1995 (8) TMI 79 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Applicability of Explanation 5 to section 271(1)(c) in cases of requisition under section 132A.
3. Interpretation of the terms "search" and "requisition" under sections 132 and 132A respectively.
4. Whether the assets requisitioned under section 132A can be treated as assets found in the course of a search under section 132.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The appeal by the assessee is against the order confirming the levy of penalty amounting to Rs. 6,00,810 under section 271(1)(c) for the assessment year 1987-88. The penalty was imposed due to the recovery of unexplained cash amounting to Rs. 12,13,850.

2. Applicability of Explanation 5 to Section 271(1)(c) in Cases of Requisition under Section 132A:
The assessee contended that Explanation 5 to section 271(1)(c) applies only to searches conducted under section 132 and not to requisitions made under section 132A. Both the Assessing Officer and the CIT (Appeals) acknowledged that Explanation 5 is not applicable to proceedings under section 132A. This finding supports the cancellation of the penalty levied under section 271(1)(c), as the presumption of deemed concealment under Explanation 5 does not apply.

3. Interpretation of the Terms "Search" and "Requisition" under Sections 132 and 132A Respectively:
The assessee's counsel argued that the terms "search" and "requisition" are distinct, and the provisions of section 132A were introduced to enable the Income-tax authorities to requisition assets seized by other departments. The counsel cited the judgment of the Supreme Court in CIT v. Tarsem Kumar and the ITAT Delhi Bench decision in Amir Chand v. ITO to support this interpretation.

4. Whether the Assets Requisitioned under Section 132A can be Treated as Assets Found in the Course of a Search under Section 132:
The Tribunal concluded that the assets requisitioned under section 132A cannot be equated with assets found during a search under section 132. The expression "search" implies a forcible action, whereas "requisition" involves a formal request for assets already seized by another government agency. The Tribunal emphasized that a deeming provision like Explanation 5 must be construed strictly and cannot be extended to cover requisitioned assets.

Conclusion:
The Tribunal held that no penalty could be levied by invoking Explanation 5 to section 271(1)(c) in the present case. Since the assessee had paid advance tax on the amount in question and included it in the return of income, there was no act of concealment. The Tribunal directed the Assessing Officer to cancel the penalty, allowing the assessee's appeal.