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TMI Blog2017 (1) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... me was filed by the assessee on 7.8.2008 declaring undisclosed income. An assessment order was passed on 29.2.008 under section 153A r.w.s. 143(3) of the Income Tax Act. During the course of search, four kaccha books inventorised as Annexure A/2, A/3, A/5 and A/8 found and seized. In these note books assessee has recorded cash transaction on day-to-day basis. On the basis of seized material, assessee has computed its unaccounted sales, and offered the income at 5% of the unaccounted sales in all these assessment years. During the quantum proceedings, certain details exhibiting income offered by the assessee, income determined by the AO have been submitted in tabular form. These were noticed by the ITAT while deciding quantum appeals of the assessee. Copy of the Tribunal's order is placed at page no.63 of the paper book. In order to appreciate controversy in more scientific manner, I deem it appropriate to take note of these details: "3. When the matter was carried before the First Appellate Authority, since he was deciding the appeals of all the years, therefore, a consolidated chart of the profit ratio as calculated by the AO, viz-a- viz, 5% profit shown by the assessee, was comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated after rejecting books of accounts or after rejecting stand of the assessee. The assessee was indulging in cash transaction and was not recording its business transaction in the books of accounts, which were considered for computing total income for the concerned years. This type of affairs were unearthed by the department on the basis of a search action. The computation of income by estimation in such case is a compulsion for determining taxable income. It is not on the basis of some difference of opinion between the assessee and the department. If this type of argument is being accepted, then it will be a premium to an assessee who was indulging in carrying out its business out of books. In other words, by not recording any transaction in the books of accounts, the assessee could assume that atleast it could absolve itself from levy of penalty because its income would be estimated if it will be caught in these activities. This is not a case where the AO has rejected book result on any difference of opinion between him and the assessee. Therefore, this fold of contention is rejected. 8. In the next fold of submission, it was pleaded that penalty has been imposed with hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at after 1.6.2007 a new Explanation i.e. Explanation-5A has been appended which infers the income embedded in the entries found in the note books during the course of search. It is important to note the discussion made by the Hon'ble Court on this issue. It reads as under: "4.On the other hand, learned counsel Shri Himani opposed the appeal contending that the Tribunal has relied on the decision of Gujarat High Court in case of Kirit Dahyabhai Patel v. Assistant Commissioner of Income Tax [Tax Appeal No.1181/2010 decided on 3.12.2014].He further submitted that in any case the additional income pertained to the assessee's on money receipts and would not be covered by explanation 5. When explanation 5 itself did not apply, the question of granting immunity upon fulfilment of conditions contained therein would not arise. 5. Explanation 5 to section 271(1)(c) reads as under : "[Explanation 5. Where in the course of a search under section 132 before the 1st day of June, 2007, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, the assessee would be liable to penalty, unless upon fulfillment of conditions contained in clauses (1) and (2) of the said explanation, the assessee can claim immunity. This explanation nowhere refers to any income based on any entry in any books of account or other documents or transactions. In other words, therefore, unless during the search, the assessee is found to be owner of any money, bullion, jewellery or other valuable article or thing, explanation 5 would not apply. This becomes clear when the legislature for the period post 1st June, 2007 has enacted explanation 5A which reads 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 (a) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (b) any income based on any entry in any books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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