By TIOL News Service

AHMEDABAD, JUNE 20, 2018: THE ISSUE IS - Whether when statements taken during search are based on documents indicating that the assessee collected cash receipts in addition to cheques, such situation comes within the sweep of Explanation 5A(b) to Sec. 271(1)(c). YES IS THE ANSWER.

Facts of the case

The assessee firm, engaged in the business of construction and development, had returned income for the relevant AY. Thereafter, a search and seizure operation was conducted at the premises of one M/s. Darshanam group including the assessee wherein, certain documents were seized. During the search, one Mr Sunil Agrawal, a key person of the group, recorded his statement by making a disclosure of an income generated from its business activity. Further, the year-wise break up of the stated disclosure was found in the search statement of the group's Taxation In-charge, Mr Dilip H. Agrawal. Accordingly, the Revenue noted that the assessee's undisclosed income in the disputed AY came to be in the nature of money receipts from various customers. Hence, proceedings were initiated u/s 153A. Consequently, a revised return was filed by the assessee post search operation and the same was accepted by the AO. Subsequently, penalty proceedings u/s 271(1)(c) were initiated alleging concealment and furnishing of inaccurate particulars of income. On appeal, the CIT(A) affirmed the actions of the AO.

On appeal, the Tribunal held that,

++ the Explanation 5A to Sec. 271(1)(c) makes it clear that it contains a non obstante clause that if an assessee is found to be owner of any money, bullion, jwellery or other valuable articles or things (assets) has acquired by utilization of his income for any previous year ending before or any income based on any entry in any books of account or other documents or transaction representing his income (wholly or in part) for any previous years before search and he has furnished return before the search not declaring the said income therein, he is deemed to have concealed such an income or furnished inaccurate particulars of such income notwithstanding the fact that such income is declared in post search return. We thus are of the view that the judgment of the Ahmedabad High Court made in the case of Kirit Dayabhai Patel vs. ACIT and the decision of the Delhi High Court in the case of PCIT vs. Neeraj Jindal do not help assessee's grievance since the stated judicial precedents are covered by the non obstante statutory clause enshrined in Sec. 271(1)(c) Explanation 5A;

++ there is no dispute that the Sec. 271(1)(c) Explanation 5A (a) applies in case of money, bullion, jewellery or other valuable articles or things. It is evident that there is no such category of assets found during the course of search. It is rather a case attracted the latter clause of "any income passed on any entry in any books of account or other documents or transaction" of Explanation 5A (b) which applies in facts of the instant case since Shri Agrawal's search statement is found to be based on seized documents indicating the assessee to have collected on money receipts in addition to cheque component. We thus conclude that both the lower authorities have rightly levied the disputed penalty of Rs.2,39,500/- in light of the facts and circumstances of the instant case.

(See 2018-TIOL-893-ITAT-AHM)