1. The only grievance projected in this appeal by the Revenue is that the learned CIT(A) is not justified in deleting the penalty of Rs. 9,90,674 levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act.
2. The assessee is a registered firm which has been assessed for a long time. It is running a Petrol Pump at Shiroli, Kolhapur and is also having business of plying of trucks. It had filed returns of income upto the assessment year 1987-88. Till that year, the business of the firm was on small basis. From the assessment year 1988-89 (under appeal) and onwards due to increase in the business of the firm, the partners of the firm were required to do some additional work and as such, administrative work and the accounts were ignored. Proper attention was not given to the maintenance of the books of account.
There was a search and seizure action on the entire Mahadik Group on 28-9-1988. At that time, one Shri Ajit Joshi, Chartered Accountant, was the assessee's tax consultant.
3. During the course of search, only stock register and some few dead stock etc. were found, but since no regular books of account were maintained nothing else was found as far as the assessee firm was concerned. In the entire Mahadik Group, other individual cases of the partners, such as Mr. M.R. Mahadik, Mr. V.R. Mahadik, Mr. R.S. Shinde etc. some other papers and documents were found. Immediately after the search, the assessee reviewed its position and decided to come forward for settlement with the Department, so that a fair assessment could be made for all the pending years and the assessee can devote its time and energy for running the business. With that end in view, the assessee firm and the partners entrusted their work to Mr. R.B. Wast, Chartered Accountant, but unfortunately, Mr. R.B. Wast could not make any significant progress in the matter of settlement, though applications were made with the CIT, Kolhapur. During the pendency of the application for settlement for Mahadik Group, inevitable delays on account of the transfer of the CIT and other officials and due to time taken by the Assessing Officer in seeking reports on the seized material, no substantial progress was made in the matter. In the year 1991, the case was entrusted to the present consultant Mr. N.T. Jadhav, Chartered Accountant. He took a decision that in absence of proper books of account, it would be better to prepare the returns for the pending years as also revised returns for the earlier years on the basis of accretion to assets and, accordingly, he took up the work of the firm as well as partners. In between, notice under Section 148 came to be issued on 8-2-1991 since till that time the assessee firm had not filed its return of income. In the meanwhile, the work of verification of facts was taken up by the department. Based on the statement of net accretion, the assessee firm filed its return for the assessment year under appeal on 30-8-1991 declaring total income of Rs. 4,67,756.
Similar returns were filed for the assessment years 1989-90 and 1990-91. Based on available evidence in the form of accretion of assets, these three assessments were completed by the Assessing Officer. In these years, mainly the question of investment in the land and building came up for consideration by the Assessing Officer and the matter was referred to the Valuation Officer. The impugned land was bearing Civil Survey Nos. 123/1A and 123/1B. The assessee had constructed a building on the said land consisting of office building and workshop. According to the assessee, the land was purchased in 1987 and the construction of office building was started in that year only.
Subsequently, some more land was purchased in stages and the construction of workshop was completed. The cost of construction shown by the assessee in preparing asset position was not accepted and the Assessing Officer made addition in different years on that account. The assessments for subsequent years also were completed on the basis of report of the Valuation Officer. The position of income returned and income assessed for the assessment years 1988-89 to 1990-91 is as under :Assessment year Income returned Income assessed Rs. Rs. The difference between the income returned and income assessed for these three years is of Rs. 2,99,000. The difference in valuation of land and building is of Rs. 3,00,719. Thus, there is only a difference of Rs. 1,027 between the income returned and income assessed. This shows that the Assessing Officer had entirely relied upon the disclosure petition on the basis of which income was returned.
4. Since the income assessed for the assessment year 1988-89 was Rs. 9,84,996 as against income returned at Rs. 4,67,756, the Assessing Officer initiated penalty proceedings under Section 271(1)(c). Similar proceedings were also initiated for assessment years 1989-90 and 1990-91.
5. In making the addition in the assessment year 1988-89, the Assessing Officer did not take the cost of building as reported by the Valuation Officer which was arrived at by deducting 71/2 per cent for carrying out the work departmentally. Thus, the Valuation Officer had allowed a deduction of Rs. 1,14,774 against gross value of the building at Rs. 15,30,325 as against Rs. 13,30,000 shown by the assessee and Rs. 14,15,551 finally reported by the Valuation Officer. The Assessing Officer, however, adopted the value of Rs. 15,30,325. From the assessment order, we find that the additions which have been made are as follows :(i) Difference in value of land Rs. 4,25,000(ii) Difference in cost ofconstruction Rs. 2,00,325(iii) Addition on account of less In us, total addition of Rs. 6,32,012 was made to the returned income.
It is with reference to this addition really that penalty proceedings Were initiated. In the assessment order, the Assessing Officer simply stated that penalty proceedings are initiated under Section 271(1)(c) in respect of the total income assessed. Accordingly, the Assessing Officer, has not given prima facie reasons for initiation of penalty.
6. The assessee filed appeal to the CIT(A) against the above assessment order. The CIT(A) allowed deduction of Rs. 1,14,774 representing deduction allowed by the Valuation Officer being difference on account of doing the work departmentally. Thus, the addition on account of construction of the building was reduced from Rs. 2,00,325 to Rs. 85,551.
7. In response to the show-cause notice, following submissions were made before the Assessing Officer : (i) The difference between the returned income and assessed income was due to difference in valuation of land and building. The said difference was accepted by the assessee to purchase peace of mind and to avoid further litigation.
(ii) Explanation 3 to Section 271(1)(c) was not applicable, as the assessee was previously assessed to tax.
(iii) Explanation 5 to Section 271(1)(c) was also not applicable in respect of investment in immovable properties. In this behalf, the assessee relied on the decision of the Cochin Bench of the Tribunal in the case of South Indian Finance v. ITO [1991] 39 ITD 370.
8. The Assessing Officer, however, did not agree with the submissions of the assessee and after rejecting the same, he levied the impugned penalty for the following reasons : (i) The decision of Cochin Bench in the case of South Indian Finance (supra) had no application to the facts of the case.
(ii) The assessee disclosed various investments only after search and seizure operation. It did not agree for being assessed on net accretion basis at the time of search. Subsequent and much delayed offer of the assessee for being assessed on accretion to asset basis cannot be said to be an offer under Section 132(4) of the Act.
Returns of income on accretion basis were filed after department had gathered all the evidence against the assessee and it could not be said that the assessee had filed returns voluntarily. In fact when the assessee became sure that the department had gathered all the evidence against the assessee and the department was in a position to frame the assessment without any help from the assessee, only then the assessee in a tactical move and in order to convert necessity into virtue filed the petition for disclosure. The offer was not thus voluntary. The assessments were also not on agreed basis, because in that case, there should not have been any appeal to the CIT(A), Kolhapur and no necessity for the CIT(A) to grant relief of Rs. 1,15,000.
(iii) There are number of decisions on the point that penalty under Section 271(1)(c) can be imposed even when the assessee agrees inclusion of an amount to the assessment. He relied for this purpose on the Bombay High Court decision in Western Automobiles (India) v. CIT [1978] 112 ITR 1048.
(iv) Explanation 5 to Section 271(1)(c) was applicable to the facts of the case. The assessee could have escaped from the rigours of the Explanation only if he had made a declaration of income as required under that Explanation. Since main provisions of Explanation 5 are applicable and since the assets now declared in the return were not returned in the books of account, penalty under Section 271(1)(c) was clearly leviable.
(v) The penalty was leviable on the entire income assessed of Rs. 9,85,000 after giving effect to the order of the CIT(A). Minimum penalty leviable at 100 per cent was Rs. 4,95,337. Since the assessee has not declared income voluntarily for a long time, maximum penalty at 200 per cent was levied at Rs. 9,90,674.
9. The assessee filed appeal to the CIT(A) who, for the detailed reasons given by him in para 8 onwards in his order, held that no penalty was leviable. His decision is mainly based on the fact that Explanation 3 to Section 271(1)(c) was not applicable as the assessee was an old assessee. As regards investment in plot and building, he relied on the decision of the Hon'ble Kerala High Court in M.K. Gabriel Babu v. ADI (Inv.) [1990] 86 ITR 435 : [1991] 55 Taxman 18 and CIT v.M.K. Gabriel Babu [1991] 188 ITR 464 : 57 Taxman 146; Sardar Parduman Singh v. Union of India [1987] 166 ITR 115 : 31 Taxman 515 (Delhi); decision of the Gujarat High Court in Bhagwandas Narayandas v. CIT [1975] 98 ITR 194 and the decision of the Hon'ble Supreme Court in CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412 : 70 Taxman 312. According to the CIT(A), the wording in Explanation 5 to Section 271(1)(c) is identical to the words used in Section 132(1)(c). The decisions of Kerala, Delhi and Gujarat High Courts were in regard to the provisions of Section 132(1)(c). Action under Section 132 is justified if the person was in possession of any money, bullion, jewellery or other valuable articles or thing and such money, bullion etc. represented wholly or partly income from property for the purpose of Income-tax Act. According to these High Courts, the expression money, bullion etc.
did not include immovable property and no action under Section 132 was possible if there was information in regard to immovable property. The CIT(A) pointed out that similar words used in Section 32A, viz.
articles or things, were considered by the Supreme Court in the case of N.C. Budharaja & Co. (supra), where the Supreme Court held that the word 'article' did not include immovable property like building. Then he referred to the judgment of the Cochin Bench of the Tribunal in the case of South Indian Finance (supra) which had considered the effect of Explanation 5 to Section 271(1)(c). Since the assessee was yet to file the return of income when the search took place and since Explanation 5 to Section 271(1)(c) was not applicable, the assessee could not be said to have concealed any particulars of income, so far as the investment in plot and building was concerned. Since Explanation 3 to Section 271(1)(c) was not applicable, no penalty was leviable on account of under-valuation of dead stock of Rs. 5,951 and on account of closing stock of Rs. 736.
10. The ld. CIT(A) next considered whether the difference in valuation could lead to levy of penalty. The difference in valuation of land was of Rs. 4,25,000, while difference in value of construction was Rs. 85,551. In dealing with the difference in valuation on account of land, the CIT(A) held that the land in question was plot Nos. 123/1A and 123/1B admeasuring 99,990 sq. ft. Out of this land, agreement of only 24 gunthas of land at Survey No. 123/1A was made for Rs. 20,000 on 14-8-1987. The value of the land was only Rs. 20,000. Further purchase of land of 26 gunthas was made on 26-6-1989 (which falls subsequent to the year of assessment). Value of this agreement as per agreement also was Rs. 20,000. Balance of the land of 62 gunthas was acquired even subsequently for which no agreement as yet has been made. Even though the price paid as per the agreement was Rs. 20,000 each for the two agreements, the assessee admitted that total consideration paid for the lots in the two plots was Rs. 5 lakhs out of which Rs. 1,50,000 were incurred in the assessment year under consideration and the balance consideration appeared in subsequent years. The Assessing Officer observed that since the construction of the office complex and workshop on this land was started during the period relevant to assessment year 1988-89, possession of the entire land must have been taken and, therefore, the assessee would have paid the entire money before he started construction. Since actual details of payments were not there, the Assessing Officer adopted the cost of land as if it was paid in the assessment year 1988-89 and the cost was to be at Rs. 5,75,000 as against Rs. 5 lakhs admitted by the assessee. According to the assessee, the cost admitted by him was Rs. 5 lakhs whereas the value estimated by the Valuer at Rs. 5,75,000 was only on estimate and it was only to avoid further litigation with the Department that the assessee agreed for the said valuation. Similarly, the Assessing Officer's observation that the construction of land had started in the assessment year 1988-89 was factually incorrect. In fact, as per the Valuation Officer's report, only construction of office complex was made on total area of 2757 sq. ft. which started in April, 1987 and was completed in June, 1988. For that purpose, the assessee had purchased land on 14-8-1987 of 24 gunthas which was sufficient for the construction of office complex. The workshop building was constructed on the other piece of land and as per the Valuer's report, construction was started in June, 1988 and completed in August, 1990. This workshop was on the other piece of land which was purchased on 26-8-1989, i.e. beyond the assessment year under consideration. The assessee had therefore challenged the Assessing Officer's observation that the construction of both the office complex and workshop started in the previous year and that therefore the entire land could be said to have been acquired only in assessment year 1988-89. The learned CIT(A) accepted this contention and held that valuation of Rs. 5,75,000 by the Valuation Officer as against Rs. 5 lakhs was only on account of estimation.
11. Dealing with the difference in cost of construction which after CIT(A) in quantum appeal was reduced to Rs. 85,551, the CIT(A) held that this difference was also on estimate and was less than 6 per cent.
This could be attributed to honest difference of opinion and with reference to this difference also, no penalty could be leviable. The CIT(A) accordingly deleted the impugned penalty.
12. Shri K. Srinivasan, the learned D.R. strongly supported the order of the Assessing Officer. His first contention was that the entire income shown in the return was after the search. There is room for stating that the assessee would not have disclosed the income voluntarily because if these were the case of an honest assessee who wanted to come forward with his correct income, he would not have taken such a long time of three years to file the return. It is this gap of three years itself in filing the return, that too, after service of notice under Section 148, which shows that the entire income represented concealed income of the assessee. In this behalf, the facts in the case of decision of the Cochin Bench in South Indian Finance's case (supra) were clearly distinguishable, inasmuch as in that case before the Cochin Bench the assessee had come forward with his return immediately. The learned D.R. also distinguished the decision of this Bench in the case of Yeshwant B. Chigteri v. Asstt. CIT [2000] 75 ITD 377 wherein this Bench had held that no penalty was leviable in respect of an assessee who after the search filed return for the first time and returned entire income covering the items considered during the search.
This was because concealment was to be found with the income returned as held by the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1 : 2 Taxman 209. According to the learned D.R., the facts in the case of Yeshwant B. Chigteri (supra) were also distinguishable and here also return was filed immediately on 31-8-1992 after the raid which was on 23-1-1992. Moreover, income assessed, i.e. income from salary, capital gain and other sources could not be said to be of the nature as would suggest any attempt to concealment of income from unknown sources, whereas in the assessee's case the sources were unknown because income was only on asset accretion basis.
13. The second contention of the learned D.R. was that difference of returned income and assessed income was covered by Explanation 5 appended to Section 132 because Explanation 5 was rule of evidence. The distinction made by the CIT(A) that Explanation 5 was not applicable to immovable property was without difference, because what is being considered is not immovable property as such, but the investment in such immovable property. The learned D.R. further pointed out that the assessee could come out of the rigors of Explanation 5 only if his case was covered under the proviso to Explanation 5. According to him, the assessee had admittedly not maintained books of account and there was thus no question of recording any income in such books of account.
Similarly, there was no declaration made during the course of search.
Thus, the exceptions to Explanation 5 as have been provided in clauses (z) and (it) were not fulfilled and hence the main provisions of Explanation 5 were attracted.
14. The third submission made by the learned D.R. was that the difference between the returned income and assessed income in any case, even on merits, represented concealed income. Anticipating the assessee's reliance on the Bombay High Court decisions in CIT v. P.M.Shah [1993] 203 ITR 792 : [1995] 79 Taxman 431 and in CIT v.Dharamchand L. Shah [1993] 204 ITR 462 : 70 Taxman 414., the learned D.R. relied on the decision of the Kerala High Court in CIT v. K.P.Madhusudanan [2000] 246 ITR 218 wherein the Hon'ble Kerala High Court had dissented from the view of the Hon'ble Bombay High Court in the above two cases. Lastly, the learned D.R. submitted that the addition on account of land as well as cost of construction could not be brushed aside merely as difference in valuation, but they represented investment made by the assessee and were evidenced by the report of the Valuation Officer. Relying on the order of the Assessing Officer in levying penalty, the ld. D.R. submitted that the penalty was rightly levied and should have been upheld by the CIT(A).
15. Shri K.A. Sathe, the learned counsel for the assessee, on the other hand, strongly supported the order of the CIT(A). His first submission was that the facts relating to assessment years 1989-90 and 1990-91 were similar. For the assessment year 1989-90, the income returned was Rs. 24,31,250 whereas the income assessed was Rs. 25,70,969. Thus, there was addition to the income returned. For the assessment year 1990-91 as against income returned of Rs. 6,55,210, the income assessed was Rs. 3,47,943. The reduction in the income arose because the assessee had shown the cost of the land spread over in assessment years 1988-89 and 1990-91, whereas the Assessing Officer had taken the entire cost of the land in assessment year 1988-89 itself. But according to the learned counsel, the fact remains that penalty proceedings under Section 271(1)(c) were initiated in both the above years. The assessee's arguments in the penalty proceedings were similar to those as have been raised in this case. He drew our attention to the assessee's reply to the show-cause notice under Section 271(1)(c) for the assessment year 1989-90 (placed at page 22 of the paper book). The learned counsel submitted that it is worth noting that the Assessing Officer dropped the penal proceedings for assessment year 1989-90 as also 1990-91 (orders dropping penalty placed on page 29 of the paper book). According to the learned counsel, even assuming that penalty for the assessment year 1990-91 was dropped because the income was assessed at a figure lesser than what was shown, for the assessment year 1989-90 it appears that the Assessing Officer was satisfied about the explanation of the assessee and correctly dropped the penalty proceedings for the assessment year 1989-90. If consistent stand is to be taken by the department in this case, it would appear that penalty for the assessment year 1988-89 under appeal also deserves to be cancelled.
16. The learned counsel's second submission was that since Explanation 3 was not applicable therefore there was no case for levying penalty with reference to the returned income in view of the decision of this Bench in the case of Yeshwant B. Chigteri (supra). The third contention of the learned counsel was that Explanation 5 was totally irrelevant in the context of immovable property and therefore, penalty on that account was not justified. He placed reliance on the decision of the Hon'ble Supreme Court in the case of N.C. Budharaja & Co. (supra) and also on the decision of the Cochin Bench in the case of South Indian Finance (supra). Since Explanation 5 was not applicable and since Explanation 1 was not invoked, no penalty was leviable with reference to difference in the income assessed and income returned. The difference was only on account of valuation and no facts have been brought out by the department to show that there was any concealment on the part of the assessee. In support of this contention, he placed reliance on the decisions of the Hon'ble Bombay High Court in the cases of P.M. Shah (supra) and Dharamchand L. Shah (supra).
17. The last contention of the learned counsel was that on facts also the difference in the value of land and building was bona fide difference on account of valuation and in respect of land also on account of the fact that income was assessed wrongly in one year.
