The order of the Bench was delivered by
Vikram Singh Yadav (Accountant Member)- This is an appeal filed by the assessee against the order of the learned Commissioner of Income- tax (Appeals)-2, Jaipur dated January 11, 2016 for the assessment year 2010-11 confirming the levy of penalty of Rs. 8,27,866 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961.
2. Briefly the facts of the case are that the assessee filed his original return of income under section 139(1) of the Act on July 30, 2010 for the assessment year 2010-11 declaring a total income of Rs. 1,22,06,480. Thereafter search and seizure operation under section 132 of the Act was carried out on September 30, 2010 at the business and residential premises of the assessee. During the course of such search against the assessee, the authorised officer confronted the assessee with noting of the seized document identified as AS-1 page 5 found in the course of search conducted against Shri D. D. Modi on August 24, 2009 wherein "25,000 Govind Ji Lashkari" was noted. In its sworn statement recorded on oath, the assessee has stated he does not recall any such entry or any such transaction which has been made with Shri D. D. Modi. However, the assessee offered to tax Rs. 25,00,000 on account of the said entry for the financial year 2009-10 for peace of mind and avoid long litigation with the Department and agree to pay the self-assessment tax thereon. Thereafter, on December 27, 2010 the assessee revised his original return of income wherein additional income of Rs. 25,00,000 was disclosed under the head "Business income". Thereafter, the Assessing Officer issued notice under section 153A of the Act on June 7, 2011 and in compliance thereof, the assessee filed a return of income on June 21, 2011 declaring a total income of Rs. 1,47,06,480 which includes the additional income of Rs. 25,00,000 disclosed during the search operation and also in the revised return of income filed earlier on December 27, 2010. Thereafter, the Assessing Officer completed the assessment under section 143 read with section 153A of the Act making further addition of Rs. 1,79,178 on account of the estimated interest earned at 12 per cent. from the date of search till March 31, 2010 and also initiated penalty proceedings under section 271(1)(c) of the Act.
3. Later on, in the course of penalty proceedings, the assessee filed his explanation in response to the show-cause notice dated November 5, 2012 which is reproduced in the penalty order. The learned Assessing Officer did not find the explanation of the assessee legally tenable and as per the discussion made by Assessing Officer in the penalty order, the same were rejected. The learned Assessing Officer levied penalty of Rs. 8,27,866 under section 271(1)(c) of the Act, 1961 on the additional income of Rs. 25,00,000 and also on the addition of Rs. 1,79,178 being estimated interest on the said additional income of Rs. 25,00,000. The learned Assessing Officer held that the case of the assessee falls within the ambit of Explanation 5A to section 271(1)(c) and stated that Explanation 5A lays down additional conditions, which if met by the assessee, then the deeming provisions of section 271(1)(c) comes into play. According to this Explanation, if the assessee is found to be the owner of 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 ; where the return of income for such previous year has been furnished before the said date but such income has not been declared therein, then such income is deemed to be the income which the assessee has concealed. As per the Assessing Officer, the case of the assessee falls clearly within the ambit of Explanation 5A because the assessee surrendered the income during the course of search on May 30, 2010 in which an amount of Rs. 25 lakhs was surrendered and the return of income disclosing such income was filed on December 27, 2010 (revised return)/June 21, 2011 (return under section 153A after the due date of filing return of income under section 139(1) had elapsed on July 31, 2010. Thus, it is a fact that the assessee disclosed an amount of Rs. 25 lakhs in the return filed on December 27, 2010 which is a return filed after the date of search. The search has been initiated after June 1, 2007. Income of Rs. 25 lakhs pertains to the previous year 2009-10, which has been ended before the date of search. The return of income for that previous year has been furnished before September 30, 2010 but income of Rs. 25 lakhs has not been declared in that return then notwithstanding that income of Rs. 25 lakhs is declared by him in any return of income furnished on or after the date of search, the assessee, for the purpose of imposition of penalty under clause (c) of this section, is hereby deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. Because all the conditions laid down in Explanation 5A have been met and the deeming provisions of section 271(1)(c) are clearly applicable to the assessee. In view of the above, it was held by the Assessing Officer that it is established beyond doubt that the assessee has furnished inaccurate and/or concealed particulars of its income to the extent of surrender and interest earned thereon for Rs. 26,79,178 and levied penalty at 100 per cent. of tax sought to be evaded i.e., Rs. 8,27,866 under section 271(1)(c) of the Act.
