TaxTMI 
TaxTMI 
2009 (11) TMI 558
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....eedings. 1.4 That without prejudice to both the grounds of appeal, in the alternative learned CIT(A) has erred in facts and in law in holding that the benefit of Expln. 5 to s. 271(1)(c) was not available to the appellant and the appellant failed to make any statement under s. 132(4) as the appellant was under obligation to make such statement voluntarily. 1.5 That the learned CIT(A) has further erred in holding that there cannot be any disclosure under s. 132(4) in respect of entries in the diary and tacitly according to him the entries were not valuable articles or things. 1.6 That the learned CIT(A) has erred in holding that the declaration and surrender could not be considered as voluntary by any stretch of imagination made by the appellant for asst. yr. 1995-96 in the normal course. 1.7 That in the facts and circumstances of the case, the Tribunal may very kindly allow the appeal of the appellant cancelling levy of penalty made by the AO under s. 271(1)(c) which has been erroneously and unjudicially maintained and held justified by learned CIT(A) vide impugned order under appeal." 2. Briefly the facts are that the assessee, a partnership firm is engaged in the b....
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....) of IT Act from imposing penalty for concealment of income would not be available to the assessee. Since the assessee has concealed an income of Rs. 50 lacs, the minimum penalty of Rs. 20 lacs equal to the amount of tax sought to be evaded, stood imposed after approval of Jt. CIT, Bikaner Range, Bikaner vide his order dt. 27th March, 2000. 3. The learned CIT(A) confirmed the said penalty and the matter travelled in appeal before the Jodhpur Bench of Tribunal who vide its order dt. 3rd July, 2003 in ITA No. 435/Jd/2000 found that the learned CIT(A) has concluded the findings after giving detailed arguments of the assessee only. The order of learned CIT(A) was found not to be a speaking order for the reasons: "(i) As to whether the surrender was made during the course of search or not? (ii) Whether the provisions of s. 271(1)(c) of IT Act r/w Expln. 5 and s. 132(4) are applicable to the facts of this case or not? (iii) Whether the declaration and surrender relate to asst. yr. 1995-96 in the normal course as has been pleaded by the assessee in ground No. 6 of appeal?" The Tribunal also took note that the assessee had surrendered the amount of Rs. 50 lacs pertaining to ....
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....e applicable to the facts of the case or not? Ans. The appellant failed to make any statement under s. 132(4) of IT Act regarding undisclosed income and also failed to specify in the statement the manner in which such income was derived or earned. Provisions of Expln. 5 make it obligatory on the part of the assessee to make such statement voluntary whether or not required to make such statement by the authorized officer. Making of statement in the course of search is voluntary which the assessee failed to do. Besides that there cannot be a disclosure under s. 132(4) in respect of entries in the diary. The disclosure could only be for unaccounted money, bullion, jewellery or other valuable articles or things. The appellant, nowhere, during the course of search specified the manner in which he earned income of Rs. 50 lacs which was disclosed by him subsequently before the Asstt. Director of IT (Inv.) after completion of search. Therefore, benefit of sub-cl. (ii) of Expln. 5 of s. 271(1)(c) of IT Act cannot be given to the appellant. Clause (i) of Expln. 5 of s. 271(1)(c) is also not applicable for the reason that entries in the seized diary were neither recorded in the regular boo....
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.... of Expln. 5 of s. 271(1)(c) of IT Act. The surrender of the assessee came for consideration of Asstt. Director of IT (Inv.) Bikaner who required the assessee to submit the details of undisclosed income after taking copies of seized material. The assessee duly acted thereupon and furnished a detailed reply vide his letter dt. 22nd Feb., 1995 along with a chart showing details of Rs. 50 lacs disclosed in his case for asst. yr. 1995-96 as under: ------------------------------------------------------------------ A Amount of entries of the exercise book (Ex No. A1/11) remaining untallied with the regular books as worked out hereunder Rs. 40,40,604 ------------------------------------------------------------------ 1. Total of debit entries Rs. 1,17,28,409 ------------------------------------------------------------------ Less: Total credit entries &n....
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....------------------ E All other items of expenditure/ investment/income such as income by way of interest, Dalali, Arhat; expenses on repairs of buildings/machinery e.g., vehicles etc. including any investment/income as per any documents seized Rs. 7,89,396 ------------------------------------------------------------------ Total of all these heads Rs. 50,00,000 ------------------------------------------------------------------ The assessee thereafter acted on the basis of surrender so made as his income and filed the return voluntarily before the due date. The final assessment has been made at an income of Rs. 50,37,470. The small difference of Rs. 7,408 in the returned income and....
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....e but are clearly available from the material on record. 9. On the second issue it was contended that the learned CIT(A) was not justified in holding that the appellant failed to give statement under s. 132(4) of IT Act. In fact it is not unilateral obligation of the assessee alone. It was simultaneously obligatory on the authorized officer also to draw attention of the assessee towards immunity available under Expln. 5 of s. 271(1)(c) of IT Act. The CBDT vide its Circular No. 14 (XL 25) of 1955 dt. 11th April, 1955 has required the authorized officer of the Department to assist the taxpayers. Reference was also made to the judgment in the ease of Chokshi Metal Refinery vs. CIT and also in the case of Parekh Bros. vs. CIT. 10. The appellant in this case has no chance to give the statement and make disclosure in the course of search and seizure operations due to the fault of Revenue. The assessee cannot be expected to perform anything impossible. In any case the fact of the matter is that the assessee made the disclosure at the first available opportunity wherein disclosure of income was made in clear terms and without any ambiguity therein. This led to voluntary act of the ap....
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....bout the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make Expln. 5(2) inapplicable." 13. As regards third issue, the assessee's letter making surrender clearly shows that income disclosed comprises of commission, dalali, arhat on the materials given to various debtors and it relates to the period after 31st March, 1994 for which no return was required to be filed upto the date of search. The action under s. 132 was taken on the assessee on 13th Jan., 1995 i.e., during the year commencing from 1st April, 1994 to 31st March, 1995. It, therefore, has to be clearly understood that surrender was for asst. yr. 1995-96 as has also been stated by the assessee bona fidely. The learned CIT(A), diverted from the scope of direction of remand order of Hon'ble Tribunal. It was not at all debatable issue in the scope of remand, the issue was whether the surrender was voluntarily made or not. The disclosure/surrender as made by the assessee was voluntary and in the normal course of things and was also ....
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....and have carefully perused the material on record with reference to sub-r. (6) of r. 18 of ITAT Rules, 1963 and have also considered the precedents cited at Bar. Briefly the undisputed facts are that an action under s. 132 commenced on assessee's premises on 11th Jan., 1995. There being no involvement of assessee or his family members, the search party having been manhandled, the proceedings were temporarily suspended. The search was concluded on 13th Jan., 1995 without recording any statement of the appellant under s. 132(4) of the Act. Thereafter the Asstt. Director of IT, Bikaner camp at Hanumangarh called the assessee on 24th Jan., 1995 during which assessee came forth with a declaration of additional income of Rs. 50 lakhs. The Asstt. Director of IT, Bikaner taking the declaration to be a voluntary declaration sought further details of disclosure, to which the appellant made due compliance. Advance tax on the disclosed income of Rs. 50 lakhs was duly paid. The assessee acted bona fidely and returned the income on the due date at Rs. 50,30,062 that stood finally assessed at Rs. 50,37,470 with minor disallowance of expenses. 16. Assessee's declaration dt. 13th Jan., 1995 file....
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....us debtors and it relates to the period after 31st March, 1994 for which no return has been filed so far. 8. We further undertake to make payment of the taxes within the period allowed by you. I, therefore, request you to kindly consider this petition of mine in the spirit of the Expln. 5 of s. 271(1)(c) for which the provisions are intended and do not deprive me of the right to do what I should have done in course of search itself but could not do due to the unfortunate circumstances on that date. Thanking you very much, Yours faithfully, Sd/-  ....
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....faithfully, Sd/- (Ram Swaroop Meena) Asstt. Director of IT (Inv.) Bikaner" 18. AO issued penalty noti....
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....e 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 cl. (c) of sub-s. (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 cl. (a) before the date of the search; and (ii) in a case falling under cl. (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 Chief CIT or CIT before the said date; or (2) he in the course of the search, makes a statement under sub-s. (4) of s. 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 sub-s. (1) of s. 139 and also specified in the statement the manner in which such income has been derive....
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....g of the statement under s. 132(4) of the Act, assessee is shown to have deprived of a benefit conveyed by Expln. 5 to s. 271(1)(c) of the Act. The expression 'may' as used in s. 132(4) of the Act in such a case needs to be read as 'shall'. This view finds support from the judgment rendered by Hon'ble apex Court in Bachahan Devi vs. Nagar Nigam, Gorakhpur (2008) 12 SCC 372 and is clear from the following passages: "The ultimate rule in construing auxiliary verbs like may and shall is to discover legislative intent, and use of words may and shall is not decisive of its discretion or mandates. The use of the words may and shall may help Courts in ascertaining legislative intent without giving to either a controlling or a determinating effect. The Courts have further to consider subject-matter, the purpose of the provisions, the object intended to be secured by the statute which is of prime importance as also the actual words employed. The question whether a particular provision of a statute, which on the fact of it appears mandatory in as much as it used the word shall, or is merely directory cannot be resolved by laying down any general rule but depends upon the facts of each ....
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.... the intent of the legislature should be looked into along with the pertinent circumstances. If it appears to be the settled intention of the legislature to convey the sense of compulsion, as where an obligation is created, the use of the word may will not prevent the Court from giving it the effect of compulsion or obligation where the statute was passed purely in public interest and that rights of private citizens have been considerably modified and curtailed in the interests of the general development of an area or in the interests or removal of slums and unsanitary areas. Though the power is conferred upon the statutory body by the use of the word may that power must be construed as a statutory duty. Conversely, the use of the term shall may indicate the use in optional or permissible sense. Although in general sense may is enabling or discretional and shall is obligatory, the connotation is not inelastic and inviolate. Where to interpret the word may as directory would render the very object of the Act as nugatory, the word may must mean shall. Where the legislature uses two words may and shall in two different parts of the same provision prima facie it would appear that....