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TMI Blog2020 (12) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal return filed u/s 139(1) and thus there is no concealment of income on which penalty could have been levied." 2. At the outset, it is noted that this is the second round of appellate proceedings. In the original round of appellate proceedings, the matter had travelled right up to the Hon'ble Supreme Court and the Hon'ble Supreme Court has remitted the matter to the Assessing officer for denovo consideration in accordance with law. 3. The relevant facts of the case, as emanating from the impugned penalty order dated 17.04.2012 are as follows. On 08.04.92, the assessee was apprehended by the Police Thana, Sikar with cash amounting to Rs. 5,92,340/- and the cash was seized by the police and thereafter, the Income tax Department was informed. Thereafter, on 09.04.92, the Income tax Department initiated requisition proceedings u/s 132A and drawn a panchnama and taken possession of cash in pursuance of warrant u/s 132A of the Income Tax Act 1961. On 09.04.92, the assessee vide its letter of even date addressed to Deputy Director of Investigation offered the said amount for inclusion in his return of income for the AY 1993-94. On 21.04.92, the Department issued and served a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emitted the matter back to the AO for denovo consideration in accordance with law. 7. Pursuant to the order of the Hon'ble Supreme Court, a fresh show-cause dated 7.02.2012 was issued by the AO to the assessee and in response, the assessee furnished its submissions and made the necessary representation before the AO. In its submission, the assessee furnished the details of the filing of return prior to and subsequent to AY 93-94 as mentioned at Pg 5 & 6 of the penalty order. He also filed detailed explanation as to the non applicability of Explanation 5 of section 271(1)(c) with reference to the requisition u/s 132A and reliance was placed on various case laws. It was contended that since the assessee had offered cash of Rs. 5,92,340/- in the return filed u/s 139(1) and Explanation 5 is not applicable, no penalty u/s 271(1)(c) is leviable. 8. The AO however, imposed penalty @ 120% on the tax on alleged concealed income of Rs. 5,92,340/- by holding that as per sub-section (3) of section 132A, provisions of sub-section (4A) to (14) of section 132(1) shall apply and therefore in Explanation 5, once reference is made to section 132 then the same is automatically deemed to include re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) is illegal and bad in law and in support, reliance was placed on the following case laws: * ITO Vs. Nurul Huda G. Aboobkar (1995) 55 ITD 296 (Bang.) (Trib.) * Gulamrasul M. Pathan Vs. ACIT (1996) 57 ITD 129 (Ahd.) (Trib.) * Vinod Goyal vs ACIT (2008) 115 TTJ 559 (Nag) 12. It was further submitted that the lower authorities have also mentioned that assessee has nowhere indicated the manner in which such income was derived. In this regard, it was submitted that the question of manner would come into picture when a statement u/s 132(4) is recorded which is not the case here as section 132(4) is not applicable in a requisition u/s 132A. In any case assessee has explained in the "Notes to the return of income" that the money belongs to his four brothers and also to his brother in law who own 40 bigha of irrigated agricultural land but still on the advice of his Counsel, he has offered the same to be taxed as income and therefore no penalty u/s 271(1)(c) be levied as the surrender is voluntarily, suo moto and to avoid litigation (though it donot represent assessee's income at all). It was submitted that it is for this reason that Hon'ble Supreme Court required the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the cash is declared in the return. Therefore, on the ground of alleged non disclosure of manner of earning income also, penalty imposed by the lower authorities is not justified. 14. It was further submitted that once Explanation 5 to section 271(1)(c) is not applicable, the levy of penalty would be governed by the main provisions of section 271(1)(c). Section 271(1)(c) envisages the levy of penalty where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. Such penalty is levied at 100% to 300% of the amount sought to be evaded. Therefore, the levy of penalty is to be seen with reference to the non disclosure of income in the original return. In the present case, assessee has included Rs. 5,92,340/- in the original return of income filed before the due date u/s 139(1). Thus, there is no concealment of income or furnishing of inaccurate particulars of income in the return and therefore, no penalty is leviable u/s 271(1)(c). Therefore, the penalty imposed by AO and confirmed by Ld. CIT(A) is not justified and against the law. In support, reliance was placed on the following cases:- * CIT Vs. SAS Pharmaceuticals (2011) 335 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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,- (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 clause (c) of sub-section (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 clause (a), before the date of the search; and (ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him for any source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to have concealed his income. Thus, Parliament has created a deeming fiction by virtue of which in such cases, even if the assessee includes such income (which represents the value of the assets found in his possession during the search) in his return filed after the search, it will be deemed that such return disclosing higher income was filed only because the assets were found in his possession during the search. Put differently, if not for the search, the Legislature deems that the assessee would not have disclosed such income in the return filed subsequently. Explanation-5 also contains two exceptions, where the assessee would not be deemed to have concealed his income and would gain immunity from levy of penalty- first, if such income is or the transactions resulting in such income are recorded in the books of account maintained by the assessee for any source of income or such income was otherwise disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of the search; second, in the course of the search, the assessee makes a statement under Section 132(4) that the assets found in his possession have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny purpose. This is also consonant with the view arrived at in the earlier part of this decision, i.e. mere increase of income in the return filed pursuant to Section 153A would not be sufficient to show concealment under Section 271(1)(c). 