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2016 (6) TMI 886 - ITAT CHANDIGARH

2016 (6) TMI 886 - ITAT CHANDIGARH - TMI - Levy penalty u/s 271(1)(c) - surrender of income - Held that:- The assessee has placed on record copy of the statement of the assessee recorded on 3.10.2007 in which entire surrender of ₹ 69 lacs was made in all the assessment years under appeals, in which no incriminating material was referred to the assessee while recoding her statement to conclude that assessee had concealed\ any income. The assessee made a surrender of ₹ 69 lacs as per l .....

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nt case. Thus no justification to sustain the penalty u/s 271(1)(c) of the I.T. Act - Decided in favour of assessee. - Levy penalty u/s 271(1)(c) - assessee had not filed its return of income u/s 139(1) of the Act within the due date and disclosure was made subsequently in response to the notice u/s 153A - Held that:- The assessment year under appeal is 2007-08 and due date of filing of the return was 31.7.2007 u/s 139(1) but no return has been filed by the assessee by the due date. The due .....

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the case of assessee because the return u/s 153A was already filed on 31.12.2008 which have been accepted as it is by the Assessing officer. Further, as is held in assessment year 2005-06, no material was referred to in the statement of the assessee while making a total surrender of ₹ 69 lacs. Therefore, in the absence of any material against the assessee, deeming provision of concealment would not apply in the case of the assessee. - Decided in favour of assessee. - ITA No. 696/CHD/2012, .....

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1961 (in short 'the Act'). All appeals have been heard together and are being disposed of through this common order on identical issue. 2. I have heard the Ld. representative of both the parties, perused the materials available on record and have also gone through the findings of the Ld. CIT(A). 3. It is submitted by both the parties that issue is same in assessment years 2005-06 and 2006-07. These appeals are, therefore, disposed of as under:- ITA 696/Chd/2012 (Assessment year 2005-06) .....

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tment / income its return of income u/s 139(1) of the I.T. Act filed on 16.3.2006. This culminated into levy of penalty vide separate order passed on 29.3.2010. 5. The assessee challenged the levy of penalty before the Ld. CIT(A) and has made the following arguments:- (i) The original return u/s 139(1) was filed before the date of search i.e 16.3.2006 declaring income of ₹ 1,57,545/-. (ii) That the surrendered income filed in response to notice u/s 153A has been accepted in the assessment .....

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is section and noted that search operation took place after Ist June 2007 as the search and seizure operation u/s 132 was conducted on 27.9.2007. The assessee filed return of income u/s 139(1) on 16.3.2006, i.e before the date of search and disclosure of income is included in the return filed after the search. Hence, the provisions of Explanation 5A of section 271(1)(c) of the Act are applicable to this case as the same covers such a situation as stated above, in respect of search operation cond .....

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ate of receipt b y the Department, therefore, no credence should be given to the same. The Ld. CIT(A) also observed that penalty u/s 271(1)(c) was initiated read with Explanation 5A for non declaration of income from capital gain and Misc. income in the original return of income. The penalty was, therefore, confirmed and appeal of the assessee has been dismissed. 7. The Ld. counsel of the assessee reiterated the submissions made before the authorities below and submitted that since the assessee .....

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that Explanation 5A is inserted in the Act w.e.f. 1.6.2007 i.e after filing of the return, therefore, the law applicable is law prevailing at the time when original return was filed and not on the date of search. He has relied upon the decision of Hon'ble Supreme Court in the case CIT Vs. Onkar Saran & Sons (1992) 195 ITR 001 (SC) and B.N. Sharma Vs. CIT (1997) 226 ITR 0442 (SC). The Ld. Counsel for the assessee, therefore, submitted that it is not a case of deemed concealment u/s 271(1) .....

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n of income, therefore, penalty is correctly levied against the assessee. 9. I have considered the rival submissions. Before proceeding further, it would be relevant to reproduce the provisions of section 271of the Act as under:- "271. (1) If the Assessing Officer or the Commissioner (Appeals) or the [Principal Commissioner or] Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) [* * *] (b) has failed to comply with a notice under sub-section (2) .....

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(i) [* * *] (ii) in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure ; (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of suc .....

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een acquired by him 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 document 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, th .....

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in the course of a search initiated under section 132 on or after the 1 s t day of June, 2007 the assessee is found to be the owner of - (i) 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 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 cl .....

