Rannodevi Agarwal, Hyd, Hyderabad V. DCIT, Central Circle-2, Hyd, Hyderabad

ITA 981/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6217 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 19-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-07-2015
• Court: TRIBUNAL
• Department Lawyers: K J RAO; U MINICHANDRAN DRS
• Keywords: Business income; Search and seizure; Retrospective amendment; Revised return
• Section: 143(3); 153A; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 976/HYD/2015 2004 - 05 SHRI KRISHNAKANTH AGARWAL, HYDERABAD [PAN: AAYPA9056E] DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 HYDERABAD 977/HYD/2015 2007 - 08 978/HYD/2015 2008 - 09 ITA NO. ASST. YEAR APPELLANT RESPONDENT 979/HYD/2015 2004 - 05 SMT. RANNODEVI AGARWAL, HYDERABAD [PAN: ABLPA4263B] DE PUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 HYDERABAD 980/HYD/2015 2007 - 08 981/HYD/2015 2008 - 09 982/HYD/2015 2009 - 10 FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI K.J. RAO, & SMT. U. MINICHANDRAN, DRS DATE OF HEARING : 19-09-2016 DATE OF PRONOUNCEMENT : 23-09-2016 O R D E R PER BENCH: THESE ARE GROUP OF APPEALS BY ASSESSEES, BOTH WIFE A ND HUSBAND, AGAINST THE CONFIRMATION OF PENALTY BY THE C OMMISSIONER OF INCOME TAX (APPEALS)-XI, HYDERABAD DATED 17-04-20 15 IN EACH SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 2 -: OF THE ASSESSEES CASE. THE APPEALS INVOLVE PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] BEING CONFIRMED BY THE CIT( A). SHRI KRISHNAKANTH AGARWAL: 2. THE FACTS OF THE CASE ARE THAT ASSESSEE, SHRI KRISHNAKANTH AGARWAL WAS SEARCHED ON 12-08-2009. BY THAT TIME ASSESSEE HAS FILED THE RETURNS OF INCOME FOR THE IMPUG NED ASSESSMENT YEARS AS UNDER: ASST. YEAR DATE OF FILING ORIGINAL RETURN INCOME DECLARED (RS) 2004 - 05 30 - 10 - 2004 4,74,090 2007 - 08 29 - 10 - 2007 3,74,130 2008 - 09 19 - 09 - 2008 3,22,72 0 2.1. CONSEQUENT TO THE SEARCH OPERATIONS AND ON THE B ASIS OF THE DECLARATION U/S. 132(4) GIVEN DURING THE COURSE OF SEARCH, ASSESSEE FILED REVISED RETURNS OF INCOME IN RESPONSE TO NOTICES U/S. 153A ON 16-06-2011, REVISING THE INCOMES AS UNDER: ASST . YEAR INCOME DECLARED IN THE ROI FILED IN RESPONSE TO NOTICE U/S. 153A (RS) ENHANCED INCOME (RS) 2004 - 05 9,56,920 4,82,830 2007 - 08 5,99,050 2,24,920 2008 - 09 4,80,850 1,58,130 THE ENHANCED INCOMES ARE MOSTLY PERTAINING TO BUSINESS INCOME IN AY. 2004-05 AND IN OTHER YEARS, MAJOR PART INVOLVES I NTEREST INCOME. AO IN THE SCRUTINY PROCEEDINGS HAS ACCEPTED THE INCOMES RETURNED. IT MAY BE NOTED THAT IN THE INTERVENING YEARS OF 2005-06 AND 2006-07, ASSESSEE HAS NOT ENHANCED ANY INCOME AN D SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 3 -: THEREFORE, THERE ARE NO PENALTY PROCEEDINGS. AO INIT IATED THE PROCEEDINGS U/S. 271(1)(C) AND INVOKING THE PROVISIO NS OF EXPLANATION-5A TO SECTION 271(1)(C), HAS LEVIED PENAL TY AS UNDER: ASST. YEAR (RS) 2004 - 05 1 , 6 8, 957 2007 - 08 68 , 8 2 5 2008 - 09 4 8, 863 3. WHEN IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT T HE PROVISIONS OF EXPLANATION-5A INTRODUCED BY FINANCE AC T, 2009 WOULD NOT APPLY TO ASSESSEE, LD. CIT(A) CONFIRMED THE PENALTY BY STATING AS UNDER: 05.4 THE JURISDICTIONAL ITAT (HYD) BENCH 'A' IN THE CASE OF DILIP KEDIA VS ACIT (2013) TAXMANN.COM 102 HAS ALSO DEALT WITH THE ISSUE IN DETAIL. THE HON'BLE MEMBERS DISCUSSED IN DETAIL THE PROVISIONS OF SECTION 271(1)(C) RWS 132 & 271AAA AND EXPLANATION 5 & 5A T O SECTION 271(1)(C) OF THE IT.ACT, 1961. IT ALSO DEALT WITH THE QUESTIO N WHETHER THE AMENDMENT TO EXPLANATION 5A THOUGH APPLICABLE TO SEARCHES INI TIATED AFTER 1-6-2007 WOULD APPLY TO RETURNS FILED BEFORE THE AMENDED EXP LANATION BECAME PART OF THE STATUTE IN 2009. IT CONCLUDED THAT THE AMEND MENT TO EXPLANATION SA WAS NOT APPLICABLE IN THE CASE BEFORE IT AS THE RET URN OF INCOME PURSUANT TO NOTICE U/S153A WAS FILED MUCH BEFORE THE AMENDME NT BECAME A PART OF THE STATUTE AND THE ASSESSING OFFICER IN VIEW OF PR OVISIONS OF SECTION 271(1)(C) AS THEY STOOD AT THE RELEVANT TIME IN THA T CASE HAD NOT BROUGHT ON RECORD OTHER MATERIAL OR EVIDENCE FOR COMING TO A C ONCLUSION THAT APPELLANT HAD CONCEALED ANY INCOME EXCEPT FOR STATEMENT RECOR DED U/S132(4) OF THE ACT. 05.5 THIS IS NOT SO IN THE CASE OF THE APPELLANT. T HE AMENDMENT TO EXPLANATION 5A IS FULLY APPLICABLE ON THE APPELLANT . THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S153A OF THE IT ACT WAS FILED MUCH AFTER THE AMENDMENT TO EXPLANATION SA BECAME THE PART OF THE STATUTE IN 2009. THE SEARCH HAD ALSO TAKEN PLACE ON 12-8-2009. DISCLOSUR E WAS MADE BY THE APPELLANT U/S 132(4) ONLY WHEN THE INCRIMINATING MA TERIAL WAS CONFRONTED TO HIM. THE APPELLANT HAS RELIED ON THE DECISION OF ITAT, PUNE 'B' BENCH IN THE CASE OF PRAMILA D.ASHTEKAR & OTHERS VS ITO(2013 ) 154 TTJ 0046. BUT ON THE OTHER HAND, THE HON'BLE ITAT (HYDERABAD) HAS DISCUSSED IN DETAIL THE CONDITIONS UNDER WHICH THE DEEMING PROVISIONS O F THE EXPLANATION 5A SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 4 -: TO SECTION 271(1)(C) OF THE IT.ACT, 1961 CAN BE APP LIED. THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE SAID DECISION OF THE JURISDICTIONAL ITAT. IN VIEW OF THIS, THE PENALTY IMPOSED BY THE A SSESSING OFFICER U/S. 271(1)(C) READ WITH EXPLANATION 5A IS SUSTAINED FOR THREE ASSESSMENT YEARS UNDER CONSIDERATION. 