26. Now for the Revenue to invoke Explanation-5, it would have to prove that its requirements are clearly fulfilled in the present case. In order for Explanation-5 to apply, it is necessary that there must be certain assets (such as money, bullion etc.) found in the possession of the assessee during the search, and that the assessee must claim that such assets have been acquired by him by utilising (wholly or in part) his income. Moreover, such income must be in relation to a particular previous year that has either ended before the date of the search or is to end on or after the date of the search and such income is declared subsequently in the return of income filed after the search. Therefore, it is only when assets are found during the search which the assessee claims have been acquired by him by utilizing (wholly or in part) his income for any particular previous year, and then declares such income (which he utilized in acquiring the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed requisition proceedings u/s 132A at par with search proceedings u/s 132 and therefore, Explanation 5 applied as much as to section 132A as it does to section 132 of the Act and once reference is made to section 132 then the same is automatically deemed to include reference to section 132A also. We find that similar contention has been advanced in case of ITO vs Nurul Huda G. Aboobkar (supra) before the Bangalore Benches of the Tribunal and the relevant findings of the Coordinate Bench read as under: "5. There is no doubt about the fact that concealment of income, if any, is to be rather with reference to the returned income filed by the assessee. In this case, the assessee himself offered the amount as his income and no further addition was made in the assessment. Hence, concealment as such, cannot be considered to have taken place. Let us now come to the question of whether Explanation 5 to section 271(1)(c) would be applicable to the present case. Section 132 alone relates to search and seizure proceeding conducted by the IT department. On the other hand, section 132A relates to books of account and other assets seized during the course of search proceedings conducted by ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y." 20. Similar, the matter again came up for consideration before Ahmedabad Benches of the Tribunal in case of Gulamrasul M. Pathan vs ACIT (supra) and it was held as under: "14. A plain reading of the provisions contained in Explanation 5 to Section 271 (1)(c) clearly reveals that the presumption as to deemed concealment of the particulars of income or deemed furnishing of inaccurate particulars of income in relation to un-disclosed assets or un-disclosed income is applicable only in relation to a case where in the course of a search under Section 132, the assessee is found to be owner of any such un-disclosed money or other assets etc. Therefore, the crucial question which requires our decision in the present case is whether the assets requisitioned by the IT authorities from the Enforcement Officers of other Government department under Section 132A can be regarded as assets found in the course of search under Section 132 and whether Explanation 5 to Section 271 (1)(c) can be applied in relation to un-disclosed assets requisitioned by the department under Section 132 A. The expression search used in Section 132 as well as in Explanation 5 to Section 271(1)(c) is clearly diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 132 have been incorporated only for the purposes of clarifying that those assets shall be dealt with in accordance with the provisions provided for in those sub-sections of Section 132. But this cannot be interpreted to mean that Explanation 5 to Section 271(1)(c) can also be made applicable in relation to income represented by assets requisitioned as per Section 132A. 16. It is well-settled law that a deeming provision must be construed strictly and if a particular amount of income comes within the strict ambit of such a provision, then and then only the assessee should be made liable under such a provision. The aforesaid rule of strict construction of a statutory provision is applicable with greater force in relation to a penalty provision. Penalty can be levied only if the case clearly and specifically fall within the terms and language of the particular statute. Such provisions should therefore be interpreted on the basis of a plain meaning of the language of the section rather than covering within its ambit. The alternative and doubtful interpretations are based on other connected provisions. Even if it is found that the language of a penalty provision is ambiguou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound was also included as assessee's income in the return of income submitted by the assessee. Such a view is clearly supported by the judgment of Hon'ble Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1. 18. In view of the aforesaid facts and discussions, we are of the considered opinion that no penalty can be validly imposed upon the assessee under the aforestated facts and circumstances. We, therefore, direct the Assessing Officer to cancel the said penalty." 21. Further, in another case of Vinod Goyal vs ACIT (supra), similar contentions were considered and the relevant findings of the Coordinate Bench read as under: "As is evident from the provisions of Explanation 5 extracted above, any money, bullion, jewellery and other valuables or things found to be owned by the assessee during the course of search under section 132 is deemed to be the concealment on the part of the assessee subject to the fulfilment of condition as stipulated therein. This deeming fiction created by Explanation 5, however, is made applicable specifically where the assessee is found to be the owner of money or other valuables during the course of a search under section 132 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or higher authority has been brought to our notice. The legislature in its wisdom has chosen to segregate the search and requisition proceedings and at the same time, provided for certain provisions which apply equally to both search and requisition proceedings as so provided in sub-section (3) to section 132A where it is stated that the provisions of sub- sections (4A) to (14) (both inclusive) of section 132 shall, so far as may be, apply to proceedings under section 132A also, as if such books of account, other documents or assets had been seized under section 132(1) by the Requisitioning Officer. However, the said deeming provision cannot, however, apply and extend to another deeming provision contained in Explanation 5 to section 271(1)(c). In absence of any specific mandate of the legislature, the scope of explanation 5 to section 271(1)(C) cannot be enlarged so to read and understood the same in context of requisition proceedings u/s 132A where it is specifically restricted in respect of search initiated u/s 132 of the Act. Therefore, following the consistent view taken by the Coordinate Benches and in absence of any contrary authority brought to our notice and keeping in v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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