This is an appeal filed by the assessee against the order dt. 2nd Jan., 2013 passed by the learned CIT(A) Central, Jaipur, Rajasthan. The only grievance of the assessee in this appeal relates to the confirmation of penalty levied by the AO under s. 271(1)(c) of the IT Act, 1961 (hereinafter referred to as "Act", for short) for a sum ofRs. 7,26,159.
2. Facts of the case in brief are that assessee originally filed his return of income declaring an income of Rs. 4,95,479 on 21st Oct., 2005 under s. 139(1) of the Act. Subsequently, a search operation was conducted on 18th Jan., 2007 at the premises of Shri Dinesh Parmar at B-45, Shastri Nagar, Jodhpur. During search operation, incriminating books of accounts/documents relating to the assessee were found and seizcd. 'The AO accordingly, issued notice under s. 153A of the Act on 7th Sept., 2007 and in response to such notice, the assessee filed the return of income declaring total income of Rs. 26,15,654 on 11th March, 2008. The assessment under s. 153A r/w s. 143(3) of the Act was completed on 11th Nov., 2008 on total income ofI~. 26,15,650, as the assessee had shown additional income ofRs. 21,78,477, therefore, such income was treated as concealed income within the meaning of s. 271(1)(c) of the Act and accordingly, penalty proceedings under s. 271(1)(c) of the Act were initiated. The assessee had not prcferred any appeal against the assessment order and therefore, the assessed income of Rs. 26,15,650 has became fillal. During penalty proceedings, the assessee submitted his written submissions before the AO which are reproduced verbatim as under :
"With reference to the grounds of appeal as already furnished, the assessee submits as under for your kind perusal and sympathetic consideration:
1. The assessee has not concealed the particulars of his income or furnished inaccurate particulars of his income.
2. The assessee has filed return of income under s. 153A declaring a total income of Rs. 26,15,650 and has been assessed at the same amount. The declared income has been duly accepted.
3. In the return of income under s. 153a, the assessee offered Rs. 19,00,000 for levy o[ tax on account of cash available with the assessee out of books. It is out of this cash which was available at the time of search and offered for levy of tax/surrendered by the assessee in his statements as recorded during the course of search. Further, the assessee has shown income of Rs. 2,20,175 on account of the difference between the sale value and the value as adopted by Sub-Registrar considering the provisions of s. 50C. The assessee was not aware of the said provisions of law nor was guided about the same. The assessee however disclosed all the facts and there was no concealment.
4. On facts, there was no concealment of income or furnishing of inaccurate particulars of income. It may be noted that the assessee waS duly assessed on the same income as declared in the return of income as
filed under s.153A.
5. It may also be informed that the assessee filed a letter with the AD:, Investigation, Jodhpur on 22nd Jan., 2007 stating that the assessee IS prepared to pay tax on legitimate and correct amount of income as may be mutually determined on agreed basis. The assessee also stated that the said letter be treated as statement under s. 132(4) thereby entitling the assessee to the benefits of Expln. 5 to s. 271(1)(c) of IT Act, 1961.
The copy of the said letter is enclosed. The assessee having been assessed on the returned income there is no justification of levy of penalty even in view of the abovesaid letter.
(). In this regard, the assessee relies on the following decisions:
(i) Gulabrai V. Gandhi vs. Asstt. CIT (2003) 79 TTJ (Mumbai) 498
(ii) CIT us. Kanhaiyalal (2008) 214 CTR (Raj) 611 : (2008) 2 DTR (Raj) 10 : (2008) 299 ITR 19 (Rqj);
(iii) CIT us. E. V. Balashanmugham (2006) 206 CTR (Mad) 440 : (2006) 286 ITR 626 (Mad);
(iv) CIT us. S.D. V. Chanda (2004) 189 CTR (Mad) 272 : (2004) 266 ITR 175 (Mad);
(v) Asstt. CIT us. Madan Lal Gaggar (2007) 211 CTR (Rqj) 185 : (2007) 291 ITR 465 (Raj).
7. The assessee may also very humbly submit that the decision of the Hon'ble Rajasthan High Court referred (supra) is fully binding despite the alleged information of filling of SLP against the same. The Hon'ble Supreme Court has clarified the doctrine of merger in its decision in Kunhayammed & Ors. us. State of Kerala & Anr. (2000) 162 CTR (SC) 97 : (2000) 245 ITR 360 (SC) :
I t was held that "In spite of a petition for special leave to appeal having been filed, the judgment, decree or order against which leave to appeal has been sought for, continues to be final, effective and binding as between the parties. Once leave to appeal has been granted, the finality of the judgment, decree or order appealed against is put in jeopardy though it continues to be binding and effective between the parties unless it is a nullity or unless the Court may pass a specific order staying or suspending the operation or execution of the judgment, decree or order under challenge."
The copies of the above judgments are enclosed.
It is therefore requested that the proposed penalty proceedings may please be dropped.
The assessee is ready to submit further information evidence etc. if need be."
The reliance was placed on the following case laws :
(1) K. Subramanian & Anr. us. Siemen's India Ltd. & Anr. (1983) 36 CTR (Bom) 197: (1985) 156 ITR 11 (Bom);
(2) Smt. Angoori Deui us. Chief Commr. (Admn.) (2005) 145 Taxman 64 (All);
(3) CITus. Darshan Talkies (1996) 217 ITR 744 (MP).
3. The AO after considering the submissions of the assessee observed that his case was not covered by the immunity granted from levy of penalty in Expln. 5 appended to s. 271(I)(c) of the Act. The AO observed that surrender was not made during the statement recorded under s. 132(4) of the Act during search proceedings. He pointed out that the assessee surrendered only Rs. 18,00,000 out of total cash of Rs. 23,40,400. During search operation, assessee failed to quantify the amount of disclosure in the surrender of income subsequently made on 23rd Jan., 2007. Therefore, mere filing of letter that he would pay tax on legitimate and correct amount of income determined on agreed basis will not grant him immunity for levy of penalty under s. 271(1)(c) of the Act. The AO imposed penalty ofRs. 7,26,159.
4. Being aggrieved, assessee carried the matter to the learned CIT(A) and furnished the written submission which is incorporated by the learned CIT(A) in para 4.4, of the impugned order and reads as under:
"With reference to the grounds of appeal as already furnished, the assessee submits as under for your kind perusal and sympathetic consideration:
I. The learned Dy. CIT was not justified on facts and in law in imposing penalty of Rs. 7,26,159 under s. 271(I)(c) ofIT Act, 1961.
2. The assessee has filed return of income under s. 153A declaring the total income of Rs. 26,15,650.
3.1 The search was conducted against the assessee on 18th Jan., 2007. The assessee filed a letter with the ADI, Investigation, Jodhpur on 22nd Jan., 2007 stating that he was prepared to pay tax on legitimate and correct amount of income as may be mutually determined on agreed basis. He also stated that the said letter be treated as statement under s . 1 32(4) thereby entitling the assessee to the benefits of Expln. 5 to s. 271(I)(c) of Act.
3.2 The learned Dy. CIT has erred in not granting immunity from penalty under s. 271(I)(c) available to the assessee in terms of cl. (i) of Expln. 5 to s. 271(I)(c) of the Act which provides that an assessee shall not be deemed to have concealed the particulars of his income or furnishing inaccurate particulars of such income if he, in the course of the search, makes a statement under sub-so (4) of s. 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or, under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-so (1) of S. 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. The assessee having filed the letter immediately after the search, the same may very well be treated as statement as made during the course of the search.
3.3 In Gulabrai V. Gandhi us. Asstt. CIT (2003) 79 TTJ (Mumbai) 498, it has been held that assessee having fulfilled all the requisite conditions for availing the benefit of immunity under Expln. 5 to s. 2'('1 (1)(e) by rnaking a disclosure in his statement under s. 132(4) that the undisclosed income was represented by assets in the form of unaccounted cash at residence and other places, unaccounted expenses/investment in gold and diamond jewellery, etc. found in his possession and specifying the source of such income, penalty under s. 271(I)(c) could not be levied.
Similarly, in CIT us. S.D. V. Chandru (2004) 189 CTR (Mad) 272 : (2004) 266 ITR 175 (Mad), it was held that part (2) in Expln. 5 does not make any distinction between the previous year which has ended before the date of search and the previous year which is to end on or after the date of search and. therefore when the assessee filed his returns for earlier years admitting a larger income and also paid tax together with interest after his statement was recorded under S. 132(4), he was entitled to immunity under Expln. 5 to s. 271(I)(c) and penalty was not leviable.
Likewise, in CIT us. Kanhaiyalal (2008) 214 CTR (Raj) 611 : (2008) 2 DTR (Raj) 10, it was held that immunity under Expln. 5 to s. 271(I)(c) is not taken away for the simple reason that income disclosed by the assessee in his statement under s. 132(4), for a particular year was spread over in the returns of several years.
4.1 The assessee, in his return of income filed under s. I53A, has surrendered/offered for levy of tax a sum of Rs. 19,00,000 out of cash available with the assessee as surrendered at the time of search and Rs. 2,20,175 towards extra amount of short term capital gain. He has duly paid tax on the said amount on his own volition. The assessee has been assessed on the returned income as such accepting the income as declared by him in the return so filed. Hence, on the facts and circumstances of case, there cannot be said to be any concealment of income or furnishing inaccurate particulars of income in terms of Expln. 5 to s. 271(I)(c) of Act. In view of the decision of jurisdictional High Court in CIT us. Kanhaiyalal (supra), there is no justification of levy of penalty.
4.2 The case of the assessee is squarely covered by the land mark judgment of the Supreme Court in CIT us. Suresh Chandra Mittal (2001) 170 CTR (SC) 182: (2001) 252ITR 9 (SC), wherein it was held that where the assessee filed revised returns showing higher income after search and notice for reopening of assessment, to purchase peace and avoid litigation and Department simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, High Court was justified in holding that no penalty could be levied.
4.3 The case of the assessee is also covered by the judgment of the Madhya Pradesh High Court in CIT us. Shyamlal M. Soni (2005) 144 Taxman 666 (MP), in which it has been held penalty under s. 271 (l)(c) could not be levied in the case, where the income returned in the revised return was accepted and assessed in the hands of the assessee though the revised returns were filed after search.
5.1 There was no concealment at all in the present case. That the assessee has already disclosed long term capital gain of Rs. 6,26,359 in his original return of income. Moreover, in the return filed under s. 153A he has declared short-term capital gain of Rs. 8,46,534. The difference of Rs. 2,20,175 was only on account of difference between the sale value and the value as adopted by Sub-Registrar considering the provisions of s. 50C. The assessee was not aware of the said provisions of law nor was guided about the same. The assessee, however, disclosed all the facts and there was no concealment. The assessee has been assessed at returned income of Rs. 26,15,650. Hence, there cannot be said to be any concealment of income.
5.2 The assessee also relies on the apex Court judgment in T. Ashok Pai us. CIT (2007) 210 CTR (SC) 259 : (2007) 292 ITR 11 (SC), wherein it has been held that 'concealment' refers to a deliberate act on part of assessee; if explanation given by assessee with regard to mistake committed by him has been treated to be bona fide and it has been found as fact that he has acted on basis of wrong legal advice. Question of his failure to . discharge his burden in terms of Explanation appended to s. 271(I)(c) would not arise.
In view of above submission the assessee prays that the penalty as levied may please be deleted and the appeal of the assessee may please be allowed."
5. the assessee filed further submissions as incorporated in para 4.5 of the impugned order which read as under:
"With reference to the grounds of appeal as already furnished, the assessee submits as under for your kind perusal and sympathetic consideration:
1. In respect of the cash as offered for levy of tax, the assessee has surrendered the cash in his statements as recorded under s. 132(4). The assessee has offered the said amount in the relevant year for levy of tax. The said declaration has been duly accepted by the learned Asstt. CIT as is evident from the assessment order for asst. yr. 2007-08 beside the facts of the assessee are very much similar to decision of the jurisdictional High Court in CIT us. Kanhaiyalal (2008) 214 CTR (Raj) 611 : (2008) 2 DTR (Raj) 10.
The levy of penalty in respect of the said surrender is therefore not justified.
2. It is also submitted that there was nothing in the seized records which could have warranted and justified the above additional income i.e. cash as surrendered and also difference in capital gains which was declared by the assessee in his return under s. 153A. On this basis, the levy of penalty is not justified. The assessee relies on the decision of Hon'ble Calcutta High Court in CIT us. Suresh Chand Bansal (2009) 223 CTR (Cal) 128 : J2009) 22 DTR (Cal) 1 : (2010) 329 ITR 330 (Cal) wherein it was held that:
The offer of the appellant was accepted in as much as no detailed discussion of the seized documents is found in the assessment orders. The offer was made to avoid litigation and the offer is an estimate of income that might not have been taxed. The offer of additional income and its acceptance in all the assessment year is a rough estimate. No attempt is made even to find out the locus of the earning and the person who concealed such earning. There was offer of additional income and it was held to be a good offer. It was accepted in its entirety. All these together present the factual context which must be considered before taking a decision about whether the appellant should bc held guilty of concealment of the income offered in each of the assessment years under consideration. If a penalty is not automatic, the relevance of such circumstances has to be taken into account. In my opinion, while the offer is in consequence of search action, the assessment order in accepting the offer of the appellant also admitted that the income that might properly be assessed in the cases of different persons or may also be properly explained with sufficient effort or where no offer need be made, additional income is offered, there is an estimate of undisclosed income considered necessary for the purpose of avoiding uncertainties. Therefore, levy of penalty on such offer is not justified without detailed discussion of the documents and their explanation which compelled the offer of additional income.
Accordingly the order of penalty is cancelled and, the appeal is allowed.' (para 4 to the judgment)
3. The assessee also relies on the decision of Tribunal Rajkot Bench in Shabbir Allauddin Latiwala us. Dy. CIT (2011) 138 TTJ (Rajkot) 104 : (2011) 53 DTR (Rajkot)(Trib) 449, it was held as under:
'We have noticed from the records that neither the assessee is in a position to establish that the additional income offered by him was a voluntary act on his side had nothing to do with the finding of search or the documents seized therefrom. On the other side there is a clear failure 01,1 the part of Revenue as well in identifYing the very foundation on the basis of which the assessees have offered additional 'income in various years and to link such foundation with the documents or other records that might have been found during the course of search. We have noticed form the assessment order as well as from order of CIT(A) that except for mentioning that the assessees offered additional income for taxation while furnishing the returns of income in response to notice under s. 153A. they have not mentioned anything about the linkage of such additional income with any seized material or subsequent finding thereof. It appears that the Department all along is going by a clear understanding and belief that the case is not covered by the immunity granted under Expln. 5(2) to s. 271(1)(c), the same amounts to automatic or deemed satisfaction about either concealment of income or furnishing of inaccurate particulars of income. In our considered view, this cannot be a permissible proposition.
In view of what has been mentioned above we have no hesitation in holding that despite the failure being on both the sides, the penalties levied in different orders are required to be deleted considering the fact that the order of penalty is not a means of collection of revenue for the Department, but meant to act as deterrent for the erring assessee. When nothing is established on either side, the assessee gets relief in this regard without our commenting anything about the merit or otherwise and basis of the additional income offered. We accordingly direct the to delete the penalties for each of the years, subject-matter of' this common order.'
In the present case, the learned Asstt. CIT has accepted the additional income as declared by the assessee in the return under s. 153A. There was no incriminating document or material which warranted the said. declaration by the assessee. The levy of the penalty is therefore not justified both on facts and in law.
4. The facts of the decision of Madras High Court in M. Shahul Hameed' Batcha us. ITO (2007) 213 CTR (Mad) 118: (2007) 292 ITR 585 (Mad) are totally different from the present case. In this case there is additional income because of spreading the surrender and also bonaflde mistake as to applicability of the legal provisions which was not the position in the said decision. The said decision Is therefore not applicable. The levy of penalty by the learned Asstt. CIT relying on the said decision is therefore not correct.
In view of above submission the assessee prays that the penalty as levied may please be deleted and the appeal of the assessee may please be allowed.
6. Learned CIT(A) after considering the submissions of the assessee observed that original return of income was filed on 21 st Oct., 2005 under s. 139(1) of the Act declaring an income of Rs. 4,95,479 subsequent to search under s. 132 of the Act on 18th Jan., 2007 and in compliance to the notice under s. 153A return of income was filed showing total income of Rs. 26,15,654 on 11th March., 2008, which was mainly on account of following reasons: .
(j) During course of search as per page Nos. 16 and 17 of Annex. A, a photocopy of agreement was seized which indicated cash payment of Rs. 2,20,000 by the assessee to Shri. M.M. Mehta S/o Shri Jatan Raj Mehta on 31st March, 2005 towards leave and license regarding plot No. 21, Durgavihar Colony, Jodhpur. Admittedly such income/payment was of undisclosed nature and has not been shown in the regular books of accounts while filing the original return and therefore the appellant has shown such income in the return filed subsequent to search' under s. 153A.
(ij) The assessee has also shown another income of Rs. 16,80,000 which was stated to be unexplained cash in circulation out of books of accounts.
(iii) In the original return the assessee has shown short term capital gain of Rs. 6,26,359 whereas in the return filed under s. 153A the assessee has declared short term capital gain of Rs. 8,46,534, the difference of Rs. 2,20,175 was stated to be on account of difference between the sale value and the value as adopted by sub registrar considering the provisions of s. 50C. As regard such disclosure the assessee has stated that he was not aware of the said provisions and accordingly in the original return short term capital gain was shown less. However all facts relating to this issue has been disclosed."
7. Learned CIT(A) was of the view that the contention of the assessee that such additional income had been filed without any detection by the Department was not factually correct. Therefore, making of incorrect and wrong claim, definitely attracted the provisions of penalty under s. 271(I)(c) of the Act. Learned CIT(A) was of the view that the assessee had strictly not made disclosure under s. 132(4) of the Act by way of recording the statement. As regards to the contention of the assessee that a letter was filed before Asstt. Director of IT on 24th Jan., 2007 stating that the assessee was prepared to pay tax on legitimate and correct amounl of Income as may be mutually determined on agreed basis and the said letter be treated as statement under s. 132(4) of the Act for the benefit of Expln. 5 to s. 271(I)(c) of the Act. Learned CIT(A) was of the view that in the said letter dt. 24th Jan., 2007, there was no reference of seized assets and similarly there was no specific quantification of undisclosed income as to how the income had been earned and that too letter had been filed subsequent to search after drawing of last Panchanama. Therefore, the finding of that such letter could not be treated as the statement under s. 132(4) of the Act cannot be faulted. Learned CIT(A), accordingly, confirmed the penalty levied by the AO. Now, the assessee is in appeal.
8. Learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that in this case, the income assessed by the AO was the same as was disclosed by the assessee in his return filed under s. 153A of the Act. Therefore, penalty under s. 271 (l)(c) of the Act was not leviable.
