IN THE ITAT KOLKATA BENCH ‘A’
Deputy Commissioner of Income-tax
Sheo Kumar Kajaria
IT Appeal Nos. 1425-1426 (Kol.) of 2010
[Assessment years 2004-05 and 2005-06]
August 1, 2012
Sanjay Arora, Accountant Member
This is a set of two Appeals by the Revenue contesting the Order u/s. 154 r.w.s. 250 of the Income-tax Act, 1961 (‘the Act’ hereinafter) dated 26-05-2010 by the Ld. Commissioner of Income-tax (Appeals)(Central)-III, Kolkata (‘CIT(A)’ for short) for the assessment years (A.Ys.) 2001-02 to 2006-07.
2. The brief facts of the case are that the assessee is a builder. Search and seizure operations in the group cases, including the assessee, u/s. 132 of the Act was conducted by the Department on 23-08-2006. Money, jewellery, investment and other valuables, aggregating to Rs. 121.29 crores, were found during the course of search from the assessee’s residential premises, and duly recorded in the Panchnama. This was followed by a disclosure petition by the assessee on 21-10-2006, admitting an amounting of Rs. 590.63 lakhs as his undisclosed income for the block period, which was spread over A.Ys. 2001-02 to 2007-08, vide returns of income filed u/s. 153A r.w s. 139(1) of the Act, filed subsequently on 28-08-2007. The aggregate returned income was in fact at Rs. 603.39 lakhs on account of some additional disclosure for A.Y 2007-08. The assessments were made accordingly for each of the years u/s.153A r.w.s. 143(3) of the Act, i.e., on the basis of the income as originally returned u/s. 139(1), and the additional income as per the disclosure pursuant to the search, being dated 20/6/2008 for A.Ys. 2004-05 and 2005-06. The assessee having returned a higher income only on the basis of search, and the materials found thereat, penalty proceedings u/s. 271(1)(c) of the Act on the additional income offered vide the disclosure petition/returns u/s. 153A were also initiated for all the years, it appears, up to A.Y. 2005-06; it being trite that the penalty for concealment and/or furnishing inaccurate particulars of income u/s. 271(1)(c) of the Act is to be with reference to the income and its particulars as returned originally (refer: CIT v. Onkar Saran & Sons  195 ITR 1/62 Taxman 440 (SC)). Penalty under the said section was accordingly levied vide separate orders u/s. 271(1)(c) of even date i.e., 26-12-2008, for the A.Ys. 2001-02 to 2005-06. The assessee was, however, successful in first appeal for A.Ys. 2001-02 to 2003-04 on the basis of the applicability of Explanation 5 to section 271(1)(c) of the Act. The assessee had duly disclosed the manner in which the impugned income had been derived, as also paid tax and interest arising thereon. For A.Ys. 2004-05 and 2005-06, however, the assessee had not paid the full demand of tax and interest and, accordingly, clause-2 of Explanation-5 could not be said to be applicable. The appeal for these two consecutive years was therefore dismissed, allowing that for the initial three years, by the ld. CIT(A) vide his order dated 27-08-2009 (copy on record). The assessee subsequently moved a rectification petition before the ld. CIT(A) for the last two years, i.e., A.Y. 2004-05 and 2005-06, claiming that the entire demand for these years also stood paid prior to the date of the appellate order i.e., 27-08-2009. The assessee’s claim was got verified by the ld. CIT(A) from the Assessing Officer (AO), who confirmed that no demand for the relevant years, i.e., A.Ys. 2004-05 and 2005-06, was outstanding as on 27-08-2009. On the basis of the said confirmation by the AO, vide his remand report dated 10-05-2010, the operating part of which stands reproduced by the ld. CIT(A) at page-3 of his order, he confirmed of a factual infirmity in his earlier order dated 27-08-2009, i.e., in-so-far as it relates to A.Ys. 2004-05 and 2005-06, and accordingly, issued a finding that the conditions of Explanation-5 to section 271(1)(c) of the Act, i.e., for availing immunity from penalty imposed under the Act, stood satisfied by the assessee for the A.Ys 2004-05 and 2005-06 as well. Reference was made to the decision by the hon’ble Supreme Court in the case of CIT v. Hero Cycles (P.) Ltd.  228 ITR 463/94 Taxman 271 and N. RajamoniAmma v. Dy. CIT  53 Taxman 331 (Ker.) for the purpose that the CIT had the authority to rectify a mistake in his order, either of fact or of law, as apparent from the record. The penalty for these years was, accordingly, deleted. Aggrieved, the Revenue is appeal before the Tribunal.
