2020 (12) TMI 446 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessee has not stated the manner of earning the income in statement u/s 132(4) - As argued assessee has declared the income on which penalty is imposed in the original return filed u/s 139(1) - HELD THAT - The legislature in its wisdom has chosen to segregate the search and requisition proceedings and at the same time, provided for certain provisions which apply equally to both search and requisition proceedings as so provided in sub-section (3) to section 132A where it is stated that the provisions of sub- sections (4A) to (14) (both inclusive) of section 132 shall, so far as may be, apply to proceedings under section 132A also, as if such books of account, other documents or assets had been seized under section 132(1) by the Requisitioning Officer - said deeming provision cannot, however, apply and extend to another deeming provision contained in Explanation 5 to section 271(1)(c). In absence of any specific mandate of the legislature, the scope of explanation 5 to section 271(1)(C) cannot be enlarged so to read and understood the same in context of requisition proceedings u/s 132A where it is specifically restricted in respect of search initiated u/s 132 of the Act. Therefore, following the consistent view taken by the Coordinate Benches and in absence of any contrary authority brought to our notice and keeping in view the strict construction of penalty provisions, the matter relating to levy of penalty in situation of requisition of assets u/s 132A shall continue to be governed by the main provisions of section 271(1)(c) and explanation 5 cannot be invoked in such cases. Even if some discrepancies were found during the survey resulting in surrender of income by the assessee, once the assessee has declared the said income in the return of income filed under section 139(1) of the Act, then the penalty cannot be levied on the surmises, conjectures and possibilities that the assessee would not have disclosed the income but for survey. In the instant case, the assessee had filed his original return of income u/s 139(1) of the Act for the impugned assessment year 93-94 on 26.04.93 declaring total income of ₹ 6,09,620/- including cash seized of ₹ 5,92,340/-/ and the said return of income has been accepted by the Assessing officer. The seizure and requisition of cash u/s 132A may have occasioned the filing of the return of income, however, where the return of income has been filed at the beginning of the assessment year itself well within time allowed u/s 139(1) and has been accepted by the Assessing officer and there is no adverse findings vis- -vis cash seized and offered in the return of income, following the settled legal proposition as laid down by the Courts, there is no basis for levy of penalty u/s 271(1)(C) of the Act and the same is hereby directed to be deleted. - Decided in favour of assessee.

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 the context of requisition under Section 132A.
3. Consideration of income declaration in the original return filed under Section 139(1) and its impact on penalty imposition.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue is whether the penalty of ?2,42,296/- under Section 271(1)(c) of the Income Tax Act, 1961, is justified. The penalty was initially imposed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] on the grounds of alleged concealment of income and furnishing inaccurate particulars of income. The AO held that the surrender of ?5,92,340/- by the assessee was due to requisition under Section 132A, and the assessee had not maintained any books of account, thus initiating penalty proceedings under Section 271(1)(c).

2. Applicability of Explanation 5 to Section 271(1)(c):
The assessee contended that Explanation 5 to Section 271(1)(c) is not applicable in cases of requisition under Section 132A. Explanation 5 applies specifically to searches initiated under Section 132, and there is no reference to Section 132A within it. The lower authorities argued that Section 132A(3) makes provisions of sub-sections (4A) to (14) of Section 132 applicable to requisitions under Section 132A, and hence Explanation 5 should apply. However, the Tribunal held that Explanation 5 is strictly applicable only to searches under Section 132 and not to requisitions under Section 132A, as supported by various case laws including ITO vs. Nurul Huda G. Aboobkar and Gulamrasul M. Pathan vs. ACIT.

3. Consideration of Income Declaration in Original Return:
The assessee declared the seized cash of ?5,92,340/- in the original return filed under Section 139(1) for the assessment year 1993-94. The Tribunal observed that the concealment or furnishing of inaccurate particulars must be examined with reference to the return of income filed. Since the assessee included the seized cash in the return filed within the due date and the return was accepted by the AO, there was no concealment or furnishing of inaccurate particulars. The Tribunal referred to the judgments in CIT vs. SAS Pharmaceuticals and Reliance Petroproducts (P) Ltd., emphasizing that penalty cannot be imposed based on the assumption that the assessee would not have disclosed the income but for the requisition.

Conclusion:
The Tribunal concluded that Explanation 5 to Section 271(1)(c) does not apply to requisitions under Section 132A. The penalty under Section 271(1)(c) is not justified as the assessee declared the income in the original return filed under Section 139(1), and there was no concealment or furnishing of inaccurate particulars. The appeal filed by the assessee was allowed, and the penalty was directed to be deleted.

Order Pronounced:
The appeal was allowed, and the order was pronounced in the open Court on 09/12/2020.

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