Income Tax Appellate Tribunal - Cochin
Sri.V.R.Ratheesh, Palakkad vs Assessee on 22 April, 2014
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ITA No. 797 & 798/Coch/2013
CO 22 & 23/Coch/2014
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
Before Shri N.R.S. Ganesan (JM) and Shri B.R. Baskaran(AM)
I.T.A No. 797 & 798/Coch/2013
(Assessment years 2005-06 & 2006-07)
The ITO, Wd.1 vs Shri V.R. Rathish
Palakkad Narsimhapuam
Kanjikode, Palakkad
PAN : ADYPR1830J
(Appellant) (Respondent)
C.O. No.22 & 23/Coch/2014
(Arising out of I.T.A No. 797 & 798/Coch/2013)
(Assessment years 2005-06 & 2006-07)
Shri V.R. Rathish vs ITO, Wd.1
Palakkad Palakkad
(Cross Objector) (Respondent)
Revenue by : Shri K.K. John, Sr DR
Respondent by : Shri Mohanan Kuttickat
Date of hearing : 22-04-2014
Date of pronouncement : 25-04-2014
ORDER
Per N.R.S. Ganesan (JM) The revenue filed the present appeals against the common order passed by the CIT(A)-V, Kochi dated 08-10-2013 confirming the penalty levied by the assessing officer u/s 271(1)(c) of the Act. Since common 2 ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014 issue arises for consideration in the appeals filed by the revenue and the cross objections filed by the assessee, we heard them together and are disposed of by this common order.
2. Shri K.K. John, the ld.DR submitted that there was a search in the premises of one Shri V.S. Ramakrishnan on 24-08-2005. Shri V.S. Ramakrishnan is none other than the father of the assessee. According to the ld.DR, the assessee has not filed returns of income before the date of search. The assessee filed the return of income in response to the notice issued by the assessing officer u/s 153A r.w.s. 153C of the Act disclosing a total income of Rs.13,30,780 and agricultural income of Rs.48,000 for the assessment year 2005-06. For the assessment year 2006-07 the assessee declared income of Rs. 9,07,274 alongwith agricultural income of Rs.48,000 in response to notice u/s 142(1). During the course of assessment proceedings, the asessee filed a statement of assets and liabilities of him and his wife and offered the shortfall as income in his hands u/s 69B of the Act. According to the ld.DR, any accretion to the wealth would attract the provisions of section 271(1)(c) of the Act. The assessing officer placing reliance on Explanation 5 to section 271(1)(c) of the Act found that the assessee has not disclosed the increase in wealth by not filing the return before the date of search. Therefore, he found that 3 ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014 there was a deeming concealment in view of Explanation 5 to section 271(1)(c) of the Act. Accordingly he levied penalty u/s 271(1)(c) of the Act at Rs. 4,25,276 for the assessment year 2005-06 and Rs.2,36,417 for the assessment year 2006-07. According to the ld.DR, the CIT(A) found that accretion to wealth and consequential levy of penalty was not referred to in the assessment order, therefore, he deleted the penalty. According to the ld.DR, the CIT(A) has not justified in deleting the penalty levied u/s 271(1)(c) of the Act.
4. On the contrary, Shri Mohan Kuttickat, the ld.representative for the assessee submitted that Explanation 5 to section 271(1)(c) of the Act provides for levy of penalty in case any bullion, money, jewellery or other valuable article or thing was found in the possession or control of the assessee in the course of search, then, there may be a deemed concealment of income. In this case, according to the ld.representative, no money or billion or jewellery or other valuable article or thing was found in the course of search proceedings. The assessee filed the return of income consequent to the notice received u/s 153A of the Act disclosing income of Rs.13,30,780 for the assessment year 2005-06. For the assessment year 2006-07 the assessee has disclosed Rs. 9,07,274 in response to notice u/s 142(1) of the Act. The assessing officer accepted the income declared 4 ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014 by the assessee in the returns of income filed and what was disallowed for both the assessment years is agricultural income of Rs.48,000 each. However, on appeal by the assessee, the CIT(A) restricted the agricultural income of Rs.24,000 for each assessment year under consideration. According to the ld.representave, in the course of search proceedings no money or bullion or jewellery or other valuable article or thing was found in the possession and control of the assessee, therefore, Explanation 5 is not applicable. The income declared by the assessee is accepted by the assessing officer with regard to investment in the wealth, therefore, the CIT(A), according to the ld.representative, has rightly deleted the penalty.
