Danekula Rama Rao, Vijayawada V. The DCIT, Central Circle, Vijayawada, Vijayawada

ITA 666/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1124 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P HARI PRASADA RAO
• Assessee Lawyers: C P RAMASWAMYAR
• Keywords: Gift; Income from undisclosed sources; Search and seizure; Opportunity of cross examination; Peak credit; Bonafide belief; Retrospective amendment; Initiation of penalty proceedings; Reasonable cause; Third party statement; Revised return
• Section: 143(3); 5(2); 153A; 32; 148; 132; 139

Judgement Text

ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.665 TO 669/VIZAG/2013 ( / ASSESSMENT YEARS: 2004-05 TO 2008-09 RESPECTIVEL Y) DHANEKULA RAMA RAO VIJAYAWADA VS. DCIT, CENTRAL CIRCLE, VIJAYAWADA [PAN: ABIPD4189L ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C.P. RAMASWAMY,AR / RESPONDENT BY : SHRI P . HARIPRASADA RAO , DR / DATE OF HEARING : 28.04.2016 / DATE OF PRONOUNCEMENT : 27.05.2016 / O R D E R PER BENCH: THESE ARE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE COMMON ORDER PASSED BY THE CIT(A), GUNTUR DATED 27. 8.2013 FOR THE ASSESSMENT YEARS 2004-05 TO 2008-09, CONFIRMING LEV Y OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 2 SINCE, THE FACTS ARE IDENTICAL, THEY ARE CLUBBED, H EARD TOGETHER AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY, SHARE OF PROFI T AND INTEREST ON CAPITAL FROM DIFFERENT PARTNERSHIP FIRMS. A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT WAS CONDUCTED IN THE RESIDENT IAL PREMISES OF THE ASSESSEE ON 22.11.2008. DURING THE COURSE OF SEARC H PROCEEDINGS, A DOCUMENT WAS SEIZED VIDE ANNEXURE DRR/A/1, WHICH CO NTAIN A LIST OF 37 NAMES GROUPED UNDER 4 BRANCHES OF THE SAPTAGIRI GRA AMEENA BANK (SGB), AGAINST WHICH CERTAIN FIGURES HAVE BEEN MENT IONED AND THE AGGREGATE OF SUCH TOTAL WAS AT RS.11.40 CRORES. DU RING THE COURSE OF SEARCH PROCEEDINGS, IN RESPONSE TO STATEMENT RECORD ED ON 22.11.2008 U/S 132(4) OF THE ACT, THE ASSESSEE STATED THAT THE ABOVE LIST REPRESENTS HIS UNACCOUNTED INCOME DEPOSITED IN BENAMI RECURRIN G DEPOSIT ACCOUNTS IN VARIOUS BRANCHES OF SGB. THE ASSESSEE FURTHER ST ATED THAT HE HAD EARNED THE SAID UNACCOUNTED INCOME FROM THE REAL ES TATE BUSINESS IN HIS INDIVIDUAL CAPACITY AND THE SAID SUM WAS DEPOSITED IN VARIOUS NAMES AS CONTAINED IN THE SAID DOCUMENT IN VARIOUS BRANCHES OF SGB. THEREFORE, AGREED FOR A DISCLOSURE OF UNACCOUNTED INCOME OF RS .11.40 CRORES FOR VARIOUS ASSESSMENT YEARS FROM 2004-05 TO 2009-10. T HE POST SEARCH ENQUIRIES REVEALS THAT THE ASSESSEE HAS MADE RECURR ING DEPOSITS IN 4 ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 3 BRANCHES OF SGB IN 37 ACCOUNTS AND THE TOTAL OF WHI CH WORKS OUT TO RS.11,65,88,422/- WHICH INCLUDES ACCUMULATED INTERE ST ON SUCH DEPOSITS. SUBSEQUENTLY, THE SEARCH PARTY RECOVERED CASH AMOUN TING TO RS.4,34,00,000/- FROM THE RESIDENTIAL PREMISES OF O NE MR. M. HARINATH WHO WAS THE CASHIER OF THE ASSESSEE. ON EXAMINATIO N, MR. M. HARINATH CONFESSED THAT THE SAID CASH WAS BELONGED TO HIS EM PLOYER SHRI DHANEKULA RAMA RAO. WHEN THE SAID STATEMENT WAS CON FRONTED TO THE ASSESSEE, THE ASSESSEE ADMITTED THAT THE SAID CASH FOUND FROM THE POSSESSION OF SHRI M. HARINATH BELONGS TO HIM AND S TATED THAT CASH REPRESENTS CLOSURE PROCEEDS OF CERTAIN BENAMI RECUR RING DEPOSITS KEPT IN VARIOUS BRANCHES OF SGB. THE ASSESSEE FURNISHED DE TAILS OF 18 RECURRING DEPOSIT ACCOUNTS MAINTAINED IN PATAMATA, GOVERNORPE T, YANAMALAKUDURU AND EEDUPUGALLU BRANCHES OF SGB. THE TOTAL OF THES E 18 R.D. ACCOUNTS INCLUDING INTEREST WORKS OUT TO RS.4,33,29,131/-. THE ASSESSEE IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT ON 22.11.2 008 HAS ADMITTED THIS AMOUNT ALONG WITH EARLIER AMOUNT OF RS.11,40,0 0,000/- AS HIS UNDISCLOSED INCOME AND FURTHER STATED THAT THE SOUR CES FOR THE SAID UNDISCLOSED INCOME IS OUT OF THE INCOME GENERATED F ROM HIS UNDISCLOSED REAL ESTATE BUSINESS. 3. CONSEQUENT TO SEARCH PROCEEDINGS U/S 132(4) OF T HE ACT, THE ASSESSEE CASE HAS BEEN NOTIFIED TO CENTRAL CIRCLE, VIJAYAWADA. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 4 THEREAFTER, NOTICE U/S 153A OF THE ACT WAS ISSUED R EQUIRING ASSESSEE TO FURNISH THE RETURNS FOR THE ASSESSMENT YEAR 2004-05 TO 2009-10. THE ASSESSEE, IN RESPONSE TO THE NOTICES U/S 153A OF TH E ACT, FILED REVISED RETURNS FOR THE ASSESSMENT YEAR 2004-05 TO 2009-10 ON 11.5.2009 DECLARING THE INCOME ADMITTED DURING THE COURSE OF SEARCH PROCEEDINGS. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDI NGLY NOTICE U/S 143(2) OF THE ACT DATED 14.9.2009 ALONG WITH A DETA ILED QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NO TICES, THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAIL S CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ISSU ED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE UNACCOUNTED INC OME ADMITTED BY THE ASSESSEE SHALL NOT BE REJECTED. THE A.O. ISSUED SHOW CAUSE NOTICE AND PROPOSED TO ASSESS THE UNDISCLOSED INCOME FOR T HE PERIOD FROM ASSESSMENT YEAR 2004-05 TO 2009-10 AS PER THE PEAK CREDIT WORKED OUT WHICH AMOUNTS TO RS.21,38,20,616/-. IN REPLY, THE ASSESSEE VIDE LETTER DATED 15.2.2010 VEHEMENTLY DENIED THE ABOVE PROPOSA L AND REQUESTED THE A.O. TO FURNISH COPIES OF ALL THE MATERIALS AND DOCUMENTS RELIED UPON BY HIM FOR ARRIVING AT THE SAID PEAK CREDIT. THE A SSESSEE FURTHER SUBMITTED THAT YOU HAVE ARRIVED AT THE SAID FIGURE WITHOUT CONSIDERING THE TELESCOPING OF INTER BRANCH TRANSFERS TO WORK O UT THE NET PEAK CREDIT FOR EACH YEAR. HE FURTHER REQUESTED THE A.O. TO GR ANT INTER BRANCH ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 5 TELESCOPING IN WHICH CASE THE AGGREGATE UNDISCLOSED INCOME WOULD BE ABOUT RS.17 CRORES WHICH IS MARGINALLY HIGHER THAN WHAT I HAVE DECLARED IN MY RETURNS IN RESPONSE TO NOTICE U/S 153A OF THE ACT. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE AND AL SO TAKEN INTO ACCOUNT THE SEIZED MATERIALS HELD THAT THE PEAK CREDIT WORK ED OUT BY THE ASSESSEE TAKING INTO ACCOUNT THE INTER BRANCH TRANS FERS OF ALL THE BRANCHES IS NOT ACCEPTABLE. THE A.O. FURTHER HELD THAT THE ASSESSEE HAS NOT DISCLOSED FEW BENAMI R.D. ACCOUNTS. THEREFORE, THE A.O. FINALLY ASSESSED THE TOTAL INCOME AS PER THE PEAK CREDIT WO RKED OUT WITHOUT ALLOWING THE BENEFIT OF TELESCOPING INTER BRANCH TR ANSFERS AND COMPLETED THE ASSESSMENT. 4. THEREAFTER, THE A.O. INITIATED PENALTY PROCEEDIN GS U/S 271(1)(C) R.W.S. 274 OF THE ACT AND ASKED TO EXPLAIN WHY PENA LTY SHALL NOT BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN RESPONSE TO SHOW CAUSE NO TICE, THE ASSESSEE SUBMITTED THAT THERE IS NO CONCEALMENT OF INCOME RE FERRED U/S 271(1)(C) OF THE ACT OR EXPLANATION 5A TO SECTION 271(1)(C) O F THE ACT TO LEVY THE PENALTY. THE ASSESSEE FURTHER SUBMITTED THAT HE HAD DECLARED UNDISCLOSED INCOME OF RS.16.63 CRORES AND PAID THE TAXES AS ADMITTED IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. THE F INAL INCOME ASSESSED AFTER THE ORDERS OF THE CIT(A) IS AT RS.17.24 CRORE S, WHICH IS MARGINALLY ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 6 HIGHER THAN THE UNDISCLOSED INCOME ADMITTED BY ME. THE SAID DIFFERENCE IS ON ACCOUNT OF ERRORS OF CALCULATION AND ACCRUAL OF INTEREST AND HENCE, SUCH ERRORS SHOULD NOT INVITE THE BURDEN OF LEVY OF PENALTY FOR CONCEALMENT OF INCOME. THE ASSESSEE FURTHER SUBMITT ED THAT PENALTY CANNOT BE LEVIED ON THE INCOME RETURNED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. AS PER THE PROVISIONS OF SECTION 271(1 B) OF THE ACT, NO PENALTY CAN BE LEVIED FOR THE INCOME ADMITTED IN TH E RETURNS OF INCOME. PENALTY CAN BE LEVIED FOR THE INCOME WHICH IS ARISE S OVER AND ABOVE THE INCOME ADMITTED IN THE RETURN OF INCOME. IN THE ABS ENCE OF ANY ADDITION OR DISALLOWANCE IN THE ORDER OF ASSESSMENT/RE-ASSES SMENT, THE QUESTION OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT CANNOT ARISE. IT IS FURTHER SUBMITTED THAT HE HAD ADMITTED UNDISCLOSED INCOME I N THE STATEMENT RECORDED U/S 132(4) OF THE ACT, DISCLOSED THE SAID INCOME IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND PAID THE RESULTANT TAXES BEFORE FILING OF THE RETURN OF INCOME. THE P ENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIED, IN CASE THE A.O. POINTS OUT ANY CONCEALMENT OR INACCURATE PARTICULARS IN THE RETURN OF INCOME. IN CASE THE A.O. HAS ACCEPTED THE UNDISCLOSED INCOME ADMITTED IN THE RET URN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, THERE WOULD BE NO OC CASION FOR THE A.O. TO ARRIVE AT THE SATISFACTION THAT THE ASSESSEE HAS CO NCEALED INCOME IN RESPECT OF SUCH ADMITTED INCOME, THEREFORE IN RESPE CT OF RETURNED ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 7 INCOME, THE A.O. DID NOT HAVE JURISDICTION TO CONSI DER THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE FURTHER SUBM ITTED THAT EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT IS S PECIFICALLY PROVIDED FOR LEVY OF PENALTY IN CASE WHERE A SEARCH IS TAKEN PLA CE. AS PER THE SAID EXPLANATION, AS IT STOOD APPLICABLE AT THE TIME OF SEARCH OR FILING OF RETURN PENALTY WOULD BE APPLICABLE ONLY IN THE CASE , WHERE THE ASSESSEE HAS NOT FILED THE RETURNS U/S 139(1) OF THE ACT. I N CASE, THE ASSESSEE HAS FILED THE RETURNS U/S 139(1) OF THE ACT, ANY AD DITIONAL INCOME ADMITTED IN THE REVISED RETURN FILED U/S 153A OF TH E ACT AND PAID THE CONSEQUENT TAXES, NO PENALTY CAN BE LEVIED U/S 271( 1)(C) OF THE ACT. IN SUPPORT OF HIS ARGUMENT RELIED UPON THE PLETHORA OF JUDGEMENTS INCLUDING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAS PHARMACEUTICALS (2011) 11 TAXMAN.COM 207 AND AL SO THE DECISION OF M.P. HIGH COURT IN THE CASE OF CIT VS. PREMIER P ROTEINS LTD. (2005) 278 ITR 252 AND SUBMITTED THAT THE HONBLE M.P. HIG H COURT CLEARLY HELD THAT PENALTY FOR CONCEALMENT OF INCOME IN TERMS OF SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED AS PER THE AMENDED PROVISI ONS OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT BY THE FINANCE ACT, 2009. 