2018 (8) TMI 648

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....planation allows levy of penalty if income is returned consequent to search whereas the assessee either did not file returns originally or concealed income was not admitted in the original return. 4) The CIT(A) has overlooked decision of the jurisdictional High Court in P.C. Joseph & Bros. vs. CIT (Ker) 243 ITR 818 (sic) where it was held that filing return of income admitting income after detection by the department does not absolve the assessee from penalty. 3. The facts of the case are that there was a search u/s. 132 of the I.T. Act at the business premises of the assessee on 05/08/2010 which unearthed a large amount of unaccounted money and other assets. On the basis of the findings of the search and examination of the seized material, notice u/s. 153A of the Act was issued on 18/02/2011. Consequently, assessments were framed u/s. 143(3) r.w.s. 153A of the Act. Finally, penalty was levied u/s. 271(1)(c) of the Act. For clarity, we reproduce the income returned, income assessed, income after giving effect to the CIT(A) order and the penalty levied as follows:- Asst. Year Income as per Return Income fixed by the A.O. ....

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.... is directed to restrict penalty levied u/s. 271(1)(c) to the amount of difference between the Returned Income and assessed income. The table of Returned income and assessed income is as under. A.Y. Income as per Return Assessed Income Difference 2005-06 16,27,900 16,27,900 Nil 2006-07 19,94,340 20,85,800 91,460 2007-08 29,64,330 29,64,325 Nil 2008-09 46,84,619 46,99,745 15,126 2009-10 45,07,091 45,07,091 Nil 2010-11 67,85,293 67,85,293 Nil   The AO has levied penalty on interest and other components also. The appellant contended that the penalty is leviable only on the amount of tax sought to be evaded. Contention of the appellant is correct. The AO is directed to calculate the tax sought to be evaded and levy penalty on tax component alone. Since there is no difference between Return Income in A.Ys. 2005-06, 2007-08, 2009-10 and 2010-11 and the assessed income, penalty-levied in these four years are deleted." 5. Against this, the Revenue is in appeal before us. The Ld. DR submitted that in this case, penalty is levied u/s. 271(1)(c) of the Act on the assessee to make g....

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.... Act. The assessments were framed u/s. 143(3) r.w.s. 153A of the Act. Finally, penalty was levied u/s. 271(1)(c) of the Act for the above assessment years vide order dated 23/02/2016. The CIT(A) has given relief to the assessee by placing reliance on Explanation 5 to section 271(1)(c) of the Act. The relevant provision applicable to the case is 271(1)(c) r.w.s. Explanation 5 and in particular clause 2 to Explanation 5 of section 271(1)(c) of the Act which reads as follows: "Where in the course of a search initiated u/s. 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 utilizing 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 before the said date or, where such return has been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein; or (b) for a....

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....f account or other documents or transactions represents his income (wholly or in part) for any previous year, which was ended before the date of search and,- (a) Where the returned 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." 7.2 For searches initiated under section 132 of the Act on or after first day of June, 2007, this Explanation 5A was applicable, which was introduced by the Finance Act, 2007 w.e.f 01.06.2007. The original Explanation 5A provided that where in the course of search, the assessee was found to be the owner of any money, bullion, jewellery, valuable articles or things and the assessee claims that such asset ha....

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....eturn of income had expired for such previous year and the assessee had not filed the return of income, it is further laid down that notwithstanding the fact that such income which has been discovered due to the search proceedings, is declared by him in any return furnished on or after the date of search, but irrespective of the same, he would be deemed to have concealed the particulars of income or furnished inaccurate particulars of income. Reading the above said provisions of the Explanation 5A to section 271(1)(c) of the Act, it is noted that the person is deemed to have concealed particulars of his income or furnished inaccurate particulars of such income, which is equivalent to the value of money, bullion, jewellery, valuable articles or things from the possession of the assessee during the course of search conducted on or after first day of June, 2007. Further, where any income is based on any entry in any books of account or other documents or transactions and he claims that all the above said represents his income for any previous year, then the Explanation lays down to that extent, the person would be deemed to have concealed his particulars of income or furnished inaccur....