TaxTMI 
TaxTMI 
2016 (6) TMI 886
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....s under:- ITA 696/Chd/2012 (Assessment year 2005-06):- 4. Briefly stated, the facts of the case are that search and seizure operation was conducted on 27.9.2007. A notice u/s 153A was issued on 31.7.2008. In response, return of income of Rs. 27,44,766/- was filed on 26.12.2008 wherein Long Term Capital Gain of Rs. 62,333/- and Misc. income of Rs. 26 lacs has been declared. The Assessing officer proceeded to levy penalty u/s 271(1)(c) of the Act read with Explanation 5A, on the basic premise that the assessee had not declared the investment / income its return of income u/s 139(1) of the I.T. Act filed on 16.3.2006. This culminated into levy of penalty vide separate order passed on 29.3.2010. 5. The assessee challenged the levy of penalty before the Ld. CIT(A) and has made the following arguments:- (i) The original return u/s 139(1) was filed before the date of search i.e 16.3.2006 declaring income of Rs. 1,57,545/-. (ii) That the surrendered income filed in response to notice u/s 153A has been accepted in the assessment order (iii) The disclosure of income during the course of search was made on the assurance by the Department that no penalty u/s....
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....5A is inserted in the Act w.e.f. 1.6.2007 i.e after filing of the return, therefore, the law applicable is law prevailing at the time when original return was filed and not on the date of search. He has relied upon the decision of Hon'ble Supreme Court in the case CIT Vs. Onkar Saran & Sons (1992) 195 ITR 001 (SC) and B.N. Sharma Vs. CIT (1997) 226 ITR 0442 (SC). The Ld. Counsel for the assessee, therefore, submitted that it is not a case of deemed concealment u/s 271(1)(c) of the Act read with Explanation 5A of the Act. The Ld. Counsel for the assessee also submitted that in respect of surrendered income, no material was found or recovered during the course of search and referred to statement of assessee recorded on 3.10.2007, copy of which is placed on record. 8. On the other hand, Ld. DR relied on the order of the authorities below and submitted that since assessee has not disclosed the Misc. income and income on account of capital gain in the original return of income, therefore, penalty is correctly levied against the assessee. 9. I have considered the rival submissions. Before proceeding further, it would be relevant to reproduce the provisions of section 271of the ....
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....ng that such income is declared by him 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.] " 11. The above Explanation 5A has been substituted by Finance (No.2) Act, 2009 w.e.f. 1.6.2007 and the same reads as under:- "Explanation 5A.- where in the course of a search initiated under section 132 on or after the 1 s t day of June, 2007 the assessee is found to be the owner of - (i) 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 utilizing (wholly or in part) his income for any previous year; or (ii) Any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year. Which has ended before the date of search a....
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....n 5A.-- Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,-- (i) any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year ; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of the search and the due date for filing the return of income for such year has expired and the assessee has not filed the return, 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." 2....
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....nt of income and assessee shall be liable to pay penalty under section 271. " 22. Thus as per the existing Explanation 5A prior to the amendment by Finance (No.2) Act 2009, if an Assessee had filed the return of income for the years covered by the search, then the addition made shall not be considered as deemed concealment. It is only by the Amendment to explanation 5A by the Finance (no.2) Act 2009,(which received the assent of the president on 13.8.2009), that addition made in the course of assessment u/s 153A, will be deemed to be concealed income, even if the Assessee had filed a return of income earlier for the relevant Assessment Year. Prior to the amendment, if an assessee had already filed a return of income, the addition made in the assessment made u/s 153A cannot be deemed to be concealed income. 23. No doubt the amendment to Explanation 5A has been made with retrospective effect from 1.6.2007 and is applicable to searches initiated after 1.6.2007, the issue is whether this amendment to Explanation will apply to returns filed before the amended explanation became part of the Statute in 2009. In the instant case the Assessee had filed return of income on ....
