SHRI S. ELANGO,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

Condonation petition has been filed. Reasons shown for the delay are justified. Delay is condoned. Appeal is admitted.

ITA No. 2128/Mds/2013. :- 2 -: Assessee assails levy of penalty u/s.271(1) (c) of the Income 3. Tax Act, 1961 (herein referred as ‘ the Act’)

In the statement recorded u/s.132(4) of the Act, assessee admitted that he had paid on cash of �49,00,000/- out of unaccounted income from the real estate business. Prior to the date of search, on 31.10.2006 assessee had filed return for the impugned assessment year declaring an income of �1,44,04,500/- and agricultural income of �5,69,518/-. After the search, a notice u/s.153A of the Act was issued to the assessee. Assessee filed a return on 09.05.2008 declaring income of �1,91,57,250/- inter-alia including the sum of �49,00,000/- offered as additional income during the course of search, while keeping the agricultural income at the original amount. The assessment was there after completed, wherein two additions were made one for understating closing stock �2,52,952/-, and other disbelieving agricultural income of �5,69,518/- claimed by the assessee.

ITA No. 2128/Mds/2013. :- 3 -:

Thereafter, penalty proceeding were initiated u/s.271 (1) (c) 5. of the Act. Ld. Assessing Officer proposed levy of penalty �49,00,000/- admitted during the course of search and for sum of �2,52,952/- and �5,69,518/- added in the assessment. Reply of the assessee was that for the additional income of �49,00,000/- offered in the return filed pursuant to notice u/s.153A of the Act, it was saved from penalty by proviso (2) to Explanation 5 to Sec.271(1) (c) of the Act. As per assessee, variance admitted in the sworn statement recorded u/s.132(4) of the Act was offered in the return of income and taxes paid thereon. In so far as �2,52,952/- and �5,69,518/- were concerned, submission of the assessee was that there was no concealment or furnishing of any inaccurate particulars. However, these explanations were not accepted by the ld. Assessing Officer. He levied penalty on all three items.

concerned, ld. Commissioner of Income Tax (Appeals) was of the opinion that proviso (2) to Explanation 5 to Sec. 271(1) (c) of the Act did not save the assessee, since original return was filed prior to the date of the search. According to him, but for the search, assessee would not have disclosed the on-money paid by him for the purchase of property.

Now before us, ld. Authorised Representative strongly 7. assailing the order of the ld. Commissioner of Income Tax (Appeals) to the extent he sustained the penalty, submitted that the assessee had disclosed the income coming out of the sale agreement found during the course of search, in the revised return filed. According to him assessee was saved by proviso (2) to Explanation 5 to Sec.271(1)

(c) of the Act. Reliance was placed on the decision of a Co-ordinate Bench in the case of ACIT vs. M/s. Jaya Educational Trust (ITA No.1359/Mds/2012, dated 22.01.2016).

ITA No. 2128/Mds/2013. :- 5 -: date for filing return for the impugned assessment year 2006-2007 was 31.10.2006. Assessee had filed return on 31.10.2006 disclosing income of �1,44,04,500/-. What the ld. Authorised Representative claims to be a revised return, is actually a return filed pursuant to notice u/s.153A of the Act. Notice was issued on 07.02.2008 and the return pursuant to such notice was filed on 09.05.2008. At this juncture, it is necessary to have a look at Explanation (5) to Sec.

271(1) (c) of the Act is reproduced hereunder:-

‘’Explanation 5.— Where in the course of a search initiated under section 132 before the 1st day of June, 2007, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income:-

(a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein ; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless,—

(1) such income is, or the transactions resulting in such income are recorded,—

(i) in a case falling under clause (a), before the date of the search ; and ITA No. 2128/Mds/2013. :- 6 -:

(ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Chief Commissioner or Commissioner before the said date ; or (2) he, in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-section (1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income’’.

Contention of the assessee that his case falls within the second proviso to Explanation 5 to Sec. 271(1) (c) of the Act. Such proviso clearly stipulate that the disclosure made in the statement recorded under section 132(4) of the Act should be part of the income liable to be shown in a return of income still to be furnished. However, in the case before us, assessee had already furnished his return of income u/s.139(1) of the Act much prior to date of search. His subsequent disclosure of on-money in the return filed pursuant to notice u/s.153A of the Act would not qualify for the benefit of second proviso. As mentioned by the ld. CIT(A) in his order, assessee would not have disclosed the on-money but for the sale agreement found during the search which clearly demonstrate such payments. Thus, additional

ITA No. 2128/Mds/2013. :- 7 -: income offered in the return filed pursuant to notice u/s.153A of the Act was not a voluntary only but only due to compulsion arising out of search. Assessee is squarely caught under the main limb of Explanation 5 to Sec. 271(1) (c) of the Act. As for the decision of Co- ordinate Bench in the case of M/s. Jaya Educational Trust (supra) relied on by the assessee, the first return itself was filed after date of search. As against this, here the return u/s.139(1) of the Act was filed prior to the date of search. We, are therefore of the opinion that levy of penalty was rightly made by the ld. Assessing Officer. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals).