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TMI Blog2019 (4) TMI 1673X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 crores on the undisclosed income of 8.25 crores disclosed in the six Returns filed by the Assessee on 13/14th August 2009. Therefore, in our opinion, the Assessee not only satisfied all the three conditions, namely (I) disclosure of undisclosed income in the course of the statements under Section 132(4) of the Act; (II) specify the manner of earning the same from real estate business; and (III) payment of tax with interest for which no time frame is fixed in the said Explanation 5(2). Therefore the Assessee was entitled to the immunity from penalty u/s 271(1)(c). No merits in the contentions raised by the Revenue that the payment of such tax liability in respect of undisclosed income as disclosed in the Returns of income filed by the Assessee after Notice u/s 153C, has to be made at the time of filing of the return itself. We are not dealing with the case for assessment of tax in the hands of the Assessee as per the amended procedure of assessment in question u/s 158(C) after 01.06.2003 but we are concerned with the applicability of Clause 5(2) of Explanation to Section 271(1)(c) which is an exception to the presumption of concealment u/s 271(1)(c). There has been no amendment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting aside penalty on one issue but also restored the penalty under Section 271(1)(c) of the Act on another issue. 2. The facts in brief leading to the filing of the present Appeals by both the sides are narrated in brief as under. 3. A search was carried out at the business place of the Assessee on 16.05.2007 and inter alia cash of ₹ 1.65 crores was found at the residential house and in the Bank locker of the Assessee. Cash of ₹ 2 crores was also found in the place of a third party, Smt. Jaya Krishnamurthy, who also stated in the course of statements that the said cash was borrowed as loan from one of the Assessee, namely, Duraipandi. The Assessee filed its returns after search in the capacity of an AOP for the first time claimed in the course of the present penalty proceedings under Section 271(1)(c) of the Act that they had also derived agricultural income during the Assessment Years in question from the Agricultural lands taken on lease from the agriculturalists during these years in question. However, we are not concerned with the assessment of tax liability in the present set of Appeals, but are only concerned with the questions of penalty under Section 271(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee and set aside the penalty under Section 271(1)(c) of the Act with the following observations:- "6.2 As regards levy of penalty on the income returned in the returns of income filed in response to notice under Section 153A, the contentions on behalf of the appellant, as discussed above, in brief, are that- The appellant had made a disclosure under Section 132(4) and the return of income was filed based on the disclosure made under the said section and the taxes were paid subsequently. The appellant is entitled to immunity from penalty under Section 271(1)(c) on the income disclosed under Section 132(4) as per the provisions or Explanation 5 to the said section as the appellant had complied with the conditions laid down therein and approved in the decision of the Hon'ble Supreme Court in the case of ACIT Vs. Gebilal Kanahya Lal 348 ITR 561. It has been held by the Hon'ble Supreme Court in the case of ACIT vs. Gebilal KanahyaLal 348 ITR 561 that since the section does not specify any time limit for payment of tax the interest, the assessee is entitled for immunity from penalty under clause 2 of Explanation 5 to Section 271(1)(c) if the complies with the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Appellate Tribunal which reversed the findings of the learned CIT (Appeals) on both the Appeals, in the following manner. 7. On the applicability of Clause 5(2) of the Explanation under Section 271(1)(c) of the Act, the learned Tribunal restored the penalty and denied the immunity with the following observations:- "5.6 The Id. Counsel for the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under Section 153A, it is not necessary for us to examine that position. The main question before us, which was debated at length, was whether the immunity granted under Explanation 5(2) to Section 271(1)(c) is available to the assessee or not. The Madras High Court in S.D.V.Chandru's case (266 ITR 175) has held that the words in Explanation 5(2)" ...... has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in subsection (1) of Section 139" are not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of the search and that the words which refer to the time limit under Section 139(1) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are founds, a taxpayer is liable to penalty for concealment even if he declares the full value of those assets as his income in the return filed after the search. This provisions has been found to operate, even in cases where the assesssee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time prescribed in clause (a) or (b) of Section 139(1) and specifies in the statement the manner in which such income has been derived and pays the taxes that are due thereon, no penalty shall be leviable". (pages 38 7 39 of 162 ITR St.) 5.8. The above circular explaining the amendment shows that ''the benefit' of immunity conferred by the Explanation 5(2), as amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 10.09.1986, is confin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hyabhai Patel [121 ITR 159 (Ahd)]. Thus despite of contrary decision of the same Bench, Pune Bench has also placed reliance on the decision of the Third Member in the case of ACIT vs. Kirit Dahyabhai Patel [supra] has been followed in the case of Mahendra Mittal v. ACIT [2011] 132 ITD 80. Further, the same decision has been followed in the case of Ahit B.Zota v. ACIT [2010] 40 SOT 543. In view of the decisions of Mumbai Benches, we are of the view, that immunity under clause (2) of Explanation 5 to Section 271(1)(c) would not be available if assessee has not disclosed the income before the date of the search in the return to be furnished before the time allowed under Section 139(1). 5.11 The Ld. Counsel of the assessee had also emphasised that Sec. 153A puts a non obstante clause and, therefore, returned already filed would abate. Now if the additional income declared in the fresh return u/s. 153A is accepted, then there will not be any difference in the returned income and the assessed income and, therefore, penalty is not leviable. 5.12. In view of the above discussions, we are of the opinion that though the assessee has admitted during the course of search and disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 260(A) of the Act before this Court. 