Income Tax Appellate Tribunal - Chandigarh
Smt. Champa Goel , Panchkula vs Assessee on 21 June, 2016
1
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, 'SMC', CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
ITA No. 696/CHD/2012
Assessment year: 2005-06
Smt. Champa Goel, Vs. The ACIT, Central Circle II,
Panchkula Chandigarh
PAN No. AGJPG7067J
ITA No. 476/CHD/2012
Assessment year: 2006-07
Smt. Champa Goel, Vs. The ACIT, Central Circle II,
Panchkula Chandigarh
PAN No. AGJPG7067J
&
ITA No. 477/CHD/2012
Assessment year: 2007-08
Smt. Champa Goel, Vs. The ACIT, Central Circle II,
Panchkula Chandigarh
PAN No. AGJPG7067J
(Appellant) (Respondent)
Appellant By : Sh. Ajay Jain
Respondent By : Sh. S.K. Mittal
Date of hearing : 15.06.2016
Date of Pronouncement : 21.06.2016
ORDER
All the appeals by the assessee are directed against the different orders of Ld. CIT(A)(Central), Phase-V, Gurgaon dated 25.2.2012 for 2 assessment year 2005-06, dated 12.04.2012 for assessment year 2006-07 and dated 12.4.2012 for assessment year 2007-08 challenging the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act'). All appeals have been heard together and are being disposed of through this common order on identical issue.
2. I have heard the Ld. representative of both the parties, perused the materials available on record and have also gone through the findings of the Ld. CIT(A).
3. It is submitted by both the parties that issue is same in assessment years 2005-06 and 2006-07. These appeals are, therefore, disposed of as under:-
ITA 696/Chd/2012 (Assessment year 2005-06):-
4. Briefly stated, the facts of the case are that search and seizure operation was conducted on 27.9.2007. A notice u/s 153A was issued on 31.7.2008. In response, return of income of Rs. 27,44,766/- was filed on 26.12.2008 wherein Long Term Capital Gain of Rs. 62,333/- and Misc.
income of Rs. 26 lacs has been declared. The Assessing officer proceeded to levy penalty u/s 271(1)(c) of the Act read with Explanation 5A, on the basic premise that the assessee had not declared the investment / income its return of income u/s 139(1) of the I.T. Act filed on 16.3.2006. This culminated into levy of penalty vide separate order passed on 29.3.2010.
35. The assessee challenged the levy of penalty before the Ld. CIT(A) and has made the following arguments:-
(i) The original return u/s 139(1) was filed before the date of search i.e 16.3.2006 declaring income of Rs. 1,57,545/-.
(ii) That the surrendered income filed in response to notice u/s 153A has been accepted in the assessment order
(iii) The disclosure of income during the course of search was made on the assurance by the Department that no penalty u/s 271(1)(c) shall be levied.
(iv) The assessee relied up several decisions in support of the arguments including the decision of Hon'ble Supreme Court in the case of CIT Vs. Onkar Saran & Sons (1992) 195 ITR 001 (SC).
6. The Ld. CIT(A) considered the submissions of the assessee and reproduced provisions of section 271(1)(c) of the Act and the Explanation 5A to this section and noted that search operation took place after Ist June 2007 as the search and seizure operation u/s 132 was conducted on 27.9.2007. The assessee filed return of income u/s 139(1) on 16.3.2006, i.e before the date of search and disclosure of income is included in the return filed after the search. Hence, the provisions of Explanation 5A of section 271(1)(c) of the Act are applicable to this case as the same covers such a situation as stated above, in respect of search operation conducted after Ist June, 2007. The penalty order was, therefore, upheld. The Ld. CIT(A) also noted that assessee declared misc. income in the return u/s 153A in order to justif y the property transactions at Zirakpur and Barwala, documents in respect thereto were found during the course of search and 4 the said disclosure had not been made in the regular return of income filed u/s 139(1) of the Act. The Ld. CIT(A) also noted that the letter of surrender filed by the assessee did not have any viable date of receipt b y the Department, therefore, no credence should be given to the same. The Ld. CIT(A) also observed that penalty u/s 271(1)(c) was initiated read with Explanation 5A for non declaration of income from capital gain and Misc.
income in the original return of income. The penalty was, therefore, confirmed and appeal of the assessee has been dismissed.
7. The Ld. counsel of the assessee reiterated the submissions made before the authorities below and submitted that since the assessee has already filed return of income u/s 139(1) of the Act on 16.3.2006, prior to search, therefore, Explanation 5A to section 271(1)(c) will not apply in the case of the assessee. Explanation 5A would apply only if the assessee had not filed a return of income before the due date. He has relied upon the order of ITAT, Hyderabad Bench 'A' Hyderabad in the case of Sri Dilip Kedia, Hyderabad Vs. ACIT in ITA No. 1986/Hyd/2011 dated 26.7.2013.
The Ld. counsel of the assessee further submitted that Explanation 5A is inserted in the Act w.e.f. 1.6.2007 i.e after filing of the return, therefore, the law applicable is law prevailing at the time when original return was filed and not on the date of search. He has relied upon the decision of Hon'ble Supreme Court in the case CIT Vs. Onkar Saran & Sons (1992) 195 ITR 001 (SC) and B.N. Sharma Vs. CIT (1997) 226 ITR 0442 (SC).
The Ld. Counsel for the assessee, therefore, submitted that it is not a case of deemed concealment u/s 271(1)(c) of the Act read with Explanation 5A of the Act. The Ld. Counsel for the assessee also submitted that in respect 5 of surrendered income, no material was found or recovered during the course of search and referred to statement of assessee recorded on 3.10.2007, copy of which is placed on record.
8. On the other hand, Ld. DR relied on the order of the authorities below and submitted that since assessee has not disclosed the Misc. income and income on account of capital gain in the original return of income, therefore, penalty is correctly levied against the assessee.
9. I have considered the rival submissions. Before proceeding further, it would be relevant to reproduce the provisions of section 271of the Act as under:-
"271. (1) If the Assessing Officer or the Commissioner (Appeals) or the [Principal Commissioner or] Commissioner in the course of any proceedings under this Act, is satisfied that any person--
(a) [* * *]
(b) has failed to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-
section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or
(d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,--
(i) [* * *]
(ii) in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure ;
(iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits."
610. Explanation 5A to Section 271(1)(c) of the Act has been inserted by Finance Act, 2007 w.e.f. 1.6.2007, reads as under:-
"Explanation 5A. - where in the course of a search initiated under section 132on or after the 1 s t day of June 2007, the assessee is found to be the owner of,-
(i) any money, bullion, jewellery or other valuable article or thing (here- in after in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him utilizing (wholly or in part) his income for any previous year; or
(ii) any income based on any entry in any books of account or other document or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of the search and the due date for filing the return of income for such year has expired and the assessee has not filed the return, then, notwithstanding that such income is declared by him 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.] "
11. The above Explanation 5A has been substituted by Finance (No.2) Act, 2009 w.e.f. 1.6.2007 and the same reads as under:-
"Explanation 5A.- where in the course of a search initiated under section 132 on or after the 1 s t day of June, 2007 the assessee is found to be the owner of -
(i) 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 utilizing (wholly or in part) his income for any previous year; or
(ii) Any income based on any entry in any books of account or other documents or transactions and he 7 claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year.
Which has ended before the date of search and,-
(a) Where the return of income for such previous year has been furnished before the said date but such income has not been declared therein;
Or
(b) The due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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."
12. The ITAT Hyderabad Bench in the case of Dilip Kedia v ACIT in ITA No. 1986/Hyd/2011 vide order dated 26.7.2013 in paras 16 to 25 held as under:-
"16. The other provisions to be considered are Explanation 5 and 5A to sec 271(1)(c). While the explanation deems the income added on the basis of search, Clause (2) of explanation 5 to sec 271(1)(c) provides for an exclusion from the deeming provision. The Sub clause reads as under:
"(2) he, in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has 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 specified in sub-section (1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income."8
17. In view of this sub clause penalty cannot be levied on the amount accepted and offered in the course of search proceedings, in a statement u/s 132(4).
18. Explanation 5 has been amended by the finance Act 2007 to restrict the application of that explanation to searches initiated before 1.6 2007. Hence the Assessee cannot seek exemption under Explanation 5 to sec 271(1)(c). The cases cited by the Assessee wherein penalty was deleted applying Explanation 5, relate to search initiated prior to 1.6.2007 and hence are not applicable to the instant case.
19. A new explanation 5A was introduced by Finance Act 2007, w.e.f 1.6.2007 to cover searches initiated after 1.6.2007 which read 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,--
(i) 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 for any previous year ; or
(ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of the search and the due date for filing the return of income for such year has expired and the assessee has not filed the return, 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."9
20. While the new explanation does away with the exemption from penalty if the Assessee offers the payment in the course of statement u/s 132(4), but under this explanation as it stood at the time of introduction, deemed concealment of income assessed in consequence of search applied only if the Assessees had not had filed a return of income before the due date for filing of return in the respective years. Explanation 5A was further amended by Finance Act (no.2) 2009 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-
(i) 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
(ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,-
(a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein ; or
(b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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."10
21. In the Circular No 5/2010 dated 3.6.2010 issued by the CBDT explaining the provisions of the Finance Act (no. 2) 2009, the amendment to explanation 5A was explained as under:
"53.2 By substituting the Explanation 5A it has been clarified that the scope extends to the cases where the assessee has filed the return of income for any previous year and the income found during the course of search relates to such previous year and had not been disclosed in the said return, then such income shall represent deemed concealment of income and assessee shall be liable to pay penalty under section 271. "
22. Thus as per the existing Explanation 5A prior to the amendment by Finance (No.2) Act 2009, if an Assessee had filed the return of income for the years covered by the search, then the addition made shall not be considered as deemed concealment. It is only by the Amendment to explanation 5A by the Finance (no.2) Act 2009,(which received the assent of the president on 13.8.2009), that addition made in the course of assessment u/s 153A, will be deemed to be concealed income, even if the Assessee had filed a return of income earlier for the relevant Assessment Year. Prior to the amendment, if an assessee had already filed a return of income, the addition made in the assessment made u/s 153A cannot be deemed to be concealed income.
23. No doubt the amendment to Explanation 5A has been made with retrospective effect from 1.6.2007 and is applicable to searches initiated after 1.6.2007, the issue is whether this amendment to Explanation will apply to returns filed before the amended explanation became part of the Statute in 2009. In the instant case the Assessee had filed return of income on 7.7.2008. He filed revised return pursuant to notice u/s 153A on 12.11.2008. Thus both the original return as well as the 11 revised return was filed before the amendment to Explanation5A became a part of the Statute. The Supreme Court in the cases of Addl CIT v Onkar saran (195 ITR 1) has held that in case of return filed in response to Notice u/s 148, law prevailing as on the date of filing of return will govern the levy of penalty by holding as under:
"Even in a case where a return filed in response to a notice under section 148 involved an element of concealment, the law applicable would be the law as it stood at the time when the original return was filed for the assessment year in question and not the law as it stood on the date on which the return was filed in response to the notice under section 148."
24. This was followed by the Apex Court in the case of B.N.Sharma v CIT (226 ITR 442). Therefore the law prevailing as on the date of filing of return should be the basis of levy of penalty and not on the subsequent amendment, even if the amendment is retrospective. The Delhi High Court in the case of Engineers Impex (P) Ltd. & Ors. Vs. D.D. Sharma (244 ITR
247) has held as under:
"12. Penal provisions in the statutes have to be considered strictly in the sense that if there is a reasonable interpretation which would avoid the penalty, that interpretation ought to be adopted. When the legislature imposes a penalty, the words imposing it must be clear and distinct. [CIT vs. T.V. Sundaram Iyenger & Sons (P) Ltd. 1976 CTR (SC)
25 : AIR 1976 SC 255 : TC 68R.372] .
13. If by an amendment in an existing statute or by an enactment an ex post facto offence is created, it will be violative of Art. 20(1) of the Constitution. Art. 20(1) is designed to prevent a person from being prosecuted for an act or omission which was considered innocent when done. [G.P. Nayyar vs. State (Delhi Admn) AIR 1979 SC 602] . An Explanation is appended to a section to explain the meaning of the words contained in the section and 12 normally is to be read to harmonise with and to clear up any ambiguity in the main section.
However, in the present case, the Explanation inserted has widened the scope of the main section and has created an obligation breach of which entails penalty and subjects to criminal prosecution. This Explanation to s. 194A has been inserted w.e.f. 1st June, 1987, and obviously is prospective and not retrospective. In case, it was to have the retrospective effect, it would be violative of Art. 20(1) of the Constitution. As the Explanatory Note noticed above itself states, the liability for deduction of tax at source from the interest payable under the existing provisions arises only if interest was actually paid or credited to the "account of the payee". This also clarified the correct scope of s. 194A as existed before the Explanation was inserted and that the scope of this section has been widened by the insertion of the Explanation w.e.f. 1st June, 1987, which has created a liability and obligation to deduct tax on interest even where the interest income is credited to any account in the books of account of the payee including credit given in the account called "interest payable account" or "suspense account".
25. Considering all the aspects viz., the Assessee had declared the amount he will be offering, in the course of statement recorded u/s 132(4), the AO has not brought on record any other materials or evidence for coming to the conclusion that the Assessee had concealed any income except for the statement recorder u/s 132(4), even the CBDT has cautioned the Assessing officers to make additions based purely on the sworn statements recorded u/s 132(4), the explanation 5 as it stood on the date of filing of return/ revised return by the Assessee, we are opinion that levy of penalty of Rs. On the additional income included in the return based only on the sworn statement of the Assessee cannot be sustained. Accordingly we allow the Assesse's appeal and delete the penalty of Rs. 16,28,258/- levied u/s 271(1)(c)."
1313. The Hon'ble Supreme Court in the case of CIT v Onkar Saran & Sons (supra) held as under:-
"Law applicable for imposing penalty under s. 271(1)(c) is the law in force at the time of filing of original return even in cases where it is the return filed under s. 148 which involves element of concealment."
14. The Hon'ble Supreme Court in the case of B.N. Sharma vs CIT (supra) following its earlier decision in the case of Onkar Saran & Sons held as under:-
"Amount of penalty imposable should be worked out on the basis of the law in force at the time of filing of the return whether original and / or revised which contained the alleged concealment or misstatement."
15. The Explanation 5A was originally introduced by Finance Act, 2007 w.e.f. 1.6.2007 to cover search initiated after Ist of June 2007 as reproduced above. The new provision has done away with the exemption from penalty, if the assessee offers the payment in due course of statement u/s 132(4), but under this Explanation as it stood at the time of introduction, deemed concealment of income assessed in consequence of search applied only if the assessee had not filed a return of income before the due date for filing of the return in the respective years. In the assessment year under appeal i.e. 2005-06, the assessee had filed original return u/s 139(1)(4) on 16.3.2006 declaring income of Rs. 1,87,545/- i.e. before the date of search on 27.9.2007. Therefore, as per Explanation 5A relevant to assessment year under appeal, prior to amendment by Finance (No.2) Act, 2009, if an assessee had filed the return of income for the years covered by the search, then the addition made shall not be 14 considered as deemed concealment. It is only by amendment to Explanation 5A by the Finance (No.2) Act, 2009 that the addition made in the course of assessment u/s 153A will be deemed to be concealed income. The Hon'ble Supreme Court in the case of CIT v Onkar Saran & Sons (supra) and B.N. Sharma Vs. CIT (supra) have held that law applicable for imposing penalt y u/s 271(1)(c) is the law in force at the time of filing of the original return.
Thus, explanation 5A to section 271(1)(c) of the I.T. Act would not be applicable in the case of the assessee in assessment year under appeal.
Further, the assessee has placed on record copy of the statement of the assessee recorded on 3.10.2007 in which entire surrender of Rs. 69 lacs was made in all the assessment years under appeals, in which no incriminating material was referred to the assessee while recoding her statement to conclude that assessee had concealed\ any income. The assessee made a surrender of Rs. 69 lacs as per letter of surrender.
Therefore, Ld. Counsel for the assessee is justified in contending that even in the absence of any incriminating documents found against the assessee during the course of search, the provisions of explanation 5A of section 271(1)(c) would not apply in the case of the assessee. This issue was considered in detail by the ITAT, Hyderabad Bench in the case of Dilip Kedia Vs. ACIT (supra) which squarely apply to the facts and circumstances of the present case. Considering the above discussion in the light of the provisions of Explanation 5A of section 271(1)(c), in the light of decision in the case of Dilip Kedai Vs. ACIT (supra) and decision of the Hon'ble Supreme Court in the case of CIT v Onkar Saran & Sons (supra) and B.N. Sharma Vs. CIT (supra), I do not find any justification to sustain the penalty u/s 271(1)(c) of the I.T. Act. Accordingly, I set aside 15 the order of the authorities below and cancel the penalty levied u/s 271(1)(c) of the I.T. Act.
16. In the result, the appeal of the assessee in ITA No. 696/Chd/2012 is allowed.
ITA No. 476/Chd/23012 (assessment year 2006-07)17. In this year, the assessee filed original return of income u/s 139 (1) of the Act on 31.3.2007 i.e before the date of search. The assessee filed return of income in response to notice u/s 153A on 26.12.2008 declaring a total income of Rs. 43,99,486/- wherein long term capital gain of Rs.
19,28,467/- and Misc. income of Rs. 42,95,000/- have been declared. The Assessing officer levied the penalty u/s 271(1)(c) of the Act read with Explanation 5A of the I.T. Act because this investment / income has not been declared in the original return of income filed u/s 139(1) of the Act.
18. Ld. Representatives of both the parties admitted that issue is similar as has been considered in assessment year 2005-06 in ITA No. 696/Chd/2012. Following the reasons for decision in assessment year 2005- 06 in ITA No. 696/Chd/2012, I am of the view that Explanation 5A of Section 271(1)(c) will also not apply against the assessee because the assessee had already filed the return of income prior to the search, therefore, orders of the authorities below are set aside and penalty is cancelled.
1619. In the result, the appeal of the assessee in ITA No. 476/Chd/2012 is allowed.
ITA No. 477/Chd/2012 (assessment year 2007-08)20. In this year, notice u/s 153A was issued on 31.7.2008. In response the return of income was filed on 31.12.2008 declaring income of Rs.
33,17,420/- wherein Short Term Capital Gain of Rs. 22,40,000/- and Misc.
income of Rs. 62,300/- had been declared. The Assessing officer levied penalty u/s 271(1)(c) read with Explanation 5A on the reasons that assessee had not filed its return of income u/s 139(1) of the Act within the due date and disclosure was made subsequently in response to the notice u/s 153A of the Income Tax Act. The Ld. CIT(A) confirmed the penalty and dismissed the appeal of the assessee.
21. After hearing the rival submissions, I am of the view that penalty is not leviable in the matter. The Ld. Counsel of the assessee relied on the orders of the Division Bench of the ITAT Chandigarh in the case of Parveen Garg Vs. ACIT in ITA No. 350/Chd/2013 dated 9.9.2015 in which in paras 9 to 11, it was held as under:-
"9. We have considered the rival submissions and perused the material available on record. It is not in dispute that the search was conducted on 15.7.2008 at the premises of the assessee. The Assessing Officer levied penalty as per Explanation 5-A to section 271(1)(c) of the Act because the return has not been filed by the assessee within the due date of filing of the return i.e. 31.7.2008. The assessee, however, explained that the assessee is a partner in two firms and the books of account of one firm are audited. Therefore, in his case the due date of filing of the return cannot be 31.7.2008 17 and it would be 30.9.2008. This fact is admitted by the learned CIT (Appeals) in his findings. It is, therefore, clear that in the present case, at the time of search on 15.7.2008, the due date of filing of the return for assessment year under appeal i.e. 2008-09 had not expired because the due date of filing of the return was 30.9.2008. The I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra) considered the application of Explanation 5-A to section 271(1)(c) of the Act and held that the deeming provisions of Explanation 5-A cannot be applied because at the time of search, the relevant previous year for the assessment year under appeal, the due date of filing of return of income had not expired. The findings of the Tribunal in paras 6 and 7 of the order are reproduced as under :
6. We have heard the rival contentions and have perused the findings of the Assessing Officer as well as the Commissioner (Appeals). In the present case, penalty has been levied by invoking the provisions of Explanation 5A to section 271(l)(c) (and not Explanation 5, as mentioned by the Assessing Officer). Explanation 5A, is a deeming provision where in case of search and seizure operation carried out under section 132 after 1 s t June 2007, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars of income, if he is found to be the owner of any money bullion jewellery or other valuable article or thing acquired by him utilizing his income in any previous year or any income based on entry in any books of account or other documents for any previous year. The relevant provisions of Explanation 5A to section 271(l)(c) is reproduced below:-
[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--
(i) 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 18 acquired by him by utilising (wholly or in part) his income for any previous year; or
(ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,--
(a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or
(b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of 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."
Thus, in case of search conducted on / or after 1 s t June 2007, penalty for concealment of income and furnishing of inaccurate particulars of income is deemed under Explanation 5A. However, two exceptions or saving clause has been provided wherein the penalty cannot be levied under this section. Firstly, the assessee has shown the assets as mentioned in clause (i) or income as mentioned in clause (ii), in the return of income furnished before the date of search or secondly, the due date for filing of return of income for such previous year has not expired. If any case falls under these saving clauses, Explanation 5A cannot be invoked.
7. In the present case, the search had taken place on 19 t h June 2007. The due date for filing of return of income for the assessment year 2007-08, had not expired on the date of search as the due date of filing of return of income under section 139(1) was 31 s t July 2007 and due date under section 139(4) was 31 s t March 2008. Thus, in the present case, deeming provisions of Explanation 5A cannot be applied here because at 19 the time of search, the relevant previous year for the assessment year 2007-08, the due date of filing of return of income had not expired. Whether the assessee had filed the return of income under section 139(1) or 139(4) after the date of search, will not be of much consequence because the income in question pertains to assessment year 2007-08 for which the due date had not expired at the time of search. The deeming provisions as given any Explanation 5A has to be strictly construed because one has to see what is the status of income on the date of search and not afterwards. The penalty in this case, cannot be levied under the main provision as the assessee has included this income in the return of income in response to notice under section 153A and which has been assessed also. There is no variation between the return of income and the assessed income, qua this addition. For levying the penalty in cases of search after 1 s t June 2007, the deeming provisions of Explanation 5A can only be invoked, which clearly carves out the exception in the cases where due date of filing of the return of income had not expired at the time of search. Thus, for levy of penalty under Explanation 5A, it has to be seen whether any assets or income found on the date of search has been acquired out of the previous year and not afterwards for which penalty can be levied or initiated under other provisions of section 271(l)(c). Thus, in our opinion, once the due date had not expired for filing the return of income for the assessment year 2007-08, at the time of search, penalty cannot be levied under the deeming provisions of Explanation 5A. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that on this preliminary ground, penalty levied by the Assessing Officer and as confirmed by the Commissioner (Appeals) cannot be sustained and same is deleted."
