High Court Of Gujarat
Pr. CIT, Vododara-3 vs. Jigesh Venilal Koralwala
Section : 271(1)(C)
Assessment Year : 2005-06
Akil Kureshi And A.J. Shastri, JJ.
Tax Appeal No. 976 Of 2015
July 18, 2016
ORAL ORDER
Akil Kureshi, J. – The Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal raising following question for our consideration.
“Whether the ITAT was correct in law and facts and circumstances of the case, in deleting the penalty levied u/s.271(1)(c) of the IT Act by holding that in case, the additional income is disclosed in furtherance to section 153A notice, the same has to be treated as one filed u/s. 139(1) and unless any addition thereupon is made, it is not a case of penalty u/s.271(1)(c) of the Act”
2. Brief facts are that for the assessment year 2005-2006, the respondent assessee was subjected to search operation under section 132 of the Income Tax Act(“the Act” for short). Based on such investigation, proceedings under section 153A were initiated. Notice was issued on 30.11.2007 in compliance to which the assessee filed the return declaring total income of Rs.2.13 crores (rounded off) as against the return of 6.93 lacs filed in the original return under section 139(1) of the Act. The Assessing Officer framed final assessment without making any addition in the disclosed income of Rs.2.13 crores but initiated penalty proceedings to the tune of Rs.2.06 crores on the ground that the assessee had concealed the particulars of income to such extent. The Assessing Officer levied penalty of Rs.70 lacs under section 271(1)(c) of the Act upon which the matter went ultimately to the Tribunal. The Tribunal by the impugned judgement reversed the penalty making the following observations :
“6. We have heard both sides and gone through the case file. Relevant facts stand narrated hereinabove. The authorities below treat assessee’s additional income declared of Rs.2,06,48,692/- as a case of concealment and furnishing of inaccurate particulars of income u/s.271(1)(c) of the Act. The assessee reiterates the same in its grounds of appeal. The Revenue strongly supports the CIT(A)’s order. We find that the hon’ble jurisdictional High Court in the case of Kirit Dayabhai Patel v. ACIT in Tax Appeal No.1181, 1182 to 1185 of 2010 decided on 3.12.2014 holds that in case the additional income is disclosed in furtherance to a section 153A notice, the same has to be treated as a one filed u/s.139(1) and unless any addition thereupon is made, it is not a case of penalty u/s.271(1)(c) of the Act. Admittedly, facts of the present case indicate that such income assessed over and above one declared post 153A notice is an addition of Rs.27,750/-(supra). Therefore, we follow the jurisdictional High Court and delete the impugned penalty. Coming to the aforesaid residual addition, the case file reveals that the assessee had already disclosed its all necessary details so as to qualify for immunity u/s.271(1)(c) Explanation 5. The assessee’s grounds challenging imposition of the impugned penalty succeed.”
3. Learned counsel Shri Parikh for the department contended that in terms of explanation 5 of section 271(1)(c), the assessee was liable to pay penalty on the income disclosed in response to notice under section 153A of the Act. The Tribunal committed an error in deleting the penalty on the ground that there was no further addition to such disclosed income upon completion of the assessment.
4. On the other hand, learned counsel Shri Himani opposed the appeal contending that the Tribunal has relied on the decision of Gujarat High Court in case of Kirit Dahyabhai Patel v. Asstt CIT [Tax Appeal No.1181/2010 decided on 3.12.2014]. He further submitted that in any case the additional income pertained to the assessee’s on-money receipts and would not be covered by explanation 5. When explanation 5 itself did not apply, the question of granting immunity upon fulfillment of conditions contained therein would not arise.
5. Explanation 5 to section 271(1)(c) reads as under :
“[Explanation 5. -Where in the course of a search 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 of income for such year has not 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 any previous year which is 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, [unless,—
(1)such income is, or the transactions resulting in such income are recorded,—
(i)in a case falling under clause (a), before the date of the search; and
(ii)in a case falling under clause (b), on of before such date,
in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the said date; or
(2)he, in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control has 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 specified in subsection (1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income.”]
6. This section applies to search carried out before 1st June, 2007. In such a case, if the assessee was found to be owner of any money, bullion, jewellery or other valuable article or thing and the assessee claims that such assets have been acquired by utilising his income, for the previous year ended before the date of the search but the return of income has not been filed before the said date or, if filed, such income has not been disclosed, then, notwithstanding that such income is declared by him in the return of income furnished after the date of the search, the assessee would be liable to penalty, unless upon fulfillment of conditions contained in clauses (1) and (2) of the said explanation, the assessee can claim immunity. This explanation nowhere refers to any income based on any entry in any books of account or other documents or transactions. In other words, therefore, unless during the search, the assessee is found to be owner of any money, bullion, jewellery or other valuable article or thing, explanation 5 would not apply. This becomes clear when the legislature for the period post 1st June, 2007 has enacted explanation 5A which reads as under :
“[Explanation 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 —
(a)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 for any previous year; or
(b)any income based on any entry in any 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 and,-
(a)where 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 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.”
7. In terms of explanation 5A, thus even in a case where during the search, the assessee is found to be the owner of any income based on any entry in the books of account or other documents or transactions, the penalty would attach, provided other requirements are fulfilled. This clause was not there in original explanation 5 which applied till 1st June 2007 and has therefore, to be applied in the present case.
8. We have perused the order of assessment and found that entire amount of Rs.2.06 crores pertained to on-money receipts by the assessee. There was no money, bullion, jewellery or other valuable article or thing of such value found during the search and the additional income was based on materials collected during the search. Prior to 1st June 2007, therefore, by applying explanation 5, penalty could not have been levied. Looked from this angle, we do not find any error in the view of the Tribunal. For the reasons somewhat different from those recorded by the Tribunal, therefore, this tax appeal is dismissed.
9. We shall address to the Revenue’s anxiety about the ratio of this Court in case of Kirit Dahyabhai Patel (supra), in an appropriate case, if the situation so arises.
[Citation : 387 ITR 177]
