SH. DIPTI LAL,MORINDA vs. DCIT, CHANDIGARH

per Explanation 5 to the section, since he had failed to file

return u/s 139(1) and pay tax alongwith interest thereon in

respect of income disclosed. Thereafter penalty was levied

under Section 271(1)(c) of the Act read with Explanation 5,

on the amount disclosed under Section 132(4). The assessee

challenged the levy of penalty before the CIT(Appeals), who

dismissed the assessees appeal. The matter was carried in

appeal before the Tribunal ,who their vide order dated

31.8.2004, upheld the order of the CIT(Appeals) dismissing

the assessees appeal. Thereafter the assessee filed appeal

before the Hon'ble High Court, who after quoting

Explanation 5 to section 271(1)(c) of the Act dealt with the

interpretation of the said section by the Hon'ble Apex Court

in the case of Gebilal Kanhaialal, HUF (supra). The Hon'ble

High Court thereafter held that the order of the I.T.A.T.

showed that in the factual matrix involved in the case, the

issue of levy of penalty as per Explanation-5 to section

271(1)(c) of the Act needed to be re-adjudicated in the light

of the interpretation given by the Hon'ble Apex Court in the

case of Gebilal Kanhaialal, HUF (supra). The relevant

findings of he Hon'ble High Court in this regard at para 10

of the order and the consequent direction to the tribunal

are as under:

“The Tribunal had only recorded that the income declared by the assessee would not provide the immunity to him from the imposition of penalty under section 271(1)© of the Act unless the conditions mentioned in the statement under section 132(4) of the Act as well as the conditions laid down in clause (2) of Explanation 5,to Section 271 of the Act are fulfilled.It further recorded that the tax authorities were fully justified that the assessee was not entitled to the immunity and imposition of penalty amounts. A perusal of the order of the Tribunal shows that the order passed by the Tribunal in the factual matrix involved herein requires to be re-adjudicated in the light of the interpretation given by the Apex Court in Gebilal’ s case (supra) to clause (2) of Explanation 5 to Section 271(1)(c) of the Act as the Tribunal is the final fact finding authority who is required to deal with all aspects of facts and law before recording its conclusions based thereon. Accordingly, the impugned orders are set aside and the matter is remanded to the Tribunal to decide the same afresh after hearing the parties and by passing a speaking order in accordance with law. Needless to say anything observed hereinbefore shall not be taken to be expression of opinion on the merits of the controversy.” 3. In pursuance to the above direction of the Hon,ble

High Court the case was heard by us.

Hon’ble High Court, is to examine the fulfillment of the

conditions specified in clause (2) to Explanation-5 to section

271(1)(c) of the Act in the facts of the present case, in the

light of the interpretation of the Hon’ble Supreme Court of

the said section in the case of Gebilal Kanhaiyalal (supra),

so as to entitle the assessee to claim immunity from levy of

penalty under the said section.

that identical issue has been adjudicated by the Tribunal in

the case of Surinder Paul in ITA No.494/Chd/2001 and Shri

Raj Kumar in ITA No.496/Chd2001 ,which cases had also

been restored to the ITAT by the Hon’ble High Court vide its

above referred consolidated order ,giving identical direction

to examine fulfillment of conditions specified in clause 2,

Explanation 5 to section 271(1)©. Copy of the order was

placed before us and drawing attention to the same,

Ld.Counsel for the assessee pointed out that the ITAT had

accepted the plea made by the Ld.Counsel for the assessee

that relevant facts being not on record the same would be

brought before the Assessing Officer who in turn could

examine the issue after verifying the facts and had therefore

restored the issue to the Assessing Officer to examine the

fulfillment of the conditions as specified in clause(2) to

Explanation-5 to section 271(1)(c) of the Act as directed by

the Hon'ble High Court . The Ld. counsel for assessee drew

our attention to the relevant portion of the I.T.A.T. as under:

“For a better understanding of the issue at hand, it is pertinent to reproduce Explanation-5 to section 271(1)(c) of the Act as under: “[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 (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 [[Principal Chief Commissioner or] Chief Commissioner or [Principal 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.]” 5. As per the said section the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars of his

income so as to attract levy of penalty if he attributes the money, bullion, jewellery or other valuable articles or thing found in his possession during search, to income of any previous year which has not been disclosed by him either by way of not filing the return of income in the said year or by not disclosing the income in the return filed, if any. The said deeming provision applies for income of any previous year which has ended before the date of search. In cases where the ownership of assets is attributed to income of a previous year which is to end on or after the date of search then even if the said income is declared in the return of income filed, he shall be deemed to have concealed or furnished inaccurate particulars of income. Clause(2) of the said section outlines conditions on the fulfillment of which the assessee becomes eligible to immunity from the levy of penalty. Now the issue before us being the examination of the fulfillment of the conditions enumerated in clause (2), it is necessary to bring out the conditions which need to be fulfilled as per the said clause which are as under: a) The assessee makes a statement under section 132(4) that the assets found in its possession or under his control have been acquired out of his income which has not been disclosed so far in his return of income furnished before expiry of time specified in section 139(1) of the Act. b) specifies in the statement the manner in which the income has been derived and’ c) pays taxes together with interest in respect of such income. 6. During the course of hearing before us the Ld. counsel for assessee was confronted with the specification of clause (2) to Explanation-5 to section 271(1)(c) of the Act and was asked to demonstrate before us as how the assessee fulfilled the aforesaid conditions. The Ld. counsel for assessee expressed his inability to demonstrate the facts before us stating that they were not readily available on record and pleaded that the issue be restored to the Assessing Officer before whom all necessary facts would be demonstrated by the assessee. 7. The Ld. DR also agreed that the necessary facts relevant for the purpose of determining the liability of the assessee to claim immunity from payment of tax as per clause (2) of Explanation-5 t section 271(1)(c) of the Act were not readily available on record and further did not object to

the restoration of the issue to the Assessing Officer for the said purpose. 8. In view of the above, we consider it fit to restore the issue to the Assessing Officer to examine the fulfillment of the conditions as specified in clause (2) to Explanation-5 to section 271(1)(c) of the Act as directed by the Hon'ble High Court. We may add that the assessee be given due opportunity of hearing and is free to adduce all evidences in this regard. The appeal of the assessee is allowed for statistical purposes. 9. In the result, both the appeals of the assesses are allowed for statistical purposes. 6. Ld.Counsel for the assessee pleaded that as in the

aforestated case, the relevant facts proving fulfillment of

conditions specified in clause 2 to Explanation 5 to section

271(1)©, for being eligible for immunity from penalty were

not on record. Ld.Counsel for the assessee stated that all

relevant facts would be adduced before the AO who in turn

could verify them also. He therefore pleaded that as in the

case of Surinder Paul (supra) the issue be restored back to

the AO. Ld.DR did not object to the same and fairly agreed

that the issue was covered by the judgment of the I.T.A.T.

in the case of Shri Surinder Paul and Shri Raj Kumar

(supra).

Assessing Officer to examine the fulfillment of the

conditions of clause(2) to Explanation-5 to section 271(1)(c)

of the Act as interpreted by the apex court in Gebilal

Kanhaiyala (supra), in the present case, and as directed by

the I.T.A.T. in the case of Shri Surinder Paul and Shri Raj

Kumar (supra) and thereafter adjudicate the issue in

accordance with law. We may add that the assessee be given

due opportunity of hearing and is free to adduce all

evidences in this regard.

statistical purposes.

Order pronounced in the Open Court.

Sd/- Sd/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 9th April, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR Assistant Registrar, ITAT, Chandigarh