TaxTMI 
TaxTMI 
2019 (4) TMI 1673
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....anted partial relief to the Assessee by setting aside penalty on one issue but also restored the penalty under Section 271(1)(c) of the Act on another issue. 2. The facts in brief leading to the filing of the present Appeals by both the sides are narrated in brief as under. 3. A search was carried out at the business place of the Assessee on 16.05.2007 and inter alia cash of Rs. 1.65 crores was found at the residential house and in the Bank locker of the Assessee. Cash of Rs. 2 crores was also found in the place of a third party, Smt. Jaya Krishnamurthy, who also stated in the course of statements that the said cash was borrowed as loan from one of the Assessee, namely, Duraipandi. The Assessee filed its returns after search in the capacity of an AOP for the first time claimed in the course of the present penalty proceedings under Section 271(1)(c) of the Act that they had also derived agricultural income during the Assessment Years in question from the Agricultural lands taken on lease from the agriculturalists during these years in question. However, we are not concerned with the assessment of tax liability in the present set of Appeals, but are only concerned with the ques....
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....Appeals) also accepted the contentions raised by the Assessee and set aside the penalty under Section 271(1)(c) of the Act with the following observations:- "6.2 As regards levy of penalty on the income returned in the returns of income filed in response to notice under Section 153A, the contentions on behalf of the appellant, as discussed above, in brief, are that- The appellant had made a disclosure under Section 132(4) and the return of income was filed based on the disclosure made under the said section and the taxes were paid subsequently. The appellant is entitled to immunity from penalty under Section 271(1)(c) on the income disclosed under Section 132(4) as per the provisions or Explanation 5 to the said section as the appellant had complied with the conditions laid down therein and approved in the decision of the Hon'ble Supreme Court in the case of ACIT Vs. Gebilal Kanahya Lal 348 ITR 561. It has been held by the Hon'ble Supreme Court in the case of ACIT vs. Gebilal KanahyaLal 348 ITR 561 that since the section does not specify any time limit for payment of tax the interest, the assessee is entitled for immunity from penalty und....
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....e partly allowed." 6. Both the parties, aggrieved with the said order, filed Cross Appeals before the learned Income Tax Appellate Tribunal which reversed the findings of the learned CIT (Appeals) on both the Appeals, in the following manner. 7. On the applicability of Clause 5(2) of the Explanation under Section 271(1)(c) of the Act, the learned Tribunal restored the penalty and denied the immunity with the following observations:- "5.6 The Id. Counsel for the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under Section 153A, it is not necessary for us to examine that position. The main question before us, which was debated at length, was whether the immunity granted under Explanation 5(2) to Section 271(1)(c) is available to the assessee or not. The Madras High Court in S.D.V.Chandru's case (266 ITR 175) 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 subsection (1) of Section 139" are not to be read as referring to income so far not disclosed in respect of the prev....
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....he existing Explanation 5 to Section 271(1) of the Income-tax Act, if at the time of search, assets which are not recorded in the books of account are founds, 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 provisions has been found to operate, even in cases where the assesssee 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". (pages 38 7 39 of 162 ITR St.) 5.8. The above circular explaining the amendment shows that ''the benefit' of immunity co....
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....e of Sarla M.Ahuja v. DCIT [I.T.A.No. 1301 (PN)/2007] for deletion of the penalty but the revenue placed reliance on the decision of the Third Member in the case of ACIT vs. Kirit Dahyabhai Patel [121 ITR 159 (Ahd)]. Thus despite of contrary decision of the same Bench, Pune Bench has also placed reliance on the decision of the Third Member in the case of ACIT vs. Kirit Dahyabhai Patel [supra] has been followed in the case of Mahendra Mittal v. ACIT [2011] 132 ITD 80. Further, the same decision has been followed in the case of Ahit B.Zota v. ACIT [2010] 40 SOT 543. In view of the decisions of Mumbai Benches, we are of the view, that immunity under clause (2) of Explanation 5 to Section 271(1)(c) would not be available if assessee has not disclosed the income before the date of the search in the return to be furnished before the time allowed under Section 139(1). 5.11 The Ld. Counsel of the assessee had also emphasised that Sec. 153A puts a non obstante clause and, therefore, returned already filed would abate. Now if the additional income declared in the fresh return u/s. 153A is accepted, then there will not be any difference in the returned income and th....
