TaxTMI 
TaxTMI 
2011 (7) TMI 650
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....ncome on account of sale of scrap in the statement recorded u/s. 132(4) of the I.T. Act. The A.O. issued the notices to the assessee u/s.153A and in response to the notices u/s.153A, the assessee furnished the return of income declaring the loss as under:- Amt. in rupees Sr. No. A.Ys. Dt. Of return u/s.153A Loss declared in the returns filed to Notices u/s.153A Loss determined by A.O. in assessment orders 1. 2002-03 14.09.2007 Rs. (-)7,79,84,630 Rs. (-)7,79,84,630 2. 2003-04 14.09.2007 Rs. (-)6,39,19,031 Rs. (-)6,39,19,031 3. 2004-05 14.09.2007 Rs. (-) 42,87,787 Rs. (-) 42,87,787 4. 2005-06 14.09.2007 Rs. (-)2,96,22,831 Rs. (-)12,96,22,831 3. During the course of the search, the assessee offered the following income in respect of the sale of scrap as under:- Amt. in rupees A.Yrs. 2002-03 2003-04 2004-05 2005-06 Amt. in rupees 5,41,732 50,130 1,30,99,890 9,20,324 The A.O. initiated the penalty proceedings u/s.271(1)(c) of the I.T. Act on the reason that the income disclosed by the assessee during the course of the search operation on account of sale of the scrap was n....
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....gues that the loss declared by the assessee in the returns filed in response to notices u/s. 153A have been accepted by the A.O. without a single rupee reduction in all the years. He submits that as there was no addition or reduction in the loss declared by the assessee, no penalty can be levied. He further submits that as undisclosed income declared by the assessee is based on some documents/papers found during the course of the search and said documents/papers cannot be treated as a money, bullion, jewellery or any valuable article or thing which are contemplated in Explanation 5 to section 271(1)(c). The Ld. Counsel relied on the following decisions:- (i) South Indian Finance v. ITO [1991] 39 ITD 370 (Coch.) (ii) T. Kodeeswaran L/H of Late A. Thangam v. ITO [2009] 123 TTJ 230 (Chennai) (iii) CIT v. Growmore Research & Asset Management Ltd. [IT Appeal No. 675 of 2008, dated 10-2-2009] (iv) Amit N. Shah v. Dy. CIT [IT Appeal No. 908 (Mum.) of 2009, dated 24-11-2010] 6. Per contra, the Ld. D.R. relied on and supported the orders of the authorities below. 7. We have heard the rival submissions of the parties and perused the reco....
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..../s. 139(4) which is in the normal parlance called "belated return". As the said return was not filed within the permissible limit prescribed under sec. 139(4), it is as good as non-filing of the return and same is non est as rightly argued by the Ld. Counsel. The assessment framed by the A.O. proved that the assessee has no taxable income and hence, there was no statutory duty to file the returns of income u/s. 139 for relevant years. The assessee was also never issued any notice under clause (i) to section 142(1) or section 148. Now, we have to examine the applicability of Explanation 5 below section 271(1)(c). the relevant Explanation 5 reads as under:- "Explanation 5.-Where in the course of a search initiated under section 132 before the 1st day of June, 2007, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished ....
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....been acquired by him by utilising, wholly or in part, his income for any previous year which had already ended before the date of the search or which is to end on or after the date of the search. 20.2 Manifestly, the aforesaid additions, to which the provisions of Expln. 5 have been applied by the CIT (A), do not represent money, bullion, jewellery or other valuable article or thing, of which the assessee was found to be the owner, in the course of search. Therefore, in our considered opinion, the CIT (A) erred in applying the provisions of Expln. 5 to the addition made by the AO on account of estimated income from various sources. 21. The Expln. 5 enacts a deeming provision having application to a particular situation. A deeming provision is a legal fiction which assumes the existence of a fact which does not really exist. A deeming provision may be intended to enlarge the meaning of a particular word or to include matters which otherwise may or may not fall within the main provision. In construing a legal fiction it is necessary to assume all those facts on which alone the fiction can operate. But, it cannot be extended beyond the purpose for which it is created or beyond t....