4. Being aggrieved, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals) against the said penalty order and filed a written submission reproduced in the appeal order of the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) relying on the provisions of section 153A, Explanation 5A to section 271(1)(c) and on the judgment of the Delhi High Court in the case of CIT v. Usha International Ltd. [2012] 254 CTR 509 (Delhi) and the decision of the co-ordinate Bench in the case of Rajnish Vohra v. Deputy CIT (I. T. A. No. 516/CHD/2012) upheld the levy of penalty. The operative part of his order reads as under :
"3.2.3. The provisions of sections 153A, 153B and 153C of the Act, are a complete code for assessment wherein search and seizure has been initiated after May 31, 2003. Thus, there is a complete detachment of assessment proceedings under section 143 or 147 from the search proceeding under section 153A of the Act. Therefore, all the assessment proceeding in this case will be abated from the date of search i.e., September 30, 2010 and though the assessee has revised his original return under section 139(4) of the Act by offering additional income of Rs. 25 lakhs to the total income offered earlier. In the computation sheet, the assessee has mentioned 'Rs. 25,00,000 as business income offered during search'. This voluntary surrender is not suo motu act but because of search action conducted under section 132 of the Act, the assessee offered the additional income of Rs. 25,00,000 for the assessment year 2010-11.
3.2.4 Therefore, after the conduct of search on September 30, 2010 there is no need for filing of belated return/revised return under section 139(4) of the Act by offering the additional undisclosed income of Rs. 25 lakhs which is not recorded in his regular books of account, accordingly the assessee will not be entitled for immunity prescribed in section 139(5) of the Act. Therefore, the said return of income filed on December 27, 2010 becomes non est. In view of these facts, the Assessing Officer has correctly not taken this revised return filed on December 27, 2010 into cognizance. However, on being cornered and also contemplating future action of penalty under section 271(1)(c) of the Act by the Department, the assessee has tried to take shelter under the garb of section 139(4) of the Act so as to get immunity prescribed under section 139(5) of the Act. But this act of the assessee is of no use because the search operation was conducted against the assessee therefore, in view of this all proceedings of assessment/reassessment shall abate.
3.2.6 It is a fact that the satisfaction for concealment of particulars of income or furnishing of inaccurate particulars of income has to come from the assessment order passed as a consequence of the return filed under section 153A of the Act. In this case, there is no variation to the returned income filed under section 153A of the Act except computation of interest Rs. 1,79,178 at 12 per cent. for the intervening period between August 24, 2009 (date of search on D. D. Modi) till March 31, 2010 i.e., for 218 days. I do not find any infirmity in this as this is fair estimation for a loan advanced at 12 per cent. per annum. More so the assessee has not preferred any appeal against the addition made in this assessment order passed under section 153A read with section 143(3) of the Act. In view of these facts, the Assessing Officer observed that the assessee's case will be squarely fall under Explanation 5A to the provisions of section 271(1)(c) of the Act. Further, the assessee has also failed to explain and substantiate the particulars of undisclosed loan advanced of Rs. 25 lakhs. Therefore, the facts of the case law relied upon by the assessee, is of no use.
3.2.7 Now let us examine Explanation 5A to section 271(1)(c) of the Act. 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.
