TMI Blog2016 (6) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... vy 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 date u/s 139(1) was extended upto 31.3.2009, which was actually extension of due date under section 139(4) of the Act. Therefore, due date had not expired for filing of the return u/s 139(1) (4) of the I.T. Act on the date of search. The assessee in response to the notice u/s 153A declared entire income including the Short Term Capital Gain and Misc. income which have been accepted by the Assessing officer as it is. Therefore, Explanation 5A introduced by the Finance Act 2009 would not apply in 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 absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relied up several decisions in support of the arguments including the decision of Hon'ble Supreme Court in the case of CIT Vs. Onkar Saran Sons (1992) 195 ITR 001 (SC). 6. The Ld. CIT(A) considered the submissions of the assessee and reproduced provisions of section 271(1)(c) of the Act and the Explanation 5A to this 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 conducted after Ist June, 2007. The penalty order was, therefore, upheld. The Ld. CIT(A) also noted that assessee declared misc. income in the return u/s 153A in order to justif y the property transactions at Zirakpur and Barwala, documents in respect thereto were found during the course of search and the said disclosure had not been made in the regular return of income file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) of section 115WD or under sub-section (2) of section 115WE or under sub- section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,-- (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 considered are Explanation 5 and 5A to sec 271(1)(c). While the explanation deems the income added on the basis of search, Clause (2) of explanation 5 to sec 271(1)(c) provides for an exclusion from the deeming provision. The Sub clause reads as under: (2) he, in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessees had not had filed a return of income before the due date for filing of return in the respective years. Explanation 5A was further amended by Finance Act (no.2) 2009 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 (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 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 date but such income has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Explanation5A became a part of the Statute. The Supreme Court in the cases of Addl CIT 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 the return was filed in response to the notice under section 148. 24. This was followed by the Apex Court in the case of B.N.Sharma v CIT (226 ITR 442). Therefore the law prevailing as on the date of filing of return should be the basis of levy of penalty and not on the subsequent amendment, even if the amendment is retrospective. The Delhi High Court in the case of Engineers Impex (P) Ltd. Ors. Vs. D.D. Sharma (244 ITR 247) has held as under: 12. Penal provisions in the statutes have to be considered strictly in the sense that if there is a reasonable interpretation which would avoid the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od on the date of filing of return/ revised return by the Assessee, we are opinion that levy of penalty of Rs. On the additional income included in the return based only on the sworn statement of the Assessee cannot be sustained. Accordingly we allow the Assesse's appeal and delete the penalty of ₹ 16,28,258/- levied u/s 271(1)(c). 13. The Hon'ble Supreme Court in the case of CIT v Onkar Saran Sons (supra) held as under:- Law 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 whether original and / or revised which contained the alleged concealment or misstatement. 15. The Explanation 5A was originally introduced by Finance Act, 2007 w.e.f. 1.6.2007 to cover search initiated after Ist of June 2007 as reproduced above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the authorities below and cancel the penalty levied u/s 271(1)(c) of the I.T. Act. 16. In the result, the appeal of the assessee in ITA No. 696/Chd/2012 is allowed. ITA No. 476/Chd/23012 (assessment year 2006-07) 17. In this year, the assessee filed original return of income u/s 139 (1) of the Act on 31.3.2007 i.e before the date of search. The assessee filed return of income in response to notice u/s 153A on 26.12.2008 declaring a total income of ₹ 43,99,486/- wherein long term capital 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under appeal i.e. 2008-09 had not expired because the due date of filing of the return was 30.9.2008. The I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra) considered the application of Explanation 5-A to section 271(1)(c) of the Act and held that the 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 provisions of Explanation 5A to section 271(l)(c) (and not Explanation 5, as mentioned by the Assessing Officer). Explanation 5A, is a deeming provision where in case of search and seizure operation carried out under section 132 after 1 st June 2007, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars of income, if he is found to be the owner of any money bullion jewellery or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2008. Thus, in the present case, deeming provisions of Explanation 5A cannot be applied here because at the time of search, the relevant previous year for the assessment year 2007-08, the due date of filing of return of income had not expired. Whether the assessee had filed the return of income under section 139(1) or 139(4) after the date of search, will not be of much consequence because the income in question pertains to assessment year 2007-08 for which the due date had not expired at the time 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 153A of the Act. The Assessing Officer levied the penalty under deeming provisions of Explanation 5-A to section 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'ble Punjab Haryana High Court in the case of CIT Vs. Ms. Jagriti Aggrwal (2011) 339 ITR 610 (P H) held as under:- Sub-s. (4) of s. 139 is in fact, a proviso to sub-s. (1) and provides for extension of period of due date for filing the return in certain circumstances and, therefore, exemption under s. 54 was allowable where the assessee had purchased new property before the extended due date of filing of return as per s. 139 (4) and filed return within such extended time 23. The ITAT Bombay Bench in the case of ITO Vs. Gope M. Rochlani (2014) 151 ITD 642 foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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