4. CONTESTING THE ABOVE, IT WAS THE CONTENTION OF THE LD. COUNSEL THAT ON MERITS, ASSESSEE HAD ADMITTED THE INCOME IN THE PROCEEDINGS U/S. 132(4) ITSELF AND AS PER THE DECLAR ATION MADE BEFORE THE INVESTIGATING AUTHORITIES, ASSESSEE HAD FILE D THE RETURNS AND PAID THE TAXES, WHICH WERE ACCEPTED BY THE AO WIT HOUT ANY FURTHER ADDITIONS. SINCE ASSESSEE HAS FILED RETURNS I N ORDER TO SETTLE THE MATTERS, THERE CANNOT BE ANY PENALTY. FURTHER, IT WAS CONTENDED THAT THE PROVISIONS OF EXPLANATION-5A TO SECTION 271(1)(C) CANNOT BE INVOKED AS ASSESSEES SEARCH WA S CONDUCTED MUCH BEFORE THE AMENDED PROVISION WAS APPROVED BY TH E HON'BLE PRESIDENT ON 13-08-2009. THEREFORE, THE DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF SHRI SANTOSH KUMAR AGARW AL IN ITA NO. 665/HYD/2015 DT. 14-10-2015 IS APPLICABLE. IT WAS FURTHER SUBMITTED THAT LD. CIT(A) HAS WRONGLY CONSIDERED THE PRI NCIPLES LAID DOWN BY THE CO-ORDINATE BENCH DECISION IN THE CA SE OF DILIP KEDIA VS. ACIT [40 TAXMAN.COM 102] DT. 26-07-2013, W HICH IN FACT IS FAVOURABLE TO ASSESSEE. IT WAS SUBMITTED THAT SINCE TH E SEARCH PROCEEDINGS HAVE BEEN CONDUCTED BEFORE THE EXPLANATIO N-5A WAS BROUGHT ON STATUTE, THE SAME ARE NOT APPLICABLE TO THE RE TURNS FILED. 5. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AO AN D CIT(A) TO SUBMIT THAT RETURNS WERE FILED MUCH AFTER THE PROVISIONS SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 5 -: WERE AMENDED. THEREFORE, EXPLANATION-5A IS APPLICAB LE TO THE FACTS OF THE CASE. HE SUPPORTED THE ORDERS OF PENALTY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE FIND THAT ASSESSEE HAS ORI GINALLY FILED THE RETURNS IN THE RESPECTIVE ASSESSMENT YEARS DECLARIN G INCOMES AS NOTED IN THE FACTS ABOVE. IN RESPONSE TO THE NOTICE S U/S. 153A, ASSESSEE HAS FILED REVISED RETURNS ADMITTING INCOMES W HICH ARE DECLARED IN THE STATEMENT U/S. 132(4), MAINLY CONSISTING OF BUSINESS INCOME IN THE AY. 2004-05 AND INTEREST INCOME S IN ALL THE YEARS. AO HAS COMPLETED THE ASSESSMENTS U/S. 143(3) R.W.S. 153A ACCEPTING THE INCOMES DISCLOSED IN THE LATER RETURNS. THE MAIN QUESTION TO BE CONSIDERED IN THIS CASE IS THE LEGAL QUE STION AS TO THE APPLICABILITY OF EXPLANATION-5A TO SECTION 271(1)( C) OF THE ACT IN THE PRESENT CASE. THE SAID EXPLANATION HAS COME ON S TATUTE BY VIRTUE OF INSERTION OF THE SAME BELOW SECTION 271(1)(C) BY FINANCE (NO.2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 01-06- 2007 WHICH WAS APPROVED BY THE HON'BLE PRESIDENT ON 13-08-2009. AN ANALYSIS OF THE SECTION 271(1)(C) R.W.S. EXPLANATION-5 AND EXPLANATION-5A WAS DONE IN DETAIL BY THE CO-ORDINATE BE NCH OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA VS. ACIT [40 TA XMAN.COM 102] DT. 26-07-2013 (SUPRA) IN PARAS 18 TO 23, WHICH READS AS UNDER: 18. EXPLANATION 5 HAS BEEN AMENDED BY THE FINANCE ACT 2007 TO RESTRICT THE APPLICATION OF THAT EXPLANATION TO SEA RCHES INITIATED BEFORE 1.6 2007. HENCE THE ASSESSEE CANNOT SEEK EXEMPTION UNDE R EXPLANATION 5 TO SEC 271(1)(C). THE CASES CITED BY THE ASSESSEE WHER EIN PENALTY WAS DELETED APPLYING EXPLANATION 5, RELATE TO SEARCH IN ITIATED PRIOR TO 1.6.2007 AND HENCE ARE NOT APPLICABLE TO THE INSTANT CASE. SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 6 -: 19. A NEW EXPLANATION 5A WAS INTRODUCED BY FINANCE ACT 2007, W.E.F 1.6.2007 TO COVER SEARCHES INITIATED AFTER 1. 6.2007 WHICH READ AS UNDER: EXPLANATION 5A. WHERE IN THE COURSE OF A SEARCH I NITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF, (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREINAFTER IN THIS EXPLANATION REFERRED TO AS ASS ETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PREVIOUS YEAR ; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCO ME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF T HE SEARCH AND THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH YEAR HAS EXPIR ED 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 SEA RCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SEC TION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INC OME OR FURNISHED 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 C OURSE OF STATEMENT U/S 132(4), BUT UNDER THIS EXPLANATION AS IT STOOD AT T HE TIME OF INTRODUCTION, DEEMED CONCEALMENT OF INCOME ASSESSED IN CONSEQUENC E OF SEARCH APPLIED ONLY IF THE ASSESSEES HAD NOT HAD FILED A RETURN OF INCOME BEFORE THE DUE DATE FOR FILING OF RETURN IN THE RESPECTIVE YEARS. EXPLANATION 5A WAS FURTHER AMENDED BY FINANCE ACT (NO.2) 2009 AS UNDER: EXPLANATION 5A.- WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSE SSEE IS FOUND TO BE THE OWNER OF- (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILI SING (WHOLLY OR IN PART) HIS INCOME FOR ANY PREVIOUS YEAR ; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESEN TS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEF ORE THE DATE OF SEARCH AND,- SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 7 -: (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN D ECLARED THEREIN ; OR (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FO R SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INC OME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSE S OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION , BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. 21. IN THE CIRCULAR NO 5/2010 DATED 3.6.2010 ISSUED BY THE CBDT EXPLAINING THE PROVISIONS OF THE FINANCE ACT (NO. 2 ) 2009, THE AMENDMENT TO EXPLANATION 5A WAS EXPLAINED AS UNDER: 53.2 BY SUBSTITUTING THE EXPLANATION 5A IT HAS BEE N CLARIFIED THAT THE SCOPE EXTENDS TO THE CASES WHERE THE ASSESSEE HAS F ILED THE RETURN OF INCOME FOR ANY PREVIOUS YEAR AND THE INCOME FOUND DURING THE COURS E OF SEARCH RELATES TO SUCH PREVIOUS YEAR AND HAD NOT BEEN DISCLOSED IN THE SAI D RETURN, THEN SUCH 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 T O THE AMENDMENT BY FINANCE (NO.2) ACT 2009, IF AN ASSESSEE HAD FILE D THE RETURN OF INCOME FOR THE YEARS COVERED BY THE SEARCH, THEN THE ADDIT ION MADE SHALL NOT BE CONSIDERED AS DEEMED CONCEALMENT. IT IS ONLY BY THE AMENDMENT TO EXPLANATION 5A BY THE FINANCE (NO.2) ACT 2009,(WHIC H 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 T HE RELEVANT ASSESSMENT YEAR. PRIOR TO THE AMENDMENT, IF AN ASSESSEE HAD AL READY FILED A RETURN OF INCOME, THE ADDITION MADE IN THE ASSESSMENT MADE U/ S 153A CANNOT BE DEEMED TO BE CONCEALED INCOME. 23. NO DOUBT THE AMENDMENT TO EXPLANATION 5A HAS BE EN MADE WITH RETROSPECTIVE EFFECT FROM 1.6.2007 AND IS 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 REVISE D RETURN PURSUANT TO NOTICE U/S 153A ON 12.11.2008. THUS BOTH THE ORIGIN AL RETURN AS WELL AS THE REVISED RETURN WAS FILED BEFORE THE AMENDMENT T O EXPLANATION5A BECAME A PART OF THE STATUTE. THE SUPREME COURT IN THE CASES OF ADDL CIT V ONKAR SARAN (195 ITR 1) HAS HELD THAT IN CASE OF RETURN FILED IN RESPONSE TO NOTICE U/S 148, LAW PREVAILING AS ON THE DATE OF FILING OF RETURN WILL GOVERN THE LEVY OF PENALTY BY HOLDING AS UNDER: SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 8 -: EVEN IN A CASE WHERE A RETURN FILED IN RESPONSE TO A NOTICE UNDER SECTION 148 INVOLVED AN ELEMENT OF CONCEALMENT, THE LAW APP LICABLE WOULD BE THE LAW AS IT STOOD AT THE TIME WHEN THE ORIGINAL RETURN WAS FILE D 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. 6.1. FURTHER ANALYSIS OF THE PROVISIONS IN A SIMILAR CASE, WHEREIN THAT ASSESSEE ALSO FILED RETURNS AFTER THE AMEND MENT WAS BROUGHT ON STATUTE, WAS ANALYSED BY THE COORDINATE BENC H AT HYDERABAD IN THE CASE OF SANTOSH KUMAR AGARWAL IN ITA NO. 665/HYD/2015 (SUPRA), WHEREIN IT WAS HELD AS UNDER: 10. IN THIS CASE, EVEN THOUGH BOTH THE RETURNS WER E 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 RETURN O F INCOME ON 10.10.2005. IN THE EVENT A SEARCH HAS OCCURRED BEFORE THE 1ST D AY OF JUNE, 2007, I.E. AFTER FILING OF RETURN BY THE ASSESSEE, AND ON OR B EFORE THE DAY S.5A HAS BEEN INTRODUCED, THEN ASSESSEES CASE WOULD HAVE BE EN GOVERNED BY EXPLANATION 5, IN WHICH CASE, AS ASSESSEE HAS DISCL OSED THE AMOUNTS UNDER S.132(4) FOLLOWED BY THE RETURN, NO PENALTY C OULD BE LEVIED AS PER THE PROVISIONS OF EXPLANATION 5 AVAILABLE UPTO THE DATE 30TH MAY, 2007. IN THE EVENT A SEARCH HAS OCCURRED AFTER THE 1ST DAY O F 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 EXPL ANATION 5A AS IT IS EXISTING WOULD MAKE THE ASSESSEE FREE FROM THE PROV ISIONS OF S.271(1)(C). IF IN THAT PERIOD THE ASSESSEE HAS FILED THE RETURN, E XPLANATION 5A WOULD NOT HAVE BEEN APPLICABLE, AND THE ASSESSEE WOULD HAVE B EEN 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 ASSE SSEE 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 ONK AR SARAN (195 ITR 1) HAS HELD THAT IN CASE A RETURN IS FILED IN R ESPONSE TO NOTICE U/S 148, LAW PREVAILING AS ON THE DATE OF FILING OF RETURN W ILL GOVERN THE LEVY OF PENALTY. IT OBSERVED THAT EVEN IN A CASE WHERE A RE TURN FILED IN RESPONSE TO A NOTICE UNDER SECTION 148, WHICH INVOLVED AN ELEME NT OF CONCEALMENT, THE LAW APPLICABLE WOULD BE THE LAW AS IT STOOD AT THE TIME WHEN THE ORIGINAL RETURN WAS FILED FOR THE ASSESSMENT YEAR IN QUESTIO N AND NOT THE LAW AS IT SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 9 -: 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 PREVAILIN G 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: 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 LEGISL ATURE IMPOSES A PENALTY, THE WORDS IMPOSING IT MUST BE CLEAR AND DISTINCT. [CIT VS. T.V. SUNDARAM IYENGER & SONS (P) LTD. 1976 CTR (SC) 25 : AIR 1976 SC 255 : TC 68R.372]. 13. IF BY AN AMENDMENT IN AN EXISTING STATUTE OR BY AN ENACTMENT AN EX POST FACTO OFFENCE IS CREATED, IT WILL BE VIOLATIVE OF ART. 20(1) OF THE CONSTITUTION. ART. 20(1) IS DESIGNED TO PREVENT A PERSON FROM BEI NG 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 AP PENDED TO A SECTION TO EXPLAIN THE MEANING OF THE WORDS CONTAINED IN THE S ECTION AND NORMALLY IS TO BE READ TO HARMONISE WITH AND TO CLEAR UP ANY AMBIGUIT Y IN THE MAIN SECTION. HOWEVER, IN THE PRESENT CASE, THE EXPLANATION INSER TED HAS WIDENED THE SCOPE OF THE MAIN SECTION AND HAS CREATED AN OBLIGATION BREACH O F WHICH ENTAILS PENALTY AND SUBJECTS TO CRIMINAL 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 V IOLATIVE OF ART. 20(1) OF THE CONSTITUTION. AS THE EXPLANATORY NOTE NOTICED ABOVE ITSELF STATES, THE LIABILITY FOR DEDUCTION OF TAX AT SOURCE FROM THE INTEREST PAYABL E UNDER THE EXISTING PROVISIONS ARISES ONLY IF INTEREST WAS ACTUALLY PAID OR CREDIT ED TO THE 'ACCOUNT OF THE PAYEE'. THIS ALSO 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 CR EATED A LIABILITY AND OBLIGATION TO DEDUCT TAX ON INTEREST EVEN WHERE THE INTEREST I NCOME IS CREDITED TO ANY ACCOUNT IN THE BOOKS OF ACCOUNT OF THE PAYEE INCLUDING CREDIT GIVEN IN THE ACCOUNT CALLED 'INTEREST PAYABLE ACCOUNT' OR 'SUSPENSE ACCOUNT'. SIMILAR VIEW IS ALSO TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DILIP KEDIA V/S. ACIT (SUPRA), WHEREIN THE PENALTY WAS NOT SUSTAINED AS BOTH THE RETURNS WERE FILED MUCH 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 EX PLANATION 5A ARE NOT SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 10 -: APPLICABLE ON THE DATE OF FILING OF THE ORIGINAL RE TURN, WE ARE OF THE OPINION THAT EXPLANATION 5A AS IT STOOD ON THE DATE OF FILI NG THE RETURN IN RESPONSE TO NOTICE UNDER S.153A BY THE ASSESSEE WOULD NOT CO VER THE CASE OF THE ASSESSEE, SO AS TO WARRANT LEVY PENALTY UNDER S.271 (1)(C). SINCE THE ASSESSEE BONA-FIDELY DECLARED THE ADDITIONAL INCOME IN THE COURSE OF SEARCH AND FILED RETURN AND PAID TAXES THEREON, WE ARE OF THE OPINION THAT PENALTY LEVIED ON SUCH AMOUNT CANNOT BE SUSTAINED. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY O F RS.12,84,177 SUSTAINED BY THE CIT(A). 6.2. SINCE IN THIS CASE ALSO, EXPLANATION-5A WAS NOT ON STATUTE AT THE TIME OF FILING ORIGINAL RETURNS AND THE AME NDED EXPLANATION-5A WAS ALSO NOT ON STATUTE ON THE DAY SEARCH HAS OCCURRED, WE ARE OF THE OPINION THAT CONSIDERING ALL THE ASPECTS AND THE FACT THAT ASSESSEE HAS A GOOD CASE ON MERITS, TH E PROVISIONS OF EXPLANATION-5A ARE NOT APPLICABLE ON THE DATE OF FILING OF THE ORIGINAL RETURNS. WE ARE ALSO OF THE OPINION TH AT FACTS OF THE ASSESSEE WOULD NOT GET ATTRACTED TO THE PENALTY U/S. 27 1(1)(C). IN THIS CASE, AS SEEN FROM THE ORDERS OF THE AO AND CIT(A ), ONLY EXPLANATION-5A WAS INVOKED AND IN OUR OPINION, THE S AME WOULD NOT BE APPLICABLE AS THE SAME WAS NOT ON THE STATUTE W HEN THE ORIGINAL RETURNS WERE FILED. SINCE ASSESSEE BONAFID ELY DECLARED THE ADDITIONAL INCOME IN THE COURSE OF SEARCH AND FILED RETURNS AND PAID TAXES THEREON, WE ARE OF THE OPINION THAT PENALTY L EVIED ON SUCH AMOUNT CANNOT BE SUSTAINED. IT IS ALSO TO BE NOTED THAT THERE WERE NO ADDITIONS IN THE ASSESSMENT COMPLETED. ACCO RDINGLY, WE ALLOW THE APPEALS OF ASSESSEE, DELETE THE PENALTIES L EVIED IN THE IMPUGNED ASSESSMENT YEARS. 7. IN THE RESULT, ALL THE APPEALS OF SHRI KRISHNAKANTH AGARWAL ARE ACCORDINGLY ALLOWED. SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 11 -: SMT. RANNODEVI AGARWAL: 8. FACTS IN THIS CASE ARE ALSO SIMILAR TO THE ABOVE CA SE. IN THIS CASE, ASSESSEE FILED RETURNS FOR THE IMPUGNED ASS ESSMENT YEARS AS UNDER: ASST. YEAR DATE OF ORIGINAL RETURN INCOME DECLARED (RS) 2004 - 05 0 2 - 0 9 - 2004 3 , 0 7,0 8 0 2007 - 08 2 6 - 0 7 - 2007 3, 08 ,3 8 0 2008 - 09 30 - 0 7 - 2008 3, 30 , 91 0 2009 - 10 24 - 07 - 2009 4,76,260 8.1. CONSEQUENT TO THE NOTICES U/S. 153A, ASSESSEE FIL ED RETURNS ON 16-06-2011 ADMITTING THE FOLLOWING INCOMES: ASST. YEAR ENHANCED INCOME (RS) 2004 - 05 6 , 1 5, 6 9 8 3 , 0 8 , 62 1 2007 - 08 4 , 61 , 9 00 1 , 53 , 511 2008 - 09 4, 6 8, 5 50 1, 37 , 6 3 6 2009 - 10 5,99,265 1,37,636 8.2. THE INCOMES WERE ASSESSED AS SUCH AND AO INVO KING THE EXPLANATION-5A TO SECTION 271(1)(C), HAS LEVIED PE NALTY IN THE RESPECTIVE ASSESSMENT YEARS AS UNDER: ASST. YEAR (RS) 2004 - 05 1,07,957 2007 - 08 4 6 ,977 2008 - 09 4 2 , 5 3 1 2009 - 10 35,564 SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 12 -: 9. LD. CIT(A) CONFIRMED THE PENALTIES AND THE REASON S ARE SIMILAR TO THE REASONS STATED ABOVE IN THE CASE OF SHR I KRISHNAKANTH AGARWAL EXTRACTED ABOVE. 10. ASSESSEE HAVING COME TO KNOW THAT THERE WERE NO SEARCH AND SEIZURE PROCEEDINGS IN HER CASE, HAS RAI SED GROUND NO. 1 ON THE ISSUE THAT THE ENTIRE ASSESSMENT MADE U/S. 143( 3) R.W.S. 153A IS VOID AB-INITIO. THIS GROUND HAVING NOT BEEN RAISED BEFORE THE CIT(A) BECAME ADDITIONAL GROUND AND ACCORDINGLY, ASSESSEE FILED PETETIONS PRAYING FOR ADMISSION OF ADDITIONAL G ROUNDS. AO WHEN ENQUIRED WHETHER SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED, VIDE LETTER DT. 13-06-2016 HAS STATED AS UND ER: 2. IT IS SUBMITTED THAT WHILE SUBMITTING THE ASSES SMENT RECORDS VIDE THIS OFFICE LETTER DATED 26.05.2016, THE COPY OF SEARCH WARRANT IN THE CASE OF SHRI KRISHNA KANT AGARWAL WAS ALSO SUBMITTE D. SUBSEQUENTLY, ANOTHER COPY OF SEARCH WARRANT IN THE CASE OF SHRI KRISHNA KANT AGARWAL DATED 12.08.2009 WAS ALSO SUBMITTED ON ORAL REQUISI TION MADE BY THE INSPECTOR SHRI MEENA. 3. AS PER SEARCH FOLDER RECEIVED FROM THE DCIT, CEN TRAL CIRCLE-1(2), HYDERABAD, ONLY ONE WARRANT COPY IN THE CASE OF SRI KRISHNA KANT AGARWAL IS AVAILABLE, WHICH HAS BEEN ALREADY SUBMIT TED. NO SEPARATE SEARCH WARRANT IN THE CASE OF SMT. RANNODEVI, WIFE OF SRI KRISHNA KANT AGARWAL IS AVAILABLE IN SAID SEARCH FOLDER. 10.1. SINCE NO WARRANT WAS ISSUED IN THE CASE OF ASS ESSEE, TECHNICALLY SPEAKING, THE EXPLANATION-5A OF SECTION 2 71(1)(C) DOES NOT APPLY TO THE FACTS OF THE CASE. THIS EXPLANATION I S APPLICABLE TO THE CASE WHERE SEARCH AND SEIZURE OPERATIONS WERE CON DUCTED. IN THAT VIEW, THE PENALTY AS LEVIED BY THE AO INVOKING EXP LANATION-5A ITSELF IS BAD IN LAW. FOR THAT REASON ALONE, THE PENAL TIES LEVIED IN THE IMPUGNED YEARS CANNOT BE CONFIRMED. NOT ONLY THAT, FOR THE SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 13 -: REASONS STATED ABOVE IN THE CASE OF SHRI KRISHNAKANTH AGARWAL ALSO, THE FACTS OF CASE DOES NOT ATTRACT LEVY OF PENALTY . FOR THESE REASONS, WE HAVE NO HESITATION IN CANCELLING THE PENA LTIES U/S. 271(1)(C) LEVIED IN THESE CASES. ACCORDINGLY, THE GR OUNDS ARE ALLOWED. 11. IN THE RESULT, APPEALS OF SMT. RANNODEVI AGARWAL A RE ALLOWED. 12. TO SUM-UP, ALL THE APPEALS OF BOTH THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 23 RD SEPTEMBER, 2016 TNMM SHRI KRISHNAKANTH AGARWAL & SMT. RANNODEVI AGARWAL :- 14 -: COPY TO : 1. SHRI KRISHNAKANTH AGARWAL, HYDERABAD. C/O. KAPAS I BANGAD & CO., CHARTERED ACCOUNTANTS, 3-6-140/A, FLA T NO. 402, CITY CENTRE, HIMAYAT NAGAR, HYDERABAD. 2. SMT. RANNODEVI AGARWAL, HYDERABAD. C/O. KAPASI BANGAD & CO., CHARTERED ACCOUNTANTS, 3-6-140/A, FLA T NO. 402, CITY CENTRE, HIMAYAT NAGAR, HYDERABAD. 3. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRC LE-2, HYDERABAD. 4. CIT(APPEALS)-XI, HYDERABAD. 5. PR.CIT (CENTRAL), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.