5. THE A.O. AFTER CONSIDERING EXPLANATIONS FURNISHE D BY THE ASSESSEE, HELD THAT THE ASSESSEE HAS WILLFULLY CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WHICH IS PROVED BY HIS ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 8 CONDUCT. THE A.O. FURTHER HELD THAT THE MODUS OF OP ERANDI OF THE ASSESSEE TO KEEP THE UNACCOUNTED INCOME BY WAY OF B ENAMI R.D. ACCOUNTS IN VARIOUS BRANCHES OF SGB REVEALS THAT TH E ASSESSEE WOULD NOT HAVE ANY INTENTION TO DISCLOSE THE INCOME FOR THE P URPOSE OF INCOME TAX. THE A.O. FURTHER HELD THAT WHATEVER DISCLOSURE MADE BY THE ASSESSEE IS NOT VOLUNTARY. THE ASSESSEE HAS DISCLOSED THE ADDIT IONAL INCOME DURING THE COURSE OF SEARCH, BECAUSE OF THE REASON THAT TH E DEPARTMENT HAS FOUND INCRIMINATING DOCUMENTS WHICH SHOWS THE UNACC OUNTED INCOME OF THE ASSESSEE WHICH WAS KEPT IN BENAMI R.D. ACCOUNTS . THE POST SEARCH INVESTIGATION REVEALS THAT THE ASSESSEE HAS OPERATE D VARIOUS R.D. ACCOUNTS IN THE NAME OF BENAMI PERSONS, WHICH WAS C ONFIRMED BY THE RESPECTIVE MANAGERS OF THE BANK IN THE STATEMENT RE CORDED BEFORE THE ASSESSING OFFICER. THEREFORE, THE DISCLOSURE MADE BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT CANNOT BE CONSIDERED AS VOLUNTARY. THE A.O. FURTHER HELD THA T IT IS PROVED FROM THE CONDUCT OF THE ASSESSEE THAT THE ASSESSEE HAS NOT D ISCLOSED TOTAL UNDISCLOSED INCOME AT THE TIME OF SEARCH PROCEEDING S. ONLY WHEN THE DEPARTMENT HAS CONFRONTED THE SEIZED DOCUMENT, THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME ON VARIOUS DATES BEFORE THE INVESTIGATION AUTHORITY. INITIALLY, THE ASSESSEE HAS NOT ADMITTE D CASH SEIZED FROM THE PREMISES OF HIS ACCOUNTANT SHRI M. HARINATH. ONLY AFTER CONFRONTING THE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 9 STATEMENT OF THE EMPLOYEE, THE ASSESSEE HAS ADMITTE D THE INCOME. THEREFORE, FROM THE CONDUCT OF THE ASSESSEE IT IS C LEAR THAT THE ADMISSION MADE BY THE ASSESSEE IN THE RETURN FILED U/S 153A OF THE ACT IS NOT VOLUNTARY AND IT IS BECAUSE OF THE EVIDENCE FOUND BY THE DEPARTMENT DURING THE COURSE OF SEARCH. 6. THE A.O. FURTHER HELD THAT AS PER THE PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT, ANY UNDISCLOSED IN COME DETECTED DURING THE COURSE OF SEARCH, WHICH WAS NOT DECLARED IN THE RETURNS FILED BEFORE THE DATE OF SEARCH, EVEN FOUND DECLARED IN RETURNS FILED SUBSEQUENT TO SEARCH, THE ASSESSEE WILL BE DEEMED TO HAVE CONCEAL ED THE INCOME FOR THAT YEAR. THE A.O. REFERRED THE EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT AND SAID THAT AS PER THE AMENDED PROVISIONS OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT, WHICH WAS AMENDED BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST DAY OF JUNE, 2007 WHETHER OR NOT THE ASSESSEE FILED THE REGULAR RETURN BEFORE THE DU E DATE SPECIFIED U/S 139(1) OF THE ACT, THE PROVISIONS OF SECTION 271(1) (C) OF THE ACT ARE APPLICABLE, ONCE THERE IS DIFFERENCE BETWEEN INCOME RETURNED ORIGINALLY AND INCOME RETURNED IN RESPONSE TO NOTICE U/S 153A. THE AMENDMENT BROUGHT OUT BY THE FINANCE ACT, 2009 IS CLARIFICATO RY IN NATURE, THEREFORE, IT APPLIES TO THE CASES WHERE THE SEARCH IS TAKEN P LACE ON OR AFTER 1.6.2007. IN THE PRESENT CASE ON HAND, THE ASSESSE E WAS SEARCHED ON ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 10 22.11.2008. AT THE TIME OF SEARCH, THE AMENDED PROV ISIONS OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT WAS BROUGHT INTO THE STATUTE, THEREFORE, AS PER THE SAID SECTION, THE AS SESSEE FILED THE RETURN FOR THE RESPECTIVE ASSESSMENT YEARS U/S 139(1) OF T HE ACT AND NOT DISCLOSED THE INCOME FOUND DURING THE COURSE OF SEA RCH IN THE REGULAR RETURN FILED, THEN THE ADDITIONAL INCOME DECLARED I N THE RETURN IN RESPONSE TO SECTION 153A OF THE ACT IS DEEMED TO BE CONCEALED INCOME FOR THE PURPOSE OF CLAUSE (C) OF EXPLANATION 1 TO S ECTION 271(1)(C) OF THE ACT. WITH THESE OBSERVATIONS, THE A.O. LEVIED THE PE NALTY IN RESPECT OF INCOME DISCLOSED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT BY INVOKING THE PROVISIONS OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. IN RESPECT OF ADDITION OR DISALLOWANCE MAD E TO THE RETURNED INCOME, THE A.O. INVOKED THE PROVISIONS OF EXPLANAT ION 1 TO SECTION 271(1)(C) OF THE ACT. 7. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURT HER SUBMITTED THAT THE A.O. ERRED IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT IN A HURRIED MANNER AND IN GROSS VIOLATION OF PRINCIPLES OF NATU RAL JUSTICE WITHOUT GIVING COPIES OF DOCUMENTS RELIED UPON BY HIM TO QU ANTIFY THE PEAK CREDIT. THE ASSESSEE FURTHER SUBMITTED THAT THERE I S NO CONCEALMENT ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 11 REFERRED TO IN SECTION 271(1)(C) OF THE ACT EITHER BY WAY OF EXPLANATION 1 OR EXPLANATION 5A, AS THE ASSESSEE HAS DISCLOSED TH E UNDISCLOSED INCOME IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT ON THE DATE OF SEARCH AND DECLARED THE SAID UNDISCLOSED INCOME IN THE REV ISED RETURNS FILED IN RESPONSE TO NOTICES U/S 153A OF THE ACT AND PAID TH E TAXES. THE DIFFERENCE BETWEEN INCOME FINALLY ASSESSED BY THE A .O. AND INCOME DECLARED BY THE ASSESSEE IS ONLY A MARGINAL DIFFERE NCE OF RS.0.61 CRORES. THE SAID MISTAKE WAS ATTRIBUTED TO ERRORS OF CALCUL ATION AND ACCRUAL OF INTEREST AND HENCE, SUCH ERROR SHOULD NOT HAVE BEEN CONSIDERED AS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE FURTHER SUBMITTED THAT PENA LTY CANNOT BE LEVIED FOR THE INCOME DECLARED IN THE RETURN IN RESPONSE T O NOTICE U/S 153A OF THE ACT. AS PER THE PROVISIONS OF SECTION 271(1B) OF THE ACT, NO PENALTY CAN BE LEVIED ON THE INCOME ADMITTED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. IN THE ABSENCE OF ANY ADDITION/DISALLOWANCE, THE QUESTION OF LEVY OF PENALTY U/S 271(1)(C) OF TH E ACT CANNOT ARISE. THE ASSESSEE FURTHER SUBMITTED THAT EXPLANATION 5A TO S ECTION 271(1)(C) OF THE ACT SPECIFICALLY PROVIDED FOR THE SEARCH CASES. AS PER THE SAID EXPLANATION, WHERE THE SEARCH IS TAKEN PLACE, NO PE NALTY CAN BE LEVIED IN THE CASES, WHERE THE ASSESSEE HAS ADMITTED THE UNDI SCLOSED INCOME IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT, DECLA RED THE SAID ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 12 UNDISCLOSED INCOME IN THE RETURN FILED IN RESPONSE TO NOTICES U/S 153A OF THE ACT AND PAID THE TAXES. THE ASSESSEE HAS ADMITT ED THE UNDISCLOSED INCOME IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT, FOLLOWED BY FILING THE RETURN U/S 153A OF THE ACT AND PAID THE TAXES. THOUGH THE A.O. ASSESSED THE INCOME AS PER THE PEAK CREDIT WORKED O UT BY HIM WHICH IS HIGHER THAN THE INCOME DISCLOSED BY THE ASSESSEE, T HE CIT(A) HAS ACCEPTED THE PLEA OF THE ASSESSEE TO WORK OUT THE P EAK CREDIT CONSIDERING THE INTER BRANCH TRANSFERS OF ALL THE B RANCHES. AS PER THE CIT(A) ORDER, THE INCOME FINALLY ASSESSED IS AT RS. 17.24 CRORES WHICH IS ONLY MARGINALLY HIGHER THAN THE UNDISCLOSED INCOME ADMITTED BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THE SAID DIFF ERENCE AND STATED THAT THE DIFFERENCE AROUSED BECAUSE OF THE REWORKIN G OF THE PEAK CREDIT BY TAKING INTO ACCOUNT THE INTER BRANCH TRANSFERS A ND ALSO ACCRUAL OF INTEREST OF R.DS. THEREFORE, THERE IS NO CONCEALME NT OF INCOME TO LEVY PENALTY U/S 271(1)(C) OF THE ACT EITHER UNDER EXPLA NATION 1 OR UNDER EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT. 8. THE CIT, AFTER CONSIDERING THE EXPLANATIONS FURN ISHED BY THE ASSESSEE HELD THAT THE ASSESSEE HAS CONCEALED THE P ARTICULARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME , THEREFORE, THE A.O. HAS RIGHTLY LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT BY INVOKING EXPLANATION 1 AND EXPLANATION 5A OF THE ACT. THE C IT(A) FURTHER HELD ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 13 THAT THE PROVISIONS OF EXPLANATION 5A ARE VERY CLEA R THAT EVEN IF AN ASSESSEE DECLARES ANY INCOME IN ANY RETURN FURNISHE D ON OR AFTER THE DATE OF SEARCH AND SUCH INCOME HAS NOT BEEN REFLECT ED IN THE RETURNS FILED BY HIM PRIOR TO THE SEARCH, HE SHALL BE DEEME D TO HAVE CONCEALED THE PARTICULARS OF INCOME IN RESPECT OF SUCH ADDITI ONAL INCOME DECLARED IN THE REVISED RETURN. IN THE CASE OF THE ASSESSEE , THE ADDITIONAL INCOME HAS BEEN REFLECTED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, BUT WAS NOT OFFERED IN THE ORIGINAL RETURN FILED U/S 139(1) OF THE ACT, THUS, THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME AS PER THE EXPRESS PROVISIONS OF EXPLANA TION 5A TO SECTION 271(1)(C) OF THE ACT, IRRESPECTIVE OF THE FACT THAT IN RESPECT OF THE ADDITIONAL INCOME REFLECTED IN THE RETURN, NO FURTH ER ADDITION WAS CONSIDERED NECESSARY. SIMILARLY, THE CIT(A) HELD TH AT AS REGARDS THE ADDITIONS MADE BY THE A.O. IN THE ASSESSMENT PROCEE DINGS, THE ASSESSEE HAS FAILED TO EXPLAIN WHY HE HAS NOT ADMITTED THE 4 BENAMI R.D. ACCOUNTS DETECTED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. CLEARLY BROUGHT OUT THE FACT THAT THESE DEPOSITS ARE BELONGED TO ASSESSEE WHICH WAS FURTHER SUPPORTE D BY THE EVIDENCE GATHERED DURING THE COURSE OF SEARCH AND POST SEARC H INVESTIGATION. THE BANK MANAGERS HAVE CLEARLY STATED THAT THE SAID R.D S ARE BELONGING TO THE ASSESSEE. THE ASSESSEE HAS FAILED TO RETRACT T HE STATEMENT GIVEN BY ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 14 THE BANK MANAGERS AND ALSO FAILED TO EXPLAIN TO THE SATISFACTION OF A.O. THAT THE SAID R.D. ACCOUNTS ARE NOT BELONG TO HIM. THE A.O. HAS LINKED THE SAID DENIED DEPOSITS TO THE DEPOSIT ADMITTED BY THE ASSESSEE. THE MERE DENIAL BY THE ASSESSEE DOES NOT AMOUNT TO A VA LID EXPLANATION UNDER PART A OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. WITH THESE OBSERVATIONS THE A.O. HAS CONFIRMED THE PENAL TY LEVIED BY THE A.O. HOWEVER, THE CIT(A) HAS REWORKED THE PENALTY TO GIV E EFFECT TO THE MODIFICATIONS MADE BY THE CIT(A) IN QUANTUM APPEALS . AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) WAS GROSSLY ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. HE FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE DELETED THE PENALTY, BECAUSE THE INCOME WAS ASSESSED ON ESTIMATED BASIS IN THE SEARCH ASSESSMENT U/S 153A OF THE ACT. THE A.R. FURTHER SU BMITTED THAT THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE DISCL OSURE MADE FOR ALL THE ASSESSMENT YEARS FROM 2004-05 TO 2009-10 WAS MARGIN ALLY LESS THAN THE AGGREGATE INCOME ASSESSED BY THE A.O., WHICH WAS DU E TO ADDITION MADE BY THE A.O. IN RESPECT OF INTEREST ON THIRD PA RTY DEPOSITS DENIED BY THE ASSESSEE, THEREFORE IT CANNOT BE HELD AS CONCEA LMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE A. R. FURTHER ARGUED THAT EXCEPT A PIECE OF PAPER FOUND DURING THE COURSE OF SEARCH, THE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 15 DEPARTMENT HAS NOT FOUND ANY RECORD WHICH INDICATES THE UNACCOUNTED INCOME. THE ASSESSEE HAS ADMITTED THE UNACCOUNTED INCOME DURING THE COURSE OF SEARCH WHILE RECORDING THE STATEMENT U/S 132(4) OF THE ACT. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT NO PENALTY IS LEVIABLE, IF INCOME IS ADMITTED AND TAXES ARE PAID ON SUCH INCOM E. THEREFORE, THE A.O. WAS NOT CORRECT IN LEVY OF PENALTY FOR THE INC OME ADMITTED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. THE LD. A.R. FURTHER SUBMITTED THAT THE CIT(A) FAILED TO APPRECI ATE THE FACT THAT EXPLANATION 5A AS IT EXIST PRIOR TO ITS SUBSTITUTIO N BY FINANCE ACT, 2009 DID NOT APPLY TO THE CASE OF THE ASSESSEE AND CONSE QUENTLY ERRED IN CONFIRMING THE PENALTY IN TERMS OF EXPLANATION 5A O F SECTION 271(1)(C) OF THE ACT ON ADMITTED INCOME IN THE RETURN FILED IN R ESPONSE TO NOTICE U/S 153A OF THE ACT. THE A.R. FURTHER ARGUED THAT THE A MENDMENT BROUGHT OUT BY THE FINANCE ACT, 2009 TO EXPLANATION 5A OF S ECTION 271(1)(C) OF THE ACT WAS NOT EXISTED AT THE TIME OF SEARCH U/S 1 32, I.E. ON 22.11.2008. THEREFORE, THE A.O. WAS ERRED IN INVOKI NG THE AMENDED PROVISIONS OF EXPLANATION 5A TO LEVY THE PENALTY FO R CONCEALMENT OF INCOME. AS REGARDS PENALTY LEVIED IN RESPECT OF ADD ITIONS TO THE RETURNED INCOME, THE A.R. SUBMITTED THAT THE ASSESSEE HAS CA TEGORICALLY DISOWNED THE DEPOSITS, WHICH WAS MADE ADDITIONS BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. HAS LINKED UP SOME OTHER BENAMI ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 16 RECURRING DEPOSITS TO ASSESSEES ACCOUNTS BASED ON THE DEPOSITION MADE BY THE BRANCH MANAGERS WITHOUT CONFRONTING THE STAT EMENTS GIVEN BY THE BRANCH MANAGERS TO THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THOUGH ASSESSEE DISOWNED THE SAID DEPOSITS, HE HAS ADMITTED BEFORE THE CIT(A) WITH A CONDITION THAT IN CASE THE TELESCOPIN G BENEFIT IS GIVEN TO ALL THE BRANCHES TOWARDS INTER BRANCH TRANSFER OF R.DS, THEN HE WOULD ADMIT THE ADDITIONAL INCOME IN RESPECT OF THOSE DISOWNED R.DS. THEREFORE, THIS ADMISSION CANNOT BE CONSIDERED AS A WILLFUL CONCEAL MENT OF PARTICULARS OF INCOME SO AS TO ATTRACT THE LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT. 10. IN SUPPORT OF HIS ARGUMENTS, THE A.R. RELIED UP ON THE FOLLOWING JUDGEMENTS: 1) CIT VS. SAS PHARMACEUTICALS (2011) 335 ITR 259 ( DEL) 2) CIT VS. SDV CHANDAER (2004) 266 ITR 175 (MAD) 3) CIT VS. SURESH CHANDER 259 ITR 9 (SC) 4) CIT VS. PREMIER PROTEINS LTD. (2005) 278 ITR 252 . 5) CIT VS. BHAN SINGH BOOTA SINGH (1974) 95 ITR 562 (P&H). 6) CIT VS. RADHA KISHAN GOEL (2006) 200 CTR 300 (AL L.) 7) ACIT VS. GEBILAL KANHAIYALAL (HUF) (2012) 348 IT R 561 (SC) 8) CIT VS. VENKATESAM (2012) 349 ITR 413 9) SRI SANTOSH KUMAR AGGARWAL VS. DCIT ITA NO.665/H YD/2015 DATED 14.10.2015 10) DILIP KEDIA VS. ACIT 40 TAXMAN.COM 102 (HYD) DA TED 26.7.2013 11) ADDL. CIT VS. ONKAR SARAN 195 ITR 1 12) B.N. SHARMA VS. CIT 226 ITR 442. 11. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT THE CIT(A) RIGHTLY UPHELD THE PENALTY LEVIED BY THE A.O. UNDER EXPLANA TION 1, IN RESPECT OF ADDITIONS MADE TO THE RETURNED INCOME AND UNDER EXP LANATION 5A IN RESPECT OF INCOME DISCLOSED IN THE REVISED RETURN U /S 153A OF THE ACT. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 17 THE D.R. FURTHER ARGUED THAT IT IS A CLEAR CASE OF CONCEALMENT, WHICH WAS PROVED BY THE CONDUCT OF THE ASSESSEE AS THE AS SESSEE HAS NOT DISCLOSED THE UNDISCLOSED INCOME IN THE RETURNS FIL ED FOR THE RESPECTIVE ASSESSMENT YEARS U/S 139(1) OF THE ACT. THE ASSESSE E HAS FILED THE REGULAR RETURNS U/S 139(1) OF THE ACT FOR ALL THE A SSESSMENT YEARS, HOWEVER FAILED TO DISCLOSE A TRUE AND CORRECT INCOM E FOR THE RESPECTIVE FINANCIAL YEAR, THEREFORE, THE A.O. HAS RIGHTLY INF ERRED THAT THE ASSESSEE HAS WILLFULLY CONCEALED THE PARTICULARS OF INCOME. THE D.R. FURTHER SUBMITTED THAT THERE IS NO MERITS IN THE SUBMISSION S OF THE ASSESSEE WITH REGARD TO THE APPLICABILITY OF THE EXPLANATIONS 5A OF SECTION 271(1)(C) OF THE ACT, AS THE LAW EXISTED AT THE TIME OF COMPLETI ON OF ASSESSMENT OR INITIATION OF PENALTY PROCEEDINGS WILL BE HOLDS GOO DS. THE SAID SECTION HAS BEEN AMENDED BY THE FINANCE ACT 2009, WITH RETR OSPECTIVE EFFECT FROM 1.6.2007 AND HENCE ANY SEARCH CONDUCTED ON OR AFTER 1.6.2007 OR ASSESSMENT FRAMED AFTER THAT DATE WOULD FALL UNDER THE AMENDED PROVISIONS OF EXPLANATION 5A OF THE ACT. IN THE PRE SENT CASE ON HAND, THE ASSESSEE THOUGH DECLARED THE ADDITIONAL INCOME ADMI TTED DURING THE COURSE OF SEARCH IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, IT IS NOT A VOLUNTARY DISCLOSURE. THE ASSESSE E WAS COMPELLED TO DISCLOSE ADDITIONAL INCOME, BECAUSE THE DEPARTMENT HAS GATHERED INCRIMINATING DOCUMENTS DURING THE COURSE OF SEARCH WHICH REVEALS THE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 18 UNDISCLOSED INCOME OF THE ASSESSEE. THE POST SEARCH INVESTIGATION CONDUCTED BY THE DEPARTMENT ALSO STRENGTHEN THE CAS E OF DEPARTMENT THAT THE ASSESSEE WAS INDULGED IN SYSTEMATIC ACTIVI TY OF ROTATING THE UNACCOUNTED MONEY EARNED FROM HIS REAL ESTATE BUSIN ESS IN BENAMI RECURRING DEPOSITS. THE ASSESSEE HAS KEPT THE UNAC COUNTED INCOME IN BENAMI NAMES IN VARIOUS BANK ACCOUNTS, WHICH WAS CO NFIRMED BY THE RESPECTIVE BRANCH MANAGERS. THEREFORE, IT IS A CLEA R CASE OF CONCEALMENT OF PARTICULARS OF INCOME. ACCORDINGLY, THE A.O. HAS RIGHTLY LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT AND HIS ORDER SHOU LD BE UPHELD. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THERE WAS A SEAR CH ACTION U/S 132 OF THE ACT IN THE ASSESSEES RESIDENTIAL AND BUSINESS PREMISES ON 22.11.2008. DURING THE COURSE OF SEARCH PROCEEDINGS , THE DEPARTMENT FOUND INCRIMINATING DOCUMENTS WHICH REVEALS THE UNA CCOUNTED INCOME KEPT IN BENAMI RECURRING DEPOSIT ACCOUNTS IN 4 BRAN CHES OF SAPTAGIRI GRAMEENA BANK (SGB). WHEN THE SAID DOCUMENT WAS CON FRONTED TO THE ASSESSEE, THE ASSESSEE HAS ADMITTED THE UNDISCLOSED INCOME AND ALSO EXPLAINED HOW THE INCOME WAS EARNED. DURING THE CO URSE OF SEARCH, THE DEPARTMENT HAS FOUND CASH OF RS. 4,34,00,000/- IN T HE RESIDENTIAL ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 19 PREMISES OF ONE SRI M HARINATH, WHO WAS THE CASHIER OF THE ASSESSEE. THE ASSESSEE ADMITTED SAID CASH FOUND FROM THE POSS ESSION OF SRI M. HARINATH BELONGING TO HIM AND STATED THAT THE CASH REPRESENTS CLOSURE PROCEEDS OF CERTAIN BENAMI RECURRING DEPOSIT ACCOUN TS AND ALSO ADMITTED THAT HE WOULD DISCLOSE THE ADDITIONAL INCOME OF RS. 4,34,00,000/- ALONG WITH EARLIER DISCLOSURE OF RS.11,40,00,000/-. CONSE QUENT TO SEARCH PROCEEDINGS, THE ASSESSEE HAS FILED REVISED RETURNS FOR THE ASSESSMENT YEAR 2004-05 TO 2009-10 AND DECLARED THE UNDISCLOSE D INCOME ADMITTED DURING THE COURSE OF SEARCH PROCEEDINGS AND PAID TH E TAXES BEFORE FILING THE RETURN OF INCOME. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. THE A.O. DETERMINED THE TOTAL IN COME OF RS.23.38 CRORES AS AGAINST THE INCOME DECLARED BY THE ASSESS EE OF RS.16.63 CRORES FOR ALL THE ASSESSMENT YEARS. AGAINST THE A SSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-1, H YDERABAD. THE CIT(A)-1 HYDERABAD FOR THE REASONS RECORDED IN DETA IL IN HIS ORDER DATED 22.3.2012 DETERMINED THE TOTAL INCOME OF RS.17.24 C RORES FOR THE PERIOD FROM 2004-05 TO 2009-10. THE DETAILS OF INCOME RETU RNED BY THE ASSESSEE U/S 139(1) OF THE ACT, UNDISCLOSED INCOME ADMITTED U/S 132(4) OF THE ACT, INCOME RETURNED IN RESPONSE TO NOTICE U /S 153A OF THE ACT, INCOME ASSESSED BY THE A.O. U/S 153A OF THE ACT AND INCOME FINALLY ASSESSED AS PER CIT(A) ORDER IS GIVEN FOR READY REF ERENCE. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 20 ASST. YEAR INCOME RETURNED/ ASSESSED U/S 139(1) UNDISCLOSED INCOME OFFERED U/S 132(4) RETURNED INCOME IN RESPONSE TO NOTICE U/S 153A ASSESSED INCOME U/S 153A NET INCOME AS PER CIT(A)S ORDER 2004-05 49,92,530 1,38,00,000 1,87,92,530 3,07,92,526 3,07,92,526 2005-06 47,93,410 -- 47,93,410 5,57,48,365 5,38,45,419 2006-07 52,17,210 1,37,00,000 1,89,17,210 3,86,35,137 1,73,51,245 2007-08 60,52,300 -- 60,52,300 2,26,06,171 3,17,87,813 2008-09 48,17,730 3,10,00,000 3,58,17,730 4,47,03,389 5,23,61,797 2009-10 81,78,620 10,39,00,000 11,20,78,620 5,55,68,460 NIL 13. THE A.O. LEVIED PENALTY U/S 271(1)(C) OF THE AC T, ON THE GROUND THAT THE ASSESSEE HAS WILLFULLY CONCEALED THE PARTI CULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WHICH IS EVIDENCED FROM THE FACT THAT HE DID NOT OFFERED THE ADDITIONAL INCOME DISCLOSED IN THE RETURN FILED IN RESPONSE TO SECTION 153A OF THE ACT, IN TH E RETURN FILED U/S 139(1) OF THE ACT. THE A.O. HAS LEVIED PENALTY ON 2 LIMBS OF THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. THE A.O . LEVIED PENALTY ON THE ADDITIONAL INCOME DECLARED BY THE ASSESSEE IN THE R ETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, BY INVOKING THE PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT. SIM ILARLY, THE A.O. LEVIED PENALTY BY INVOKING PART A OF EXPLANATION 1 OF SECT ION 271(1)(C) OF THE ACT, IN RESPECT OF ADDITIONS MADE TO THE RETURNED I NCOME. THE A.O. WAS OF THE OPINION THAT IT IS A CLEAR CASE OF CONCEALME NT OF INCOME AS THE ASSESSEE NEITHER DISCLOSED THE TRUE AND CORRECT INC OME IN THE ORIGINAL RETURN FILED U/S 139(1) OF THE ACT, NOR RETURN FILE D IN RESPONSE TO NOTICE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 21 U/S 153A OF THE ACT. THE A.O. FURTHER WAS OF THE OP INION THAT IF THE SEARCH COULD NOT HAVE TAKEN PLACE THE ASSESSEE WOUL D NOT HAVE DISCLOSED TRUE AND CORRECT INCOME. THE ASSESSEE WAS COMPELLED TO DISCLOSE UNDISCLOSED INCOME BY VIRTUE OF INCRIMINAT ING DOCUMENTS, THEREFORE, IT CANNOT BE CONSIDERED AS VOLUNTARY DIS CLOSURE OF INCOME BY THE ASSESSEE. THE A.O. FURTHER HELD THAT WHETHER OR NOT THE ASSESSEE HAS FILED THE RETURN U/S 139(1) OF THE ACT, IN VIEW OF THE AMENDED PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)(C) O F THE ACT, ONCE THERE IS A DIFFERENCE BETWEEN INCOME AS PER REVISED RETUR N FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND INCOME AS PER RETURN FILED U/S 139(1) OF THE ACT, THEN THE DEEMING FICTION PROVIDED UNDER EX PLANATION 5A WOULD ATTRACT. IN THE PRESENT CASE ON HAND, FROM THE REC ORDS, IT IS CLEAR THAT THE ASSESSEE HAD NOT DISCLOSED THE UNDISCLOSED INCO ME IN THE ORIGINAL RETURN FILED U/S 139(1) OF THE ACT. THOUGH ASSESSE E DECLARED ADDITIONAL INCOME IN THE RETURN FILED IN RESPONSE TO NOTICE U/ S 153A OF THE ACT, IN VIEW OF THE CLEAR PROVISIONS OF EXPLANATION 5A OF S ECTION 271(1)( C) THE PENALTY IS LEVIABLE. IT IS THE CONTENTION OF THE A SSESSEE THAT THE A.O. WAS NOT CORRECT IN HOLDING THAT THERE IS A CONCEALM ENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME, AS HE HAD DISCLOSED UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SE ARCH IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. T HOUGH THE A.O. HAS ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 22 ASSESSED SLIGHTLY HIGHER INCOME, THAN THE INCOME RE TURNED WHICH WAS OCCURRED DUE TO THE FACT THAT THE CIT(A) HAS REWORK ED THE PEAK CREDIT BY ALLOWING TELESCOPING OF INTER BRANCH TRANSFERS AND ALSO ACCRUAL OF INTEREST ON FEW DEPOSITS WHICH WAS DISOWNED BY THE ASSESSEE. THEREFORE, THE A.O. WAS NOT CORRECT IN HOLDING THAT THERE IS A CON CEALMENT OF INCOME WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT HE HAD ADMITTED THE ADDITION AL INCOME DURING THE COURSE OF SEARCH AND FURTHER FOLLOWED BY FILING OF THE RETURN AND ALSO PAID THE RESULTANT TAX BEFORE FILING OF THE RETURN OF INCOME. HE WAS UNDER THE BONAFIDE BELIEF THAT ONCE THE INCOME WAS DISCLOSED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132( 4) OF THE ACT, HE WOULD GET IMMUNITY FROM PENALTY PROVISIONS. IT WAS FURTHER CONTENDED THAT THE ADDITION MADE BY THE A.O. IS PURELY ON EST IMATION BASIS AND THE UNDISCLOSED INCOME WAS QUANTIFIED BY WORKING OUT TH E PEAK CREDIT FOR THE RELEVANT PERIOD. THE ASSESSEE FURTHER STATED T HAT HE HAS DISOWNED CERTAIN RD. ACCOUNTS. HOWEVER, THE A.O. HAS CONSID ERED THE SAME DEPOSITS BASED ON THE STATEMENT GIVEN BY THE THIRD PARTIES WITHOUT CONFRONTING THE STATEMENTS FOR HIS REBUTTAL. UNDER THESE CIRCUMSTANCES LEVY OF PENALTY FOR ESTIMATED INCOME IS NOT CORRECT . 14. THE QUESTION BEFORE US IS WHETHER THERE IS A CO NCEALMENT OF INCOME, WHICH WARRANTS LEVY OF PENALTY UNDER EXPLAN ATION 1 AND ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 23 EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT. BE FORE WE GO INTO THE FACTS OF THE CASE, LET US UNDERSTAND THE POSITION O F LAW AS ENUMERATED U/S 271(1)(C) OF THE ACT. SECTION 271(1)(C) OF THE ACT PROVIDES FOR LEVY OF PENALTY, IN A CASE WHERE THE A.O. OR CIT(A) IS S ATISFIED THAT THE PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, SUCH PERSON, MAY BE DIRECTED TO PAY, PENALTY A SUM NOT LESS THAN 100% AND NOT MORE THAN 300% OF TAX SOUGHT TO BE EVADED. EXPLANATION 1 APPENDED TO SEC TION 271(1)(C) OF THE ACT PROVIDES FOR LEVY OF PENALTY, IF THAT PERSO N FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY SUCH PERS ON IS FOUND TO BE FALSE OR THE EXPLANATION OFFERED BY HIM IS NOT SUBS TANTIATED AND HE FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL FACTS RELATING TO THE SUM AND MATERIAL TO THE COMPUTATION OF HIS TOTA L INCOME HAS BEEN DISCLOSED BY HIM. THEREFORE, TO LEVY A PENALTY, TH E ASSESSING OFFICER HAS TO SATISFY HIMSELF THAT THE EXPLANATIONS OFFERED BY THE ASSESSEE IS NOT BONAFIDE OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SUBSTANTIATED WITH ANY EVIDENCES. IN THE PRESENT CASE ON HAND, T HE CONTENTION OF THE ASSESSEE THAT HE HAD ADMITTED THE UNDISCLOSED INCOM E AS SOON AS THE DEPARTMENT HAS FOUND THE INCRIMINATING MATERIAL AND DECLARED SUCH UNDISCLOSED INCOME IN THE RETURNS FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, FURTHER FOLLOWED BY PAYMENT OF TAXES BEFOR E FILING OF RETURN. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 24 THE ASSESSEE EXPLAINED THAT THE A.O. HAS QUANTIFIED THE PEAK CREDIT WITHOUT ALLOWING THE TELESCOPING BENEFIT TOWARDS IN TER BRANCH TRANSFERS. THEREFORE, THE INCOME ASSESSED BY THE A.O. IS SLIGH TLY HIGHER THAN THE INCOME DECLARED IN THE RETURN. HOWEVER, THE CIT(A) HAS ALLOWED THE PLEA OF THE ASSESSEE AND TELESCOPED THE INTER BRANC H TRANSFER AND AFTER TELESCOPING THE INTER BRANCH TRANSFER WORKED OUT TH E PEAK CREDIT AS PER WHICH THE TOTAL ASSESSED INCOME FOR THE PERIOD FROM 2004-05 TO 2009-10 WAS SLIGHTLY HIGHER THAN THE INCOME DECLARED BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THE SAID DIFFERENCE AND STAT ED THAT THE DIFFERENCE IS BECAUSE OF REWORKING PEAK CREDIT BY ALLOWING THE INTER BRANCH TRANSFERS AND ALSO INTEREST ACCRUED ON THE DISOWNED THIRD PARTY RECURRING DEPOSIT ACCOUNTS WHICH CANNOT BE CONSIDERED AS CONC EALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREF ORE, WE ARE OF THE VIEW THAT THE EXPLANATION OFFERED BY THE ASSESSEE I S BONAFIDE AND ALSO SUBSTANTIATED WITH THE EVIDENCES AND HENCE, THE A.O . WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLA NATIONS FOR THE CONCEALMENT OF PARTICULARS OF INCOME. 15. THE A.O. HAS LEVIED PENALTY UNDER TWO LIMBS OF THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT. PENALTY ON THE ADDITIONA L INCOME ADMITTED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, BY INVOKING THE PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)( C) OF THE ACT AND ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 25 PENALTY ON ADDITIONS TO RETURNED INCOME, BY INVOKIN G PART A OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. AS R EGARDS THE LEVY OF PENALTY ON ADDITIONAL INCOME ADMITTED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT, THE A.O. WAS OF THE OPI NION THAT IN VIEW OF THE CLEAR PROVISIONS OF EXPLANATION 5A TO SECTION 2 71(1)(C) OF THE ACT, WHETHER OR NOT THE ASSESSEE HAS FILED RETURN U/S 13 9(1) OF THE ACT, THE DIFFERENCE BETWEEN INCOME ADMITTED IN THE REVISED R ETURN FILED U/S 153A OF THE ACT AND RETURNS FILED U/S 139(1) OF THE ACT WOULD COME WITHIN THE DEEMING FICTION PROVIDED UNDER EXPLANATION 5A OF TH E ACT. THE A.O. FURTHER WAS OF THE OPINION THAT AS PER THE AMENDED PROVISIONS OF EXPLANATION 5A, WHICH WAS AMENDED BY THE FINANCE AC T, 2009 WITH RETROSPECTIVE EFFECT FROM 1.6.2007, IT COVERS THE C ASES WHERE THE SEARCH HAS BEEN TAKEN PLACE ON OR AFTER 1.6.2007 AND THE A SSESSEE HAS NOT DISCLOSED THE UNDISCLOSED INCOME IN THE RETURN FILE D U/S 139(1) OF THE ACT. THEREFORE, THE A.O. HELD THAT ASSESSEE HAS FIL ED THE REGULAR RETURN UNDER THE PROVISIONS OF SECTION 139(1) OF THE ACT F OR THE RESPECTIVE ASSESSMENT YEARS AND NOT DISCLOSED UNDISCLOSED INCO ME DETECTED DURING THE COURSE OF SEARCH IN THE ORIGINAL RETURNS, THOUG H SAID INCOME HAS BEEN ADMITTED IN THE REVISED RETURN, FOR THE PURPOS E OF CLAUSE (C) OF SECTION 271(1)(C) OF THE ACT, THE ASSESSEE DEEMED T O HAVE CONCEALED THE PARTICULARS OF INCOME. IN THE PRESENT CASE ON HAND, FROM THE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 26 RECORDS IT IS CLEAR THAT THE ASSESSEE HAD FILED THE RETURN U/S 139(1) OF THE ACT AND NOT DISCLOSED THE UNDISCLOSED INCOME DE TECTED DURING THE COURSE OF SEARCH. THEREFORE, THE DIFFERENCE BETWEE N UNDISCLOSED INCOME DECLARED IN THE RETURN IN RESPONSE TO NOTICE U/S 15 3A OF THE ACT AND TOTAL INCOME DECLARED IN THE RETURN U/S 139(1) OF THE ACT WOULD FALL UNDER EXPLANATION 5A, ACCORDINGLY, LEVIED THE PENALTY. I T IS THE CONTENTION OF THE ASSESSEE THAT EXPLANATION 5A AS IT STOOD AT THE TIME OF SEARCH APPLIES ONLY TO A NON-FILER ASSESSEE WHO WAS SEARCH ED U/S 132(1) OF THE ACT. THE AMENDMENT BROUGHT OUT BY FINANCE ACT, 2009 , COVERED FILERS WITHIN THE SAID EXPLANATION WITH RETROSPECTIVE EFFE CT, THEREFORE, THE RETROSPECTIVE AMENDMENT BROUGHT OUT BY THE FINANCE ACT, 2009 CANNOT BE MADE APPLICABLE TO THE ASSESSEE, SINCE THE SEARC H TOOK PLACE IN HIS CASE ON 22.11.2008 AND AS ON THAT DATE EXPLANATION 5A AS IT EXISTED ON THE STATUTE BOOK DID NOT APPLY TO A FILER. THEREFOR E, THE ASSESSEE CANNOT BE VISITED WITH THE RIGOROUS OF A PENALTY BY VIRTUE OF A RETROSPECTIVE AMENDMENT. 16. EXPLANATION 5A APPENDED TO SECTION 271(1)(C) OF THE ACT SPECIFICALLY DEALS WITH SEARCH CASES. AS PER THE A MENDED PROVISIONS OF EXPLANATION 5A, WHERE IN THE COURSE OF A SEARCH INI TIATED U/S 132 OF THE ACT ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION OR JEWELLERY AND THE SA ID INCOME REPRESENTS ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 27 HIS INCOME FOR ANY PREVIOUS YEAR WHICH WAS ENDED BE FORE THE DATE OF SEARCH AND THE DUE DATE FOR FILING THE RETURN OF IN COME HAS EXPIRED AND THE ASSESSEE HAS NOT FILED A RETURN, THEN NOTWITHST ANDING THAT SUCH INCOME IS DECLARED BY HIM IN THE RETURN OF INCOME F URNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSE OF IM POSITION OF A PENALTY UNDER CLAUSE (C) OF SUB SECTION 1 OF THIS SECTION, DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE ASSESSEE STRONGLY OB JECTED FOR APPLICATION OF AMENDED PROVISIONS OF THE EXPLANATION 5A OF SECT ION 271(1)(C) OF THE ACT. BEFORE WE GO INTO THE FACTS OF THE PRESENT CA SE, LET US UNDERSTAND THE PROVISIONS OF LAW AS ENUMERATED BY WAY OF EXPLA NATION 5A OF SECTION 271(1)(C) OF THE ACT BEFORE AMENDMENT BY THE FINANC E ACT, 2009 AND AFTER AMENDMENT BY THE FINANCE ACT, 2009 WHICH READ S AS FOLLOWS: EXPLANATION 5A, AS INSERTED BY THE FINANCE ACT, 200 7, W.E.F. 1.6.2007, READ AS UNDER: EXPLANATION 5AWHERE IN THE COURSE OF A SEARCH INIT IATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF,-- (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE OR THING (HEREINAFTE4R IN THIS EXPLANATION REFERRED TO AS AS SETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PR EVIOUS YEAR; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOU NT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRE SENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH AND T HE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH YEAR HAS EXPIR ED AND THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THA T SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED O N OR AFTER THE DATE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 28 OF THE SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSI TION 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. EXPLANATION 5A, AS AMENDED BY THE FINANCE ACT, 200 9, WITH RETROSPECTIVE EFFECT FROM 1.6.2007, READ AS UNDER: EXPLANATION 5A,-- WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE 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 ACCOU NTS OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRE SENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HA S ENDED BEFORE THE DATE OF SEARCH AND,-- (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR H AS 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 SU CH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETU RN, 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 CLAUS E (C) OF SUB SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED TH E PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 17. EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT PROVIDES FOR LEVY OF PENALTY, IN A CASE WHERE IN THE CASE OF A SEARCH IN ITIATED U/S 132 OF THE ACT ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE OWNER OF ANY MONEY OR OTHER ASSETS WHICH REPRESENTS HIS INCOME OF ANY OF PREVIOUS YEAR WHICH IS ENDED BEFORE THE DATE OF SEARCH AND THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH YEAR AS EXPIRED AND THE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 29 ASSESSEE HAS NOT FILED THE RETURN, THEN NOTWITHSTAN DING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHE D ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSE OF IMPOSITION OF PENALTY UNDER CLAUSE (C) OF SUB SECTION 1 OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE SAID EXPLANATION 5A HAS BEEN AMENDED B Y THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.6.2007 AND AS PER THE AMENDED PROVISIONS, WHERE IN THE COURSE OF SEARCH U/S 132 O F THE ACT ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER ASSET WHICH REPR ESENTS HIS INCOME FOR ANY PREVIOUS YEAR WHICH IS ENDED BEFORE THE DATE OF SEARCH AND WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR HAS BEE N FURNISHED BEFORE THE SAID DATE, BUT SUCH INCOME HAS NOT BEEN DECLARE D THEREIN OR THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH PREVI OUS YEAR HAS EXPIRED, BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN NOT WITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME F URNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSE OF IM POSITION OF A PENALTY UNDER CLAUSE (C) OF SUB SECTION 1 OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE INCOME. 18. A PLAIN READING OF PRE AMENDED PROVISIONS OF E XPLANATION 5A OF SECTION 271(1)(C) OF THE ACT MAKES IT CLEAR THAT IT APPLIES TO THE CASES ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 30 WHERE THE ASSESSEE HAS NOT FILED ANY RETURN OF INCO ME FOR THE RESPECTIVE ASSESSMENT YEARS U/S 139(1) OF THE ACT. THE POST A MENDED PROVISIONS OF EXPLANATION 5A BROUGHT OUT TO THE STATUTE INCLUD ED THE CASES WHERE THE ASSESSEE HAS FILED THE RETURN OR NOT U/S 139(1) OF THE ACT, IF THE UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARC H IS NOT DISCLOSED IN THE REGULAR RETURN FILED U/S 139(1) OF THE ACT, THE N THE DEEMING FICTION PROVIDED IN EXPLANATION 5A WOULD APPLICABLE. HOWEV ER, THE NEW EXPLANATION INSERTED IN TO STATUTE BY THE FINANCE A CT, 2009 HAS DONE AWAY WITH THE EXEMPTION FROM PENALTY, IF THE ASSESS EE OFFERS THE PAYMENT IN THE COURSE OF STATEMENT U/S 132(4) OF TH E ACT, 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 ASSESSEE HAD NOT FILED A RETURN OF INCOME BEFORE TH E DUE DATE FOR THE RESPECTIVE YEARS. THUS, AS PER THE EXISTING PROVISI ONS OF EXPLANATION 5A PRIOR TO THE AMENDMENT BY THE FINANCE ACT, 2009, IF AN ASSESSEE HAD FILED THE RETURN OF INCOME FOR THE YEARS COVERED BY THE SEARCH, THEN THE ADDITION MADE SHALL NOT BE CONSIDERED AS DEEMED CON CEALMENT. IT IS ONLY BY THE AMENDMENT TO EXPLANATION 5A BY THE FINA NCE ACT, 2009 (WHICH RECEIVED THE ASCENT OF THE PRESIDENT ON 13.8 .2009), FOR 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 ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 31 EARLIER FOR THE RELEVANT ASSESSMENT YEARS. PRIOR TO THE AMENDMENT, IF AN ASSESSEE HAS ALREADY FILED A RETURN OF INCOME, THE ADDITION MADE IN THE ASSESSMENT U/S 153A OF THE ACT CANNOT BE DEEMED TO BE CONCEALED INCOME. NO DOUBT THE AMENDMENT TO EXPLANATION 5A HA S BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1.6.2007 AND IS APPLICABLE TO SEARCHES INITIATED ON OR AFTER 1.6.2007. THE ISSUE IS WHETHER THIS AMENDMENT TO EXPLANATION WILL APPLY TO SEARCHES CON DUCTED OR RETURNS FILED BEFORE THE AMENDED EXPLANATION BECOME PART OF THE STATUTE IN 2009. IN OUR CONSIDERED VIEW, THOUGH THE AMENDMENT WAS BROUGHT WITH RETROSPECTIVE EFFECT FROM 1.6.2007, FOR THE PURPOSE OF RIGOROUS PROVISIONS OF LEVY OF PENALTY, THE RETROSPECTIVE AM ENDMENT CANNOT BE MADE APPLICABLE. WHAT IS IMPORTANT IS THAT IT IS THE DATE OF FILING THE RETURN WHICH IS RELEVANT FOR THE PURPOSE OF CONCEAL MENT, BECAUSE IT WAS ON THAT DATE THE CONCEALMENT OF INCOME OCCURS. 19. COMING TO THE FACTS OF THE PRESENT CASE ON HAND . IN THE PRESENT CASE ON HAND, ADMITTEDLY, THE ASSESSEE HAS FILED TH E REGULAR RETURNS U/S 139(1) OF THE ACT FOR THE RESPECTIVE ASSESSMENT YEA RS. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NOT DISCLOSED T HE UNDISCLOSED INCOME QUANTIFIED DURING THE COURSE OF SEARCH PROCE EDINGS, IN THE RETURNS FILED UNDER THE PROVISIONS OF SECTION 139(1 ) OF THE ACT. HOWEVER, THE ASSESSEE HAS ADMITTED UNDISCLOSED INCOME IN THE STATEMENT ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 32 RECORDED U/S 132(4) OF THE ACT DURING THE COURSE OF SEARCH AND FOLLOWED BY FILING OF RETURN U/S 153A OF THE ACT AND PAID TH E TAXES. THE SEARCH IS TOOK PLACE ON 22.11.2008. THE ASSESSEE HAS FILED T HE RETURNS U/S 153A OF THE ACT FOR ALL THE ASSESSMENT YEARS ON 11.5.200 9. IN THE INSTANT CASE, THE ASSESSEE HAD FILED ORIGINAL RETURN OF INC OME AND REVISED RETURN OF INCOME PURSUANT TO NOTICE U/S 153A OF THE ACT AN D BOTH THE ORIGINAL AND REVISED RETURNS WERE FILED BEFORE THE AMENDED E XPLANATION 5A BECOMES PART OF THE STATUTE (WHICH RECEIVED THE ASC ENT OF THE PRESIDENT ON 13.8.2009). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AMENDED PROVISIONS OF EXPLANATION 5A OF SECTION 271 (1)(C) OF THE ACT CANNOT BE MADE APPLICABLE FOR THE PURPOSE OF LEVY O F PENALTY. 20. THE A.O. LEVIED PENALTY FOR THE REASON THAT WHE THER OR NOT ORIGINAL RETURNS U/S 139(1) OF THE ACT WAS FILED BEFORE THE DATE OF SEARCH, ONCE THERE WAS A DIFFERENCE BETWEEN THE INCOME ADMITTED IN THE REVISED RETURN U/S 153A OF THE ACT AND RETURN FILED U/S 139 (1) OF THE ACT, THEN THE DEEMING FICTION PROVIDED BY THE STATUTE BY WAY OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS APPLICABLE. WE DO N OT SEE ANY MERITS IN THE ARGUMENTS OF THE ASSESSING OFFICER, FOR THE REA SON THAT FOR CLAIMING IMMUNITY FROM PAYMENT OF PENALTY UNDER EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT, THREE CONDITIONS HAVE TO BE S ATISFIED BY THE ASSESSEE. FIRSTLY, THE ASSESSEE MUST MAKE A STATEM ENT U/S 132(4) OF ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 33 THE ACT IN THE COURSE OF SEARCH STATING THAT UNACCO UNTED ASSETS AND INCRIMINATING DOCUMENTS FOUND FROM HIS POSSESSION D URING THE SEARCH HAVE BEEN ACQUIRED OUT OF HIS INCOME, WHICH WAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME TO BE FURNISHED BEFORE EXPIRY OF TIME SPECIFIED IN SECTION 139(1) OF THE ACT. SECONDLY, ASSESSEE SHOU LD SPECIFY IN HIS STATEMENT U/S 132(4) OF THE ACT, THE MANNER IN WHIC H SUCH INCOME STOOD DERIVED. THIRDLY, ASSESSEE HAS TO PAY TAX WITH INT EREST, IF ANY IN RESPECT OF SUCH UNDISCLOSED INCOME, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. GEBILAL KANHAIYALAL (HUF)(2012 ) 348 ITR 561 (SC). IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DOCU MENTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS ADMITTED THE UNDISCLOSED INCOME IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. T HE ASSESSEE ALSO FILED THE RETURN IN RESPONSE TO NOTICE U/S 153A OF THE AC T AND DECLARED THE UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SE ARCH. FINALLY, THE ASSESSEE HAS PAID THE RELEVANT TAXES ALONG WITH INT EREST IF ANY IN RESPECT OF SUCH UNDISCLOSED INCOME BEFORE FILING THE RETURN OF INCOME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IMMUN ITY PROVIDED UNDER EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT IS N OT TAKEN AWAY FOR THE SIMPLE REASON THAT THE INCOME DISCLOSED BY THE ASSE SSEE IN THE STATEMENT U/S 132(4) OF THE ACT FOR A PARTICULAR YE AR WAS ENHANCED BY THE A.O. OR RESHUFFLED BY THE A.O. FOR ONE OR OTHER REASONS. WHAT IS ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 34 IMPORTANT IS, IS THERE ANY ADMISSION OF UNDISCLOSED INCOME WHICH WAS FURTHER FOLLOWED BY FILING OF THE RETURN ADMITTING SUCH UNDISCLOSED INCOME AND PAYMENT OF TAXES. THE ASSESSEE HAS FULFI LLED ALL THE CONDITIONS, WHICH LIABLE FOR IMMUNITY FROM THE LEVY OF PENALTY UNDER EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. TH EREFORE, WE DIRECT THE A.O. TO DELETE THE PENALTY LEVIED BY INVOKING THE E XPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. 21. COMING THE SECOND LIMB OF THE PROVISIONS OF SEC TION 271(1)(C) OF THE ACT. THE A.O. LEVIED PENALTY UNDER PART A OF EX PLANATION 1 TO SECTION 271(1)(C) OF THE ACT FOR ADDITIONS MADE TO THE RETU RNED INCOME. THE A.O. LEVIED THE PENALTY FOR THE REASON THAT THE ASS ESSEE HAS NOT DISCLOSED THE TRUE AND CORRECT INCOME, EVEN AFTER T HE ADMISSION DURING THE COURSE OF STATEMENT RECORDED U/S 132(4) OF THE ACT. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE HAS DI SOWNED CERTAIN RECURRING DEPOSITS, HOWEVER, FAILED TO PROVE THAT T HOSE DEPOSITS ARE NOT BELONG TO HIM. THE A.O. WHILE ENHANCING THE INCOME HAS BROUGHT ON RECORD THE PAPER TRIAL WHICH ESTABLISHES A LINK BET WEEN THE DENIED DEPOSITS AND OTHER BENAMI RECURRING DEPOSITS ADMITT ED BY THE ASSESSEE. ACCORDING TO THE A.O., THERE IS A SUFFICIENT EVIDEN CE TO LINK THE DENIED DEPOSITS TO THE DEPOSITS ADMITTED BY THE ASSESSEE D URING THE COURSE OF SEARCH. IT IS THE CONTENTION OF THE ASSESSEE THAT THOSE DEPOSITS WHICH ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 35 ARE DENIED BY HIM ARE NOT BELONGING TO HIM. THE A. O. HAS CONSIDERED THOSE DEPOSITS AS HIS UNDISCLOSED INCOME BASED ON T HE DEPOSITION GIVEN BY THE BANK MANAGERS WITHOUT CONFRONTING THE STATEM ENT OF BANK MANAGERS FOR HIS REBUTTAL. HOWEVER, THE ASSESSEE B EFORE THE CIT(A) HAS GIVEN A CONDITIONAL ACCEPTANCE THAT IF THE TELESCOP ING IS ALLOWED FOR INTER BRANCH TRANSFER, THEN HE WOULD OWN THE 4 DISOWNED R ECURRING DEPOSITS AS HIS UNDISCLOSED INCOME. THE CIT(A) AFTER CONSIDE RING THE EXPLANATIONS OF THE ASSESSEE ALLOWED THE TELESCOPING OF INTER BR ANCH TRANSFER AND REWORKED THE UNDISCLOSED INCOME FOR THE PERIOD FROM 2004-05 TO 2009-10. ACCORDING TO THE WORKINGS OF THE CIT(A), T HE PEAK CREDIT FOR THE ABOVE PERIOD INCLUDING ACCRUED INTEREST HAS WOR KED OUT TO RS.17.24 CRORES. THE ASSESSEE FURTHER STATED THAT THE INCOME FINALLY ASSESSED AS PER THE ORDER OF CIT(A) HAS BEEN WORKED OUT TO RS.1 7.24 CRORES WHICH IS MARGINALLY HIGHER THAN THE INCOME DECLARED BY THE A SSESSEE IN HIS REVISED RETURN U/S 153A OF THE ACT. THE ASSESSEE A LSO EXPLAINED THE REASONS FOR THE DIFFERENCE BETWEEN THE ENHANCED INC OME AND INCOME ADMITTED BY HIM. ACCORDING TO THE ASSESSEE, THE DI FFERENCE IS OCCURRED BECAUSE OF REWORKING OF THE PEAK CREDIT AFTER ALLOW ING THE INTER BRANCH TRANSFERS AND ALSO ACCRUED INTEREST ON THOSE DENIED DEPOSITS. THEREFORE, IT CANNOT BE HELD THAT THERE IS A PURPOSEFUL CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 36 22. WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESS EE AND ALSO PERUSED THE DOCUMENTS AVAILABLE ON RECORD. THE A.O . LEVIED PENALTY ON ADDITIONS MADE TO THE RETURNED INCOME BY INVOKING T HE PROVISIONS OF PART A OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE DISOWNED DEPOSITS WITH ANY EVIDENCES. ON THE OTHER HAND, HE HAD GATHERED SUFFICIENT EVIDENCES AND INTERLINKED THE DISOWNED D EPOSITS TO THE DEPOSIT ACCEPTED BY THE ASSESSEE. THEREFORE, THERE IS A CL EAR CONCEALMENT OF INCOME AND ASSESSEE HAS NOT OFFERED ANY EXPLANATION , THEREFORE LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT. IT IS THE CO NTENTION OF THE ASSESSEE THAT THERE IS NO WILLFUL CONCEALMENT OF INCOME AND THE ADDITIONS MADE BY THE A.O. HAS BEEN SUBSTANTIALLY REDUCED BY THE CIT( A) AND AFTER THE ORDER OF CIT(A), THE FINAL INCOME ASSESSED HAS BEEN MARGINALLY HIGHER THAN BY RS.0.61 CRORES, WHEN COMPARED TO UNDISCLOSE D INCOME ADMITTED BY THE ASSESSEE. THEREFORE, NO PENALTY IS LEVIABLE U/S 271(1)(C) OF THE ACT. 23. THE QUESTION WHETHER THERE WAS A REASONABLE CAU SE FOR WHICH THE REQUIREMENT OF CONCERNED PROVISIONS OF SECTION COUL D NOT BE COMPLIED WITH IS PRIMARILY AN ESSENTIAL QUESTION OF FACT AND IT HAS TO BE DECIDED ON EACH CASE ON CONSIDERATION OF MATERIALS PLACED BEFO RE THE CONCERNED AUTHORITIES. THE LEVY OF PENALTY U/S 271(1)(C) OF T HE ACT IS NOT AUTOMATIC. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 37 BEFORE LEVYING THE PENALTY, THE CONCERNED AUTHORITY IS REQUIRED TO FIND OUT THAT EVEN THERE WAS ANY VIOLATION REFERRED TO I N THE SAID PROVISIONS OF THE ACT AND THE SAME WAS WITHOUT A REASONABLE CA USE. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTS A REASONABLE CAUSE, WHICH WAS THE REASON FOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISIONS. THEREFORE, THE ASSESSING OFFICER DEALI NG WITH THE MATTER IS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASS ESSEE OR THE PERSON AS THE CASE MAY BE AS REGARDS THE REASON WAS ON ACC OUNT OF REASONABLE CAUSE. IN THE PRESENT CASE ON HAND, RIGHT FROM THE BEGINNING, THE ASSESSEE CONTENDS THAT THE DISOWNED DEPOSITS ARE NO T BELONGING TO HIM. THOUGH THE A.O. HAS LINKED THE DISOWNED DEPOSITS BA SED ON THE THIRD PARTY STATEMENT, THE SAME HAS NOT BEEN CONFRONTED T O THE ASSESSEE FOR HIS REBUTTAL. ON THE OTHER HAND, THE ASSESSEE HAS EXPLAINED THAT THE INCOME FINALLY ASSESSED BY THE A.O. IS MARGINALLY H IGHER THAN THE INCOME ADMITTED BY THE ASSESSEE. THE SAID DIFFERENCE IS O CCURRED ON ACCOUNT OF ERROR IN REWORKING OF THE PEAK CREDIT AFTER ALLOWIN G THE INTER BRANCH TRANSFERS AND ALSO INTEREST ACCRUALS ON THOSE DISOW NED DEPOSITS. THEREFORE, WE ARE OF THE VIEW THAT THE EXPLANATION OFFERED BY THE ASSESSEE APPEARS TO BE REASONABLE AND ALSO BONAFIDE . THE A.O. WITHOUT CONSIDERING THE EXPLANATIONS OFFERED BY THE ASSESSE E INVOKED THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND LEVI ED THE PENALTY. WE ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 38 FURTHER OBSERVED THAT THE ADDITION MADE TO BY THE A .O. IS ON ACCOUNT OF ESTIMATION OF PEAK CREDIT BASED ON THE INTRA BRANCH TRANSFERS AND ALSO INTEREST ACCRUED ON SUCH DEPOSITS, THEREFORE, THIS CANNOT BE A CASE OF WILLFUL CONCEALMENT OF INCOME SO AS TO ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. 24. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE RELIED UPON PLETHORA OF JUDGEMENTS IN SUPP ORT OF HIS ARGUMENTS. THE ASSESSEE RELIED UPON THE DECISION O F HONBLE SUPREME COURT, IN THE CASE OF ACIT VS. GEBILAL KANHAIYALAL (HUF) (SUPRA). THE HONBLE SUPREME COURT, IN THE SAID CASE HELD THAT F OR CLAIMING IMMUNITY FROM PAYMENT OF PENALTY UNDER CLAUSE (2) OF EXPLANA TION 5A TO SECTION 271(1)(C) OF THE ACT, THREE CONDITIONS HAVE TO BE S ATISFIED BY THE ASSESSEE. FIRSTLY, THE ASSESSEE MUST MAKE A STATEM ENT U/S 132(4) OF THE ACT, IN THE COURSE OF SEARCH STATING THAT UNACC OUNTED ASSETS FOUND DURING THE COURSE OF SEARCH HAVE BEEN ACQUIRED OUT OF HIS INCOME, WHICH HAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME TO B E FURNISHED BEFORE EXPIRY OF TIME SPECIFIED U/S 139(1) OF THE ACT. SE CONDLY, THE ASSESSEE SHOULD SPECIFY IN HIS STATEMENT U/S 132(4) OF THE A CT, THE MANNER IN WHICH SUCH INCOME STOOD DERIVED. THIRDLY, THE ASSE SSEE HAS TO PAY TAX TOGETHER WITH INTEREST IF ANY, IN RESPECT OF SUCH U NDISCLOSED INCOME. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 39 EXPLANATION 5 IS A DEEMING PROVISION WHICH PROVIDE S WHERE, IN COURSE OF SEARCH U/S. 132, ASSESSEE IS FOUND TO BE OWNER OF UNACCOUNTED ASSETS AND ASSESSEE CLAIMS THAT SUCH AS SETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING, WHOLLY OR PARTLY , HIS INCOME FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE DATE OF SEARCH OR WHICH IS TO END ON OR AFTER THE DATE OF SEARCH, THEN, IN SUCH A SITUATION, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER DATE OF SEARCH, HE SHA LL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME FOR TH E PURPOSES OF IMPOSITION OF PENALTY U/S. 271(1)(C). ONLY EXCEPTIO NS TO SUCH A DEEMING PROVISION OR TO SUCH A PRESUMPTION OF CONCE ALMENT ARE GIVEN IN SUB-CLAUSES (1) AND (2) OF EXPLANATION 5. THREE CONDITIONS HAVE GOT TO BE SATISFIED BY ASSESSEE, FOR CLAIMING IMMUNITY FROM PAYMENT OF PENALTY UNDER CL. (2) OF EXPL. 5 TO S. 271 (1)(C), I.E. CONDITION NO. 1. ASSESSEE MUST MAKE A STATEMENT U/S. 132(4) IN COURS E OF SEARCH STATING THAT UNACCOUNTED ASSETS AND INCRIMINATING D OCUMENTS FOUND FROM HIS POSSESSION DURING THE SEARCH HAVE BEEN ACQ UIRED OUT OF HIS INCOME, WHICH HAS NOT BEEN DISCLOSED IN RETURN OF I NCOME TO BE FURNISHED BEFORE EXPIRY OF TIME SPECIFIED IN S. 139 (1), SUCH STATEMENT WAS MADE BY KARTA DURING SEARCH WHICH CONCLUDED ON AUGUST 1, 1987. CONDITION NO.1 WAS FULFILLED. CONDITION NO. 2 . ASSESSEE SHOULD SPECIFY, IN HIS STATEMENT U/S. 132(4), MANNER IN WH ICH SUCH INCOME STOOD DERIVED. CONDITION NO. 2 ALSO SATISFIED. COND ITION NO. 3. ASSESSEE HAD TO PAY TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH UNDISCLOSED INCOME. HOWEVER, AS NO TIME LIMIT FOR PAYMENT OF SUCH TAX STOOD PRESCRIBED UNDER CLAUSE (2), THIRD C ONDITION ALSO STOOD FULFILLED. ASSESSEE HAS PAID TAX WITH INTEREST UPTO DATE OF PAYMENT. THEREFORE, ASSESSEE WAS ENTITLED TO IMMUNITY UNDER CL. (2) OF EXPL. 5 TO S. 271(1)(C). APPEAL DISMISSED. 