TMI Blog2002 (9) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... e not due and as such were not filed. As a result of search under section 132, the assessment for the assessment years 1981-82 to 1988-89 were reopened. In due course, the returns for all the eight years were filed in response to notice under section 148 of the Act. During the course of search, certain diaries were seized wherein various transactions were recorded. The assessee on the basis of said diaries had calculated his unaccounted and professional income and offered the same for taxation under section 132(4) of the Act. The books of account were not maintained by the assessee as per provisions contained in section 44AA read with rule 6F. 3. For the assessment year 1982-83, the assessee had filed his return of income declaring total income of Rs. 3,28,140. The assessment was completed under section 143(1) on total income of Rs. 3,28,140. The assessee made the disclosure of additional income of Rs. 1,84,000 under section 132(4) of the Act which he admitted to be his unaccounted professional receipts or unaccounted investments. The original assessment had been completed at a total income of Rs. 3,28,140 but as a result of assessee's admission pursuant to search action under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer that as the disclosure made was voluntary and as there was no difference between the returned income and assessed income, there was no concealment and no penalty under section 271(1)(c) was attracted. The Assessing Officer has further stated that the additional income offered for taxation under section 132(4) and returned through the revised returns, was admitted by the assessee and therefore, the same constitute the concealed income of the assessee. According to the Assessing Officer, the additionally returned income constitute concealed income, the particulars of which had not been disclosed in the original return of income filed under section 139(1) of the Act. The contention of the assessee that the returned income and the assessed income remained the same and the disclosure was made voluntarily by the assessee did not find favour with the Assessing Officer because, according to him, additional income was disclosed only after the action under section 132 when some incriminating materials were found and seized. The Assessing Officer has further stated that even in a case where disclosure is made voluntarily, concealment penalty under section 271(1)(c) is attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount also, the learned CIT(A) held that immunity provided under Explanation 5 is not available to the assessee. The learned CIT(A), therefore, confirmed the penalties levied by the Assessing Officer. 8. At the time of hearing, the learned counsel for the assessee brought to our notice that the assessee has not contested the additions made by the Department. The learned counsel referred to the cash flow statement (compilation page 1) and contended that the Department accepted the income as per cash flow statement filed for the relevant assessment years (compilation pages 4 5). He explained that the disclosure made was mainly the unexplained expenditure. The learned counsel also invited our attention to the compilation pages 14 15 which pertain to the preliminary statement of the assessee recorded under section 132(4) of the Act. He explained that the total cash found during the course of search was Rs. 5,02,000. The learned counsel argued that the assessee in his statement has explained the investment made in the house property and also the capitation fees paid for the admission of his son. According to the learned counsel, the assessee in his statement has referred to the sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the statement under section 132(4) and later filed revised returns for two years declaring additional income which formed part of said undisclosed income was entitled to immunity under clause (2) of Explanation 5 to section 271(1)(c) of the Act. The learned DR contended that diaries were never used to prepare the books of account, therefore, these diaries were not meant for drawing the profit and loss account. He, therefore, fully justified the findings of the tax authorities for levying the penalties. 9. We have carefully considered the submissions made by the rival parties. We have also perused the documents produced before us. The main point for consideration in this case is whether the diaries found and seized during the course of search can be considered as books of account maintained by the assessee for the purpose of immunity to be granted to the assessee under the provisions of Explanation 5(a) to section 271(1)(c) of the Act. Explanation 5 to section 271(1)(c) has been inserted by the Taxation Laws (Amendment) Act, 1984 with effect from 1st October, 1984. The newly inserted Explanation enacts deeming provision and hence applies to a situation where in the course of sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search, certain documents and diaries were seized. The appellant in his statement under section 132(4) disclosed additional income for taxation of Rs. 1,84,000, Rs. 2,00,000 and Rs. 2,56,000 in the assessment years 1982-83, 1985-86 and 1988-89 respectively. Such income was admitted to be his unaccounted professional receipts or unaccounted investments. The assessments were reopened under section 147 of the Income-tax Act, 1961 and the total incomes redetermined at Rs. 5,12,140, Rs. 5,20,525 and Rs. 5,38,380 respectively. Penalty proceedings were also initiated. The case of the assessee is, therefore, covered under clause (a) of Explanation 5 to section 271(1)(c) of the Act because, the previous years under consideration ended before the date of search and the returns of income were filed before the date of search, but the income declared during the search was not declared therein. But the learned counsel contended that the penalty under section 271(1)(c) is not leviable because immunity provided under sub-clause (1) of the Explanation. According to the learned counsel, the income disclosed by the assessee was out of the transactions recorded in the books of account, maintained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account for the purpose of Explanation 5to section 271(1)(c) of the Act. The expression "Books maintained" mentioned in Explanation 5 to section 271(1)(c) means the books of account maintained for the purpose of computing the taxable income of the assessee. The diaries maintained by the assessee were not meant for computation of taxable income of the assessee. These diaries were only personal records of the assessee for fixing the dates for the patients, for recording certain expenditure incurred by the assessee himself and his family members and also certain amounts received from the patients. Therefore, these diaries were meant for the personal memorandum of the assessee and they can never be considered as books of account for the purpose of determining the income of the assessee for income-tax purposes. In the earlier years, the assessee filed the returns and the assessments were completed under section 143(1)(a) of the Act. The income returned in the earlier years was not based on these diaries. The very fact that the assessee disclosed income to the extent of Rs. 5 lakhs under the provisions of section 132(4) of the Act on the basis of these diaries makes it abundantly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries are roughly written. Some of the figures have been deleted. Therefore, such types of records maintained by the assessee cannot be considered as books of account as has been laid down by the Hon'ble Supreme Court in the above judgment. 12. The decision of the Bombay High Court in the case of Sheraton Apparels v. Asstt. CIT [2002] 123 Taxman 238 is exactly on this issue and it has been decided in favour of the Department. In this case - "The appellant-firms, including the assessee belonged to one family. Search was conducted in all the premises of the appellants after the returns were filed. One of the search was conducted at the residence of partners of the group concern and certain documents, papers and records including certain diaries were seized. The group-concern, including the assessee appellant, filed revised returns in respect of unaccounted income which was worked out and admitted by the assessee-group and disclosed on the basis of entries recorded in diaries during the search. The penalty was thereafter levied under section 271(1)(c). On appeal, the Commissioner (Appeals) and the Tribunal upheld the penalty. The appellant contended that the diaries on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conceal income so as to avoid imposition of tax thereon. The words in Explanation 5 'books of account, if any, maintained by him for any source of income' are important words signifying the legislative intent embodied in the Explanation warranting grant of immunity from penalty. The legislative intent is to admit only those books of account maintained by the assessee on his own behalf as by their very nature and circumstances are maintained for the purposes of drawing source of income. Therefore, when the books of account are tendered for claiming benefit of Explanation 5 of section 271(1)(c), it must be shown to be a book, that book must be a books of account and on the top of it that must be one maintained for the purposes of drawing source of income under the Act. These essential requirements must be carefully observed while implementing tax legislation in the country where secret and parallel accounts based on frauds and forgery are extremely common and responsibility of keeping and maintaining accounts for the purposes of the Tax Legislation is honoured in the breach rather than the observance. In the instant case private diaries have been most regularly maintained. These may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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