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TMI Blog2013 (7) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... r) For the Petitioner : K. C. Devadas For the Respondent : Gangadhar Panda ORDER Asha Vijayaraghavan (Judicial Member) This appeal is directed against the order of the CIT(A)-VII, Hyderabad, passed on 21/10/2011 for the assessment year 2007-08. 2. This is an appeal against the levy of penalty under section 271(1)(c) in respect of additional income offered pursuant to search and seizure conducted under Section 132 of the I.T Act, 1961 on the Kedia Group of case along with the assessee on 01.02.2008. 3. Briefly the facts of the case are that during the course of search and seizure operations, loose sheets and documents, were found and seized. During the course of search and seizure operations on 01.02.2008, Sri Ravinder Kedia, Director of M/s. Binju Metals and alloyes Industries P Ltd was confronted with the seized Annexures A/PDK/Res/3 and A/PDK/Res/4 and was asked to go through the same and explain the contents thereon. In reply, Sri Ravinder Kedia disposed that pages 1 to 104 of Annexures A/PDK/Res/3 and Pages 1 to 30 of A/PDK/Res/4 are the petty cash books maintained by Sri Mahesh Sharma, Cashier of M/s. Binju Metals and Alloys Industries P Ltd. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the appellant has made a declaration albeit, based on the seized material found during the course of search proceedings with the said income admitted his revised return which has been accepted by the assessing officer without making any further additions, the deeming nature of the provisions are not coming to the rescue of assessee in this case. Hence the immunity claimed under sub-section (2) of section 271AAA of the Act by the assessee are not made u/s.132(4) of the I.T Act, 1961 vis a vis the provision of Section 271(1)(c). It is observed that the actions of the appellant are applicable to a situation falling in explanation 1 to Section 271(1)(c) of the Act but not the explanation 5A to Sec.271(1)(c). Further, the case law in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 (SC) as quoted by the appellant are relevant to the facts of a case where the explanation 1 to Section 271(1)(c) and the same is not applicable in this case. Accordingly, it is held that the provisions of Section 271(1)(c) with the relevant explanation i.e. explanation 5A of the I.T Act is applicable in this case. The said provisions of Explanation 5A are deeming in nature without any exceptions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been initiated under section 132 on or after the 1st day of June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived ; (ii) substantiates the manner in which the undisclosed income was derived ; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub- section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. 14. In the CBDT circular 3/2008 dated 12.3.2008, provisions of this section has been explained as under (299 ITR 8 St at page 84): 68.1 A new sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the course of search proceedings, in a statement u/s 132(4). 18. Explanation 5 has been amended by the Finance Act, 2007 to restrict the application of that explanation to searches initiated before 1.6 2007. Hence the Assessee cannot seek exemption under Explanation 5 to sec 271(1)(c). The cases cited by the Assessee wherein penalty was deleted applying Explanation 5, relate to search initiated prior to 1.6.2007 and hence are not applicable to the instant case. 19. A new explanation 5A was introduced by Finance Act, 2007, w.e.f 1.6.2007 to cover searches initiated after 1.6.2007 which read as under: Explanation 5A.- Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,- (i) 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 for any previous year ; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars of his income or furnished inaccurate particulars of such income. 21. In the Circular No 5/2010, dated 3.6.2010 issued by the CBDT explaining the provisions of the Finance (no. 2) Act, 2009, the amendment to explanation 5A was explained as under: 53.2 By substituting the Explanation 5A it has been clarified that the scope extends to the cases where the assessee has filed the return of income for any previous year and the income found during the course of search relates to such previous year and had not been disclosed in the said return, then such income shall represent deemed concealment of income and assessee shall be liable to pay penalty under section 271. 22. Thus as per the existing Explanation 5A prior to the amendment by Finance (No.2) Act, 2009, if an Assessee had filed the return of income for the years covered by the search, then the addition made shall not be considered as deemed concealment. It is only by the Amendment to explanation 5A by the Finance (no.2) Act, 2009, (which received the assent of the president on 13.8.2009), that addition made in the course of assessment u/s 153A, will be deemed to be concealed income, even if the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being prosecuted for an act or omission which was considered innocent when done. [G.P. Nayyar v. State (Delhi Administation) AIR 1979 SC 602. An Explanation is appended to a section to explain the meaning of the words contained in the section and normally is to be read to harmonise with and to clear up any ambiguity in the main section. However, in the present case, the Explanation inserted has widened the scope of the main section and has created an obligation breach of which entails penalty and subjects to criminal prosecution. This Explanation to s. 194A has been inserted w.e.f. 1st June, 1987, and obviously is prospective and not retrospective. In case, it was to have the retrospective effect, it would be violative of Art. 20(1) of the Constitution. As the Explanatory Note noticed above itself states, the liability for deduction of tax at source from the interest payable under the existing provisions arises only if interest was actually paid or credited to the account of the payee . This also clarified the correct scope of s. 194A as existed before the Explanation was inserted and that the scope of this section has been widened by the insertion of the Explanation w.e.f. 1st Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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