2020 (12) TMI 446 - AT - Income Tax

Explanation 5 not applicable to Section 132A requisitions; penalty unjustified; appeal allowed.

Sh. Mohamed Mohtram Farooqui Mohalla Pirzadan Versus ACIT, Circle, Jhunjhunu

Sh. Mohamed Mohtram Farooqui Mohalla Pirzadan Versus ACIT, Circle, Jhunjhunu - TMI Issues Involved:1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Applicability of Explanation 5 to Section 271(1)(c) in the context of requisition under Section 132A.3. Consideration of income declaration in the original return filed under Section 139(1) and its impact on penalty imposition.Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The primary issue is whether the penalty of Rs. 2,42,296/- under Section 271(1)(c) of the Income Tax Act, 1961, is justified. The penalty was initially imposed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] on the grounds of alleged concealment of income and furnishing inaccurate particulars of income. The AO held that the surrender of Rs. 5,92,340/- by the assessee was due to requisition under Section 132A, and the assessee had not maintained any books of account, thus initiating penalty proceedings under Section 271(1)(c).2. Applicability of Explanation 5 to Section 271(1)(c):The assessee contended that Explanation 5 to Section 271(1)(c) is not applicable in cases of requisition under Section 132A. Explanation 5 applies specifically to searches initiated under Section 132, and there is no reference to Section 132A within it. The lower authorities argued that Section 132A(3) makes provisions of sub-sections (4A) to (14) of Section 132 applicable to requisitions under Section 132A, and hence Explanation 5 should apply. However, the Tribunal held that Explanation 5 is strictly applicable only to searches under Section 132 and not to requisitions under Section 132A, as supported by various case laws including ITO vs. Nurul Huda G. Aboobkar and Gulamrasul M. Pathan vs. ACIT.3. Consideration of Income Declaration in Original Return:The assessee declared the seized cash of Rs. 5,92,340/- in the original return filed under Section 139(1) for the assessment year 1993-94. The Tribunal observed that the concealment or furnishing of inaccurate particulars must be examined with reference to the return of income filed. Since the assessee included the seized cash in the return filed within the due date and the return was accepted by the AO, there was no concealment or furnishing of inaccurate particulars. The Tribunal referred to the judgments in CIT vs. SAS Pharmaceuticals and Reliance Petroproducts (P) Ltd., emphasizing that penalty cannot be imposed based on the assumption that the assessee would not have disclosed the income but for the requisition.Conclusion:The Tribunal concluded that Explanation 5 to Section 271(1)(c) does not apply to requisitions under Section 132A. The penalty under Section 271(1)(c) is not justified as the assessee declared the income in the original return filed under Section 139(1), and there was no concealment or furnishing of inaccurate particulars. The appeal filed by the assessee was allowed, and the penalty was directed to be deleted.Order Pronounced:The appeal was allowed, and the order was pronounced in the open Court on 09/12/2020.