TMI Blog2009 (6) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... AR., I. S. VERMA., H. L. KARWA., A. N. PAHUJA. ORDER Per A.N Pahuja, Accountant Member.-These five appeals by the revenue, relating to the two assessees, arising out of two separate orders dated 30-3-2007 of the ld. Commissioner of Income-tax (Appeals)-I, Ahmedabad, raise the following grounds: "1. The CIT(A) has erred in law and on facts in cancelling the penalty of Rs. 2,33,684 in ITA No. 2344, Rs. 4,20,000 in ITA No. 2345, Rs. 3,45,001 in ITA No. 2346, Rs. 11,67,076 in ITA No. 2348 Rs. 5,15,447 in ITA No. 2389 levied under section 271(1)(c) of the Act, by the Assessing Officer, without considering the fact that the assessee had not voluntarily disclosed the true and correct income. 2. The CIT(A) has erred in law and on facts in not properly considering the Explanation 5 to section 271(1)(c) of the Act, according to which, the assessee is not entitled to immunity from the penalty for the earlier period where the due date of return under section 139(1) of the Act has expired. 3. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losure response to notice ------------------------------------- 31-5-2004 9,00,940 5,50,000 ------------------------------------- 31-5-2004 15,38,310+ 14,00,000 Ag income- 60,000 ------------------------------------- 31-5-2004 13,07,320+ 11,50,000 Ag income- 2,00,000 ------------------------------------- 31-5-2004 34,75,720+ 33,55,000 Ag income- 1,50,250 ------------------------------------- 31-5-2004 18,21,490+ 18,00,000 Ag income- 2,38,475 ------------------------------------- 2.1 As is evident from the relevant orders, during the course of search, it transpired that the taxpayers were engaged in business of land and construction and were a member of a group known as 'Bata Group' in Kalol. The group used to acquire co-operative housing societies for selling land released by AUDA for the benefit of members of the society. The promoters and members of the societies were close business associates of the Bata Group. After allotment of land by AUDA to the society, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- 6. Pragatlaxmi Co-op. Hous. -do- 4497620 Rajesh A.Patel Society Purchase of land A-9 Pg. 47 ---------------------------------------------------------------------- 7. Shrijikrupa Co-op. Hous. -do- 10625000 Kirit B.Modi Society-Purchase of land A-2 Item No. 101 Pg.3 to 32 ---------------------------------------------------------------------- 8. Swamikrupa Co-op. Hous. ...... Nayan A.Patel Society-Purchase of land A-17 Pg. 33 34 ---------------------------------------------------------------------- 9. Kanaiyanagar Co-op. Hous. -do- 15000000 Rajesh A.Patel Society-Purchase of land A-9 Pg. 44 46 ---------------------------------------------------------------------- 10. Avdhut Co-op. Hous. Society- -do- 1823153 Ganesh Corpn. Purchase of land A-4 Pg. 8 ---------------------------------------------------------------------- 11. Tirupati Co-op. Hous. Society- -do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A-2 Pg. 82, 83A-17 Pg. 37 ---------------------------------------------------------------------- 21. Dhar Association -do- 3765000 Pravin D.Patel A-20 ---------------------------------------------------------------------- 22. Parimal Co-op. Hous. Society Income 3222250 Kirit D.Patel A-1, A-2 and A-5 ---------------------------------------------------------------------- 23. Manavmandir Co-op. Hous. -do- 2570778 Pravin D.Patel Society-Purchase of land A-13 A-19 ---------------------------------------------------------------------- 24. Akar (Kalol) Owners' Association -do- 1780000 Pravin D.Patel A-12 Pg. 32 ---------------------------------------------------------------------- 25. Purnima (Kalol) Association -do- 611647 Pravin D.Patel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs were also initiated under section 271(1)(c) of the Act, the taxpayers having disclosed additional income in pursuance to the search in the return filed under section 153A(1)(a) of the Act, particulars of which were concealed by these taxpayers while filing the original returns of income on respective dates as shown above. 2.4 In response to a show-cause notice issued before levy of penalty under section 271(1)(c) of the Income-tax Act, the assessees submitted vide letter dated 21-8-2006 that the assessment has been finalized under section 153A(1)(b) of the Act wherein income returned is assessed and the taxpayers have fully co-operated with the Income-tax Department during the course of search proceedings as well as assessment proceedings and that there was no return of income in existence on the date of search. It was pleaded that in view of the specific provisions of section 153A of the Act, the section requires issuance of fresh notice, furnishing of fresh returns for all 6 years and all past actions abate i.e. put an end to all the returns filed and assessments become non est. The assessees offered income which was admitted in statement and explained how the income were e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on this account under Explanation 5 to section 271(1)(c). (d) A.P. Sehgal v. Asstt. CIT [2004] 89 ITD 580 (Delhi) In this case, return for assessment year 1990-91 was already filed. During search assessee made a declaration under section 132(4) on 18-9-1992 having not disclosed income of Rs. 1,80,000 invested in boundary wall, agricultural land and purchase of shop. It is held that Explanation 5 to section 271(1)(c) does not in any manner dilute the rigour of section 271(1)(c). On the contrary, it extends the scope of default under section 271(1)(c). Since the concealment is detected and admitted by assessee under section 132(4), filing of revised return (under section 153A in the present case) would not absolve the assessee from penalty. In arriving at these findings, the ITAT relied upon the ratio laid down in Amjad Ali Nazir Ali v. CIT [1977] 110 ITR 419 (All.), CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC), CIT v. K.R. Sadavappam [1990] 185 ITR 49 (SC), G.C. Agrawal v. CIT [1990] 186 ITR 571 (SC) and K.P. Madhusudanan v. CIT [2001] 251 ITR 99 (SC). 3. On appeal, the taxpayers reiterated their contentions before the Assessing Officer and further argued that in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been earned, offered such incomes in the return filed after search and paid taxes together with interest. The same is not accepted by the Assessing Officer for this year under the presumption that the explanation is not available/applicable to the earlier years i.e. assessment year 1998-99 to assessment year 2002-03. The appellant on the other hand claimed that he is entitled to get benefit of the said provisions, in support of this the appellant has relied upon the ratio laid down by the Hon'ble Madras High Court in the case of CIT v. S.D.V. Chandru 266 ITR 175, where the Hon'ble Madras High Court held that immunity under Explanation 5(2) to section 271(1)(c) of the Income-tax Act is available and penalty was liable for all the earlier years. Respectfully following the ratio laid down by Hon'ble Madras High Court, I hold that the appellant is entitled to the benefit of the provisions of Explanation 5(2) to section 271(1)(c) of the Income-tax Act for earlier years i.e. for assessment year 1998-99 to assessment year 2002-03, no penalty can be imposable for earlier years. (ii) Penalty on the income returned under section 153A of the Income-tax Act I have gone through the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Parliament during the budget presentation by the FM, a new section, being section 271AAA is proposed, wherein a penalty is proposed to be leviable in the search cases with effect from 1-6-2007. The introduction of such provisions itself shows that no penalty under section 271(1)(c) of the Income-tax Act is imposable on the income returned under section 153A of the Income-tax Act, prior to such amendment. 13. In view of the above facts brought out on record, in the light of case laws relied upon by the appellant and legal provisions as discussed in the foregoing paragraphs I hold that penalty under section 271(1)(c) of the Income-tax Act cannot be levied on the incomes shown in the returns filed under section 153A of the Income-tax Act. Therefore, the Assessing Officer was not justified in imposing penalty under section 271(1)(c) of the Income-tax Act for assessment year 1998-99 to assessment year 2002-03, as the assessments are made on the income returned under section 153A. Accordingly the penalty levied for assessment year 1998-99 to assessment year 2002-03 are cancelled." 5. The revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58 (Guj.) affirming Ahmedabad Tribunal in Mahendra Chimanlal Shah v. Asstt. CIT [1994] 51 ITD 244, it was contended that even if manner of earning of income is not explained in the course of search under section 132(4) but the same is explained subsequently, it amount to sufficient compliance for immunity from penalty as per Explanation 5(2) to section 271(1)(c) of the Act. 5.1 Continuing, it was further contended that respondents Shri Rajesh A. Patel and Shri Kirit D. Patel disclosed additional incomes of Rs. 80,05,000 and Rs. 27,50,000 respectively as tabulated on page 2 of order of CIT(A). The Assessing Officer assessed incomes as disclosed by the respondents in the returns filed under section 153A and not on the basis of alleged undisclosed incomes tabulated and referred to in the penalty order. Since the taxpayers did not file any appeal against the assessment orders, the assessments so made could be held to be agreed assessments and on this ground also no penalty under section 271(1)(c) could be levied merely because assessee opted to disclose additional incomes in returns filed under section 153A of the Act. It was further submitted that if there is no variation between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as detailed in para 2 above. During the search incriminating material was seized. Thereafter, the returns filed by these taxpayers in terms of provisions of section 153A(1)(a) of the Act were accepted by the Assessing Officer. Before the Assessing Officer and the ld. CIT(A), these taxpayers pleaded that the return filed under section 153A is deemed to be a return filed under section 139 on the ground that identical language is also used in section 148(1) and also that their case to covered by Explanation 5(2) to section 271(1)(c) of the Act. However, before us the ld. AR in his written submissions dated 2-5-2008 pleaded that respondents are entitled to immunity from levy of penalty under section 271(1)(c) as provided in explanation to the said section but in written submissions dated 17-10-2008 pleaded that none of the explanation to section 271(1)(c) is attracted in their case and that no penalty under section 271(1)(c) of the Act is envisaged in respect of returns filed under section 153A of the Act. The taxpayer further relied upon a number of decisions including that of Hon'ble Supreme Court in the case of Sudarshan Silks Sarees. 6.1 Adverting first to the issue applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.]" 7. Before proceeding further to analyse the impact of the aforesaid explanation, we may refer to the aspect of concealment-as to when the concealment is effected. It is well settled that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when .the act of concealment takes place which is relevant. It is wholly immaterial that the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date on which the concealment was effected by the assessee. Thus it is well settled that the concealment of the particulars of income was effected by these assessees when the taxpayer filed their original returns of total income on the dates mentioned in para 2 above. 7.1 In the case under consideration, the Assessing Officer levied the penalty under section 271(1)(c) of the Act for concealment of income. The CIT(A) cancelled the penalty on two premises i.e., (i) by making applicability of concession in Explanation 5(2) to section 271(1)(c) of the Act (ii) and penalty on returned income under section 153A of the Act by considering the return filed under section 139 of the Act as abated and non est in the eyes of law. As regards contentions of the taxpayer regarding applicability of the aforesaid Explanation 5 to section 271(1)(c) of the Act, it is noticed that prior to the insertion of Explanation 5 to section 271 by the Taxation Laws (Amendment) Act, 1984 with effect from 1-10-1984, an assessee, who was found to be the owner of any money, bullion, jewellery etc., recovered during the course of search, was entitled to explain that such assets were acquired by him by utilising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k; (iii) Rs. 1,50,000 deposited in cash in a/c No. 7374 with the UBI, Kalol; (iv) Rs. 2,23,000 on account of lottery in the name of his minor son; (v) Rs. 11,000 on account of consultancy; (vi) Rs. 2 lacs deposited in her wife account and (vii) expenses of Rs. 30,000 as also (viii) donations of Rs. 10,850, out of his undisclosed income. Total of these works out to Rs. 12,15,000. However, out of this, Rs. 8,35,000 is stated to have been brought forward in the form of cash out of undisclosed income of the earlier years and for the year under consideration as per cash flow statement reproduced on page 7 of the assessment order. Accordingly, the Assessing Officer assessed undisclosed income of Rs. 7,73,039. Assessing Officer also mentioned in his assessment order that in the return of income, only an amount of Rs. 5,50,000 has been declared as business income under section 132(4) of the Act. Thus, entire undisclosed income assessed by the Assessing Officer has not been declared under section 132(4) of the Act nor the relevant statement of the taxpayer recorded under section 132(4) has been placed before us by the taxpayer. 10.1 Likewise in the case of Shri Rajesh A. Patel in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel; (vi) Rs. 50,000 invested in KVP in the name of Shri Nayanbhai A. Patel; (vii) Rs. 35,000 + Rs. 30,000 on account of unexplained investment in vehicles in the name of Shri Nayanbhai A. Patel besides cash available from Bata group, admitted to have been out of his undisclosed income of Rs. 18 lacs by the taxpayer, have been assessed as undisclosed income. 10.5 The plea on behalf of the assesses that mere offer of income in respect of investments belonging to others cannot be held to be concealed income of the assessee is not tenable, since admittedly as is evident from the relevant assessment orders, the assesses have earned undisclosed income and utilized the same income in such investments and assets, inter alia, in the name of their relations. In the face of admission on the part of these assessee's regarding their undisclosed income, where is the need of any further enquiry to nail the truth with regard to the correct source of income, as pleaded by the ld. AR. Now it is well settled that where assessee had admitted to concealment during the course of enquiry or assessment proceedings and in this case in the return of income filed under section 153A(a) of the Act itself, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a similar question. In that case, the Income-tax Department in a search and seizure operation conducted in the assessee's shop and residence, seized cash, jewellery and certain documents. Thereafter, the assessee filed a revised return for the assessment year 1986-87 disclosing additional income which was accepted and assessment was made on the basis of revised return. The assessee took the stand that there was no concealment and it was only for the purpose of buying peace with the Department that the additional income was disclosed and revised return was filed. The Tribunal accepted this plea of the assessee and held that no penalty, in the circumstances, was leviable by relying on the Supreme Court decision in Sir Shadilal Sugar General Mills Ltd. v. CIT [1987] 168 ITR 705. On the reference, the Madras High Court set aside the order and observed:- "Learned counsel for the revenue submitted that the order of the Tribunal is not in accordance with law, as it has ignored the Explanation to section 271(1)(c) of the Act. Learned counsel also placed reliance on the decision in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC), wherein it was held that the law declared by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in circumstances of the case and law, the diaries, on the basis of which the additions were made could be regarded as books of account for the purposes of clause (1) of Explanation 5 to section 271(1)(c) of the Act, so as to provide immunity to the appellants?" Dismissing all the appeals, the Hon'ble High Court observed:- "The term 'books of account' referred to in clause (1) of Explanation 5 to section 271(1)(c) means books of account which have been maintained for determining any source of income. The term 'source of income' as understood in the Income-tax Act is to identify or classify income so as to determine under which head, out of the various heads of income referred to in section 14 of the Act, it would fall for the purposes of computation of the total income for charging income-tax thereon. Thus, the term 'books of account' referred to in this relevant sub-clause of Explanation 5 would mean those books of account whose main object is to provide credible data and information to file the tax returns. A credible accounting record provides the best foundation for filing returns of both direct and indirect taxes. Accounting is called a language of business. Its a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been most regularly maintained, it may have been exhibiting record of the factual facts, contemporaneously made but they were never maintained for the purposes of the Income-tax Act to draw the source of income or for the computation of total income to offer income calculated therefrom for the purposes of taxation. Such books or diaries can hardly be designed or accepted as books of account for the purposes of Explanation 5 of section 271(1)(c) of the Act, so as to afford immunity from penalty. None of the cases cited by the appellants were close to the facts found herein, hence no reference thereto in our opinion, is necessary. The Tribunal was perfectly justified in upholding the levy of penalty under section 271(1)(c) of the Act. Accordingly, question of law reframed is answered in the negative, i.e., against the appellants/assessees and in favour of the Revenue. In the result, ail the appeals are dismissed with no order as to costs." 10.8.1 In view of the foregoing, we are of the opinion that provisions of section 271(1)(c) were rightly invoked by the Assessing Officer and in terms of Explanation 5 to the said section, these assessees were rightly deemed to have conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI v. Shriram Mutual Fund [2006] 5 SCC 361. 10.9.5 The aforesaid decision in the case of Chairman, SEBI, has recently been reaffirmed in the case of Union of India v. Dharamendra Textile Processors [2008] 174 Taxman 571, wherein Hon'ble Supreme Court vide their order dated 29-9-2008 in civil appeal Nos. 10289-10303 of 2003 after analysing a number of decisions in (a) Director of Enforcement v. MCTM Corpn. (P) Ltd. [1996] 2 SCC 471 (SSC pp. 478 480-81, paras 8 12-13); (b) J.K. Industries Ltd. v. Chief Inspector of Factories Boilers [1996] 6 SCC 665 (SCC p. 692, para 42); (c) R.S. Joshi v. Ajit Mills Ltd. [1977] 4 SCC 98 (SCC p. 110, para 19); (d) Gujarat Travancore Agency v. CIT [1989] 3 SCC 52 (SCC p. 55, para; (e) Swedish Match Ab v. SEBI [2004] 11 SCC 641 (SCC p. 671, para 113) and (f) SEBI v. Cabot International Capital Corpn. [2005] 123 Compo Cas. 841 (Bom.) (Comp. Cas. pp. 862 864-65, paras 47,52 54), held- "24. It is of signif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilized the same in acquiring various assets, which formed the basis of income disclosed and assessed. Yet, the compulsion of the circumstances that unfolded themselves consequent upon the search and seizure operations would itself constitute a constraint effective enough to render the filing of returns by them "involuntary". The disclosure made in the returns actually tantamounts to an admission on the part of the assessees having earned concealed income, which according to the assessment orders has been admitted by the assessees. The disclosure cannot even be termed as one made in good faith. The expression "good faith" means an act done honestly even if the same be tainted with negligence or mistake. Section 2(22) of the General Clauses Act, lends a similar meaning to the said expression. In order that a disclosure is termed as having been made in good faith, the same must be demonstrably honest. A disclosure which is made under the compulsion of a possible penalty or other proceedings cannot be termed honest or one made in good faith, the underlying object of any such disclosure being not to come clean on the subject but to avoid the adverse consequences that may follow a non-di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, it is well settled that principles of res judicata and estoppel are not applicable to the decisions of Income-tax authorities [New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC); ITO v. Muralidhar Bhagwan Das [1964] 52 ITR 335 (SC)]. In the absence of any reasons having been adduced before us for dropping the proceedings for other years, the plea on behalf of the assessee being without any basis, is not tenable. 