TMI Blog2007 (12) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in his statement under section 132(4) has agreed to surrender the undisclosed income of Rs. 3,50,000 for the ssessment year 1987-88, the Tribunal was right in holding that the assessee was entitled to claim the benefit of immunity from levy of penalty under Explanation 5 to section 271(1) (c) notwithstanding that the assessee has not surrendered his undisclosed income for the assessment year 1987-88 but has spread over the same for five years." 3 While Appeal No. 42 of 2003 was admitted on September 15, 2003, by farming the following substantial question of law: "Whether, on the facts and in the circumstances of the case, the Income -tax Appellate Tribunal was correct in its interpretation of Explanation 5 to section 271(1)(c) so as to hold that penalty under n 271(1) (c) was not leviable in the case, contrary to the findings given by Commissioner of Income-tax (Appeals) ?" 4 In our view, the precise question that emerges is, about the interpretation Explanation 5 to section 271(1)(c), as to whether on the face of the statement given by the assessee under section 132(4), any liability of penalty is attracted, on account of the assessee filing revised returns for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1987-88, but then, the amount was spread over for five years, to avoid higher rate of tax, which would have been applicable, if the entire surrendered amount was taxed in the year 1987-88. Thus, the assessee has not stuck to the statement given under section 132(4), and, consequently, the penalty order was upheld. 8 Then in further appeal, the learned Tribunal found that the assessee had submitted revised returns for the assessment years 1984-85 to 1988-89, on the basis, that such income [as disclosed under section 132(4)] did pertain to the said years, and that, this stand of the assessee was accepted by the Assessing Officer, in view of the fact, that the documents found during the course of search indicated that the assessee is carrying on a business from the assessment year 1984-85, and the quantum of the income declared by the assessee in each year was varied by him, on estimate basis, and thus, it was clear, that as a matter of fact, the concealed income of Rs. 3,50,000 was earned during the 5 years, which was accepted by the Department, and that being the position, it cannot be said that the assessee did not stick to the statement given under section 132(4). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withstanding 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 particular 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 failing 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 sub section (4) of section 132 that any money, bullion, jeweilery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-section (1) of section 139, and also specifies in the statement the manner in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is thereafter, that the penalty proceedings had been initiated, with respect to the assessment years 1987-88 and 1988-89 only, and the income assessed for these two years, pursuant to the revised assessment order is 1,05,000 and Rs. 1,25,000, respectively. In this background, a look at Explanation 5 again, would show, that it provides, that where in the course of a search initiated under section 132, the assessee is found to be the owner of any assets mentioned therein, and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income, for any previous year, which has ended before the date of the search, but the return of income for the said year, has not been furnished before the said date, or where such return had been furnished before the said date, such income has not been declared therein, 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 purpose of imposition of penalty under sub-section (1) (c) be deemed to have concealed the particulars of his income, or furnished inaccurate particulars of income. 14 Significantly, such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in sub-clause (2), which do not exist, and according to the settled legal position regarding the interpretation of statutes, this is not permissible for us to so read. Then the other thing to be seen is, as to whether this sub-clause (2) confers any immunity or not. Admittedly, the assessee had given the statement under section 132(4) disclosing to be having undisclosed assets worth Rs. 3,50,000, of course in addition, he gave out therein that he would show it in the return for the assessment year 1987-88. But then in the language of section 132(4) read with sub-clause (2) of Explanation 5, this is nowhere the requirement, that the assessee should undertake to show that asset, in a return of any particular assessment year, to be entitled to claim the immunity. 17 To appreciate this aspect, we may again revert to the opening part of Explanation 5, which attracts the liability under section 271(1) by providing Explanation, and clause (a) thereof clearly contemplates a situation, where the assessee may claim the undisclosed assets to have been acquired by him for any previous year, which has ended before the date of the search, but the return of the income of such year has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prevailing on the assessee, he may straightaway make a disclosure of all existing assets under section 132(4), disclosing to be in possession of the assets as found, which by virtue of the covering language of Explanation 5 would amount to the concealment of the income for the purpose of section 271(1) (c), but then, sub-clause (2) being in the nature of the proviso, would come in, and in that event, obviously, the assessee would be not only entitled, rather would be under obligation to make disclosure of the income earned during the relevant previous years, in which the income may have been earned, resulting into the disclosure of the total assets as acquired by undisclosed income, and admitted in statement under section 132(4). 20 This may be a question of fact, as to whether the particular extent of income shown by the assessee in such revised returns in each particular previous year, may be correct or not, but then, there may be cases, where there may be foolproof material to show, that the assets found during the search, and disclosed under section 132(4), were acquired by the assessee during a particular past previous year. For instance, let us take an example, that in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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