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e is declared by him in any return of income furnished on or after the date of 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." 12. The ITAT Hyderabad Bench in the case of Dilip Kedia v ACIT in ITA No. 1986/Hyd/2011 vide order dated 26.7.2013 in paras 16 to 25 held as under:- "16. The other provisions to be cons .....

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hich 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 such income has been derived and pays the tax, together with interest, if any, in respect of such income." 17. In view of this sub clause penalty cannot be levied on the amount accepted and offered in the course of search proceedings, in a statement u/s 132(4). 18. Explanation 5 has been amen .....

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ad 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 .....

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urposes 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." 20. While the new explanation does away with the exemption from penalty if the Assessee offers the payment in the course of statement u/s 132(4), but under this explanation as it stood at the time of introduction, deemed concealment of income assessed in consequence of search applied only if the .....

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at such assets have been acquired by him by utilising (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 search and,- (a) where the return of income for such previous year has been furnished before the said dat .....

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lars of such income." 21. In the Circular No 5/2010 dated 3.6.2010 issued by the CBDT explaining the provisions of the Finance Act (no. 2) 2009, the amendment to explanation 5A was explained as under: "53.2 By substituting the Explanation 5A it has been clarified that the scope extends to the cases where the assessee has filed the return of income for any previous year and the income found during the course of search relates to such previous year and had not been disclosed in the said .....

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resident 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 .....

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T v Onkar saran (195 ITR 1) has held that in case of return filed in response to Notice u/s 148, law prevailing as on the date of filing of return will govern the levy of penalty by holding as under: "Even in a case where a return filed in response to a notice under section 148 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 .....

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es 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. When the legislature imposes a penalty, the words imposing it must be clear and distinct. [CIT vs. T.V. Sundaram Iyenger & Sons (P) Ltd. 1976 CTR (SC) 25 : AIR 1976 SC 255 : TC 68R.372] . 13. If by an amendment in an existing statute or by an enactment an ex post facto offence is created, it will be violative of Art. 20(1) of the .....

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created an obligation breach of which entails penalty and subjects to criminal prosecution. This Explanation to s. 194A has been inserted w.e.f. 1st June, 1987, and obviously is prospective and not retrospective. In case, it was to have the retrospective effect, it would be violative of Art. 20(1) of the Constitution. As the Explanatory Note noticed above itself states, the liability for deduction of tax at source from the interest payable under the existing provisions arises only if interest wa .....

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t payable account" or "suspense account". 25. Considering all the aspects viz., the Assessee had declared the amount he will be offering, in the course of statement recorded u/s 132(4), the AO has not brought on record any other materials or evidence for coming to the conclusion that the Assessee had concealed any income except for the statement recorder u/s 132(4), even the CBDT has cautioned the Assessing officers to make additions based purely on the sworn statements recorded u .....

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applicable for imposing penalty under s. 271(1)(c) is the law in force at the time of filing of original return even in cases where it is the return filed under s. 148 which involves element of concealment." 14. The Hon'ble Supreme Court in the case of B.N. Sharma vs CIT (supra) following its earlier decision in the case of Onkar Saran & Sons held as under:- "Amount of penalty imposable should be worked out on the basis of the law in force at the time of filing of the return wh .....

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onsequence of search applied only if the assessee had not filed a return of income before the due date for filing of the return in the respective years. In the assessment year under appeal i.e. 2005-06, the assessee had filed original return u/s 139(1)(4) on 16.3.2006 declaring income of ₹ 1,87,545/- i.e. before the date of search on 27.9.2007. Therefore, as per Explanation 5A relevant to assessment year under appeal, prior to amendment by Finance (No.2) Act, 2009, if an assessee had filed .....

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e at the time of filing of the original return. Thus, explanation 5A to section 271(1)(c) of the I.T. Act would not be applicable in the case of the assessee in assessment year under appeal. Further, the assessee has placed on record copy of the statement of the assessee recorded on 3.10.2007 in which entire surrender of ₹ 69 lacs was made in all the assessment years under appeals, in which no incriminating material was referred to the assessee while recoding her statement to conclude that .....

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which squarely apply to the facts and circumstances of the present case. Considering the above discussion in the light of the provisions of Explanation 5A of section 271(1)(c), in the light of decision in the case of Dilip Kedai Vs. ACIT (supra) and decision of the Hon'ble Supreme Court in the case of CIT v Onkar Saran & Sons (supra) and B.N. Sharma Vs. CIT (supra), I do not find any justification to sustain the penalty u/s 271(1)(c) of the I.T. Act. Accordingly, I set aside the order o .....

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gain of ₹ 19,28,467/- and Misc. income of ₹ 42,95,000/- have been declared. The Assessing officer levied the penalty u/s 271(1)(c) of the Act read with Explanation 5A of the I.T. Act because this investment / income has not been declared in the original return of income filed u/s 139(1) of the Act. 18. Ld. Representatives of both the parties admitted that issue is similar as has been considered in assessment year 2005-06 in ITA No. 696/Chd/2012. Following the reasons for decision in .....

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In response the return of income was filed on 31.12.2008 declaring income of ₹ 33,17,420/- wherein Short Term Capital Gain of ₹ 22,40,000/- and Misc. income of ₹ 62,300/- had been declared. The Assessing officer levied penalty u/s 271(1)(c) read with Explanation 5A on the reasons that assessee had not filed its return of income u/s 139(1) of the Act within the due date and disclosure was made subsequently in response to the notice u/s 153A of the Income Tax Act. The Ld. CIT(A) .....

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dispute that the search was conducted on 15.7.2008 at the premises of the assessee. The Assessing Officer levied penalty as per Explanation 5-A to section 271(1)(c) of the Act because the return has not been filed by the assessee within the due date of filing of the return i.e. 31.7.2008. The assessee, however, explained that the assessee is a partner in two firms and the books of account of one firm are audited. Therefore, in his case the due date of filing of the return cannot be 31.7.2008 and .....

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deeming provisions of Explanation 5-A cannot be applied because at the time of search, the relevant previous year for the assessment year under appeal, the due date of filing of return of income had not expired. The findings of the Tribunal in paras 6 and 7 of the order are reproduced as under : 6. We have heard the rival contentions and have perused the findings of the Assessing Officer as well as the Commissioner (Appeals). In the present case, penalty has been levied by invoking the provision .....

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previous year or any income based on entry in any books of account or other documents for any previous year. The relevant provisions of Explanation 5A to section 271(l)(c) is reproduced below:- [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 (hereafter in this Explanation referred to as assets) and the assessee claims .....

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ate but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but 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 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 partic .....

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condly, the due date for filing of return of income for such previous year has not expired. If any case falls under these saving clauses, Explanation 5A cannot be invoked. 7. In the present case, the search had taken place on 19 t h June 2007. The due date for filing of return of income for the assessment year 2007-08, had not expired on the date of search as the due date of filing of return of income under section 139(1) was 31 s t July 2007 and due date under section 139(4) was 31 s t March 20 .....

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of search. The deeming provisions as given any Explanation 5A has to be strictly construed because one has to see what is the status of income on the date of search and not afterwards. The penalty in this case, cannot be levied under the main provision as the assessee has included this income in the return of income in response to notice under section 153A and which has been assessed also. There is no variation between the return of income and the assessed income, qua this addition. For levying .....

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rovisions of section 271(l)(c). Thus, in our opinion, once the due date had not expired for filing the return of income for the assessment year 2007-08, at the time of search, penalty cannot be levied under the deeming provisions of Explanation 5A. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that on this preliminary ground, penalty levied by the Assessing Officer and as confirmed by the Commissioner (Appeals) cannot be sustained and same is .....

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lanation 5-A cannot be applied because at the time of search, the relevant previous year for the assessment year under appeal, the due date of filing of the return of income had not expired. Thus, the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra) is squarely applicable to the facts and circumstances of the case. Further, the assessee explained that there was no variation in the return of income and assessed income as per the assessment order passed under section 153A .....

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ion 271(1)(c) of the Act, which in our view, is not applicable to the facts and circumstances of the case. There is thus, no concealment of income in the case of the assessee for attracting levy of penalty. Therefore, considering the facts and circumstances of the case in the light of the decision in the case of Kshiti R. Maniar (supra), we set aside the orders of the authorities below and cancel the penalty. 11. in the result, the appeal filed by the assessee is allowed." 22. The Hon'b .....

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The ITAT Bombay Bench in the case of ITO Vs. Gope M. Rochlani (2014) 151 ITD 642 following the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Jagriti Aggrwal (supra) held as under- "Provisions of section 139 (4) was actually extension of due date of section 139(1) and, thus where late return was filed u/s 139 (4), benefit of immunity under explanation 5A of section 271 (1) (c ) was available to same." 24. The ITAT Cuttack Bench in the case of Sarat C .....

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