TaxTMI 
TaxTMI 
2008 (10) TMI 273
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Commission on 23rd Nov., 1992. Subsequently, the immunity granted from penalty and prosecution, in the order under s. 244D(4), dt. 23rd Nov., 1992, was withdrawn by the Commission vide its order dt. 8th Sept., 1998. 4. The assessee did not file the return of income for asst. yr. 1986-87. The assessment order for asst. yr. 1986-87 was passed by the AO under s. 144 of the Act on 28th March, 1990 and the total income was assessed at Rs. 20,56,130. This assessment was set aside by the CIT(A) vide his order dt. 29th March, 1993. The fresh assessment order was passed by the AO once again under s. 144 of the Act on 27th March, 1995. This assessment order was also set aside by the CIT(A) vide his order dt. 30th Sept., 1996. The assessment order was passed by the AO for the third time on 31st March, 1999, once again under s. 144 of the Act. In this order, the income was assessed at Rs. 20,56,130. 5. The AO, subsequently, levied penalty of Rs. 10,06,590 for the reasons given in paras 3, 4, 5, and 6 of his order dt. 28th Sept., 1999 as under: "3. As stated earlier, the assessee had not filed the return of income though he derived substantial income from running Arrack shops. Bailwan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was found that the appellant was running wine shops in benami names and the income earned from such wine shops was invested in immovable assets. The AO had taxed both the incomes from wine shops and investments in immovable properties and others for asst. yrs. 1986-87 and 1987-88. While deciding the quantum appeals in IT Appeal Nos. 243 and 244 of 2004-05, dt. 10th July, 2007. I have telescoped one addition against the other and allowed partial relief to the appellant. Thus, it is a clear case where the appellant earned income and invested in immovable properties but did not file any return of income and did not co-operate with the Department in completion of assessment proceedings and payment of tax. The contention of the appellant that penalty is not imposable as the appellant did not file any return under s. 148 cannot be accepted because Expln. 5 to s. 271(1)(c) would be applicable in this case. It is only on account of search and seizure the investments made by the appellant came to light as a result of which assessments were completed determining the total income at a much higher figure than what was admitted by the appellant. As this is a case where Expln. 5 to s. 271(1)(c)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; (Rs.) ------------------------------------------------------------ Rental income 6,181 6,181 ------------------------------------------------------------ Purchase of sites 1,34,380 1,34,380 ------------------------------------------------------------ Arrack shops 14,22,784 92,500 15,15,284 ------------------------------------------------------------ Bayilwan Gas Agency 10,000 52,000 62,000 ----------------------------------------....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; 25,000 ------------------------------------------------------------ 6,181 14,49,784 6,01,014 20,56,979 ------------------------------------------------------------ 11. The main item of Rs. 15,15,284, representing the undisclosed income from Arrack shops was worked out by the AO as under: ------------------------------------------------------------ Income from Arrack Business Other sources Total (Rs.) Shops (Rs.) (Rs.) ------------------------------------------------------------ Assessment year 1986-87 ------------------------------------------------------------ Pothi 3,31,500 2,750 3,34,250 -----------------------------------------------....
X X X X Extracts X X X X
X X X X Extracts X X X X
....----------------------------------------------------------- 40,000 ------------------------------------------------------------ Advance Kisti paid 40000 x 3 1,20,000 Income estimated at 2-1/2 times the Kisti ------------------------------------------------------------ paid 2-1/2 times of 40000 x 15 15,00,000 ------------------------------------------------------------ Less: Kisti paid 6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r appears to be right in saying that there could be no 'concealment' of income for a particular year. within the meaning of s. 271(1)(c) of the Act, if for that year no return was filed by the assessee. This proposition gets support from the decision of the Madras High Court in the case of S. Santhosa Nadar vs. First Addl. ITO & Anr. (1962) 46 ITR 411 (Mad). In this case the Court held as under: "As a voluntary return filed after the period of four years from the close of the assessment year is not a valid return, such a case should be regarded as if no return had been filed at all. It could not be said in such a case that there has been a concealment of the particulars of income or deliberate furnishing of inaccurate particulars and s. 28(1)(c) of the IT Act, 1922, would not be applicable; the case would come only within the scope of s. 28(1)(a). Sec. 28(1)(a) and s. 28(1)(c) are mutually exclusive. Where no return is filed the case could not fall under s. 28(1)(c) and accordingly the case will not be taken out of the operation of s. 34(3) of the Act and an assessment made beyond the period of four years would be invalid." 15.1 A similar view was taken by the Madras High ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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." 19. The scope and the effect of the amendment were explained in paras 36.1 to 36.4 of the CBDT Circular No. 394, dt. 14th Sept., 1984 [(1984) 42 CTR (TLT) 50], and in para 12.4(c)(B) of the CBDT Circular No. 469, dt. 23rd Sept., 1986 [(1987) 59 CTR (St) 9]. 19.1 Prior to this insertion, an assessee who was found to be the owner of any money, bullion, jewellery, etc., recovered during the course of search, was entitled to explain that such assets were acquired by him by utilizing his income relating to any previous year, whether it ended before the date of the search or is to end on or after the date of the search. By doing so, the assessee could have escaped the liability to penalty under s. 271(1)(c). 19.2 In order to plug the aforesaid loophole, Expln. 5 was inserted by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1st Oct., 1984. 20. In the present case, the main item of addition of Rs. 15,15,284, representing income from Arrack shops, was worked out by the AO on the basis of pure estimation. The income fr....