TMI Blog2017 (4) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanation-5 dealing with search cases provides an exception and departure to this general rule that concealment is committed vis-ŕ-vis the return filed alone. In view of overriding provision of Explanation-5 the default under s.271(1)(c) gets triggered towards undisclosed income, immediately on search action pending filing of return subject to ‘escape route’ as provided in the said Explanation. it is difficult to reckon the case made out by the assessee that additional income declared in the post search returns would be entitled to immunity from penalty in a sweeping manner regardless of the satisfaction of conditions as provided for its non-applicability as enumerated under clause(2) of Explanation-5. The abstract proposition of non-applicability of penalty proceedings in all circumstances (wherever undisclosed income has been included in the return filed post-search) is singularly misplaced and is not supported by the factual context in which the decision in Kirit Dahyabhai Patel [2009 (6) TMI 654 - ITAT AHMEDABAD-B] was rendered. On holistic considerations, it is manifest that the abstract proposition suggested on behalf of the assessee that penalty can be reckoned on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assailing the action of the Commissioner of Income Tax (Appeals)-VI Baroda [CIT(A) in short] in upholding the penalty under s.271(1)(c) of the Act imposed by the Assessing Officer (AO). The assessee however essentially seeks to assail the order of CIT(A) wherein the action of the Assessing Officer (AO) towards imposing penalty under s.271(1)(c) was sustained. 4. Briefly stated, assessee derives income from proprietary concern, viz. Vijay Transport. The assessee also derives interest income from partnership-firm and income from other sources. The assessee is an individual and a partner in partnership-firm which is carrying on business as contractors. A search and seizure operation was carried out on 17/01/2007 in the case of assessee and its group wherein various materials were found during the course of search. Consequently, the proceedings under s.153A of the Act were initiated in the case of assessee. The assessee declared total income of ₹ 6,76,140/- in the return filed in response to notice under s.153A as against ₹ 4,40,605/- declared in the original return of income under s.139(1) of the Act filed prior to search. It was accordingly observed by the AO that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed ₹ 80,490/- in quantum out of ₹ 5,48,088/- 2006-07 3,23,830 5,91,560 2,67,730 1,63,845 ITAT deleted ₹ 69,260/- in quantum out of ₹ 1,63,845/- 6.1. As regards imposition of penalty towards difference in the income declared between the original return prior to search and subsequent return filed pursuant to search under s.153A of the Act is concerned, the Ld.AR contended that the Revenue is not entitled to impose penalty on income declared by the assessee himself under s.153A of the Act. The Ld.AR pointed out that the search was conducted prior to 01/06/2007 when Explanation-5 to section 271(1)(c) of the Act was in vogue. In this context, ld.AR referred to the judgment of the Hon ble Jurisdictional High Court in the case of Kirit Dahyabhai Patel vs. ACIT in Tax Appeal No.1181 of 2010 Ors. dated 03/12/2014 for the proposition that income returned in response to notice under s.153A is required to be considered for the purpose of penalty under s.271(1)(c) of the Act and penalty can be levied only on the income assessed over and above the income re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not sufficient to impugn the explanation of the assessee towards source of unexplained investment in so far as penalty proceedings are concerned. It is the case of the assessee that as a partner of M/s.Tirupati Construction Co., the assessee was having access to the whole amount of unaccounted credit added after granting telescoping benefit. Thus, the unexplained investment sustained in the hands of the assessee stands explained by the corresponding unaccounted peak credit added in the hands of partnership-firm. It was therefore contended on behalf of the assessee that the imposition of penalty is not justified on facts in so far as unexplained investment is concerned. The Ld.AR submitted that similar justifications are available in respect of unexplained investments for other years as per order of the ITAT B Bench Ahmedabad in quantum appeal in IT(SS)A Nos.211 to 214/Ahd/2010 for AYs 2003-04 to 2006- 07, order dated 13/11/2013. The Ld.AR, thus, contended that the penalty imposed by revenue is not sustainable in law and on facts and hence requires to be deleted. 7. The Ld.DR, on the other hand, relied upon the order of the CIT(A) and submitted that no inference is called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtinent is whether Explanation-5 to section 271(1)(c) is attracted in the facts of the case. Explanation-5 to section 271(1)(c) is applicable to cases where in the course of a search under s.132 of the Act, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing. In such cases, if the assessee claims that these assets have been acquired by him by utilizing (whlly or in part) his income for any previous year which has ended before the date of 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 in the return or such previous year is yet to end on or after the date of the search, the assessee shall, for the purposes of imposition of penalty under s.271(1)(c) of the Act be deemed to have concealed the particulars of his income. Ostensibly, this Explanation has been added to specifically address the situations where consequent to a search, assets and valuables are discovered to be in control or possession of the assessee, and thereafter the assessee files return of income after the date of search. In such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain assets (money, bullion etc.) found in the control or possession of the assessee during the search and the assessee must claim that such assets have been acquired by him by utilizing unaccounted income. Ostensibly, Explantion-5 would come to play only when unaccounted assets of the nature as mentioned in the said Explanation are found during the search. In other words, the undisclosed income discovered in the course of search are to be necessarily represented by assets as enumerated in the aforesaid Explanation. In the instant case, the income offered to tax under s.153A for AYs 2003-04, 2004-05, 2005-06 2006-07 is based on alleged incriminating material and confessional statement alone. The revenue has not claimed unaccounted income to be in the nature of aforementioned assets. Notably, the quantum order or penalty order or appellate order of CIT(A) are non-descript in so far as the nature and specification of incriminating material are concerned. Returning to this point, in our considered view, reference to assets in the form of money, bullion, jewellery or other article or thing is a sin qua non for putting Explanation-5 in motion. Hence, on facts, Explanation cannot be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t once the return is filed by the assessee after the search in response to notice issued under s.153A including undisclosed income discovered in the course of search, the assessee gets indefeasible right to shun away penalty proceedings on such undisclosed income is squarely at loggerheads with deeming fiction created under Explanation-5 for this purpose. Needless to say, this generic proposition towards non-applicability of penalty on undisclosed income, if seen in affirmative, will render the legislative fiat under Explanation-5 relatable to search cases as otiose and infructuous. As can be seen, the benefit of immunity provided under Explanation-5 is well defined and structured. As provided, it is available only in respect of such year where the due date of filing of the return has not expired before the date of search subject to fulfillment of conditions as contemplated in the said Explanation. 9.2. We shall now advert to the decision in the case of Kirit Dahyabhai Patel (supra) referred to and extensively relied upon on behalf of the assessee. We notice that in that case, the substantial question of law framed for decision before the Hon ble Gujarat High Court was conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be read in isolation and their purport and contents are derived from their context. As noted, the law is codified for applicability of penalty in search cases. The legislature has made conscious distinction between the cases where the return of income has already been filed prior to search qua the cases where the return is yet to be filed and has put them on a different pedestal. It is trite law that a judgement cannot be read out of context in which the question arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of a Court divorced from the context of the question in consideration and to treat it to be the complete law declared by the Court. A judgment must be read as a whole and the observations from the judgment have to be considered in the light of questions which were presented before the Court. A decision of the Court takes its colour from its question in which it is rendered as enumerated in CIT vs. Sun Engineering works Pvt.Ltd. (1992) 198 ITR 297 (SC). Thus, context holds the key and the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted credit attributable to partnership-firm was available to meet the unexplained investment of the Assessee as opposed to only certain percentage of share in the partnership-firm endorsed upon by the ITAT in quantum appeal. It is, thus, case on behalf of the assessee that plea of the assessee in support of unexplained investment is plausible and consequently bonafide. It was thus pleaded that penalty towards unexplained investment is not justified. 13. We find force in the argument on behalf of the assessee. The partnership-firm has admittedly paid taxes on the unexplained peak credit. The aforesaid income is thus available at the command and control of the partners of the firm in ordinary course. The assessee being one of its partners can possibly have unilateral access to the entire unexplained peak credit owing to mutual agency. Therefore, the explanation of the assessee cannot be said to wholly improbable and hence cannot be summarily brushed aside. Consequently, while the addition has been sustained partially in quantum proceedings based on proportion of share in partnership, such finding do not ipso facto apply in the penalty proceedings in view of the difference in its ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
