TMI Blog2020 (12) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... ood the same in context of requisition proceedings u/s 132A where it is specifically restricted in respect of search initiated u/s 132 of the Act. Therefore, following the consistent view taken by the Coordinate Benches and in absence of any contrary authority brought to our notice and keeping in view the strict construction of penalty provisions, the matter relating to levy of penalty in situation of requisition of assets u/s 132A shall continue to be governed by the main provisions of section 271(1)(c) and explanation 5 cannot be invoked in such cases. Even if some discrepancies were found during the survey resulting in surrender of income by the assessee, once the assessee has declared the said income in the return of income filed under section 139(1) of the Act, then the penalty cannot be levied on the surmises, conjectures and possibilities that the assessee would not have disclosed the income but for survey. In the instant case, the assessee had filed his original return of income u/s 139(1) of the Act for the impugned assessment year 93-94 on 26.04.93 declaring total income of ₹ 6,09,620/- including cash seized of ₹ 5,92,340/-/ and the said return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e police and thereafter, the Income tax Department was informed. Thereafter, on 09.04.92, the Income tax Department initiated requisition proceedings u/s 132A and drawn a panchnama and taken possession of cash in pursuance of warrant u/s 132A of the Income Tax Act 1961. On 09.04.92, the assessee vide its letter of even date addressed to Deputy Director of Investigation offered the said amount for inclusion in his return of income for the AY 1993-94. On 21.04.92, the Department issued and served a notice upon the assessee under Rule 112A read with section 132(5) to explain the nature and source of acquisition of the aforesaid seized cash. On 11.06.92, the assessee filed reply surrendering the seized cash as income for the financial year 92-93 relevant to assessment year 1993-94 and offered the cash to be retained to set off his tax liability. On 22.07.92, the Assistant Commissioner Investigation Circle 1(1), Jaipur passed the summary order under section 132(5) by assessing the total income of assessee for the FY 92-93 at ₹ 5,95,340/- and also imposed penalty u/s 271(1)(c) at ₹ 7,30,917/- which was challenged u/s 132(12) and while rejecting the assessee s petition, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led explanation as to the non applicability of Explanation 5 of section 271(1)(c) with reference to the requisition u/s 132A and reliance was placed on various case laws. It was contended that since the assessee had offered cash of ₹ 5,92,340/- in the return filed u/s 139(1) and Explanation 5 is not applicable, no penalty u/s 271(1)(c) is leviable. 8. The AO however, imposed penalty @ 120% on the tax on alleged concealed income of ₹ 5,92,340/- by holding that as per sub-section (3) of section 132A, provisions of sub-section (4A) to (14) of section 132(1) shall apply and therefore in Explanation 5, once reference is made to section 132 then the same is automatically deemed to include reference to section 132A also. Further, though the assessee offered ₹ 5,92,340/- for taxation but he did not indicate the manner in which the aforesaid amount was earned. He therefore, held that the provisions of section 271(1)(c) along with Explanation 5 are applicable and the assessee is liable to penalty as per the provisions of said section. 9. Being aggrieved, the assessee again carried the matter in appeal before the ld CIT(A). The ld. CIT(A) observed that assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the question of manner would come into picture when a statement u/s 132(4) is recorded which is not the case here as section 132(4) is not applicable in a requisition u/s 132A. In any case assessee has explained in the Notes to the return of income that the money belongs to his four brothers and also to his brother in law who own 40 bigha of irrigated agricultural land but still on the advice of his Counsel, he has offered the same to be taxed as income and therefore no penalty u/s 271(1)(c) be levied as the surrender is voluntarily, suo moto and to avoid litigation (though it donot represent assessee s income at all). It was submitted that it is for this reason that Hon ble Supreme Court required the AO to verify the income declared in the return filed earlier and subsequent to AY 93-94. The assessee has not filed any return prior to AY 93-94 but in the return filed for AY 93-94 and in subsequent year, the income declared is only the income under the head house property / income from other sources . All these facts shows that the cash of ₹ 5,92,340/- offered in the return is just to avoid the litigation which is neither a concealment of income or furnishing of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome or furnished inaccurate particulars of such income. Such penalty is levied at 100% to 300% of the amount sought to be evaded. Therefore, the levy of penalty is to be seen with reference to the non disclosure of income in the original return. In the present case, assessee has included ₹ 5,92,340/- in the original return of income filed before the due date u/s 139(1). Thus, there is no concealment of income or furnishing of inaccurate particulars of income in the return and therefore, no penalty is leviable u/s 271(1)(c). Therefore, the penalty imposed by AO and confirmed by Ld. CIT(A) is not justified and against the law. In support, reliance was placed on the following cases:- CIT Vs. SAS Pharmaceuticals (2011) 335 ITR 259 (Del.) PCIT Vs. Shree Sai Developers (2019) 418 ITR 306 (Guj.) Sh. Rajendra Shringi Vs. DCIT (2020) 77 ITR (Trib) 0085 (Jaipur) Vasavi Shelters Vs. ITO 141 ITD 590 (2013) (Bang.) DCIT Vs. Dr. Satish B. Gupta (2011) 49 DTR 262 (Ahd.) CIT Vs. Reliance Petroproducts (P) Ltd. 322 ITR 158 (SC) 15. Per contra, the ld DR submitted that as per sub-section (3) of section 132A, provisions of sub-section (4A) to (14) of section 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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,- (1) such income is, or the transactions resulting in such income are recorded,- (i) in a case falling 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 Principal Chief Commissioner or Chief Commissioner or Principal 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, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch. Put differently, if not for the search, the Legislature deems that the assessee would not have disclosed such income in the return filed subsequently. Explanation-5 also contains two exceptions, where the assessee would not be deemed to have concealed his income and would gain immunity from levy of penalty- first, if such income is or the transactions resulting in such income are recorded in the books of account maintained by the assessee for any source of income or such income was otherwise disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of the search; second, in the course of the search, the assessee makes a statement under Section 132(4) that the assets found in his possession have 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 the time specified in Section 139(1), 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. 24. The purpose of inserting Explanation-5 in the statute books was explained by the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply, it is necessary that there must be certain assets (such as money, bullion etc.) found in the possession of the assessee during the search, and that the assessee must claim that such assets have been acquired by him by utilising (wholly or in part) his income. Moreover, such income must be in relation to a particular previous year that has either ended before the date of the search or is to end on or after the date of the search and such income is declared subsequently in the return of income filed after the search. Therefore, it is only when assets are found during the search which the assessee claims have been acquired by him by utilizing (wholly or in part) his income for any particular previous year, and then declares such income (which he utilized in acquiring the assets found) in a subsequent return filed after the date of search, would it be deemed that the assesee has concealed his income. In other words, the assets seized during the search must relate to the income of the particular assessment year whose return is filed after the date of the search. Such a conclusion is only logical, considering that assessment under the Act is with respect to a particular assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) before the Bangalore Benches of the Tribunal and the relevant findings of the Coordinate Bench read as under: 5. There is no doubt about the fact that concealment of income, if any, is to be rather with reference to the returned income filed by the assessee. In this case, the assessee himself offered the amount as his income and no further addition was made in the assessment. Hence, concealment as such, cannot be considered to have taken place. Let us now come to the question of whether Explanation 5 to section 271(1)(c) would be applicable to the present case. Section 132 alone relates to search and seizure proceeding conducted by the IT department. On the other hand, section 132A relates to books of account and other assets seized during the course of search proceedings conducted by other departments. The heading of section 132A is Powers to requisition books of account, etc., . It is, therefore, clear that this particular section although, may be analogous to the provisions of section 132 dealing with search and seizure proceedings taken recourse to by other departments, again at the same time cannot be considered to convey the idea that in the case of requisition of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate particulars of income in relation to un-disclosed assets or un-disclosed income is applicable only in relation to a case where in the course of a search under Section 132, the assessee is found to be owner of any such un-disclosed money or other assets etc. Therefore, the crucial question which requires our decision in the present case is whether the assets requisitioned by the IT authorities from the Enforcement Officers of other Government department under Section 132A can be regarded as assets found in the course of search under Section 132 and whether Explanation 5 to Section 271 (1)(c) can be applied in relation to un-disclosed assets requisitioned by the department under Section 132 A. The expression search used in Section 132 as well as in Explanation 5 to Section 271(1)(c) is clearly different and distinct than the expression requisition made under Section 132A. The assets found in the course of search under Section 132 cannot therefore, be equated with the assets requistioned by the IT department from other Government departments under Section 132A. No search is required to be made in respect of an asset which has already been found, detected and seized by other G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. 16. It is well-settled law that a deeming provision must be construed strictly and if a particular amount of income comes within the strict ambit of such a provision, then and then only the assessee should be made liable under such a provision. The aforesaid rule of strict construction of a statutory provision is applicable with greater force in relation to a penalty provision. Penalty can be levied only if the case clearly and specifically fall within the terms and language of the particular statute. Such provisions should therefore be interpreted on the basis of a plain meaning of the language of the section rather than covering within its ambit. The alternative and doubtful interpretations are based on other connected provisions. Even if it is found that the language of a penalty provision is ambiguous or capable of more than one meaning, then the view which is favourable to the assessee has to be adopted. Such a view is clearly supported by the judgment of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 relied upon by the learned Counsel for the assessee. In the present case, the language of Explanation 5 to Section 271(1)(c) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the aforestated facts and circumstances. We, therefore, direct the Assessing Officer to cancel the said penalty. 21. Further, in another case of Vinod Goyal vs ACIT (supra), similar contentions were considered and the relevant findings of the Coordinate Bench read as under: As is evident from the provisions of Explanation 5 extracted above, any money, bullion, jewellery and other valuables or things found to be owned by the assessee during the course of search under section 132 is deemed to be the concealment on the part of the assessee subject to the fulfilment of condition as stipulated therein. This deeming fiction created by Explanation 5, however, is made applicable specifically where the assessee is found to be the owner of money or other valuables during the course of a search under section 132 and the same, therefore, cannot be extended where the assessee is found to be the owner of any money or other valuables as a result of requisition made under section 132A as is the position in the present case. Explanation 5 thus cannot be invoked in the present case of the assessee since there was no search conducted in his case under section 132 and he was found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - sections (4A) to (14) (both inclusive) of section 132 shall, so far as may be, apply to proceedings under section 132A also, as if such books of account, other documents or assets had been seized under section 132(1) by the Requisitioning Officer. However, the said deeming provision cannot, however, apply and extend to another deeming provision contained in Explanation 5 to section 271(1)(c). In absence of any specific mandate of the legislature, the scope of explanation 5 to section 271(1)(C) cannot be enlarged so to read and understood the same in context of requisition proceedings u/s 132A where it is specifically restricted in respect of search initiated u/s 132 of the Act. Therefore, following the consistent view taken by the Coordinate Benches and in absence of any contrary authority brought to our notice and keeping in view the strict construction of penalty provisions, the matter relating to levy of penalty in situation of requisition of assets u/s 132A shall continue to be governed by the main provisions of section 271(1)(c) and explanation 5 cannot be invoked in such cases. 23. In terms of section 271(1)(c), it is a settled legal proposition that the concealment of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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