High Court Of Karnataka
CIT vs. A.B. Kage & Co.
Assessment Year : 1988-89
Section : 271(1)(C)
Mrs. Manjula Chellur And Mrs. B.V. Nagarathna, JJ.
IT Appeal No. 29 Of 2003
March 16, 2009
JUDGMENT
Mrs. Manjula Chellur, J. – This appeal is filed by the Revenue under section 260A of the Income-tax Act, 1961 aggrieved by the orders passed by the Income-tax Appellate Tribunal, Panaji, in I. T. A. No. 817/Bang/ 1994 dated August 7, 2002, raising the following substantial question of law :
“Whether the Tribunal was correct in deleting the penalty levied under section 271(1)(c) of the Act without the assessee discharging the burden under the Explanation which would entitle such a deletion by merely holding that the subsequent admission revised return and the co-operative attitude of the assessee was sufficient to delete the penalty ?”
2. It is not in dispute that the assessee in question-the respondent before us came into existence under a deed of partnership in the year 1986. The assessee was carrying on the business of selling the supply of arrack and the return of income came to be filed on October 5, 1998 for the assessment year 1988-89 declaring a total income of Rs. 87,380. A search came to be conducted between the October 9 and 10, 1988 in the residential premises of one of the partners of the assessee-firm and several incriminating materials said to have come to light during the said search. During the course of search itself on October 10, 1988 they said to have made a declaration disclosing the details of the income which was not declared in the returns of income filed on October 5, 1988 and he also come forward to pay the tax payable on the undisclosed income by filing a revised return on August 21, 1989.
3. The Assessing Officer after issuing notice to the assessee initiated action and proceeded to impose penalty by virtue of section 271(1)(c) of the Act. Aggrieved by the said order the assessee went before the Appellate Tribunal and the Appellate Tribunal apart from this I. T. A. No. 817 of 1994 considered other similar matters and passed a common order on August 7, 2002 giving immunity to the assessee so far as penalty of 100 per cent of the tax payable. Aggrieved by the same, the Revenue has come up in this appeal challenging the orders of the Appellate Tribunal in I. T. A. No. 817 of 1994. The relevant provision applicable to the case on hand is section 271(1)(c) of the Act and also Explanation 5 and in particular clause (2) to Explanation 5 of section 271(1)(c). Section 271(1)(c) reads as under :
271. Failure to furnish returns, comply with notices, concealment of income, etc.—(1) If the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person—
(a) and (b) **
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or”
Explanation 5 reads as under :
“Where in the course of a search initiated 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 to 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 or 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 Chief 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 sub-section (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.”
4. By reading Explanation 5 it is definitely a search initiated under section 132 of the Act before June 1, 2007 as the date of search was October 9, 1988. The amendment to section 271 came to be brought in with effect from October 1, 1984. The present search was made much later than the amendment to the section.
5. Reading the entire Explanation 5 having reference to clause (2) the respondent-assessee has declared undisclosed income while making a statement on October 10, 1988 and he has not disclosed the said income in his returns filed on October 5, 1988. Having regard to clause (2) whatever was required has been complied with by the assessee. Therefore, he was entitled for the immunity so far as payment of penalty contemplated under that section. The Appellate Tribunal simply referring to the immunity provided under section Explanation 5 of section 271(1)(c) has given immunity to the assessee by deleting the 100 per cent penalty of tax levied and we do not find any illegality in the said opinion of the Tribunal.
6. In view of the discussion made above, we do not find any ground to interfere with the orders of the Appellate Tribunal.
7. Therefore, the appeal stands dismissed. The substantial question of law referred to above is answered against the Revenue.
[Citation : 333 ITR 189]
