Sameer N.Shah, Mumbai vs Department Of Income Tax

सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं सश्र ु ी सष ु भम चमर्रम, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & MS. SUSHMA CHOWLA, JM आमकय अऩीर सं./ITA No.5282/Mum/2013 ( नििाारण वषा / Assessment Year :2003-04) ACIT, Central Circle-12, Vs. Shri Sameer N Shah, Mumbai 2/20, Zalawad Nagar, Juhu Lane, Andheri (W ), Mumbai-400058 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AACPS 0634 C (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent)

यमजस्र् की ओर से /Revenue by : Shri Neil Philip यनधमवरयती की ओर से /Assessee by : Shri Rajesh Gupte

सन ु र्मई की तमयीख / Date of Hearing : 02/06/2015 घोषणम की तमयीख/Date of Pronouncement 10/06/2015

आदे श / O R D E R

PER R.C.SHARMA (A.M):

This is an appeal filed by the revenue against the order of CIT(A)-

37, Mumbai, dated 30-5-2013 for the assessment year 2003-04, in the

matter of order imposition of penalty u/s.271(1)(c) of the I.T. Act, wherein

the revenue is aggrieved in deletion of penalty so imposed by the

Assessing Officer.

2. Rival contentions have been heard and record perused. Facts in

brief are that the assessee claimed alleged Long Term Capital gains on

sale proceeds of Penny Stock Shares of M/s Data Base Finance Ltd..

during the course of search, the assessee conceded the furnishing of 2 ITA No.5282/13

inaccurate particulars of income on alleged Long Term Capital Gains on

the sale of Penny Stock Shares of M/s Data Base Finance Ltd..

Accordingly, the assessee filed return u/s.153A by offering the said LTCG

as "income from other sources. Thereafter the AO completed the

assessment after making addition of Rs.2,60,329/- towards unaccounted

commission for obtaining LTCG. The AO also noted that the assessee did

not disclose his correct income in its return filed originally and furnished

inaccurate particulars of his income, therefore, levied penalty u/s.271(1)(c)

of the Act.

3. In appeal, the CIT(A) cancelled the penalty imposed u/s.271(1)(c) of

the Act in regard to long term capital gain of Rs.52,06,574/-, after having

following observation :-

"5.5. Ld. AR pointed out that on same set of facts, Hon'ble IT AT, Mumbai in the case of appellant's brother Shri Amit Shah and father, Shri Narottam M. Shah as, in IT.A. No. 908/Mum/2009 dated 24/04/10 and IT.A No. 907/Mum/2009 dated 22112/10 has held that penalty u/s. 271(1)(c) was not imposable on the amount of Capital Gains declared in the returned filed u/s.153A. Relevant part of the Hon'ble Tribunal's order in IT.A No. 908/Mum/2009 is as under:

"In our humble opinion, the penalty in question is levied only with reference of the return of income filed u/s 153A. The AO while passing an order u/s.143(3), did not hold that the assessee has furnished inaccurate particulars in the return file u/s 153A on 15/09/2006 except for an amount of Rs. 2,59,829/-. Thus to hold that the assessee has furnished inaccurate particulars with reference to the return of income based on which penalty u/s. 271 (1)(c) has been initiated, would be bad in law except to the extent of Rs.2, 59,829/-. The original return filed u/s.139(1) is not the basis on which the assessment has been completed nor is it the basis on which the penalty u/s 271(1)(c) has been initiated. The return filed u/s153A cannot be considered a revised return. Thus as there is not variation between the returned income and the assessed income, except to the tune of RS.2,59,821/-, we hold that levying penalty u/s271(1)(c) on the amount of Rs.51,96,559/- is bad in law. As far as the levy of penalty on commission of Rs. 2, 59, 829/- is concerned, the same has not been furnished in the return of income 3 ITA No.5282/13

and hence tantamount to furnishing of inaccurate particulars and we uphold the levy of penalty on the same.

Coming to the argument of the assessee on the issue of applicability of Expln.5 to sec.271(1)(c), we find that the same does not apply to this case for the reason that the statement u/s.132(4) does not refer to any money/bullion/jewellery or other valuable article or thing. The declaration stated that the long term capital gain claimed by the assessee was non-genuine. Clause(2) of Expln.5 reads as follows:

(2) he, in the course of search, makes a statement under sub-

sec.(4) of sec. 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-sec(1) OF SEC 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.

