Income Tax Appellate Tribunal - Ahmedabad
Gulamrasul M. Pathan vs Assistant Commissioner Of Income-Tax on 22 August, 1995
Equivalent citations: [1996]57ITD129(AHD)
ORDER
B.M. Kothari, Accountant Member
1. This appeal by the assessee is directed against the order passed by the learned CIT (Appeals) confirming the. levy of penalty of Rs. 6,00,810 under Section 271(1)(c) for assessment year 1987-88.
2. The assessee is an Individual. He is one of the partners of a partnership firm styled as M/s. Belite Founders. The assessee and one Shri Mohamed Iqbal Noormohmed were travelling in a car on 18-6-1986, when they were apprehended by the police authorities and cash of Rs. 12,13,850 was recovered and the same was handed over to the Enforcement Authorities. The Enforcement Authorities subsequently handed over the said amount of cash to the Income-tax Authorities in response to requisition made under Section 132A of IT Act, 1961.
3. The ADI recorded the statement on 19-6-1986. It was initially claimed that cash of Rs. 8,50,000 belongs to M/s Belite Founders and the balance cash of Rs. 3,63,850 was claimed as belonging to M/s. Amrut Sales India of Rakhial, Ahmedabad. The assessee however agreed to surrender the said amount as income and also submitted that tax thereon will be paid. A letter dated 21-6-1986 was sent by the assessee to the ADI. It was, inter alia, submitted in this letter that a sum of Rs. 12,13,850 may be treated as income from other sources for the current financial year 1986-87, relevant to assessment year 1987-88 in which the assessee made the following prayers :--
1. The amount of Rs. 12,13,850 may be treated as income from other sources for the current financial year 1986-87, relevant to the assessment year 1987-88.
2. Any action on levy of penalty or initiation of prosecution may kindly be waived.
3. No action may be taken against me in respect of past years or future years in keeping with the assurances given by the Ministry of Finance in connection with the Voluntary Disclosure Scheme.
4. I am ready and willing to submit an estimate of advance tax for the assessment year 1987-88 immediately including therein the aforesaid amount of Rs. 12,13,850 as income of the current financial year. This is in addition to my other business income of about Rs. 35,400 estimated for this year. I request that the appropriate amount equal to the advance-tax amount may be released so that the advance tax can be paid.
5. Order under Section 132(5) if any may be passed immediately so that I can settle the matter.
4. On 26-6-1986, the assessee submitted a petition for disclosure of income under Voluntary Disclosure Scheme, 1986 to the Commissioner of Income-tax. In this letter also, it was submitted that the assessee is disclosing the said amount of cash of Rs. 12,13,850 as income for assessment year 1987-88 and has accordingly submitted a revised estimate of income for assessment year 1987-88. A revised estimate of income was accordingly furnished on 26-6-1986 in which the aforesaid amount was shown as income from other sources and it was requested that tax thereon amounting to Rs. 5,98,952 may be adjusted from the cash of Rs. 12,13,850 seized by the ADI, Bombay. The assessee submitted a letter dated 22-8-1986 to the Income-tax Officer, Ahmedabad in response to some queries raised by the ITO vide his letter dated 7-8-1986. The Income-tax Officer vide letter dated 12-9-1986 informed the assessee with reference to his application dated 26-6-1986 submitted to the CIT that his case does not fall in the Amnesty Scheme and the return will have to be processed in normal course. It was further indicated that the amnesty scheme is not applicable for assessment year 1987-88 and onwards. The Chief Commissioner of Income-tax vide letter dated 29-2-1987 informed the assessee that out of the seized amount of Rs. 12,13,850, an amount of Rs. 5,98,952 has been adjusted on 12-2-1987 against the demand for assessment year 1987-88 as advance tax. The challan receipt was also given to the assessee. The assessee, thereafter, filed a return of income declaring an income of Rs. 12,50,890 on 31-8-1988. The assessment was completed by the Income-tax Officer at an income of Rs. 12,58,290 vide order dated 31-3-1989 which includes the aforesaid amount of unexplained cash of Rs. 12,13,850. The variation between the declared income and the income assessed is only due to minor variation in the share income from the partnership firm M/s. Belite Founders. The Assessing Officer issued, inter alia, a show-cause notice under Section 271(1)(c).
5. The Assessing Officer, after considering the assessee's reply dated 22-4-1989 imposed penalty under Section 271(1)(c) amounting to Rs. 6,00,810 in respect of the aforesaid undisclosed income of Rs. 12,13,850 being the amount of aforesaid un-explained cash.