25. THE ASSESSEE RELIED UPON THE DECISION OF HONBL E PUNJAB & HARYANA HIGH COURT, IN THE CASE OF CIT VS. BHAN SIN GH BOOTA SINGH (1974) 95 ITR 562. THE HONBLE HIGH COURT HELD THA T THE LAW APPLICABLE FOR THE PURPOSE OF LEVYING PENALTY IS THE LAW IN EX ISTENCE ON THE DATE OF FILING OF RETURN ON WHICH DATE THE CONCEALMENT HAD TAKEN PLACE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 40 IT IS COMMON GROUND THAT THE EXPLANATION WAS ADDED BY THE FINANCE ACT OF 1964 W.E.F. 1ST APRIL, 1964. IN FACT, CI. (C ) OF S. 271(1) WAS AMENDED AND THE WORD 'DELIBERATELY' WAS OMITTED. TH E ANSWER TO THE QUESTION THAT HAS BEEN REFERRED LIES IN THE ANSWER TO THE QUESTION AS TO WHEN THE CONCEALMENT TOOK PLACE. SO FAR AS THE D EPARTMENT IS CONCERNED, IT IS MAINTAINED, THAT THE CONCEALMENT W ILL BE WHEN THE TRUE STATE OF FACTS IS NOT DISCLOSED TO THE DEPARTM ENT IN THE RETURN, I.E., THE TRUE PARTICULARS OF THE INCOME ARE NOT DI SCLOSED TO IT IN THE RETURN THAT IS FILED. THEREFORE, THE DISCLOSURE, SO FAR AS THE DEPARTMENT IS CONCERNED, IS NECESSARILY BY A RETURN . IF THE RETURN HAD BEEN FILED BEFORE 1ST APRIL, 1964, OBVIOUSLY THE PR OVISIONS OF S. 40 OF THE FINANCE ACT OF 1964 WOULD NOT HAVE COME INTO PL AY. THIS IS CONCEDED BY THE COUNSEL FOR THE DEPARTMENT. BUT, IN THE PRESENT CASE, THE RETURN WAS FILED ON 9TH OF APRIL, 1964, WHEN TH E PROVISIONS OF S. 271, AS THEY EMERGE AFTER THE FINANCE ACT OF 1964, HAD COME INTO OPERATION. THEREFORE, THOSE PROVISIONS MUST GOVERN THE CASE BECAUSE THE CONCEALMENT WOULD BE WHEN THE RETURN IS FILED, AND NOT PRIOR TO IT. IT IS ONLY WHEN THE MATERIAL IS FURNISHED TO THE DE PARTMENT THAT THEY ARE IN A POSIT/ON TO ARRIVE AT A FINDING WHETHER TH ERE IS OR THERE IS NO CONCEALMENT. IT IS THE RETURN THAT IS FILED WHICH H AS TO BE SEEN TO DETERMINE WHETHER THERE HAS BEEN CONCEALMENT OR NOT . IT IS NO DOUBT TRUE THAT IN THE MATTER OF ASSESSMENT OF INCOME, TH E LAW, AS IT PREVAILS ON THE FIRST DAY OF THE ASSESSMENT YEAR, WILL BE AP PLICABLE. BUT THAT WOULD NOT BE THE POSITION IN THE CASE OF IMPOSITION OF PENALTY. IN THE PRESENT CASE THE RETURN WAS FILED ON 9TH OF APRIL, 1964, WHEN S. 271, AS IT STANDS AMENDED, WAS ON THE STATUTE BOOK AND, THEREFORE, EFFECT HAD TO BE GIVEN TO THE PROVISION. SAEED AHMAD VS. IAC (1971) 79 ITR 28 (ALL) RELIED ON. 26. THE ASSESSEE RELIED UPON THE DECISION OF ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS. RADHA KISHAN GOEL (2005) 278 IT R 454. THE HONBLE HIGH COURT HELD THAT AN EXCEPTION IS PROVIDED IN CL AUSE (2) OF EXPLANATION 5, WHERE THE DEEMING PROVISION WILL NOT APPLY, IF DURING THE COURSE OF SEARCH, THE ASSESSEE MAKES THE STATEMENT UNDER SUB SECTION 4 OF SECTION 132 OF THE ACT THAT THE UNACCOUNTED INCO ME FOUND IN HIS POSSESSION HAS BEEN ACQUIRED OUT OF HIS INCOME WHIC H HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURN ISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SECTION 139 OF THE ACT AND ALS O SPECIFIED IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND ALSO ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 41 PAYS THE TAX TOGETHER WITH INTEREST IF ANY, IN RESP ECT OF SAID INCOME. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELO W: FROM A PERUSAL OF EXPLN. 5 IT IS EVIDENT THAT IN C IRCUMSTANCES WHICH OTHERWISE DID NOT ATTRACT THE PENALTY PROVISIONS OF S. 271(1)(C), A DEEMING PROVISION WAS INTRODUCED AS TO ATTRACT THE PENALTY PROVISIONS TO THOSE CASES AS WELL. BUT AN EXCEPTION IS PROVIDE D IN CL. (2) OF EXPLN. 5 WHERE THE DEEMING PROVISION WILL NOT APPLY IF DUR ING THE COURSE OF SEARCH THE ASSESSEE MAKES THE STATEMENT UNDER SUB-S . (4) OF S. 132 THAT THE MONEY, BULLION, JEWELLERY, ETC., FOUND IN HIS POSSESSION HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXP IRY OF TIME SPECIFIED IN S. 139 AND ALSO SPECIFIES IN THE STATEMENT THE M ANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER W ITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. THE EXCEPTION APPEA RS TO BE TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO MAKE A CLEAN AND FAIR CONFESSION AND TO SURRENDER HIS INCOME AND ALSO TO DEPOSIT THE TAX AND INTEREST THEREON WHICH MAY RESULT IN AN AGREED ASSESSMENT. T HE PARAMOUNT INTENTION APPEARS TO BE THAT IN THE CASE OF FAIR AN D CLEAN CONFESSION AND SURRENDER OF HIS INCOME, DURING THE COURSE OF S EARCH FURTHER LITIGATION MAY BE AVOIDED AND THE REVENUE MAY GET T HE TAX AND INTEREST, ETC., AT AN EARLIEST AND THE ASSESSEE MAY BE SAVED FROM FURTHER LITIGATION. UNDER S. 132(4), IT IS THE AUTH ORISED OFFICER, WHO EXAMINES ON OATH ANY PERSON, WHO IS FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUNT, DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING, THEREFORE, IT I S FOR THE AUTHORISED OFFICER TO RECORD THE STATEMENT IN HIS OWN WAY. THE REFORE, IT IS NOT EXPECTED FROM THE PERSON TO STATE THOSE THINGS, WHI CH ARE NOT ASKED BY THE AUTHORISED OFFICER. DURING THE COURSE OF SEA RCH PERSON IS SO TORTURED, HARASSED AND PUT TO A MENTAL AGONY THAT H E LOSES HIS NORMAL MENTAL STATE OF MIND AND AT THAT STAGE IT CANNOT BE EXPECTED FROM A PERSON TO PRE-EMPT THE STATEMENT REQUIRED TO BE GIV EN IN LAW AS A PART OF HIS DEFENCE. UNDER S. 132(4), UNLESS THE AU THORISED OFFICER PUTS A SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WH ICH INCOME HAS BEEN DERIVED, IT IS NOT EXPECTED FROM THE PERSON TO MAKE A STATEMENT IN THIS REGARD AND IN CASE IN THE STATEMENT THE MAN NER IN WHICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATED BUT HAS BEEN STATED SUBSEQUENTLY, THAT AMOUNTS TO THE COMPLIANCE WITH E XPLN. 5(2). IN CASE, THERE IS NOTHING TO THE CONTRARY IN THE STATE MENT RECORDED UNDER S. 132(4), IN THE ABSENCE OF ANY SPECIFIC STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, IT CAN BE IN FERRED THAT SUCH UNDISCLOSED INCOME WAS DERIVED FROM THE BUSINESS WH ICH HE WAS CARRYING ON OR FROM OTHER SOURCES. THE OBJECT OF TH E PROVISION IS ACHIEVED BY MAKING THE STATEMENT ADMITTING THE NON- DISCLOSURE OF MONEY, BULLION, JEWELLERY, ETC. THUS, MUCH IMPORTAN CE SHOULD NOT BE ATTACHED TO THE STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. IT CAN BE INFERRED ON THE FACTS AND C IRCUMSTANCES OF THE CASE, IN THE ABSENCE OF ANYTHING TO THE CONTRARY. T HEREFORE, MERE NON-STATEMENT OF THE MANNER IN WHICH SUCH INCOME WA S DERIVED WOULD NOT MAKE EXPLN. 5(2) INAPPLICABLE. FOR THE REASONS STATED ABOVE, THERE IS NO ERROR IN THE ORDER OF THE TRIBUNAL AND THE SA ME IS UPHELD. ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 42 27. THE ASSESSEE ALSO RELIED UPON THE DECISION OF H ONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. B. VENKATE SAM (2012) 349 ITR 413. THE HONBLE HIGH COURT HAS HELD THAT THE ASSES SEE HAS FULLY COMPLIED WITH THE PROVISIONS OF CLAUSE (2) OF EXPLA NATION 5 TO SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAS ADMITTED TH E ADDITIONAL INCOME AND PAID THE TAXES ON SUCH UNDISCLOSED INCOME, IN S UCH EVENT NO CASE FOR IMPOSITION OF PENALTY WAS HELD TO BE MADE OUT. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: THE MATERIAL ON RECORD CONCURRENTLY SHOWS THAT THE ASSESSEE HAD FULLY COMPLIED WITH THE PROVISIONS OF CLAUSE (2) OF EXPLA NATION 5 TO SECTION 271 (1) (C) OF THE ACT. MOREOVER, THE ASSESSEE HAD NOT ACTED IN A CONTUMACIOUS MANNER. IN FACT, THE ASSESSEE HAD MADE A CLEAN BREAST OF THE ENTIRE FACTS AND HAD ADMITTED THE PURCHASE O F THE PROPERTY FROM THE INCOME WHICH WAS NOT DISCLOSED. THE NON-DISCLOS URE OF THE INCOME WAS DUE TO THE CIRCUMSTANCES MENTIONED ABOVE VIZ., THAT THE ASSESSEE WAS AN UNEDUCATED AND ILLITERATE PETTY CONTRACTOR W HO RECEIVED PAYMENTS ONLY AFTER DEDUCTION OF TAX AT SOURCE. IT IS UNDER THESE CIRCUMSTANCES THAT THE ASSESSEE BELIEVED BONA FIDE THAT NO FURTHER TAX WAS REQUIRED TO BE PAID. IN THE PRESENT CASE, BOTH THE CIT (APPEALS) AND THE TRIBUNAL WERE SATISFIED ABOUT THE BONA FIDE S OF THE ASSESSEE. THAT BEING THE POSITION, COUPLED WITH THE FACT THAT THE ASSESSEE HAD COMPLIED WITH THE PROVISIONS OF CLAUSE (2) OF EXPLA NATION 5 TO SECTION 271 (1) (C) OF THE ACT, NO CASE FOR IMPOSITION OF P ENALTY WAS MADE OUT. THE APPEALS ARE DISMISSED. - T. ASHOK PAI V. CIT (2007) 292 ITR, RELIED ON. 28. THE ASSESSEE RELIED UPON ITAT, HYDERABAD A BE NCH, IN THE CASE OF SRI SANTOSH KUMAR AGGARWAL VS. DCIT IN ITA NO.66 5/HYD/2015. THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CI RCUMSTANCES HELD THAT THE AMENDED PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 43 CANNOT BE MADE RETROSPECTIVE APPLICATION. THE BENCH FURTHER HELD THAT THE LAW AS IT STOOD AT THE TIME OF FILING OF RETURN IS IMPORTANT TO APPLY THE PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)(C) O F THE ACT. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSES SEE 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 SEARCH ACTION OF 8.9.2010, FOR THE YEAR UNDER APPEAL, ASSE SSEE HAS FILED RETURN OF INCOME ON 14.8.2012, ADMITTING TOTAL INCO ME OF RS.19,07,254, WHICH INCLUDED ADDITIONAL INCOME ADMI TTED OF RS.16,14,870 ON ACCOUNT OF UNDISCLOSED INVESTMENT I N KISAN VIKAS PATRA, INTEREST ON FDR5 AND BOGUS GIFTS RECEIVED. A SSESSMENT WAS ULTIMATELY COMPLETED UNDER 5.143(3) READ WITH S.153 A BY THE ASSESSING OFFICER ON DATED 25.3.2013, ACCEPTING THE INCOME DISCLOSED IN THE SAID RETURN. THE MAIN QUESTION TO BE CONSIDERED IN THIS CASE IS THE LEGAL QUESTION AS TO THE APPLIC ABILITY 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 VIRTUE OF INSERTION OF THE SAME BELOW S.271(1)(C) BY THE FINA NCE (NO.2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 1.6.2007. 