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.... I.T.a.No. 570/Mds/2015 is allowed for statistical purposes and the appeals of the assessee in I.T.A.Nos. 1666, 1667, 1668, 1669, 1670, 1671 & 1672/Mds/2016 are allowed." 9. Being aggrieved, both the parties have filed the present Appeals under Section 260(A) of the Act before this Court. 10. The following substantial questions of law, in our opinion, arise from the order of the learned Tribunal:- "(i) Whether the provisions of Explanation 5(2) appended to Section 271(1)(c) of the Act are attracted in the facts and circumstances of the case or not and whether the Assessee is entitled to the immunity from imposition of penalty in the present case; and (ii) Whether the learned Tribunal was justified in setting aside the penalty under Section 271(1)(c) of the Act on the agricultural income estimated by the learned CIT (Appeals) which was however taxed as "Income from Other Sources" by the Assessing Authority?" 11. The learned counsel for the Assessee Mr. R.Sivaraman submitted before us that the Assessee in the course of search conducted at the business place of the Assessee on 16.05.2007 had duly disclosed his undisclosed income during the course of search i....
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....denying the immunity to the Assessee and reversing the order passed by the learned CIT (Appeals). We may state here that learned counsel for the Revenue has not disputed the aforesaid payment of taxes given in aforesaid table and Rs. 1.65 Crores cash seized being adjusted against tax liability of Assessee for these Assessment Years. 14. The learned counsel for the Assessee in this regard has relied on the decision of the Hon'ble Supreme Court in the case of Assistant Commissioner of Income-tax v. Gebilal Kanhaialal HUF reported in [2012] 348 ITR 561 (SC) wherein dealing with a case involving almost similar facts, the Hon'ble Supreme Court after quoting the Explanation 5 to 5.271 (1)(c) of the Act, interpreted of these provisions in the following manner:- "5. To answer the above question, it would be worthwhile to reproduce Explanation 5 read with clause (2) of Section 271(1)(c), which is quoted herein below: "Explanation 5: Where in the course of a search under Section 132, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee cla....
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.... 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 make a statement under Section 132(4) in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1). Such statement was made by the Karta during the search which concluded on August 1, 1987. It is not in dispute that condition No.1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(c) was that the assessee should specify, in his statement under Section 132(4), the manner in which such income stood derived. Admittedly, the second condition, in the present case also stood satisfied. According to the Department, the assessee was not entitled to immunity under clause (2) as he did not satisfy the third condition for availing the benefit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on 31....
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....ion 153A onwards in Chapter XIV of the Act with effect from 01.06.2003 by Finance Act 2003. He therefore submitted that the Judgement of the Hon'ble Supreme Court in the case of Gebilal Kanhaialal HUF cited supra relied upon by the learned counsel for the Assessee is not applicable to the facts of the present case as the same dealt with the applicability of Clause 5(2) in Explanation for Assessment Year 1987-1988 which was prior to the said amendment and now since the Assessee was required to file separate returns for all these six Assessment Years in question, the tax admitted in his returns filed in pursuance of the Notice under Section 153C has to be paid along with the returns filed and subsequent payment of tax cannot entitle the Assessee to the immunity as claimed by him. 16. The second contention of the learned counsel for the Revenue is that the Assessee failed to explain the sources of agricultural income. The Assessee could not satisfy the availability of agricultural land with him merely by production of two documents, namely, 'Chitta and Adangal' along with a certificate of the Village Administrative Officer. Therefore, the Assessing Authority was justifi....
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....t, mandate the Assessee to pay such tax admitted by him to be payable with interest on the undisclosed income admitted by him in the course of search in the statements under Section 132(4) of the Act. The only change brought about with effect from 01.06.2003 is in the procedure in the filing of Returns and in the assessment for each year independently rather than in the assessment for a Block of Period as was the position prior to 01.06.2003. The case of Gebilal Kanhaialal HUF cited supra before the Hon'ble Supreme Court also arose from a search under Section 132 of the Act. The purpose of providing the exception to Explanation 5 which otherwise enacts a presumption of concealment attracting penalty under Section 271(1)(c) of the Act, is to save the Assessee from the rigour of penalty in case he surrenders or admits the earning of undisclosed income which was not disclosed in the Returns filed by him under Section 139(1) of the Act before the date of search. Besides such disclosure in statement under Section 132(4) during the course of search he has to specify the manner of earning such undisclosed income and also has to undertake the liability of payment of tax with interest u....