9. In his rival submissions, learned Departmental Representative although supported the orders passed by the authorities below, but could not controvert this contention of the learned counsel for the assessee that no addition was made by the AO in the income declared by the assessee in his return filed in response to notice under s. 153A of the Act.
10. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that assessment was framed by the AO on the basis of return of income filed under s. 153A of the Act and the assessed income was the same as was declared by the assessee. However, penalty under s. 271(1)(c) of the Act was levied by the AO since there was difference in the income declared in the return of income filed under s. 139(1) and disclosed under s. 153A of the Act. The difference in those two incomes was mainly on account of cash, which was shown by the assessee as an income on account of unexplained cash in circulation <lut of the books of accounts. In this regard. it is noticed from the assessment order for the asst. yr. 2007-08 (copy of which is placed on record) that the AO accepted the cash available with the assessee by observing at p. 4 of the said order as under:
"After considering the reply filed by the assessee and the fact that Rs. 16,80,000 (Rs. 19,00,000 - Rs. 2,20,000) was cash available with him on account of surrender made in the asst. yr. 2005-06 and Rs. 5,00,000 was further available with him for on money received from Shri J agdish Rangwani against sale of property and Rs. 5,40,376 is the cash available in the books as such no interference is required on the issue."
Therefore, the earlier cash available with the assessee in circulation cannot be treated as undisclosed income for the purposes of levy of penalty under s. 271(l)(c) of the Act. The other difference was on account of short-term capital gain. The said difference was of Rs. 2,20,1757 which was on account of difference between the sale value and the value as adopted by Sub- Registrar considering the provisions of s. 50C of the Act the assessee disclosed all the relevant facts in his return of income relating to the shortterm capital gain, so it was not a concealed income. ~ the present case, what was offered by the assessee in his return of income under s. 153A of the Act had been accepted by the AO while framing the assessment under s. 153B (sic-153A) rjw s. 143(3) of the Act. There is no observation of the AO that the amounts .. on which penalty under s. 271(l)(c) of the Act was levied were not disclosed in the return filed by the assessee under s. 153A of the Act. The AO simply stated that the assessee had not disclosed those income in the original return of income. The assessment in this case was framed on 11 th Nov., 2008 and before completion of the said assessment, the assessee vide letter dt. 22nd Jan., 2007 i.e. just after the search operation on 18th Jan., 2007 stated that he was prepared to pay tax on legitimate and correct amount of income as may be mutually determined on agreed basis. The assessee also stated that the said letter be treated as statement under s. 132(4) of the Act, thereby entitling the assessee to the benefits of Expln. 5 to s. 271(l)(c) of the Act. The AO nowhere stated that the contents of the said letter were wrong and not accepted. In other words, he had not stated anything to disprove the contents of the said letter in the assessment order dt. 11 th Nov., 2008. Moreover, whatever was offered by the assessee in his return of income has been accepted by the AO while framing assessment under s. 143(3) r jw s. 153A of the Act. Therefore, the penalty 271(l)(c) of the Act was not leviable in this case. For the aforesaid view, we are fortified by the judgment of the Hon'ble jurisdictional high Court in the case of CIT us. Kanhaiyalal (2008) 214 CTR (Raj) 611 : (2008) 2 DTR (Raj) 10 : (2008) 299 ITR 19 (Raj), wherein it has been held as under:
" ... that, tpe AO had found the income to relate to different assessment years, in different volumes, as contra distinguished to the one submitted by the assessee, and had accordingly made the assessments, which assessments had become final, and were not the subject-maher of challenge. Hence, the assessee was entitled to the immunity under Expln. 5 to s. 271(l)(c). Penalty could not be imposed."
11. In the present case also the income which was declared by the assessee in return of income filed under s. 153A of the Act. Therefore, we are of the considered view that learned CIT(A) was not justified in confirming the action of the AO for imposing the penalty amounting to Rs. 7,26,159 under s. 271(l)(c) of the Act. Accordingly, the same is deleted.
12. In the result, appeal of the assessee is allowed .