As the declaration is not in connection with money, bullion, jewellery or other valuable article or thing found in the control of the assessee, in our humble opinion, the immunity cannot be extended. In view of the above finding, we need not discuss the other case laws relied upon by the assessee as the same would be an academic exercise.

In the result, we partly confirm the penalty levied u/s 271(1)(c) and hold that the penalty on an amount of RS.51,25, 144/- is bad in law and hence deleted and that levy on an amount of Rs.2,59,829/- is hereby confirmed.

5.6 As the facts obtaining in the present case are same as in the above order of the Tribunal, respectfully following the same, penalty imposed on Long Term Capital Gain of Rs. 52,06,574/-, is directed to be cancelled. The above view is also fortified by the decision of Hon'ble Delhi Bench of the ITAT in the case of Prem Arora Vs. DCIT (2012) 78 DTR (Del) (Trib) 91. The head notes and summary of decision in the above case are as' under:

Penalty u/s. 271 (1 )(c)-Concealment-Disclosure of additional income in the return filed under sec. 153A-Normal assessment procedure covered by sections. 139, 147, 148, 149, 151 and 153 has been completely excluded by operation of non obstante clause occurring in sec. 153A and therefore, the search assessment under sec. 153A cannot be treated as continuance of normal assessment proceedings, whether abated or not- There is complete detachment of assessment. proceedings under sec.143 or sec. 147 from search assessment u/s.153A -When the scheme of search assessment does not take into account the earlier assessment proceedings, whether abated or not, it is not proper to refer to the returned income under sec. 139 for the purpose of imposition of penalty 4 ITA No.5282/13

uls.271(1)(c)-Thus, the concealment of income has to be seen with reference to the additional income brought to tax over and above that returned by the assessee in response to notice issued under sec. 15 u/s.153A-Penalty uls.271(1)(c) is imposable when there is variation between the assessed income and returned income - where returned income disclosed in the return filed under sec. 153A is accepted by the AO, there is not concealment and consequently penalty uls.271(1)(c) is not leviable-In this case, though the AO has rejected the cash flow statement prepared from the seized material for all the six assessment years and estimation of commission income by the assessee, he has accepted the returned undisclosed income declared by the assessee in response to notice uls. 153A- Since the returned income has been accepted, no satisfaction is recorded by the AO that the assessee has concealed income with reference to the return filed by him m response to notice uls. 153A-lt is also not discernible from the assessment order-Hence, penalty uls.271(1)(c) is not leviable-As per Expln. 5A, in case of a search initiated on or after 1st June, 2007, the assessee would be liable for penalty u/s,271(I1)(c) both in respect of assets of assets as well as any Income based on nay entry in books of account or other documents or transactions- No such provision relating to entries was in existence in Expln. 5 prior to insertion of Expln.5A in sec.271 (1)-Hence, till insertion of Expln. 5A and sec. 271AAA by the Finance Act, 2007, the scheme of assessment gave immunity to the assessee in respect of undisclosed income based on the entries in the seized material-In the instant case, cash of Rs.1,11,45,350 was found from the possession of the assessee at the time of search on 2~d Nov.,2006-Expln. 5 to sec.271(1)(c) cannot be invoked in A. Y.2004-05 merely on the presumption that the assessee might have been in possession of cash throughout the period covered by the search assessments-Unlike provisions of Expln.5A, the provision of Expln. 5 cannot be invoked in A. Y. 2004-05 in respect of entries recorded in the seized material-Hence, the contention of the Revenue that the assessee was in possession of cash throughout the period of six assessment years has to be rejected- Thus, even the amended provisions of Expln.5 cannot be applied in A. Y.2004-

05- Consequently, penalty u/s.271(1)(c) cannot be imposed even by invoking Expln. 5 in A. Y. 2004-05 in respect of the cash found during the search.