6. The CIT(Appeals) confirmed the said penalty.
7. The learned Counsel for the assessee submitted that the Assessing Officer has himself accepted in para 4 at page 6 of the penalty order that Explanation 5 to Section 271(1)(c) applies to statement recorded under Section 132(4) and proceedings under Section 132 of the Act only. In this case the proceedings were carried out under Section 132A of the Act in relation to which such provision is not applicable. The CIT (Appeals) has similarly observed at page 7 of the order passed by him that this case is not covered by provisions to Explanation 5 of Section 271(1)(c) r.w.s. 132(3) of IT Act. These findings given by the Assessing Officer and the CIT(Appeals) by itself would justify cancellation of penalty levied under Section 271(1)(c) by resort to Explanation 5 of that section which contains a presumption as to deemed concealment in respect of income represented by money, jewellery or other valuable article found in the course of search under Section 132. If Explanation 5 is not applicable, the question of levy of any penalty for concealment of income or for furnishing of inaccurate particulars of income does not arise, as the assessee had duly paid advance tax on the said income and had also disclosed the said amount as his income in the return of income.
7.1 The learned Counsel further submitted that the Income-tax authorities have no power to direct a search in respect of any asset which was already found and seized by other authorities. That is why the provisions of Section 132A had to be inserted with effect from 1-10-1975 to nullify the effect of earlier decision of various Courts and to enable the IT authorities to requisition from other departments the assets seized by them in the course of proceedings under the other laws. He placed reliance on judgment of the Hon'ble Supreme Court in the case of CIT v. Tarsem Kumar[1986] 161 ITR 505. The learned Counsel also placed heavy reliance on the decision of the ITAT, Delhi Bench in the case of Amir Chand v. ITO [1994] 49 ITD 606 to support his contention that Explanation 5 could be invoked only in the case of search conducted under Section 132 and could not be invoked in a case where the un-disclosed income was detected either during the course of survey under Section 133A or in the course of requisition made under Section 132A. The learned Counsel further submitted that an asset which had already been revealed earlier could not be treated as concealed at a later point of time. He submitted that on the facts and circumstances of the present case, no penalty under Section 271(1)(c) can be validly levied. He, therefore, urged that the penalty should be cancelled.
8. The learned departmental representative submitted that the provisions of Section 132A(3) clearly provides that where any assets have been delivered to the requisitioning officer, the provisions of Section 132(4A) to (14) shall apply as if such assets had been seized under Section 132(1) by the requisitioning officer from the custody of the person referred to in Section 132A(1)(a) or (b) or (c). A combined reading of Section 132A(3) with the relevant provisions of Section 132 clearly proves that penalty can be validly levied by resort to Explanation 5 to Section 271(1)(c). The learned departmental representative submitted that, the cash was found from the car on 18-6-1986. This was requisitioned by the IT department from Enforcement authorities in the month of June 1986. The provisions contained in Explanation 5 to Section 271(1)(c), as it existed prior to its amendment by the Taxation Laws (Amendment and Misc. Provisions) Act, 1986 with effect from 10-9-1986 provides for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income in respect of assets found in the course of a search which has not been accounted for in the books of accounts or which have not been disclosed to the Commissioner of Income-tax prior to such detection. It did not provide for any immunity from penalty under Explanation 5 to Section 271 (1)(c) prior to its amendment with effect from 10-9-1986 on the assessee agreeing to pay tax on such undisclosed income in the statement recorded under Section 132(4) and on the fulfilment of other conditions mentioned in Explanation 5, as amended with effect from 10-9-1986. He, thus, vehemently argued that the penalty has rightly been imposed by the Assessing Officer and the same has also been validly confirmed by the CIT(A). He also placed reliance on the elaborate reasons mentioned in the orders of the departmental authorities and submitted that the penalty should be confirmed.
9. The learned Counsel for the assessee, in the rejoinder, submitted that the provisions of Section 132A(3) cannot lead to the conclusion that Explanation 5 to Section 271(1)(c) would be applicable in a case where the assets are requisitioned by the IT Authorities under Section 132A, as the said Explanation 5 applies only in a case where the assets are found in the course of search under Section 132. The expression "search under Section 132" used in Explanation Sis very categorical, definite and specific and it cannot cover within its ambit the assets requisition under Section 132A. He, therefore, once again submitted that penalty cannot be legally levied in a case like this.
10. We have carefully considered the rival submissions made by the learned representatives of the parties and have also examined the relevant provisions of law. We have also carefully gone through the orders of the departmental authorities and all other documents to which our attention was drawn during the course of hearing.
11. A new Explanation 5 was inserted in Section 271 with effect from 1-10-1984. The said Explanation contains a special provision applicable to cases where in the course of a search under Section 132 of the IT Act the assessee is found to be the owner of any money, jewellery or valuable article etc. The Explanation provides that if, in such cases, the assessee claims that the assets so found have been acquired by him by utilising his income for any previous year which has ended 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, the assessee shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income unless such income is recorded before the date of the search in the books of account, if any, maintained by him or such asset or income is otherwise disclosed to the Commissioner before the date of the search. Where the assessee claims that the aforesaid assets have been acquired by him by utilising his income for any previous year which is to end on or after the date of the search, he shall for the purposes of Section 271(1)(c) of the Act be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income unless such income is recorded on or before such date in the books of accounts, if any, maintained by him or such income is otherwise disclosed to the Commissioner before the said date.
12. The aforesaid Explanation 5thus provided that if at the time of search, assets which are not recorded in the books of accounts are found, a tax payer 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.
13. The aforesaid Explanation 5 to Section 271(1)(c) was amended by the TLA [Taxation Laws (Amendment) Act], 1986 with effect from 10-9-1986. By the said 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 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.
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 different and distinct than the expression requisition made under Section 132A. The assets found in the course of search under Section 132 cannot therefore, be equated with the assets requistioned by the IT department from other Government departments under Section 132A. No search is required to be made in respect of an asset which has already been found, detected and seized by other Government agencies. The question of making a requisition under Section 132A will come into existence only after the assets have already been found by some other Government agency. The expression "search" and "seizure" necessarily implies a forcible exaction for searching and taking possession from the owner or one who has the possession and who is un-willing to part with the possession. On the other hand, the requisition by one wing of the Government under the authority of Law such as Section 132A from other agency of the Government cannot be treated as a forcible action like search and seizure. The provisions relating to search and seizure contained in Section 132 and the provisions relating to requisition of books of accounts and assets from other Government departments contained in Section 132A are clearly different and distinct in nature. Prior to insertion of Section 132A by the Taxation Laws (Amendment) Act, 1975, it was held by various Courts that the money, etc. sought to be seized must have been in the possession of the person who had committed a default by not disclosing the same for the purposes of IT Act. It followed that lawful seizure could not be effected if the money etc. to be seized had already been seized by, and was in possession and control of, another Government authority, such as the Police Department or Excise Department. Such a view is clearly supported by the judgment of Hon'ble Supreme Court in the case of Tarsem Kumar (supra). That is why perhaps Section 132A was introduced in the IT Act by the aforesaid Amending Act.
15. The provisions of Explanation 5 to Section 271(1)(c) cannot be made applicable in relation to asset requisitioned under Section 132 A merely because Section 132A(3) provides that the provisions of Section 132(4A) to (14) shall, so far as may be, applied as if such assets or books of accounts had been seized by the Requisitioning Officer from the custody of the persons referred to in that section. Some of these provisions contained 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 ambiguous or capable of more than one meaning, then the view which is favourable to the assessee has to be adopted. Such a view is clearly supported by the judgment of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 relied upon by the learned Counsel for the assessee. In the present case, the language of Explanation 5 to Section 271(1)(c) is absolutely clear and it explicitly provides that "where in the course of a search under Section 132", the assessee is found to be the owner of any money, or other valuable articles etc. and such assets have not been disclosed, the assessee shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. The plain language of the said provision clearly excludes the applicability thereof in a case where the income is represented by an undisclosed assets requisitioned by the IT department from the Enforcement department under Section 132A. The ITAT, Delhi in the case of Amir Chand(supra) has also taken the view that Explanation 5 to Section 271(1)(c) is applicable only in proceedings under Section 132 and cannot be applied while dealing with a case of survey under Section 133 A.
17. We are, therefore, of the considered opinion that no penalty could be levied on the facts and circumstances of the present case by invoking Explanation 5 to Section 271(1)(c). Once the said Explanation 5 to Section 271(1)(c) is held to be in applicable on the facts and circumstances of the present case, no penalty can be levied under Section 271 (1)(c) under any of the other provisions contained in that section. It is well settled law that an attempt to conceal or a planning made for concealment of income by itself would not attract levy of penalty under Section 271(1)(c) unless the actual offence of concealment is committed. The Act of concealment or furnishing of inaccurate particulars of income takes place only when a return of income is filed and the income in question is not disclosed in such return of income. The default of furnishing of inaccurate particulars of income or the act of concealment of income can take place only when the disputed amount of income has not been disclosed in the return. In the present case, it is an undisputed fact that the assessee duly paid advance tax on the amount in question, the said amount of income represented by cash found 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.
19. In the result, the assessee's appeal is allowed.