5. We have carefully gone through the orders of the lower authorities, materials available on record. We have also carefully gone through the provisions of section 271(1)(c) of the Act, more particularly, Explanation 5 to section 271(1)(c). Explanation 5 to section 271(1)(c) reads as follows:
"Explanation 5.- Where in the course of a search initiated under section 132 before the 1st day of June, 2007, 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,-5
ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014
(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 record,-
(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 of income or such income is otherwise disclosed to the Chief Commissioner or Commissioner before the said date; or 6 ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014 (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."
6. Thus Explanation 5 to section 271(1)(c) is a deeming provision which envisages four situations, viz. - (1) there should be a search initiated u/s 132 of the Act before 01-06-2007; (2) in the course of the search proceedings, the assessee is found to be the owner of any money, bullion, jewellery or any other article or thing; (3) the assessee claims that the assets have been acquired by him by utilizing his income either partly or wholly; and (4) no return of income was furnished before the date of search or if the return of income was furnished, the income was not disclosed therein.
7. In the case before us, it is not the case of the revenue that during the course of search proceedings, the assessee was found to be the 7 ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014 owner of any asset, viz. money, bullion, jewellery or other valuable article or things. In the course of assessment proceedings, the assessee filed the statement of assets and liabilities for himself and his wife. To explain the shortfall, the assessee has also offered the shortfall as income u/s 69B of the Act. The returns filed by the assessee with regard to investment in the assets were accepted by the assessing officer without any whisper. The disallowance was made only in respect of agricultural income declared by the assessee to the extent of Rs.48,000 for each assessment year under consideration. However, this was restricted to Rs.24,000 for each of the assessment year by the first appellate authority.
8. The question arises for consideration is that when no material was found with regard to the ownership of any asset by the assesse, whether Explanation 5 to section 271(1)(c) would come into operation. This Tribunal is of the considered opinion that section 271(1)(c) is a penal provision, therefore, it has to be construed strictly. When the language employed by the legislature clearly suggests that for the purpose of application of a deeming provision as provided in Explanation 5 to section 271(1)(c) it is necessary to ensure that the asset is found in the course of search proceedings and that the assessee is the owner of the asset. In case, no material is available on record to come to a conclusion that the 8 ITA No. 797 & 798/Coch/2013 CO 22 & 23/Coch/2014 assessee is the owner of any asset, then, the deeming provision has no role to play. In other words, the deeming provision cannot be applied when no material was found with regard to the ownership of the asset during the course of search proceedings.
9. In view of the above, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the penalty levied by the assessing officer. This Tribunal do not find any infirmity in the order of the CIT(A). Accordingly, the same is confirmed.
10. The assessee filed the cross objections only to support the orders of CIT(A), therefore, the cross objections become infructuous.
11. In the result, both the appeals of the revenue and the cross objections of the assessee stand dismissed.
Order pronounced in the open court on this 25th April, 2014.
Sd/- sd/-
(B.R. Baskaran) (N.R.S. Ganesan)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin, Dt : 25th April, 2014
pk/-
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ITA No. 797 & 798/Coch/2013
CO 22 & 23/Coch/2014
copy to:
1. The ITO, Wd.1, Palakkad
2. Shri V.R. Rathish, 4/140A, Nicholas Trading Co, Narsimhapuram, Kanjikode, Palakkad
3. The Commissioner of Income-tax, Trichur
4. The Commissioner of Income-tax(A)-V, 7th Floor, Kera Bhavan, Opp. SRV High School, Kochi-16
5. The DR (True copy) By order Asstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench