TMI Blog2000 (9) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs. 90,704 in respect of amounts advanced to debtors. The assessee also filed a return of income on 3-3-1992 for assessment year 1989-90 declaring total income at Rs. 1,52,500 which included declaration under section 132(4) at Rs. 90,704. For assessment year 1986-87 also, the assessee filed another return on 30-7-1992 in pursuance to notice under section 148 in which income was returned at Rs. 1,48,290 against Rs. 18,250 declared in the original return. For both assessment years 1986-87 and 1989-90, the assessee argued that by virtue of statement under section 132(4) the assessee was not liable for penalty under section 271(1)(c) insofar as the sum of Rs. 1,30,000 for assessment year 1986-87 and the sum of Rs. 90,704 for assessment year 1989-90 was concerned. The Assessing Officer held otherwise and levied penalty under section 271(1)(c) for both these assessment years. For assessment year 1986-87, the Assessing Officer completed assessment under section 143(3) at Rs. 1,64,290. The Assessing Officer held that the assessee was liable to be levied penalty on the difference between the tax on total income of Rs. 1,64,290 and tax on originally returned income of Rs. 18,250. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that exception (1) provided in Explanation 5 referred to both clause (a) and clause (b), whereas exception (2) did not state that it applied only to clause (b). The specific mention of both the clauses in exception (1) and absence of such mention in exception (2) led to the presumption that exception (2) was not restricted to clause (b). In other words, exception (2) covers even the cases in which not only the previous year has ended but return of income has also been filed for such previous year before the date of search. 4. The learned counsel further argued that exception (2) mentioned 'income which has not been disclosed so far'. The words 'so far' could not be referred to the return for a previous year which had not ended before the search or for which the return of income had no fallen due under section 139(1). To interpret the words 'so far' as referable to the return not yet fallen due would be absurd as well as grammatically doing violence to the language. As held by Hon'ble Supreme Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323, where plain language results into absurdity, Court can modify the language. Furthermore, in respect of penal provisions, if two o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 5. The whole of Explanation 5 simply stated that this benefit could be given to the person who was yet to file his return of income under section 139(1). In other words, to the cases where the return of income had not fallen due as on the date of the search. Secondly, Explanation 5 also laid down the condition that the assessee should specify in the statement under section 132(4) the manner in which the income had been derived. As far as assessment year 1989-90 was concerned, the assessee had not filed return of income until expiry of time limit to file the return of income and such return of income was filed only after notice under section 148 was issued. 8. We have carefully considered the rival submissions. Decision in this appeal hinges upon a correct reading and interpretation of Explanation 5 appended to section 271(1)(c). Provision for penalty for concealment of particulars of income or furnishing inaccurate particulars of such income as it stood prior to amendment by the Finance Act, 1964, did not have any Explanation and it was held by Courts that the burden to prove either concealment of particulars of income or furnishing of inaccurate particulars of such in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees got away by simply asserting that the matter related to certain returns of income which were not filed or had not fallen due for being filed as on the date of the search. This aspect has been highlighted in CBDT Circular No. 394 dated 14-9-1984 in the following words:-- "Amendment of section 271 relating to penalty for certain defaults.-- 36.1 The Amending Act has inserted a new Explanation 5 to sub-section (1) of section 271 of the Income-tax Act. 36.2 The new Explanation contains a special provision applicable to cases where in the course of a search under section 132 of the Income tax Act, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing. The new Explanation provides that if, in such cases the assessee claims that the assets referred to above have been acquired by him by utilising (whether wholly or in part) his income 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 in the return, the assessee shall, for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition 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." From the reading of Explanation 5 above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far" and "to be furnished" have been employed in the statute in the same breath and, therefore, our task is to understand the provisions in a manner in which both these expressions are reconciled and, if that is not possible, to place a reasonable interpretation. In our opinion, we are not faced with a situation in which these two expressions may be said to be irreconcilable. The words 'income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in section 139(1)" are intended to encompass only such situations where the time limit specified in section 139(1) did not expire as on the date of the search. Having regard to the historical background of Explanations appended to section 271(1)(c) enumerated by us in the foregoing paragraphs, we are convinced that these words have been employed to avoid a situation in which as a result of certain money, bullion, jewellery or any other article or thing having been found during the course of the search the assessee attempts to wriggle out of the situation of not having declared income represented by it in the corresponding return of income by filing a revised return of income after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income filed by the assessee on the ground only that such return of income had been filed in response to notice under section 148, otherwise the return of income filed by the assessee on 3 -3-1992 was invalid and non est. He has held that the assessee had certainly concealed particulars of income by not filing return of income in time. We are unable to accept this stand taken by the learned CIT(A). There cannot be any concealment attributed to an assessee unless and until return of income is filed in the first place except in the cases where assessee is deemed to have concealed particulars of his income or furnished inaccurate particulars of such income by virtue of operation of the provisions of Explanation 3 to section 271(1)(c). No case has been made out in the orders of authorities below on the basis of Explanation 3. It is not the case of revenue that the assessee before us had not previously been assessed to income-tax. We therefore direct deletion of penalty or assessment year 1989-90 on amount of income exceeding Rs. 90,704. 13. In the result, assessee's appeal for assessment year 1986-87 is dismissed and for assessment year 1989-90, the same is partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of section 139". That means the time to file the return was not still run out. Therefore, the combined reading would show that the Legislature only intended the situation where the obligation to disclose had arisen, but still there was some time to disclose. It is because of this reason that the Legislature came to the rescue of such assessee by carving out such situation from the deeming provisions. Therefore, the interpretation put forth by my learned Brother in my opinion also, is not only in consonance with the language employed by the Legislature, but also does not make the words "so far" redundant as apprehended by the learned counsel for the assessee. Therefore, the decision of Supreme Court in the case of J.H. Gotla cannot be applied to the present case since there is no absurdity in the interpretation put forth by us. 17. It is also important to note that the Legislature in the main provisions of Explanation 5 has used the words "in previous year(s)" so as to include all the years whether return(s) was/were filed for such year(s) or not but in the exception 2, it has avoided the use of word "any" before the words "his return of income". If the Legislature h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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