18. We have considered the rival submissions and perused the facts on record. Penalty proceedings are penal in nature. Elementary principles of Criminal Law will apply. It is a quasi-criminal proceeding. There should be conscious concealment. Penalty proceedings are distinct and different from assessment proceedings. Findings in the assessment proceedings are not conclusive, but are relevant. The entire material should be considered afresh by the authorities below before imposing penalty. Even after addition of Explanation to Section 271 conscious concealment is necessary. The Explanation provides only a rule of evidence raising rebuttable presumption in certain cases. No substantive right is created or added thereof. Substantive law relating to levy of penalty is preserved. The learned D.R's argument that the assessee had not come forward immediately after the raid and this therefore was a clear case where there could be said to be concealment of entire income as assessed is not correct. The raid was on the entire Mahadik Group and what one has to see is the facts relevant to the assessee firm who is in appeal. As far as the assessee was concerned, there was nothing substantial found in the search proceedings, but as a Mahadik Group there were certain materials found and it was with reference to these materials the assessee was proposing to get the whole matter settled with the CIT. It was with that end in view that the assessee made application for settlement of the cases. These facts are not denied by the Department. The assessee in the course of three years had faced a number of difficulties. Its Tax Consultant Shri Ajit Joshi was changed and in his place Shri Wast was appointed, but till 1990-91 he could not make any significant progress in the matter of settlement. It was only in March 1991 when the present consultant Shri N.T. Jadhav, Chartered Accountant took over the matter that there was progress in the matter. The delay was also caused partly because after the application for settlement was made to the C.I.T., Kolhapur, there were changes in the incumbent in office and sometime was also taken by the office of the Commissioner in obtaining reports from the Assessing Officer. This was with reference to the entire Mahadik Group and in totality the entire delay of about three years was for bona fide reasons. We may state that in fact the reasons for the delay came up for consideration before this Tribunal in appeal against the penalty under Section 271(1)(a) for the year under consideration and a substantial part of the delay has been found by this Tribunal to be on account of reasonable cause. Thus, the learned D.R's argument that the assessee came forward only after a gap of three years or the contention of the Assessing Officer in his penalty order that the assessee came forward only when found that the department had completed enquiries and was in position to make the assessment, are both wrong. In fact, the assessment has been made on the basis of statements prepared by the assessee on asset accretion basis. There was no material found as far as the assessee firm is concerned and there was no enquiry except one with reference to the assessee's application for settlement that the department had to make. The fact that for an overall period of three years the difference between the returned and assessed income, leaving aside difference on account of valuation, was only of Rs. 1,027, as has been pointed out in para 3 supra, clearly shows that the assessee has shown the income based on the settlement petition and the same has been accepted by the department, except to the extent of difference in valuation. In Anand Kumar Saraf v. CIT [1995] 211 ITR 562 : [1994] 75 Taxman 320, the Hon'ble Calcutta High Court has clearly held that merely seizure of papers cannot mean detection (in this case no papers were seized) and that when detection has not taken place, if the assessee were to come forward with a disclosure under the Amnesty Scheme (in this case by way of settlement petition) he is very well eligible for all the benefits as envisaged under the Amnesty Scheme.
The Hon'ble Calcutta High Court further observed at page 574 as under : The mere stigma of search and seizure cannot shut out the assessee from the amnesty. The scheme is an inducement to evaders to make a clear breast of past evasions and square up accounts with the Revenue. The persons who are left out from this opportunity are those whose concealments have come to light beforehand by investigations and search and seizure operations carried out by the Revenue. The clarification of the Board in its answer to question No. 19 as to the meaning of the expression 'before detection by the department' show that if the assessing authority has a prima facie belief that would not mean detection. The dictionary meaning of the word 'detect' is 'to discover the true especially hidden or disguised' character or 'to discover or determine the existence, presence or fact' (see Webster's Third New Internationa] Dictionary, 1976 Edn.). In the instant case, certain documents and papers were seized. They might or might not reveal concealment. Even the seizure could not lend to a prima facie belief as to concealment as the contents, purport and the implications of the documents were yet to be gone into. Therefore, at the point of time the return under the Amnesty Scheme was filed, the Assessing Officer admittedly had no idea as to whether the seized papers would reveal any concealment.
The mere fact that the petitioner appellant's case was awaiting a probe with reference to his past records as well as extrinsic sources could not lead to his ouster from the scope of the scheme.
We find that though the assessee took three years to file returns, but during these three years, the Revenue did not carry out any investigation in respect of the search material and accordingly, the ratio laid down by the Calcutta High Court in the case of Anand Kumar Saraf (supra) squarely applies here. Since Explanation 3 was not applicable as the assessee was an old assessee, it cannot be said that the entire income which the assessee returned was concealed income and the decision of this Bench in the case of Yeshwant B. Chigteri (supra) is squarely applicable to the facts of the case. The two points which the learned D.R. made in distinguishing the above decision are not at all tenable. In the first place, the fact that the assessee filed the return of income immediately after the search has not affected the decision at all. In fact, in that case also return was filed in response to notice under Section 148. The next point of distinction which the ld. D.R. made was that items of income considered in the assessment, such as salary and capital gain were such which were known to the department and which in any case were not kept outside the knowledge of the department whereas in the assessee's case the sources of income were not known. We may state that this distinction is not borne out from the facts of Yeshwant B. Chigteri's case (supra). In that case, the Assessing Officer's case was that but for the search the assessee would not have filed the return of income showing capital gain of Rs. 2,86,470 on sale of shares. According to the Assessing Officer, there was nothing on record to show that the assessee would have disclosed the entire capital gain even if the search action would not have taken place. In rejecting the contention of the department that there could be no concealment with reference to the income returned, this Bench did not base its decision either on the fact that return was filed without delay or that sources were known to the department; but we based our decision on the fact that under the Income-tax Act, concealment is to be seen with reference to the income returned. This finding of ours was based on the decision of the Hon'ble Supreme Court in the case of Brij Mohan (supra). We also found that the default of concealment could have arisen only if Explanation 3 were to be applicable, but since on facts Explanation 3 was not applicable, no penalty was leviable with reference to the income returned. In the assessee's case also the facts are similar. It is wrong to state that the sources of income were unknown to the department. The assessee firm was carrying on business of petrol pump and was earning income from transport. These were the only sources of income which the department knew and there is nothing on record to suggest that any income other than the income from the above two sources was earned. It was only because the accounts were not maintained that income was returned on the basis of asset accretion. We therefore hold that in regard to income assessed no penalty could have been levied by the Assessing Officer as he did and for this we take support from our order in the case of Yeshwant B. Chigteri (supra).
19. We find that the second objection of the Revenue that Explanation 5 was applicable to the facts of the case is equally untenable. The entire Explanation has been linked with the search proceedings under Section 132 and the opening words of Explanation itself show that it is with reference to the money, bullion or jewellery or other valuable articles or things that the provisions are applicable. These very expressions are used in Section 132(1)(c). In the context of Section 132(1)(c), (he three decisions which the CIT(A) has referred, viz.
decision of the Kerala High Court in M.K. Gabriel Babu's case [1990] 186 ITR 435, of Delhi High Court in Sardar Parduman Singh's case (supra) and decision of the Gujarat High Court in Bhagwandas Narayandas's case (supra) clearly establish that proceedings under Section 132 cannot be taken in respect of immovable property. This is obvious because the transactions in immovable property are matter of public record and public knowledge and no action like searching premises etc. is required to find out whether the assessee has acquired any property or constructed any building. The purpose of the search is to find out valuable articles or things which the assessee normally would not disclose and it is only in the context of this that proceedings under Section 132 are envisaged. If, therefore, search could not have been initiated for the acquisition of immovable property or for construction of the property, Explanation 5 could not have any relevance. Moreover, Explanation 5 itself uses the expression "any money, bullion, jewellery or other valuable article or thing" with reference to which the provisions apply. In this expression "other valuable article or thing" has to be read ejusdem generis with the earlier words "money, bullion, jewellery". Therefore, "other valuable article or thing" have necessarily to be movable articles which are capable of having a value. In this sense neither the word "article" or "thing" could include any immovable property. In the context of Section 32A similar Explanation was considered by the Hon'ble Supreme Court in the case of N.C. Budharaja & Co. (supra). The Hon'ble Apex Court held that the words "article or thing" in the context of Section 32A were used interchangeably. In the scheme and context of the provision, it would not be right to isolate the word "thing", ascertain its meaning with reference to the Law Lexicons and attach to it a meaning which it was never intended to bear. In the context of Section 132 also keeping in mind that the High Court decisions are in favour of the view that Section 132 is not applicable in respect of immovable property, the fact that Explanation 5 is only with reference to search proceedings and lastly the fact that the expression "article or thing" has to be read ejusdem generis with the words, money, bullion, jewellery, it is clear that the decision of the Hon'ble Apex Court in N.C. Budharaja & Co. 's case (supra) is squarely applicable and, therefore, we hold that in the present case Explanation 5 is not applicable. Once Explanation 5 is not applicable, question of going into exceptions provided under that Explanation will not arise and therefore, the D.R's contention that the assessee did not satisfy the exceptions to Explanation 5 has no relevance.
20. Coming to the learned D.R's argument that the decision of the Cochin Bench in the case of South Indian Finance (supra) was distinguishable because in that case the assessee had come forward immediately after the raid was a distinction without difference. What one has to see is the ratio of the decision and not the other facts which have no relevance or bearing on the decision given by the Bench.
Moreover, the assessee has relied on the decision of the Cochin Bench in the case of South Indian Finance (supra) for the proposition that Explanation 5 is not applicable and we have agreed with the learned counsel's submission in para 19 supra.
21. Coming now to the argument of the learned D.R. based on the decision of the Kerala High Court in the case of K.P. Madhusudanan (supra), we are of the opinion that the decisions in P.M. Shah's case (supra) and Dharamchand L. Shah's case (supra) given by the Hon'ble jurisdictional High Court are binding on this Tribunal. Particularly the facts in D.L. Shah are worth noting. In that case, the assessee along with an accomplice, was apprehended by the Customs Authorities and gold biscuits with foreign markings weighing 400 tolas was found on his person. The assessee admitted that the gold belonged to him. But in the course of assessment, he resiled from the statement and contended that he was not owner of the gold. The I.T.O. rejected the contention and treated the sum of Rs. 84,000 as assessee's income from undisclosed sources by invoking Section 69A. This was confirmed by the Tribunal.
Penalty proceedings were initiated, but Explanation to Section 271(1)(c) was not invoked. The assessee had not replied to the show-cause notice and the IAC proceeded to levy penalty on the assessee which was cancelled by the Tribunal. These facts prima facie clearly show that these are much worse than those obtaining in the case before us. Even then because Explanation to Section 271(1)(c) was not invoked, the Hon'ble Bombay High Court held that no penalty was leviable merely because an addition had been made in the assessment. In view of the above judgment of the jurisdictional High Court, in the present case there is no justification for levy of penalty since Explanation 1 to Section 271(1)(c) has not been invoked and penalty has been levied on the basis of main section.
22. Factually speaking also, the CIT(A) was justified in deleting the penalty in regard to the difference in the value of land. He has rightly referred to the fact that the Assessing Officer's assumption in the assessment that the entire land was purchased in one year was factually incorrect. In fact, substantial portion of the land was acquired after end of the assessment year and this was borne out from the fact that construction of the workshop area situated on other piece of land was taken up and completed beyond the assessment year under appeal. The difference of Rs. 75,000 in the value shown by the assessee (Rs. 5 lakhs) and value adopted by the Assessing Officer was merely matter of estimation, inasmuch as there was no evidence on record to show that the assessee had paid anything more than Rs. 5 lakhs. In fact, it was the assessee who voluntarily submitted that as against consideration of Rs. 20,000, the actual consideration was much more and cost of Rs. 5 lakhs was spread out on the basis of agreements Rs. 1,50,000 being shown in assessment year 1988-89 and balance being shown in assessment year 1990-91. Thus, we find that there were no facts to justify levy of penalty with reference to the increase in value of land from Rs. 1,50,000 to Rs. 5,75,000, because the difference arose on account of certain wrong assumptions made by the Assessing Officer in taking the entire value of the land in one year. Even though the assessee had not preferred any appeal on this point, it was only because the assessee did not want to litigate further, but it is not as if that even though he did not dispute the point in the assessment that he could not dispute it again in the penalty proceedings as held by us supra that penalty proceedings are distinct from assessment proceedings.
23. As regards the difference in valuation of the building, the CIT(A) has rightly pointed out that the ultimate difference was of Rs. 85,551 and this was much less than 10 per cent of the cost shown by the assessee. In these circumstances, increase in the value cannot be attributed to any concealment but such difference can arise on account of honest difference of opinion and, accordingly, we hold that no penalty was leviable in respect of that item.
24. In the light of the above discussion, we hold that there is no justification for the impugned penalty and the CIT(A) has rightly deleted the same. We accordingly decline to interfere.