TaxTMI 
TaxTMI 
2015 (5) TMI 423
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....lows :- 2. Grievance of the assessee, in substance, is that the CIT(A) erred in confirming penalties under section 271(1)(c) of the Act imposed on the assessee (Rs.79,070/- for A.Y. 2003-04, Rs. 82,070/- for A.Y. 2004-05 and Rs. 65,025/- for A.Y. 2005-06). 3. The issue in appeal lies a very narrow compass of material facts. The assessee before us, a lady in mid sixes, is a partner in Malika Enterprises. A search and seizure operation was carried out at the residential premises of the assessee, and her family members, on 14th December, 2005. During the course of this search operation, a statement given by Ehasan Haji Amin Gadawala on behalf of the family including his mother i.e. the assessee before us, was duly recorded under section 132(4) of the Act. In the statement so given, the assessee appellant's son, inter alia, disclosed income of Rs. 3,50,000/-, Rs. 3,60,000/- and Rs. 2,16,750/- for assessment years 2003-04, 2004-05 & 2005-06 respectively. The income so disclosed was duly shown in the returns filed by the assessee under section 139 read with section 153A of the Act and tax due, with interest thereon, was duly paid by the assessee. 4. It was in respect of these incomes ....
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.... (b) for any previous year which is to end on or after the date 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 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, ...." Thus, prima facie, the Explanation 5 to section 271(1)(c) of the Income Tax Act, 1961, goes against the assessee. Explanation 5 has provided for a deeming provision whereby the assessee is treated as defaulter under section 271(1)(c). The case of the assessee falls squarely within the deeming provision of Explanation 5 whereby the return of income has been furnished after the date of search for the A.Y. relevant to the instant penalty proceeding. Thus, Explanation 5 deems the assessee as an offender and liable to penal action. Further, the assessee has claimed the shelter under the exception to Explanation 5 to section 271(1)(c) of the Income Tax Act, 1961. The relevant portion of the clause is laid down below: "[unless- (1) Such income is, or the t....
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.... a statute is penal in character, it must be strictly construed and followed ....." Hence, the Law is crystal clear and settled that in respect of the penal and exception provisions about strict interpretation, without liberty of intendment. Thus, assessee can not be granted benefit of having made voluntary disclosure statement under s.132(4) of I.T. Act for purpose of exemption of penalty to assessee. Thus, the assessee's claim of protection under exception provision to explanation 5 of section 271(1)(c) of the Act is untenable. Thus, assessee has failed to fulfil any of the conditions laid out in the exceptions clause. Hence, the assessee is completely ineligible for the protection provided by the clauses. To the contrary, assessee is hit by the deeming provision of Explanation 5 to section 271(1)(c), and is deemed to be liable for concealment of income." 6. Aggrieved, assessee carried the matter in appal before the CIT(A) but without any success. Learned CIT(A), rejecting the contentions of the assessee appellant, observed as follows :- "4. The appellant has submitted in the statement of facts that he had complied all the conditions laid down under the provisions of Explanat....
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....s of the case, in the light of the applicable legal position. 9. As learned Counsel for the assessee rightly points out, the issue is now covered, in favour of the assesses, by Hon'ble jurisdictional High Court's judgement in the case of Kirit Dahyabhai Patel vs. ACIT (ITA Nos.1181, 1182 & 1185 of 2010; judgement dated 03.12.2014), wherein reversing the very Third Member decision of this Tribunal which was relied upon by the CIT(A). Their Lord ships have observed as follows :- "8. We have heard learned advocates for the parties and perused the material on record. Before dealing with the contentions, it would be relevant to reproduce Explanation 5 to Section 271 (1) (c) of the Income Tax Act, which reads as under: "Explanation 5. Wherein 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 ....
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....upra), wherein the Apex Court in paragraph No.6 has observed as under: "6. Explanation 5 is a deeming provision. It provides that where, in the course of search under Section 132, the assessee is found to be the owner of unaccounted assets and the assessee claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous Year which has ended before the date of search or which is to end on or after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purpose of imposition of penalty under Section 271(1) (C). The only exceptions to such a deeming provision or to such a presumption of concealment are given in subclauses (1) and (2) of Explanation 5. In this case, we are concerned with interpretation of clause (2) of Explanation 5, which has quoted above. Three conditions have got to be satisfied by the assessee for claiming immunity from payment of penalty under clause (2) of Explanation 5 to Section 271(1(C). The first condition was that the assessee must ....
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....ed, and paid tax as well as interest on the surrendered amount. 12. At this stage, it is required to be noted that the Apex Court in the case of Commissioner of Income Tax, West BanagalI Vs. Vegetable Products Ltd. (supra), has held that if the Court finds that the language of a taxing provision is ambiguous or capable of more meaning than one, then the Court has to adopt the interpretation which favours the assessee, more particularly so where the provision relates to the imposition of a penalty. 13. Considering the facts and circumstances of the case and also considering the decisions relied upon by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT(A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under Section 139 of the Act, as the Assessing Officer has made assessment on the ....