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2015 (10) TMI 2470 - ITAT HYDERABAD

2015 (10) TMI 2470 - ITAT HYDERABAD - TMI - Penalty under S.271(1)(c) - assessment completed u/s 153A - Held that:- Considering all the aspects and the fact that the assessee has a good case on merits and that the provisions of Explanation 5A to S.271(1)(c) 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 assesse .....

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. - ITA No.665/Hyd/2015 - Dated:- 14-10-2015 - SMT. P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER Appellant by : Shri K.A.Sai Prasad Respondent by : Shri Rama Krishna Bandi DR ORDER Per B.Ramakotaiah, Accountant Member : This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) XI, Hyderabad dated 9.3.2015, confirming part of the penalty imposed by the Assessing Officer under S.271(1)(c) of the Act for the assessment year 200 .....

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10.10.2005, assessee admitted an income of ₹ 2,92,384. Consequent upon search and seizure operations and in response to notice under S.153A dated 17.11.2011, assessee filed return of income on 14.8.2012, admitting total income of ₹ 19,07,254, which included income admitted of ₹ 16,14,870 on account of undisclosed investment in Kisan Viskas Patra, interest on FDRs and bogus gifts received. Accepting the said return, assessment was completed on a total income of ₹ 19,07,25 .....

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ssessment year 2005-06, and the said return has been accepted by the Assessing Officer. Once the income declared in the return filed in response to the return under S.153A was accepted by the Assessing Officer in the assessment completed thereupon, it was contended that there was no case of either concealment of income or furnishing of inaccurate particulars of income. It was also claimed that the concealment of income has to be seen with reference to the additional income brought to tax over an .....

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lved in the matter. Not finding merit in the explanation of the assessee and also observing that the case of the assessee fell under the main section of S.271(1)(c) and also Explanation 5A to S.271(1)(c) of the Act, the Assessing Office, working out the penalty at 200% of the tax sought to be evaded, imposed penalty of ₹ 25,68,354, vide order dated 30.9.2013 passed under S.271(1)(c) of the Act. 4. On appeal before the CIT(A), assessee, reiterating the contentions urged before the Assessing .....

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able to the case of the assessee as well, justified the action of the Assessing Officer in imposing the penalty for concealment, though he reduced the quantum of penalty from 200% of tax sought to be evaded to 100% of tax sought to be evaded. 5. Still aggrieved, assessee preferred this second appeal before us. 6. The learned counsel for the assessee submitted that on merits, there is no incriminating material at all found in the search, and in order to settle the matter, since considerable time .....

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elied on the coordinate bench decision of the Tribunal in the case of Dilip Kedia V/s. ACIT (40 Taxman.com.102)- (Hyd) dated 26.7.2013. 7. The Learned Departmental Representative, however, submitted that Explanation 5A of S.271(1)(a) will apply, as penalty has to be calculated with reference to the original return, and the assessee has filed the return admitting enhanced income in response to notice under S.153A. He supported the orders of the Assessing Officer and the CIT(A). 8. We have conside .....

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70 on account of undisclosed investment in Kisan Viskas patra, interest on FDRs and bogus gifts received. Assessment was ultimately completed under S.143(3) read with S.153A by the Assessing Officer on dated 25.3.2013, accepting the income disclosed in the said return. The main question to be considered in this case is the legal question as to the applicability of Explanation 5A to S.271(1)(c) of the Act to the present case. The said Explanation has come on to the statute book by virtue of inser .....

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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 .....

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ons represents his income (wholly or in part) for any previous year, which has ended before the date of the search and the due date for filing the return of income for such year has expired and the assessee has not filed the return, 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 sub-section (1) of this section, be deemed to have concealed the .....

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5A was further amended by Finance Act (no.2) 2009 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 (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year ; or (ii) any income base .....

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ired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after 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 (n .....

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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 received the assent of the president on 13.8.2009), that addition made in the course of assessment u/s 153A, will be deemed to be concealed income, even if the Assessee had filed .....

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part of the Statute in 2009. In the instant case the Assessee had filed return of income on 7.7.2008. He filed revised return pursuant to notice u/s 153A on 12.11.2008. Thus both the original return as well as the revised return was filed before the amendment to Explanation5A became a part of the Statute. The Supreme Court in the cases of Addl CIT v Onkar saran (195 ITR 1) has held that in case of return filed in response to Notice u/s 148, law prevailing as on the date of filing of return will .....

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introduced, it is a fact that original return has been filed much before the said provision came on to the statute. It is to be noted that the assessee filed the original return of income on 10.10.2005. In the event a search has occurred before the 1st day of June, 2007, i.e. after filing of return by the assessee, and on or before the day S.5A has been introduced, then assessee s case would have been governed by Explanation 5, in which case, as assessee has disclosed the amounts under S.132(4) .....

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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 retu .....

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tion 148. 12. This was followed by the Apex Court in the case of B.N.Sharma V/s. CIT (226 ITR 442). Therefore the law prevailing as on the date of filing of return should be the basis of levy of penalty and not on the subsequent amendment, even if the amendment is retrospective. The Delhi High Court in the case of Engineers Impex (P) Ltd. & Ors. Vs. D.D. Sharma (244 ITR 247) has held as under: 12. Penal provisions in the statutes have to be considered strictly in the sense that if there is a .....

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g prosecuted for an act or omission which was considered innocent when done. [G.P. Nayyar vs. State (Delhi Admn) AIR 1979 SC 602]. An Explanation is appended to a section to explain the meaning of the words contained in the section and normally is to be read to harmonise with and to clear up any ambiguity in the main section. However, in the present case, the Explanation inserted has widened the scope of the main section and has created an obligation breach of which entails penalty and subjects .....

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