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The Taxation Laws (Amendment) Act, 2001

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Punjab-Haryana High Court
Surender Paul vs Commisssioner Of Income Tax on 26 May, 2006
Equivalent citations: (2006) 204 CTR P H 218, 2006 287 ITR 223 P H
Bench: A K Goel, R Bindal

ORDER

1. This is an appeal filed by the assessee raising the following substantial questions of law arising out of order dt. 31st Aug., 2004 passed by the Income-tax Appellate Tribunal, Chandigarh, Bench 'A' (in short "the Tribunal") in ITA No. 493/Chd/2001 for the asst. yr. 1993-94:

A. Whether, on the facts and circumstances of the case, the appellant can be said to have concealed the particulars of his income or furnished inaccurate particulars of such income and is thus liable for penalty under Section 271(1)(c) especially in the light of Expln. 5 thereof ?

B. Whether, the decision of Tribunal and authorities below is erroneous in upholding the levy of penalty under Section 271(1)(c) of the IT Act, 1961, on a conditional surrender (i.e., to avoid litigation and subject to no penalty) which is admitted to have been made on a mistaken belief corroborated by the fact that no incriminating facts, documents, income or any assets have been found or established against the appellant ?

C. Whether, the decision of Tribunal and authorities below is perverse in view of the facts and circumstances of the case pending that the seized assets were far more in value as compared to the tax liability due on returned income and the appellant had offered adjustment of those assets against his taxes due vide a note appended to return of income, thus the appellant cannot be penalized on the ground of non-payment of taxes ?

D. Whether there is any requirement of time as to when the tax on income surrendered during the statement made under Section 132(4) is to be paid and when the return of income should have been filed by the appellant within time-limit specified under Section 139(1) in order to get the benefit of Expln. 5 of Section 271(1)(c) of IT Act, 1961 ?

E. Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the return of income should have been filed by the appellant within time-limit specified under Section 139(1) in order to get the benefit of Expln. 5 of Section 271(1)(c) of IT Act, 1961 ?

F. Whether, on the facts and circumstances of the case, the Tribunal was justified in concurring with the AO and in rejecting the explanation of appellant that taxes due on the basis of returns as filed could have been considered as paid in view of seized assets in addition to the cash seized ?

G. Whether, on the facts and circumstances of the case, the decision of Tribunal is perverse being based on erroneous interpretation of legal provisions and irrelevant factors and is thus liable to be set aside ?

2. The facts in brief are that the search and seizure operation, under Section 132 of the Act, was carried out at the business and residential premises of family on 30th Aug., 1993. As a result thereof valuables including cash, jewellery, etc. were found and seized besides other incriminating materials. During the search, the assessee made a disclosure of Rs. 3,00,000 under Section 132(4) of the Act. It is not in dispute that for the assessment year in question, the return of income was to be filed by the assessee on or before 31st Oct., 1993 but the same was not filed within time and was filed on 23rd May, 1994. It is further not in dispute that amount of tax required to be paid with the return was also not paid.

3. The assessment of the assessee was framed on 31st Jan., 2000 and surrender of Rs. 3,00,000 was accepted and a penalty notice under Section 271(1)(c) of the Act was ordered to be issued. In the penalty proceedings, the assessee relied upon Expln. 5 to Section 271(1)(c) of the Act and submitted that no penalty be levied under Section 271(1)(c) of the Act.

After hearing counsel for the assessee, minimum penalty leviable under Section 271(1)(c) of the Act was imposed on the assessee. The assessee failed in his appeal before the CIT(A) and also the Tribunal. The Tribunal while considering the plea with regard to Expln. 5 to Section 271(1)(c) of the Act, held as under:

3.10 On going through the relevant provisions, we find that the new Explanation contains the special provisions applicable to the case wliere in the course of search under Section 132 of the IT Act, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing. The new Explanations provide that if in such cases, the assessee claims that the assets referred to above have been acquired by him by utilizing (whether wholly or in part) his income 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 in the return, the assessee shall, for the purposes of imposition of penalty under Section 271(1)(c) of the IT Act, be deemed to have concealed the particulars of the income of furnished inaccurate particulars of such income unless such income is, or the transactions resulting in such income are, recorded before the date of the search in the books of account, if any maintained by him for any source of income or such income is otherwise disclosed to the CIT before the date or unless the assessee in the course of search, makes a statement under Section 132(4) of the Act 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 the time specified in Section 139(1) and also specified in the statement the manner in which such income has been derived and pays tax together with the interest; if any, in respect of such income.

3.11 The fact that the income referred to above is declared by the assessee in any return of income furnished by him on or after the date of search, will not provide the immunity to the assessee from imposition to the penalty under Section 271(1)(c) of the Act unless the conditions mentioned the statement under Section 132(4) of the Act, as well as the conditions as laid down in Expln. 5, Sub-clause (2) to Section 271 are fulfilled. It means that the arguments of the learned Authorised Representative for the assessee that since no date or time has been prescribed in Expln. 5, Sub-clause (2) to Section 271 of the Act cannot be withdrawn, has no merits.

We are of the opinion that in order to seek immunity under Expln. 5 to Section 271(1)(c) of the Act, the assessee was required to fulfil the conditions as specified in Expln. 5, sub-cl, (2) to Section 271 of the Act as well as the conditions specified in his statement under Section 132(4) of the Act while seeking immunity from the Department.

4. We have heard learned Counsel for the parties and with their assistance have perused the impugned orders. The only issue sought to be raised by the counsel for the assessee is with regard to levy of penalty keeping in view Expln. 5 to Section 271(1)(c) of the Act.

5. Penalty under Section 271(1)(c) of the Act is leviable in case an assessee is found to have concealed the particulars of income or to be furnishes fresh particulars of such income are led by the assessee after search and seizure operation itself show that during the year in question, the assessee had concealed the facts of his income. Explanation added by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1st Oct., 1984 provides for a special provision where search under Section 132 of the Act had taken place. Relevant provisions of Expln. 5 to Section 271(1)(c) of the Act are extracted 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 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 of income or

such income is otherwise disclosed to the Chief CIT or CIT before the said date; or

(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. We have perused the provision of the Act, which was sought to be relied upon by the assessee to escape the liability of the penalty under Section 271(1)(c) of the Act and are of the opinion that the case of the assessee does not fall in any of the two exceptions carved out in the Explanation, referred to above. Admittedly the income which was surrendered by the assessee was not disclosed by him in his return of income before the search took place. Return for the income for the assessment year in question was not filed within time and further the amount of tax due thereon was also not paid by the assessee even along with return filed on 23rd May, 1994, which was required to be filed and tax paid upto 31st Oct., 1993.

For the reasons recorded above, we do not find any substantial question of law arises in the appeal, the appeal accordingly is dismissed.