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TMI Blog1997 (12) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... d departmental representative, Sri Kuruvilla M. George. We have also heard the learned counsel for the assessee, Sri C. Kochunni Nair. We have taken into consideration the rival submissions. 4. According to the learned departmental representative, Sri Kuruvilla M. George, the penalty levied by the Assessing Officer is in consonance with the provisions of section 271(1)(c) of the Income-tax Act, 1961. He submitted that the Assessing Officer has rightly applied the Explanation 5(a) to section 271(1)(c) for levying the penalty for concealment of income. The assessee had come in appeal before the Tribunal, being ITA. No. 30(Coch.)/ 1992 relating to the assessment year 1987-88, under appeal. After considering all the facts and the arguments advanced on both sides in the above quantum appeal, the Tribunal held that the estimate adopted by the CIT (Appeals) was quite reasonable in the circumstances of the case and confirmed the addition of Rs. 55,000 as unexplained investment. Therefore, the learned departmental representative submitted that penalty to the extent of the addition of Rs. 55,000 confirmed by the Tribunal in the quantum appeal has to be confirmed. He further submitted that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar facts and circumstances of the case. 6. The learned counsel for the assessee, Sri C. Kochunni Nair firstly submitted that even though the Tribunal had confirmed the addition to the extent of Rs. 55,000 in the quantuam appeal, that would not itself form a basis to levy penalty for concealment of income under the provisions of section 271 (1)(c). Secondly, Sri Kochunni Nair submitted that the Explanation 5(a) to section 271(1)(c) as tried to be applied by the Assessing Officer is not at all applicable in the facts and circumstances of the case. He submitted that on these two counts itself, the levy of penalty under section 271(1)(c) cannot be confirmed. In support of his argument, Sri Nair has relied on the decision of the Supreme Court in the case of CIT v. N. C Budharaja & Co. [1993] 204 ITR 412 / 70 Taxman 312. The Supreme Court in that case made the following observations: "The principle of adopting a liberal interpretation which advances the purpose and object of beneficent Provisions cannot be carried to the extent of doing violence to the plain and simple language used in the enactment. It would not be reasonable or permissible for the court to rewrite the section or sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) is correct. 8. To arrive at a correct finding it is necessary now to examine the facts and circumstances of the case and the applicability of Explanation 5(a) to section 271(1)(c) of the IT Act. The assessee had filed quantum appeal, ie., ITA No. 30 (Coch.)/92 relating to the assessment year 1987-88, under appeal, against addition made by the Assessing Officer towards unexplained investment by the assessee. The relevant facts in this regard are that the assessee constructed a Kalyana mandapam at Nagercoil. The addition was made on account of the unexplained investment in the construction of the Kalyana mandapam. The Registerd Valuer estimated the cost of construction of the said Kalyana mandapam at Rs. 4,50,000; while the cost of construction declared by the assessee was Rs. 5,00,000. The departmental Valuation Officer estimated the cost of construction at Rs. 6,15,000. On appeal, the CIT (Appeals) made an estimation of the cost of construction at Rs. 5,50,000. Thus, the difference between the estimates came to Rs. 65,000. However, after allowing certain other items, the difference was found at Rs. 55,000. In the quantum appeal, the Tribunal confirmed the addition to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is income in the return of income filed. The residential and business premises of the firm in which the assessee was a partner were searched under section 132 of the IT Act. The statement of the assessee's husband was taken. The assessee's husband stated in the statement that a building was already existing on the land where the Kalyana mandapam was constructed. Hence, the assessee declared the cost of construction at Rs. 5,00,000. Sri Nair pointed out that on identical facts, the Cochin Bench of the Income-tax Appellate Tribunal had held that there was no concealment of income in the case of South India Finance. Relying on this decision of the Tribunal, Sri Kochunni Nair, justified that the CIT (Appeals) has rightly cancelled the penalty levied under section 271(1)(c). 12. Another aspect of the argument of the learned counsel for the assessee is that Explanation 5(a) to section 271(1)(c) is not applicable to the facts of the instant appeal. He took us through the provisions of Explanation 5(a) which reads as follows:--- "Explanation 5: Where in the course of a search under section 132, the assessee is found to be the owner of any money, bullion, jewellery, or other valuable arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with 132(4). Section 132(1)(c) empowers the authorities to conduct search if there is reason to believe "that any person is in possession of any 'money, bullion, jewellery or other valuable article or thing' and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property for the purpose of the Income-tax Act, 1922 or this Act (hereinafter in this section referred to as the undisclosed income or property". Thus the power of search is based upon the reasonable belief that there is concealment of income represented by "money, bullion, jewellery or other valuable article or thing'. These very expressions have been engrafted in the Explanation 5 to section 271(1)(c) in which the reference to 'documents' is conspicuous by its absence. Therefore, the inevitable conclusion is that it is only in respect of "such assets" enumerated in Explanation 5 to section 271(1)(c) (which are in pari materia with those in section 132(1)(c), as are found in the ownership of the assessee but not recorded in the books of account that the assessee is deemed to have concealed his income. Thus, the documents of title which represent the right to Unmov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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