11. Now adverting to the findings of the ld. CIT(A) and the contentions of the taxpayer in their written submissions dated 2-5-2008 regarding applicability of exception provided in clause (2) of the Explanation 5 to section 271(1)(c) of the Act. In this connection, a co-ordinate Bench of the ITAT have already taken a view in a group case of Rupesh Bholidas Patel for the assessment years 1998-99 to 2002-03, wherein the ITAT reversed the findings of the ld. CIT(A) on these aspects. When the said decision was brought to the notice of the ld. AR, the ld. AR brushed aside that decision, mentioning that decision was rendered ex parte. Even if the decision was rendered ex parte, the Hon'ble Bench arrive at their decision in the light of facts of the case while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made in the course of search under section 132(4) of the Act. It means income admitted under section 132(4) of the Act which has not been disclosed in his return of income to be furnished before the expiry of time limit under section 139(1) of the Act, then the assessee will not be liable to the penalty. But the facts in the present case before us are clearly different that the assessment year to which the income is admitted under section 132(4) is assessment year 1998-99 and the search was conducted as on 4-9-2003. It means no time is left for the return under section 139(1) of the Act and even the assessee has filed his original return of income and in this return he has not declared this income detected during the course of search. 12. In view of these facts and circumstances, and respectfully following the Hon'ble Bombay High Court in the case of Sheraton Apparels: Max Corporation: Tressa Fashion, supra, we are of the view that the assessee's case does not fall in the exceptions provided under Explanation 5 to section 271(1)(c) read with section 132(4) of the Act. Accordingly, on this aspect we confirm the penalty and reverse the order of CIT(A)." 12. As regards the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings were pending on the date of search and the Assessing Officer cannot initiate any action on the original return i.e. issuance of notice under section 143(2) of the Act or any other action as the time under any other sections elapsed. In the search assessments jurisdiction can be assumed by the Assessing Officer to initiate assessment proceedings by issuing notice under section 153A with no necessity for inference of escapement of income or under assessment as provided under section 147 of the Act. This provision requires to be read down to justify notice only where search or other material lead to prima facie inference of liability. In that case, the initiation of proceedings under section 153A of the Act arises even in the case of completed assessments or where the assessee has filed returns of income for these six assessment years but no action is pending and no valid return is pending for assessment in which any action cannot be taken by the department as on the date of the search under section 132 of the Act, then those returns will not abate. 16. In view of the above facts and circumstances, we are not in agreement with the view of the CIT(A) that the original return fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s belong to the same group, therefore facts and circumstances of the assessees in this case are similar to the facts found by the ITAT in the aforesaid decision while no such material has been referred before us so as to take a different view in the matter, we have no hesitation in drawing support from the said decision. In the case under consideration, there is nothing to suggest that any assessment or reassessment was pending for the years under consideration on the date of search. Therefore, plea of abatement of all past actions i.e., putting an end to all the returns filed and assessments becoming non est is baseless and devoid of any merit. In this connection, we draw support from the decision of Hon'ble Jharkhand High Court in the case of Abhay Kumar Shroff v. CIT [2007] 290 ITR 114, wherein it was observed that- "The second proviso to section 153A makes it clear that assessment or reassessment relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A shall abate. In other words, if on the date of initiation of search or requisition under section 132 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of search. It was found that the appellant was maintaining double set of books and was accounting for only 50 per cent of sales in the regular set of books. This fact was admitted by Shri J.S. Ramesh, a partner of the firm in the statement recorded under section 132(4) of the Act. The total turnover suppressed by the assessee for the assessment year 1987-88 was found to be to the tune of Rs. 44,07,783. The Assessing Officer estimated that the sales of the assessee were Rs. 50,000 per day, whereas the accounted sales were not found even 50 per cent of the total sales. Apart from this, it was found that certain purchases were also not being accounted for. Similarly certain payments made were not being accounted for. All these were pointed out to the assessee. The assessee came forward with an offer of additional income. The assessee filed a revised return on March 31, 1989, declaring a total income for this year at Rs. 3,74,226 as against the earlier amount of Rs. 43,650. This was accepted and after verification the assessment was completed on December 29, 1989. In the course of assessment proceedings, penal action under section 271(1)(c) of the Act was initiated and, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reference and held that in the facts and circumstances of the case, the Tribunal was not right in upholding the order of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under section 271(1)(c). On further appeal, Hon'ble Apex Court held- "In the present case, the question of law referred to the High Court for its opinion was, as to whether the Tribunal was right in upholding the findings of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction on1v if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. In terms of clause (2) of the Explanation 5 to section 271(1)(c) of the Act and that the assessee had no mens rea in not disclosing the income offered during the search, in the original return filed by him for the assessment year 2005-06. The ITAT affirmed these findings. 15.2-1 But in the case consideration, facts are otherwise. We have already concluded in the light of decision of the Apex Court that mens rea is not an essential ingredient for levy of penalty under section 271(1)(c) of the Act and that in view of decision of Hon'ble Punjab and Haryana High Court in the case of Ashok Kumar Gupta and view already taken by a co-ordinate Bench in a case of the same group, these assessees are not entitled to concession available in terms of clause (2) of the Explanation 5 to section 271(1)(c) of the Act. The facts in the cited decision being at variance with the facts in the case under consideration, we are not inclined to follow the aforesaid decision. 15.3 As far as decision in the case of Mahendra C. Shah is concerned, in that case search operations took place at the premises of one M/s. Dinal Gems under section 132 of the Act on 3-7-1987 and assess men t proceedings rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und myself not in agreement with the same and, therefore, I proceed to write my separate order. 2. These five appeals by the revenue, relating to the two assessees, arising out of two separate orders dated 30-3-2007 of the ld. Commissioner of Income-tax (Appeals)-I, Ahmedabad, raise the following grounds:- "1. The CIT(A) has erred in law and on facts in cancelling the penalty of Rs. 2,33,684 in ITA No. 2344, Rs. 4,20,000 in ITA No. 2345, Rs. 3,45,001 in ITA No. 2346, Rs. 11,67,076 in ITA No. 2348 and Rs. 5,15,447 in ITA No. 2389 levied under section 271(1)(c) of the Act, by the Assessing Officer, without considering the fact that the assessee had not voluntarily disclosed the true and correct income. 2. The CIT(A) has erred in law and on facts in not properly considering the Explanation 5 to section 271(1)(c) of the Act, according to which, the assessee is not entitled to immunity from the penalty for the earlier period where the due date of return under section 139(1) of the Act has expired. 3. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace on or after 1-6-2003, but before 7-2008 (sic) then irrespective of the fact as to whether the assessee discloses the undeclared income found during the search in accordance with Explanation 5 to section 271(1)(c) of the Act read with section 132(4) of the Act, the benefits of Explanation 5 relating to immunity from penalty under section 271(1)(c) of the Act will be available only for the assessment year for which previous year has not ended on the date of search. 7. Keeping in view the complicity of the issue involved in these appeals, I am of the opinion that to resolve the controversy, it is foremost task to resolve the issue as to the "status" of a return furnished as required under section 139 of the Act or under section 142(1) or 148 on one hand and the status of return required to be furnished under section 153A of the Act, on the other hand, and, therefore, first of all, I proceed to consider the status of returns furnished under various sections by considering the sections which are in the following terms:- "Provision of section 139 as they stood prior to 1-4-2001 139. Return of income.-(1) Every person, if his total income or the total income of any other person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve society or in the case of a working partner of a firm whose accounts are required under this Act or any other law to be audited, the 31st day of October of the assessment year; (ii) in a case where the total income referred to in this sub-section includes any income from business or profession, not being a case falling under sub-clause (i), the 31st day of August of the assessment year; (iii) in any other case, the 30th day of June of the assessment year. Explanation 2.-For the purposes of sub-clause (i) of clause (b) of Explanation 1, the expression "working partner" shall have the meaning assigned to it in Explanation 4 of clause (b) of section 40. Explanation 3.-For the purpose of this sub-section, the expression "motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988). Explanation 4.-For the purposes of this sub-section, the expression "travel to any foreign country" does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette. (3) If any person who has sustained a loss in any previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1). (5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier:- Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed, reduce or waive the interest payable by any assessee under this sub-section. Explanation 1.-For the purposes of this sub-section, "specified date", in relation to a return for an assessment year, means,- (a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year or the 30th day of June of the assessment year, whichever is later; (b) in the case of every other assessee, the 30th day of June of the assessment year. Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section. (b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companied by a statement showing the computation of the tax payable on the basis of the return; (bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report; (c) the return is accompanied by proof of- (i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid; (ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974); (d) where regular books of account are maintained by the assessee, the return is accompanied by copies of- (i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet; (ii) in the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heel attached to such two-wheeled motor vehicle or not; or (iii) [ *** ] (iv) has incurred expenditure for himself or any other person on travel to any foreign country; or (v) is the holder of a credit card, not being an "add-on" card, issued by any bank or institution; or (vi) is a member of a club where entrance fee charged is twenty-five thousand rupees or more, shall furnish a return, of his income [during any previous year ending before the 1st day of April, 2005], on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided further that the Central Government may, by notification in the Official Gazette, specify the class or classes of persons to whom the provisions of the first proviso shall not apply: Provided also that every company [or a firm] shall furnish on or before the due date the return in respect of its income or loss in every previous year: [Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and in such case, any employee who has filed a return of his income to his employer shall be deemed to have furnished a return of income under sub-section (1), and the provisions of this Act shall apply accordingly.] [***]] [(1B) Without prejudice to the provisions of sub-section (1), any person, being a company or being a person other than a company, required to furnish a return of income under sub-section (1), may, at his option, on or before the due date, furnish a return of his income for any previous year in accordance with such scheme as may be specified by the Board in this behalf by notification in the Official Gazette and subject to such conditions as may be specified therein, in such form (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media) and in the manner as may be specified in that scheme, and in such case, the return of income furnished under such scheme shall be deemed to be a return furnished under sub-section (1), and the provisions of this Act shall apply accordingly.] [***] (3) If any person who [ *** ] has sustained a loss in any previous year under the head "Profits and gains of business or professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).] [(4C) Every- (a) scientific research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (d) institution referred to in clause (23B) of section 10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in [sub-clause (iiiad) or] sub-clause (vi) or any hospital or other medical institution referred to in [sub-clause (iiiae) or] sub-clause (via) of clause (23C) of section 10; (f) trade union referred to in sub-clause (a) or association referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout prejudice to the provisions of sub-section (6), the prescribed form of the returns referred to [in [***] this section, and in clause (t) of sub-section (1) of section 142] shall, in the case of an assessee engaged in any business or profession, also require him to furnish [the report of any audit [referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, a copy of such report together with proof of furnishing the report], the] particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and, if he is a member of an association or body of individuals, the names of the other members of the association or the body of individuals and the extent of the share of the assessee and the shares of all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.] (7) [***] [(8)(a) [Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.]] [(c) The provisions of this sub-section shall apply in respect of the assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to the other provisions of this Act shall be construed as references to the said provisions as they were applicable to the relevant assessment year.] [(9) Where the [Assessing] Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the [Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals; (e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report [and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section]; (f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.] [***] (10) [Omitted by the Finance (No. 2) Act, 1991, with effect from 1-4-1991.] Provision of section 142(1) as they stood prior to 1-4-1989 142. Inquiry before assessment.-(1) For the purpose of making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section,] 142(2) ........... 142(2A) ........... 142(2B) ........... 142(2C) ........... 142(2D) ........... 142(3) ........... 142(4) ........... Provisions of section 148 as they stood prior to 1-4-1989 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion.-For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] [(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons [or doing so.] Provisions of section 153A relevant for case where search under section 132 or requisition of 132A has taken place on or after 1-6-2003 153A.Assessment in case of search or requisition-Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. [(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation.-For the removal of doubts, it is hereby declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income 8.3 The consequence of non-furnishing of return as required under section 142(1) of the Act will also be the same as for failure to furnish the return under section 139(1) of the Act. Consequence of non-compliance to notice under section 148 for furnishing of the return of income 8.4 Consequence of failure to furnish the return under section 148 of the Act will, in addition to the consequence for failure to furnish the return in response to section 139 or 142(1) of the Act, be that if income returned in such return is found to be more than the income returned in return furnished under section 139 or under section 139(4) or 139(5) or in response to notice issued under section 142(1) of the Act, then the same may be considered as concealed income or as a result of wrong particulars of such income and assessee may be liable to penalty under section 271(1)(c) of the Act. 9. Consequence for failure to furnish the return as required under section 153A of the Act (i) In view of Explanation 3 to section 234A of the Act, if the assessment for a particular year is made for the first time under section 153A of the Act, then the same shall be regarded as regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is liable to penalty under section 271(1)(c) of the Act and such action can be initiated only after assessing such income under section 147 of the Act. (iii) Under section 139(4), if assessee fails to furnish the return within the period prescribed section 139(1) of the Act, he has right to furnish the belated return under section 139(4) of the Act, though, of course, subject to payment of interest under section 234A of the Act. (iv) In addition to above, if the assessee, after having furnished the return under section 139(1) of the Act, detects any discrepancy or mistake in such return, he has right to correct the same by furnishing a revised return as prescribed under section 139(5) of the Act. (v) So far as return furnished under section 142(1) of the Act is concerned, the Assessing Officer is free to make an assessment under section 143(3) of the Act or under section 144 of the Act as the circumstances may require, (vi) The assessee has similar rights as after furnishing return under section 139(1) of the Act. (vii) So far as return furnished in response to notice under section 148 of the Act is concerned, I would like to once again to reproduce the provisions of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148." The relevant paragraph in details contained in paragraph No. 31, reads as under:- "31. In contrast, section 148 does not provide any methodology for computing the income on reassessment or assessment. On the contrary, it creates a legal fiction that such return shall be treated as one made under section 139. By the creation of such legal fiction all the procedures prescribed in and subsequent to section 139 automatically apply in toto. It is a settled principle that a legal fiction has to be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148. Therefore, the proviso will apply to a return filed in response to notice under section 148. It is pertinent to note that clause (b) of section 158BC specifically talks of the applicability of section 142, sub-sections (2) and (3) of section 143. There is an omission of sub-section (1) to section 143. This chapter clearly prescribes its own return, form of own methodology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I have no hesitation to have opinion that a return furnished under section 153A of the Act is a return as furnished under section 139 which will include a return furnished under section 139(1), 139(4) and 139(5) for all intends and purposes and this is clear from the language of the section itself, which reads as under:- "Section 153A. Assessment in case of search or requisition.-(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall,- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly, as if such return were a return requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o notice under section 153A/153C of the Act, as the case may be, can only be a return as furnished under section 139(1) or 139(4) or 139(5), as the case may be, and, therefore, cannot, in any case, be considered. (i) Either an involuntary return, or (ii) A revised return of the Return furnished under sections 139(1)/139(4)/139(5)/142(1)/148 in the normal course (not in response to notice under section 153A or "153C/153A" of the Act) after the search. 13.2 The aforesaid findings are based on the basis of language used in provisions of sections 148 and 153A of the Act on one hand and the decision of Hon'ble ITAT Special Bench in the case of Raj Kumar Chawla on the other hand. 13.3 The aforesaid findings, so far as applicability of provisions of section 271(1)(c) of the Act or other provisions, such as, section 271F or section 234A, go to show that these provisions will be applicable only on the basis of return furnished under section 153A or under section 153C, read with section 153A of the Act and on the basis of earlier regular return furnished as required by section 139 or 142(1) or 148 of the Act. 13.4 Having held as above, I am of the opinion that the status of return, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn furnished in response to under section 153A or under section 153C of the Act. 13.7 In view of above facts and circumstances of the case, I am of the opinion that so far as present case is concerned, the assessment under section 153A of the Act having been framed by accepting the returned income declared in the returns furnished in response to notice issued under section 153A of the Act, there was neither concealment nor furnishing of wrong particulars and, therefore, the CIT (Appeals) was justified in cancelling the penalties in all these cases. 14. Without prejudice to the above, I would like to further clarify that provisions of section 153A of the Act, if interpreted in the strict sense, itself clarify that - (i) Any right or obligation of the assessee as envisaged in the provisions of sections 139, 147, 148, 149, 151 and 153 of the Act and also the powers of revenue available under these sections available under ordinary circumstances, i.e., had there been no search; have no effect on the cases covered by section 153A of the Act; meaning thereby that all such rights/obligations or powers are rendered non est (analysis of words "notwithstanding anything containing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mate under section 18A(3) cannot be said to have failed to furnish the return of his total income which he was required to furnish in response to a notice issued under section 22 or section 34; secondly, the said person cannot be said to have failed to furnish it within the time allowed and in the manner required by such notice, for estimates under section 18A(3) must be furnished before the 15th March in the financial year immediately preceding the year of assessment whereas the returns required by the notices under sections 22 and 34 can be furnished at later dates. With respect, the error in this reasoning lies in this that it fails to give due effect to the fiction contained in section 18A(9)(b) of the Act. Under that provision, when an assessee has failed to comply with section 18A(3) he "shall be deemed to have failed to furnish the return of his total income and the provisions of section 28, so far as may be, shall apply accordingly". In other words, by a legal fiction the failure to send an estimate of the tax under section 18A(3) is treated as a failure to furnish return of income under section 22. It is a necessary implication of this fiction that the estimate of tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is to be deemed to be a failure to make a return. Now, there can be no failure to make a return, unless notice had been issued under section 22(1) or section 22(2) and there has been a default in complying with that notice. Therefore, the fiction that the failure to send an estimate is to be deemed to be a failure to send a return necessarily involves the fiction that notice had been issued under section 22, and that had not been complied with. It is a rule of interpretation well-settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. The following oft-quoted- 9bscrvations of Lord Asqiuth in East End Dwellings Co. Ltd. v. Finsbury Borough Council may appropriately be referred to: 'If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 271AAA with effect from 1-4-2007, whereby a mandatory penalty at the rate of 10 per cent in cases where search proceedings under section 132 of the Act have been initiated on or after 1-7-2007 and the undisclosed income of the specified previous year has to be paid (clearly go to show that the provisions of section 153A of the Act) are noting but a disclosure scheme to enable a defaulter to come clear by declaring the true income in the returns furnished in response to notice issued under section 153A or under section 153C read with section 153A, as the case may be, because had it been so, then the Legislature would not have made provisions for adjustment for opening assessment or reassessment and also would not have made these provisions subject to non obstante clause. In my opinion, the penal provisions of section 271AAA have been brought on record, to avoid criticism or struck down of the provisions of section 153A of the Act on the ground that a dishonest taxpayer is permitted to go such fee just by paying normal tax; whereas a law abiding citizen is made to suffer fear of penal provisions of section 271(1)(c) of the Act. 15. Coming to the decision of ITAT Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 153A of the Act requiring the assessee to furnish the returns of income of six assessment years covered by the provisions, is dependent neither on - (a) Detection of any undisclosed income. (b) Nor on detection of any concealed income (as envisaged in the provisions of section 271(1)(c) of the Act. (c) Nor to tax the income which has or might have escaped assessments (as envisaged in the provisions of sections 147 to 151 of the Act. (d) Nor on the basis of material or income or valuables or assets or books of account or documents found and seized during the search action under section 132 or in consequence upon the requisition made under section 132A of the Act. (e) Nor on the satisfaction or choice of the Assessing Officer. (f) Nor on the basis of Assessing Officer's having reason to believe or not to believe. 18.1 In other words, notice under section 153A of the Act has to be issued by the Assessing Officer in every case, where search action under section 132 of the Act has been carried on or requisition under section 132A has been made after 31-5-2003 requiring the assessee to furnish the returns of income of previous six assessment years as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts have been stated in great detail in the dissenting orders and there is no need to repeat them. I have heard both the sides at length. I may straightaway say that though initially the learned counsel for the assessees attempted to argue that the provisions of section 271(1)(c) are not applicable at all to assessments made under section 153A and in fact addressed elaborate arguments on the point, later he submitted that he would not continue this line of argument further and also fairly stated that it may be recorded that the provisions of section 271(1)(c) are applicable to assessment made under section 153A. Accordingly, this part of the dissenting orders need not detain me any longer and I hold, agreeing with the learned AM, that section 271(1)(c) is applicable to an assessment made under section 153A. The learned JM has dealt with this issue from paragraphs 1 to 14.5 of his dissent, but having regard to the stand taken before me on behalf of the assessee I do not feel compelled to discuss this point any further. 3. The next submission of the assessees was that Explanation 5(2) to section 271(1)(c) is applicable to the case and the benefit thereof was available to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e levy of penalty with reference to the plea that Explanation 5(2) was applicable and has also considered the judgment of the Bombay High Court in Sheraton Apparels' case and that of the Madras High Court in S.D.V. Chandru's case. He further found in paragraph 13 of his order that the present assessees belong to the same group as Rupesh Bholidas Patel and the facts and circumstances are similar to those in the cited order. Accordingly, he held that the assessees are not entitled to the benefit of Explanation 5(2) to section 271(1)(c). He also noted that a similar view has been taken by the Punjab and Haryana High Court in Ashok Kumar Gupta's case where the benefit of the said Explanation was held confined to the year in respect of which the due date for filing the return is yet to come. The learned AM also noticed the judgment of the Hon'ble Gujarat High Court in Mahendra C. Shah's case and held that in that judgment the immunity was granted because the search took place on 31987 and the return for the assessment year 1988-89, which was the year before the High Court, was due only on 31-7-1988 and, accordingly, it was held that penalty cannot be imposed under Explanation 5(2) to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. As regards the question of immunity under Explanation 5(2) to section 271(1)(c) read with section 132(4) the learned JM held in paragraph 16 of his dissent, without prejudice, that even if the returns filed under section 153A are considered to be involuntary revised returns (i.e., returns prompted by the search), since the assessees have disclosed additional incomes even at the time of the search and also paid the tax, they were entitled to the immunity. 8. The learned JM ultimately concluded that penalty under section 271(1)(c) can be levied with reference to assessments made under section 153A only if the assessed income is found to be in excess of the income returned by the assessee in the returns filed in response to the notice issued under section 153A and not otherwise. Since in the present case the returned income and the assessed income under section 153A were the same, he held that no penalty was imposable. 9. The arguments on behalf of the department, which is the appellant in these appeals, are as follows: (a) the learned JM has overlooked the binding order of the Ahmedabad Bench of the Tribunal in the case of Rupesh Bholidas Patel belonging to the same group [si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 11. I have considered the arguments. Since the learned counsel for the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under section 153A, it is not necessary for me to examine that position. The main question before me, which was debated at length, was whether the immunity under Explanation 5(2) to section 271(1)(c) is available to the assessees. No judgment of the Hon'ble Gujarat High Court on this question was brought to my notice by either side. The Madras High Court in S.D.V. Chandru's case has held that the words in Explanation 5(2) "....has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in sub-section (1) of section 139" are not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of the search and that the words which refer to the time-limit under section 139(1) are "only a reiteration of the legal requirement regarding the time within which returns should normally be filed". In this view of the matter it was held that no penalty can be imposed on the basis of the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxpayer has no intention to fabricate evidence or to conceal his undisclosed income after search and seizure". The anomaly and the remedial amendment made are explained by the above circular in the following words: "As per the existing Explanation 5 to section 271(1) of the Income-tax Act, if at the time of search, assets which are not recorded in the books of account are found, a taxpayer is liable to penalty for concealment even if he declares the full value of those assets as his income in the return filed after the search. This provision has been found to operate even in cases where the assessee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have 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 prescribed in clause (a) or (b) of section 139(1) and specifies in the statement the manner in which such income ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ahd.) wherein similar view was taken. The learned AM has discussed this contention in paragraph 10.6 of his order and has held that the assessees were found to be the owner of cash, jewellery and admitted to have deposited cash in bank or post office or utilised the undisclosed income and became owners of the articles or things and, therefore, Explanation 5 is attracted. He has further noted that the assessees themselves have claimed that the assets were acquired out of undisclosed income and have also accepted the assessments made under section 153A. In this view, he has not accepted the contention. The learned JM, however, does not appear to have touched this aspect at all. Thus, I do not have the benefit of his views. There being no difference on this aspect of the matter for the reason that the learned JM did not express any views on the same, I am unable to proceed further and decide this point. The learned counsel for the assessee contended that the Bench should be directed to consider this issue when the matter goes back to them for giving effect to my opinion, but that it is a matter on which I have no jurisdiction to give directions to the Bench, except observing that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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