAIYALAL (2008) 299 ITR 19(RAJ) 3. CIT VS CHABRA EMPORIUM 264 ITR (2003) 249(DELHI) 4. CIT VS SURAJ BHAN 294 ITR 481(P&H) 5. SHYAM BIRI WORKS (P)LTD VS ACIT (2001) 70 TTJ 88 0 8. THE ASSESSEE HAS SURRENDERED THE ADDITIONAL INCO ME UNDER SEC 132(4) OF THE I.T ACT TO AVOID LITIGATION WITH THE DEPARTMENT AND TO BUY PEACE OF MIND AND MAINTAINING GOOD RELATION WITH TH E DEPARTMENT. THEREFORE NO PENALTY IS LEVIABLE ON THE ASSESSEE. RELIANCE HAS BEEN PLACED ON THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS SURESHCHANDRA MITTAL 251ITR 481. IT IS ALSO SUBMITT ED THAT THE LD CIT(A) CENTRAL II MUMBAI IN THE CASE OF NIRANJAN SIGTA FOR ASST. YEAR 2001-02 TO ASST. YEAR 2006-07 IN APPEAL NO. CIT(A) C II/IT 01 TO 06/ACCC-46/08-09 HAS CANCELLED THE PENALTY U/S 271(1) (C) IN THE SI MILAR GROUNDS. A COPY OF APPELLATE ORDER IS ENCLOSED FOR READY REFERENCE. 9. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE REPLY GIVEN BY THE APPELLANT AND PERUSED THE PENALTY ORDER. THE APPELLANT HAS CL AIMED RS 79 08 620/- WAS DISCLOSED AS ADDITIONAL INCOME DURI NG THE SEARCH AND SEIZURE OPERATION WHILE RECORDING STATEMENT UND ER SEC 132(4) OF THE IT ACT AND CLAIMED IMMUNITY AS PER EXPLANATION 5 TO SEC 271(1) AS THIS INCOME HAS BEEN DISCLOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A AND PAID TAXES THEREON WITH INTEREST. ITA NO. 1541/M/09 6 THE APPELLANT HAS NOT FILED ANY REPLY OF THE PENALT Y NOTICE ISSUED BY THE APPELLANT. THEREFORE THE REPLY OF THE APPELLANT FILED DURING THE PENALTY PROCEEDING WAS SENT TO THE ASSESSING OFFICE R VIDE THIS OFFICE LETTER DATED 23.10.2008 FOR THE ITS OBJECTION AND C OMMENTS. THE ASSESSING OFFICER SENT HER REMAND REPORT VIDE L ETTER DATED 12.11.2008 WHICH IS REPRODUCED AS UNDER: KINDLY REFER TO THE LETTER NO CIT (A)C VIII/AO 33/REMAND REPORT /08-09 DATED 23.10.2008. AT THE OUTSET IT MAY BE MENTIONED THAT THE ASSESSE E WAS ALLOWED ADEQUATE OPPORTUNITY BEFORE IMPOSING PE NALTY UNDER SEC 271(1) THE FIRST NOTICE WAS ISSUED ON 30 .11.2007 AND ANOTHER OPPORTUNITY WAS GRANTED VIDE SHOWCAUSE LETTER DATED 6.5.2008 HOWEVER THE ASSESSEE DID NOT AVAIL OF THE OPPORTUNITIES SO ALLOWED. DURING THE COURSE OF SEARCH ACTION CONDUCTED ON 14.2.2006 THE DIRECTOR OF THE ASSESSEE COMPANY SHRI MAHENDRA CHHEDA HAD ADMITTED THAT A SUM OF RS 81 86 500/- WAS GIVEN IN CASH TO ONE SHRI KETAN LOD AYA INN LIEU OF SALE BILL RELATING TO SHARES OF M/S FAST TR ACK ENTERTAINMENT LTD THE RETURNED INCOME OF RS 81. 