Sri. Santosh Kumar Jain, Hyderabad V. ACIT, Central Circle-4, Hyderabad

ITA 1485/HYD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98673 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-09-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2013
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: A V RAGHURAM
• Keywords: Gift; Search and seizure; Retrospective amendment; Block assessment; Revised return; Reassessment proceedings
• Section: 153A; 147; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 ASSESSMENT YEARS: 2004-05, 2005-06 & 2006-07 S RI SANTOSH KUMAR JAIN, HYDERABAD [PAN: ACLPJ8506D] VS ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RA GHU RAM , AR FOR REVENUE : SHRI M . SITARAM , DR DATE OF HEARING : 1 3 - 1 0 - 201 5 DATE OF PRONOUNCEMENT : 13 - 1 1 - 2015 O R D E R THESE THREE APPEALS ARE BY ASSESSEE AGAINST THE CO MMON ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APP EALS)-III, HYDERABAD DATED 12-08-2013 FOR THE AYS. 2004-05, 20 05-06 & 2006-07 LEVYING PENALTY U/S. 271(1)(C) OF THE INCOM E TAX ACT [ACT] RESPECTIVELY IN THE THREE YEARS. 2. ASSESSEE IS AN INDIVIDUAL AND DERIVED INCOME FRO M SALARY AND HOUSE PROPERTY. HE HAS FILED HIS RETURNS REGULARLY WITH THE RESPECTIVE DUE DATES. THERE WERE SEARCH AND SEIZUR E OPERATIONS IN THE BUSINESS PREMISES OF M/S. KIWASARA FINANCE LTD. UPON OBTAINING THE BANK ACCOUNT EXTRACT, IT WAS FOUND TH AT BANK ACCOUNTS HAD BEEN OPENED IN VARIOUS NAMES AND THERE WERE TRANSACTIONS DURING THE ABOVE MENTIONED THREE YEARS . ASSESSEE ADMITTED THAT THESE BANK ACCOUNTS WERE OPENED IN TH E NAMES OF VARIOUS PERSONS FOR CONDUCTING TRANSACTIONS BELONGE D TO HIM. I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 2 -: THERE WERE SHARES PURCHASED IN VARIOUS NAMES THROUG H THESE BANK ACCOUNTS AND PROFITS HAD ALSO BEEN EARNED. AC CORDINGLY, IN THE PROCEEDINGS U/S. 153A INITIATED AGAINST ASSESSE E, ASSESSEE ADMITTED ADDITIONAL INCOMES AND PAID TAXES THEREON. AO ACCEPTED THE SAME IN THE RESPECTIVE ASSESSMENT ORDERS, HOWEV ER, INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C). THE ADDITIONAL INCOMES OFFERED AND PENALTY IMPOSED ARE AS UNDER: AY. ORIGINAL INCOM E RETURNED (RS) ADDITIONAL INCOME ADMITTED (RS) PENALTY IMPOSED (RS) 2004 - 05 5,47,980 7,82,215 2,21,727 2005 - 06 8,81,030 6,00,000 1,81,622 2006 - 07 5,79,280 9,00,000 2,42,212 3. AO LEVIED PENALTY EVEN THOUGH ASSESSEE EXPLAINED THAT IN ORDER TO SETTLE THE MATTERS, HE AND HIS BROTHER HAS OFFERED THE ADDITIONAL INCOME IN VARIOUS ASSESSMENT YEARS AND F ILED THE RETURNS, ACCORDINGLY ADMITTED THE ADDITIONAL INCOME S. AO DID NOT AGREE AND LEVIED PENALTY CONCEALING THE PARTICULARS OF INCOME. 4. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT ASS ESSEE HAS OWNED UP BANK ACCOUNTS OF SOME OTHER PERSONS IN GOO D FAITH AND HAD MADE DECLARATION U/S. 132(4) BY STATING THAT N O PENALTY WOULD BE LEVIABLE ON THE APPELLANT. IT WAS FURTHER CONTE NDED THAT NO INCOME HAD BEEN CONCEALED AS ASSESSEE HAD ADMITTED THE INCOME IN HIS RETURN AND AO HAD NOT MADE ANY ADDITIONS OVE R AND ABOVE THE RETURNED INCOME IN THESE PROCEEDINGS. HE FURTH ER CONTENDED THAT EXPLANATION-5A WOULD NOT BE APPLICABLE TO ASSE SSEE, WHICH WAS BROUGHT LATER RETROSPECTIVELY. I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 3 -: 5. LD. CIT(A) HOWEVER, DID NOT AGREE WITH THE CONTE NTIONS OF ASSESSEE AND RELYING ON THE JUDGMENT OF HON'BLE DEL HI HIGH COURT IN THE CASE OF CIT VS. HCIL KALINDEE ARSSPL CONFIRMED THE PENALTY. AFTER ANALYZING THE ISSUE, HE ALSO RELIED ON THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S. MANJUNATHA COTTON AND GINNING FACTORY IN ITA NO. 2564/2005 AND ITATS ORDER IN THE CASE OF V. KUMARA SWAMY NAIDU DT. 14-05-2010 AND DISTINGUISHED ANOTHER JUDGMENT OF SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS [322 ITR 165]. LD. CIT(A) CONFIRMED THE PENALTY STATING THAT ENTIRE ARRANGEMENT WAS MADE WI TH CLEAR INTENTION OF TAX EVASION, ACCORDINGLY, HE CONFIRMED THE PENALTY. 6. LD. COUNSEL REITERATING THE FACTS AS SUBMITTED B EFORE THE AUTHORITIES, RELIED ON THE CO-ORDINATE BENCH DECISI ON IN THE CASE OF MR. B. RAJESWARA RAO IN ITA NOS. 1531 TO 1534/HYD/2 014 DT. 29-05-2015. 7. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AUTH ORITIES TO SUBMIT THAT PENALTY IS WARRANTED AS ASSESSEE HAS OF FERED ADDITIONAL INCOMES CONSEQUENT TO THE SEARCH AND SEIZURE PROCEE DINGS. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FAC T THAT THE ABOVE PROCEEDINGS U/S. 153A WERE CONSEQUENT TO THE SEARCH IN ONE OF THE COMPANIES IN WHICH ASSESSEE AND HIS BROTHERS ARE DI RECTORS. IT IS ALSO FACT THAT DURING THE COURSE OF SEARCH, VARIOUS BANK ACCOUNTS HAVE BEEN IDENTIFIED AND ASSESSEE OWNED UP THOSE AC COUNTS ALONG WITH PROFITS EARNED THEREON. IT IS ALSO FACT THAT ASSESSEE DECLARED THE INCOMES U/S. 132(4) AND FILED RETURNS IN RESPON SE TO THE NOTICES U/S. 153A. AO, EVEN THOUGH ANALYSED THE NA TURE OF I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 4 -: ADDITIONS MADE IN THE ORDER, ULTIMATELY THE TOTAL I NCOME DETERMINED WAS SAME AS RETURNED BY ASSESSEE, WITHOU T ANY FURTHER ADDITIONS. THUS, THE RETURNED INCOME AND ASSESSED INCOME IN THESE PROCEEDINGS U/S. 153A BEING THE SAME, ASSESSE ES CONTENTION THAT THERE CANNOT BE ANY PENALTY HAS TO BE ACCEPTED . THESE ISSUES WERE ANLAYSED IN THE CO-ORDINATE BENCH DECISION OF MUMBAI TRIBUNAL IN THE CASE OF MR. KIRAN SHAH VS. ACIT, CE NTRAL 15 & 16, MUMBAI IN ITA NO. 5919 TO 5925/MUM/2011 DT. 08-01- 2014 WHICH WAS EXTRACTED IN THE CO-ORDINATE BENCH DECISI ON IN THE CASE OF MR. B. RAJESWARA RAO IN ITA NOS. 1531 TO 1534/HY D/2014 DT. 29-05-2015 (SUPRA). FOR THE SAKE OF RECORD, PARA 6 & 7 OF THAT ORDER IS REPRODUCED AS UNDER: 6. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE SOLITARY ISSUE IN THE P RESENT APPEALS IS SQUARELY COVERED BY THE ORDER OF THE COORDINATE BENCH OF MUMBAI TRIB UNAL IN THE CASE OF MR. KIRAN SHAH VS. ACIT, CENTRAL 15 & 16, MUMBAI IN ITA .NO.5919 TO 5925/MUM/2011 DATED 08.01.2014 WHEREIN THE TRIBUNAL WHILE ALLOWING THE APPEALS OF THE ASSESSEE HELD AS UNDER : 13. . IT WOULD BE PERTINENT TO REFER TO THE DECIS ION OF THE DELHI BENCH IN THE CASE OF PREM ARORA VS. DCIT (SUP RA) WHEREIN IT