10. Considering the facts of the case in the light of the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra), it is clear that in the case of the assessee, search had taken place on 15.7.2008. The due date of filing of the return for assessment year under appeal i.e. 2008-09 had not expired on the date of the search as the due date of filing of the return of income under section 139(1) was 30.9.2008. Thus, in the present case, the deeming provisions of Explanation 5-A cannot be applied because at the time 20 of search, the relevant previous year for the assessment year under appeal, the due date of filing of the return of income had not expired. Thus, the decision of I.T.A.T., Mumbai Bench in the case of Kshiti R. Maniar (supra) is squarely applicable to the facts and circumstances of the case. Further, the assessee explained that there was no variation in the return of income and assessed income as per the assessment order passed under section 153A r.w.s. 143(3) of the Act because the returned income was accepted including the surrendered income. The learned counsel for the assessee also explained that due to the bonafide error, surrendered income was no included in the return filed under section 139(1) or 139(4) of the Act because as per the advice, the surrendered income was to be declared in the return to be filed under section 153A of the Act. The Assessing Officer levied the penalty under deeming provisions of Explanation 5-A to section 271(1)(c) of the Act, which in our view, is not applicable to the facts and circumstances of the case. There is thus, no concealment of income in the case of the assessee for attracting levy of penalty. Therefore, considering the facts and circumstances of the case in the light of the decision in the case of Kshiti R. Maniar (supra), we set aside the orders of the authorities below and cancel the penalty.
11. in the result, the appeal filed by the assessee is allowed."
22. The Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Ms. Jagriti Aggrwal (2011) 339 ITR 610 (P&H) held as under:-
"Sub-s. (4) of s. 139 is in fact, a proviso to sub-s. (1) and provides for extension of period of due date for filing the return in certain circumstances and, therefore, exemption under s. 54 was allowable where the assessee had purchased new property before the extended due date of filing of return as per s. 139 (4) and filed return within such extended time"21
23. The ITAT Bombay Bench in the case of ITO Vs. Gope M. Rochlani (2014) 151 ITD 642 following the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Jagriti Aggrwal (supra) held as under;_ "Provisions of section 139 (4) was actually extension of due date of section 139(1) and, thus where late return was filed u/s 139 (4), benefit of immunity under explanation 5A of section 271 (1) (c ) was available to same."
24. The ITAT Cuttack Bench in the case of Sarat Chandra Sahoo Vs. DCIT (2015) 152 ITD 326 held as under:-
"Once a notice under section 153A was issued, then the return filed in response to the notice under section 153A would be deemed to be a return furnished under section 139 of the Act. The assessee had hitherto not filed the return of income and the return filed in response to the notice under section 153A itself. Once this was a situation then no penalty can be lived in respect of the returned income which had been disclosed in the return filed in response to the notice under section153A. Consequently Tribunal was of view that for the assessment year 2003-04 to 2008-09 the penalty levied was liable to be cancelled to the extent that the penalty had been levied in respect of the returned income as there was no concealment proved, and we do so."
25. The assessment year under appeal is 2007-08 and due date of filing of the return was 31.7.2007 u/s 139(1) but no return has been filed by the assessee by the due date. The due date u/s 139(1) was extended upto 31.3.2009, which was actually extension of due date under section 139(4) 22 of the Act. Therefore, due date had not expired for filing of the return u/s 139(1) (4) of the I.T. Act on the date of search. The assessee in response to the notice u/s 153A declared entire income including the Short Term Capital Gain and Misc. income which have been accepted by the Assessing officer as it is. Therefore, the decisions in the case of Dilip Kedia Vs. ACIT (supra), Parveen Garg Vs. ACIT (supra), CIT Vs. Jagriti Aggarwal (supra), ITO Vs. Gope M. Rochlani (supra) and Sarat Chandra Sahoo v DCIT (supra) are squarely applicable in favour of the assessee.
Therefore, Explanation 5A introduced by the Finance Act 2009 would not apply in the case of assessee because the return u/s 153A was already filed on 31.12.2008 which have been accepted as it is by the Assessing officer.
Further, as is held in assessment year 2005-06, no material was referred to in the statement of the assessee while making a total surrender of Rs. 69 lacs. Therefore, in the absence of any material against the assessee, deeming provision of concealment would not apply in the case of the assessee. I, therefore, set aside the orders of the authorities below and cancel the penalty. As a result, the appeal of the assessee in ITA No. 477/Chd/2012 is allowed.
26. In the result, all the appeals of the assessee are allowed.
Sd/-
(BHAVNESH SAINI) JUDICIAL MEMBER Dated : 21 s t June, 2016 Rkk Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR 23