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TMI Blog2017 (4) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... per normal provisions of section 271(1)(c) as the concealment of income can be attributed only with reference to the return filed. However, as noted, the Explanation-5 dealing with search cases provides an exception and departure to this general rule that concealment is committed vis-ŕ-vis the return filed alone. In view of overriding provision of Explanation-5 the default under s.271(1)(c) gets triggered towards undisclosed income, immediately on search action pending filing of return subject to ‘escape route’ as provided in the said Explanation. it is difficult to reckon the case made out by the assessee that additional income declared in the post search returns would be entitled to immunity from penalty in a sweeping manner regardless of the satisfaction of conditions as provided for its non-applicability as enumerated under clause(2) of Explanation-5. The abstract proposition of non-applicability of penalty proceedings in all circumstances (wherever undisclosed income has been included in the return filed post-search) is singularly misplaced and is not supported by the factual context in which the decision in Kirit Dahyabhai Patel [2009 (6) TMI 654 - ITAT AHMEDABAD-B] was rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed several grounds assailing the action of the Commissioner of Income Tax (Appeals)-VI Baroda [CIT(A) in short] in upholding the penalty under s.271(1)(c) of the Act imposed by the Assessing Officer (AO). The assessee however essentially seeks to assail the order of CIT(A) wherein the action of the Assessing Officer (AO) towards imposing penalty under s.271(1)(c) was sustained. 4. Briefly stated, assessee derives income from proprietary concern, viz. Vijay Transport. The assessee also derives interest income from partnership-firm and income from other sources. The assessee is an individual and a partner in partnership-firm which is carrying on business as contractors. A search and seizure operation was carried out on 17/01/2007 in the case of assessee and its group wherein various materials were found during the course of search. Consequently, the proceedings under s.153A of the Act were initiated in the case of assessee. The assessee declared total income of ₹ 6,76,140/- in the return filed in response to notice under s.153A as against ₹ 4,40,605/- declared in the original return of income under s.139(1) of the Act filed prior to search. It was accordingly observed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .153A of the Act is concerned, the Ld.AR contended that the Revenue is not entitled to impose penalty on income declared by the assessee himself under s.153A of the Act. The Ld.AR pointed out that the search was conducted prior to 01/06/2007 when Explanation-5 to section 271(1)(c) of the Act was in vogue. In this context, ld.AR referred to the judgment of the Hon'ble Jurisdictional High Court in the case of Kirit Dahyabhai Patel vs. ACIT in Tax Appeal No.1181 of 2010 & Ors. dated 03/12/2014 for the proposition that income returned in response to notice under s.153A is required to be considered for the purpose of penalty under s.271(1)(c) of the Act and penalty can be levied only on the income assessed over and above the income returned under s.153A of the Act, if any. The Ld.AR for the assessee accordingly emphasized that imposition of penalty under S.271(1)(c) towards additional income offered in the return filed under S.153A is not sustainable in law. The Ld.AR pointed out that the CIT(A) relied upon the decision of the Tribunal in the case of ACIT vs. Kirit Dahyabhai Patel reported at (2009) 121 ITD 159 [Ahd.(TM] for imposition of penalty towards difference in income declared in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed peak credit added in the hands of partnership-firm. It was therefore contended on behalf of the assessee that the imposition of penalty is not justified on facts in so far as unexplained investment is concerned. The Ld.AR submitted that similar justifications are available in respect of unexplained investments for other years as per order of the ITAT "B" Bench Ahmedabad in quantum appeal in IT(SS)A Nos.211 to 214/Ahd/2010 for AYs 2003-04 to 2006- 07, order dated 13/11/2013. The Ld.AR, thus, contended that the penalty imposed by revenue is not sustainable in law and on facts and hence requires to be deleted. 7. The Ld.DR, on the other hand, relied upon the order of the CIT(A) and submitted that no inference is called for. 8. We have carefully considered the rival submissions. In the present set of appeals, the controversy involves around imposition of penalty broadly on two counts:- (i) towards underreporting of income found in the return originally filed and under S.139 of the Act prior to search vis-a-vis return subsequently filed on account of search action as a consequence of notice u/s.153A of the Act. (ii) unexplained investments in the construction of bungalow of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the date of 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 in the return or such previous year is yet to end on or after the date of the search, the assessee shall, for the purposes of imposition of penalty under s.271(1)(c) of the Act be deemed to have concealed the particulars of his income. Ostensibly, this Explanation has been added to specifically address the situations where consequent to a search, assets and valuables are discovered to be in control or possession of the assessee, and thereafter the assessee files return of income after the date of search. In such cases, even after the assessee includes the amounts utilized by him in acquiring the assets (found in his control or possession during the search operations) as his income in the return filed after the search, the assessee would be deemed to have been concealed his income. Thus, Explanation-5 creates a deeming fiction whereby, notwithstanding the fact that the assessee includes such unrecorded income (which represents the value of the assets found in his possession during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets as enumerated in the aforesaid Explanation. In the instant case, the income offered to tax under s.153A for AYs 2003-04, 2004-05, 2005-06 & 2006-07 is based on alleged incriminating material and confessional statement alone. The revenue has not claimed unaccounted income to be in the nature of aforementioned assets. Notably, the quantum order or penalty order or appellate order of CIT(A) are non-descript in so far as the nature and specification of incriminating material are concerned. Returning to this point, in our considered view, reference to assets in the form of money, bullion, jewellery or other article or thing is a sin qua non for putting Explanation-5 in motion. Hence, on facts, Explanation cannot be invoked in the aforesaid assessment years on declarations based presumably on entries in the purportedly seized documents in the absence of its correlation with any corresponding undisclosed asset. A reading of substituted Explanation 5A seeking to plug this purported anomaly also underscores this view. In view of the aforesaid discussion, we are of the considered view that recourse to Explanation-5 cannot be taken without bringing on record, the particulars of undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mative, will render the legislative fiat under Explanation-5 relatable to search cases as otiose and infructuous. As can be seen, the benefit of immunity provided under Explanation-5 is well defined and structured. As provided, it is available only in respect of such year where the due date of filing of the return has not expired before the date of search subject to fulfillment of conditions as contemplated in the said Explanation. 9.2. We shall now advert to the decision in the case of Kirit Dahyabhai Patel (supra) referred to and extensively relied upon on behalf of the assessee. We notice that in that case, the 'substantial question of law' framed for decision before the Hon'ble Gujarat High Court was confined to availability of immunity under clause(2) to Explanation-5 of Section 271(1)(c) in the facts of the case. For ready reference, it is reproduced hereunder:- "Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in restoring the penalty imposed under Section 271(1)(c) of the Act holding that benefit under explanation 5 to Section 271(1)(c) of the Act would be available only for period where due date for filing the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of a Court divorced from the context of the question in consideration and to treat it to be the complete law declared by the Court. A judgment must be read as a whole and the observations from the judgment have to be considered in the light of questions which were presented before the Court. A decision of the Court takes its colour from its question in which it is rendered as enumerated in CIT vs. Sun Engineering works Pvt.Ltd. (1992) 198 ITR 297 (SC). Thus, context holds the key and the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows there from. A stray sentence cannot be allowed to be put into service to draw a meaning which was never probably meant by the author himself. A judgment is not to be read as statute. Thus, in the light of question framed for decision by Hon'ble Gujarat High Court, we are inclined to hold that the abstract proposition of non-applicability of penalty proceedings in all circumstances (wherever undisclosed income has been included in the return filed post-search) is singul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee. The partnership-firm has admittedly paid taxes on the unexplained peak credit. The aforesaid income is thus available at the command and control of the partners of the firm in ordinary course. The assessee being one of its partners can possibly have unilateral access to the entire unexplained peak credit owing to mutual agency. Therefore, the explanation of the assessee cannot be said to wholly improbable and hence cannot be summarily brushed aside. Consequently, while the addition has been sustained partially in quantum proceedings based on proportion of share in partnership, such finding do not ipso facto apply in the penalty proceedings in view of the difference in its scope and consideration vis-a-vis quantum proceedings. Thus, benefit of doubt is required to be assigned in favour of assessee on the touchstone of preponderance of probabilities. Thus, we are disposed to appreciate the stand of the assessee in affirmative and consequently hold that penalty under S.271(1)(c) cannot be saddled on additions towards unexplained investments. 14. In the result, all the four appeals of the assessee are disposed of as allowed. This Order pronounced in Open Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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