HAS BEEN HELD AS UNDER : ON BARE READING OF SECTION 153A IT IS SEEN THAT TH IS SECTION STARTS WITH A NON OBSTANTE CLAUSE RELATING TO NORMA L ASSESSMENT PROCEDURE COVERED BY SECTIONS 139, 147, 148, 149, 151 AND 153 IN RESPECT OF SEARCHES MADE AFTER 31.5.2003. THE SECTIONS, SO EXCLUDED, RELATE TO FIL ING OF RETURN, ASSESSMENT AND REASSESSMENT PROCEEDINGS. FURTHER, S ECTION 153A INTENDS TO ASSESS OR REASSESS TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SE ARCH IS CONDUCTED OR REQUISITION IS MADE. THUS, THE LEGISLA TIVE INTENTION IS NOT TO ASSESSEE ESCAPED INCOME AS IN S ECTION 147 OR UNDISCLOSED INCOME AS WAS ASSESSED U1S. 158BC. T HE FIRST PROVISO TO SEC. 153A MAKES IT CLEAR THAT NOTICE U/S . 153A WILL BE FOR EACH OF SUCH SIX ASSESSMENT YEARS FOR ASSESS MENT OR REASSESSMENT OF TOTAL INCOME. SECOND PROVISO TO SEC TION 153A PROVIDES THAT SUCH NOTICE WILL HAVE THE EFFECT OF A BATING ALL THE PENDING ASSESSMENT OR REASSESSMENT PROCEEDINGS, SO AS TO I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 5 -: AVOID MULTIPLICITY OF PROCEEDINGS, WHICH WAS A FEAT URE OF BLOCK ASSESSMENT. THUS, THERE IS COMPLETE DETACHMENT OF ASSESSMENT PROCEEDINGS U/S. 143 OR 147 FROM SEARCH PROCEEDINGS U/S. 153A. WHEN SCHEME OF SEARCH ASSESSMENT AS DESIGNED BY THE LEGISLATURE DOES NOT PRESCRIBE TO TAKE INTO ACC OUNT THE EARLIER ASSESSMENT PROCEEDINGS WHETHER ABATED OR NO T, IT WILL NOT BE PROPER OR JUSTIFIED TO REFER TO RETURNED INC OME U/S. 139 FOR THE PURPOSE OF IMPOSITION OF PENALTY U/S. 271 ( 1)(C). IT FOLLOWS THAT THE CONCEALMENT OF INCOME HAS TO BE SE EN WITH REFERENCE TO ADDITIONAL INCOME BROUGHT TO TAX OVER AND ABOVE INCOME RETURNED BY THE ASSESSEE IN RESPONSE TO NOTI CE ISSUED U/S. 153A. ACCORDINGLY, FOR THE PURPOSE OF IMPOSITI ON OF PENALTY U/S.271(1)(C) RESULTING AS A RESULT OF SEAR CH ASSESSMENTS MADE U/S. 153A, THE ORIGINAL RETURN OF INCOME FILED U/S. 139 CANNOT BE CONSIDERED. FURTHER, IN CASE OF SEARCH INITIATED AFTER 1.6.2003 A RETURN OF INCOME IS ALWAYS FILED ON ISSUE OF NOTICE U/S. 153A. AS HELD ABOVE THE PENALTY U/S. 271(1)(C) IS IMPOSSI BLE WHEN THERE IS VARIATION IN ASSESSED AND RETURN INCOME. I F THERE IS NO VARIATION, THERE WILL BE NO CONCEALMENT. WHEN THERE IS NO CONCEALMENT, QUESTION OF LEVY OF PENALTY U/S. 271(1 )(C) WILL NOT ARISE. THIS IS SETTLED POSITION OF LAW. THE CONCEPT OF VOLUNTARY RETURN OF INCOME MAY BE IMPORTANT IN PENALTY PROCEE DINGS INITIATED IN COURSE OF NORMAL ASSESSMENT PROCEEDING S MADE U/S.143(3) OR 147 BUT NOT UNDER SECTION 153A. FROM ABOVE DISCUSSION IT FOLLOWS THAT WHERE RETURNED INCOME FI LED UNDER SECTION 153A IS ACCEPTED BY THE AO, THERE WILL BE N O CONCEALMENT OF INCOME AND, CONSEQUENTLY, PENALTY U/ S. 271(1)(C) CANNOT BE IMPOSED. 14. . 15. 15.1.. 15.2. CONSIDERING THE FACTS UNDER APPEAL WITH THE J UDICIAL DECISIONS RELIED UPON AND CITED HEREINABOVE, WE DO NOT FIND ANY SUBSTANCE FOR THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. THE A.O. IS DIRECTED TO DELETE THE PENALTY SO LEVIE D IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. THE APPEALS F ILED BY THE ASSESSEE FOR ALL THE ABOVE ASSESSMENT YEARS ARE ALLOWED. 