Thus under the amended provisions of the Income-tax Act, 1961 with respect to the penalty in cases of search as applicable today, there is no immunity as such, even if the full disclosure of such income is made in the statement under section 132(4) of the Act and also taxes has been paid thereon. The legislative language of Explanation 5A to section 271(1)(c) of the Act is such that it provides no escape route from the levy of penalty. This provision is directly applicable to this case where the assessee is duly disclosing the additional unaccounted income as admitted in the statement under section 132(4) of the Act by paying appropriate tax in the return of income filed under section 153A of the Act and the assessment under section 153A read with section 143(3) of the Act is made without any deviation from the returned income except interest (earned at 12 per cent. on Rs. 25 lakhs money advance) computed for the intervening period of 228 days. The facts of this case are that since the assessee offered the said undisclosed income in the revised return after the search operation i.e., on being cornered by the Department, it was a deliberate act of concealment of income and the assessee deemed to have concealed the particulars of income for the year under consideration, and it spoke of volumes of contrivance by the assessee with apparent element of mens rea. Thereafter, where in pursuance of the search operation, the assessee has filed his revised return declaring higher taxable income (Rs. 25 lakhs as additional undisclosed income) since it is undisputed that the time of filing the original return the assessee was aware of the concealment, it has to be concluded that there was no compliance with section 139(5) of the Act and therefore, the revised return being filed non est, as the conduct of the assessee cannot be said to be bona fide, therefore, the penalty order so passed has to be sustained.
On similar facts, the hon'ble Gujarat High Court has sustained the penalty order passed under section 271(1)(c) of the Act in the case of Snita Transport (P.) Ltd. v. Asst. CIT [2014] 42 taxmann.com 54 (Guj) ; 221 Taxman 21 (Guj) (Mag) and Bharatkumar G. Rajni v. Deputy CIT [2013] 40 taxmann.com 344 (Guj).
Therefore, in view of the facts and circumstances of the case as discussed above, the concealment of income came to be established and penalty under section 271(1)(c) of the Act has been rightly levied upon the assessee. Accordingly the Assessing Officer's action is sustained. The assessee's appeal in ground No. 1 fails."
5. During the course of hearing, the learned authorised representative of the assessee has submitted that in respect to income of Rs. 25 lakhs included in the revised return/return filed under section 153A by the assessee, in the course of search in the case of the assessee, he was confronted with a paper market annexure AS-1 page 5 alleged to have been seized in the course of search from Shri D. D. Modi alleging that an advance of Rs. 25 lakhs was made by the assessee to him. The paper contained no date etc., and simply mention "25000 Govindji Lashkari". The assessee stated that it is true I am known in market as Govind Lashkari and it is also true that D. D. Modi is my main finance broker but I did not remember any such entry and neither remember that I did any cash transaction with Shri Modi. Even, however I for my peace of mind and to save me from long departmental procedure/litigation I surrender this as my additional business income for the financial year 2009-10 for tax and will deposit the self- assessment tax thereon. The assessee thereafter filed a revised return within time allowed under section 139(5) of the Income-tax Act, 1961 disclosing the said amount of Rs. 25 lakhs as its income from business and paid tax. In the return filed under section 153A the same income was disclosed. The learned Assessing Officer thus have no cogent evidence of such advance and also made no enquiry but addition got made on account of voluntarily disclosure of the said business income of Rs. 25 lakhs as stated above. Thus the addition is solely on the voluntary admission of the assessee in good faith to buy peace and avoid litigation. In the case of the assessee no material has been found corroborating the said advance. In CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC), the hon'ble Supreme Court held that where the assessee filed returns showing higher income after search to purchase peace and avoid litigation and the Department simply rested its conclusion on the act of the voluntary surrender by the assessee in good faith, the High Court was justified in holding that no penalty could be levied under section 271(1)(c).
5.1 It was further submitted that section 153A deals with the provision of framing the assessment in the case of search and seizure action made under the Act. The section starts with a non obstante clause relating to the normal assessment procedure covered by sections 139, 147, 148, 149, 151 and 153 in respect of the search made after May 31, 2003. The section, so excluded relate to filing of returns, assessment and reassessment proceedings.
The provisions of sections 153A, 153B and 153C are a complete code for assessment wherein search and seizure has been initiated after May 31, 2003. Thus, there is complete detachment of assessment proceedings under section 143 or 147 from search proceeding under section 153A of the Act.
For the purpose of imposition of penalty under section 271(1)(c) resulting as a result of search assessment made under section 153A, the original return of income filed under section 139 cannot be considered. The Assessing Officer has to frame an assessment on the basis of the return filed under section 153A.
5.2 It was further submitted that the penalty under section 271(1)(c) is imposable when there is a variation between the assessed and the returned income. If there is no variation, there will be no concealment or furnishing inaccurate particulars of income. When there is no concealment or furnishing of inaccurate particulars of income the question of levy of penalty under section 271(1)(c) of the Act will not arise. Where the returned income filed under section 153A is accepted by the Assessing Officer, there will be no concealment of income or furnishing of inaccurate particulars of income and consequently penalty under section 271(1)(c) cannot be imposed.
The satisfaction for concealment of particulars of income or furnishing of inaccurate particulars of income has to come from the assessment order passed as a consequence of the return filed under section 153A.
Section 271(1)(c) does not authorise the Assessing Officer to compare the return filed under section 139(1) and under section 153A to conclude that the assessee had furnished false particulars of income. When an assessment under section 143(3) read with section 153A is made, the fault had to be seen with reference to the return filed under section 153A. No penalty could be imposed under section 271(1) (c) of the Act as there was no variation in the income returned in response to the notice under section 153A vis-a-vis the assessment passed under section 143(3) read with section 153A of the Act.
The addition of Rs. 25 lakhs made by the assessee in the revised return/ return under section 153A was not based on any incriminating material found in the case of search in his case but was included voluntarily to avoid litigation. The addition for the alleged interest on the alleged advance was only estimated which was also not based on any incriminating material seized in the course of search.
5.3 In support, the learned authorised representative relied on the following judicial pronouncements :
(A) Deputy CIT v. Purti Sakhar Karkhana [2013] 23 ITR (Trib) 667 (Nag); [2013] 35 taxmann.com 594 (Nagpur-Trib) held as under :
"Search assessments made under section 153A cannot be treated as continuance of normal assessment proceedings whether abated or not and, therefore, it will not be justified to refer to returned income under section 139 for the purpose of imposition of penalty under section 271(1)(c).
Where the returned income filed under section 153A is accepted by the Assessing Officer and there is no variation in the assessed income and the returned income, penalty under section 271(1)(c) cannot be imposed."
(B) The hon'ble High Court of Madhya Pradesh in the case of CIT v. Shyamlal M. Soni [2005] 276 ITR 156 (MP) held laid down as under :
"that no penalty under section 271(1)(c) could be levied in case, where income returned in revised returns was accepted and assessed in the hands of the assessee even though the revised returned were filed after search and subsequent to inquiries made by the Department during the course of assessment proceedings."
(C) The hon'ble Supreme Court in case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC) held that where the assessee filed revised returns showing higher income after search to purchase peace and to avoid litigation penalty cannot be levied under section 271(1)(c) as the burden of proving the concealment has not been discharged.
In the above referred to case, in the penalty proceedings under section 271, the assessee claimed that he had offered the additional income to buy peace of mind and avoid litigation. Penalty orders were passed and the Commissioner (Appeals) confirmed the orders. But the Appellate Tribunal held that the Department had not discharged its burden of proving the concealment and had simply rested its conclusion on the act of the voluntary surrender done by the assessee in good faith, and that penalty could not be levied. On a reference, the Madhya Pradesh High Court held that no penalty could be levied for concealment (see CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP). The Department preferred appeals to the Supreme Court. The Supreme Court dismissed the appeals holding that no interference with the order of the High Court was called for (CIT v. Suresh Chandra Mittal [2000] 251 ITR 9 (SC)).
(D) The hon'ble Rajkot Tribunal in the case of Shabbir Allauddin Latiwala v. Deputy CIT [2011] 16 taxmann.com 177 (Rajkot) held as under:
"When there was nothing placed on record which might even remotely indicate about the specific nature of additional income offered by the assessee while furnishing the returns in response to a notice issued under section 153A, and there was no direct or indirect linkage brought on record with reference to any of specific seized materials so as to establish charge for which penalty had been levied then the penalty order should be set aside."
5.4 In respect of the estimated addition of Rs. 1,97,178 on the said alleged amount of Rs. 25 lakhs, it was submitted that the addition is not based on any incriminate document/paper found in the course of search. The assessee has not admitted or owned the alleged advance of Rs. 25 lakhs to Shri D. D. Modi nor admitted the receipt of any interest thereon. Thus the addition is merely on estimate as per the own perception of the learned Assessing Officer and this is neither a concealment of income nor furnishing of inaccurate particulars within the meaning of section 271(1)(c) or any Explanation thereunder as there was no direct or indirect linkage brought or record with reference to any specific seized material from the assessee and so the learned Assessing Officer has not established any charge for which penalty under section 271(1)(c) could be levied on the assessee. In CIT v. Dhillon Rice Mills [2002] 256 ITR 447 (P&H) it was held that where additions were made on the estimate basis and the Department failed to prove the concealment of income penalty under section 271(1)(c) cannot be levied. In CIT v. SAS Pharmaceuticals [2011] 335 ITR 259 (Delhi) held that where addition on surmises, conjectures and possibilities on estimate there could be no penalty under section 271(1)(c).
5.5 It was further submitted that the learned Commissioner of Income- tax (Appeals) relied on the judgment in the case of CIT v. Usha International Ltd. [2012] 254 CTR (Delhi) 509 which is distinguishable on facts. In that case in survey discrepancy in cash, stock and renovation details found which were found which was incriminating material while in the case of assessment in search no material was found regarding advance of Rs. 25 lakhs to D. D. Modi or earning of any interest thereon. The other cases cited by the learned Commissioner of Income-tax (Appeals) is the concluding part of the order also distinguishable on facts as therein also some incriminating document/material was found with the assessee in search/survey proceedings which is not the case of the assessee. Thus the appeal order of the Commissioner of Income-tax (Appeals) is not in accordance with law. It was further submitted that the learned Commissioner of Income-tax (Appeals) in the appeal order not appreciated facts of the case in a correct perspective. The judgment relied on by the learned Commissioner of Income-tax (Appeals) is distinguishable on facts and do not lay down that in such case penalty is certainly leviable. The judgment of the Income-tax Appellate Tribunal relied on by the Commissioner of Income-tax (Appeals) is also on a different facts for invoking Explanation 5A on account of disclosure of undisclosed income on finding of some incriminating material in the course of search of the assessee himself. In the search of the assessee no incriminating material was found in respect of the said alleged advance of Rs. 25 lakhs but the surrender was made on account of some documents alleged to have been seized from a third party simply to buy peace and avoid litigation. Thus the said judgment cannot be applied in the case of the assessee. The original return was filed in time and the revised return was filed within the time allowed under section 139(5) so the learned Commissioner of Income-tax (Appeals) is not correct in law to hold the revised return as non est.
5.6 It was finally submitted that on totality of facts and in law, no penalty under section 271(1)(c) is leviable on the assessee either on account of including of Rs. 25 lakhs in the return filed by the assessee in the revised return filed under section 139(5) of Act/return under section 153A or on the addition of Rs. 1,79,198 being estimated addition made by the learned Assessing Officer on account of the estimated interest on the said alleged amount of Rs. 25 lakhs. The appeal order passed by the Commissioner of Income-tax (Appeals) confirming the penalty is not correct in law and on facts and, therefore, penalty confirmed by him deserves to be deleted.
6. The learned Department is heard who has vehemently argued the matter and relied on the order of the lower authorities. He has also referred to the decision of the hon'ble Calcutta High Court in the case of CIT v. Prasanna Dugar [2015] 371 ITR 19 (Cal) ; [2015] 59 Taxmann.com 99 (Cal) and it was submitted that a special leave petition filed against the said decision has been subsequently dismissed by the hon'ble Supreme Court.
7. We have heard the rival contentions and pursued the material available on record. The Assessing Officer has invoked the deeming provisions of Explanation 5A to section 271(1)(c) of the Act to levy penalty in the instant case. Section 271(1)(c) of the Act being in the nature of penal provisions require a strict interpretation and it is to be seen that the instant case falls within the four corners of the said provisions and conditions laid down therein are specifically fulfilled. Therefore, it would be relevant to examine the conditions specified in Explanation 5A which reads 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 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 in accurate particulars of such income."
7.1 In the instant case, in the course of search which has been initiated under section 132 on September 30, 2010 the assessee has admitted and offered to tax Rs. 25,00,000 for the financial year 2009-10. The said admission is based on the seized document identified as AS-1 page 5 found in the course of search conducted against Shri D. D. Modi on August 24, 2009 wherein "25,000 Govind Ji Lashkari" was noted. Therefore, the assessee is found to be the owner of income of Rs. 25 lakhs based on the said entry in the documents so seized and he claims that such entry represents his income for the financial year 2009-10. Further, the financial year 2009-10 has ended on March 31, 2010 much before the date of search which happened on September 30, 2010. In the return of income furnished under section 139(1) on July 31, 2010 for the such financial year 2009-10, such income has not been disclosed. Such income has been disclosed subsequently in the revised return filed under section 139(5) on December 27, 2010 and thereafter, in the return filed pursuance to issuance of notice under 153A on June 21, 2011. No specific arguments have been taken by the learned authorised representative to dispute the applicability of Explanation 5A in the instant case. In light of these undisputed facts, the provisions of Explanation 5A are clearly attracted in the instant case.
7.2 Now coming to the other contentions raised by the learned authorised representative. Firstly, the learned authorised representative has placed reliance on the hon'ble Supreme Court decision in the case of CIT v. Suresh Chand Mittal (supra) for the proposition that there was voluntary disclosure in good faith to buy piece and avoid litigation and the same should not be a basis for levy of penalty. The said decision was rendered by the hon'ble Supreme Court much prior to the insertion of Explanation 5A by the Legislature in the statue books and hence, did not consider Explanation 5A and does not help the case of the assessee in the instant case. Recently, in the context of Explanation 5 to section 271(1)(c) of the Act, a similar contention came up for consideration before the hon'ble Delhi High Court in the case of Principal CIT v. Neeraj Jindal [2017] 393 ITR 1 (Delhi) and it was held that Explanation 5 was specifically inserted to deal with such situations where higher income was disclosed in the return filed consequent to search operation, and the assessee but for such explanation, can contend that addition made to his income in the return filed after the search operations were only to buy peace and did not tantamount to concealment. Here it would be relevant to refer to para 24 of the said decision of the hon'ble Delhi High Court which reads as under :
"The purpose of inserting Explanation 5 in the statute books was explained by the Supreme Court in K. P. Madhusudhanan v. CIT [2001] 251 ITR 9 9 (SC), wherein the court held (page 104) :
'The learned counsel for the assessee then drew our attention to the judgment of this court in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC). He submitted that the assessee had agreed to the additions to his income referred to hereinabove to buy peace and it did not follow therefrom that the amount that was agreed to he added was concealed income. That it did not follow that the amount agreed to be added was concealed income is undoubtedly what was laid down by this court in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC) and that therefore, the Revenue was required to prove the mens rea of a quasi- criminal offence. But it was because of the view taken in this and other judgments that the Explanation to section 271 was added.'
This shows that Explanation 5 was specifically inserted to deal with the situation where higher income was disclosed in the return filed consequent to a search operation, and the assessee claimed that such addition of income did not imply that there was concealment. In other words, but for the insertion of Explanation 5, it would be open to the assessee to contend that additions made to his income in the return filed after the search operation, were only to buy peace and did not tantamount to concealment. This also flows from the language of Explanation 5 itself, wherein the words used by the Legislature are 'be deemed to have concealed the particulars of his income', which shows that there is a deeming fiction by virtue of which such additional income is considered as concealment. It such additions in the income in the return filed consequent to a search, were to automatically evidence concealment under section 271(1)(c), there would be no need for Parliament to enact a deeming fiction in the form of explanation ; such a reading would render Explanation 5 otiose and without any purpose."