9. AN ANALYSIS OF S.271(1)(C) READ WITH EXPLANATION 5 AND EXPLANATION 5A WAS DONE IN DETAIL BY THE COORDINATE BENCH OF THE T RIBUNAL IN THE CASE OF DILIP KEDIA V/S. ACIT (SUPRA) 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: ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 44 '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 O N 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 HA VE 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 INTRODUCTION, DEEMED CONCEALMENT OF INC OME ASSESSED IN CONSEQUENCE OF SEARCH APPLIED ONLY IF THE ASSESS EES HAD NOT HAD FILED A RETURN OF INCOME BEFORE THE DUE DATE FO R 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 ART ICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PART) HIS INCOME FOR ANY PR EVIOUS YEAR; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOU NT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACT IONS REPRESENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEA R, WHICH HAS ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 45 ENDED BEFORE THE DATE OF SEARCH AND,- (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR H AS 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 SU CH 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 CLAUS E (C) OF SUB- SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONC EALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS 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 BEE N CLARIFIED THAT THE SCOPE EXTENDS TO THE CASES WHERE THE ASSESSEE H AS FILED THE RETURN OF INCOME FOR ANY PREVIOUS YEAR AND THE INCO ME FOUND DURING THE COURSE OF SEARCH RELATES TO SUCH PREVIOUS YEAR AND HAD NOT BEEN DISCLOSED IN THE SAID RETURN, THEN SUCH INCOME SHAL L 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 TH E AMENDMENT BY FINANCE (NO.2) ACT 2009, IF AN ASSESSE E HAD FILED THE RETURN OF INCOME FOR THE YEARS COVERED BY THE SEARC H, THEN THE ADDITION MADE SHALL NOT BE CONSIDERED AS DEEMED CON CEALMENT. IT IS ONLY BY THE AMENDMENT TO EXPLANATION 5A BY THE FINA NCE (NO.2) ACT 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 FI LED A RETURN OF INCOME EARLIER FOR THE RELEVANT ASSESSMENT YEAR. PR IOR TO THE AMENDMENT, IF AN ASSESSEE HAD ALREADY FILED A RETUR N OF INCOME, THE ADDITION MADE IN THE ASSESSMENT MADE U/S 153A CANNO T BE DEEMED TO BE CONCEALED INCOME. 23. NO DOUBT THE AMENDMENT TO EXPLANATION 5A HAS BEEN M ADE WITH RETROSPECTIVE EFFECT FROM 1.6.2007 AND IS APPL ICABLE 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. T HUS BOTH THE ORIGINAL RETURN AS WELL AS THE REVISED RETURN WAS F ILED BEFORE THE AMENDMENT TO EXPLANATION5A BECAME A PART OF THE STATUTE. THE SUPREME COURT IN THE CASES OF ADDL CIT V ONKAR SARA N (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 W ILL GOVERN THE LEVY OF PENALTY BY HOLDING AS UNDER: ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 46 '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 WAS FILED FOR THE ASSESSMENT YEAR I N QUESTION AND NOT THE LAW AS IT STOOD ON THE DATE ON WHICH THE RE TURN WAS FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148.' 10. IN THIS CASE, EVEN THOUGH BOTH THE RETURNS WERE NOT FILED BEFORE THE EXPLANATION 5A WAS INTRODUCED, IT IS A FACT THA T ORIGINAL RETURN HAS BEEN FILED MUCH BEFORE THE SAID PROVISION CAME ON T O THE STATUTE. IT IS TO BE NOTED THAT THE ASSESSEE FILED THE ORIGINAL RE TURN OF INCOME ON 10.10.2005. IN THE EVENT A SEARCH HAS OCCURRED BEFO RE THE 1ST DAY OF JUNE, 2007, I.E. AFTER FILING OF RETURN BY THE ASSE SSEE, AND ON OR BEFORE THE DAY S.5A HAS BEEN INTRODUCED, THEN ASSESSEE'S C ASE WOULD HAVE BEEN GOVERNED BY EXPLANATION 5, IN WHICH CASE, AS A SSESSEE HAS DISCLOSED THE AMOUNTS UNDER 8.132(4) FOLLOWED BY TH E RETURN, NO PENALTY COULD BE LEVIED AS PER THE PROVISIONS OF EX PLANATION 5 AVAILABLE UPTO THE DATE 30TH MAY, 2007. IN THE EVENT A SEARCH HAS OCCURRED AFTE R THE 1 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 TH E ASSESSEE FREE FROM THE PROVISIONS OF S.271(1)(C). IF IN THAT PERIOD TH E ASSESSEE HAS FILED THE RETURN, EXPLANATION 5A WOULD NOT HAVE BEEN APPLICAB LE, 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 S ARAN (195 ITR 1) HAS HELD THAT IN CASE A RETURN IS FILED IN RESPO NSE 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 CON CEALMENT, THE LAW APPLICABLE WOULD BE THE LAW AS IT STOOD AT THE TIME WHEN THE ORIGINAL RETURN WAS FILED FOR THE ASSESSMENT YEAR IN QUESTIO N 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 PEN ALTY AND NOT ON THE SUBSEQUENT AMENDMENT, EVEN IF THE AMENDMENT IS RETR OSPECTIVE. THE DELHI HIGH COURT IN THE CASE OF ENGINEERS IMPEX (P) LTD. & ORS. VS. D.D. SHARMA (244 ITR 247) HAS HELD AS UNDER: ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 47 '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 PENALTY, THAT INTERPRETATION OUGHT TO BE ADOPTED. WHEN THE LEGISLATURE IMPOSES A PENALTY, TH E WORDS IMPOSING IT MUST BE CLEAR AND DISTINCT. [CIT VS. T. V. SUNDARAM IYENGER & SONS (P) LTD. 1976 CTR (SC) 25 AIR 1976 S C 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 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 EXPLANAT ION INSERTED HAS WIDENED THE SCOPE OF THE MAIN SECTION AND HAS C REATED AN OBLIGATION BREACH OF WHICH ENTAILS PENALTY AND SUBJ ECTS TO CRIMINAL PROSECUTION. THIS EXPLANATION TO S. 194A H AS BEEN INSERTED W.E.F. 1ST JUNE, 1987, AND OBVIOUSLY IS PR OSPECTIVE AND NOT RETROSPECTIVE. IN CASE, IT WAS TO HAVE THE RETR OSPECTIVE EFFECT, IT WOULD BE VIOLATIVE OF ART. 20(1) OF THE CONSTITUTION. AS THE EXPLANATORY NOTE NOTICED ABOVE ITSELF STATES, T HE LIABILITY FOR DEDUCTION OF TAX AT SOURCE FROM THE INTEREST PA YABLE UNDER THE EXISTING PROVISIONS ARISES ONLY IF INTEREST WAS ACTUALLY PAID OR CREDITED TO THE 'ACCOUNT OF THE PAYEE'. THIS ALS O CLARIFIED 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 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 CREDI TED TO ANY ACCOUNT IN THE BOOKS OF ACCOUNT OF THE PAYEE INCLUD ING CREDIT GIVEN IN THE ACCOUNT CALLED 'INTEREST PAYABLE ACCOU NT' 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 BEFOR E 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 EXPLANATI ON 5A ARE NOT APPLICABLE ON THE DATE OF FILING OF THE ORIGINAL RETURN, WE ARE OF TH E 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 BONAFIDELY DE CLARED THE ADDITIONAL INCOME IN THE COURSE OF SEARCH AND FILED RETURN AND PAID TAXE S THEREON, WE ARE OF THE OPINION THAT PENALTY LEVIED ON SUCH AMOUNT CANNOT BE SUSTAI NED. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY OF RS .12,84,177 SUSTAINED BY THE CIT(A). ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 48 29. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE VIEW THAT THE PROVISIONS OF EXPLANATION 5A AS IT STOOD ON THE DATE OF SEARCH OR FILING OF RETURN IN RESPONSE TO N OTICE U/S 153A OF THE ACT IS IMPORTANT TO RECKON WHETHER THE DEEMING FICT ION PROVIDED IN THE SAID PROVISIONS IS APPLICABLE OR NOT. THE PRE AMEN DED PROVISIONS OF EXPLANATION 5A WAS APPLICABLE WHERE THE ASSESSEE HA S NOT FILED ANY RETURN BEFORE THE SEARCH AND ALSO NOT DISCLOSED THE UNDISCLOSED INCOME IN HIS RETURN OF INCOME. THE AMENDED PROVISIONS OF EXPLANATION 5A WHICH WAS BROUGHT INTO THE STATUTE BY THE FINANCE A CT, 2009 WAS APPLICABLE IN CASE OF FILERS AND NON-FILERS OF THE RETURNS. IN THE PRESENT CASE ON HAND, THE LAW APPLICABLE AS ON THE DATE OF SEARCH, WHICH WAS PRE AMENDED PROVISIONS OF EXPLANATION 5A AS PER WHI CH NO PENALTY CAN BE LEVIABLE, IN CASE THE ASSESSEE HAS FILED THE RET URN OF INCOME U/S 139(1) OF THE ACT BEFORE THE DATE OF SEARCH WHETHER OR NOT THE UNDISCLOSED INCOME IS DISCLOSED IN THE SAID RETURN. ADMITTEDLY, IN THIS CASE, THE SEARCH IS TAKEN PLACE ON 22.11.2008. THE ASSESSEE HAS FILED THE RETURN ON 11.5.2009. BOTH ORIGINAL RETURN AS WE LL AS REVISED RETURN U/S 153A OF THE ACT HAS BEEN FILED BEFORE THE AMEND ED PROVISIONS WERE BROUGHT INTO THE STATUTE (WHICH WAS RECEIVED ASCENT OF PRESIDENT ON 13.8.2009). THEREFORE, WE ARE OF THE VIEW THAT THE EXPLANATION 5A OF ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 49 SECTION 271(1)(C) OF THE ACT IS NOT APPLICABLE IN T HE PRESENT CASE. ACCORDINGLY, WE DIRECT THE A.O. TO DELETE THE PENAL TY LEVIED UNDER EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT FOR ALL THE YEARS. SIMILARLY, IN RESPECT OF PENALTY LEVIED UNDER PART A OF EXPLANATION 1 OF SECTION 271(1)(C) OF THE ACT, THE ASSESSEE HAS GIVE N EXPLANATIONS WHICH APPEARS TO BE REASONABLE AND BONAFIDE. THE A.O. WIT HOUT APPRECIATING THE FACTS HAS LEVIED THE PENALTY. THEREFORE, WE DIR ECT THE A.O. TO DELETE THE PENALTY LEVIED UNDER EXPLANATION 1 OF SECTION 2 71(1)(C) OF THE ACT FOR ALL THE YEARS. 30. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR ALL THE ASSESSMENT YEARS ARE ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH MAY16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 27.05.2016 VG/SPS ITA NOS.665 TO 669/VIZAG/2013 DHANEKULA RAMA RAO, VIJAYAWADA 50 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT DHANEKULA RAMA RAO, D.NO.40-5-19 , SIDDHARTA ROAD, VENKATESWARAPURAM, VIJAYAWADA 2. / THE RESPONDENT DCIT, CENTRAL CIRCLE, VIJAYAWAD A 3. + / THE CIT (CENTRAL), HYDERABAD 4. + ( ) / THE CIT (A), GUNTUR 5. + ( ) / THE CIT (A), VIJAYAWADA 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM