Case Law Details
Rahul Shamrao Mahajan Vs ACIT (ITAT Pune)
ITAT Pune held that penalty u/s 271(1)(c) of the Income Tax Act duly leviable in case the additional income is disclosed in ITR filed u/s 153A and such additional income is originated out of seized material.
Facts- The appellant for AY 2014-15 has set-up case alleging that the penalty u/s 271(1)(c) of the Income Tax Act is not attracted for the income voluntarily disclosed by him u/s 153A of the Act and which was accepted by the department without any variation.
Conclusion- Admittedly the additional income so disclosed in the ITR filed u/s 153A was solely attributable and arising out of such unrecorded entries. Therefore once it is clearly and undisputedly established that the additional income disclosed and returned in the ITR filed u/s 153A is indeed originated out of seized material, then explanation 5A of section 271 of the Act comes into play notwithstanding the returned income was accepted without variation. Therefore in the light of settled legal position the action of tax authorities in invoking the penal provisions for levy of penalty u/s 271(1)(c) on such account is well within the law and cannot be faulted.
FULL TEXT OF THE ORDER OF ITAT PUNE
These twin appeals of the assessee are assailed against the separate orders of first appellate authority Commissioner of Income Tax (Appeals-12), Pune [‘CIT(A)’ in short] for different assessment year [‘AY’ in short] passed u/s 250 of the Income-tax Act,1 961 [‘the Act’ in short].
2. Subject to rule 18 of ITAT-Rules, 1963 perused the appeal memo relating to levy of penalty u/s 271 (1 )(c) for the AY 2014-15 assailed through ITA No 602/PUN/2022, and quantum addition assessed u/s 143(3) r.w.s. 153A of the Act agitated in ITA No 603/PUN/2022.
3. Since the facts of assessment are sailed into consequential penalty proceedings thus both being interconnected, with the agreement of parties, for the purpose of convenience & brevity are heard together resulting into this consolidated order.
4. We shall first deal with ITA No. 603/PUN/2022 wherein we observe that;
4.1 The assessee is an individual engaged in a medical profession, who for the AY 2017-18 had filed his original return of income [‘ITR’ in short] u/s 139(1) of the Act on 30/10/2017 declaring total income of ₹82,220/-.
4.2 Consequent to a search action u/s 132 of the Act on 20/02/2019 certain incriminating material was seized and analysis thereof revealed certain unrecorded investments or expenditure of the appellant which were over and above the value of investment recorded in the books of account maintained by him for his profession.
4.3 Pursuant to notice u/s 153A of the Act, the assessee returned a revised income of₹1,64,73,700/- disclosing thereby the previously suppressed & undisclosed cash receipts/income earned of ₹87,96,912/- which was attributable to unrecorded investment made or expenditure incurred in terms of findings of the department.
4.5 Subsequently, on a similar line the income for AY 2014-15 was also re-assessed u/s 153A of the Act wherein the appellant admittedly declared previously suppressed / undisclosed professional receipts as established from the entries of same seized incriminating material.
4.6 Based on the aforestated assessment, the assessee made a fresh claim by filing an appeal against the impugned order for AY 2017-18 seeking a telescopic effect of undisclosed income offered to tax in AY 2014-15. The Ld. CIT(A), however finding no force in the augments of the assessee, has rejected the claim of the appellant after giving his detailed findings & reasoning vide para 5.5 placed at page 11 of 16 of impugned order;
“5.5 Now the first claim of the appellant, which was not considered by the AO, is that out of Rs. 76,71,300/- declared in A. Y. 2012-13, the amount of Rs. 70,00,000/- was available with him for investment/expenses in the year under consideration. The appellant stated that the cash of Rs. 70,00,000/- was given to relatives/friends for his personal use, but the same was immediately returned by the relatives and therefore, it was available with him during the year under consideration. The appellant had filed confirmations from these persons in support of the same before the AO and copies of the same were also given during the course of appellate proceedings. However, it appears to be a very convenient story on the part of the appellant. There is no other document / evidence in support of this claim of the appellant except these confirmations. The confirmations filed by the appellant were also examined. It is seen that in the confirmation of Shri Milind Avinash Mahajan, it was stated that the cash of Rs.30 lakhs was given for purchase of immovable property in Pune/nearby areas and since the same was not crystalised, the cash was returned in March 2012. Similarly, in the confirmation of Smt. Lenna Jitendra Patil, it was stated that the cash of Rs.29 lakhs was given for purchase of immovable property in Pune/nearby areas and since the same was not crystalised, the cash was returned in April 2012. Also, in the confirmation of Shri Vinod Patii, he stated that he received 5 lakhs for booking of banana saplings but the same were not booked and the money was returned within 4-5 days to the appellant. For other three persons, the appellant filed signed copy of accounts only. It is seen that these parties were given money at around the same time and it is claimed at this stage that the money was returned immediately thereafter without utilizing the same. The appellant is at liberty to raise any claim, but such claim had to be backed up by substantial evidence. However, no supporting evidence or document in support of these claims made, as per the confirmation, was filed. Moreover, these persons were given money on other occasions also e.g. Lina Tai (Smt.Lenna Jitendra Patil) was given 8 lakhs, 5 lakhs by appellant and 3 lakhs by his wife and the appellant received back his money on 18.5.2013 and his wife received back the money on 25.5.2013. The entries of giving the money and receiving back the same are recorded in the diary. But there is no entry for receiving back the amounts under consideration. Further, there are several entries in the diary for giving certain sum to various persons and the subsequent return of the same or utilization is also recorded in the diary, which was also explained by the appellant during the search/post-search/ assessment proceedings. However, as mentioned above, there is no such noting of return of cash by these persons for the amounts under consideration. Moreover, it is seen from the notings in the diary that meticulous records for quite a long period were maintained and therefore, if these amounts were returned, as claimed by the appellant, notings to that effect would have been recorded in the diary. However, no such entries were found. In view of these facts, it is clear that these amounts under consideration were not received back and the same were utilized for the purposes best known to the appellant. Also, during the course of search as well as the post-search proceedings too, no such claim was made by the appellant. In fact, while filing the return of income u/s 153A of the Act also, when the appellant offered income on account of unexplained expenditure/investment for which the source of fund could not be explained, no such explanation was filed. Only when the proceedings were initiated for A. Y. 2012-1 3 in the case of the appellant, he came up with this claim, which is not backed up with supporting evidence, as discussed above. Therefore, this claim made by the appellant for telescopy is found to be be incorrect and hereby rejected.”
5. During the course of physical hearing the Ld. AR reiterated that, the difference of investment disclosed in the year under consideration and assessed u/s 1 53A of the Act was solitarily attributable to money or cash returned by the parties to whom on a previous occasion such sums were advanced or given by the assessee for purchase of immovable properties. However subsequent to impugned assessment such sums were also disclosed in the 1 53A proceedings for AY 2014-15. Thus once an undisclosed income has suffered the taxation in AY 2014-1 5, the same income should not be subjected to tax again in AY 2017-18 on the basis of its re-utilization for the purpose of investment. Per contra the Ld. DR adverting to the findings of impugned order has vehemently opposing the plea of the appellant submitted that, the appellant has dejectedly failed to establish from the incriminating material that any such monies were indeed returned to him by the parties to whom the monies were claimed to have advanced for purchase of immovable properties, for the reasons the claim for telescopic effect stands legless. The Ld. DR further argued that, in so far as the impugned AY is concern there is no addition while assessing the total income of the appellant; hence there cannot be any grievance against the income voluntarily returned by him, therefore this appeal is without any merit.
6. We have carefully gone through the impugned order of first appellate authority and we find that the Ld. CIT(A) had amply analyzed facts in wholesome corresponding with that of notings found in the incriminating seized dairy maintained by the appellant which was seized during the course of search and seizure operations u/s 132 of the Act. The impugned order has categorically recorded that, although entries of giving money and receiving them back are found recorded in the seized diary, but there are no entries in the said seized diary relating to monies advanced as well returned form the parties viz; (1) Milind Avinash Mahajan for 30Lakhs, (2) Lenna Jitendra Patil for 29Lakhs, and (3) Shri Vinod Patil for 5Lakhs. On the basis these flawless findings coupled with absence of any plausible explanation from the assessee, the Ld. CIT(A) confirmed the addition of ₹87,96,912/- denyingthe claim for telescopic effect, thus making it just, proper and reasonable warranting no interference of this Tribunal. For the reason in our considered view the appeal of the appellant fails to make difference.
7. We shall now take-up the ITA No.602/PUN/2022 whereby the appellant for AY 2014-15 has set-up case alleging that the penalty u/s 271(1)(c) is not attracted for the income voluntarily disclosed by him u/s 153A of the Act and which was accepted by the department without any variation.