7.3 Further, the learned Departmental representative has drawn our attention to the decision of the hon'ble Calcutta High Court in the case of CIT v. Prasanna Dugar (supra) which was rendered in the context of Explanation 5A to section 271(1)(c) of the Act. In that decision, the hon'ble High Court has held that the term "voluntary" has to seen in the context of statement not been recorded by applying force. It is in that sense a voluntary disclosure and it has been clarified by the assessee that he had not given any statement under pressure and he didn't want to rectify or modify the statement made by him.
7.4 In view of the above legal proposition laid down by the hon'ble Delhi High Court as well as the hon'ble Calcutta High Court, we are unable to subscribe to the view that in the instant case since there was voluntary disclosure in good faith to buy piece and avoid litigation, the same should not be a basis for levy of penalty as subscribing to such a view would make Explanation 5A otiose which has been specifically invoked in the instant case.
7.5 Now, coming to another contention of the learned authorised representative that for the purpose of imposition of penalty under section271(1)(c) resulting as a result of search assessment made under section 153A, the original return of income filed under section 139 cannot be considered. In our view, the said issue is no more rest integra. Considering the non obstante clause under section 153A which excludes the application of section 139, the return filed pursuant to notice under section 153A takes the place of the original return for the purposes of all the provisions of the Act including levy of penalty under section 271(1)(c) of the Act. In the instant case, there is no dispute in this regard as the Assessing Officer has not compared the income returned under section 139(1) and income returned under section 153A. Even the learned Commissioner of Income-tax (Appeals) has accepted the same where he states that the provisions of sections 153A, 153B and 153C are a complete code for assessment wherein the search and seizure has been initiated after May 31, 2003 and complete detachment of assessment proceedings under section 143 or 147 from search proceedings under section 153A of the Act. The said contention therefore does not support the case of the assessee.
7.6 Now, coming to another contention of the learned authorised representative that the penalty under section 271(1)(c) is impossible only where there is variation between the assessed and returned income. Where the returned income filed under section 153A is accepted by the Assessing Officer, there will be no concealment of income or furnishing of inaccurate particulars of income and consequently penalty under section 271(1)(c) cannot be imposed. To appreciate this contention, it would be relevant to refer to Explanation 4 to section 271(1)(c) which defines the term "tax sought to be evaded". It contains three clauses which are applicable in different situation. In the case of the assessee, the clause (c) is clearly attracted which provides that "in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished."
7.7 In the instant case, it is no doubt true that the returned income under section 153A has been accepted (except for an amount of Rs. 1,97,178) and assessed as such by the Assessing Officer. What is how ever relevant to examine is the difference between the amount of income assessed and amount of income in respect of which particulars have been deemed to have been concealed invoking the provisions of Explanation 5A. In the instant case, the particulars which have been deemed to have been concealed amounts to Rs. 25 lakhs and on such amount, the penalty has been rightly levied by the Assessing Officer. Therefore, this contention of the learned authorised representative does not support the assessee.
7.8 Now coming to the levy of penalty on the addition of Rs. 1,97,178 is concerned, we find that the Assessing Officer has applied the same analogy as applied in the case of surrender of Rs. 25 lakhs and invoked Explanation 5A to levy the penalty. We are of the view that the addition is based on purely estimated basis where the Assessing Officer has worked out interest income on the said loan amount of Rs. 25 lakhs advanced to Shri D. D. Modi, and there is no material to support either the charging of interest or the rate at which such interest has been charged which has been found during the course of search. In the result, it cannot be said to be a case of concealment of income and the penalty to this extent stand deleted.
7.9 We may add that we have also gone through the other decisions relied upon by the learned authorised representative. In our view, the said decisions are clearly distinguishable on facts and does not the support the case of the assessee.
7.10 In the light of the above discussions and in the entirety of facts and circumstances of the case, we hereby upheld the levy of penalty on Rs. 25 lakhs under the deeming provisions of Explanation 5A to section 271(1)(c) of the Act. The appellant therefore gets a partial relief on Rs. 1,97,178 and the ground of appeal taken by the appellant is thus partly allowed.
8. In the result, the appeal of the assessee is partly allowed.
The order pronounced in the open court on May 24, 2017.