Principal Commissioner Of Income Tax-1, Kolkata v. M/S. Thakur Prasad Sao & Sons. Pvt. Ltd

A.F.R. OD – 2 IN THE HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax] ORIGINAL SIDE ITA/66/2018 PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLKATA VS M/S. THAKUR PRASAD SAO & SONS. PVT. LTD. BEFORE : THE HON’BLE JUSTICE SURYA PRAKASH KESARWANI And THE HON’BLE JUSTICE RAJARSHI BHARADWAJ Date :2[nd] May, 2024 Appearance : Smt. Smita Das De, Adv. ...for the appellant. Sri Abhratosh Majumder, Sr. Adv. Sri AvraMazumder, Adv. Smt. Alisha Das, Adv. Sri Samrat Das, Adv. Sri Kausheyo Roy, Adv. ...for the respondent. 1.Heard Smt. Smita Das De, learned senior standing counsel for the appellant/revenue and Mr. Abhratosh Majumder, learned senior advocate assisted by Mr. AvraMazumder, learned counsel for the respondent/assessee. appellant/revenue and Mr. Abhratosh Majumder, learned senior advocate assisted by Mr. AvraMazumder, learned counsel for the respondent/assessee. 2.The present appeal relates to penalty under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the said ‘Act, 1961’) relating to assessment years 2006-07 and 2007-08. Income Tax Act, 1961 (hereinafter referred to as the said ‘Act, 1961’) relating to assessment years 2006-07 and 2007-08. 3.This appeal was admitted by this Court by order dated 14[th] May, 2018 on the following substantial question of law :- the following substantial question of law :- Facts “Whether the penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 are invalid if the show-cause notice does not specifically spell out the grounds for imposition of the proposed penalty?”. 4.Briefly stated facts of the present case are that a search was conducted by the income tax department on 23.11.2007 under section 132(1) of the Act, 1961 against various persons and business concerns of “Thakur Prasad Sao Group of Chaibasa” at different locations of Chaibasa and Kolkata. A survey was conducted under section 133A of the Act was carried out simultaneously at different places of the Group at Joda (Orissa), Rourkela, Jamshedpur and Tirildih(Jamshedpur). The aforesaid Group is engaged in mining of iron ore, manufacturing of sponge iron and trading in liquor. In the course of search and seizure operations, Panchnama were drawn in the name of various assessees in the Group including the assessee herein. After the search and seizure operations, the respondent/assessee has disclosed income of Rs.4,99,00,000/- through Sri R.P. Sao, director of the company for the assessment year 2006-07. A notice under section 153A of the Act was issued and assessment was completed determining total income of the respondent/assessee at Rs.27,14,06,050/-. Against the aforesaid assessment order under section 153A, the respondent/assessee filed an appeal before the CIT(A) who granted the relief by deleting additions of Rs.54,91,493/-. During the course of assessment proceedings, the respondent/assessee admitted that cashamounting to Rs.4,20,19,077/- was received without there being any supply of material to the party concerned, i.e. Sree Metallik Limited. On the basis of the aforesaid entries, Sri Ramesh Prasad Sao declared an undisclosed income of Rs.4,30,00,000/- including the aforesaid amount, in the return of income filed under Section 153A for the assessment year 2007-08. Under invoicing of sales was also admittedby the respondent/assessee which was not recorded in the books of accounts that were offered to tax as part of disclosure under section 132(4) of the Act. (Accordingly, a sum of Rs.19,25,388/- for the assessment year 2006-07 and Rs.43,02,020/- for the assessment year 2007-08 were disclosed as an additional income pursuant to the search.) It was also found that expenditures under various heads were enhanced by the assessee to the extent of Rs.4,79,05,925/- which the respondent/assessee admitted to be not genuine business expensesand, accordingly, disclosed additional income pursuant to the search in the assessment year 2006-07. Thus, a total sum of Rs.4,99,00,000/- was admitted as undisclosed income in the assessment year 2006-07which forms part of total disclosure of Rs.27 crores of the Group made under section 132(4) of the Act, 1961. 5.Similarly, for the assessment year 2007-08 notice under section 153A of the Act, 1961 was issued to the respondent/assessee on 26.2.2009 and in response thereof, respondent/assessee filed return of income on 31.3.2009 declaring total income of Rs.1,38,39,05,410/- as against original return filed on 31.10.2007 under section 139 disclosing income of Rs.127,24,13,150/-. After the search and seizure operations andimpounding of documents, the respondent/assessee declared an undisclosed income of Rs.13,16,25,370/- which was added to the income disclosed in the returns apart from certain other additions.In the assessment order the assessing officer mentioned that penalty proceeding under section 271(1)(c) of the Act, 1961 has been initiated and show cause notice under section 274 for imposing penalty under section 271(1)(c) read with Explanation 5A of the Act is being issued separately. 6.The aforesaid assessment orders were followed by notices under section 271(1)(c) read with section 274 of the Act, 1961. The respondent/assessee participated in the penalty proceedings for both the assessment years i.e. assessment years 2006-07 and 2007-08 and made submissions through his authorised representative, namely, Sri Manav Chhawchharia, FCA, as under – -Submissions for assessment year 200607 in penalty proceeding (i)Total disclosure of Rs. 27 crores was made in the name of various assesses of the Sao Group. The company has admitted undisclosed income of Rs. 4,99,00,000/-for the A.Y. 2006-07.assesses of the Sao Group. The company has admitted undisclosed income of Rs. 4,99,00,000/-for the A.Y. 2006-07. (ii)In the statement recorded u/s 132(4) on 24-11-2007, Mr. R.P. Sao, Director of the Co. said thatthe ad-hoc disclosure of additional income ofRs. 4.99 Cores for the A.Y.2006-07 was made on the expectations that no penalty u/s 271(0)(c) will be imposed upon it. Director of the Co. said thatthe ad-hoc disclosure of additional income ofRs. 4.99 Cores for the A.Y.2006-07 was made on the expectations that no penalty u/s 271(0)(c) will be imposed upon it. (iii)Undisclosed income of Rs. 4,99,00,000/- was duly included in the return filed u/s 153A which is treated as return u/s 139. Assessment was also completed on the returned income; hence no question of penalty arises. return filed u/s 153A which is treated as return u/s 139. Assessment was also completed on the returned income; hence no question of penalty arises. (iv)Disclosure u/s 153A was made by the assesse voluntarily, after the search. Thus, there is no concealment of income in this year. after the search. Thus, there is no concealment of income in this year. -Submissions for assessment year 200708 in penalty proceeding (iii)Undisclosed income of Rs. 4,99,00,000/- was duly included in the return filed u/s 153A which is treated as return u/s 139. Assessment was also completed on the returned income; hence no question of penalty arises. return filed u/s 153A which is treated as return u/s 139. Assessment was also completed on the returned income; hence no question of penalty arises. (iv)Disclosure u/s 153A was made by the assesse voluntarily, after the search. Thus, there is no concealment of income in this year. after the search. Thus, there is no concealment of income in this year. -Submissions for assessment year 200708 in penalty proceeding (i)Total disclosure of Rs.27 crores was made in the name of various assesses of the Sao Group. The company has admitted undisclosed income of Rs. 10,63,00,000/-for the A.Y. 2007-08. assesses of the Sao Group. The company has admitted undisclosed income of Rs. 10,63,00,000/-for the A.Y. 2007-08. (ii)In the statement recorded u/s 132(4) on 24-11-2007, the assesseeCo. said that the ad-hoc disclosure of additional income of Rs.10.63 Crores for this year was made on the expectations that no penalty u/s 271(1)(c) would be imposed upon it. assesseeCo. said that the ad-hoc disclosure of additional income of Rs.10.63 Crores for this year was made on the expectations that no penalty u/s 271(1)(c) would be imposed upon it. (iii)Undisclosed income of Rs. 10,63,00,000/- was duly included in the return filed u/s 153A which is treated as return u/s 139. Assessmentwas also completed on the returned income; hence no question of penalty arises. return filed u/s 153A which is treated as return u/s 139. Assessmentwas also completed on the returned income; hence no question of penalty arises. (iv)Disclosure u/s 153A was made by the assesse Voluntarily, after the search. Thus, there is noconcealment of income in this year. after the search. Thus, there is noconcealment of income in this year. 7.The assessing officer considered the submissions of the respondent/assessee and imposed a penalty of Rs.1,67,97,340/- under section 271(1)(c) of the Act read with Explanation 5A for the assessment year 2006-07 and Rs.3,63,20,279/- for the assessment year 2007-08. respondent/assessee and imposed a penalty of Rs.1,67,97,340/- under section 271(1)(c) of the Act read with Explanation 5A for the assessment year 2006-07 and Rs.3,63,20,279/- for the assessment year 2007-08. 8.The reasons recorded by the assessing officer in the penalty order for the assessment year 2006-07, is reproduced below :- “The above submission has been carefully considered. The relevant facts of the case are reproduced below to ascertain whether the assessee had of the case are reproduced below to ascertain whether the assessee had indeed declared voluntarily the undisclosed income of Rs.4,99,00,000/- for the A.Y. 2006-07: a) Original return was filed voluntarily u/s 139 on 25-11-2006 disclosing total income of Rs.22,15,91,170/- and further revised u/s 139(5) on 13-10-2007 reducing the total income to 21,60,99,680/-. Return was duly verified by the authorized signatory of the assessee. b) In the verification of return the assessee has declared that "to the best of my knowledge and belief. the information given in the return thereto is correct and complete and that the amount of total income and other particulars shown therein are truly stated and are in accordance with the provisions of the Income Tax Act, 1961, in respect of income chargeable to income tax the previous year relevant to the assessment year 2006-07. c) Pages 4 & 16 of the seized documents marked as TPS -9 indicates the difference between total sales and sales recorded in Regular Books in case of M/S D.D. International. Thus entries on those pages related to the previous year 2005-06 relevant to the A.Y. 2006-07. d) Assessee admitted during the course of search that expenditure b) In the verification of return the assessee has declared that "to the best of my knowledge and belief. the information given in the return thereto is correct and complete and that the amount of total income and other particulars shown therein are truly stated and are in accordance with the provisions of the Income Tax Act, 1961, in respect of income chargeable to income tax the previous year relevant to the assessment year 2006-07. c) Pages 4 & 16 of the seized documents marked as TPS -9 indicates the difference between total sales and sales recorded in Regular Books in case of M/S D.D. International. Thus entries on those pages related to the previous year 2005-06 relevant to the A.Y. 2006-07. d) Assessee admitted during the course of search that expenditure under various heads were inflated to the extent of Rs. 4,79,05,925/- and the under-invoiced sale to thetune of Rs.19,25,388/-, which was exposed from the seized documents and printout taken from the impounded laptop. These facts were neither recorded in the company’s regular Books of a/cs nor in any regular books of a/cs of any other member of this Group. This was undisclosed income of the assesse Co. which was within the knowledge of the concerned Authorised Signatory as on 25- 11-2006 & 13-10-2007 when the original and revised returns were filed. e) Thus, the assessee Co. has wilfully, deliberatelyand intentionally concealed the particulars of the income to the extent of Rs.4,99,00,000/- for the A.Y. 2006-07 while filing the original on return of income on 25-11-2006 and revised return on 13-10-2007. f) Assessee admitted the undisclosed income only when the irrefutable evidences like pages 4 & 16 of the loose bunch marked TPS-9 and printout of laptop was found and seized/impounded by the Department in course of search/ Survey. g) Alleged voluntary disclosure u/s 132(4) stated to have been made with the sole intention to get the immunity from imposition of penalty u/s 271(1)(c)of the I.T Act is in contravention to explanation 5A to section 271(1)(c). That is why undisclosed income of Rs. 4.99 Crore was included in the return of income filed u/s 153A only in pursuant to search for the A.Y. 2006-07. The submission of the assessee was considered and found to have no merit in the light of the provisions of the Explanation 5A to section 271(1)(c) inserted by the Finance Act 2007. The provisions are very clear that if any undisclosed income is found or declared after the date of search initiated u/s 132 on or after the 01-06-2007, the on the said assessee will be liable for penalty on the said income & investment not already declared in the return filed under Section 139(1) of the Act. Inthis case, the assessee had filed return of income u/s 139(1) for the A.Y.2006-07 on 25-11-2006. But the income in question was not offered in the said return filed u/s 139(1). Accordingly, I am of the consideredopinion that this is a fit case for imposition of penalty u/s 271(1)(c) read with Explanation -5A of the I.T. Act. 9.The reasons recorded by the assessing officer in the penalty order for the assessment year 2007-08, is reproduced below :- “The above submission has been carefully considered. The relevant facts of the case are reproduced below to ascertain whether the assessee had indeed declared voluntarily the undisclosed income of Rs. 10,63,00,000/-for the A.Y. 2007-08: a) Original return was filed voluntarily u/s 139 on 31-10-2007 disclosing total income of Rs.127,24,13,150/- and was duly verified by the authorized signatory of the assessee. b) In the verification of return the assessee has solemnly declared that "to the best of my knowledge and belief, the information given in the return thereto is correct and complete and that the amount of total income and other particulars shown therein are truly stated and are in accordance with the provisions of the Income Tax Act, 1961, in respect of income chargeable to income tax the previous year relevant to the assessment year 2007-08." a) Original return was filed voluntarily u/s 139 on 31-10-2007 disclosing total income of Rs.127,24,13,150/- and was duly verified by the authorized signatory of the assessee. b) In the verification of return the assessee has solemnly declared that "to the best of my knowledge and belief, the information given in the return thereto is correct and complete and that the amount of total income and other particulars shown therein are truly stated and are in accordance with the provisions of the Income Tax Act, 1961, in respect of income chargeable to income tax the previous year relevant to the assessment year 2007-08." c) Pages 3, 4 & 15 of the seized documents marked as TPS -9 indicates the difference between total sales and sales recorded in Regular Books. Thus entries on those pages related to the previous year 2006-07 relevant to the A.Y. 2007-08. d) Assessee admitted during the course of search that expenditure under various heads were inflated which was exposed from the seized documents and printout taken from the impounded laptop, Hard Disks etc. These facts were neither recorded in the company's regular Books of a/cs nor in any regular books of a/cs of any other members of the Group. This was undisclosed income of the assesse Co. which was within the knowledge of the concerned Authorised signatory as on 31-10-2007 when the original and revised returns were filed. e) Thus, the assessee Co. has wilfully, deliberately and intentionally concealed the particulars of the income to the extent of Rs.10.63 Crores for the A.Y. 2007-2008while filing the original return of income on 31.10.2007. f) Apart from the above, the assessee has intentionally furnished inaccurate particulars as discussed above namely, Suspense and Advance of 139(1) on 31-10-2007. Rs. 603386/-, cash receipt from S.K Naredi for Rs.10,00,000/-while filing the original return u/s 139(1) on 31-10-2007. g) Assessee admitted the undisclosed income only when the irrefutable evidences like pages 3, 4 & 15 of the loose bunch marked TPS-9, printout of laptop, Recordings of Computer Hard disk. Audited Balance Sheet for the A.Y. 2007-08 and other loose sheets which were found and seized/impounded by the Department in course of search/ Survey. h) Alleged voluntary disclosure u/s 132(4) stated to have made with the sole intention to get the immunity from imposition of penalty u/s 271(1)(c) of the I.T Act is in contravention to explanation 5A to section 271(1)(c). That is why undisclosed income of Rs. 10.63 Crore was included in the return of income filed u/s 153A only in pursuant to search for the A.Y. 2007-08. The submission of the assessee was considered and found to have no merit in the light of the provisions of the Explanation 5A to section 271(1)(c) inserted by the Finance Act 2007. The provisions are very clear that if any undisclosed income is found or declared after the date of search initiated u/s 132 on or after the 01-06-2007, the assessee will be liable for penalty on the said income/investment not already declared in the return filed under section 139(1) of the Act. In this case, the assessee had filed return of income u/s 139(1) for the A.Y. 2007-08 on 31-10-2007. But the income in question was not offered in the said return filed u/s 139(1). Accordingly, I am of the considered opinion that this is a fit case for imposition of penalty u/s 271(1)(c) read with Explanation -5A of the I.T. Act, 1961.” 10.Aggrieved with the aforesaid penalty orders under section 271(1)(c) of the Act, 1961, the respondent/assessee filed an appeal being Appeal No.352/CC-XVII/CIT(A), C-1/12-13 for the assessment year 2006-07 and appeal No.351/CC-XVII/CIT(A), C-1/12-13 for the assessment year 2007-08. Both the aforesaid appeals were dismissed by the Commissioner of Income Tax (Appeals), Central – 1, Kolkata. for imposition of penalty u/s 271(1)(c) read with Explanation -5A of the I.T. Act, 1961.” 10.Aggrieved with the aforesaid penalty orders under section 271(1)(c) of the Act, 1961, the respondent/assessee filed an appeal being Appeal No.352/CC-XVII/CIT(A), C-1/12-13 for the assessment year 2006-07 and appeal No.351/CC-XVII/CIT(A), C-1/12-13 for the assessment year 2007-08. Both the aforesaid appeals were dismissed by the Commissioner of Income Tax (Appeals), Central – 1, Kolkata. 11.Aggrieved with the aforesaid orders of the CIT(A), the respondent/assessee filed an appeal being ITA No.1434/Kol/11 for the assessment year 2006-07 and an appeal being ITA No.1535/Kol/11 for the assessment year 2007-08 before the Income Tax Appellate Tribunal, Bench “A”, Kolkata and both were allowed by order dated 23.3.2016 passed by the ITAT. The filed an appeal being ITA No.1434/Kol/11 for the assessment year 2006-07 and an appeal being ITA No.1535/Kol/11 for the assessment year 2007-08 before the Income Tax Appellate Tribunal, Bench “A”, Kolkata and both were allowed by order dated 23.3.2016 passed by the ITAT. The Tribunal allowed an appeal holding as under – 3.6.5 It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. 3.6.6. For the reasons given above, we hold that the levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the assessee and allow the appeals of the assessee. In view of our above conclusions on the issue of defect in show cause notice u/s 274 of the Act, we are not dealing with the other arguments made on merits of the orders imposing penalty on the assessee. 12.Aggrieved with the aforesaid order of the ITAT, the appellant/revenue has filed the present appeal. filed the present appeal. Submissions 13.Learned counsel for the appellant submits that the penalty for both the assessment years was lawfully imposed by the assessing officer and it was correctly upheld by the CIT(A). The Tribunal has committed a manifest error on law and facts to set aside both the penalty orders. She submits that in view of the judgment of Hon’ble Supreme Court in K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin (2001) 6 SCC 665 (para 10), the impugned order of the ITAT deserves to be set aside. assessment years was lawfully imposed by the assessing officer and it was correctly upheld by the CIT(A). The Tribunal has committed a manifest error on law and facts to set aside both the penalty orders. She submits that in view of the judgment of Hon’ble Supreme Court in K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin (2001) 6 SCC 665 (para 10), the impugned order of the ITAT deserves to be set aside. 14.Learned counsel for the respondent/assessee submits that the assessing officer has failed to initiate penalty proceedings under section 271(1)(c) of the Act, 1961 during the course of assessment proceeding and has not recorded that the assessee has concealed his income. assessing officer has failed to initiate penalty proceedings under section 271(1)(c) of the Act, 1961 during the course of assessment proceeding and has not recorded that the assessee has concealed his income. 14.Learned counsel for the respondent/assessee submits that the assessing officer has failed to initiate penalty proceedings under section 271(1)(c) of the Act, 1961 during the course of assessment proceeding and has not recorded that the assessee has concealed his income. assessing officer has failed to initiate penalty proceedings under section 271(1)(c) of the Act, 1961 during the course of assessment proceeding and has not recorded that the assessee has concealed his income. 15.Therefore, the penalty orders were quite illegal and have been lawfully set aside by the ITAT. He further submits that in the notice under Section 274 of the Act, 1961, the assessing officer has not recorded the grounds on which the penalty was sought to be imposed. Therefore, the notice under Section 271 (1)(c) of the Act, 1961 was defective. Consequently, the ITAT has not committed any error of law or fact to set aside both the penalties. In support of his submission, learned counsel for the respondent/assessee has relied upon the following judgments: set aside by the ITAT. He further submits that in the notice under Section 274 of the Act, 1961, the assessing officer has not recorded the grounds on which the penalty was sought to be imposed. Therefore, the notice under Section 271 (1)(c) of the Act, 1961 was defective. Consequently, the ITAT has not committed any error of law or fact to set aside both the penalties. In support of his submission, learned counsel for the respondent/assessee has relied upon the following judgments: i) (2013) 359 ITR 565 (Kar.) Commissioner of Income Tax & Anr. vs. Manjunatha Cotton & Ginning Factory (paragraphs 62 & 63); ii)(2023) 154 taxmann.com 433 (Cal) Principal Commissioner of Income Tax-II, Kolkata vs. Industrial Safety Project (P) Ltd. (paragraph 13); Income Tax-II, Kolkata vs. Industrial Safety Project (P) Ltd. (paragraph 13); iii)Order dated 26.02.2019 in ITAT No.8 of 2019 Principal CIT-I, Kolkata vs. M/s. SRMB Srijan Ltd.; Kolkata vs. M/s. SRMB Srijan Ltd.; iv)Order dated 22.04.2019 in ITAT No.272 of 2017 Principal Commissioner of Income Tax, Central-II, Kolkata vs. Bijoy Kumar Agarwal; Commissioner of Income Tax, Central-II, Kolkata vs. Bijoy Kumar Agarwal; v)(2021) 434 ITR 1 (Bom.) Mr. Md. Farhan A. Shaikh vs. The Deputy Commissioner of Income Tax (Central), Circle-I, Belgaun & Anr. Deputy Commissioner of Income Tax (Central), Circle-I, Belgaun & Anr. vi)(2005) 278 ITR 32 (Del.) Commissioner of Income Tax vs. Auto Lamps Ltd.Lamps Ltd. Discussion & Findings: 16.We have carefully considered the submission of the learned counsel for the parties and perused the paper book. the parties and perused the paper book. 17.Before we proceed to examine the rival submissions of learned counsels for the parties, it would be appropriate to reproduce the relevant provisions of the Act, 1961 as under: for the parties, it would be appropriate to reproduce the relevant provisions of the Act, 1961 as under: 271. (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) [ * * *] (b) * * * (c) has concealed the particulars of his income or [***] furnished inaccurate particulars of [such income, or] furnished inaccurate particulars of [such income, or] (d) * * * he may direct that such person shall pay by way of penalty- (i) [ * * *] (ii) in the cases referred to in clause (b), "[in addition to tax, if any, payable] by him, "[a sum of ten thousand rupees] for each such failure:] payable] by him, "[a sum of ten thousand rupees] for each such failure:] 271. (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) [ * * *] (b) * * * (c) has concealed the particulars of his income or [***] furnished inaccurate particulars of [such income, or] furnished inaccurate particulars of [such income, or] (d) * * * he may direct that such person shall pay by way of penalty- (i) [ * * *] (ii) in the cases referred to in clause (b), "[in addition to tax, if any, payable] by him, "[a sum of ten thousand rupees] for each such failure:] payable] by him, "[a sum of ten thousand rupees] for each such failure:] (iii) in the cases referred to in clause (c) "[or clause (d)], "[in addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed [three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his income [or fringe benefits] or the furnishing of inaccurate particulars of such income "[or fringe benefits]. to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed [three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his income [or fringe benefits] or the furnishing of inaccurate particulars of such income "[or fringe benefits]. Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the [Assessing] Officer or the [Commissioner (Appeals)] "[or the Commissioner] to be false, or which is found by the [Assessing] Officer or the [Commissioner (Appeals)] "[or the Commissioner] to be false, or (B) such person offers an explanation which he is not able to substantiate [and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], substantiate [and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. (B) such person offers an explanation which he is not able to substantiate [and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], substantiate [and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. Explanation 2.- Where the source of any receipt, deposit, outgoing or investment in any assessment year is claimed by any person to be an amount which had been added in computing the income or deducted in computing the loss in the assessment of such person for any earlier assessment year or years but in respect of which no penalty under clause (iii) of this sub-section had been levied, that part of the amount so added or deducted in such earlier assessment year immediately preceding the year in which the receipt, deposit, outgoing or investment appears (such earlier assessment year hereafter in this Explanation referred to as the first preceding year) which is sufficient to cover the amount represented by such receipt, deposit or outgoing or value of such investment (such amount or value hereafter in this Explanation referred to as the utilised amount) shall be treated as the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the first preceding year; and where the amount so added or deducted in the first preceding year is not sufficient to cover the utilised amount, that part of the amount so added or deducted in the year immediately preceding the first preceding year which is sufficient to cover such part of the utilised amount as is not so covered shall be treated to be the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the year immediately preceding the first preceding year and so on, until the entire utilised amount is covered by the amounts so added or deducted in such earlier assessment years. Explanation 3.--Where any person [***] fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 Commissioner or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.] Explanation 4.- For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded",- April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 Commissioner or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.] Explanation 4.- For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded",- (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been Concealed or inaccurate particulars have been furnished had such income been the total income;] particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been Concealed or inaccurate particulars have been furnished had such income been the total income;] (b) in any case to which Explanation 3 applies, means the tax on the total income assessed [as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148]; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished.] Explanation 5.-Where in the course of a [search initiated under section 132 before the 1[st] 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, 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 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.] Explanation 5A.- Where in the course of a search initiated under section 132 on or after the 1[st] day of June, 2007, the assessee is found to be the owner of,- (i)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 utilizing (wholly or in part) his income for any previous year; or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii)any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and, - (a)where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or furnished before the said date but such income has not been declared therein; or (b)the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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.”] Explanation 6.-Where any adjustment is made in the income or loss declared in the return under the proviso to clause (a) of sub-section (1) of section 143 and additional tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustment so made.] then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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.”] Explanation 6.-Where any adjustment is made in the income or loss declared in the return under the proviso to clause (a) of sub-section (1) of section 143 and additional tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustment so made.] Explanation 7.-Where in the case of an assessee who has entered into an international transaction defined in section 92B, any amount is added or disallowed in computing the total income under sub-section (4) of section 92C, then, the amount so added or disallowed shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished, unless the assessee proves to the satisfaction of the Assessing Officer or the Commissioner (Appeals) [or the Commissioner] that the price charged or paid in such transaction was computed in accordance with the provisions contained in section 92C and in the manner prescribed under that section, in good faith and with due diligence.] Section 271(1B) (inserted by Finance Act, 2008 (18 of 2008) with retrospective effect from 1.4.1989- (1B) Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains adirection for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c). 274. Procedure.- (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) No order imposing a penalty under this Chapter shall be made- (a)by the Income-tax Officer, where the penalty exceeds ten thousand rupees; thousand rupees; (b)by the [Assistant Commissioner or Deputy Commissioner], where the penalty exceeds twenty thousand rupees, where the penalty exceeds twenty thousand rupees, except with the prior approval of the [Joint Commissioner.] 18.From perusal of the provisions afore-quoted, it is clear that if the assessing officer or the Commissioner (Appeals) or the Commissioner, in course of any proceeding under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty in addition to tax, if any, payable by him, a sum which shall not be less but which shall not exceed three times, the amount of tax sought to be evaded by reason of concealment of particulars of his income or the furnishing of inaccurate particulars of such income. 19.Explanation–5A as afore-quoted is a deeming provision that notwithstanding that such income is declared by him in the return of income furnished on after the date of search, he shall for the purposes of imposition of 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. notwithstanding that such income is declared by him in the return of income furnished on after the date of search, he shall for the purposes of imposition of 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. 19.Explanation–5A as afore-quoted is a deeming provision that notwithstanding that such income is declared by him in the return of income furnished on after the date of search, he shall for the purposes of imposition of 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. notwithstanding that such income is declared by him in the return of income furnished on after the date of search, he shall for the purposes of imposition of 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. 20.In the present set of facts, undisputedly the search and seizure operation under Section 132 of the Act, 1961 was conducted on 23.11.2007. The original returnof income under Section 139 of the Act, 1961 for the assessment year 2006-07 was filed by the assessee on 25.11.2006 disclosing total income of Rs.22,15,91,970/- which was revised by him under Section 139(5) of the Act, 1961 on 13.10.2007 disclosing total income of Rs.21,60,97,680/- and the notice under Section 153A was issued to the assessee on 26.02.2009 and pursuant thereto, the under Section 132 of the Act, 1961 was conducted on 23.11.2007. The original returnof income under Section 139 of the Act, 1961 for the assessment year 2006-07 was filed by the assessee on 25.11.2006 disclosing total income of Rs.22,15,91,970/- which was revised by him under Section 139(5) of the Act, 1961 on 13.10.2007 disclosing total income of Rs.21,60,97,680/- and the notice under Section 153A was issued to the assessee on 26.02.2009 and pursuant thereto, the assessee filed return of his income for the assessment year 2006-07 on 31.03.2009 declaring a total income of Rs.26,55,63,560/-.Likewise, for the assessment year 2007-08, the assessee filed original return of income under Section 139 of the Act, 1961 on31.10.2007disclosing total income of Rs.127,24,13,150/-. After the search and seizure operations on 23.11.2006 and pursuant to the notice dated 26.02.2009 under Section 153A of the Act, 1961, the respondent/assessee filedreturn of income for the assessment year 2007-08 on 31.03.2009 declaring total income of Rs.138,39,05,410/-. Thus, the Explanation-5A creating a deeming clause of “concealment of particulars of income” is fully attracted on facts of the present case for both the assessment years. 21.We have carefully perused both the assessment orders for the assessment years 2006-07 and 2007-08. From the assessment order for the assessment year 2006-07, it is evident that the respondent/assessee, due to seizure of vario