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TMI Blog2015 (4) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... s, on 14th December, 2005. During the course of this search operation, a statement given by Ehasan Haji Amin Gadawala on behalf of the family including his mother i.e. the assessee before us, was duly recorded under section 132(4) of the Act. In the statement so given, the assessee appellant's son, inter alia, disclosed income of Rs. 3,50,000/-, Rs. 3,60,000/- and Rs. 2,16,750/- for assessment years 2003-04, 2004-05 & 2005-06 respectively. The income so disclosed was duly shown in the returns filed by the assessee under section 139 read with section 153A 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 to her income on account of a deeming fiction, and, as such, it was not a fit case for impositions of penalty. Finally, it was contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the shelter under the exception to Explanation 5 to section 271(1)(c) of the Income Tax Act, 1961. The relevant portion of the clause is laid down below: "[unless- (1) Such income is, or the transactions resulting in such income are recorded,- (i) in a case falling under clause (a), before the date of the search; and (ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is untenable. Thus, assessee has failed to fulfil any of the conditions laid out in the exceptions clause. Hence, the assessee is completely ineligible for the protection provided by the clauses. To the contrary, assessee is hit by the deeming provision of Explanation 5 to section 271(1)(c), and is deemed to be liable for concealment of income." 6. Aggrieved, assessee carried the matter in appal before 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 Explanation 5 to Section 271(1)(c) of the Act. The returned income has been accepted and no addition is made. The appellant has made disclosure only to buy peace of mind. Further, even otherwise also, the appellant is eligible for immunity granted under Explanation 5(2) to Section 271(1)(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, 2007], the assessee is found to be the owner of 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- (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, wherein such return has been furnished before the said date, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purpose of imposition of penalty under Section 271(1) (C). The only exceptions to such a deeming provision or to such a presumption of concealment are given in sub-clauses (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 the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1). Such statement was made by the Karta during the search which concluded on August 1, 1987. It is not in dispute that condition No.1 was fulfilled. The second condition for availing of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the facts and circumstances of the case and also considering the decisions relied upon by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT(A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under Section 139 of the Act, 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 the Act. The provision does not specify any time limit during which t ..... 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