3.1 Before us, the ld. DR could not rebut the factual findings by the ld. CIT(A) per his impugned order. On the Bench specifically inquiring of him if all the conditions of Explanation 5 to sec. 271 (1)(c) stood met in the instant case, he confirmed it to be so, i.e., conceded to the applicability of clause (2) of Explanation 5 to sec. 271(1)(c) for the relevant years. The ld. AR, on the other hand, would submit that there is no basis whatsoever for the Revenue’s challenge. The ld. CIT(A) had declined relief in the first instance only on the basis that the entire admitted demand had not been paid by assessee, which finding was factually incorrect. The first appellate authority had called for a remand report from the AO, and only on the latter’s confirmation that no demand, either as to tax or interest thereon, for the relevant years was outstanding as on the date of the appellate order, i.e., on 27-08-2009, rectified the said order in relation to these years; the same clearly bearing a factual mistake in this regard.
3.2 The hearing was closed at this stage, pronouncing the result of these appeals by the Revenue against it; it being the common contention of both the parties that the provision of Explanation 5 to section 271(1)(c) stood attracted and satisfied in the instant case for the relevant years.
4. We have heard the parties, and perused the materials on record, including the assessment order; the penalty orders, as well as those by the appellate authorities in the first round, i.e., prior to the rectification by the ld. CIT(A) of his earlier order confirming the levy of penalty for the relevant years vide the impugned order. The tribunal is supposed to decide an issue/s arising before it on merits, applying the law to the given facts and circumstances, issuing specific finding/s of fact, where and to the extent required, of course, on the basis of the material on record and after hearing the parties to the list.
4.1 Explanation 5 to section 271(1)(c) reads as under:-
|Explanations 1 to 4 **||
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 utilizing (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 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.”
A bare reading of the provision would exhibit that clause 2 of Explanation 5 section 271(1)(c), i.e., the provision under which the assessee seeks immunity, and which has been found applicable in the instant case by the first appellate authority, is applicable only to cases where the due date for furnishing the return of income u/s. 139(1) of the Act has not expired as on the date of search, which in the instant case is 23-08-2006. Though, the ld. counsel, in this regard, placed a copy of the order by the Honorable jurisdictional high court in the case of CIT v. Ramesh Chand Goyal [in ITAT No.181 of 2010, dated 11-08-2010] on record during hearing, we do not think that the hon’ble court has answered the question of law raised before it, questioning the applicability of Explanation 5 to section 271(1)(c) of the Act to the years for which the time limit for filing the return of income u/s. 139(1) had expired as on date of search, as for the relevant years in the instant case, but only declined to admit the Revenue’s appeal in view of the various findings of fact rendered by the tribunal in the matter. It is settled law that mere denial of admission (of appeal) does not amount to its acceptance on merits. As such, the said decision would be of little assistance to the assessee in the present case [refer, inter alia, S. ShanmugavelNadar v. State of Tamil Nadu  263 ITR 658 (SC).
4.2 Our second observation in the matter is that the admitted income-tax, together with interest, as per the provisions of Explanation 5 is to be paid, if not immediately after the statement/deposition u/s. 132(4), by the date of filing of the return of income u/s. 153A, i.e., for the purpose of framing the assessment there under, which is to mandatorily follow a search u/s. 132 or requisition u/s. 132A of the Act after 31-05-2003 in respect of the defined period, and under which section the assessments in the instant case have been framed. We have compared the figures of income-tax and interest liability as assessed, and the details of its payment for both the years, as mentioned in the appellate order dated 27-08-2009 (at para-3.3, pg.16), with that per the respective assessment orders u/s. 153A r.w.s. 143(3) of the Act dated 20-06-2008, to find the same as identical. Clearly, therefore, there has been, firstly, no error in recording the said figures by the ld. CIT(A) in his order dated 27-08-2009. Secondly, and more importantly, tax and interest to the extent mentioned in the assessment orders, i.e., at in his order Rs.13.33 lakhs and Rs. 20.17 lakhs for A.Ys. 2004-05 and 2005-06 respectively, was outstanding for payment as on the date of assessment, i.e., 20-06-2008. The same has admittedly been paid, i.e., to the extent of Rs. 9,20,284/- and Rs. 11,98,845/- for A.Ys. 2004-05 and 2005-06 respectively, subsequent to the assessment, and prior to the confirmation of penalty by the first appellate authority on 27-08-2009, though it is not clear whether the same stood paid by the date of penalty order (26-12-2008) or subsequent thereto. The balance demand of Rs. 4,12,461/- and Rs. 8,17,864/- for A.Ys. 2004-05 & 2005-06 respectively, observed as outstanding as on 27-08-2009 by the ld. CIT(A) vide his order of even date, is, thus, per se not incorrect. As it appears, demand (liability) to that extent stands ‘discharged’ on rectifications under section 154 being effected by the AO subsequent to the assessments. The rectification order would stand to be merged with the respective assessment order, and thus have the effect of reducing the outstanding liability as on the date of the assessment (20-06-2008). As such, therefore, liability on account of tax and interest, to the extent of Rs. 9,20,284/-and Rs. 11,98,845/- was outstanding for payment for A.Ys. 2004-05and 2005-06 respectively as on the date of the assessment (20-06-2008), if not the date of levy of penalty u/s. 271(1)(c) for the said years (26-12-2008). The statute, in our clear view, provides a time-limit up to the date of filing the return u/s. 153A of the Act for the same. Even if the ld. CIT(A) was of the view that an extended time period for the payment of the admitted demand (i.e., tax and interest) is available under Explanation 5, which of course did not find expression in his earlier order dated 27/8/2009, the question is: Could such a view at all be taken in rectification proceedings, and which in fact represents the Revenue’s second ground before us? The decisions cited by the ld. CIT(A) in this regard (refer para 2 above), rather, answer this question firmly in the negative. Further, as clarified during the course of hearing on an earlier date (30-07-2012, whereat the ld. DR was specifically required to prepare himself and address the Bench on the issue of non-applicability of Explanation 5 in the instant case, and which is in substance the Revenue’s grievance), the order by the tribunal (Kolkata “C” Bench) dated 26-12-2010 (in ITA No. 1857 to 1859/Kol/2009, copy on record) would not operate to decide the issue qua applicability of Explanation 5 to section 271(1)(c) for the years under reference, i.e., A.Ys. 2001-02 to 2003-04. This is for the reason that the Revenue’s appeal for the first three years (A.Ys. 2001-02 to 2003-04), was dismissed on account of low tax-effect u/s. 268A. Sub-section (3) of s. 268A precludes the assessee from contending that in such case the Income-tax Authority has acquiesced in the decision on the disputed issue. Reference in this regard may also be made to the decision in the case of S. ShanmugavelNadar (supra). As regards the years under reference in the instant case, i.e., A.Ys. 2004-05 and 2005-06, the assessee’s appeals were dismissed by the tribunal, being infructuous. Clearly, no appeal by the assessee would survive after impugned order for the relevant years, deleting the penalty. The order by the tribunal would thus not have any bearing in the matter on the merits of the case.
In view of the foregoing, we find the assessee’s claim for immunity under Explanation 5 to section 271(1)(c) as not maintainable for three reasons. Firstly, due to the in applicability of the provision for the relevant years; the due date for filing the return u/s. 139(1) of the Act having expired or elapsed as on the date of search; rather, much prior thereto. Secondly, for non-satisfaction of the condition of payment of tax and interest by the due date of filing the return of income u/s. 153A in response to notice there under pursuant to search u/s. 132, or even the actual date of filing of the return there under; being, rather, only after the date of assessment/s. Thirdly, as aforesaid, even if the ld. CIT(A) held the view that the extended period for the payment of admitted demand is available, such a view, being in any case contentious and not free from debate, could not have been taken by him in the rectification proceedings u/s. 154 of the Act. So, however, the matter having been conceded to by the ld. DR during hearing, admitting to the assessee’s case for the relevant years being squarely covered by Explanation 5 to section 271(1)(c), we, as aforesaid, on the basis of said concession, dismiss the Revenue’s appeal for both the years. We decide accordingly (also refer paras 4.1 & 4.2).
6. In the result, both the appeals by the Revenue are dismissed.