B. Janardhan Reddy, Hyderabad, Hyderabad V. DCIT, Circle-6(1), Hyderabad, Hyderabad

ITA 662/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6444 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-07-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 11-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P V SUBBA RAJU
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Business income; Search and seizure; Retrospective amendment; Cost of acquisition; Revised return
• Section: 143(3); 153A; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE S MT P. MADHAVI DEVI , JUDICIAL MEMBER AND SHRI S . RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 662 /HYD/201 7 ASSESSMENT YEAR: 20 06 - 07 B. JANARDHAN REDDY, HYDERABAD. PAN ADYPB 3929 N VS. DY . COMMISSIONER OF INCOME - TAX, CIRCLE 6 ( 1 ), HYDERABAD. ( APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SHRI P.V. SUBBARAJU DATE OF HEARING 16 / 0 7 /2018 DATE OF PRONOUNCEMENT 2 7 / 0 7 / 201 8 O R D E R PER S . RIFAUR RAHMAN , A .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3 0 / 1 2 / 201 6 OF CIT(A) 9 , HYDERABAD FOR AY 20 06 - 07 WHEREBY HE CONFIRMED THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT) . 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2006 - 07 ON 26 . 07.2006, ADMITTING INCOME OF RS. 5,09,349/ - AND AGRICULTURAL INCOME OF RS. 31,550/ - . SEARCH AND SEIZURE PROCEEDINGS U/S 132 WERE CONDUCTED ON 24,08.2007 . SUBSEQUENTLY, ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO NOTICE U/S 153A, DECLARING AN INCOME OF R S, 8,87,269/ - AND AGRICULTURAL INCOME OF RS. 31,55 0/ - , ASSESSMENT U/S 143(3) R.W,S 153A WAS COMPLETED ON 31.12,2009 . 2 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. 2. 1 DURING THE COURSE OF SEARCH PROCEEDINGS, DOCUMENTS RELATING TO SALE OF 11 PLOTS BY ASSESSEE AT PASMMAMLA VILLAGE VIDE 11 SALE DEEDS DATED 31.10.2005, WERE FOUND AND SEIZED. ASSESSEE DID NOT ADMIT CAPITAL GAINS FROM SALE OF THESE 11 PLOTS, IN HIS ORIGINAL RETURN OF INCOME, IN THE POST SEARCH PROCEEDINGS, ASSESSEE ADMITTED THAT HE SOLD THE ABOVE PLOTS FOR A TOTAL CONSIDERATION OF RS. 8, 25,000/ - DURING THE FY 2005 - 06 RELEVANT TO THE PRESENT ASSESSMENT YEAR. ACCORDINGLY, THE ASSESSEE DISCLOSED LONG TERM CAPITAL GAINS OF RS. 4,14,914/ - , AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS. 4,10,086/ - , 2.2 IN VIEW OF THE ABOVE OBSERVATION S, THE AO INITIATED PENALTY PROCEEDINGS BY WAY OF ISSUE OF NOTICE U/S 271(1)(C) READ WITH EXPLANATION 5A, ON THE GROUND THAT THE ASSESSEE HAS NOT SHOWN THIS INCOME FROM LONG TERM CAPITAL GAINS IN HIS ORIGINAL RETURN OF INCOME. THEREAFTER, A SHOW CAUSE NOTI CE DATED 03.09 . 2013 WAS ISSUED REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) SHOULD NOT BE LEVIED FOR T HE YEAR UNDER CONSIDERATION. 3. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED THAT IN THE ORIGINAL RETURN OF INCOME FIL ED, THE SAID LONG TERM CAPITAL GAIN WAS NOT DECLARED AS HE HAD INVESTED RS. 20,00,000/ - IN PURCHASE OF LAND AT SERINGAMPALLY AND WAS UNDER THE IMPRESSION THAT LONG TERM CAPITAL GAIN IS EXEMPTED ON SALE OF PLOT AGAINST PURCHASE OF PLOT IN THE SAME YEAR AND, THEREFORE, NOT SHOWN THE INCOME AS LONG TERM CAPITAL GAIN IN THE ORIGINAL RETURN OF INCOME FILED. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO OBSERVED THAT THE CASE OF ASSESSEE FALLS UNDER EXPLANATION 5A TO SECTIO N 271 AND LEVIED PENALTY U/S 271(1)(C) OF THE ACT AT RS. 93,107/ - WHICH IS MINIMUM PENALTY ON THE GROUND THAT FOR FURNISHING INACCURATE PARTICULARS LEADING TO CONCEALMENT OF INCOME AND DECLARED THE LONG TERM CAPITAL GAIN AFTER THE SEARCH. 3 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. 5. ON APPEAL BY THE ASSESSEE BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) CONFIRMI NG THE ORDER OF THE AO LEVYING PENALTY IS ERRONEOUS BOTH ON FACTS AND IN LAW IN SO FAR AS IT IS PREJUDICIAL TO THE ASSESSEE. 2. THE LEARNED CIT (A) ERRED IN DISMISSING GROUND AGAINST LIMITATION U/ S.275 ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE EVID ENCE THAT THE ORDER OF THE CIT(A) IS PASSED ON 10 - 9 - 2010 THOUGH THE SAME IS VERIFIABLE FROM THE RECORDS AND WITHOUT PROVIDING AN OPPORTUNITY TO PRODUCE EVIDENCE. 3. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LEARNED CIT(A) FURTHER ERRED IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF RS.94,000 THOUGH THERE IS NO CONCEALMENT IN THE RETURN OF INCOME THAT IS FILED U/ S.153 A AND IN SUCH ASSESSMENT PENALTY FOR CONCEALMENT IN THE REGULAR RETURN COULD NOT BE LEVIED. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LE ARNED CIT (A) FAILED TO APPRECIATE THAT A LEGITIMATE CLAIM WAS MADE IN THE ORIGINAL RETURN CLAIMING THE CAPITAL GAINS AS NOT TAXABLE IN VIEW OF INVESTMENT IN PURCHASE OF LAND AND IN THE RETURN FILED U/S.153 A, THE SAME IS ADMITTED AS CONSTRUCTION DID NOT T AKE PLACE AS EXPECTED AND THEREFORE THERE IS NO CONCEALMENT AND OUGHT TO HAVE DELETED THE PENALTY. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 7. LD. AR SUBMITTED THAT AO PASSED PENALTY ORDER U/S 271(1)(C) BEYOND THE PE RIOD OF LIMITATION. HE SUBMITTED THAT THE ORDER OF CIT(A) ON QUANTUM APPEAL PASSED ON 10/09/2011 AND THE PENALTY ORDER SHOULD HAVE BEEN PASSED ON OR BEFORE 31/03/2012. WHEREAS, PENALTY ORDER WAS PASSED ON 30/09/2013, THEREFORE, IT IS BARRED BY LIMITATION. HOWEVER, HE COULD NOT BRING ON RECORD ANY EVIDENCE THAT A COPY OF THE CIT(A)S ORDER ON QUANTUM APPEAL. FURTHER, HE SUBMITTED THAT ON MERITS, ASSESSEE HAS FILED RETURN OF INCOME SUBSEQUENT TO SEARCH AND DISCLOSED ALL THE INFORMATION RELEVANT TO COMPLETE TH E ASSESSMENT U/S 143(3) READ WITH SECTION 153A, HENCE, THERE IS NO CONCEALMENT. HE 4 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. SUBMITTED THAT THE ASSESSEE WAS IN A BONAFIDE IMPRESSION THAT ASSESSEE HAS PURCHASED ANOTHER PROPERTY OUT OF THE SALE CONSIDERATION RECEIVED, THEREFORE, THERE MAY NOT BE ANY CAPITAL GAINS TAX ON THE TRANSFER OF LAND. 7.1 LD. AR SUBMITTED THAT AO HAS INVOKED EXPLANATION 5A OF SECTION 271(1)(C) WHEN THE ABOVE PROVISION WAS SUBSTITUTED BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01/06/2007 WHEREAS ASSESSEE HAS FILE D THE RETURN OF INCOME ON 26/07/2006 AND SEARCH WAS CONDUCTED ON 24/08/2007. IN THE CASE OF ASSESSEE, PENALTY U/S 271(1)(C) IS NOT APPLICABLE. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING CASES: 1. SHRI SANTOSH KUMAR AGARWAL IN ITA NO. 665/HYD/2015, ORDER DATED 14/10/2015 . 2. SHRI KRISHNAKANTH AGARWAL IN ITA NO. 976/HYD/2015 AND OTHERS ORDER DATED 23/09/2016, COPIES OF WHICH ARE AVAILABLE ON RECORD. 8. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SANTOSH KUMAR AGARWAL (SUPRA) AND IN THE CASE OF SHRI KRISHNAKANTH AGARWAL (SUPRA ), WHEREIN THE COORDINATE BENCH HAS EXTRACTED THE FINDINGS IN THE CASE OF SHRI SANTOSH KUMAR AGARWAL. FOR THE SAKE OF CLARITY, WE REPRODUCE THE FINDINGS OF COORDINATE BENCH IN THE CASE OF SHRI KRISHNAKANTH AGARWAL, AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ASSESSEE HAS ORIGINALLY FILED THE RETURNS IN THE RESPECTIVE ASSESSMENT YEARS DECLARING INCOMES AS NOTED IN THE FACTS ABOVE. IN RESPONSE TO THE NOTICES U/S. 153A, ASSE SSEE HAS FILED REVISED RETURNS ADMITTING INCOMES WHICH ARE DECLARED IN THE STATEMENT U/S. 132(4), MAINLY CONSISTING OF BUSINESS INCOME IN THE AY. 2004 - 05 AND INTEREST INCOMES IN ALL THE YEARS. AO HAS COMPLETED THE ASSESSMENTS U/S. 143(3) R.W.S. 153A ACCEPT ING THE INCOMES DISCLOSED IN THE LATER RETURNS. THE MAIN QUESTION TO BE CONSIDERED IN THIS CASE IS THE LEGAL QUESTION AS TO THE APPLICABILITY OF EXPLANATION - 5A TO 5 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. SECTION 271(1)(C) OF THE ACT IN THE PRESENT CASE. THE SAID EXPLANATION HAS COME ON STATUTE BY VIRTUE OF INSERTION OF THE SAME BELOW SECTION 271(1)(C) BY FINANCE (NO.2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 01 - 06 - 2007 WHICH WAS APPROVED BY THE HON'BLE PRESIDENT ON 13 - 08 - 2009. AN ANALYSIS OF THE SECTION 271(1)(C) R.W.S. EXPLANATION - 5 AND EXPLANA TION - 5A WAS DONE IN DETAIL BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA VS. ACIT [40 TAXMAN.COM 102] DT. 26 - 07 - 2013 (SUPRA) IN PARAS 18 TO 23, WHICH READS AS UNDER: 18. EXPLANATION 5 HAS BEEN AMENDED BY THE FINANCE ACT 2007 TO RES TRICT 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 SE ARCH 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 TH E 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 S UCH 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 A ND 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. 20. WHILE THE NEW EXPLANATION DOES AWAY WITH THE EXEMPTION FROM PENALTY IF THE ASSESSEE OFFERS THE PAYMENT IN THE COURSE O F 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 6 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. 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 PARTICUL ARS 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 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 I NCOME 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 INCOM E 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 ADDITI ON 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, TH E 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 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 RETU RN 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 CONCEALM ENT, 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. 7 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. 6. 1. FURTHER ANALYSIS OF THE PROVISIONS IN A SIMILAR CASE, WHEREIN THAT ASSESSEE ALSO FILED RETURNS AFTER THE AMENDMENT WAS BROUGHT ON STATUTE, WAS ANALYSED BY THE COORDINATE BENCH AT HYDERABAD IN THE CASE OF SANTOSH KUMAR AGARWAL IN ITA NO. 665/HYD/2015 (SU PRA), WHEREIN IT WAS HELD AS UNDER: 10. IN THIS CASE, EVEN THOUGH BOTH THE RETURNS WERE NOT FILED BEFORE THE EXPLANATION 5A WAS INTRODUCED, IT IS A FACT THAT ORIGINAL RETURN HAS BEEN FILED MUCH BEFORE THE SAID PROVISION 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 OCCURRED BEFORE THE 1ST 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 ASSESSEE S 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 PROVISIONS OF EXPLANATION 5 AVAILABLE UPTO THE DATE 30TH MAY, 2007. IN THE EVENT A SEARCH HAS OCCURRED AFTER THE 1ST DAY OF JUNE, 2007, BUT BEFORE 13.8.2009, I.E. AMENDMENT OF S.271(1)(C) BY INSERTION OF EXPLANATION 5A, BY THE FINANCE ACT, 2009, THEN EXPLANATION 5A AS IT IS EXISTING WOULD MAKE THE ASSESSEE FREE FROM THE PROVISION S OF S.271(1)(C). IF IN THAT PERIOD THE ASSESSEE HAS FILED THE RETURN, EXPLANATION 5A WOULD NOT HAVE BEEN APPLICABLE, AND THE ASSESSEE WOULD HAVE BEEN EXEMPT FROM PENALTY. SINCE THE DATE OF SEARCH HAPPENED TO BE 8.9.2010, I.E. AFTER THE NEW EXPLANATION 5A WAS BROUGHT ON STATUTE, THE ASSESSEE WAS COVERED BY THE NEW EXPLANATION 5A. AS CONSIDERED ABOVE IN DIFFERENT EVENTUALITIES, THE ASSESSEE 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 ONKAR SARAN (195 ITR 1) HAS HELD THAT IN CASE A RETURN IS 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 WH ERE A RETURN FILED IN RESPONSE TO A NOTICE UNDER SECTION 148, WHICH 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. 12. THIS WAS FOLLOWED BY THE APEX COURT IN THE CASE OF B.N.SHARMA V/S. 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 TH E 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 DIST INCT. [CIT VS. T.V. SUNDARAM IYENGER & SONS (P) LTD. 1976 CTR (SC) 25 : AIR 1976 SC 255 : TC 68R.372]. 1 3. 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 C ONSIDERED 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 AMBIGU ITY IN THE MAIN SECTION. HOWEVER, IN THE PRESENT CASE, THE EXPLANATION INSERTED 8 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. 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 BE EN 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 LIABI LITY 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 EXPLANAT ION 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'. SIMILAR VIEW IS ALSO TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA V/S. ACIT (SUPRA), 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 THAT THE ASSESSEE HAS A GOOD CASE ON MERITS AND THAT THE PROVISIONS OF EXPLANATION 5A ARE NO T SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL : - 10 - : APPLICABLE ON THE DATE OF FILING OF THE ORIGINAL RETURN, WE ARE OF THE OPINION THAT EXPLANATION 5A AS IT STOOD ON THE DATE OF FILING THE RETURN IN RESPONSE TO NOTICE UNDER 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 SEARCH AND FILED RETURN AND PAID TAXES THEREON, WE ARE OF THE OPINION THAT PENALTY LE VIED ON SUCH AMOUNT CANNOT BE SUSTAINED. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY OF RS.12,84,177 SUSTAINED BY THE CIT(A). AS THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THE ABOVE DECISIONS, FOLLOWING THE DECISION THEREIN , WE DIRECT THE AO TO DELETE THE ADDITION MADE U/S 271(1)(C) . 10. AS REGARDS THE CONTENTION OF THE LD. AR OF THE ASSESSEE THAT PENALTY ORDER PASSED BY THE AO U/S 271(1)(C) BARRED BY LIMITATION, SINCE THE LD. AR FAILED TO SUBSTANTIATE THE SAME BY WAY OF DOCUMENTARY EVIDENCE I.E. FILING COPY OF THE CIT(A)S APPEAL ORDER ON QUANTUM APPEAL, THE CONTENTION OF THE LD. AR IS HEREBY REJECTED. 9 ITA NO. 662 /HYD/1 7 B. JANARDHAN REDDY, HYD. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 27 TH JU LY , 2018 KV C OPY TO: - 1) SHRI B. JANARDHAN REDDY, C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2) D CI T, C IRCLE 6 ( 1 ), IT TOWERS, HYDERABAD. 3) CIT(A) 9 , HYDERABAD. 4) PR. CIT - 6 , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE