TaxTMI 
TaxTMI 
2011 (10) TMI 263
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....B/06 2003-04 " Shri. V. N, Sridhar, B'lore 5 ITA 511/2008 663/B/06 2001-02 " Smt. Muktha Sridhar, B'lore 6 ITA 512/2008 664/B/06 2002-03 " Smt. Muktha Sridhar, B'lore 7 ITA 513/2008 665/B/06 2003-04 " Smt. Muktha Sirhdar, B'lore 8 ITA 514/2008 666/B/06 2001-02 " Smt. Sathyavathi, B'lore ITA Nos. 565, 567, 570, 572, 574, 589, 592, 594, 598, 600, 601, 602, 605, 609, 611, 614, 617, 621, 622, 625, 628, 632, 630, 637, 641, 596, 582 of 2008 are directed against the common order of the Income Tax-Appellate Tribunal, Bangalore Bench 'B' dated 13.12.2007 passed in ITA Nos.721 to 747/Bang/06, the details of which are as under: ITA No. Before the High Court ITA No. Before the Tribunal Asst. Year Appellant Respondent ITA 582/2008 721/Bang/06 2000-01 The DCIT, Central Cirlce-2(3) B'lore Shri. H. N. Nagaraj (HUF), Bangalore ITA 565/2008 722/Bang/06 2001-02 -do- -do- ITA 567/2008 723/Bang/06 2002-03 -do- -do- ITA 570/2008 724/Bang/06 2003-04 -do- -do- ITA 572/2008 725/Bang/06 2001-02 -do- Sri. H. N. Nagaraj (Ind.)....
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....ble to assessment years 1983-84 to 1986-87 based on the law declared by Apex Court in 168 ITR 705, which is held to be not good law after insertion of Explanation to Sec. 271(1)(c) of the Act by the Apex Court in 251 ITR 99? 3. Whether the Appellate Authorities were correct in accepting the explanation offered by the assessee that the entire income detected was declared in the revised return which was factually incorrect as the addition of entire undisclosed income was made by the Assessing Officer and consequently recorded a perverse finding? 3. Apparently all the respondents - assessees had filed their returns under Section-139 of the Act prior to the assessment. From the records, it is noticed that a search of the premises was conducted under Section-132 of the Act which commenced on 6.1.2004 and went up to 27.2.2004 when statement under Section-132 of the Act came to be recorded and so also panchanama was drawn. Subsequent to the search proceedings, the respondents-assessees filed revised returns twice surrendering the income brought to tax, during the course of search. After assessment of revised returns, the assessing authority proceeded with the assessment ....
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....detected was declared in the revised return, which was factually incorrect. According to the learned counsel, the defence of the respondents - assessees was different from time to time, which is evident from the defence raised before the first appellate authority and the new defence raised by them before the Tribunal. Once the explanation-5 to Section 271(1)(c) is not to the satisfaction of the Assessing Officer, question of extending the benefit would not arise. Therefore the orders of the Commissioner of Income Tax (Appeals) and, the order of the Tribunal deserves to be set aside confirming the order of the Assessing Officer. 7. As against this, the learned counsel Mr. Chaitanya appealing for the respondents - assessees contends that once statement is recorded while conducting search as provided under sub-section (4) of Section-132 and when all the questions were answered and when the letter dated 26.2.2004 given by all the assessees is referred to in the statement, the object and the purpose with which Explanation-5(2) of Section 271(1)(c) giving immunity to such persons has to be extended and object cannot be frustrated. When perversity in appreciating the material on record....
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....efore according to him, the statement recorded under section 132(4) of the Act is as good as statement of others and even otherwise letter dated 26.2.2004 has been signed by all the assessees and as such Expln. (5) is applicable to them also. 10. From the material placed before the Court and also the submissions of the learned counsel appearing for the Revenue and the respondents - assessees, two provisions of the Act are relevant for considering the substantial questions of law raised in the above appeals. They are sections-132(4) and 271(1)(c) Explanation-(5). It is useful to extract the said provisions here: Section-132: (1) Where the [Director General or Director] or the [Chief Commissioner or Commissioner] [or Additional Director or Additional Commissioner] [or Joint Director or Joint Commissioner] in consequence of information in his possession, has reason to believe that - (a) & (b)** ** ** (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not b....
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....es 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 [Chief 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 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, 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.] ....
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....It was further opined that the assessee group has neither established the existence of the donors or their creditworthiness. It was also opined (that the assessee group has organized non-genuine gifts for the purpose of converting unaccounted income and bringing the same into the books without payment of tax only with an intention of avoiding payment of tax. The authority opined that the material confirms the state of mind, which is guilty of evasion of tax. 15. The respondents - assessees went up in appeal before the Commissioner of Income Tax (Appeals). The respondents - assessees contended that gift amounts were already disclosed to the department in the respective returns filed before the date of search and during the assessment proceedings and with a view to end the proceedings and on the understanding that no penalty will be levied, they agreed for subjecting all the amounts to tax. By placing reliance on Suresh Chandra Mittal case (supra) and also CIT v. Shyamlal M. Soni [2005] 276 ITR 156/144 Taxman 666 (MP), the appellate authority held that no penalty under Section 271(1)(c) could be levied in a case where income returned in revised return is accepted eventhough revise....
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.... revealed in the course of a search under Section-132 of the Act. If the assessee asserts and claims that the abovementioned assets were acquired by him by utilising (wholly or in part) his income for the previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared in the return, the assessee shall be liable for payment of penalty under section 271(1)(c) of the Act and such income is deemed to have been; concealed or inaccurately furnished. However the income referred to above if declared by the assessee in any return of income furnished by him, on or after the date of search will not provide any immunity to the assessee unless the conditions indicated in clause-(2) of Explanation-5 are fulfilled. 19. Learned counsel for the Revenue emphasises that in the present case, the conditions in Clause-2 to Explanation-5 of Section 271(1)(c) of the Act are not completely fulfilled. Therefore both the appellate authorities were not justified in setting aside the order of imposition of penalty. 20. Learned cou....
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....ion-5 itself. He also relies on the decision in the case of P. K. Metrani v. CIT AIR 2007 SC 386 to contend that Section-132 being a complete code by itself, it cannot intrude into any other provisions of the Act. Similarly, other provisions of the Act cannot interfere with the scheme or the working of Section-132 or its provisions. The learned counsel places reliance on this decision to contend that the statement given by Mr. V.N. Sridhar if accepted could be accepted only as a statement given by him and it cannot be held as a valid statement in so far as other members of his family. In that context, learned counsel contends that there has to be strict compliance of Section-132 of the Act. He places reliance on the unreported decision of this Court in the case of the CIT v. J. Alexander in ITRC No. 64/1999 disposed of on 19.6.2008. In this case, the oath was not administered as required under Section-6 of the Oaths Act. Therefore Their Lordships held that the statement of the Officer concerned, which is recorded without administering oath has no evidentiary value and in the eye of law, it is not at all an evidence and hence there is no evidence to conclude that the amount of the f....
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....nts made by the assessee during the course of search under Section-132 of the Act can be taken note of and the explanation offered by the assessee in such statement in the opinion of the officer concerned is acceptable, question of imposing of penalty would not arise. In other words, it means in the opinion of the officer, if the explanation is acceptable, imposition of penalty is not justified. 25. He also places reliance on the decision in the case of CIT v. S.D.V. Chandru [2004] 136 Taxman 537 (Mad.) to contend that the statement of the assessee recorded under Section 132(4) of the Act followed by filing of Returns by the assessee for the earlier assessment year admitting large income and also paying the tax together with interest, such income will get immunised from the levy of penalty. 26. He also places reliance on the decision in the case of CIT v. Radha Kishan Goel [2005] 278 ITR 454/[2006] 152 Taxman 290 (All.). In this case, Revenue contended that though the assessee made the statement recorded under Section 132(4) that unexplained cash and unexplained jewellery were undisclosed income, the manner in which such income was derived has not been disclosed in the statem....
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....were initiated. Held on facts conditions laid down in Explanation 5(2) to Section 271(1)(c) were fulfilled and no penalty was leviable. Their Lordships held that the basic idea or intention behind providing Explanation 5(2) of Section 271(1)(c) is to avoid litigation by the Department and to get the maximum tax at the earliest from the person whose business as well as residential premises are searched. This was also a case of whole group which had made an application for settlement, a little more than the original surrender and far less than the subsequent surrender. In that context, Their Lordships held that imposition of penalty was not justified. 30. He also places reliance on the decision in the case of CIT v. Mahesh Chand Agrawal [2006] 157 Taxman 539 (All.) wherein relying on the earlier decision in Radha Kishan Goel's case (supra) held that no penalty was leviable. 31. He places reliance on the decision in the case of Sudarshan Silks & Sarees v. CIT [2008] 300 ITR 205/169 Taxman 321 (SC). In this case, Their Lordships held that Tribunal being the final Court of fact, decision of the Tribunal on facts can be gone into by the high Court only if a question has been referr....
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....'s case (supra) to the effect that mens rea was an essential Ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff's case (supra) was overruled. 34. He also places reliance on the decision in the case of New Sorathia Engg. Co. v. CIT [2006] 282 ITR 642/155 Taxman 513 (Guj.) wherein when the order of the authority concerned showed that no clear-cut finding had been reached as to whether penalty under section 271(1)(c) was being levied for concealment of particulars of income by assessee or whether any inaccurate particulars of income had been furnished, order of penalty could not be sustained. 35. According to the learned counsel for the Revenue, clause-2 to Explanation 5 of Section-271(1)(c) can be divided into five parts as mentioned below: 1. He (assessee) in the course of search makes a statement under sub-section 4 of section-132, 2. 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. 3. Which (income) has not been disclosed so far in the return of income to be furnished before the expiry of time....
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.... deponent by the officer concerned from the department. It is at the option of the concerned officer such statement would be recorded. If no statement is recorded under section 132(4) of other persons, there is no procedure to compel the officer to record statements of all other persons. Though learned counsel for Revenue contends that individual notices were sent, we do not have such records before us. The very questions and answers under section 132(4) indicate the deponent was asked details pertaining not only to himself but also all other family members. It is not the case of the department that other than the statement of Mr. V.N. Sridhar, any other statement was recorded under Section 132(4) and it is in existence. There is only one statement of Mr. V.N. Sridhar recorded under Section 132(4) and endorsed by 3 other assessees. As a matter of fact, Mr. N. Shashindra, Smt. Vani Shashindra and Smt. Muktha Sridhar at the end of the statement of Mr. V.N. Sridhar have also stated that the said statement was given in their presence and they abide by what has been stated by Mr. V.N. Sridhar. During the search proceedings between 6.1.2004 and 27.2.2004, the statement of V.N. Sridhar wa....