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2015 (5) TMI 423 - ITAT AHMEDABAD

2015 (5) TMI 423 - ITAT AHMEDABAD - TMI - Penalty under section 271(1)(c) - disclosure of income during search operation - Held that:- As decided in case of S.D.V. Chandru [2003 (12) TMI 40 - MADRAS High Court] in a case where the assessee had not disclosed his income in the returns filed for the previous year which have ended prior to the date of the search and, in the statement given under Section 132(4) the assessee admitted the receipt of undisclosed income for those years and also specif .....

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e assessee, the provisions of Explanation 5 to section 271(1)(c) of the Act will come into play on the facts of this case. Accordingly, as the assessee rightly contends, penalty under section 271(1)(c) can not be sustained in law. In any event, as held by the Hon’ble jurisdictional High Court above, the penalty under section 271(1)(c) of the Act can only be imposed in respect of an income over and above the income disclosed in the return filed under section 153A, and since the income in question .....

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ni For the Respondent : P.L. Kureel ORDER Per Pramod Kumar: 1. These three appeals, filed by the assessee, are directed against the order dated 16th August, 2010 passed by the CIT(A) in the matter of penalty under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), for the assessment years 2000-01, 2001-02 and 2002-03. 2. Learned Representatives fairly agree that whatever we decide in IT(SS)A Nos.464, 465 & 466/Ahd/2011, in the case of Smt. Maleka Haji Amin G .....

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der section 271(1)(c) of the Act imposed on the assessee (Rs.79,070/- for A.Y. 2003-04, ₹ 82,070/- for A.Y. 2004-05 and ₹ 65,025/- for A.Y. 2005-06). 3. The issue in appeal lies a very narrow compass of material facts. The assessee before us, a lady in mid sixes, is a partner in Malika Enterprises. A search and seizure operation was carried out at the residential premises of the assessee, and her family members, on 14th December, 2005. During the course of this search operation, a st .....

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A of the Act and tax due, with interest thereon, was duly paid by the assessee. 4. It was in respect of these incomes that penalty proceedings were initiated by the Assessing Officer. During the penalty proceedings, it was contend by the assessee that since there was no concealment of income qua the return filed by her, there is no occasion for implosion of concealment of penalty under section 271(1)(c). It was also contended that the amount added to her income was not her real earning but added .....

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ll these submissions and proceeded to impose penalty under section 271(1)(c). While doing so, and rejecting assessee s reliance on Explanation 5 to Section 271(1)(c), the Assessing Officer, inter alia, observed as follows :- Finally, the assessee argued the following: Moreover the amount was part of our disclosure made u/s.132(4) r.w.s. explanation 5 below Section 271(1)(c) of the Act and therefore, no penalty is liveable with reference to same in view of said explanation 5 of the Act. Rebuttal: .....

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wner of any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) For any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein; .....

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ome Tax Act, 1961, goes against the assessee. Explanation 5 has provided for a deeming provision whereby the assessee is treated as defaulter under section 271(1)(c). The case of the assessee falls squarely within the deeming provision of Explanation 5 whereby the return of income has been furnished after the date of search for the A.Y. relevant to the instant penalty proceeding. Thus, Explanation 5 deems the assessee as an offender and liable to penal action. Further, the assessee has claimed t .....

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he [Chief Commissioner or Commissioner] before the said date; or (2) he, in the course of the search, makes a statement under subsection (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 such-section(1) of section 139, and also specifies in the statement the manne .....

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iii) Nowhere in the statement has the manner of derivation of undisclosed income been specified. The assessee can not be conferred the benefit of exception to Explanation 5 s the assessee has not voluntarily disclosed the asset and the manner of earning of undisclosed income in the statement under section 132(4) of the Income Tax At, 1961 during search operations. The law requires strict interpretation in case of exceptions and such omissions as committed by the assessee can not be over-looked. .....

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94 of 2003, that .... it is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed ..... Hence, the Law is crystal clear and settled that in respect of the penal and exception provisions about strict interpretation, without liberty of intendment. Thus, assessee can not be granted benefit of having made voluntary disclosure statement under s.132(4) of I.T. Act for purpose of exemption of penalty to assessee. Thus, the assessee s .....

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the CIT(A) but without any success. Learned CIT(A), rejecting the contentions of the assessee appellant, observed as follows :- 4. The appellant has submitted in the statement of facts that he had complied all the conditions laid down under the provisions of Explanation 5 to Section 271(1)(c) of the Act. The disclosure was made in statement recorded u/s 132(4) of the Act and also the same was offered as income in the returns filed and the taxes were paid. The AO did not grant immunity to Explana .....

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Patel, in ITA No.2344/Ahd/2007 for A.Y. 2002-03 and in the case of Shri Rajesh A. Patel in ITA No.2345, 2346, 2348 & 2389/Ahd/2007 for A.Ys. 98-99, 99-2000, 2001-02 & 2002-03 dated 25.06.2009 [given by Shri R V Easwar Vice President and Third Member], have considered the point of applicability of explanation 5 to section 271(1)(c) for the years earlier to the year of search. The Hon ble Member did not approve the decision of Madras High Court in the case of CIT vs. S.D.V. Chandru 266 ITR .....

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date for filing the return is yet to come but the benefit is not available to earlier years where due date to file the return of income u/s. 139(1) has expired. As the decision of Hon ble ITAT Ahmedabad [Third Member] is binding the same is followed. Accordingly, it is held that the appellant is not entitled to the benefit of exemption under explanation 5(2) to section 271(1)(c) of the I.T. Act and penalty is liveable. Hence, the action of the Assessing Officer is upheld and the penalty is confi .....

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.2014), wherein reversing the very Third Member decision of this Tribunal which was relied upon by the CIT(A). Their Lord ships have observed as follows :- 8. We have heard learned advocates for the parties and perused the material on record. Before dealing with the contentions, it would be relevant to reproduce Explanation 5 to Section 271 (1) (c) of the Income Tax Act, which reads as under: Explanation 5. Wherein in the course of a [search initiated under section 132 before the 1st day of June .....

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such income has not been declared therein; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause(c) of subsection (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 .....

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ment under subsection (4) of section 132 that any money, bullion, jewellery or other valuable article of 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. .....

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sclosed income would get immunised from the levy of penalty. 10. Looking to the facts and circumstances of the case, it would be relevant to refer the decision relied upon by learned senior advocate for the appellant in the case of Gebilal Kanbhaialal (HUF)(supra), wherein the Apex Court in paragraph No.6 has observed as under: 6. Explanation 5 is a deeming provision. It provides that where, in the course of search under Section 132, the assessee is found to be the owner of unaccounted assets an .....

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. The only exceptions to such a deeming provision or to such a presumption of concealment are given in subclauses (1) and (2) of Explanation 5. In this case, we are concerned with interpretation of clause (2) of Explanation 5, which has quoted above. Three conditions have got to be satisfied by the assessee for claiming immunity from payment of penalty under clause (2) of Explanation 5 to Section 271(1(C). The first condition was that the assessee must make a statement under Section 132(4) in th .....

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Section 271(1)(C) was that the assessee should specify, in his statement under Section 132(4), the manner in which income stood derived. Admittedly, the second condition, in the present case also stood satisfied. According to the department, the assessee was not entitled to immunity under Clause (2) as he did not satisfy the condition for availing the benefit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on 31st July, 1987 and pay tax thereon pa .....

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The assessee has paid tax with interest upto the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income upto the date of payment. Clause(2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4). 11. Even, the High Court of Chattisgarh in t .....

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ommissioner of Income Tax, West BanagalI Vs. Vegetable Products Ltd. (supra), has held that if the Court finds that the language of a taxing provision is ambiguous or capable of more meaning than one, then the Court has to adopt the interpretation which favours the assessee, more particularly so where the provision relates to the imposition of a penalty. 13. Considering the facts and circumstances of the case and also considering the decisions relied upon by learned senior advocate for the appel .....

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as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under Section 271(1)(c ) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under Section 153A, if any. 14. Further, in the present case, it appears from the record that the assessees had satisfied all the conditions which are required for claiming immunity from payment of penalty under Section 271(1) of th .....

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ase and also the principle laid down in the decisions relied upon by the learned senior counsel for the appellant more particularly the principle laid down in the case of Assistant Commissioner of Income Tax Vs. Gebilal Kanhailal (supra) and Commissioner of Income Tax Vs. Abdul Rashid (supra), we are of the considered opinion that the penalty under Section 271(1)(C) of the Income Tax Act cannot be levied on the income shown in the return filed under Section 153 of the I.T. Act. 17. Considering t .....

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