Santosh Kumar Agarwal, Hyd, Hyderabad V. DCIT, Central Circle-1(3), Hyd, Hyderabad

ITA 665/HYD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1910 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Gift; Retrospective amendment; Revised return
• Section: 153A; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.665/HYD/2015 (ASSESSMENT YEARS 2005-06) SHRI SANTOSH KUMAR AGARWAL , HYDERABAD (PAN - AFCPA 8998 J ) V/S DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6 ( PRESENTLY CENTRAL CIRCLE 1(3) ) , HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.A.SAI PRASAD RESPONDENT BY : SHRI RAMA KRISHNA BANDI DR DATE OF HEARING 20. 08.2015 DATE OF PRONOUNCEMENT 14.10.2015 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) XI, HYDE RABAD DATED 9.3.2015, CONFIRMING PART OF THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER S.271(1)(C) OF THE ACT FOR THE ASSESS MENT YEAR 2005-06. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS PROPRIETOR OF M/S. SHIV SHAKTI TRANSPORT COMPANY AND ONE OF TH E DIRECTORS OF M/S. MAHESWARI BROTHERS COAL LTD. A SEARCH AND SEI ZURE OPERATION UNDER S.132 OF THE INCOME TAX ACT, 1961 WAS CONDUCT ED IN THE GROUP OF MAHESWARI BROTHERS AND AT THE RESIDENTIAL PREMIS ES OF THE ASSESSEE ON 8.9.2010. IN THE COURSE OF SAID SEARCH, CERTAIN DOCUMENTS AND ASSETS WERE FOUND AND SEIZED. IN THE RETURN ORIGIN ALLY FILED FOR THE ASSESSMENT YEAR 2005-06 ON 10.10.2005, ASSESSEE ADM ITTED AN INCOME OF RS.2,92,384. CONSEQUENT UPON SEARCH AND S EIZURE OPERATIONS AND IN RESPONSE TO NOTICE UNDER S.153A D ATED 17.11.2011, ASSESSEE FILED RETURN OF INCOME ON 14.8.2012, ADMIT TING TOTAL INCOME ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 2 OF RS.19,07,254, WHICH INCLUDED INCOME ADMITTED O F RS.16,14,870 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN KISAN VISKAS P ATRA, INTEREST ON FDRS AND BOGUS GIFTS RECEIVED. ACCEPTING THE SAID RETURN, ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.19,07,254, VI DE ORDER OF ASSESSMENT DATED 25.3.2013 PASSED UNDER S.143(3) R EAD WITH S.153A OF THE ACT. 3. WHILE COMPLETING THE ASSESSMENT AS ABOVE, THE ASSESSING OFFICER ALSO INITIATED PROCEEDINGS FOR IMPOSITION O F PENALTY UNDER S.271(1)(C) OF THE ACT. IN RESPONSE TO THE PENALT Y NOTICE, ASSESSEE POINTED OUT THAT AN AMOUNT OF RS.16,14,870 WAS ADMI TTED IN THE COURSE OF STATEMENT UNDER S.132(4), AND THE SAME HA S ALSO BEEN DISCLOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE UNDER S.153A FOR ASSESSMENT YEAR 2005-06, AND THE SAID RE TURN HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. ONCE THE INCOME DECLARED IN THE RETURN FILED IN RESPONSE TO THE RETURN UNDER S.153A WAS ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED T HEREUPON, IT WAS CONTENDED THAT THERE WAS NO CASE OF EITHER CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS ALSO CLAIMED THAT THE CONCEALMENT OF INCOME HAS TO BE SEEN WITH REFE RENCE TO THE ADDITIONAL INCOME BROUGHT TO TAX OVER AND ABOVE THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER S.153A AND NOT WITH REFERENCE TO THE INCOME DECLARED IN TH E ORIGINAL RETURN DECLARED UNDER S.139(1) OF THE ACT. HE ALSO SUBMITT ED THAT THOUGH THE GIFTS RECEIVED WERE GENUINE, ADDITIONAL INCOME IN R ELATION TO THE SAME WAS OFFERED TO TAX, DUE TO DIFFICULTIES IN GETTING THE RELEVANT DONORS, WHO ALSO MAY NOT TURN UP TO CONFIRM THE GIFTS MADE BEFORE THE IT AUTHORITIES, AND ALSO DUE TO OTHER COMPLEX ISSUES I NVOLVED IN THE MATTER. NOT FINDING MERIT IN THE EXPLANATION OF T HE ASSESSEE AND ALSO OBSERVING THAT THE CASE OF THE ASSESSEE FELL UNDER THE MAIN SECTION OF ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 3 S.271(1)(C) AND ALSO EXPLANATION 5A TO S.271(1)(C) OF THE ACT, THE ASSESSING OFFICE, WORKING OUT THE PENALTY AT 200% O F THE TAX SOUGHT TO BE EVADED, IMPOSED PENALTY OF RS.25,68,354, VIDE OR DER DATED 30.9.2013 PASSED UNDER S.271(1)(C) OF THE ACT. 4. ON APPEAL BEFORE THE CIT(A), ASSESSEE, REITERA TING THE CONTENTIONS URGED BEFORE THE ASSESSING OFFICER, CON TESTED THE ABOVE PENALTY NOT ONLY ON FACTUAL ASPECTS, BUT ALSO ON TH E APPLICABILITY OF THE PROVISIONS OF EXPLANATION 5A OF S.271(1)(C) TO THE CASE OF THE ASSESSEE. THE CIT(A), OBSERVING THAT THE ASSESSING OFFICER HAS COMPUTED THE UNDISCLOSED INCOME ON THE BASIS OF THE INCRIMINATING MATERIAL FOUND DURING SEARCH, AND DISCLOSURE UNDER S.132(4) WAS MADE ONLY WHEN INCRIMINATING MATERIAL WAS CONFRONTED TO HIM, AND ALSO HOLDING THAT THE PROVISIONS OF EXPLANATION 5A TO S. 271(1)(C) IS APPLICABLE TO THE CASE OF THE ASSESSEE AS WELL, JUS TIFIED THE ACTION OF THE ASSESSING OFFICER IN IMPOSING THE PENALTY FOR C ONCEALMENT, THOUGH HE REDUCED THE QUANTUM OF PENALTY FROM 200% OF TAX SOUGHT TO BE EVADED TO 100% OF TAX SOUGHT TO BE EVADED. 5. STILL AGGRIEVED, ASSESSEE PREFERRED THIS SECON D APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT ON MERITS, THERE IS NO INCRIMINATING MATERIAL AT ALL F OUND IN THE SEARCH, AND IN ORDER TO SETTLE THE MATTER, SINCE CONSIDERAB LE TIME HAS LAPSED FROM THE TIME THE ASSESSEE HAS RECEIVED THE GIFTS, THEY WERE ACCEPTED AS INCOME, IN ADDITION TO CERTAIN INTEREST AVAILABL E IN THE NAMES OF THE FAMILY MEMBERS. THUS, ON FACTS, THE ASSESSEE HAS A DMITTED CERTAIN INCOME AND HAS FILED THE RETURN IN ORDER TO SETTLE THE MATTER CONSEQUENT UPON THE SEARCH CONDUCTED. HOWEVER, IT WAS ALSO ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 4 CONTENDED THAT PROVISIONS OF EXPLANATION 5A TO S.27 1(1)(C) CANNOT BE INVOKED, AS HE HAS FILED THE ORIGINAL RETURN MUCH B EFORE THE PROVISIONS WERE AMENDED AND RELIED ON THE COORDINATE BENCH DEC ISION OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA V/S. ACIT (40 T AXMAN.COM.102)- (HYD) DATED 26.7.2013. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVE R, SUBMITTED THAT EXPLANATION 5A OF S.271(1)(A) WILL APPLY, AS PENALTY HAS TO BE CALCULATED WITH REFERENCE TO THE ORIGINAL RETURN, AND THE ASSESSEE HAS FILED THE RETURN ADMITTING ENHANCED I NCOME IN RESPONSE TO NOTICE UNDER S.153A. HE SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PE RUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSE SSEE HAS ORIGINALLY FIELD THE RETURN UNDER S.139(1) OF THE ACT 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 SEARCH ACTION OF 8.9.2010, FOR THE YEAR UNDER APPEAL, ASSESSEE HAS FILED RETURN OF INCOME ON 14.8.2012, ADMITTING TOTAL INCOME OF RS.19,07,254, WHICH INCLUDED ADDITIONAL INCOME ADMITTED OF RS.16,14,870 ON ACCOU NT OF UNDISCLOSED INVESTMENT IN KISAN VISKAS PATRA, INTEREST ON FDRS AND BOGUS GIFTS RECEIVED. ASSESSMENT WAS ULTIMATELY COMPLETED UNDE R S.143(3) READ WITH S.153A BY THE ASSESSING OFFICER ON DATED 25.3. 2013, ACCEPTING THE INCOME DISCLOSED IN THE SAID RETURN. THE MAIN Q UESTION 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 PRE SENT CASE. THE SAID EXPLANATION HAS COME ON TO THE STATUTE BOOK BY VIRT UE OF INSERTION OF THE SAME BELOW S.271(1)(C) BY THE FINANCE (NO.2) AC T, 2009, WITH RETROSPECTIVE EFFECT FROM 1.6.2007. ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 5 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 UNDER- 18. EXPLANATION 5 HAS BEEN AMENDED BY THE FINANCE ACT 2007 TO RESTRICT THE APPLICATION OF THAT EXPLANATIO N TO SEARCHES INITIATED BEFORE 1.6 2007. HENCE THE ASSES SEE 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 NO T 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 AF TER 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 YEA R ; 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 SU CH 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 T HE 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. ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 6 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 DAT E FOR FILING OF RETURN IN THE RESPECTIVE YEARS. EXPLANATI ON 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 YEA R ; 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 FO R SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THA T 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. 21. IN THE CIRCULAR NO 5/2010 DATED 3.6.2010 ISSUED BY THE CBDT EXPLAINING THE PROVISIONS OF THE FINANCE A CT (NO. 2) 2009, THE AMENDMENT TO EXPLANATION 5A WAS EXPLAI NED AS UNDER: ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 7 53.2 BY SUBSTITUTING THE EXPLANATION 5A IT HAS BEE N 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 SUC H 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 ASSESSE E HAD FILED THE RETURN OF INCOME FOR THE YEARS COVERE D 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) A CT 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 RETUR N 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 APPLICABLE TO SEARCHES INITIATED AFTER 1.6.2007, TH E 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 TH E 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 A S THE REVISED RETURN WAS FILED BEFORE THE AMENDMENT TO EXPLANATION5A BECAME A PART OF THE STATUTE. THE SUPR EME COURT IN THE CASES OF ADDL CIT V ONKAR SARAN (195 IT R 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 APPLICABLE WOULD BE THE LAW AS IT STOOD AT THE TIME WHEN THE ORIGINAL RETURN WA S 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. ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 8 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 AS SESSEES 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 PROVI SIONS 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 INSERTION OF EXPLANATIO N 5A, BY THE FINANCE ACT, 2009, THEN EXPLANATION 5A AS IT IS EXI STING WOULD MAKE THE ASSESSEE FREE FROM THE PROVISIONS OF S.271(1)(C ). IF IN THAT PERIOD THE ASSESSEE HAS FILED THE RETURN, EXPLANATION 5A W OULD 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 DIFF ERENT EVENTUALITIES, THE ASSESSEE WAS NOT VISITED WITH PENALTY, EXCEPT I N 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 IS FILE D 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 W HERE A RETURN FILED IN RESPONSE TO A NOTICE UNDER SECTION 148, WHICH INVO LVED 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 ASS ESSMENT YEAR IN ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 9 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. 12. THIS WAS FOLLOWED BY THE APEX COURT IN THE C ASE 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 AMENDM ENT 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 CONSIDERED STRICTLY IN THE SENSE THAT IF THERE IS A REASONABLE INTERPRETATION WHICH WOULD AVOID THE PEN ALTY, THAT INTERPRETATION OUGHT TO BE ADOPTED. WHEN THE LEGISLATURE IMPOSES A PENALTY, THE WORDS IMPOSING I T MUST BE CLEAR AND DISTINCT. [CIT VS. T.V. SUNDARAM IYENG ER & 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 W ILL BE VIOLATIVE OF ART. 20(1) OF THE CONSTITUTION. ART. 2 0(1) IS DESIGNED TO PREVENT A PERSON FROM BEING PROSECUTED FOR AN ACT OR OMISSION WHICH WAS CONSIDERED INNOCENT WH EN DONE. [G.P. NAYYAR VS. STATE (DELHI ADMN) AIR 1979 S C 602]. AN EXPLANATION IS APPENDED TO A SECTION TO EX PLAIN THE MEANING OF THE WORDS CONTAINED IN THE SECTION A ND NORMALLY IS TO BE READ TO HARMONISE WITH AND TO CLE AR 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 OBLIGA TION BREACH OF WHICH ENTAILS PENALTY AND SUBJECTS TO CRI MINAL 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 NOTICE D 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 PAI D OR CREDITED TO THE 'ACCOUNT OF THE PAYEE'. THIS ALSO CL ARIFIED 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 ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 10 EXPLANATION W.E.F. 1ST JUNE, 1987, WHICH HAS CREATE D A LIABILITY AND OBLIGATION TO DEDUCT TAX ON INTEREST EVEN WHERE THE INTEREST INCOME IS CREDITED TO ANY ACCOUN T 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 BEFO RE 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 OPINION THAT PENALTY LEVIED ON SUCH AMOUNT CANNOT BE SUSTAINED. ACCORDINGLY, WE AL LOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY OF RS.12,84,177 SUSTAINED BY THE CIT(A). 14. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14 TH OCTOBER, 2015 SD/- SD/- (P.MADHAVI DEVI ) (B.RAMAKOTAIAH) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 14 TH OCTOBER, 2015 ITA NO.665/HYD/2015 SHRI SANTOSH KUMAR AGARWAL , HYDERABAD 11 COPY FORWARDED TO: 1. SHRI SANTOSH KUMAR AGARWAL, M/S CH. PARTHASARATH Y & CO., 1- 1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOK NAGAR, HYDERABAD. 2. DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 6 (PR ESENTLY CENTRAL CIRCLE 1(3), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) XI HYDERABAD 4. PR. COMMISSIONER OF INCOME - TAX CENTRAL, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.