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2015 (4) TMI 1060 - ITAT AHMEDABAD

2015 (4) TMI 1060 - ITAT AHMEDABAD - TMI - Penalty u/s 271(1)(c) - income in question was included in the return filed by the assessee under section 153AHeld that:- 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 conte .....

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also, the impugned penalties therefore, deleted. - Decided in favour of assessee - IT(SS)A Nos.464, 465 & 466/Ahd/2011. - 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 (hereinaft .....

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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 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 ₹ 3,50,000/-, ₹ 3,60,000/- and ₹ 2,16,750/- fo .....

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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 that the amount added to the income was part of our disclosure made under section 132(4) read with Explanation 5 below section 271(1)(c) of the Act, and, therefore, no penalty is live .....

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u/s.132(4) r.w.s. explanation 5 below Section 271(1)(c) of the Act and therefore, no penalty is liveable with reference to same in view of said explanation 5 of the Act. Rebuttal: The claims of the assessee have been examined from the perspective of concealment and have been found to be unacceptable on account of the following reasons. For proper appreciation of the contentions of assessee, the provisions of Explanation 5 to section 271(1)(c) of the Income Tax Act, 1961 as claimed relevant to th .....

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eturn 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 d .....

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arch 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) .....

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been disclosed so far in his return of income to be furnished before the expiry of time specified in such-section(1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income .... The assessee is not eligible for the protection provided under the exception to Explanation 5 because of the reasons mentioned below : (i) Assessee has not disclosed any table income to the Chief Comm .....

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Income Tax At, 1961 during search operations. The law requires strict interpretation in case of exceptions and such omissions as committed by the assessee can not be over-looked. The extant position of law as 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 offen .....

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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 assessee is completely ineligible for the protection provided by the clauses. To the contrary, assessee is h .....

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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 the I.T. Act. Hence, the penalty .....

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o section 271(1)(c) for the years earlier to the year of search. The Hon ble Member did not approve the decision of Madras High Court in the case of CIT vs. S.D.V. Chandru 266 ITR 175 and Rajasthan High Court decision in the case of CIT vs. Kanhaiyalal 299 ITR 19 and order of the Allahabad Bench of ITAT in the case of Shyam Biri Works P. Ltd. vs. ACIT 70 TTJ 880. Instead the Member have followed the decision of Bombay High Court in the case of Sheraton Apparels vs. ACT 256 ITR 20 and ITAT Ahmeda .....

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fit 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 f .....

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tion 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 .....

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) of subsection (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless, - (1) Such income is, or the transactions resulting in such income are recorded, (i) in a case falling under clause(a), before 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 of such income is otherwise disclosed to the [principa .....

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1) of Section 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. 9. The High Court of Madras in the case of S.D.V. Chandru (supra) held that in a case where the assessee had not disclosed his income in the returns filed for the previous year 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 undisclo .....

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s 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 in .....

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g 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 Kart .....

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fy the condition for availing the benefit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on 31st July, 1987 and pay tax thereon particularly when the assessee concealed on August 1, 1987 that there was concealment of income. The third condition under clause (2) was that the assessee had to pay the tax together with interest, if any, in respect of such undisclosed income. However, no time limit for payment of such tax stood prescribed under clause .....

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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 whic .....

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ates to the imposition of a penalty. 13. Considering 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 Se .....

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ent 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 the aforesaid amount i.e. the amount of penalty with interest has to be paid. Admittedly when the assessees herein have paid the entire amount with interest, the Assessing Officer ought to have granted them immunity available under Section 271(1)(C ) of .....

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