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Judgment
Manjula Chellur J.
ITA Nos.513/2008, 512/2008, 514/2008, 664/2008, 667/2008, 670/2008, 673/2008 and 511/2008 are directed against the common order of the Income Tax Appellate Tribunal, Bangalore Bench ''B'' dated 13.12.2007 passed in ITA Nos.659 to 666/B/06. The above appeals pertain to different persons of the same joint family for different assessment years as detailed below:
SN
ITA No.
ITA No.
Asst. Year
Appellant
Respondent
1
ITA 667/2008
659/B/06
2001-02
DCIT, Central Cir. - 2(3) B''lore
Shri. S.Kumar B''lore
2
ITA 664/2008
660/B/06
2001-02
DCIT, Central Cir. - 2(3) B''lore
Shri.S.Kumar (HUF), B''lore
3
ITA 670/2008
661/B/06
2001-02
"
Shri. V. N.
Sridhar,
B''lore
4
ITA 673/2008
662/B/06
2003-04
"
Shri. V. N.
Sridhar, B''lore
5
ITA 511/2008
663/B/06
2001-02
"
Smt. Muktha
Sridhar,
B''lore
6
ITA 512/2008
664/B/06
2002-03
"
Smt. Muktha Sridhar, B''lore
7
ITA 513/2008
665/B/06
2003-04
"
Smt. Muktha
Sirhdar, B''lore
8
ITA 514/2008
666/B/06
2001-02
"
Smt Sathyavathi, B''lore
ITA Nos. 565, 567, 570, 572, 574, 589, 592, 594, 598, 600, 601, 602, 605, 609, 611, 614, 617, 621, 622, 625, 628, 632, 630, 637, 641, 596, 582 OF 2008 are directed against the common order of the Income Tax Appellate Tribunal, Bangalore Bench ''B'' dated 13.12.2007 passed in ITA Nos.721 to 747/Bang/06, the details of which are as under:
ITA NO. Before the High Court
ITA NO. Before the Tribunal
Asst. Year
Appellant
Respondent
ITA 582/2008
721/Bang/06
2000-01
The DCIT, Central Cirlce-2(3) B''lore
Shri. H. N. Nagaraj (HUF), Bangalore
ITA 565/2008
722/Bang/06
2001-02
-do-
-do-
ITA 567/2008
723/Bang/06
2002-03
-do-
-do-
ITA 570/2008
724/Bang/06
2003-04
-do-
-do-
ITA 572/2008
725/Bang/06
2001-02
-do-
Sri. H. N. Nagaraj (Ind.), Bangalore
ITA 574/2008
726/Bang/06
2002-03
-do-
-do-
ITA 589/2008
727/Bang/06
2003-04
-do-
-do-
ITA 592/2008
728/Bang/06
2000-01
-do-
Shri. V. N. Sridhar (HUF), Bangalore
ITA 596/2008
729/Bang/06
2001-02
-do-
-do-
ITA 600/2008
730/Bang/06
2002-03
-do-
-do-
ITA 601/2008
731/Bang/06
2003-04
-do-
-do-
ITA 605/2008
732/Bang/06
2001-02
-do-
Smt. Vani Shashindra, Bangalore
ITA 614/2008
733/Bang/06
2002-03
-do-
-do-
ITA 611/2008
734/Bang/06
2003-04
-do-
-do-
ITA 617/2008
735/Bang/06
2001-02
-do-
Shri.V.N.Manjunath, Bangalore
ITA 621/2008
736/Bang/06
2002-03
-do-
-do-
ITA 625/2008
737/Bang/06
2003-04
-do-
-do-
ITA 594/2008
738/Bang/06
2000-01
-do-
Sri. N, Shashindra (HUF), Bangalore
ITA 632/2008
739/Bang/06
2001-02
-do-
-do-
ITA 598/2008
740/Bang/06
2002-03
-do-
-do-
ITA 609/2008
741/Bang/06
2003-04
-do-
-do-
ITA 622/2008
742/Bang/06
2001-02
-do-
Shri.N.Shashindra, Bangalore
ITA 602/2008
743/Bang/06
2002-03
-do-
-do-
ITA 628/2008
744/Bang/06
2003-04
-do-
-do-
ITA 630/2008
745/Bang/06
2001-02
-do-
Smt.N.Nagaratna, Bangalore
ITA 637/2008
746/Bang/06
2002-03
-do-
-do-
ITA 641/2008
747/Bang/06
2003-04
-do-
-do-
In the above batch of appeals, the following substantial questions of law have been formulated for adjudication:
Whether the Appellate Authorities were correct in holding that the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act, is not sustainable in law in respect of an amount shown as gift received in the original return, which was found to be incorrect as per material detected in the search and was the undisclosed income of the assessee?
Whether the Appellate Authorities were correct in deleting the penalty levied as the assessee filed revised return declaring part of searched income in order to buy peace with the department so that penalty will not be levied by relying on the judgment of the Apex Court in Commissioner of Income Tax Vs. Suresh Chandra Mittal, confirming the judgment of M. P. High Court in Commissioner of Income Tax Vs. Suresh Chandra Mittal, which was applicable to assessment year 1983-84 to 1986-87 based on the law declared by Apex Court in Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, which is held to be not good law after insertion of Explanation to Sec. 271(1)(c) of the Act by the Apex Court in M/s. K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin, ?
Whether the Appellate Authorities were correct in accepting the explanation offered by the assessee that the entire income detected was declared in the revised return which was factually incorrect as the addition of entire undisclosed income was made by the Assessing Officer and consequently recorded a perverse finding?
Apparently all the respondents - assesses had filed their returns under Section-139 of the Act prior to the assessment. From the records, it is noticed that a search of the premises was conducted under Section-132 of the Act which commenced on 6.1.2004 and went up to 27.2.2004 when statement under Section-132 of the Act came to be recorded and so also panchanama was drawn. Subsequent to the search proceedings, the respondents -assessees filed revised returns twice surrendering the income brought to tax, during the course of search. After assessment of revised returns, the assessing authority proceeded with the assessment and passed orders in the year 2005. Subsequently penalty proceedings came to be initiated. The Assistant Commissioner of Income Tax rejecting the defence taken by the respondents -assessees proceeded to impose of penalty on all the assessees under Sec. 271(1) (c).
Aggrieved by the order of imposing penalty, appeals came to be fifed before the Commissioner of Income Tax (appeals) for the above assessment years and the first appellate authority by common order dated 16.5.2006 held that as the assesses proceeded to declare the entire amount as their income pursuant to search in order to buy peace with the department and for the reasons stated in the order, held levying of penalty was not justified. All the appeals filed by different assesses came to be allowed and penalty order came to be set aside.
Aggrieved by the same, the Revenue went in appeal before the Income Tax Appellate Tribunal in ITA Nos.659-666/B/06. The Tribunal held that penalty in respect of commission paid by the asseses for securing the gifts was leviable. However in respect of the gift amounts, which were found to be the income of the assesses pursuant to the search, the Tribunal upheld the finding of the Appellate Commissioner by a common order dated 13.12.2007. Aggrieved by the said order, the Revenue is before us raising the above substantial questions of law.
According to the learned counsel for the Revenue Mr. Sheshachala, once the amount shown as gift received in the original return was found to be incorrect as per material detected in the search and which was undisclosed by the assessee in their return of income, the Assessing Officer was justified in levying penalty u/s 271(1)(c) of the Act. According to the learned counsel, after insertion of explanation to Section 271(1)(c) of the Act in the light of the judgment of the Apex Court in M/s. K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin, , the law relied upon by the Tribunal and the Appellate Authority in Commissioner of Income Tax Vs. Suresh Chandra Mittal, , Commissioner of Income Tax Vs. Suresh Chandra Mittal, and Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, is not good taw. According to Mr. Seshachala, the appellate authority committed an error by accepting the explanation offered by the assesses that the entire income detected was declared in the revised return, which was factually incorrect. According to the learned counsel, the defence of the respondents - assesses was different from time to time, which is evident from the defence raised before the first appellate authority and the new defence raised by them before the Tribunal. Once the explanation-5 to Section 271(1)(c) is not to the satisfaction of the Assessing Officer, question of extending the benefit would not arise. Therefore the orders of the Commissioner of Income Tax (Appeals) and, the order of the Tribunal deserves to be set aside confirming the order of the Assessing Officer.
As against this, the learned counsel Mr. Chaitanya appearing for the respondents - assessees contends that once statement is recorded while conducting search as provided under sub-section (4) of Section-132 and when all the questions were answered and when the letter dated 26.2.2004 given by all the assessees is referred to in the statement, the object and the purpose with which Explanation-5(2) of Section 271(1)(c) giving immunity to such persons has to be extended and object cannot be frustrated. When perversity in appreciating the material on record by the appellate authorities being not the ground of challenge, the Revenue cannot question the same is his contention. According to him, application Explanation (5) is not a question of law, which entirely depends on question of fact and the same is dealt with by a final fact finding authority and Revenue cannot agitate the same again and again, According to him, search team having chosen to take the statement in the format or fashion which they have taken i.e. by putting question and answer, it is binding on all the members who have signed confirming that they abide by the same. The questions and answers do not relate to any individual person i.e. Mr. Sridhar and all the questions were answered for the entire amount disclosed during the search relating to entire family. The entire amount disclosed by Mr. Sridhar was accepted and subjected to tax. Therefore there is no ground available to the appellant - Revenue to challenge the same in the present appeals.
In reply, the learned counsel for the Revenue Mr. Sheshachala has taken us through paragraphs 21, 26 and 27 of the order of the Tribunal to contend that derival or origin of undisclosed income explained by one individual Mr. Sridhar could be at the most accepted for himself and it cannot be an explanation or answer in respect of others. Therefore there is non-compliance of Section 132(4) of the Act so far as all other assesses except Mr.Sridhar. He strenuously contends that explanation 5(2) of Section 271(c) is not applicable to other assessees except Sridhar if no reason is disclosed. The statement of the party relating to the business affair is part of return of income. Till revised returns filed, income was not shown as income, but they were purposely shown as gift. Therefore the appeals deserve to be allowed.
Learned counsel for the respondents - assesses in reply further contends that as notice was given to Prakash Tea Agency Group, Mr. Sridhar on behalf of all the persons of group has given the statement on 27.2.2004 after oath being administered to him. Therefore it is as good as explanation on behalf of all the persons pertaining to Prakash Tea Agency group. He further contends that Mr. N. Shashindra, Smt. Vani Shashindra, Mr. Muktha Sridhar have stated that statement given by Mr. V.N. Sridhar was in their absence and they abide by what has been stated by Mr. V.N. Sridhar. Therefore according to him, the statement recorded u/s 132(4) of the Act is as good as statement of others and even otherwise letter dated 26.2.2004 has been signed by all the assessees and as such Expln. (5) is applicable to them also.
From the material placed before the Court and also the submissions of the learned counsel appearing for the Revenue and the respondents - assesses, two provisions of the Act are relevant for considering the substantial questions of law raised in the above appeals. They are sections-132(4) and 271(1)(c) Explanation-(5). It is useful to extract the said provisions here:
Section-132:
(1) Where the [Director General or Director] or the [Chief Commissioner or Commissioner] [or Additional Director or Additional Commissioner] [or Joint Director or Joint Commissioner] in consequence of information in his possession, has reason to believe that -
(a) xxx
(b) xxx
(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be, disclosed] for the purposes of the Indian income tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property).
(4) The authorised officer may, during the course of the search or seizure, examine on oath any person, who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian income tax Act, 1922 (11 of 1922), or under this Act.
[Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian income tax Act, 1922 (11 of 1922), or under this Act,]
(1) If the [Assessing] Officer or the [***] [Commissioner (Appeals)] [or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person -
(a) xxx
(b) xxx
(c) has concealed the particulars of his income or [***] furnished inaccurate particulars of such income,
(d) xxx he may direct that such person shall pay by way of penalty-
[Explanation 5. - Where in the course of a [search initiated u/s 132 before the 1st day of June, 2007], the assessee is found to be the owner of 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.-
(a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein; or
(b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the 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 inaccurate particulars of such income, [unless,-
(1) such income is, or the transactions resulting in such income are recorded, -
(i) in a case falling under clause (a), before the date of the search; and
(ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the [Chief Commissioner or Commissioner] before the said date; or
(2) he, in the course of the search, makes a statement under sub-section (4) of section 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-section (1) of section 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 department launched action against Prakash Tea Agency group of cases in pursuance of search conducted under Section-132 of the Act between 6.1.2004 and 27.2.2004. The above mentioned respondents -assessees filed revised return of income once and again another revised return of income was filed. Some of the assessees had filed returns in their individual capacity and also as members of Hindu Undivided Family. Assessment orders in favour of the above respondents - assessees also came to be passed. Amounts represent credits in the capital account of assesses during the previous year alleged to have been received by way of gifts. During the course of search, it was established that such gifts are not genuine and the assessees agreed to offer the same for tax by treating them as income. As already stated above, additional income also came to be declared by revised returns.
During the course of hearing before the Assessing Officer, the main person of Prakash Tea Agency group by name Sri V.N. Sridhar had admitted paying commission for organizing the gifts. Therefore in the returns subsequently filed, the expenditure in the nature of commission to an extent of 3% in obtaining such gifts was also revealed. Taking into consideration all these facts, assessment orders came to be passed and these gifts were treated as undisclosed income of the assessee and it was brought to tax. Quantum proceeding has reached finality and same has been accepted by the assessees.
Subsequently, penalty proceedings u/s 271(1)(c) of the Act came to be initiated against the respondents - assesses. Before the authority concerned, the assesses denied furnishing of inaccurate particulars or concealment of income and further contended that though the donors of the gifts are ail identifiable and available to confirm the gifts, only with a view to buy peace with the department, the same was declared as undisclosed income. According to the representatives of the respondents - assessees, imposition of penalty cannot be automatic as there being no mens rea or guilty mind on the part of the respondents to conceal the income.
Ultimately rejecting all the contentions, the authority concerned passed an order holding that statements recorded during the course of search reveal that gifts were agreed as not genuine and therefore the income has been offered to tax. It was further opined that the assessee group has neither established the existence of the donors or their creditworthiness. It was also opined that the assessee group has organized non-genuine gifts for the purpose of converting unaccounted income and bringing the same into the books without payment of tax only with an intention of avoiding payment of tax. The authority opined that the material confirms the state of mind, which is guilty of evasion of tax.
The respondents - assesses went up in appeal before the Commissioner of Income Tax (Appeals). The respondents - assesses contended that gift amounts were already disclosed to the department in the respective returns filed before the date of search and during the assessment proceedings and with a view to end the proceedings and on the understanding that no penalty will be levied, they agreed for subjecting ail the amounts to tax. By placing reliance on Commissioner of Income Tax Vs. Suresh Chandra Mittal, and also Commissioner of Income Tax Vs. Shyamlal M. Soni, , the appellate authority held that no penalty u/s 271(1)(c) could be levied in a case where income returned in revised returns is accepted eventhough revised returns were filed after search and subsequent to inquiries. The material for this conclusion was disclosure of gifts to the department in the returns filed before the date of search and appellate authority accepted the defence that only in order to buy peace and with an understanding that no penalty would be levied, the assessees had agreed to file revised returns. According to the first appellate authority, no enquiries were conducted by the department and it was due to candid admission on the part of the respondents - assessees these gifts were brought to tax as income. The Appellate Authority opined that all the particulars are available in the return and to buy peace, the respondents filed revised returns of income and therefore in the light of the observations made in the above decisions, it held that the imposition of penalty was not justified.
Challenging the order of the first appellate authority, the Revenue went in appeal before the Appellate Tribunal. The Appellate Tribunal has gone into all the material facts with reference to several precedents relied upon by both Revenue and respondents - assesses and ultimately opined that unexplained gifts have been found to be recorded in the regular books of account and such gifts were disclosed in the returns fifed, therefore Explanation 5(2) to Section-271(1)(c) is complied with and hence there cannot be imposition of penalty on the gifts. It further opined that commission for arranging gifts was also surrendered in the revised returns and same is subject to penalty as per Explanation (5).
So far as imposition of penalty on the amount surrendered as commission, the respondents - assesses have not challenged and the said finding has reached finality. So far as the other finding that no penalty could be imposed on the unexplained gifts in view of surrendering the same in the revised returns which was already recorded in the books of accounts, the Revenue has come up in these appeals.
Explanation-5 to Section-271(1)(c) depends upon the particulars found with the assessee at the time of search under Section-132 of the Act. As a matter of fact, Explanation-5 to sub-section (i) of Section-271 was inserted by amendment. This new explanation is a special provision applicable to cases when assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing revealed in the course of a search under Section-132 of the Act. If the assessee asserts and claims that the abovementioned assets were acquired by him by utilising (wholly or in part) his income for the previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared in the return, the assessee shall be liable for payment of penalty u/s 271(1)(c) of the Act and such income is deemed to have been concealed or inaccurately furnished. However the income referred to above if declared by the assessee in any return of income furnished by him, on or after the date of search will not provide any immunity to the assessee unless the conditions indicated in clause-(2) of Explanation-5 are fulfilled.
Learned counsel for the Revenue emphasises that in the present case, the conditions in Clause-2 to Explanation-5 of Section 271(1)(c) of the Act are not completely fulfilled. Therefore both the appellate authorities were not justified in setting aside the order of imposition of penalty.
Learned counsel for the Revenues relies upon the decision of the Apex Court in the case of M/s. K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin, to contend that when the assessee is put to notice under Section-271 of the Act that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, then deemed provision regarding concealing the particulars of his income or furnishing inaccurate particulars of income could be drawn. In the said case, Their Lordships opined that after the introduction of Explanation-5, there is no question of proof of mens rea. He also places reliance on the decision of the Hon''ble Supreme Court in the case of Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, to contend that provisions of Section-11AC inserted with the intention of imposing mandatory penalty on persons who evaded payment of tax cannot be read to contain mens rea as an essential ingredient and there is no discretion with the authority competent to impose penalty to levy penalty below the prescribed minimum. Their Lordships further opined that the object behind enactment of Section 271(1)(c) read with Explanation indicate that the said section has been enacted to provide for a remedy for loss of revenue and penalty under that provision is a civil liability. They further opined that wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section-276C of the Act. In this context, they proceeded to hold that in the case of Dilip N. Shroff vs. JT. C CIT & Another - (2007) 210 CTR (SC) 228 the conceptual and contextual difference between Section 271(1)(c) and section 276-C of the Act was lost sight of. He places reliance on the decision in the case of Ashok Kumar Gupta Vs. Commissioner of Income Tax, to contend that concession given in Explanation-5 to Section 271(1)(c) is meant for the persons who after surrendering the undisclosed income pay the amount of tax alongwith interest, if any, on such income before the due date and such benefit cannot be extended to an assessee where he comes up with a plea of non-availability of funds for payment of tax on surrendered income. Their Lordships further opined that only circumstances that could be explained for absolving the payment of penalty are indicated in Explanation-5 itself. He also relies on the decision in the case of P.R. Metrani Vs. Commissioner of Income Tax, Bangalore, to contend that Section-132 being a complete code by itself, it cannot intrude into any other provisions of the Act. Similarly, other provisions of the Act cannot interfere with the scheme or the working of Section-132 or its provisions. The learned counsel places reliance on this decision to contend that the statement given by Mr. V.N. Sridhar if accepted could be accepted only as a statement given by him and it cannot be held as a valid statement in so far as other members of his family. In that context, learned counsel contends that there has to be strict compliance of Section-132 of the Act. He places reliance on the unreported decision of this Court in the case of The Commissioner of Income Tax vs. J. Alexander in ITRC 64/1999 disposed of on 19.6.2008. In this case, the oath was not administered as required under Section-6 of the Oaths Act. Therefore Their Lordships held that the statement of the Officer concerned, which is recorded without administering oath has no evidentiary value and in the eye of law, it is not at all an evidence and hence there is no evidence to conclude that the amount of the fixed deposits belonged to the assessee therein. He also places reliance on another unreported decision of this Court in the case of Commissioner of Income Tax. vs. The Sunrise Industrial Syndicate in ITRC 246/1998 disposed of on 14.2.2005 to contend that if an addition is made and if there is no proper explanation for such addition, it would amount to concealment of income and the authorities under the Act are justified in levying penalty.
According to the learned counsel for Revenue Mr. Seshachala, after the decision in M/s. K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin, , the Supreme Court has clearly distinguished and has in fact observed that the observations made in the case of Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, was prior to the introduction of Explanation to Section-271 of the Act, therefore the said decision do not come to the aid of assessee after introduction of Explanation to Section-271 of the Act. From M/s. K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin, , what we notice is after Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, Explanation to Section-271 was introduced and therefore the Revenue was no longer required to prove the mens rea of a quasi-criminal offence regarding the intentional or deliberate concealment of the amount. As a matter of fact, the word, ''deliberately'' is removed from sub-section (c) of Section-271(1). It only says, concealing the particulars of his income or furnishing inaccurate particulars of such income. The assessee would get the immunity from paying the penalty if he is able to explain the causes as stated in clauses (1) or (2) of Explanation-5.
The respondent''s counsel relied on various decisions so far as Clause-2 of Explanation-5 to Section-271 of the Act.
He places reliance on the decision in the case of Commissioner of Income Tax-1 Vs. Mishrimal Soni, to contend that expression ''possession'' used in clause (2) of Explanation 5 to Section 271 is not confined to physical possession, but extends to other type of possession which is capable of being held. It was further held that as long as the assessee comes with a clean breast of his undisclosed income represented by assets found to be in possession of the assessee, he is not deemed to have concealed his income or concealed particulars thereof
He also places reliance on the decision in the case Of Commissioner of Income Tax - II Vs. Shri E.V. Balashanmugham, to contend that the statements made by the assessee during the course of search under Section-132 of the Act can be taken note of and the explanation offered by the assessee in such statement in the opinion of the officer concerned is acceptable, question of imposing of penalty would not arise. In other words, it means in the opinion of the officer, if the explanation is acceptable, imposition of penalty is not justified.
He also places reliance on the decision in the case Of Commissioner of Income Tax. vs. S.D.V. Chandru - (2004)136 Taxman 537 (MAD) to contend that the statement of the assessee recorded u/s 132(4) of the Act followed by filing of Returns by the assessee for the earlier assessment year admitting large income and also paying the tax together with interest, such income will get immunised from the levy of penalty.
He also places reliance on the decision in the case of Commissioner of Income Tax Vs. Shri Radha Kishan Goel, In this case, Revenue contended that though the assessee made the statement recorded u/s 132(4) that unexplained cash and unexplained jewellery were undisclosed income, the manner in which such income was derived has not been disclosed in the statement and therefore immunity under Explanation 5 to Section 271(1)(c) was not applicable. Their Lordships held that in case there is nothing to the contrary in the statement recorded u/s 132(4) of the Act, in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which the assessee was carrying on or from other sources. They further opined that much importance should not be attached to the statement about the manner in which such income has been derived.
He also places reliance on the decision in the case of Gebilal Kanhaialal (HUF) Vs. Assistant Commissioner of Income Tax, In this case it was held that when once in the statement u/s 132(4), the assessee has disclosed particulars of concealed income and surrendered it for tax and tax has been paid along with interest, imposition of penalty was not warranted.
He places reliance on the decision in the case of Commissioner of Income Tax Vs. Mahendra C. Shah, It was held in this case that there is no prescription as to point of time when tax has to be paid qua amount of income declared in statement made u/s 132(4) of the Act. It was held that it would be sufficient compliance of provision if tax is shown to have been paid before assessment was completed. It was further held that explanation -2 of explanation - 5 itself specifies payment of tax together with interest, if any indicating that Legislature did not stipulate any specified time limit for payment of tax. Referring to Commissioner of Income Tax Vs. Shri Radha Kishan Goel, , Their Lordships proceeded to hold that once income is declared and tax thereon is paid, it would amount to substantial compliance not warranting any denial of benefit under Explanation 5 of Section 271(1)(c) of the Act.
He further places reliance on the decision in the case of Commissioner of Income Tax Vs. Manmohan Goel, In this case, a search was conducted in the residential as well as business premises of the assessee in which cash, jewellery and other valuable articles and things were found and seized and subsequently, assessee declared his income u/s 132(4) and moved application for settlement. Assessment was completed on disclosed income of the assessee and thereafter penalty proceedings were initiated, Held on facts conditions laid down in Explanation 5(2) to Section 271(1)(c) were fulfilled and no penalty was leviable. Their Lordships held that the basic idea or intention behind providing Explanation 5(2) of Section 271(1)(c) is to avoid litigation by the Department and to get the maximum tax at the earliest from the person whose business as well as residential premises are searched. This was also a case of whole group which had made an application for settlement, a little more than the original surrender and far less than the subsequent surrender. In that context, Their Lordships held that imposition of penalty was not justified.
He also places reliance on the decision in the case of Commissioner of Income Tax, Kanpur. vs. Mahesh Chand Agrawal - (2006) 157 Taxman 539 (ALL.) wherein relying on the earlier decision in Commissioner of Income Tax Vs. Shri Radha Kishan Goel, , held that no penalty was leviable.
He places reliance on the decision in the case of Sudarshan Silks and Sarees Vs. Commissioner of Income Tax, Karnataka, . In this case, Their Lordships held that Tribunal being the final Court of fact, decision of the Tribunal on facts can be gone into by the High Court only if a question has been referred to it which says that findings arrived at by the Tribunal on facts are perverse, in sense that no reasonable person could have taken such a view.
A reference is also made to the decision in the case of Dilip N. Shroff Karta of N.D. Shroff Vs. Joint Commissioner of Income Tax, Special Range Mumbai and Another, on the aspect of concealment of income and furnishing of inaccurate particulars, wherein it is held as under:
''Concealment of income'' and ''furnishing of inaccurate particulars'' are different. Both concealment and furnishing inaccurate particulars refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. Although it may not be very accurate or apt but suppressio veri would amount to concealment, suggestio falsi would amount to furnishing of inaccurate particulars.
It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations.
The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [See MALABAR INDUSTRIAL CO. LTD. Vs. COMMISSIONER OF INCOME TAX,
He also places reliance on the decision in the case of Commissioner of Income Tax, Ahmedabad vs. Reliance Petroproducts (P) Limited - (2010) 322 ITR 158, wherein it is held as under:
xxx xxx The basic reason why decision in Dilip N. Shroff''s case (supra) was overruled by this Court in Dharamendra Textile Processors'' case (supra), was that according to this Court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in case of Dilip N. Shroff (supra). However, it must be pointed out that in Dharamendra Textile Processors'' case (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff''s case (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff''s case (supra) to the effect that mens rea was an essential ingredient for the penalty u/s 271(1)(c) that the decision in Dilip N. Shroff''s case (supra) was overruled.
He also places reliance on the decision in the case of New Sorathia Engineering Co. Vs. Commissioner of Income Tax, wherein when the order of the authority concerned showed that no clear-cut finding had been reached as to whether penalty u/s 271(1)(c) was being levied for concealment of particulars of income by assessee or whether any inaccurate particulars of income had been furnished, order of penalty could not be sustained.
According to the learned counsel for the Revenue, clause-2 to Explanation 5 of Section-271(1)(c) can be divided into five parts as mentioned below:
He (assessee) in the course of search makes a statement under sub-section 4 of section-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 (income) has not been disclosed so far in the return of income to be furnished before the expiry of time specified in sub-section 1 of Section 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.
Learned counsel for the Revenue contends that if tax together with interest, if any in respect of such income is not paid, as stated above, no benefit could be extended. In order to understand what exactly explanation given by the assessee, one has to see 132(4) statement given by the assessee. According to the learned counsel, 132 statement was given by one Mr. V.N. Sridhar is applicable only to him and not to other family members as the said statement does not cover the statement of other family members.
On perusal of this statement recorded under section-132(4), we note that oath was administered to the deponent Mr. V.N. Sridhar on 27.2.2004. It is in the form of questions and answers. The officer puts a question to him in a particular way and the deponent gives the answer. The statement of Mr. V.N. Sridhar dated 27.2.2004 is placed on record. The notice for recording this statement is dated 27.2.2004 wherein it is stated that Mr. V.N. Sridhar was required to personally attend in respect of proceedings in the case of M/s Prakash Tea Agency Group. Question No.4 in the statement pertains to undisclosed income of Sri V.N. Sridhar, his business and his family members. He has given the details not only relating to himself, but also other family members. He also refers to a joint letter dated 26.2.2004 signed by all the family members which was already submitted to the concerned authorities indicating that all the details are already mentioned. He has stated in the statement the manner in which the income was derived i.e. the tea business of the family. He has also disclosed the details of the income were shown in the respective returns and it is offered for taxation in the respective years in the hands of the concerned persons. He also answers the question No.6 saying that the amount shown against M/s Prakash Tea Agency is out of the income of the tea business of the firm and the income shown by him and Mr. Shashindra is the professional income of tea testing and similarly the income received by others is on account of undisclosed income earned by them.
Apparently the oath would be administered to the deponent by the officer concerned from the department. It is at the option of the concerned officer such statement would be recorded. If no statement is recorded u/s 132(4) of other persons, there is no procedure to compel the officer to record statements of all other persons. Though learned counsel for Revenue contends that individual notices were sent, we do not have such records before us. The very questions and answers u/s 132(4) indicate the deponent was asked details pertaining not only to himself but also all other family members. It is not the case of the department that other than the statement of Mr. V.N. Sridhar, any other statement was recorded u/s 132(4) and it is in existence. There is only one statement of Mr. V.N. Sridhar recorded u/s 132(4) and endorsed by 3 other assessees. As a matter of fact, Mr. N. Shashindra, Smt. Vani Shashindra and Smt. Muktha Sridhar at the end of the statement of Mr. V.N. Sridhar have also stated that the said statement was given in their presence and they abide by what has been stated by Mr. V.N. Sridhar. During the search proceedings between 6.1.2004 and 27.2.2004, the statement of V.N. Sridhar was recorded. The manner in which the questions were put to this deponent indicates that he was expected to answer for himself and all his family members. It would be at the option of the officer what has to be asked by way of question and it would be at the option of the deponent what should be deposed. If the deponent had made clear that statement was only on his behalf and not for other family members, he would not have made statement explaining the details of others. Once the concerned officer of the department chose to record the statement in the above fashion indicating that Mr. V.N. Sridhar had to answer all the questions on behalf of Prakash Tea Agency Group, now they cannot turn round and say the details given in the statement of Mr. V.N. Sridhar u/s 132(4) holds good only for Mr. V.N. Sridhar and not for others. It was the concerned officer who recorded this statement who has to explain why he did not choose to record the statement of others. Having chosen to discharge the duty of recording the statement u/s 132(4) in the above fashion, now the Revenue cannot find fault with the respondents -assessees contending it would not bind others. Even otherwise, letter submitted on 26.2.2004 by all the assessees which has been referred to in the statement is signed by all the family members and a reference is made to this letter not at one place but at several places in the statement recorded u/s 132(4).
It is now well settled that the mens rea regarding concealing and inaccurate particulars need not be established by the department. It is also not in dispute that the immunity from imposing penalty available under two clauses of Explanation (5) can be extended to the respondents - assesses depending upon the facts and circumstances of each case if the explanation offered is to the satisfaction of the officer concerned. This Court can refer to the facts only if the Tribunal on facts has proceeded to give a perverse finding. In the present case, we are not faced with such a situation. The facts have to be referred because of the stand of the Revenue in these appeals contending that the benefit of statement of Mr. V.N. Sridhar cannot be extended to other respondents - assesses. Before concluding the search, a declaration was obtained from this group on 26.2.004 and surrender of undisclosed income was made vide the statement dated 27.2.2004 recorded u/s 132(4) of the Act. The search commenced on 6.1.2004 and the statement u/s 132(4) of the Act was obtained. Under these circumstances, naturally the assessee would start thinking that if a declaration is made u/s 132(4) along with the taxes together with interest payable is paid, no penalty would be imposed. The department would also be keen to get declaration u/s 132(4) so as to collect tax and avoid litigation. Only with this view, the exception was created in Explanation 5 to Section 271(1)(c) under clauses (1) and (2) to give immunity to assessee from levy of penalty. During the course of search, if the assessee surrendered the income agreeing to pay the tax and interest and if explanation is given to the satisfaction of the officer concerned, assessee would be under the impression that no penalty would be levied which would be subject to explanation offered. In the present case, records reveal that the unexplained gifts were treated as income and reference of such gifts is recorded in the regular books of accounts which were disclosed in the returns filed. As a matter of fact, after surrendering the income, they offered the said income to tax along with interest and in fact they have paid the tax and interest on such income. We also note that apart from surrendering the gifts so received as income, the assesses have surrendered the expenditure incurred in the form of commission for arranging such gifts. This resulted in imposition of penalty on the amount surrendered as commission and the assessees have not challenged the same.
In view of the above discussion and reasoning, we are of the opinion that all the amounts referred to as gifts were surrendered by assessees offering to pay tax. Subsequently tax was also paid alongwith interest and the revised returns were filed. In that view of the matter, we are of the opinion the substantial questions have to be answered against the Revenue and in favour of the respondents - assessees.
Accordingly, appeals are dismissed.