Held : The provisions of sections 153A, 1538 and 153C are complete code for search assessments wherein search has been initiated after 31st May, 2003. The existence of the words "all other provisions of this Act shall apply to the assessment made under this section" in Expln. (i) to sec.153A make it clear that in search assessments, amongst others the provisions

relating to penalty and prosecution will also be applicable. However, when normal assessment procedure covered by sections 139, 147, 148, 149, 151 and 153 has been completely excluded by operation of non obstante clause "notwithstanding anything contained" the search assessments made u/s.153A cannot be treated as 5 ITA No.5282/13

continuance of normal assessment proceedings whether abated or not. "

Thus there is complete detachment of assessment proceedings u/s.143 or sec. 147 from search proceedings u/s.153A. When scheme of search assessment as designed by the legislature does not prescribe to take into account the earlier assessment proceedings whether abated or not, it will not be proper or justified to refer to returned income u/s. 139 for the purpose of imposition of penalty u/s.271(1)(c). it follows that the concealment of income has to be seen with reference to additional income brought to tax over and above returned by the assessee in 'response to notice issued under sec. 153A. Accordingly for the purpose of imposition of penalty under sec. 271(1)(c) resulting as a result of search assessment made under sec. 153A, the original return of income filed under sec. 139 cannot be considered. Further in the case of search initiated after 1st June, 2003 a return of income is always filed on issue of notice under sec. 153A. the penalty under sec. 271(1)( c) is imposable when there is variation in assessed and returned income), If there is no variation, there will be no concealment When there is no concealment, question of penalty u/s. 271(1)( c) will not arise. This-is settled position of law, the concept of voluntary return of income may be important in penalty provision initiated in course of normal assessment proceedings made u/s.143(3)or sec.147 but not u/s. 153A. lft.om above discussion it follows that where returned income filed u/s. 153A is accepted by the AD, there will be not concealment of income and consequently penalty u/s.271(1)(c) cannot be imposed. [Emphasis supplied]"

4. Ld. DR before us submitted that as the assessee has offered the

sale proceeds of shares of above petty stock company of Rs.52,06,574/-

and commission of Rs.2,60,329/- as income from other sources,

therefore, the above amounts has rightly been treated by the AO as

income from other sources and taxed accordingly. However, the CIT(A)

did not pay heed to the alleged artificial long term capital gain of

Rs.52,06,574/- as the income of the assessee.

5. On the other hand, ld. AR of the assessee relied on the order of the

CIT(A).

6 ITA No.5282/13 6. We have considered rival contentions and perused the orders of the

authorities below and found that the after following the order of the

Tribunal decided in the case of assessee's father and brother in ITA

No.907&908/Mum/2009, dated 24-4-2010 and decision of the Delhi bench

of the Tribunal in case of Prem Arora Vs. DCIT (2012) 78 DTR (Del) (Trib)

91, the CIT(A) had cancelled the penalty imposed on Long Term Capital

Gain of Rs.52,06,574/-. In the instant case, we found that the penalty is

imposed with reference of the return of income filed u/s.153A. We also

found that as there is no variation between the returned income and the

assessed income, except to the tune of Rs.2,60,329/-, the CIT(A) has

rightly held that the levying penalty u/s.271(1)(c) of the Act on the amount

of Rs.52,06,574/- is bad in law. Accordingly, we do not find any infirmity in

the order of CIT(A) deleting the penalty by following the decision of

coordinate bench having similar facts.

7. In the result, appeal of the revenue is dismissed.

Order pronounced in the open court on this 10/06/2015.

Sd/- Sd/- (सष ु भम चमर्रम) (आय.सी.शभमव) (SUSHMA CHOWLA) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भंफ ु ई Mumbai; ददनमंक Dated 10/06/2015 प्र.कु.मभ/pkm, यन.स/ PS

आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :

1. अऩीरमथी / The Appellant प्रत्मथी / The Respondent. आदे शािसार/ BY

2. ORDER,

3. आमकय आमक् ु त(अऩीर) / The CIT(A), Mumbai.

4. आमकय आमुक्त / CIT वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai उप/सहायक पुंजीकार

5. (Asstt. Registrar)

6. गमर्व पमईर / Guard file.

आयकर अपीऱीय अधिकरण, भुंफई / सत्ममवऩत प्रयत //True Copy/ ITAT, Mumbai