TMI Blog2016 (1) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... 1486, 1487/HYD/2013 - - - Dated:- 13-11-2015 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri A.V. Raghu Ram, AR For The Revenue : Shri M. Sitaram, DR ORDER These three appeals are by assessee against the common order passed by the Commissioner of Income Tax (Appeals)-III, Hyderabad dated 12-08-2013 for the AYs. 2004-05, 2005-06 2006-07 levying penalty u/s. 271(1)(c) of the Income Tax Act [Act] respectively in the three years. 2. Assessee is an individual and derived income from salary and house property. He has filed his returns regularly with the respective due dates. There were search and seizure operations in the business premises of M/s. Kiwasara Finance Ltd. Upon obtaining the bank account extract, it was found that bank accounts had been opened in various names and there were transactions during the above mentioned three years. Assessee admitted that these bank accounts were opened in the names of various persons for conducting transactions belonged to him. There were shares purchased in various names through these bank accounts and profits had also been earned. Accordingly, in the proceedings u/s. 153A initiated against assessee, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Mr. B. Rajeswara Rao in ITA Nos. 1531 to 1534/Hyd/2014 dt. 29-05-2015. 7. Ld. DR however, relied on the orders of the authorities to submit that penalty is warranted as assessee has offered additional incomes consequent to the search and seizure proceedings. 8. I have considered the rival contentions and perused the material on record. There is no dispute to the fact that the above proceedings u/s. 153A were consequent to the search in one of the companies in which assessee and his brothers are directors. It is also fact that during the course of search, various bank accounts have been identified and assessee owned up those accounts along with profits earned thereon. It is also fact that assessee declared the incomes u/s. 132(4) and filed returns in response to the notices u/s. 153A. AO, even though analysed the nature of additions made in the order, ultimately the total income determined was same as returned by assessee, without any further additions. Thus, the returned income and assessed income in these proceedings u/s. 153A being the same, assessee s contention that there cannot be any penalty has to be accepted. These issues were anlaysed in the Co-ordinate Bench decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 271 (1)(c). It follows that the concealment of income has to be seen with reference to additional income brought to tax over and above income returned by the assessee in response to notice issued u/s. 153A. Accordingly, for the purpose of imposition of penalty u/s.271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered. Further, in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A. As held above the penalty u/s. 271(1)(c) is impossible when there is variation in assessed and return income. if there is no variation, there will be no concealment. When there is no concealment, question of levy of penalty u/s. 271(1)(c) will not arise. This is settled position of law. The concept of voluntary return of income may be important in penalty proceedings initiated in course of normal assessment proceedings made u/s.143(3) or 147 but not under section 153A. From above discussion it follows that where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lysis of S.271(1)(c) read with Explanation 5 and Explanation 5A was done in detail by the coordinate bench of the Tribunal in the case of Dilip Kedia V/s. ACIT (supra) in paras 18 to 23 of its order dated 26.7.2013, which read as under- 18. Explanation 5 has been amended by the finance Act 2007 to restrict the application of that explanation to searches initiated before 1.6 2007. Hence the Assessee cannot seek exemption under Explanation 5 to sec 271(1)(c). The cases cited by the Assessee wherein penalty was deleted applying Explanation 5, relate to search initiated prior to 1.6.2007 and hence are not applicable to the instant case. 19. A new explanation 5A was introduced by Finance Act 2007, w.e.f 1.6.2007 to cover searches initiated after 1.6.2007 which read as under: Explanation 5A.- Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,- (i) any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 21. In the Circular No 5/2010 dated 3.6.2010 issued by the CBDT explaining the provisions of the Finance Act (no. 2) 2009, the amendment to explanation 5A was explained as under: 53.2 By substituting the Explanation 5A it has been clarified that the scope extends to the cases where the assessee has filed the return of income for any previous year and the income found during the course of search relates to such previous year and had not been disclosed in the said return, then such income shall represent deemed concealment of income and assessee shall be liable to pay penalty under section 271. 22. Thus as per the existing Explanation 5A prior to the amendment by Finance (No.2) Act 2009, if an Assessee had filed the return of income for the years covered by the search, then the addition made shall not be considered as deemed concealment. It is only by the Amendment to explanation 5A by the Finance (no.2) Act 2009, (which recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore 13.8.2009, i.e. amendment of S.271(1)(c) by insertion of Explanation 5A, by the Finance Act, 2009, then Explanation 5A as it is existing would make the assessee free from the provisions of S.271(1)(c). If in that period the assessee has filed the return, Explanation 5A would not have been applicable, and the assessee would have been exempt from penalty. Since the date of search happened to be 8.9.2010, i.e. after the new Explanation 5A was brought on statute, the assessee was covered by the new Explanation 5A. As considered above in different eventualities, the assessee was not visited with penalty, except in the last considered situation of search being conducted after 13.8.2009. 11. The Supreme Court in the case of Addl CIT v Onkar Saran (195 ITR 1) has held that in case a return is filed in response to Notice u/s 148, law prevailing as on the date of filing of return will govern the levy of penalty. It observed that even in a case where a return filed in response to a notice under section 148, which involved an element of concealment, the law applicable would be the law as it stood at the time when the original return was filed for the assessment year in question and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest income is credited to any account in the books of account of the payee including credit given in the account called interest payable account or suspense account . Similar view is also taken by the coordinate bench of the Tribunal in the case of Dilip Kedia V/s. ACIT (supra), wherein the penalty was not sustained as both the returns were filed much before the Explanation 5A was brought on statute. 13. Considering all these aspects and the fact that the assessee has a good case on merits and that the provisions of Explanation 5A are not applicable on the date of filing of the original return, we are of the opinion that Explanation 5A as it stood on the date of filing the return in response to notice under S.153A by the assessee would not cover the case of the assessee, so as to warrant levy penalty under S.271(1)(c). Since the assessee bona-fidely declared the additional income in the course of search and filed return and paid taxes thereon, we are of the opinion that penalty levied on such amount cannot be sustained. Accordingly, we allow the appeal of the assessee and delete the penalty of ₹ 12,84,177 sustained by the CIT(A) . 9. Since the facts in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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