TaxTMI 
TaxTMI 
2010 (10) TMI 1071
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....earch & seizure action u/s.132 of the I.T. Act on 24.04.2006. In response to noticed issued u/s.153A the assessee filed the returns of income on 17.1.2007, declaring income as under:- Amount in Rs. Sr. No. ITA No. Assessment Year Return of income u/s.153A Amount of income declared/disclosed 1. 615/M/10 2001-02 36,91,180 35,20,500 2. 616/M/10 2002-03 14,68,640 13,22,840 3. 617/M/10 2003-04 25,12,140 23,55,668 4. 619/M/10 2004-05 68,23,160 66,31,100 4. During the course of search & seizure operation, the assessee's statement was recorded u/s.132(4) on 20.4.2006 and in the statement the assessee offered aggregate undisclosed income of Rs. 1,46,80,608/- for the A.Ys. 2000-01 to 2006-07 that was in respect of unaccounted deposits found in the bank account of the assessee. In respect of A.Y. 2001-02 the A.O. also made an addition u/s.68 in respect of the loans taken from two persons, namely Shri K.D. Shah Rs. 30,000/- and Shri D.J. Shah Rs. 30,000/-. The A.O. passed the assessment orders u/s.143(3) r.w.s. 153A. So far as the income declared by the assessee in....
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..... The questions pertaining to the undisclosed income admitted and offered are question nos.32 and 43 in the statement u/s.132(4) dated 20.04.2006, which are reproduced for sake of convenience as under:- "A.32 Earlier in your statement you had stated that the business is handed over to your brother from 01.04.2003. In the Assessment year 2005-06, you have still carried on catering business of M/s. Varsha Caterers. In view of this and also in view of your earlier Q.No.25 above, it is clear that, even after 01.04.2003 the bank account No.991144 with Cosmos Bank, was operated by you only, and that sources of deposits after 01.04.2003 have to be explained by you. In view of this, please explain as to why all the deposits in a/c no.991144 for the period 15.11.99 to 16.06.2005, which is the date of closure of this A/c, should not be treated as your undisclosed income? Ans: I have consulted my brother Shri Vinod Sangoi and I hereby confirm that I have carried on the catering business from the year 1994 to 16.06.2006. This business was carried out under the name & style of M/s. Varsha Caterers, my proprietorship concern. The cash deposits in my A/c No. 991144 with Cosmos B....
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....cepted by the A.O. without any addition. The assessee also pleaded that in view of Explanation 5(2) to section 271(1)(c) of the Act, as assessee has declared the income offered during the course of search, more particularly, in the statement recorded u/s.132(4) and also paid entire tax on disclosed income, hence, the assessee is entitled for immunity from levy of the penalty. The assessee relied on the following decisions:- i) CIT vs. S.D.V. Chandru -266 ITR 175 (Mad.); ii) CIT vs. Kanhaiyalal -299 ITR 19 (Raj.) 7. In respect of the addition made u/s.68 that was on account of unexplained cash credit in respect of the loans taken from Shri K.D. Shah and Shri D.J. Shah, both the loans were by account payee cheques and assessee has filed relevant bank statement in which the said amounts were declared. As the assessee was not in contact with the said parties due to long time-gap, no confirmation could be filed. It was pleaded by him that merely because addition is made u/s.68 that would not justify the levy of the penalty. The Ld. CIT (A) accepted the plea of the assessee to the extent of the declaration made during the course of search and seizer operation and held that the a....
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....d at length, was whether the immunity under Explanation 5(2) to section 271(1)(c) is available to the assessees. No judgment of the Hon'ble Gujarat High Court on this question was brought to my notice by either side. The Madras High Court in S.D.V. Chandru's case (supra) has held that the words in Explanation 5(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 and that the words which refer to the time limit under section 139(1) are "only a reiteration of the legal requirement regarding the time within which returns should normally be filed". In this view of the matter it was held that no penalty can be imposed on the basis of the returns filed after the date of the search, pursuant to declaration under section 132(4), in which additional income was shown by the assessee though such returns related to earlier assessment years. To the same effect is the judgment of the Rajasthan High Court in Kanhaiyalal (supra).....
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.... "As per the existing Explanation 5 to section 271(1)(c) of the Income-tax Act, if at the time of search, assets which are not recorded in the books of account are found, a taxpayer is liable to penalty for concealment even if he declares the full value of those assets as his income in the return filed after the search. This provision has been found to operate even in cases where the assessee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have 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 prescribed in clause (a) or (b) of section 139(1) and specifies in the statement the manner in which such income has been derived and pays the taxes that are due thereon, no penalty shall be leviable." The above circular explaining the amendment shows that the benefit of immunity conferred by the Explanation 5(2), as amended by ....