TMI Blog2015 (4) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 24-4-2015 - Pramod Kumar, AM and S.S. Godara, JM Ramesh Kumar Malpani, for the appellant P.L. Kureel, for the respondent ORDER Per Pramod Kumar: 1. These three appeals, filed by the assessee, challenge correctness of consolidated order dated 16th August, 2010 passed by the CIT(A) in the matter of penalties under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), for the assessment years 2003-04, 2004-05 and 2005-06. 2. Grievance of the assessee, in substance, is that the CIT(A) erred in confirming penalties under 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 statement given by Ehasan Haji Amin Gadawala on behalf of the family including his mother i.e. the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is found to be the owner 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; 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 sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, .... Thus, prima facie, the Explanation 5 to section 271(1)(c) of the Income 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). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards to strict interpretation of exceptions clauses is discussed below : In the case of N.K. Jain vs. C.K. Shah (SC) [1991 AIR 1289], the Apex Court has held that it is true that all the penal statutes should be construed strictly and the court must see that the thing charged as an offence is within the plain meaning of the words used ...... Further, the Apex Court has again laid down in the case of State of Jharkhand and Ors. Vs. Ambay Cements; Appeal (civil) 7994 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 claim of protection under exception provision to explanation 5 of section 271(1)(c) of the Act is untenable. Thus, assessee has failed to fulfil any of the conditions laid out in the exceptions clause. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 confirmed. 7. The assessee is not satisfied and is in further appeal before us. 8. We have heard the rival contentions, pursued the material on record and duly considered facts of the case, in the light of the applicable legal position. 9. As learned Counsel for the assessee rightly points out, the issue is now covered, in favour of the assesses, by Hon ble jurisdictional High Court s judgement in the case of Kirit Dahyabhai Patel vs. ACIT (ITA Nos.1181, 1182 1185 of 2010; judgement dated 03.12.2014), 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 relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 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 specified the manner in which such income had been derived and thereafter pays the tax on that undisclosed income with interest, then such undisclosed 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 and the assessee claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous Year which has ended before the date of search or which is to end on or after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 the case of Abdul Rashid(supra) has held that in order to get the benefit of immunity under clause(2) of explanation 5 to Section 271(1)(c) of the Income Tax Act, it is not necessary to file the return before the due date provided that the assessee had made a statement, during the search and explained the manner in which the surrendered amount was derived, and paid tax as well as interest on the surrendered amount. 12. At this stage, it is required to be noted that the Apex Court in the case of Commissioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble jurisdictional High Court, we uphold the grievance of the assessee. In view of the fact that the income in question was covered by the declaration made in the statement recorded under section 132(4) and the tax thereon was duly paid by the 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 was included in the return filed by the assessee under section 153A, the impugned penalty is unsustainable. For this reason also, the impugned penalties of ₹ 79,070/- for A.Y. 2003-04, ₹ 82,070/- for A.Y. 2004-05 and ₹ 65,025/- for the A.Y. 2005-06 are, therefore, deleted. The assessee gets the relief accordingly. 11. In the result, the appeals are allowed. Pronounced in the open court today on 24th April, 2015. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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