8 5 00/- DECLARED IN THE RETURN FILED ON 5 6.2007 IN RESPONS E TO NOTICE UNDER SEC 153A INCLUDED A SUM OF RS 79 08 620/- BEI NG THE LONG TERM CAPITAL GAIN DECLARED IN RESPECT OF SALE OF THE SAID SHARES (AFTER DEDUCTING COST RS 2 56 700/) THE ASSE SSMENT WAS MADE UNDER SEC 143(3) R.W.S. 153A ON 30.11.2007 DETERMINING TOTAL INCOME OF RS 88 51 460/- WHICH IN CLUDES THE SUM OF RS 81 65 320/- OFFERED FOR TAXATION DURING T HE COURSE OF SEARCH ACTION AND RS 408 266/- ON ACCOUNT OF UNE XPLAINED EXPENDITURE INCURRED FOR OBTAINING THE BOGUS CAPITA L GAIN. THE SHARES WERE CLAIMED TO HAVE BEEN PURCHASED IN THE F INANCIAL YEAR RELEVANT TO ASST. YEAR 2004-05. DURING THE CO URSE OF THE SEARCH ACTION THE INVESTIGATION WING HAD UNEARTHED THE MODUS OPERANDI OF SUCH BOGUS TRANSACTIONS AND FOUND THAT THE ALLEGED PURCHASE OF SUCH PENNY STOCK SHARES IS ONLY AN ACCOMMODATION ENTRY AND TO GET SUCH BACK DATED ACCOMMODATION ENTRY PERSONS ENGAGING IN SUCH BOGUS TRANSACTIONS HAVE TO MAKE PAYMENT OF 5% OF THE AMOU NT OF ARTIFICIAL CAPITAL GAIN AS COMMISSION OR SERVICE CH ARGES TO THE OPERATORS. SUCH COMMISSION CHARGES ARE FOR OBVIOUS REASONS PAID IN CASH. ACCORDINGLY AN ADDITION OF RS 408 266 /- WAS MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE FOR OBTAINING THE BOGUS CAPITAL GAIN. ITA NO. 1541/M/09 7 IN THE STATEMENT RECORDED DURING THE COURSE OF THE SEARCH ACTION THE DIRECTOR OF THE ASSESSEE COMPANY SHRI MAHENDRA CHHEDA HAD CLEARLY ADMITTED TO THE FACT TH AT HE HAD GIVEN CASH OF RS 81 65 320/- TO SHRI KETAN LODA YA FOR OBTAINING THE SALE BILL IN RESPECT OF SHARES OF FAS T TRACK ENTERTAINMENT LTD FROM THE FINDINGS ARRIVED AT DURI NG THE COURSE OF THE SEARCH ACTION AND THE STATEMENT OF S HRI MAHENDRA CHHEDA IT WAS CLEAR THAT THE ASSESSEE HAD NEVER PURCHASED THE SAID SHARES. HENCE THE DEDUCTION OF R S 256 700/- IMPLICITY CLAIMED BY THE ASSESSEE OUT OF THE ALLEGED SALE RECEIPT WAS NOT ALLOWED. THE ASSESSEE DID NOT FILE APPEAL AGAINST THE ORDER. THE DETAILED REPLY BY THE ASSESSEE DURING THE COURS E OF THE APPELLATE PROCEEDING HAS BEEN PERUSED. HOWEVER THE ASSESSEES PLEA FOR DELETING THE PENALTY DOES NOT H OLD MERIT. IT IS NOT A CASE WHERE THE ASSESSEE STILL HAD TIME TO FILE THE RETURN OF INCOME AS ON THE DATE OF DECLARATION AND HENCE IMMUNITY FROM PENALTY CANNOT BE ALLOWED IN TERMS . OF CLAUSE (2) OF EXPLANATION 5 OF SEC. 271(1) HAD THE SEARC H ACTION NOT TAKEN PLACE THE SAME WOULD HAVE REMAINED UNACCOUNTE D. THE ENTIRE UNACCOUNTED CASH OF RS 81 65 320/- AS ADMITT ED BY THE ASSESSEE WAS UNEARTHED ONLY AS A RESULT OF THE SEA RCH ACTION HAD THE SEARCH ACTION NOT BEEN CONDUCTED THE ASSESS EE WOULD HAVE SUCCEEDED IN BRINGING SUCH UNACCOUNTED CASH IN TO ITS BOOKS BY MERELY PAYING TAX @ 10% ON RS 13 49 515/- BEING THE BALANCE LONG TERM CAPITAL GAIN LEFT AFTER CLAIM ING SET OFF OF LONG TERM CAPITAL LOSS OF RS 65 59 105/- THE FACTS OF THE CASE CLEARLY INDICATE AN INBUILT ELEMENT OF CONCEALMENT. IT WAS UNDER THESE CIRCUMSTANCES THAT PENALTY UNDER SECTIO N 271(1) WAS IMPOSED ON THE ASSESSEE. AS PER EXPLANATION 5 TO SEC 271(1) THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF THE INC OME IN RESPECT OF THE UNACCOUNTED ASSETS DETECTED RENOVATI ON EXPENSES UNLESS THE CONDITIONS LAID DOWN IN CLAUSES (1) AND (2) THEREUNDER ARE FULFILLED. IN THE ASSESSEES CA SE BOTH THESE CONDITIONS HAVE NOT BEEN FULFILLED AND HE IS LIABLE FOR IMPOSITION OF PENALTY UNDER SEC 271(1) EVEN THOUGH THE UNACCOUNTED ASSETS WERE DECLARED AND OFFERED FOR TA XATION IN THE STATEMENT RECORDED UNDER SEC 132(4) HERE IT MAY BE MAINTAINED THAT AS PER SECTION 139(1) THE DUE DATE FOR FILING RETURN WAS ON OR BEFORE 31.10.2005 HAD THE DECLARAT ION BEEN MADE PRIOR TO THAT DATE THE ASSESSEE WOULD HAVE BE EN ELIGIBLE FOR IMMUNITY FROM PENALTY UNDER SEC 271(1). ITA NO. 1541/M/09 8 AS FAR AS VARIOUS JUDGMENTS RELIED UPON BY THE ASSESSEE ARE CONCERNED THE FACTS OF THE ASSESSEES CASE ARE DISTINGUISHABLE FROM THE FACTS INVOLVED IN THESE CA SES. SUBMITTED FOR KIND PERUSAL. 10. THE LD. CIT(A) IN HIS ORDER HAS STATED AS FOLLO WS: A COPY OF REMAND REPORT WAS ALSO CONFRONTED TO THE APPELLANT AND ITS REPLY WAS OBTAINED AND CONSIDERED. THE APPELLANT HAS EXPLAINED THAT THE IMMUNITY AS PE R EXPLANATION 5 TO SEC 271(1) IS AVAILABLE NOT ONLY IN RESPECT OF INCOME FOR WHICH RETURN HAS NOT BEEN FILED BUT ALSO APPLICABLE WHERE THE RETURN OF INCOME HAS ALREADY BEEN FILED AND SUCH INCOME HAS N OT BEEN DECLARED IN THE RETURN OF INCOME FILED BUT DECLARED SUBSTANTIALLY DURING THE SEARCH AND SEIZURE OPERATIONS UNDER SEC 132(4) OF THE IT ACT. THE APPELLANT HAS RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE CASE OF CIT VS SDV CHANDRU 266 I TR 175IN WHICH THE COURT HAS HELD AS UNDER: EXPLANATION 5 TO SEC 271(1) PROVIDES THAT IN THE C IRCUMSTANCES SET OUT IN PARAS 91) AND (2) OF THAT EXPLANATION THE AS SESSEE IS NOT TO BE REGARDED AS HAVING CONCEALED HIS INCOME. WHILE CLAU SES(A) AND (B) MAKES A CLEAR DISTINCTION BETWEEN THE PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH AND A PREVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH PARA (2) IN EXPLANATION 5 DOES NOT MAKE ANY SUCH DISTINCTION IT REFERS TO THE STAT EMENT GIVEN BY THE ASSESSEE AT THE TIME OF SEARCH BEING THE STATEMENT TO THE EFFECT THAT SUCH ASSETS HAVE BEEN ACQUIRED OUT OF HIS UNDISCLOS ED INCOME AND THE SPECIFICATION BY THE ASSESSEE IN SUCH STATEMENT WITH REGARD TO THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AN D THE SUBSEQUENT PAYMENT BY THE ASSESSEE OF THE TAX ON SU CH UNDISCLOSED INCOME TOGETHER WITH INTEREST. THE WORDS IN PARA ( 2) HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCL OSED IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIR Y OF TIME SPECIFIED IN SUB SECTION (1) OF SECTION 139 IS NOT T O BE REA D AS REFERRING TO INCOME SO FAR NOT DISCLOSED IN RESPECT OF THE PREVI OUS YEAR WHICH IS TO END AFTER THE DATE OF THE SEARCH. THE WORDS USE D ARE INCOME WHICH HAS NOT BEEN SO FAR DISCLOSED IN HIS RETURN O F INCOME. THE ADDITIONAL WORDS WHICH REFER TO THE TIME SPECIFIED IN SEC 139(1) ARE ONLY A REITERATION OF THE LEGAL REQUIREMENT REGARDI NG THE TIME WITHIN ITA NO. 1541/M/09 9 WHICH RETURNS SHOULD NORMALLY BE FILED. IN CASES W HERE THE ASSESSEE HAD NOT DISCLOSED HIS INCOME IN THE RETURN S FILED FOR THE PREVIOUS YEAR WHICH HAVE ENDED PRIOR TO THE DATE OF THE SEARCH AD IN THE STATEMENT GIVEN UNDER SEC 132(4) THE ASSESSEE A DMITS THE RECEIPT OF UNDISCLOSED INCOME FOR THESE YEARS AND A LSO SPECIFIES THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AND TH EREAFTER PAYS THE TAX ON THAT UNDISCLOSED INCOME WITH INTEREST SU CH UNDISCLOSED INCOME WOULD GET IMMUNIZED FROM THE LEVY OF PENALTY . THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS KARHALYALAL 299 IT R 19 HAS HELD AT PAGE 27 OF THE SAID ITR AS FOLLOWS: THUS WHEN THE PARENT PROVISION CONTEMPLATES THE INC OME TO BE PERMISSIBLE IN ANY PREVIOUS YEARS OBVIOUSLY SUB CLA USES (1)AND(3) WHICH ARE IN THE NATURE OF THE PROVISO TO THIS EXPL ANATION HAVE TO BE READ IN LINE THEREWITH AND THEREFORE IF THE DISCLOS URE OF THE ASSET HAS BEEN MADE THEN THE ASSESSEE CANNOT BE PROHIBITED FR OM SHOWING THAT THE INCOME RELATED TO ANY ONE OR MORE OF THE P REVIOUS YEARS BEFORE THE DATE OF THE SEARCH AT THE PARA OF THE IM MUNITY CONFERRED BY SUB CLAUSE (2) OF EXPLANATION 5 BEING TAKEN AWAY . THEY HAVE ALSO HELD AT PAGE 29 OF THE SAID ITR AS F OLLOWS: EXAMINING THE PRESENT CASE FROM THAT STAND POINT IT IS CLEAR THAT THE ASSESSING AUTHORITY HAS MADE ASSESSMENT FOR THE FIV E ASSESSMENT YEARS AND INSTEAD OF BELIEVING THE RETURNS FILED B Y THE ASSESSEE THE ASSESSING AUTHORITY AS A FACT HAD FOUND THE INCOME TO BE RELATING TO DIFFERENT ASSESSMENT YEARS IN DIFFERENT VOLUMES AS CONTRA DISTINGUISHED TO THE ONE SUBMITTED BY THE ASSESSEE AND HAS ACCORDINGLY MADE THE ASSESSMENTS WHICH ASSESSMENTS AD BECOME FINALAND ARE NOT THE SUBJECT MATTER OF CHALLENGE TH AT BEING THE POSITION IN OUR VIEW IT CANNOT BE SAID THAT THE IMM UNITY CONFERRED BY SUB CLAUSE (2) OF EXPLANATION 5 CONSEQUENT UPON THE ASSESSEE GIVING STATEMENTS UNDER SEC 132(4) WAS AT ALL TAKEN AWAY O R EVEN WATERED DOWN. THE APPELLANT HAS FURTHER INVITED MY ATTENTION TOW ARDS THE DECISION ON DELHI HIGH COURT IN THE CASE OF CIT VS CHATBRA E MPORIUM 264 ITR 249 IN WHICH THE COURT HAS HELD THAT SURRENDER OF R S 8 00 000/- WAS MADE ON THE DATE OF THE SEARCH ACTION AND SUCH SURR ENDER FELL WITHIN THE IMMUNITY OF EXPLANATION 5 OF SEC 271(1) ALTHOU GH AMOUNT