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2015 (10) TMI 2470

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..... ER 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 2005-06. 2. Facts of the case in brief are that the assessee is proprietor of M/s. Shiv Shakti Transport Company and one of the directors of M/s. Maheswari Brothers Coal Ltd. A search and seizure operation under S.132 of the Income Tax Act, 1961 was conducted in the group of Maheswari Brothers and at the residential premises of the assessee on 8.9.2010. In the course of said search, certain documents and assets were found and seized. In the return originally filed for the assessment year 2005-06 on 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 & .....

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..... A), observing that the Assessing Officer has computed the undisclosed income on the basis of the incriminating material found during search, and disclosure under S.132(4) was made only when incriminating material was confronted to him, and also holding that the provisions of Explanation 5A to S.271(1)(c) is applicable 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 has lapsed from the time the assessee has received the gifts, they were accepted as income, in addition to certain interest available in the names of the family members. Thus, on facts, the assessee has admitted certain income and has filed the return in order to settle the matter consequent upon the search conducted. However, it was also contended that provisions of Explanati .....

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..... 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 income for any previous year ; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions 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 th .....

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..... 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 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 a return of income earlier for the relevant Assessment Year. Prior to the amendment, if an assessee had already filed a return of income, the addition made in the assessment made u/s 153A cannot be deemed to be concealed income. 23. No doubt the amendment to Explanation 5A has been made with retrospective effect from 1.6.2007 and is applicable to searches initiated after 1.6.2007, the issue is whether this amendment to Explanation will apply to returns filed before the amended explanation became part of the Sta .....

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..... he 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 not the law as it stood on the date on which the return was filed in response to the notice under section 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 reasonable interpretation which would avoid the penalty, that interpretation ought to be adopted. Whe .....

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