8. In this context the case records revealed that;
8.1 As against the returned income of proceedings with that of ITR originally filed u/s 139(1) of the Act.
8.2 The Ld. AO invoking explanation 5A of section 271(1)(c) levied the consequential penalty @100% of tax sought to be evaded on differential amount of income declared in the ITR filed pursuant 153Aproceedings with that of ITR originally filed u/s 139(1) of the Act.
8.3 The said imposition of penalty was assailed before Ld. FAA on the solitary ground that since the assessee has voluntarily offered the undisclosed income arising out of suppressed professional receipt and the Ld. AO accepted the return without variation, the penalty is his case not attracted. The Ld. CIT(A) however placing reliance on latest decision of Hon’ble Jurisdictional Bombay High Court in the case of ‘Dr. Nitin Laxmikant Lad Vs ACIT’ reported in 307 CTR 213 (Bom) has downright rejected the argument of the appellant with a well- reasoned order after giving his findings placed at para 4.10 to 4.11 of impugned order which reads as under;
“4.10 In fact, in the impugned penalty order, the AO has relied upon the decision of the Hon ‘ble Bombay High Court in the case of Dr. Nitin Lad in ITA No. 1081 of 2016, which is squarely applicable to the case of the appellant. In that case, the jurisdictional Hon ‘ble Bombay High Court has held for the effect of explanation 5A as under:
“7. By virtue of this explanation, where any income based on any entry in books of account or other documents or transactions is found and the assessee claimed that such entry in the books of account or transactions represents his income from any previous year, then notwithstanding that the income declared in the return filed for a period under consideration is accepted, the assessee would still be liable to penalty under Section 271(1)(c) of the Act. In the present case, going by the order of the Tribunal, this is precisely what has happened. By virtue of this explanation, therefore, penalty could be levied and the fact that in the assessment order, no additional income is assessed in assessment in response to the notice under Section 153A of the Act, would be of no consequence. The contention that there was no incriminating material found during such search which related to the income so declared, cannot be accepted in view of the clear findings of facts from the Tribunal. No question of law arises. Income Tax Appeals are dismissed. “ (Emphasis applied).
4.11 The facts of the appellant’s case are exactly identical to the judgment of Hon ‘ble Bombay High Court in the above case of Dr. Nitin Lad (supra). The appellant also declared additional income of 76,71,300/- in the return of income filed consequent to notice u/s 153A of the Act as suppressed receipts, to cover the evidence of unaccounted loans/advances/investments made in cash, which were found during the course of search action as in the case of Dr. Lad. Therefore, since the additional income declared after search, in the return of income filed in response to the notice u/s 153A of the Act, was directly based on the evidences of undisclosed income/unaccounted investment found during the search action, the same was squarely covered within the meaning of Explanation 5A of 271(1)(c) of the Act. In view of the facts narrated in above paragraphs, the appellant’s case is squarely covered by the Explanation 5A to section 271(1)(c) and therefore, the penalty was correctly levied by the AO.” (Emphasis supplied)
9. In the light of aforestated discussion we do not see any cogent reason to interfere with the impugned order upholding the penalty passed u/s 250 of the Act for the very reason that, upon the search action u/s 132 of the Act on the appellant certain incriminating material in the form of diary was seized and from such seized incriminating diary the department has undisputedly established the suppression of professional receipts pinpointing the entries recorded therein which were remained unrecorded in the regular books of account maintained by the appellant for his medical profession. Admittedly the additional income so disclosed in the ITR filed u/s 153A was solely attributable and arising out of such unrecorded entries. Therefore once it is clearly and undisputedly established that the additional income disclosed and returned in the ITR filed u/s 1 53A is indeed originated out of seized material, then explanation 5A of section 271 of the Act comes into play notwithstanding the returned income was accepted without variation. Therefore in the light of settled legal position the action of tax authorities in invoking the penal provisions for levy of penalty u/s 271(1)(c) on such account is well within the law and cannot be faulted with in view of decision of Hon’ble Jurisdictional Bombay High Court (supra).
10. In the absence of any other contentions vis-à-vis deprecative cogent material, we countenance the action of both the tax authorities below.
11. Resultantly, both the appeals of the appellant assessee are DISMISSED.
In terms of rule 34 of ITAT Rules, 1963 the orders are pronounced in the open court on this Thursday 13th day of April, 2023.
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