High Court Of Madras
CIT vs. S.D.V. Chandru
Sections 271(1)(c), Expln. 5
Asst. Year 1985-86, 1986-87
R. Jayasimha Babu & S.R. Singharavelu, JJ.
Tax Case Nos. 330 & 331 of 2000
9th December, 2003
Counsel Appeared
T. Ravikumar, for the Revenue : P.P.S. Janarthana Raja for M/s Subbarya Iyer, for the Petitioner
JUDGMENT
R. Jayasimha Babu, J. :
The assessment years are 1985-86 and 1986-87. The question referred is as to whether the Tribunal was right in cancelling the penalty levied under s. 271(1)(c) r/w Expln. 5 thereunder after the Tribunal found that the assessee had not filed the return of income before the due date mentioned under s. 139(1) of the IT Act.
There was a search in the premises of the assessee on 13th Feb., 1990. A statement of the assessee was recorded, under s. 132(4) of the Act, at the time of search. Thereafter, the assessee filed his returns for the earlier years and admitted a larger income and also paid the tax together with interest.
The AO nevertheless levied penalty on the assessee even while such penalty had not been levied for other members of his group on whose behalf he had admitted a larger income. The AO construed para (2) in Expln. 5 of s. 271(1)(c) as being limited to the year of search and not applicable to earlier years. Expln. 5 to s. 271(1)(c) provides that in the circumstances set out in paras (1) and (2).of that Explanation, the assessee is not to be regarded as having concealed his income. That part of Expln. 5 reads as under : “(1) such income is, or the transactions resulting in such income are recorded,— (i) in a case falling under cl. (a), before the date of the search; and (ii) in a case falling under cl. (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 CIT or CIT before the said date; or (2) he, in the course of the search, makes a statement under sub-s. (4) of s. 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-s. (1) of s. 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.” Clause (a) and cl. (b) referred to above reads thus : “(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.” While cls. (a) and (b) make a clear distinction between the previous year which has ended before the date of the search, and the previous year which is to end on or after the date of the search, para (2) in Expln. 5 does not make any such distinction. It refers to the statement given by the assessee at the time of the search under s. 132(4) with regard to the assets found at the time of search being the statement to the effect that such assets have been acquired out of his undisclosed income and the specification by the assessee in such statement with regard to the manner in which such income had been derived, and the subsequent payment by the assessee of the tax on such undisclosed income together with interest.
The words in para. (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 sub-s. (1) of s. 139,” are not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of the search. The words used are “income which has not been so far disclosed in his return of income”. The additional words which refer to the time specified in s. 139(1) are only a reiteration of the legal requirement regarding the time within which returns should normally be filed.
In cases where the assessee had not disclosed his income in the returns filed for the previous year which have ended prior to the date of the search and, in the statement given under s. 132(4), the assessee admits the receipt of undisclosed income for those years and also specifies the manner in which such income had been derived, and thereafter pays the tax on that undisclosed income with interest, such undisclosed income would get immunised from the levy of penalty.
The Tribunal, therefore, was right in holding that the penalty was not leviable. The question referred is therefore, answered in favour of the assessee and against the Revenue.
[Citation : 266 ITR 175]