7. RESPECTFULLY FOLLOWING THE ORDER OF THE COORDIN ATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF MR. KIRAN SHAH (SUPRA), WE ALLOW THE APPEALS OF THE ASSESSEE BY DELETING THE PENALTY LEVIED FOR ALL THE ASSESSMENT UNDER CONSIDERATION I.E., A.YS. 2003-04 TO 2006-07. I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 6 -: 8.1. NOT ONLY THAT IN THE CASE OF ASSESSEE, WHERE T HE SEARCH AND SEIZURE PROCEEDINGS HAVE HAPPENED AFTER 01-06-2007, EXPLANATION- 5A IS APPLICABLE WHILE CONSIDERING THE PENALTY. EX PLANATION-5A ITSELF HAS UNDERGONE MANY AMENDMENTS WHICH WAS CONS IDERED BY THE CO-ORDINATE BENCH IN THE CASE OF DILIP KEDIA V/ S. ACIT (40 TAXMAN.COM.102)-(HYD) DATED 26-07-2013. THE SAID CASE WAS ANALYSED AND CONSIDERED IN ANOTHER CO-ORDINATE BENC H DECISION IN THE CASE OF SHRI SANTOSH KUMAR AGARWAL VS. DCIT IN ITA NO.665/HYD/2015 DT.14-10-2015, WHEREIN IT WAS HELD THAT : 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND P ERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS ORIGINALLY FIELD THE RETURN UNDER S.139(1) OF THE A CT ON 10.10.2005 DECLARING AN INCOME OF RS.2,92,384. IN RESPONSE TO THE NOTICE UNDER S.153A DATED 17.11.2011, ISSUED SUBSEQUENT TO THE S EARCH ACTION OF 8.9.2010, FOR THE YEAR UNDER APPEAL, ASSESSEE HA S FILED RETURN OF INCOME ON 14.8.2012, ADMITTING TOTAL INCOME OF RS.1 9,07,254, WHICH INCLUDED ADDITIONAL INCOME ADMITTED OF RS.16,14,870 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN KISAN VISKAS PATRA, INTER EST ON FDRS AND BOGUS GIFTS RECEIVED. ASSESSMENT WAS ULTIMATELY CO MPLETED UNDER S.143(3) READ WITH S.153A BY THE ASSESSING OFFICER ON DATED 25.3.2013, ACCEPTING THE INCOME DISCLOSED IN THE SA ID RETURN. THE MAIN QUESTION TO BE CONSIDERED IN THIS CASE IS THE LEGAL QUESTION AS TO THE APPLICABILITY OF EXPLANATION 5A TO S.271(1)( C) OF THE ACT TO THE PRESENT CASE. THE SAID EXPLANATION HAS COME ON TO T HE STATUTE BOOK BY VIRTUE OF INSERTION OF THE SAME BELOW S.271(1)(C ) BY THE FINANCE (NO.2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 1. 6.2007. 9. AN ANALYSIS OF S.271(1)(C) READ WITH EXPLANAT ION 5 AND EXPLANATION 5A WAS DONE IN DETAIL BY THE COORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA V/S. ACIT (SUPR A) IN PARAS 18 TO 23 OF ITS ORDER DATED 26.7.2013, WHICH READ AS UNDE R- 18. EXPLANATION 5 HAS BEEN AMENDED BY THE FINANCE ACT 2007 TO RESTRICT THE APPLICATION OF THAT EXPLANATION TO SEARCHES INI TIATED BEFORE 1.6 2007. HENCE THE ASSESSEE CANNOT SEEK EXEMPTION UNDER EXPL ANATION 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: I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 7 -: 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 ASS ETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM B Y 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 E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESEN TS 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 IN COME 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 INC OME FURNISHED ON OR AFTER THE DATE OF THE SEARCH, HE SHALL, FOR THE PUR POSES 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 FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. 20. WHILE THE NEW EXPLANATION DOES AWAY WITH THE EX EMPTION 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 I NTRODUCTION, DEEMED CONCEALMENT OF INCOME ASSESSED IN CONSEQUENCE OF SE ARCH APPLIED ONLY IF THE ASSESSEES HAD NOT HAD FILED A RETURN OF INCOME BEFO RE THE DUE DATE FOR FILING OF RETURN IN THE RESPECTIVE YEARS. EXPLANATION 5A W AS 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 ASSE SSEE 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 ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILI ZING (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 E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESEN TS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, W HICH HAS ENDED BEFORE THE DATE OF SEARCH AND,- (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN D ECLARED THEREIN ; OR I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 8 -: (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FO R 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 INC OME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSE S 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 FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. 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 BE EN CLARIFIED THAT THE SCOPE EXTENDS TO THE CASES WHERE THE ASSESSEE HAS F ILED THE RETURN OF INCOME FOR ANY PREVIOUS YEAR AND THE INCOME FOUND DURING T HE COURSE OF SEARCH RELATES TO SUCH PREVIOUS YEAR AND HAD NOT BEEN DISC LOSED IN THE SAID RETURN, THEN SUCH INCOME SHALL REPRESENT DEEMED CONCEALMENT OF INCOME AND ASSESSEE SHALL BE LIABLE TO PAY PENALTY UNDER SECTI ON 271. 22. THUS AS PER THE EXISTING EXPLANATION 5A PRIOR T O THE AMENDMENT BY FINANCE (NO.2) ACT 2009, IF AN ASSESSEE HAD FILED T HE 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, (WHI CH RECEIVED THE ASSENT OF THE PRESIDENT ON 13.8.2009), THAT ADDITIO N 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 T HE RELEVANT ASSESSMENT YEAR. PRIOR TO THE AMENDMENT, IF AN ASSESSEE HAD AL READY 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 BE EN MADE WITH RETROSPECTIVE EFFECT FROM 1.6.2007 AND IS APPLICABL E TO SEARCHES INITIATED AFTER 1.6.2007, THE ISSUE IS WHETHER THIS AMENDMENT TO EXPLANATION WILL APPLY TO RETURNS FILED BEFORE THE AMENDED EXPLANATI ON BECAME PART OF THE STATUTE IN 2009. IN THE INSTANT CASE THE ASSESSEE H AD FILED RETURN OF INCOME ON 7.7.2008. HE FILED REVISED RETURN PURSUANT TO NO TICE U/S 153A ON 12.11.2008. THUS BOTH THE ORIGINAL RETURN AS WELL A S THE 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 T O 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 APP LICABLE WOULD BE THE LAW AS IT STOOD AT THE TIME WHEN THE ORIGINAL RETURN WA S FILED FOR THE ASSESSMENT I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 9 -: 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 1 48. 10. IN THIS CASE, EVEN THOUGH BOTH THE RETURNS WE RE NOT FILED BEFORE THE EXPLANATION 5A WAS INTRODUCED, IT IS A F ACT THAT ORIGINAL RETURN HAS BEEN FILED MUCH BEFORE THE SAID PROVISIO N CAME ON TO THE STATUTE. IT IS TO BE NOTED THAT THE ASSESSEE FILED THE ORIGINAL RETURN OF INCOME ON 10.10.2005. IN THE EVENT A SEARCH HAS OC CURRED BEFORE THE 1 ST DAY OF JUNE, 2007, I.E. AFTER FILING OF RETURN BY THE ASSESSEE, AND ON OR BEFORE THE DAY S.5A HAS BEEN INTRODUCED, THEN ASSESSEES CASE WOULD HAVE BEEN GOVERNED BY EXPLANATION 5, IN WHICH CASE, AS ASSESSEE HAS DISCLOSED THE AMOUNTS UNDER S.132(4) FOLLOWED BY THE RETURN, NO PENALTY COULD BE LEVIED AS PER THE P ROVISIONS OF EXPLANATION 5 AVAILABLE UPTO THE DATE 30 TH MAY, 2007. IN THE EVENT A SEARCH HAS OCCURRED AFTER THE 1 ST DAY OF JUNE, 2007, BUT BEFORE 13.8.2009, I.E. AMENDMENT OF S.271(1)(C) BY INSERTI ON OF EXPLANATION 5A, BY THE FINANCE ACT, 2009, THEN EXPLANATION 5A A S IT IS EXISTING WOULD MAKE THE ASSESSEE FREE FROM THE PROVISIONS OF S.271(1)(C). IF IN THAT PERIOD THE ASSESSEE HAS FILED THE RETURN, E XPLANATION 5A WOULD NOT HAVE BEEN APPLICABLE, AND THE ASSESSEE WO ULD HAVE BEEN EXEMPT FROM PENALTY. SINCE THE DATE OF SEARCH HAPP ENED TO BE 8.9.2010, I.E. AFTER THE NEW EXPLANATION 5A WAS BRO UGHT ON STATUTE, THE ASSESSEE WAS COVERED BY THE NEW EXPLANATION 5A. AS CONSIDERED ABOVE IN DIFFERENT EVENTUALITIES, THE AS SESSEE WAS NOT VISITED WITH PENALTY, EXCEPT IN THE LAST CONSIDERED SITUATION OF SEARCH BEING CONDUCTED AFTER 13.8.2009. 11. THE SUPREME COURT IN THE CASE OF ADDL CIT V O NKAR SARAN (195 ITR 1) HAS HELD THAT IN CASE A RETURN I S FILED IN RESPONSE TO NOTICE U/S 148, LAW PREVAILING AS ON THE DATE OF FILING OF RETURN WILL GOVERN THE LEVY OF PENALTY. IT OBSERVED THAT EVEN IN A CASE WHERE A RETURN FILED IN RESPONSE TO A NOTICE UNDER SECTION 148, WHICH INVOLVED AN ELEMENT OF CONCEALMENT, THE LAW A PPLICABLE WOULD BE THE LAW AS IT STOOD AT THE TIME WHEN THE ORIGINA L 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. 12. THIS WAS FOLLOWED BY THE APEX COURT IN THE CAS E OF B.N.SHARMA V/S. CIT (226 ITR 442). THEREFORE THE L AW 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 AM ENDMENT IS RETROSPECTIVE. THE DELHI HIGH COURT IN THE CASE O F ENGINEERS IMPEX (P) LTD. & ORS. VS. D.D. SHARMA (244 ITR 247) HAS H ELD AS UNDER: 12. PENAL PROVISIONS IN THE STATUTES HAVE TO BE CO NSIDERED STRICTLY IN THE SENSE THAT IF THERE IS A REASONABLE INTERPRETATION WHICH WOULD AVOID THE I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 10 - : PENALTY, THAT INTERPRETATION OUGHT TO BE ADOPTED. W HEN THE LEGISLATURE IMPOSES A PENALTY, THE WORDS IMPOSING IT MUST BE CL EAR 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 P ERSON FROM BEING PROSECUTED FOR AN ACT OR OMISSION WHICH WAS CONSIDE RED 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 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 T HE MAIN SECTION AND HAS CREATED AN OBLIGATION BREACH OF WHICH ENTAILS PENAL TY AND SUBJECTS TO CRIMINAL PROSECUTION. THIS EXPLANATION TO S. 194A H AS BEEN INSERTED W.E.F. 1ST JUNE, 1987, AND OBVIOUSLY IS PROSPECTIVE AND NO T RETROSPECTIVE. IN CASE, IT WAS TO HAVE THE RETROSPECTIVE EFFECT, IT WOULD B E VIOLATIVE OF ART. 20(1) OF