OF SURRENDERED INCOME WAS DISCLOSED IN REVISED RETURN. IN VIEW OF THE DECISION OF HONBLE MADRAS HIGH COUR T IN THE CASE OF CIT VS SDV CHANDRU 266 ITR 175 DECISION OF HONBLE ITAT ITA NO. 1541/M/09 10 ALLAHABAD IN THE CASE OF SHYAM BIRI WORKS(P) LTD VS ACIT 70 TTJ 880 AND DECISION ON HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS KANHAIYALAL 299 ITR 19 IT IS CLEAR THAT THE APPELLANT IS ENTITLED TO IMMUNITY PROVIDED IN EXCEPTION TO EXPL ANATION 5 TO SEC 271(1) OF THE IT ACT AS THE APPELLANT HAS DISCLOSE D HIS ADDITIONAL INCOME DURING SEARCH AND SEIZURE OPERATION UNDER SE C 132(4) AND PAID TAXES THEREIN. THUS THE APPELLANT FULFILLED T HE CONDITION OF EXCEPTION OF EXPLANATION 35 OF SEC 271(1)() OF THE INCOME TAX ACT THE ASSESSING OFFICER HAS ALSO CONFIRMED THIS FACT IN H IS REMAND REPORT. THUS THE PENALTY LEVIED BY THE ASSESSING OFFICER UN DER SECTION 271(1) ON THE INCOME OF RS 79 08 620/- IS CANCELLE D. 11. THE LD. DEPARTMENTAL REPRESENTATIVE SHRI VIJAY SHANKAR ARGUED AS FOLLOWS: THE ISSUE IS COVERED AGAINST THE ASSESSEE IN THE C ASE OF ASHOK KUMAR GUPTA VS CIT REPORTED IN 287 ITR 376 BY THE HIGH COURT OF PUNJAB AND HARYANA. HE HAS ALSO ARGUED TH AT THE DECISION OF THE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT V S KANHAYALAL REPORTED IN 299 ITR 19 RELIED ON BY CIT(A) IS DISTI NGUISHABLE FROM THE FACTS OF THIS CASE. 12. THE LD. COUNSEL FOR THE ASSESSEE SHRI VIPUL JOS HI REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND R ELIED ON THE ORDER OF THE LD. CIT(A). 13. WE HEARD BOTH THE PARTIES. IN THE CASE OF ASHOK KUMAR GUPTA VS CIT (287 ITR 376) RELIED ON BY THE DEPARTMENTAL RE PRESENTATIVE SEARCH AND SEIZURE WAS CARRIED OUT ON THE ASSESSEE ON 27.0 3.1993. IN THE COURSE OF SEARCH THE ASSESSEE HAS OFFERED TO SURREN DER AN UNDISCLOSED INCOME OF RS. 10 LAKHS. THE ASSESSEE FILED RETURN O N 19 TH JANUARY 1995 OFFERING THE SURRENDERED INCOME IN RESPONSE TO NOTI CE UNDER SECTION 142(1). THE PENALTY WAS IMPOSED BECAUSE THE ASSESS ING OFFICER HELD THAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS LAID DOWN UNDER EXPLANATION 5 TO SECTION TO SECTION 271(1)(C). AFTER CONSIDERI NG THE ISSUE AND VARIOUS DECISIONS THE PUNJAB AND HARYANA HIGH COUR T HELD AS UNDER:_ ITA NO. 1541/M/09 11 IN GEBILAL KANHAILALAL (HUF) VS ACIT 270 ITR 523 (RAJ) THE TRIBUNAL HAD RESTORED THE PENALTY BY REJECTING THE PLEASE OF CONCESSION AVAILABLE UNDER EXPLANATION 5 REFERRED TO ABOVE. THE CONTENTION OF THE ASSESSEE BEFORE THE HIGH COURT WA S THAT THE AMOUNT OF TAX WAS PAID BEFORE COMPLETION OF ASSESSM ENT WHICH SHOULD BE HELD TO BE SUFFICIENT FOR INVOKING EXPLAN ATION 5 SUPRA. TO SUPPORT HIS ARGUMENT HE RELIED UPON A JUDGEMENT OF THE DELHI HIGH COURT IN CHHABRA EMPORIUM CASE (2003) 264 ITR 249 WHICH WAS DIFFERENT ON THE FACTS. THE HIGH COURT ACCEPTED THE PLEA OF THE ASSESSEE BY RECORDING THE FOLLOWING OBSERVATIONS (P AGE 525): THERE IS NO DISPUTE ON THE FACTS THAT SEARCH WAS CONTINUED TILL AUGUST 1 1987 AND ON AUGUST 1 1987 IN THE ST ATEMENT THE ASSESSEE HAS DISCLOSED A PARTICULAR CONCEALED I NCOME AND SURRENDERED IT FOR THE TAX AND TAX HAS BEEN PAID AL ONG WITH INTEREST. IN THESE CIRCUMSTANCES THE TRIBUNAL HAS COMMITTED ERROR IN RESTORING THE PENALTY ORDER OF THE ASSESSI NG OFFICER. WE RESPECTFULLY DO NOT SUBSCRIBE TO THE VIEW TAKEN BY THE RAJASTHAN HIGH COURT FOR TWO REASONS NAMELY THE FACTS IN THA T CASE ARE DISTINGUISHABLE AND SECONDLY THERE IS NO DISCUSSIO N ON THE ISSUE. IN OUR VIEW IF IMMUNITY FROM PENALTY IS TO BE AVAILED OF BY THE ASSESSEE BY INVOKING THE PROVISIONS OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT ON THE SURRENDERED INCOME ALO NG WITH INTEREST IF ANY IS REQUIRED TO BE PAID IMMEDIATELY AND IN ANY C ASE BEFORE DUE DATE OF RETURN IN VIEW OF THE SCHEME OF LAW WHICH IS CLEAR FROM THE LANGUAGE OF THE STATUTE ITSELF. THE PLEA OF THE NON -AVAILABILITY OF FUNDS FOR PAYMENT OF TAX DUE ON THE SURRENDERED INC OME PAYMENT OF TAX ALONG WITH INTEREST BEFORE THE DATE OF ASSESSME NT OR PAYMENT OF INTEREST FOR DELAYED PAYMENT OF TAX CANNOT BE CIRCU MSTANCES WHICH COULD BE PLEADED BY THE ASSESSEE TO CLAIM IMMUNITY FROM LEVY OF PENALTY IN TERMS OF EXPLANATION 5 AS REFERRED TO AB OVE. AN ASSESSEE WHO HAVING SURRENDERED HIS CONCEALED INCOME DURING THE COURSE OF SEARCH AND SEIZURE STILL NEITHER FILES THE RETURN I N TIME NOR DEPOSITS THE TAX ON SURRENDERED INCOME IMMEDIATELY AFTER THE SURRENDER CANNOT BE GIVEN THE BENEFIT OF EXPLANATION 5 AS RE FERRED TO ABOVE. 14. IN THE ABOVE CASE THE SEARCH OPERATIONS WERE C ONDUCTED ON 27.03.1993 AND THE ASSESSEE HAS ACCEPTED THE UNDISC LOSED INCOME IN THE STATEMENT GIVEN IN THE COURSE OF SEARCH. BOTH HAD T AKEN PLACE PRIOR TO THE CLOSE OF THE PREVIOUS YEAR. THEREFORE THE HIGH COURT HAS HELD THAT THE ASSESSEE SHOULD HAVE FILED REGULAR RETURN WITHI N THE TIME PERMITTED ITA NO. 1541/M/09 12 UNDER SECTION 139(1) AND OFFERED UNDISCLOSED INCOME ACCEPTED IN THE STATEMENT GIVEN IN THE COURSE OF SEARCH AND PAID TH E TAX ON THE SAME. WE FIND THAT THE FACTS IN THE PRESENT CASE ARE TOTALLY DIFFERENT FROM THE FACTS BEFORE THE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF ASHOK KUMAR GUPTA VS CIT (287 ITR 376) . IN THE PRESENT CASE THE SEARCH WAS CONDUCTED ON 14.02.2006 BY WHICH TIME THE RETURN FO R THE ASSESSMENT YEAR 2005-06 HAS ALREADY BEEN FILED. HENCE THE ASSE SSEE COULD NOT HAVE FILED RETURN FOR A.Y 2005-06 AFTER THE SEARCH ON 14 .2.2006 WITHIN THE TIME PERMITTED UNDER SECTION 139(1). AFTER THE INTR ODUCTION OF SEC 153A THE UNDISCLOSED INCOME FOUND DURING THE SEARCH HAS TO BE COMPUTED ONLY IN THE ASSESSMENT COMPLETED U/S 153A. FOR THAT THE AO HAS TO ISSUE A NOTICE CALLING THE ASSESSEE TO FILE THE RETURN OF INCOME FOR SIX ASSESSMENT YEARS. THE ASSESSEE CANNOT FILE A RETURN ON HIS OWN AFTER THE SEARCH. THEREFORE THE RATIO OF THE DECISION OF THE PUNJAB AND HARYANA HIGH COURT ASHOK KUMAR GUPTA VS CIT (287 ITR 376) A RE NOT APPLICABLE. 15. THE ABOVE DECISION OF PUNJAB AND HARYANA WAS RE NDERED RELATING TO PERIOD PRIOR TO INTRODUCTION OF BLOCK ASSESSMENT . AT THAT TIME WHENEVER A SEARCH TAKES PLACE DURING A PREVIOUS YEA R THE CONCEALED INCOME IS NORMALLY ASSESSED IN THE YEAR OF SEARCH B Y INCLUDING IT IN THE RETURN OF INCOME FILED IN THE NORMAL COURSE. WITH T HE INTRODUCTION OF CHAPTER-XIV B WITH EFFECT FROM 01.07.1995 AND SECTI ON 153A WITH EFFECT FROM 01.06.2003 WHENEVER THERE IS A SEARCH THE UN DISCLOSED INCOME FOUND DURING THE SEARCH HAS TO BE ASSESSED IN THE A SSESSMENT MADE CHAP XIV B OR AS THE CASE MAY BE UNDER SEC 153A. TH E BLOCK ASSESSMENT UNDER THESE PROVISIONS COVER A PERIOD OF SIX ASSESSMENT YEARS GOING BACKWARDS FROM THE YEAR OF SEARCH. AFT ER THE SEARCH THE AO WILL ISSUE NOTICE CALLING THE ASSESSEE TO FILE RETU RN FOR THE SIX ASSESSMENT YEARS (SEC 153A(1)(A)) AND ASSESS THE TOTAL INCOME FOR THE SIX ASSESSMENT YEARS (153A(1)(B)). AS PER SECOND PROVISO TO SEC 15 3(1) WHEN THE ASSESSMENT IS MADE U/S 153A OTHER ASSESSMENTS MADE FOR THESE SIX ITA NO. 1541/M/09 13 ASSESSMENT YEARS SHALL ABATE. THEREFORE THE ASSESSE E IN THIS CASE CANNOT BE DENIED THE IMMUNITY UNDER EXPLANATION-5 TO SEC 2 71(1)(C) ON THE GROUND THAT HE DID NOT FILE THE RETURN IN TIME AND PAY THE TAX. 16. WE FIND THAT THE RATIO OF THE DECISION OF THE M ADRAS HIGH COURT IN THE CASE OF CIT VS SDV CHANDRU LIMITED REPORTED IN 266 ITR 175 AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS CHHABRA EMPORIUM CASE (2003) 264 ITR 249 REPORTED IN 264 ITR 249 AND THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS KANHAYALAL REPORTED IN 299 ITR 19 ON THE EXPLANATION-5 TO SEC 271(1)(C) ARE MORE APPROPRIATE TO THE FACTS OF THIS CASE. RESPECTFULLY FOLLOWING THE ABOVE THREE DECISION W E UPHOLD THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY OF RS. 30 76 770/- AND DISMISS THE REVENUES APPEAL ON THIS ISSUE. 17. IN THE RESULT THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH 2011 SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 25 TH MARCH 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 1541/M/09 14 DATE INITIALS 1 DRAFT DICTATED ON: 2 1 .0 3 .2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 3 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______