TMI Blog2019 (4) TMI 1673X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, in our opinion, the Assessee not only satisfied all the three conditions, namely (I) disclosure of undisclosed income in the course of the statements under Section 132(4) of the Act; (II) specify the manner of earning the same from real estate business; and (III) payment of tax with interest for which no time frame is fixed in the said Explanation 5(2). Therefore the Assessee was entitled to the immunity from penalty u/s 271(1)(c). No merits in the contentions raised by the Revenue that the payment of such tax liability in respect of undisclosed income as disclosed in the Returns of income filed by the Assessee after Notice u/s 153C, has to be made at the time of filing of the return itself. We are not dealing with the case for assessment of tax in the hands of the Assessee as per the amended procedure of assessment in question u/s 158(C) after 01.06.2003 but we are concerned with the applicability of Clause 5(2) of Explanation to Section 271(1)(c) which is an exception to the presumption of concealment u/s 271(1)(c). There has been no amendment in the language of the said provision before or after 01.06.2003 and therefore the interpretation as made by the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under Section 271(1)(c) of the Income Tax Act 1961 and granted partial relief to the Assessee by setting aside penalty on one issue but also restored the penalty under Section 271(1)(c) of the Act on another issue. 2. The facts in brief leading to the filing of the present Appeals by both the sides are narrated in brief as under. 3. A search was carried out at the business place of the Assessee on 16.05.2007 and inter alia cash of ₹ 1.65 crores was found at the residential house and in the Bank locker of the Assessee. Cash of ₹ 2 crores was also found in the place of a third party, Smt. Jaya Krishnamurthy, who also stated in the course of statements that the said cash was borrowed as loan from one of the Assessee, namely, Duraipandi. The Assessee filed its returns after search in the capacity of an AOP for the first time claimed in the course of the present penalty proceedings under Section 271(1)(c) of the Act that they had also derived agricultural income during the Assessment Years in question from the Agricultural lands taken on lease from the agriculturalists during these years in question. However, we are not concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under appeal are dismissed. 5. However with regard to immunity claimed by the Assessee as per Clause 5(2) of the Explanation the learned CIT (Appeals) also accepted the contentions raised by the Assessee and set aside the penalty under Section 271(1)(c) of the Act with the following observations:- 6.2 As regards levy of penalty on the income returned in the returns of income filed in response to notice under Section 153A, the contentions on behalf of the appellant, as discussed above, in brief, are that- The appellant had made a disclosure under Section 132(4) and the return of income was filed based on the disclosure made under the said section and the taxes were paid subsequently. The appellant is entitled to immunity from penalty under Section 271(1)(c) on the income disclosed under Section 132(4) as per the provisions or Explanation 5 to the said section as the appellant had complied with the conditions laid down therein and approved in the decision of the Hon'ble Supreme Court in the case of ACIT Vs. Gebilal Kanahya Lal 348 ITR 561 . It has been held by the Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years under appeal and the grounds of appeal in this regard are allowed. After considering the submission of the appellant on all the grounds of appeals in respect of all the assessment years under appeal, the appeals in ITA.Nos. 107 to 113/13-14 are partly allowed. 6. Both the parties, aggrieved with the said order, filed Cross Appeals before the learned Income Tax Appellate Tribunal which reversed the findings of the learned CIT (Appeals) on both the Appeals, in the following manner. 7. On the applicability of Clause 5(2) of the Explanation under Section 271(1)(c) of the Act, the learned Tribunal restored the penalty and denied the immunity with the following observations:- 5.6 The Id. Counsel for the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under Section 153A, it is not necessary for us to examine that position. The main question before us, which was debated at length, was whether the immunity granted under Explanation 5(2) to Section 271(1)(c) is available to the assessee or not. The Madras High Court in S.D.V.Chandru's case (266 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remove an anomaly in the existing provisions in respect of cases where penalty is imposable for concealment of income even if the taxpayer has no intention to fabricate evidence or to conceal his undisclosed income after search and seizure. The anomaly and the remedial amendment made are explained by the above circular in the following words: As per the existing Explanation 5 to Section 271(1) of the Income-tax Act, if at the time of search, assets which are not recorded in the books of account are founds, a taxpayer is liable to penalty for concealment even if he declares the full value of those assets as his income in the return filed after the search. This provisions has been found to operate, even in cases where the assesssee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally out of context because the Hon'ble Court was concerned with the levy of penalty and immunity under clause (1) of Explanation 5. Therefore, the above observations, in our opinion, are of binding nature. When similar situation arose before the Pune Bench in the case of DCIT Vs. Omkareshwar R. Kalantri Ors. [2010] 42 debtor 489 , wherein assessee relied on the decision of the Coordinate Bench in the case of Sarla M.Ahuja v. DCIT [I.T.A.No. 1301 (PN)/2007] for deletion of the penalty but the revenue placed reliance on the decision of the Third Member in the case of ACIT vs. Kirit Dahyabhai Patel [121 ITR 159 (Ahd)] . Thus despite of contrary decision of the same Bench, Pune Bench has also placed reliance on the decision of the Third Member in the case of ACIT vs. Kirit Dahyabhai Patel [supra] has been followed in the case of Mahendra Mittal v. ACIT [2011] 132 ITD 80 . Further, the same decision has been followed in the case of Ahit B.Zota v. ACIT [2010] 40 SOT 543 . In view of the decisions of Mumbai Benches, we are of the view, that immunity under clause (2) of Explanation 5 to Section 271(1)(c) would not be avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Dilip N.Shroff v. JCIT 291 ITR 519 (SC) and UOI v. Dharmendra Textile Processors 306 ITR 277 (SC) observed. 7.2. Following the above Judgement, we are of the opinion that this is not a fit case to levy of penalty on treating the agricultural income declared by the assessee as income from other sources. Accordingly, the penalty levied under Section 271(1)(c) of the Act is deleted for all the assessment years. 8. In the result, all the appeals filed by the Revenue are allowed. The appeal of the assessee in I.T.a.No. 570/Mds/2015 is allowed for statistical purposes and the appeals of the assessee in I.T.A.Nos. 1666, 1667, 1668, 1669, 1670, 1671 1672/Mds/2016 are allowed. 9. Being aggrieved, both the parties have filed the present Appeals under Section 260(A) of the Act before this Court. 10 . The following substantial questions of law, in our opinion, arise from the order of the learned Tribunal:- (i) Whether the provisions of Explanation 5(2) appended to Section 271(1)(c) of the Act are attracted in the facts and circumstances of the case or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. September 2011 15,00,000 5. October 2011 10,00,000 6. November 2011 3,00,000 7. December 2011 12,00,000 8. January 2012 5,00,000 9. February 2012 5,00,000 10. March 2012 10,00,000 11. May 2012 3,00,000 12. July 2012 2,00,000 13. October 2012 10,00,000 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly or in part) his income,- (a) For any previous year which has ended before the date of the 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 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 deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless,- (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 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 clause (a) or clause (b) of sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income on 31st July, 1987 and pay tax thereon particularly when the assessee conceded 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 (2). The only requirement stipulated in the third condition was for the assessee to pay tax together with interest . In the present case, the third condition also stood fulfilled. The assessee has paid tax with interest upto the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income upto the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4). 7. For the above reasons, we hold that the assessee was entitled to immunity under clause (2) of Explanation 5 to Section 271(1)(c) and accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate of the Village Administrative Officer. Therefore, the Assessing Authority was justified in treating the same as 'Income from Other Sources' and the learned CIT (Appeals) was justified in imposing penalty to that extent and the learned Tribunal has erred in setting aside the same by the impugned order and hence, the Revenue has filed the present batch of Appeals. 17. He relied upon the decision of the Madras High Court in the case of B.Ramachandhiran v. CIT reported in [2014] 43 taxmann.com 430 (Madras) . Paragraph No. 12 of the said Judgement is quoted below for ready reference:- 12. As far as the present case is concerned, if the assessee had any agricultural operation and earned income, certainly, it was always open to the assessee to bring any such material to substantiate the facts. The facts, therefore, ought to have been brought before the Assessing Officer or before the First Appellate Authority to substantiate the case of the assessee, that he had been in receipt of the income earned out of agricultural operation. In the absence of any materials shown or onus discharged in the manner known to law, we do not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 132(4) during the course of search he has to specify the manner of earning such undisclosed income and also has to undertake the liability of payment of tax with interest up to the date of payment on such tax liability in respect of undisclosed income. No time frame has been fixed in the said Explanation 5(2) for the payment of tax with interest and this interest naturally in such cases has to be computed up to the date of payment. 20. There is no dispute facts before us that besides the adjustment 1.65 crores of the cash seized during the course of search and the monthly payments of taxes made by the Assessee aggregating to ₹ 2,42,53,137/- total of which would come to ₹ 4,07,53,137/- the total tax paid by Assessee is in excess of the admitted tax liability of ₹ 3.50 crores on the undisclosed income of ₹ 8.25 crores disclosed in the six Returns filed by the Assessee on 13/14th August 2009. Therefore, in our opinion, the Assessee not only satisfied all the three conditions, namely (I) disclosure of undisclosed income in the course of the statements under Section 132(4) of the Act; (II) specify the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal has found it to be a fit case not to impose the penalty on the Assessee under Section 271(1)(c) of the Act, we do not find any reason to interfere with the said findings of the learned Tribunal and therefore in our opinion, the second question also deserved to be answered in favour of Assessee and against the Revenue. 24. The Judgement of the Madras High Court in the case of B.Ramachandhiran v. CIT cited supra relied by the learned counsel for the Revenue is of little help to the learned counsel for the Revenue in the present case as would appear from paragraph 12 quoted above, the Co-ordinate Bench of this Court only found that from the facts as determined by the authorities below that the Assessee had been in receipt of the income earned out of agricultural operation for which in the absence of any contra material brought on record, does not give rise to any question of law and therefore, the Appeals filed by the Assessee were liable to be rejected, in a way supports our view that a finding of fact with regard to the nature of income and the extent thereof is a finding of fact which binds this Court under Section 260-A of the Act. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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