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....serted w.e.f. 1st June, 1987, and obviously is prospective and not retrospective. In case, it was to have the retrospective effect, it would be violative of Art. 20(1) of the Constitution. As the Explanatory Note noticed above itself states, the liability for deduction of tax at source from the interest payable under the existing provisions arises only if interest was actually paid or credited to the "account of the payee". This also clarified the correct scope of s. 194A as existed before the Explanation was inserted and that the scope of this section has been widened by the insertion of the Explanation w.e.f. 1st June, 1987, which has created a liability and obligation to deduct tax on interest even where the interest income is credited to any account in the books of account of the payee including credit given in the account called "interest payable account" or "suspense account". 25. Considering all the aspects viz., the Assessee had declared the amount he will be offering, in the course of statement recorded u/s 132(4), the AO has not brought on record any other materials or evidence for coming to the conclusion that the Assessee had concealed any income except for the....
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....l be deemed to be concealed income. The Hon'ble Supreme Court in the case of CIT v Onkar Saran & Sons (supra) and B.N. Sharma Vs. CIT (supra) have held that law applicable for imposing penalt y u/s 271(1)(c) is the law in force at the time of filing of the original return. Thus, explanation 5A to section 271(1)(c) of the I.T. Act would not be applicable in the case of the assessee in assessment year under appeal. Further, the assessee has placed on record copy of the statement of the assessee recorded on 3.10.2007 in which entire surrender of Rs. 69 lacs was made in all the assessment years under appeals, in which no incriminating material was referred to the assessee while recoding her statement to conclude that assessee had concealed\ any income. The assessee made a surrender of Rs. 69 lacs as per letter of surrender. Therefore, Ld. Counsel for the assessee is justified in contending that even in the absence of any incriminating documents found against the assessee during the course of search, the provisions of explanation 5A of section 271(1)(c) would not apply in the case of the assessee. This issue was considered in detail by the ITAT, Hyderabad Bench in the case of Dilip ....
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.... date and disclosure was made subsequently in response to the notice u/s 153A of the Income Tax Act. The Ld. CIT(A) confirmed the penalty and dismissed the appeal of the assessee. 21. After hearing the rival submissions, I am of the view that penalty is not leviable in the matter. The Ld. Counsel of the assessee relied on the orders of the Division Bench of the ITAT Chandigarh in the case of Parveen Garg Vs. ACIT in ITA No. 350/Chd/2013 dated 9.9.2015 in which in paras 9 to 11, it was held as under:- "9. We have considered the rival submissions and perused the material available on record. It is not in dispute that the search was conducted on 15.7.2008 at the premises of the assessee. The Assessing Officer levied penalty as per Explanation 5-A to section 271(1)(c) of the Act because the return has not been filed by the assessee within the due date of filing of the return i.e. 31.7.2008. The assessee, however, explained that the assessee is a partner in two firms and the books of account of one firm are audited. Therefore, in his case the due date of filing of the return cannot be 31.7.2008 and it would be 30.9.2008. This fact is admitted by the learned CIT (Appeals) in ....
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....the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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, in case of search conducted on / or after 1 s t June 2007, penalty for concealment of income and furnishing of inaccurate particulars of income is deemed under Explanation 5A. However, two exceptions or saving clause has been provided wherein the penalty cannot be levied under this section. Firstly, the assessee has shown the assets as mentioned in clause (i) or income as mentioned in clause (ii), in the return of income furnished before the date of search or secondly, the due date for filing of return of income for such previous year has not expired. If any....
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....and same is deleted." 10. Considering the facts of the case in the light of the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra), it is clear that in the case of the assessee, search had taken place on 15.7.2008. The due date of filing of the return for assessment year under appeal i.e. 2008-09 had not expired on the date of the search as the due date of filing of the return of income under section 139(1) was 30.9.2008. Thus, in the present case, the deeming provisions of Explanation 5-A cannot be applied because at the time of search, the relevant previous year for the assessment year under appeal, the due date of filing of the return of income had not expired. Thus, the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra) is squarely applicable to the facts and circumstances of the case. Further, the assessee explained that there was no variation in the return of income and assessed income as per the assessment order passed under section 153A r.w.s. 143(3) of the Act because the returned income was accepted including the surrendered income. The learned counsel for the assessee also explained that due to the bonafide error, ....