2013 (1) TMI 285 - AT - Income Tax

Immunity under Explanation 5 to section 271(1)(c) - Search and seizure conducted on 23-08-2006 - ROI filed u/s. 153A r.w s. 139(1), filed on 28-08-2007 - Furnishing inaccurate particulars of income - Undisclosed income - Penalty for concealment - Held that - As per clause 2 of Explanation 5 section 271(1)(c), i.e., the provision under which the assessee seeks immunity, and which has been found applicable by the first appellate authority, is applicable only to cases where the due date for furnishing the return of income u/s. 139(1) has not expired as on the date of search, which in the instant case is 23-08-2006. Immunity under Explanation 5 to section 271(1)(c) was not maintainable for three reason. First, inapplicability of the provision for the relevant years; the due date for filing the return u/s. 139(1) having expired or elapsed as on the date of search; rather, much prior thereto. - Secondly, for non-satisfaction of the condition of payment of tax and interest by the due date of filing the return of income u/s. 153A in response to notice thereunder pursuant to search u/s. 132, or even the actual date of filing of the return thereunder; being, rather, only after the date of assessment - Thirdly, as aforesaid, even if the CIT(A) held the view that the extended period for the payment of admitted demand is available, such a view, being in any case contentious and not free from debate, could not have been taken by him in the rectification proceedings u/s. 154. So, however, the matter having been conceded to by the ld. DR during hearing, admitting to the assessee s case for the relevant years being squarely covered by Explanation 5 to section 271(1)(c), we, as aforesaid, on the basis of said concession, dismiss the Revenue s appeal for both the years. We decide accordingly. - In favour of assessee

Issues Involved:
1. Applicability of Explanation 5 to Section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2004-05 and 2005-06.
2. Satisfaction of conditions for immunity from penalty under Explanation 5 to Section 271(1)(c).
3. Legitimacy of rectification proceedings under Section 154 of the Act.

Detailed Analysis:

1. Applicability of Explanation 5 to Section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2004-05 and 2005-06:

The core issue revolves around whether Explanation 5 to Section 271(1)(c) applies to the assessment years 2004-05 and 2005-06. The provision states that for immunity from penalty, the due date for filing the return of income under Section 139(1) should not have expired as on the date of search. In this case, the search was conducted on 23-08-2006, and the due date for filing the return had already expired for the relevant years. The Tribunal noted that the jurisdictional High Court in CIT v. Ramesh Chand Goyal did not address the applicability of Explanation 5 to the years where the time limit for filing returns had expired as on the date of search. Therefore, the Tribunal found that the provision was not applicable to the relevant years.

2. Satisfaction of conditions for immunity from penalty under Explanation 5 to Section 271(1)(c):

The assessee claimed immunity under Explanation 5 by arguing that the entire tax and interest demand had been paid before the date of the appellate order. The CIT(A) initially denied relief due to non-payment of the full demand but later rectified the order upon verification from the AO that no demand was outstanding as on 27-08-2009. However, the Tribunal observed that the payment of tax and interest should be made by the date of filing the return under Section 153A, which was not met in this case. The Tribunal highlighted that the figures of income-tax and interest liability as assessed were identical to those mentioned in the appellate order, indicating that the tax and interest were outstanding as on the date of assessment and penalty order.

3. Legitimacy of rectification proceedings under Section 154 of the Act:

The Tribunal questioned whether the CIT(A) could rectify his order under Section 154, especially when the rectification involved a contentious issue. The CIT(A) cited decisions by the Supreme Court to justify his authority to rectify factual or legal mistakes. However, the Tribunal found that the extended period for payment of admitted demand, if considered by the CIT(A), could not be taken in rectification proceedings. The Tribunal emphasized that the rectification should be limited to clear and undisputed errors, which was not the case here.

Conclusion:

The Tribunal concluded that the assessee's claim for immunity under Explanation 5 to Section 271(1)(c) was not maintainable for three reasons:
1. The due date for filing the return under Section 139(1) had expired as on the date of search.
2. The condition of payment of tax and interest by the due date of filing the return under Section 153A was not met.
3. The contentious nature of the extended period for payment could not be addressed in rectification proceedings under Section 154.

Despite these findings, the Tribunal dismissed the Revenue's appeals based on the concession by the Departmental Representative that the conditions of Explanation 5 were met. The Tribunal emphasized that the decision was made on the basis of this concession and not on the merits of the case.

Result:
Both appeals by the Revenue were dismissed.

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