TaxTMI 
TaxTMI 
2008 (1) TMI 513
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....of Rs. 1,42,983/-, levied Under Section 271(1)(c) of the Act, by the A.O., without considering the fact that the assessee had not voluntarily disclosed the true and correct income. 2. The CIT(A) has erred in law and on facts in not properly considering the Explanation 5 to Section 271(1)(c) of the Act, according to which, the assessee is not entitled to immunity from the penalty for the earlier period where the due date of return Under Section 139(1) of the act has expired. 2. These two grounds are common in all the five appeals of the revenue except the figures. The facts and circumstances' are exactly identical in all the years, hence we will take up Read year i.e. A.Y. 1998-99 in ITA No. 2395/Amd/2007. 3. The briefly stated facts in this case are, that, a search action Under Section 132 of the act was carried out in the Bata group of cases in Kalol Dist. Mehsana on 04.09.2003 including the assessee. In view of the above action, proceedings Under Section 153A(a) of the Act was initiated vide notice dated 12.12.2003. In response to this notice, the return of income was filed on 31.05.2004 declaring total income at Rs. 5,79,830/-. The assessee in his return of income disclo....
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....released by AUDA for the benefit of members of the societies. During the course of search, one Shri Kirti B Modi who was covered Under Section 132 of the Act, was working as Accountant for all the co-operative housing societies and was maintaining the books of accounts on his personal computer. Annexure-A, Item No. 9, 10 and 11 seized from his residence shows that he has received fees from Shri Rajesh Amratlal Patel and Shri Rupesh Bholidas Patel in respect of various co-operative housing societies. The books of accounts of the societies were maintained by this Accountant on behalf of Shri Rajesh Amratlal Patel and Shri Rupesh Bholidas Patel. The AO has discussed all the co-operative societies as described in Annexure-A, Item No. 9, 10 and 11. Further many files containing correspondence with AUDA, signed application for membership, agreement, resignation letters, and vouchers for receipt of amount deposited with the societies of the members who were enrolled at the time of formation of the society and also at the time of making initial payments to AUDA were found and seized from his residence. All these evidences proved that this Bata Group was involved in land dealings at large s....
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....nd also disclosed the manner in which this income was earned. It was also claimed that the taxes have been paid by making adjustments of FDRs/cash seized during the course of search. The assessee pleaded that he is relying upon the application of Explanation 5(2) to Section 271(1)(c)read with Section 132(4) of the Act. The AO after considering the reply of the assessee has held that the assessee was having taxable income for the assessment year but the same was not fully disclosed in the original return of income filed on 27/10/98 and the same was unearthed by the Department during the course of search and the same was disclosed after issuance of notice Under Section 153A(a) and this fact regarding the income escaping assessment was detected by the Department during the course of search Under Section 132 of the Act. This proved that the assessee has concealed the particulars of income knowingly and in view of this the AO levied the penalty on the concealed income on which tax sought to be evaded, Under Section 271(1)(c) of the Act. 6. Aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(A) after considering the penalty order, arguments of the assessee and written....
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.... 147, Section 148, Section 149, Section 151 and Section 153. Therefore, the return filed Under Section 153A overrides the other returns filed prior to search, if any, and they become nonest. The return filed Under Section 153A is the only return, which is considered by AO for making assessment Under Section 153A(b) and in the present case the income returned Under Section 153A and income assessed Under Section 153A(b) are same, this being the factual position and since there is no dispute about these facts, I am inclined to agree with the submissions and arguments made on behalf of the appellant that it is not relevant whether any income of income was filed by the appellant prior to the date of search and whether any income was disclosed in that return of income. In view of specific provision of Section 153A, the return of income filed in response to notice Under Section 153A(a) is to be considered as return filed Under Section 139 of the Act, as the AO has made assessment on the said return, therefore this return is to be considered for the purpose of penalty Under Section 271(1)(c) and penalty is to be levied on the income assessed over and above to the income returned Under Sect....
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....ver and above what was disclosed in the original return. The Assessing Officer levied the penalty Under Section 271(1)(c)of the Act for concealment of income. The CIT(A) deleted the penalty on two premises i.e i) by making applicability of explanation 5(2) to Section 271(1)(c) of the Act ii) and penalty on returned income Under Section 153A of the Act by considering the return filed Under Section 139 of the Act as abated and non est in the eyes of law. 9. First we will deal with the issue of applicability of Explanation 5(2) to Section 271(1)(c)of the Act as decided by the CIT(A). The assessee has filed its original return of income Under Section 139(1)of the Act on 27.10.98 declaring an income of Rs. 79,830/. Subsequently, search was conducted Under Section 132(1) of the Act on 4.9.03 and in lieu of that action under chapter XIV was initiated Under Section 153A(a) of the Act, by issuing notice, and in response to the same the assessee disclosed the income of Rs. 5,00,000/- as declared Under Section 132(4)of the Act during the course of search. Whether this disclosure can be treated as disclosure made Under Section 132(4) r.w.s Explanation 5 to Section 271(1)(c) of the Act. First ....
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....been disclosed so far in his return of income to be furnished before the expiry of time specified in [* * *] Sub-Section (1) of Section 139, 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.] It is seen that prior to the insertion of Explanation 5 to Section 271(1)(c) of the Act by the tax laws amendment act 1984 w.e.f. 1.4.1984 the assessee who is found to be the owner of any money, jewellery etc. recovered during the course of search was entitled to Explain that such assets were acquired by him by utilising his income relating to any previous year whether it ended before the date of search or is to end on or after the date of search by doing so. It is seen that prior to the insertion of Explanation 5 to Section 271 by the Taxation Laws(Amendment) Act, 1984 with effect from lst October 1984, an assessee, who is 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 utilising his income relating to any previous year, whether it ended before the date of the search o....
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....th regard to the assets found at the time of search being the statement to the effect that such assets have been acquired out of his undisclosed income and the specification by the assessee in such statement with regard to the manner in which such income had been derived, and the subsequent payment by the assessee of the tax on such undisclosed income together with interest. The words in para. (2),"... has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in Sub-Section (1) of Section 139," are not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of the search. The words used are "income which has not been so far disclosed in his return of income". The additional words which refer to the time specified in Section 139(1) are only a reiteration of the legal requirement regarding the time within which returns should normally be filed. In cases where the assessee had not disclosed his income in the returns filed for the previous year which have ended prior to the date of the search and, in the statement given under Section 132(4....
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.... search Under Section 32 took place on 4.9.2003 and the assessee has not declared this additional income of Rs. 5,00,000/-, declared during the course of search Under Section 132(4) of the Act, in the original return. The explanation 5 to Section 271(1)(c) of the Act will not come to the rescue of the assessee as there is no time available for filing of return Under Section 139(1) of the Act as mentioned in Clause 2 of Explanation 5 of this Section . The words used in Sub-clause 2 are that which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in Sub-Section (1) of Section 139 of the Act. There are two limbs to this explanation, Clause (1) speaks about the income or the transactions resulting in such income are recorded in the books of accounts or disclosed to the Chief commissioner or commissioner before the date of search and in the cases falling under Clause (a) or Clause (b) of this explanation. Clause (2) speaks about the assets found during the course of search i.e. any money, bullion, jewellery or valuable article or thing from his possession or under his control, which have been acquired out of his income and not disc....
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....under Section 271(1)(c) is imposable on the income returned under Section 153A prior to such amendment. In view of this he deleted the penalty. 14. First of all it is seen that the facts of this case are very clear. A search action Under Section 132of the act was carried out in the Bata group of cases in Kalol Dist. Mehsana on 04.09.2003 including the assessee. In view of the above action, proceedings Under Section 153A(a) of the Act was initiated vide notice dated 12.12.2003. In response to this notice, the return of income was filed on 31.05.2004 declaring total income at Rs. 5,79,830/-. The assessee in his return of income under Section 153A(a) of the Act disclosed Rs. 5,00,000/- as income from business or profession as declared Under Section 132(4)of the Act as his undisclosed income for the year under consideration apart from regular return filed Under Section 139(1) of the Act on 27.10.1998, declaring total income at Rs. 79,830/-. On these facts, first of all we have go to the provisions of Section 153A and second proviso to this Section reads as under: Assessment in case of search or requisition 153A ... Provided further that assessment or reassessment, if any, relati....
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....47, Section 148, Section 149, Section 151 and Section 153, issue notices to such person requiring him to furnish within such period as may be specified in the notice the return of income in respect of each assessment year falling within six assessment years referred to in Clause (b) of Section 153A, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of the Income tax Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139. The Assessing Officer shall assess or reassess the total income of six assessment years immediately preceding the previous year during which such search is conducted or requisition is made and such assessment or reassessment shall be made in respect of each assessment year falling within six assessment years. This clause also provides that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this Section , pending on the date of the initiation of the search under Section 132 or requisition under Section 132A, as the case may b....
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....essment will not be valid. From this it is clear that the second proviso to Section 153A(b) provides that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in Section 153A pending on the date of the initiation of the search Under Section 132 or requisition under Section 132A, as the case may be, shall abate. 15. In view of the above provisions, now the only vital question arises is which, in view of the second proviso to Section 153A of the Act, assessment or reassessment relating to any assessment year falling within the period of six assessment years shall abate. As per the second proviso the pending assessment or reassessment falling within the period of six assessment years referred to in Section 153A on the date of initiation of search under Section 132 shall abate. It means that the assessments will abate only which are pending assessments or reassessments. Now we will discuss, what is pending assessment. Pending assessment means, if a valid return of income submitted by the assessee within the period prescribed under Section 139(1) or 139(4) of the Act, has been pending, then there is nothin....