THE CONSTITUTION. AS THE EXPLANATORY NOTE NOTICED A BOVE ITSELF STATES, THE LIABILITY FOR DEDUCTION OF TAX AT SOURCE FROM THE I NTEREST PAYABLE UNDER THE EXISTING PROVISIONS ARISES ONLY IF INTEREST WAS ACT UALLY PAID OR CREDITED TO THE 'ACCOUNT OF THE PAYEE'. THIS ALSO CLARIFIED THE COR RECT SCOPE OF S. 194A AS EXISTED BEFORE THE EXPLANATION WAS INSERTED AND THA T THE SCOPE OF THIS SECTION HAS BEEN WIDENED BY THE INSERTION OF THE EX PLANATION W.E.F. 1ST JUNE, 1987, WHICH HAS CREATED A LIABILITY AND OBLIG ATION 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 GIVE N IN THE ACCOUNT CALLED 'INTEREST PAYABLE ACCOUNT' OR 'SUSPENSE ACCOUNT'. SIMILAR VIEW IS ALSO TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA V/S. ACIT (SUPR A), WHEREIN THE PENALTY WAS NOT SUSTAINED AS BOTH THE RETURNS WERE FILED MUCH BEFORE THE EXPLANATION 5A WAS BROUGHT ON STATUTE. 13. CONSIDERING ALL THESE ASPECTS AND THE FACT THA T THE ASSESSEE HAS A GOOD CASE ON MERITS AND THAT THE PRO VISIONS OF EXPLANATION 5A ARE NOT APPLICABLE ON THE DATE OF FI LING OF THE ORIGINAL RETURN, WE ARE OF THE OPINION THAT EXPLANATION 5A A S IT STOOD ON THE DATE OF FILING THE RETURN IN RESPONSE TO NOTICE UND ER S.153A BY THE ASSESSEE WOULD NOT COVER THE CASE OF THE ASSESSEE, SO AS TO WARRANT LEVY PENALTY UNDER S.271(1)(C). SINCE THE ASSESSEE BONA-FIDELY DECLARED THE ADDITIONAL INCOME IN THE COURSE OF SEA RCH AND FILED RETURN AND PAID TAXES THEREON, WE ARE OF THE OPINIO N THAT PENALTY LEVIED ON SUCH AMOUNT CANNOT BE SUSTAINED. ACCORDIN GLY, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY O F RS.12,84,177 SUSTAINED BY THE CIT(A). I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 11 - : 9. SINCE THE FACTS IN THIS CASE ALSO ARE MORE OR LE SS SIMILAR TO THE CASE OF THE CASE OF DILIP KEDIA VS. ACIT (40 TA XMAN.COM.102)- (HYD) DATED 26-07-2013 (SUPRA) AND ASSESSEE FILED H IS RETURNS OF INCOME MUCH BEFORE THE PROVISIONS OF EXPLANTION-5A WERE INTRODUCED ON THE STATUTE AND AS RIGHTLY HELD BY TH E SUPREME COURT, THE PENALTY PROVISIONS AS APPLICABLE ON THE DATE OF FILING THE ORIGINAL RETURN ARE APPLICABLE, I AM OF THE OPINION THAT THERE CANNOT BE ANY PENALTY U/S. 271(1)(C) SINCE ASSESSEE FILED RETURNS OF INCOME AS DECLARED IN STATEMENTS U/S. 132(4) AND PROCEEDIN GS U/S. 153A ARE INDEPENDENT AND SEPARATE PROCEEDINGS FROM THE R EGULAR ASSESSMENT PROCEEDINGS. IN VIEW OF THIS, I AM OF T HE VIEW THAT PENALTY U/S. 271(1)(C) IS NOT WARRANTED ON THE FACT S OF THE CASE. ACCORDINGLY, THE ORDERS OF AO AND CIT(A) ARE SET AS IDE AND GROUNDS ARE ALLOWED. 10. IN THE RESULT, ALL THE THREE APPEALS OF ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH NOVEMBER, 2015 TNMM I.T.A. NOS. 1485, 1486 & 1487/HYD/2013 SRI SANTOSH KUMAR JAIN :- 12 - : COPY TO : 1. SRI SANTOSH KUMAR JAIN, 5-5-670/4, MALAKUNTA, HYDERABAD. C/O. A.V. RAGHU RAM, P. VINOD, ADVOCATES , 610, BABUKHAN ESTATE, BASHEERBAGH, HYDE RABAD. 2. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -4, HYDERABAD. 3. CIT(APPEALS) - I II , HYDERABAD. 4. THE CIT - II , HYDERABAD . 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.