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TMI Blog2008 (10) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... nity granted from penalty and prosecution, in the order under s. 244D(4), dt. 23rd Nov., 1992, was withdrawn by the Commission vide its order dt. 8th Sept., 1998. 4. The assessee did not file the return of income for asst. yr. 1986-87. The assessment order for asst. yr. 1986-87 was passed by the AO under s. 144 of the Act on 28th March, 1990 and the total income was assessed at Rs. 20,56,130. This assessment was set aside by the CIT(A) vide his order dt. 29th March, 1993. The fresh assessment order was passed by the AO once again under s. 144 of the Act on 27th March, 1995. This assessment order was also set aside by the CIT(A) vide his order dt. 30th Sept., 1996. The assessment order was passed by the AO for the third time on 31st March, 1999, once again under s. 144 of the Act. In this order, the income was assessed at Rs. 20,56,130. 5. The AO, subsequently, levied penalty of Rs. 10,06,590 for the reasons given in paras 3, 4, 5, and 6 of his order dt. 28th Sept., 1999 as under: "3. As stated earlier, the assessee had not filed the return of income though he derived substantial income from running Arrack shops. Bailwan Gas Agency and Bailwan Enterprises, etc. Before the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... names and the income earned from such wine shops was invested in immovable assets. The AO had taxed both the incomes from wine shops and investments in immovable properties and others for asst. yrs. 1986-87 and 1987-88. While deciding the quantum appeals in IT Appeal Nos. 243 and 244 of 2004-05, dt. 10th July, 2007. I have telescoped one addition against the other and allowed partial relief to the appellant. Thus, it is a clear case where the appellant earned income and invested in immovable properties but did not file any return of income and did not co-operate with the Department in completion of assessment proceedings and payment of tax. The contention of the appellant that penalty is not imposable as the appellant did not file any return under s. 148 cannot be accepted because Expln. 5 to s. 271(1)(c) would be applicable in this case. It is only on account of search and seizure the investments made by the appellant came to light as a result of which assessments were completed determining the total income at a much higher figure than what was admitted by the appellant. As this is a case where Expln. 5 to s. 271(1)(c) is applicable I find that this is a fit case for levy of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------------------------------- Bayilwan Gas Agency 10,000 52,000 62,000 ------------------------------------------------------------ Bayilwan Enterprises 4,000 20,000 24,000 ------------------------------------------------------------ Money lending 1,000 5,000 6,000 ------------------------------------------------------------ Lorry vehicle 12,000 12,000 ------------------------------------------------------------ Match factory lease 7,200 7,200 ------------------------------------------------------------ Chit contribution 41,675 41,675 ------------------------------------------------------------ Deposit in 9 persons 37,000 37,000 ------------------------------------------------------------ Bank deposit 1,77,328 1,77,328 ------------------------------------------------------------ Bank interest 8,931 8,931 ------------------------------------------------------------ Domestic expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------------------------------------------------- Less: Kisti paid 6,00,000 ------------------------------------------------------------ 9,00,000 ------------------------------------------------------------ Less: 15% estimated expenses 1,35,000 ------------------------------------------------------------ 7,65,000 ------------------------------------------------------------ Business: 6-1/2 months 3,31,500 ------------------------------------------------------------ 13. The AO levied the penalty under s. 271(1)(c) of the Act. on the ground that 'the assessee had concealed his income particulars'. Before the CIT(A) it was contended on behalf of the assessee that penalty under s. 271(1)(c) was not leviable because the assessee had not filed any return of income for asst. yr. 1986-87. The CIT(A) rejected this plea on the ground that Expln. 5 to s. 271(1)(c) was applicable to this case, that it was only on account of search and seizure that the investments made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income,- (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, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under cl. (c) of sub-s. (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless,- (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresent money, bullion, jewellery or other valuable article or thing, of which the assessee was found to be the owner, in the course of search. Therefore, in our considered opinion, the CIT(A) erred in applying the provisions of Expln. 5 to the additions made by the AO on account of estimated income from various sources. 21. The Expln. 5 enacts a deeming provision having application to a particular situation. A deeming provision is a legal fiction which assumes the existence of a fact which does not really exist. A deeming provision may be intended to enlarge the meaning of a particular word or to include matters which otherwise mayor may not fall within the main provision. In construing a legal fiction it is necessary to assume all those facts on which alone the fiction can operate. But, it cannot be extended beyond the purpose for which it is created or beyond the language of the section by which it is created. It cannot be extended by importing another fiction. 21.1 A legal fiction cannot be extended further by so interpreting it as to go beyond the legislature's intention in creating the fiction. This is because legal fictions are created only for a definite purpose and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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