10. The following substantial questions of law, in our opinion, arise from the order of the learned Tribunal:- "(i) Whether the provisions of Explanation 5(2) appended to Section 271(1)(c) of the Act are attracted in the facts and circumstances of the case or not and whether the Assessee is entitled to the immunity from imposition of penalty in the present case; and (ii) Whether the learned Tribunal was justified in setting aside the penalty under Section 271(1)(c) of the Act on the agricultural income estimated by the learned CIT (Appeals) which was however taxed as "Income from Other Sources" by the Assessing Authority?" 11. The learned counsel for the Assessee Mr. R.Sivaraman submitted before us that the Assessee in the course of search conducted at the business place of the Assessee on 16.05.2007 had duly disclosed his undisclosed income during the course of search in his statements recorded under Section 132(4) of the Act on 23.05.2007 that to the extent of cash seized of ₹ 1.65 crores, the same represented the undisclosed income of Assessee from real estate business and the Assessee undertook to pay tax with interest on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 14. The learned counsel for the Assessee in this regard has relied on the decision of the Hon'ble Supreme Court in the case of Assistant Commissioner of Income-tax v. Gebilal Kanhaialal HUF reported in [2012] 348 ITR 561 (SC) wherein dealing with a case involving almost similar facts, the Hon'ble Supreme Court after quoting the Explanation 5 to 5.271 (1)(c) of the Act, interpreted of these provisions in the following manner:- "5. To answer the above question, it would be worthwhile to reproduce Explanation 5 read with clause (2) of Section 271(1)(c), which is quoted herein below: "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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, which has not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1). Such statement was made by the Karta during the search which concluded on August 1, 1987. It is not in dispute that condition No.1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(c) was that the assessee should specify, in his statement under Section 132(4), the manner in which such income stood derived. Admittedly, the second condition, in the present case also stood satisfied. According to the Department, the assessee was not entitled to immunity under clause (2) as he did not satisfy the third condition for availing the benefit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on 31st July, 1987 and pay tax thereon particularly when the assessee conceded on August 1, 1987 that there was concealment of income. The third condition under clause (2) was that the assessee had to pay the tax together with interest, if any, in respect of such undisclosed income. However, no time limit for payment of such tax stood prescribed under clause (2). The only requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for Assessment Year 1987-1988 which was prior to the said amendment and now since the Assessee was required to file separate returns for all these six Assessment Years in question, the tax admitted in his returns filed in pursuance of the Notice under Section 153C has to be paid along with the returns filed and subsequent payment of tax cannot entitle the Assessee to the immunity as claimed by him. 16. The second contention of the learned counsel for the Revenue is that the Assessee failed to explain the sources of agricultural income. The Assessee could not satisfy the availability of agricultural land with him merely by production of two documents, namely, 'Chitta and Adangal' along with a certificate of the Village Administrative Officer. Therefore, the Assessing Authority was justified in treating the same as 'Income from Other Sources' and the learned CIT (Appeals) was justified in imposing penalty to that extent and the learned Tribunal has erred in setting aside the same by the impugned order and hence, the Revenue has filed the present batch of Appeals. 17. He relied upon the decision of the Madras High Court in the case of B.Ramachandhiran v. CIT rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod as was the position prior to 01.06.2003. The case of Gebilal Kanhaialal HUF cited supra before the Hon'ble Supreme Court also arose from a search under Section 132 of the Act. The purpose of providing the exception to Explanation 5 which otherwise enacts a presumption of concealment attracting penalty under Section 271(1)(c) of the Act, is to save the Assessee from the rigour of penalty in case he surrenders or admits the earning of undisclosed income which was not disclosed in the Returns filed by him under Section 139(1) of the Act before the date of search. Besides such disclosure in statement under Section 132(4) during the course of search he has to specify the manner of earning such undisclosed income and also has to undertake the liability of payment of tax with interest up to the date of payment on such tax liability in respect of undisclosed income. No time frame has been fixed in the said Explanation 5(2) for the payment of tax with interest and this interest naturally in such cases has to be computed up to the date of payment. 20. There is no dispute facts before us that besides the adjustment 1.65 crores of the cash seized during the course of search and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Income from Other Sources' by the Assessing Authority, we find that the matter of there being agricultural income of the Assessee and the estimation of agricultural income by the authorities below is a finding of fact and a particular amount of the same as assessed by the Assessing Authority being reduced the learned CIT (Appeals), nonetheless remains a finding of fact and therefore, on the basis of such findings of fact by the First Appellate Authority below if the learned Tribunal has found it to be a fit case not to impose the penalty on the Assessee under Section 271(1)(c) of the Act, we do not find any reason to interfere with the said findings of the learned Tribunal and therefore in our opinion, the second question also deserved to be answered in favour of Assessee and against the Revenue. 24. The Judgement of the Madras High Court in the case of B.Ramachandhiran v. CIT cited supra relied by the learned counsel for the Revenue is of little help to the learned counsel for the Revenue in the present case as would appear from paragraph 12 quoted above, the Co-ordinate Bench of this Court only found that from the facts as determined by the authorities below that the As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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