Assistant Commissioner of Income-tax, CC-1(3), Ahmedabad v. Kirit Dahyabhai Patel

ORDER

Per A.N. Pahuja, Accountant Member. - These five appeals by the revenue, relating to the two assessees, arising out of two separate orders dated 30-3-2007 of the ld. Commissioner of Income-tax (Appeals)-I, Ahmedabad, raise the following grounds :

"1. The CIT(A) has erred in law and on facts in cancelling the penalty of Rs. 2,33,684 in ITA No. 2344, Rs. 4,20,000 in ITA No. 2345, Rs. 3,45,001 in ITA No. 2346, Rs. 11,67,076 in ITA No. 2348 & Rs. 5,15,447 in ITA No. 2389 levied under section 271(1)(c) of the Act, by the Assessing Officer, without considering the fact that the assessee had not voluntarily disclosed the true and correct income.

2. The CIT(A) has erred in law and on facts in not properly considering the Explanation 5 to section 271(1)(c) of the Act, according to which, the assessee is not entitled to immunity from the penalty for the earlier period where the due date of return under section 139(1) of the Act has expired.

3. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer.

4. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the Assessing Officer be restored to the above extent."

Since similar issues were involved in all these five appeals, these were heard together and are being disposed of through this common order.

2. Facts, in brief, as per relevant orders are that in these cases, a search under section 132 of the Income-tax Act, 1961 [hereinafter referred to as the 'Act'] was conducted in the aforesaid taxpayer's residential and office premises on 4-9-2003. These taxpayers submitted the original returns and returns after the search in response to notice under section 153A(a) of the Act on various dates as under :

2.1 As is evident from the relevant orders, during the course of search, it transpired that the taxpayers were engaged in business of land and construction and were a member of a group known as 'Bata Group' in Kalol. The group used to acquire co-operative housing societies for selling land released by AUDA for the benefit of members of the society. The promoters and members of the societies were close business associates of the Bata Group. After allotment of land by AUDA to the society, the land was sold to actual users by enrolling them as new members of the societies. During the course of search, one Shri Kirit B. Modi was also covered under section 132 of the Act, who was working as an accountant for all the co-operative societies and was maintaining books of account on his personal computer. Annexure-A, Item Nos. 9, 10 and 11 seized from his residence reflected that he received fees from Shri Rajesh Amratlal Patel and Shri Rupesh Bholidas Patel in respect of various co-operative societies. Since the fee for maintaining the books of account of societies was paid by Shri Rajesh Amritlal Patel and Shri Rupesh Bholidas Patel to Shri Kirit B. Modi, Assessing Officer was of the opinion that it is proved beyond doubt that these co-operative societies are con- trolled and managed by these two persons of Bata Group. Names of such co-operative societies along with undisclosed income/ investments detected are as under:—

2.2 On pages 3 to 5, of Annexure- A Item No. 10 seized from residence of Shri Kirit B. Modi, the details of fees received on 3-11-2002 in respect of Sharda Co-op. Housing Society, Jayvir Co-op. Housing Society, Manavmandir Co-op. Housing Society, Akar (Kalol) Owners' Association, Shivalay (Kalol) Owners' Association and Chitrakut Co-op. Housing Society are mentioned. The fees have been received in cash by Shri Kirit B. Modi from Shri Rupesh Bholidas Patel. Further many files containing corres-pondence with AUDA, signed applications for membership, agreement, resignation letters, and vouchers for receipt of amount deposited with the societies of the members, who were enrolled at the time of formation of the society and also at the time of making initial payments to AUDA were found and seized from his residence and from the residence of Shri Pravin D. Patel, one of the prominent members of Bata Group. According to the Assessing Officer, all these evidences proved that the group was involved in land trading on large scale and profits from this business were not disclosed in the return(s) of income. This was also accepted by some members of the group in their statements under section 132(4) of the Act.

2.3 The aforesaid persons in the group were also engaged in development of land for which certain non-trading corporations were formed. Only after seizure of various incriminating documents, these taxpayers disclosed additional income as mentioned in para 2 above in the return filed in response to notice under section 153A(a) of the Act, over and above, the income which was returned in their respective original returns. Assessment proceedings under section 153A(1)(b) of the Act in the aforesaid cases were completed on 20-3-2006 and income returned in pursuance to the search was accepted. Simultaneously, penalty proceedings were also initiated under section 271(1)(c) of the Act, the taxpayers having disclosed additional income in pursuance to the search in the return filed under section 153A(1)(a) of the Act, particulars of which were concealed by these taxpayers while filing the original returns of income on respective dates as shown above.

2.4 In response to a show-cause notice issued before levy of penalty under section 271(1)(c) of the Income-tax Act, the assessees submitted vide letter dated 21-8-2006 that the assessment has been finalized under section 153A(1)(b) of the Act wherein income returned is assessed and the taxpayers have fully co-operated with the Income-tax Department during the course of search proceedings as well as assessment proceedings and that there was no return of income in existence on the date of search. It was pleaded that in view of the specific provisions of section 153A of the Act, the section requires issuance of fresh notice, furnishing of fresh returns for all 6 years and all past actions abate i.e. put an end to all the returns filed and assessments become non est. The assessees offered income which was admitted in statement and explained how the income were earned. Thus, true and full income was offered in return and due taxes were paid/provided thereon. Vide another letter dated 14-9-2006, the assessees submitted that since the main persons have made a confession under section 132(4) of the Act and disclosed the manner in which income was earned and taxes are also claimed to have been paid, no penalty is leviable. Inter alia, these taxpayers relied upon decisions regarding applicability of Explanation 5( 2) to provisions of section 271(1)(c) of the Act. However, the Assessing Officer rejected these contentions of the assessees and levied penalty at the rate of 100 per cent of tax sought to be evaded on the ground that neither the transactions relating to concealed income were recorded in the books of account nor disclosure was voluntary. Assessing Officer was of the opinion that though the assessees have been filing returns for the preceding so many years, they did not disclose their income in the original returns filed on various dates as mentioned in para 2 above. Only after evidence was found during the course of search and documents were seized, additional income was declared in the returns filed after the search. It was also concluded by the Assessing Officer that in terms of provisions of section 153A of the Act, merely the pending assessments abate and not all the past actions of the taxpayer, as has been stated by the assessees. Inter alia, Assessing Officer relied upon the following decisions :

(a) Hakam Singh v. CIT [1980] 124 ITR 228 (All.)
Held that the returns filed due to restrain & fear is not voluntary and penalty is leviable.
(b) CIT v. Handloom Emporium [2005] 149 Taxman 224 (All.)
When sales recorded on loose papers found during the course of search were not found recorded in the books of account and later, return is revised showing higher income, it is held that the assessee had deliberately concealed the income and penalty under section 271(1)( c) was leviable.
(c) (1) Sheraton Apparels v. (2) Max Corporation [2002] 256 ITR 20 (Bom.)
In this case, it is held that transactions recorded in personal diaries etc. cannot be considered as recorded in books of account before the date of search because books of account for the purposes of Explanation 5 will be regular books of account maintained for the purposes of computation of income for income-tax purposes. Hence, the assessee cannot seek any benefit on this account under Explanation 5 to section 271(1)( c).
(d) A.P. Sehgal v. Asstt. CIT [2004] 89 ITD 580 (Delhi)
In this case, return for assessment year 1990-91 was already filed. During search assessee made a declaration under section 132(4) on 18-9-1992 having not disclosed income of Rs. 1,80,000 invested in boundary wall, agricultural land and purchase of shop. It is held that Explanation 5 to section 271(1)(c ) does not in any manner dilute the rigour of section 271(1)(c ). On the contrary, it extends the scope of default under section 271(1)(c ). Since the concealment is detected and admitted by assessee under section 132(4), filing of revised return (under section 153A in the present case) would not absolve the assessee from penalty. In arriving at these findings, the ITAT relied upon the ratio laid down in Amjad Ali Nazir Ali v. Commissioner Of Income-Tax, Kanpur. [1977] 110 ITR 419 (All.), Commissioner Of Income Tax v. Messrs Mussadilal Ram Bharose. [1987] 165 ITR 14 (SC), CIT v. K.R. Sadavappam [1990] 185 ITR 49 (SC), G.C. Agrawal v. CIT [1990] 186 ITR 571 (SC) and K.P. Madhusudanan v. CIT [2001] 251 ITR 99 (SC).

3. On appeal, the taxpayers reiterated their contentions before the Assessing Officer and further argued that in view of specific provisions of section 153A of the Act, the returns filed in response to notice under section 153A(1)(a) of the Act, have to be treated as return filed under section 139 of the Act and therefore, penalty is to be levied on the income assessed over and above the income returned under section 153A of the Act. Referring to the provisions of section 153A of the Act, it was pleaded that return filed under section 153A of the Act, being fresh return, no penalty can be levied if the income assessed is income returned. It was further argued that unlike provisions of Explanation 3 to section 271(1)(c) of the Act, there are no provisions/explanations for levy of penalty under section 271(1)(c) of the Act on the return furnished under section 153A of the Act. While citing the instances of other Assessing Officers, not levying penalty in respect of income returned under section 153A of the Act, it was further submitted that there is immunity from penalty as per provisions of Explanation 5(2 ) of section 271(1)(c) of the Act since the taxpayers fulfilled the conditions stipulated under the said explanation. In this connection, decision of Hon'ble Madras High Court in the case of CIT v. S.D.V. Chandru [2004] 266 ITR 175 was relied upon.

4. In the light of aforesaid submissions, the ld. CIT(A) held as under :

"11. I have considered the penalty order, arguments of the appellant and written submissions made on behalf of the appellant before Assessing Officer and before me. It is noticed that the appellant had made detailed submissions before the Assessing Officer and cited various case laws, the Assessing Officer has merely stated that submission of the appellant is not acceptable and levied penalty under section 271(1)(c) of the Income-tax Act. I am inclined to agree with the arguments of the appellant on the following issues :

(i) Applicability of Explanation 5 (2) to section 271(1)(c ) of the Income-tax Act

I have gone through the submissions made on behalf of appellant and arguments of Ld. A.R., penalty of assessment year 2003-04 and assessment year 2004-05 are dropped by the Assessing Officer in view of the provisions of Explanation 5( 2) to section 271(1)(c) of the Income-tax Act. Thus there is no dispute with regard to the conditions for immunity from penalty viz. the appellant accepted the undisclosed income, specified the manner in which such income has been earned, offered such incomes in the return filed after search and paid taxes together with interest. The same is not accepted by the Assessing Officer for this year under the presumption that the explanation is not available/applicable to the earlier years i.e. assessment year 1998-99 to assessment year 2002-03. The appellant on the other hand claimed that he is entitled to get benefit of the said provisions, in support of this the appellant has relied upon the ratio laid down by the Hon'ble Madras High Court in the case of CIT v. S.D.V. Chandru 266 ITR 175 , where the Hon'ble Madras High Court (supra) held that immunity under Explanation 5( 2) to section 271(1)(c) of the Income-tax Act is available and penalty was liable for all the earlier years. Respectfully following the ratio laid down by Hon'ble Madras High Court (supra), I hold that the appellant is entitled to the benefit of the provisions of Explanation 5( 2) to section 271(1)(c) of the Income-tax Act for earlier years i.e. for assessment year 1998-99 to assessment year 2002-03, no penalty can be imposable for earlier years.

(ii) Penalty on the income returned under section 153A of the Income-tax Act

I have gone through the submissions made on behalf of the appellant and arguments of Ld. A.R. The provisions of section 153A of the Income-tax Act due to its notwithstanding clause supersedes the other provisions of section 139, section 147, section 148, section 149, section 151 and section 153 of the Income-tax Act. Therefore, the return filed under section 153A of the Income-tax Act overrides the other returns filed prior to search, if any, and they become non est. The return filed under section 153A of the Income-tax Act is the only return, which is considered by Assessing Officer for making assessment under section 153A(b) of the Income-tax Act and in the present case the income returned under section 153A of the Income-tax Act and income assessed under section 153A(b) of the Income-tax Act are same, this being the factual position and since there is no dispute about these facts, I am inclined to agree with the submissions and arguments made on behalf of the appellant that it is not relevant whether any return of income was filed by the appellant prior to the date of search and whether any income was disclosed in that return of income. In view of specific provision of section 153A of the Income-tax Act, the return of income filed in response to notice under section 153A(a) of the Income-tax Act is to be considered as return filed under section 139 of the Act, as the Assessing Officer has made assessment on the said return, therefore this return is to be considered for the purpose of penalty under section 271(1)(c) of the Income-tax Act and penalty is to be levied on the income assessed over and above to the income returned under section 153A, if any. In the provisions of section 148 there are specific provision in Explanation 3 to section 271(1)(c) of the Income-tax Act for levy of penalty, whereas in the provisions of section 153A there are no such provisions/explanations in the Act for levy of penalty under section 271(1)(c) of the Income-tax Act on the return furnished under section 153A and as section 153A overrides provisions of section 148 due to its notwithstanding clause no help can be taken from section 148 or Explanation 3 of section 271(1)(c) of the Income-tax Act in the matter of penalty in the case of search and return filed under section 153A of the Income-tax Act.

12. The appellant brought to my notice the proposed amendment made in the Finance Bill introduced to the Parliament during the budget presentation by the FM, a new section, being section 271AAA is proposed, wherein a penalty is proposed to be leviable in the search cases with effect from 1-6-2007. The introduction of such provisions itself shows that no penalty under section 271(1)(c) of the Income-tax Act is imposable on the income returned under section 153A of the Income-tax Act, prior to such amendment.

13. In view of the above facts brought out on record, in the light of case laws relied upon by the appellant and legal provisions as discussed in the foregoing paragraphs I hold that penalty under section 271(1)(c) of the Income-tax Act cannot be levied on the incomes shown in the returns filed under section 153A of the Income-tax Act. Therefore, the Assessing Officer was not justified in imposing penalty under section 271(1)(c) of the Income-tax Act for assessment year 1998-99 to assessment year 2002-03, as the assessments are made on the income returned under section 153A. Accordingly the penalty levied for assessment year 1998-99 to assessment year 2002-03 are cancelled."

5. The revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Before us, the ld. DR relied heavily upon the decision dated 25-1-2008 of the ITAT 'B' Bench, in the case of another member of the group i.e.,Asstt. CIT v. Rupesh Bholidas Patel [2009] 309 ITR (AT) 217 (Ahd.) for the assessment years 1998-99 to 2002-03, wherein the ITAT reversed the findings of the ld. CIT(A) on the legal issues. On the other hand, the ld. A.R. on behalf of taxpayer while distinguishing decisions relied upon by the Assessing Officer submitted that the provisions of section 153A of the Act are overriding in nature and cannot be at par with the provisions of section 148 of the Act. It was pleaded that the income offered in pursuance to notices under section 153A(1)(a) has been accepted by the Assessing Officer in assessment made under section 153A(1)(b) of the Act without making any further additions. It was further submitted that the respondents are entitled for immunity from levy of penalty under section 271(1)(c) as provided in Explanation 5 to section 271(1)(c) of the Act in a situation where the incomes were found to be not disclosed in the returns already filed on account of transactions relating to immovable properties as the words "books of account, documents" as appearing in section 132(4) are not appearing in Explanation 5 to section 271(1)(c) which is applicable in search cases. Explanation 5 is not applicable to documents or title to immovable properties as held in South Indian Finance v. ITO [1991] 39 ITD 370 (Cochin) wherein Hon'ble Tribunal after relying upon decisions in the case of Sri Radhakrishna Trading Co., Kurnool…Applicant; v. Commr. Of Income-Tax…. [1954] 26 ITR 666 (Mad.) and C.A. Abraham v. ITO [1961] 41 ITR 425 (SC) held that whether, in the Explanation 5 to section 271(1)(c) the omission of the words 'other documents' as is found in section 132(4) is a lacuna or a deliberate omission it is not for us to state. Relying on the decisions in the case of Gulabrai V. Gandhi v. Asstt. CIT [2003] 84 ITD 370 (Mum.) and Vishwa Nath Agarwal v. Asstt. CIT [2001] 71 TTJ 668 (All.) , it was further contended that if no specific question regarding the mode of earning of income was put to the assessee and assessee paid due tax on the income declared, immunity from penalty under section 271(1)(c) read with Explanation 5 is available to the assessee. Relying on decisions in the case of Commissioner Of Income-Tax v. Radha Kishan Goel [2005] 278 ITR 454 (All.) and Commissioner Of Income-Tax v. Mahendra C. Shah [2008] 172 Taxman 58 (Guj.) affirming Ahmedabad Tribunal in Mahendra Chimanlal Shah v. Asstt. CIT [1994] 51 ITD 244 , it was contended that even if manner of earning of income is not explained in the course of search under section 132(4) but the same is explained subsequently, it amount to sufficient compliance for immunity from penalty as per Explanation 5(2) to section 271(1)(c) of the Act.

5.1 Continuing, it was further contended that respondents Shri Rajesh A. Patel and Shri Kirit D. Patel disclosed additional incomes of Rs. 80,05,000 and Rs. 27,50,000 respectively as tabulated on page 2 of order of CIT(A). The Assessing Officer assessed incomes as disclosed by the respondents in the returns filed under section 153A and not on the basis of alleged undisclosed incomes tabulated and referred to in the penalty order. Since the taxpayers did not file any appeal against the assessment orders, the assessments so made could be held to be agreed assessments and on this ground also no penalty under section 271(1)(c) could be levied merely because assessee opted to disclose additional incomes in returns filed under section 153A of the Act. It was further submitted that if there is no variation between the income assessed and income returned under section 153A, then no penalty under section 271(1)(c) could be levied. If it is held that Explanation 5 to section 271(1)(c) is not applicable to the search cases where assessments have been made under section 153A of the Act in view of Hon'ble Finance Minister's Budget Speech for 2003-04 on the floor of Parliament that no confessional statement shall be obtained from the assessee in the course of search and seizure operations [260 ITR (Statutes) 29] and reiterated in CBDT Instruction F. No. 286/2/2003/I.T.(Inv.), dated 11-3-2003, then also no penalty is leviable under section 271(1)(c) as respondents in such a situation would not fall in any of the categories specified from Explanation 1 to Explanation 7 of section 271(1)(c) of the Act. In this connection, the taxpayer relied upon decision in the case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC), wherein it was held that no penalty under section 271(1)(c) could be levied where assessee filed revised return showing higher income subsequent to search and after issue of notice for reopening of assessment to buy peace and to avoid litigation and department simply rested its conclusion on the act of voluntary surrender done by assessee in good faith, inter alia, it was pleaded that the Assessing Officer has himself dropped penalty proceedings for assessment years 2003-04 and 2004-05 but levied penalty in respect of other assessment years in the case of respondents and therefore proprietary demands cancellation of penalties levied for earlier years as well because same Assessing Officer has adopted two different approaches on the same date in deciding identical issue. It was further argued that none of the Explanations 1 to 7 to section 271(1)(c) of the Act are attracted in this case and, therefore, there is no case for levy of penalty under section 271(1)(c) of the Act. In this connection, he relied upon the decisions in the case of Dr. Dharamveer Singh Dhillon v. CIT [2008] 116 TTJ 141 (Bilaspur) and Sudarshan Silks & Sarees v. Commissioner Of Income Tax, Karnataka. [2008] 169 Taxman 321 (SC) .

6. We have heard rival contentions and gone through the facts of the case as also the decisions relied upon and material placed before us. As is evident from the facts of the case, these assessees were subjected to search under section 132 of the Act on 4-9-2003 after filing of original returns of income as detailed in para 2 above. During the search incriminating material was seized. Thereafter, the returns filed by these taxpayers in terms of provisions of section 153A(1)(a) of the Act were accepted by the Assessing Officer. Before the Assessing Officer and the ld. CIT(A), these taxpayers pleaded that the return filed under section 153A is deemed to be a return filed under section 139 on the ground that identical language is also used in section 148(1) and also that their case to covered by Explanation 5(2) to section 271(1)(c) of the Act. However, before us the ld. AR in his written submissions dated 2-5-2008 pleaded that respondents are entitled to immunity from levy of penalty under section 271(1)(c) as provided in explanation to the said section but in written submissions dated 17-10-2008 pleaded that none of the explanation to section 271(1)(c) is attracted in their case and that no penalty under section 271(1)(c) of the Act is envisaged in respect of returns filed under section 153A of the Act. The taxpayer further relied upon a number of decisions including that of Hon'ble Supreme Court in the case of Sudarshan Silks & Sarees (supra).

6.1 Adverting first to the issue applicability of provisions of Explanation 5 to section 271(1)(c) of the Act, raised by these taxpayers before the ld. CIT(A) and before us in written submissions dated 2-5-2008 the assessees initially sought shelter of clause 5(2) of the said Explanation. However, later the assessees pleaded that the said Explanation is not attracted in their case. The relevant provisions of said explanation read as under :—

"271. Failure to furnish returns, comply with notices, concealment of income, etc.—(1) If the [Assessing Officer] or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person—

(a).......

(b).......

(c)has concealed the particulars of his income or furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty.

..................................................................

Explanation 1................

Explanation 2................

Explanation 3................

Explanation 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 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 [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.]"

7. Before proceeding further to analyse the impact of the aforesaid explanation, we may refer to the aspect of concealment-as to when the concealment is effected. It is well settled that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past, in the case under consideration, the concealment of the particulars of income was effected by the assessees when these assessees filed their original returns of total income on the dates mentioned in para 2 above [Brij Mohan v. CIT [1979] 120 ITR 1 (SC), CIT v. Onkar Saran & Sons [1992] 195 ITR 1 (SC), B.N Sharma v. Commissioner Of Income Tax, Orissa [1997] 226 ITR 442 (SC) ]. The assessment framed under section 153A(1)(b) of the Act after the search, accepting the return of income as disclosed by the assessees during the course of search is over and above what was disclosed in the original return. Since the assessees had to disclose their real, total income in the original return filed under section 139, if they had failed to do so but concealed or furnished inaccurate particulars in that return, the offence becomes complete. Thus, the offence of concealment is complete and final when the assessees had not disclosed the real income in their original return. If the plea on behalf of the assessees that since there was no difference in the income returned after the search and the assessed income accepted, an anomalous result will follow in certain glaring cases of concealment. Let us take the following illustration. An assessee conceals income in his original return. He gets away with it and the original assessment is completed without detecting the concealment. Subsequently, a notice is given for assessing the escaped or undisclosed income. In these proceedings, the assessee files a return of income including the escaped or undisclosed income. In this situation, the argument on behalf of the taxpayer, if accepted, will result in the conclusion that the department will be helpless in imposing a penalty in such a case. That certainly cannot be the effect of the legal provisions. Again, an assessee would completely escape penalty, if he does not at all file a return in response to the notice under section 153A of the Act. The argument could be that; since a penalty can be imposed only with regard to the return filed in the reassessment proceedings and since he had filed no such return, he cannot be penalised at all. If the original return could form the basis for determining the quantum of penalty imposable on the reassessment, there is no reason why the original return should also not form the basis for determining the date on which the concealment was effected by the assessee. Thus it is well settled that the concealment of the particulars of income was effected by these assessees when the taxpayer filed their original returns of total income on the dates mentioned in para 2 above.

7.1 In the case under consideration, the Assessing Officer levied the penalty under section 271(1)(c) of the Act for concealment of income. The CIT(A) cancelled the penalty on two premises i.e., (i) by making applicability of concession in Explanation 5( 2) to section 271(1)(c) of the Act (ii) and penalty on returned income under section 153A of the Act by considering the return filed under section 139 of the Act as abated and non est in the eyes of law. As regards contentions of the taxpayer regarding applicability of the aforesaid Explanation 5 to section 271(1)(c) of the Act, it is noticed that prior to the insertion of Explanation 5 to section 271 by the Taxation Laws (Amendment) Act, 1984 with effect from 1-10-1984, an assessee, who was found to be the owner of any money, bullion, jewellery etc., recovered during the course of search, was entitled to explain that such assets were acquired by him by utilising his income relating to any previous year, whether it ended before the date of the search or is to end on or after the date of the search. By doing so the assessee could escape the liability to penalty under section 271(1)(c) of the Act. In order to plug the loophole, the aforesaid Explanation 5 was inserted with effect from 1-10-1984 and is applicable to a situation where in the course of a search under section 132 of the Act the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing and the assessee claims that such assets have been acquired by him by utilising, wholly or in part, his income for any previous year which has already ended before the date of the search or which is to end on or after the date of the search. In view of the explanation, notwithstanding the fact 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 section 271(1)(c), be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income except in cases where such income is, or the transactions resulting in such income are, recorded on or before the date of the search in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Commissioner before the date of the search. Thus, by the deeming provisions of Explanation 5, the assessee is fastened with the liability to penalty under section 271(1)(c) in case he explains the acquisition of assets, recovered in the course of search, from out of income of a previous year which has already ended before the date of the search or which is to end on or after the date of search.

8-10 In the present case the respective assessees filed their original returns of income on various dates as indicated in para 2 above before the date of search. Admittedly, income disclosed in the returns filed in pursuance to notice under section 153A of the Act was not declared in these returns. Thereafter, search under section 132 took place on 4-9-2003. As is evident from the relevant assessment order of Shri Kirit Bhai Patel, the Assessing Officer has concluded that the said assessee accepted (i) an amount of Rs. 2,50,000 on account of investment in car No. GJ-1, HE-4578; (ii) cash of Rs. 3 lacs deposited on 31-7-2001 in POIMS pass book; (iii) Rs. 1,50,000 deposited in cash in a/c No. 7374 with the UBI, Kalol; (iv) Rs. 2,23,000 on account of lottery in the name of his minor son; (v) Rs. 11,000 on account of consultancy; (vi) Rs. 2 lacs deposited in her wife account and (vii) expenses of Rs. 30,000 as also (viii) donations of Rs. 10,850, out of his undisclosed income. Total of these works out to Rs. 12,15,000. However, out of this, Rs. 8,35,000 is stated to have been brought forward in the form of cash out of undisclosed income of the earlier years and for the year under consideration as per cash flow statement reproduced on page 7 of the assessment order. Accordingly, the Assessing Officer assessed undisclosed income of Rs. 7,73,039. Assessing Officer also mentioned in his assessment order that in the return of income, only an amount of Rs. 5,50,000 has been declared as business income under section 132(4) of the Act. Thus, entire undisclosed income assessed by the Assessing Officer has not been declared under section 132(4) of the Act nor the relevant statement of the taxpayer recorded under section 132(4) has been placed before us by the taxpayer.

10.1 Like wise in the case of Shri Rajesh A. Patel in the assessment year 1998-99, Rs. 2,64,000 on account of undisclosed investment in agricultural land Rs. 94,000 + Rs. 4,60,400 + Rs. 4,60,400 on account of undisclosed investment in land besides funds available in cash from Bata group, admitted to have been out of his undisclosed income of Rs. 14 lacs by the taxpayer have been assessed as undisclosed income.

10.2 In the assessment year 1999-2000 in the case of Shri Rajesh A. Patel, Rs. 2,68,500 & Rs. 1,44,500 on account of undisclosed investment in agricultural land in the name of Shri Kirit Patel and Ganesh Corporation; Rs. 1,00,000 on account of undisclosed investment in bungalow in the name of Shri Nayanbhai A. Patel and Rs. 60,000 on account of his foreign travel besides funds available in cash from Bata group, admitted to have been out of his undisclosed income of Rs. 11.50 lacs by the taxpayer, have been assessed as undisclosed income.

10.3 In the assessment year 2001-02 in the case of Shri Rajesh A. Patel, (i) Rs. 7,50,000 on account of undisclosed investment in his bungalow; (ii) Rs. 10,00,000 on account of undisclosed investment in bungalow in the name of assessee's brother Shri Nayanbhai A. Patel; (iii) Rs. 1,25,000 on account of his foreign travel; (iv) Rs. 1,02,000 on account of unexplained deposits in post office in his own name; (v) Rs. 1,40,000 on account of deposits in his bank account; (vi) Rs. 1,45,000 on account of loan given to his mother; (vii) Rs. 30,000 + Rs. 24,000 on account of cash deposited in the bank/PO account of his brother Shri Nayanbhai A. Patel; (viii) Rs. 75,000 each invested in KVP in the name of Shri Nayanbhai A. Patel and mother; (ix) Rs. 2,31,000 on account of payment of development charges to AUDA besides funds available in cash from Bata group, admitted to have been out of his undisclosed income of Rs. 33.55 lacs by the taxpayer, have been assessed as undisclosed income.

10.4 In the assessment year 2002-03, in the case of Shri Rajesh A. Patel, (i) Rs. 1,00,000 on account of undisclosed investment in the bungalow in the name of Shri Nayanbhai A. Patel; (ii) Rs. 1,00,000 on account of his foreign travel; (iii) Rs. 5,65,000 + 2,97,515 on account of unexplained deposits in bank account in his own name; (iv) Rs. 26,100 on account of interest on account loan given to his mother; (v) Rs. 75,000 on account of cash deposited in the bank account of his brother Shri Nayanbhai A. Patel; (vi) Rs. 50,000 invested in KVP in the name of Shri Nayanbhai A. Patel; (vii) Rs. 35,000 + Rs. 30,000 on account of unexplained investment in vehicles in the name of Shri Nayanbhai A. Patel besides cash available from Bata group, admitted to have been out of his undisclosed income of Rs. 18 lacs by the taxpayer, have been assessed as undisclosed income.

10.5 The plea on behalf of the assesses that mere offer of income in respect of investments belonging to others cannot be held to be concealed income of the assessee is not tenable, since admittedly as is evident from the relevant assessment orders, the assesses have earned undisclosed income and utilized the same income in such investments and assets,inter alia, in the name of their relations. In the face of admission on the part of these assessee's regarding their undisclosed income, where is the need of any further enquiry to nail the truth with regard to the correct source of income, as pleaded by the ld. AR. Now it is well settled that where assessee had admitted to concealment during the course of enquiry or assessment proceedings and in this case in the return of income filed under section 153A(a) of the Act itself, no independent enquiry to prove concealment is necessary for levy of penalty under section 271(1)(c) of the Act. As already mentioned, the offence of concealing the particulars of income or furnishing inaccurate particulars of income in the instant case has to be considered in relation to the original returns which were submitted by these assessees and wherein this concealment of particulars of income or furnishing inaccurate particulars of such income has occurred. So in determining the quantum of penalty the amount of income, the particulars of which were concealed or inaccurate particulars of which were furnished, has to be taken into consideration G.C. Agarwal's case (supra).

10.6 The ld. AR on behalf of the taxpayer contended that Explanation 5 is not applicable to documents of title to immovable properties and relied upon decision in the case of South Indian Finance (supra). We are not able to understand as to how this decision helps the assessees. In the case under consideration the assessees were found to be the owner of cash jewellery and admitted to have deposited cash in bank and PO or utilized the undisclosed income and became owner of various articles or things. Apparently, Explanation 5 is attracted. In this case search was conducted before 1-6-2007and the assessees are found to be the owner of money, jewellery or other valuable articles or things and the assessees themselves claimed that these have been acquired out of their undisclosed income as is evident from the relevant assessment orders. The findings in the relevant assessment orders have been accepted by the assessees and have not been disputed at all at any stage. In these circumstances, apparently, Explanation 5 is attracted. The ld. CIT(A), while allowing the appeal by setting aside the order of penalty, proceeded on the basis that (i) the exception provided in Explanation 5(2 ) to section 271(1)(c) of the Act is attracted (ii) and penalty on returned income under section 153A of the Act by considering the return filed under section 139 of the Act has abated and non est in the eyes of law. We are of the opinion that the ld. CIT(A) has not considered the effect of provisions of section 271(1)(c) of the Act and of the Explanation 5 to section 271(1)(c) of the Act in proper perspective.

10.7 In the case of Commissioner Of Income-Tax v. C. Ananthan Chettiar [2005] 273 ITR 401 , the Hon'ble Madras High Court was considering a similar question. In that case, the Income-tax Department in a search and seizure operation conducted in the assessee's shop and residence, seized cash, jewellery and certain documents. Thereafter, the assessee filed a revised return for the assessment year 1986-87 disclosing additional income which was accepted and assessment was made on the basis of revised return. The assessee took the stand that there was no concealment and it was only for the purpose of buying peace with the Department that the additional income was disclosed and revised return was filed. The Tribunal accepted this plea of the assessee and held that no penalty, in the circumstances, was leviable by relying on the Supreme Court decision in Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705 . On the reference, the Madras High Court set aside the order and observed :—

"Learned counsel for the revenue submitted that the order of the Tribunal is not in accordance with law, as it has ignored the Explanation to section 271(1)(c) of the Act. Learned counsel also placed reliance on the decision in the case of K.P Madhusudhanan v. Commissioner Of Income Tax, Cochin [2001] 251 ITR 99 (SC) , wherein it was held that the law declared by the Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC) was no longer applicable by reason of the addition of the Explanation to section 271. That Explanation casts a burden on the assessee to show that the additional income that had not been disclosed was not due to fraud or neglect.

In this case, the assessee offered no explanation at all except to assert that he disclosed the income only to buy peace with the Department and what was disclosed, in fact, was additional income. The reason for not having disclosed the income earlier was not stated. In these circumstances, the ITAT was in error in setting aside the penalty. The question is answered in favour of the Revenue and against the assessee, in the light of the later decision of the three judge Bench of the Supreme Court in the case of K.P Madhusudhanan v. Commissioner Of Income Tax, Cochin [2001] 251 ITR 99 ."

10.8 Similarly, in the case of Sheraton Apparels (supra) the provisions of section 271(1)(c) of the Act and Explanation 5 came up for consideration before the Hon'ble Bombay High Court. In that case, a search and seizure operation under section 132 of the Act was carried out in the shop premises of the appellant after returns filed by him. In the course of search and seizure operations, certain documents, papers and records, including certain diaries were seized. After scrutiny, unaccounted income was worked out. The assessee admitted the unaccounted income and offered to disclose the additional income in the hands of various persons in various years which were broadly on the basis of entries recorded in the diaries. On the basis of disclosures, all the groups concerned including the appellant chose to file a revised return disclosing the additional income which was accepted by the Assessing Officer by passing the assessment order under section 143(3) of the Act. In the assessment order, the Assessing Officer ordered initiation of penalty proceedings under section 271(1)(c) of the Act. The assessing authority finally passed the order of penalty. Aggrieved the said order, the appellant preferred appeals before the appellate authority who confirmed the levy of penalty. The appellant then moved the Income-tax Appellate Tribunal by filing appeals which were eventually dismissed. The appellant then moved the Bombay High Court raising the following substantial question of law :—

"Whether, on the facts and in circumstances of the case and law, the diaries, on the basis of which the additions were made could be regarded as books of account for the purposes of clause (1) of Explanation 5 to section 271(1)(c) of the Act, so as to provide immunity to the appellants?"

Dismissing all the appeals, the Hon'ble High Court observed :—

"The term 'books of account' referred to in clause (1) of Explanation 5 to section 271(1)(c) means books of account which have been maintained for determining any source of income. The term 'source of income' as understood in the Income-tax Act is to identify or classify income so as to determine under which head, out of the various heads of income referred to in section 14 of the Act, it would fall for the purposes of computation of the total income for charging income-tax thereon. Thus, the term 'books of account' referred to in this relevant sub-clause of Explanation 5 would mean those books of account whose main object is to provide credible data and information to file the tax returns. A credible accounting record provides the best foundation for filing returns of both direct and indirect taxes. Accounting is called a language of business. Its aim is to communicate financial information about the financial results. This is not possible unless the main objectives of the books of account are to maintain a record of business: to calculate profit earned or loss suffered during the period of time, to depict the financial position of the business; to portray the liquidity position; to provide up to date information of assets and liabilities with a view to derive information so as to prepare a profit and loss account and draw a balance-sheet to determine income and source thereof. Thus, the term 'books of account' referred to in Explanation 5 must answer the above qualifications. It cannot be understood to mean compilation or collections of sheets in one volume. The books of account referred to are those books of account which are maintained for the purposes of the Income-tax Act and not diaries which are maintained merely as a man's private record; prepared by him as may be in accordance with his pleasure or convenience to secretly record secret, unaccounted clandestine transactions not meant for the purposes of the Income-tax Act, but with specific intention or desire on the part of the assessee to hide or conceal income so as to avoid imposition of tax thereon.

The words in Explanation 5 'books of account, if any, maintained by him for any source of income' are important words signifying the legislative intent embodied in the Explanation warranting grant of immunity from penalty. The legislative intent is to admit only those books of account maintained by the assessee on his own behalf as by their very nature and circumstances are maintained for the purposes of drawing the source of income. Therefore, when books of account are tendered for claiming the benefit of Explanation 5 to section 271(1)(c) of the Act, it must be shown to be a book, that book must be a book of account, and on the top of it that must be one maintained for the purposes of drawing the source of income under the Income-tax Act. These essential requirements must be carefully observed while implementing tax legislation in the country where secret and parallel accounts based on frauds and forgery are extremely common and responsibility of keeping and maintaining accounts for the purposes of the tax legislation is honoured in the breach rather than the observance.

Now, turning to the facts of the cases in hand, private diaries may have been most regularly maintained, it may have been exhibiting record of the factual facts, contemporaneously made but they were never maintained for the purposes of the Income-tax Act to draw the source of income or for the computation of total income to offer income calculated therefrom for the purposes of taxation. Such books or diaries can hardly be designed or accepted as books of account for the purposes of Explanation 5 of section 271(1)(c) of the Act, so as to afford immunity from penalty. None of the cases cited by the appellants were close to the facts found herein, hence no reference thereto in our opinion, is necessary.

The Tribunal was perfectly justified in upholding the levy of penalty under section 271(1)(c)of the Act.

Accordingly, question of law reframed is answered in the negative, i.e., against the appellants/assessees and in favour of the Revenue. In the result, all the appeals are dismissed with no order as to costs."

10.8.1 In view of the foregoing, we are of the opinion that provisions of section 271(1)(c) were rightly invoked by the Assessing Officer and in terms of Explanation 5 to the said section, these assessees were rightly deemed to have concealed the particulars of their income. Now only thing under the said explanation that remains to be considered is as to whether or not concession in the said explanation is available to these assessees.

10.9 As regards plea on behalf of these assessees that mens rea has to be established to levy penalty , we are not inclined to accept this plea also. In this connection, we are supported by the statement in Corpus Juris Secundum, Volume 85, page 580, paragraph 1023 :—

"A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture I provided as punishment for the violation of criminal or penal laws."

10.9.1 Even otherwise it is a settled law that in economic offences, the statutory liability to pay either duty or tax is nothing but a strict liability where the question of proving beyond the shadow of doubt one's existence of bona fide belief that such duty or interest is not taxable does not arise. It goes without saying that any violation of the law or rules relating to economic offences, either relating to the payment of duty or tax as the case may be, the theory of mens rea is not attracted. In such matters, the rules of interpretation contemplate a strict interpretation rather than a liberal and wider interpretation.

10.9.2 The rule of mens rea has to be established beyond all reasonable doubt in criminal cases, but it is not so in the case of an economic offence. The classical view that "no mens rea, no crime" has long ago been eroded, especially regarding economic crimes. In economic offences, the notion that a penalty or a punishment cannot be cast in the form of an absolute or no fault liability but must be preceded by mens rea must be rejected. A rule of strict liability or absolute liability should be imposed without insisting mens rea to deal with such socio economic crimes, vide Bagavathy v. State Of Tamil Nadu [2007] 1 LW 892.

10.9.3Mens rea is not an essential ingredient for contravention of the provisions of the civil Act. Unless the language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred and it is wholly unnecessary to ascertain whether such a violation was intentional or not.

10.9.4 The breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI v. Shriram Mutual Fund [2006] 5 SCC 361.

10.9.5 The aforesaid decision in the case of Chairman, SEBI (supra), has recently been reaffirmed in the case of Union of India v. Dharamendra Textile Processors [2008] 174 Taxman 571 , wherein Hon'ble Supreme Court vide their order dated 29-9-2008 in civil appeal Nos. 10289 -10303 of 2003 after analysing a number of decisions in (a) Director of Enforcement v. MCTM Corpn. (P.) Ltd. [1996] 2 SCC 471 (SSC pp. 478 & 480-81, paras 8 & 12-13); (b) J.K. Industries Ltd. v. Chief Inspector of Factories & Boilers [1996] 6 SCC 665 (SCC p. 692, para 42); (c) R.S. Joshi v. Ajit Mills Ltd. [1977] 4 SCC 98 (SCC p. 110, para 19); (d) Gujarat Travancore Agency v. CIT [1989] 3 SCC 52 (SCC p. 55, para; (e) Swedish Match AB v. SEBI [2004] 11 SCC 641 (SCC p. 671, para 113) and (f) SEBI v. Cabot International Capital Corpn. [2005] 123 Comp. Cas. 841 (Bom.) (Comp. Cas. pp. 862 & 864-65, paras 47, 52 & 54), held—

"24. It is of significance to note that the conceptual and contextual difference between section 271(1)(c) and section 276C of the Income-tax Act was lost sight of in Dilip Shroff's case (supra).

25. The Explanations appended to section 271(1)(c) of the Income-tax Act entirely indicates the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The judgment in Dilp N. Shroff's case (supra) has not considered the effect and relevance of section 276C of the Income-tax Act. Object behind enactment of section 271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C of the Income-tax Act."

10.9.6 In view of the foregoing, the plea regarding requirement of establishing mens rea for levy of penalty, is devoid of any merit and is, thus rejected.

10.10 The next plea that income had been offered by the assessees to buy peace and voluntarily and without any element of concealment and on agreed basis is again without any basis and is not substantiated by any material on record nor any such plea seems to have been taken before the Assessing Officer or the ld. CIT(A). In this connection, Hon'ble Allahabad High Court observed in Bhairav Lal Verma v. Union Of India, [1998] 230 ITR 855 (FB) that—

"As a principle of law it cannot be held that the disclosure of the concealed income after the raid or search cannot be voluntary. It is a question which has to be decided by the Department in each case on the basis of the material available on the record. The criteria for deciding this question is to find out as to whether the Department has any incriminating material with regard to the disclosed income. If the answer is in the affirmative, the disclosure cannot be said to be voluntary. But if the Department has no incriminating material with regard to the income disclosed, the disclosure is liable to be treated as voluntary even if it was made after raid/search."

10.11 In the case under consideration, as is evident from the relevant assessment orders, not only that the Department had incriminating material, the assessees themselves admitted to have earned undisclosed income and utilized the same in acquiring various assets, which formed the basis of income disclosed and assessed. Yet, the compulsion of the circumstances that unfolded themselves consequent upon the search and seizure operations would itself constitute a constraint effective enough to render the filing of returns by them "involuntary". The disclosure made in the returns actually tantamounts to an admission on the part of the assessees having earned concealed income, which according to the assessment orders has been admitted by the assessees. The disclosure cannot even be termed as one made in good faith. The expression "good faith" means an act done honestly even if the same be tainted with negligence or mistake. Section 2(22) of the General Clauses Act, lends a similar meaning to the said expression. In order that a disclosure is termed as having been made in good faith, the same must be demonstrably honest. A disclosure which is made under the compulsion of a possible penalty or other proceedings cannot be termed honest or one made in good faith, the underlying object of any such disclosure being not to come clean on the subject but to avoid the adverse consequences that may follow a non-disclosure. Blameworthiness attached to the assessees with reference to the original return cannot be avoided by filing a fresh return after concealment was detected by the assessing authority. Where the surrender of income made in the subsequent return was not voluntary, but was as a result of detection by the assessing authority, the filing of the subsequent return would not be a mitigating circumstance. In the facts and circumstances of the case under consideration, it is clear that the original return filed by the assessees, when compared with the returns filed pursuant to the notice issued under section 153A of the Act forms the basis for the satisfaction of the Assessing Officer for initiating penalty proceedings under section 271(1)(c) of the Act. The Assessing Officer, therefore, has rightly reached the satisfaction that the assessee had concealed income in the original return by way of indicating his satisfaction that the penalty proceedings are proposed to be initiated. In these circumstances of the case and the law discussed hereinabove, in our considered opinion these assessees did not act voluntarily and bona fidely in filing the return, offering the additional income. Admittedly, the return was not filed before search and seizure was conducted and incriminating documents were recovered showing undisclosed income of the assessee. Explanation 5 has been added in section 271(1)(c) of the Act in order to meet such situations. As regards reliance on the decision in the case of Suresh Chandra Mittal (supra), in that case issue was as to whether, the Tribunal was justified in coming to the conclusion that burden of proving concealment not discharged and penalty cannot be levied? How this decision is relevant is not understood, especially when admittedly, these assessees did not reflect their income found to have been earned in terms of the documents seized during the search in their original returns of income and even accepted that they had utilized their undisclosed income in having valuable articles or things in their name or in the name of their relations. Thus, reliance on the said decision is totally misplaced.

10.12 As regards plea of the ld. AR regarding dropping of penalty proceedings for the assessment year 2003-04 and assessment year 2004-05, neither the ld. DR nor the ld. AR on behalf of the assessees could throw any light on this aspect. In any case, it is well settled that principles of res judicata and estoppel are not applicable to the decisions of New Jehangir Vakil Mills v. Commissioner Of Income-Tax. [1963] 49 ITR 137 (SC) ; Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) ]. In the absence of any reasons having been adduced before us for dropping the proceedings for other years, the plea on behalf of the assessee being without any basis, is not tenable.

11. Now adverting to the findings of the ld. CIT(A) and the contentions of the taxpayer in their written submissions dated 2-5-2008 regarding applicability of exception provided in clause (2) of the Explanation 5 to section 271(1)(c) of the Act. In this connection, a co-ordinate Bench of the ITAT have already taken a view in a group case of Rupesh Bholidas Patel (supra) for the assessment years 1998-99 to 2002-03, wherein the ITAT reversed the findings of the ld. CIT(A) on these aspects. When the said decision was brought to the notice of the ld. AR, the ld. AR brushed aside that decision, mentioning that decision was rendered ex parte. Even if the decision was rendered ex parte, the Hon'ble Bench arrive at their decision in the light of facts of the case while considering the decision of Hon'ble Madras High Court in the case of S.D.V. Chandru ( supra) and following the decision of Hon'ble Bombay High Court in the case of Sheraton Apparels (supra) and accordingly, held—

"11. From the above case law of Hon'ble Bombay High Court in the case of Sheraton Apparels : Max Corporation: Tressa Fashion, supra, it is clear that if an assessee in such case makes a statement during the course of search admitting the assets found during such search, have been acquired by him out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of the time prescribed under section 139(1) and also specifies in the statement made under section 132(4), the manner in which such income has been derived and pays the taxes that are due including interest, then the Assessing Officer will not levy any penalty under section 271(1)(c) of the Act. In the present case before us the assessee has filed his original return of income under section 139(1) declaring an income of Rs. 79,830. Whereas search under section 132 took place on 4-9-2003 and the assessee has not declared this additional income of Rs. 5,00,000, declared during the course of search under section 132(4) of the Act, in the original return. The Explanation 5 to section 271(1)(c) of the Act will not come to the rescue of the assessee as there is no time available for filing of return under section 139(1) of the Act as mentioned in clause 2 of Explanation 5 of this section. The words used in sub-clause 2 are that 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 of the Act. There are two limbs to this explanation, clause (1) speaks about the income or the transactions resulting in such income are recorded in the books of account or disclosed to the Chief Commissioner or Commissioner before the date of search and in the cases falling under clause (a) or clause (b) of this explanation. Clause (2) speaks about the assets found during the course of search i.e., any money, bullion, jewellery or valuable article or thing from his possession or under his control, which have been acquired out of his income and not disclosed so far in his return of income to be furnished before the expiry of time specified in section 139(1) of the Act and now admitted during a statement made in the course of search under section 132(4) of the Act. It means income admitted under section 132(4) of the Act which has not been disclosed in his return of income to be furnished before the expiry of time limit under section 139(1) of the Act, then the assessee will not be liable to the penalty. But the facts in the present case before us are clearly different that the assessment year to which the income is admitted under section 132(4) is assessment year 1998-99 and the search was conducted as on 4-9-2003. It means no time is left for the return under section 139(1) of the Act and even the assessee has filed his original return of income and in this return he has not declared this income detected during the course of search.

12. In view of these facts and circumstances, and respectfully following the Hon'ble Bombay High Court in the case of Sheraton Apparels : Max Corporation: Tressa Fashion, supra, we are of the view that the assessee's case does not fall in the exceptions provided under Explanation 5 to section 271(1)(c) read with section 132(4) of the Act. Accordingly, on this aspect we confirm the penalty and reverse the order of CIT(A)."

12. As regards the second ground on which the CIT(A) deleted the penalty agreeing with the submissions made by the assessee that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was disclosed in that return or not, the ld. CIT(A) relying on provision of section 153A of the Act held that the return of income filed in response to notice under section 153A(1)(a) of the Act is to be considered as return filed under section 139 and the Assessing Officer has made assessment on this return and therefore this return is to be considered for the purposes of levy of penalty of the Act and in any case penalty is to be levied over and above the return of income returned under section 153A of the Act. The ld. CIT(A) also relied on the new provision introduced in the Finance Bill being section 271AAA of the Act, wherein a penalty is proposed to be levied in the cases of search with effect from 1-6-2007. The CIT(A) held that the introduction of such provision itself shows that no penalty under section 271(1)(c) is imposable on the income returned under section 153A prior to such amendment. In view of this he deleted the penalty. On these aspects, the ITAT in the aforesaid decision held as under—

"15. In view of the above provisions, now the only vital question arises is which, in view of the second proviso to section 153A of the Act, assessment or reassessment relating to any assessment year falling within the period of six assessment years shall abate. As per the second proviso the pending assessment or reassessment falling within the period of six assessment years referred to in section 153A on the date of initiation of search under section 132 shall abate. It means that the assessments will abate only which are pending assessments or reassessments. Now we will discuss, what is pending assessment. Pending assessment means, if a valid return of income submitted by the assessee within the period prescribed under section 139(1) or 139(4) of the Act, has been pending, then there is nothing that prevents the Assessing Officer from taking up the return and proceeding to assess the income of the assessee. Here in the present case the assessee has filed his original return of income for the assessment year 1998-99 on 27-10-1998 and no proceedings were pending as on the date of the search i.e., 4-9-2003. It means that no proceedings were pending on the date of search and the Assessing Officer cannot initiate any action on the original return i.e. issuance of notice under section 143(2) of the Act or any other action as the time under any other sections elapsed. In the search assessments jurisdiction can be assumed by the Assessing Officer to initiate assessment proceedings by issuing notice under section 153A with no necessity for inference of escapement of income or under assessment as provided under section 147 of the Act. This provision requires to be read down to justify notice only where search or other material lead to prima facie inference of liability. In that case, the initiation of proceedings under section 153A of the Act arises even in the case of completed assessments or where the assessee has filed returns of income for these six assessment years but no action is pending and no valid return is pending for assessment in which any action cannot be taken by the department as on the date of the search under section 132 of the Act, then those returns will not abate.

16. In view of the above facts and circumstances, we are not in agreement with the view of the CIT(A) that the original return filed by the assessee as on 27-10-1998 will abate and the return filed in response to section 153A(a) of the Act is to be considered as return filed under section 139 of the Act as the original return. The assessee in the present case has already filed the original return as on 27-10-1998 and no action whatsoever is pending and the return of income was accepted as it is. Subsequently, during the course of search the assessee has disclosed a sum of Rs. 5,00,000 in his return of income filed under section 153A(a) of the Act as declared under section 132(4) of the Act and accepted the assessment also. As regards to this legal issue, we are of the view, that the CIT(A) has erred in ignoring the return filed originally on 27-10-1998 in view of the second proviso to section 153A of the Act. Another aspect on which the CIT(A) has given his finding, that, the introduction of section 271AAA of the Act nowhere puts bar for levy of penalty under section 271(1)(c) of the Act on or before 1-6-2007 as introduced by the Finance Act, 2007. Even by the Finance Act, 2007, with effect from 1-6-2007 there is amendment in Explanation 5 and the words substituted for "search under section 132" are "search initiated under section 132 before the 1-6-2007". By this Finance Bill, 2007 it was proposed said Explanation 5 so as to provide that provision of said Explanation shall be applicable in a case where search initiated under section 132 before the 1st June, 2007. Further it has been clarified by the memo explaining the provisions in the Finance Bill, 2007 clause 67 as under :— (Source [2007] 289 ITR 329 (St.)

'It has been proposed to amend the said Explanation 5 so as to provide that provisions of the said Explanation shall be applicable only in a case where search under section 132 was initiated before 1-6-2007.'

In view of the introduction of these words, which clarifies these penalty provisions are applicable even in the case where search under section 132 was initiated before 1-6-2007. Accordingly, the reasoning given by the CIT(A) that by introduction of section 271AAA of the Act itself shows that no penalty under section 271(1)(c) is imposable on the income returned under section 153A of the Act, is clearly a wrong interpretation of this Explanation. In view of this, on this legal issue also we confirm the penalty and reverse the order of CIT(A)."

13. Since these assessees belong to the same group, therefore facts and circumstances of the assessees in this case are similar to the facts found by the ITAT in the aforesaid decision while no such material has been referred before us so as to take a different view in the matter, we have no hesitation in drawing support from the said decision. In the case under consideration, there is nothing to suggest that any assessment or reassessment was pending for the years under consideration on the date of search. Therefore, plea of abatement of all past actions i.e., putting an end to all the returns filed and assessments becoming non est is baseless and devoid of any merit. In this connection, we draw support from the decision of Hon'ble Jharkhand High Court in the case of Abhay Kumar Shroff v. CIT [2007] 290 ITR 114 , wherein it was observed that—

"The second proviso to section 153A makes it clear that assessment or reassessment relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A shall abate. In other words, if on the date of initiation of search or requisition under section 132 or section 132A any assessment or reassessment proceeding is initiated relating to any assessment year falling within the period of six assessment years, it shall stand abated and the assessing authority cannot and shall not proceed with such pending assessment after initiation of search or requisition as contemplated hereinabove."

13.1 In the case under consideration, there is nothing to suggest that on the date of initiation of search under section 132 of the Act, any assessment or reassessment proceedings were initiated relating to any assessment year falling within the period of six assessment years. Therefore, there is no question of abatement of any assessment. The plea of the taxpayer that all past actions abate does not flow from the language of the proviso to section 153A of the Act and is accordingly, rejected.

14. As held by the ITAT in the aforesaid decision in the case of Rupesh Bholidas Patel (supra), these assessees are not entitled to any concession in terms of provisions of clause (2) of Explanation 5 to section 271(1)(c) of the Act, search having been conducted on 4-9-2003 and assessment years being 1998-99 to 2002-03. In this connection, Hon'ble Punjab and Haryana High Court in the case of Ashok Kumar Gupta v. Commissioner Of Income-Tax [2006] 287 ITR 376 , held that—

"From a reading of Explanation 5 to section 271(1)(c) of the Act, it is evident that this concession is meant for persons who after surrendering the undisclosed income for the current year, pay the amount of tax along with interest, if any, on such income before the due date."

14.1 In the light aforesaid decisions of the Hon'ble Punjab and Haryana High Court and the Hon'ble Bombay High Court as also of view already taken by a co-ordinate Bench in a case of the same group, following the principles of judicial consistency, we are of the opinion that the ld. CIT(A) was not justified in cancelling the penalty on the basis of reasons given in the impugned orders.

15. Adverting now to the decisions relied upon on behalf these assessees, in the case of Sudarshan Silks & Sarees (supra),relied upon on behalf of the taxpayer, we find that the said decision was rendered on its own peculiar facts. In that case a search was conducted in the premises of the assessees on October 14/15, 1987, and incriminating documents evidencing concealment of income by the assessee were unearthed apart from cash and jewellery found at the time of search. It was found that the appellant was maintaining double set of books and was accounting for only 50 per cent of sales in the regular set of books. This fact was admitted by Shri J.S. Ramesh, a partner of the firm in the statement recorded under section 132(4) of the Act. The total turnover suppressed by the assessee for the assessment year 1987-88 was found to be to the tune of Rs. 44,07,783. The Assessing Officer estimated that the sales of the assessee were Rs. 50,000 per day, whereas the accounted sales were not found even 50 per cent of the total sales. Apart from this, it was found that certain purchases were also not being accounted for. Similarly certain payments made were not being accounted for. All these were pointed out to the assessee. The assessee came forward with an offer of additional income. The assessee filed a revised return on March 31, 1989, declaring a total income for this year at Rs. 3,74,226 as against the earlier amount of Rs. 43,650. This was accepted and after verification the assessment was completed on December 29, 1989. In the course of assessment proceedings, penal action under section 271(1)(c) of the Act was initiated and, after considering the reply filed by the appellant, the Assessing Officer chose to levy maximum penalty under section 271(1)(c). While levying the penalty, the Assessing Officer repelled the contention of the appellant that a promise had been made not to levy the penalty, as there was no evidence to this effect on record. It was also held that the appellant was not entitled to the immunity given under section 132(4) read with section 271(1)(c) of the Act. On appeal, the ld. CIT(A) cancelled the penalty on the ground that the taxpayer clearly offered in his statement under section 132(4) of the Act, the amount for taxation for the purpose of purchasing peace and that no books of account or other documentary evidence were discovered, that proved any concealment for the earlier years. Therefore, relying upon the Supreme Court's decision in Sir Shadilal Sugar & General Mills' case (supra ) supporting the proposition that no penalty is leviable when unproved income is offered to purchase peace would be directly applicable, particularly considering that the additional income returned, have only been on the basis of the appellant's own estimates and the appellant's own admission, unsupported by the discovery of any other documentary evidence relevant to years for which the higher incomes were returned.On further appeal, the ITAT upheld the order of ld. CIT(A) holding that the facts and circumstances strongly indicate that an inducement and an allurement had been provided to the assessee at the time of search in that matter. Although incriminating materials were found out during the search, such materials were, however, ultimately not used by the Departmental authorities in making the assessments. The assessments were made totally on the basis of estimation of income for the earlier years as disclosed in the revised returns. The revised returns should, therefore, be considered as having been filed in good faith. So far as assessment of the undisclosed income is concerned, such revised returns would be sufficient evidence for that purpose. However, for levying penalty, some further and stronger evidences were surely required. However, on further appeal, Hon'ble High Court concluded that the findings recorded by the Tribunal and the Commissioner of Income-tax (Appeals) being perverse, which no reasonable person could have taken, are liable to be set aside and accordingly accepted the reference and held that in the facts and circumstances of the case, the Tribunal was not right in upholding the order of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under section 271(1)(c). On further appeal, Hon'ble Apex Court held—

"In the present case, the question of law referred to the High Court for its opinion was, as to whether the Tribunal was right in upholding the findings of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of the question was not as to whether the findings recorded by the Tribunal on facts were perverse, the High Court was precluded from entering into any discussion regarding the perversity of the finding of fact recorded by the Tribunal."

15.1 As is apparent from the aforesaid facts, the said decision was rendered on its own facts, where in seized material was altogether ignored and estimated undisclosed income on account of sales outside the books of account was accepted by the Assessing Officer. The ITAT in the peculiar facts of the case concluded that an inducement and an allurement had been provided to the assessee at the time of search in that matter. Although incriminating materials were found out during the search, such materials were, however, ultimately not used by the Departmental authorities in making the assessments. But in the case under consideration, there is nothing to suggest that any allurement or inducement was made for offering additional income nor such plea has been taken by the assessees before the lower authorities or even before us in these appeals. In this case, assessment orders reveal the basis for determination of undisclosed income and their utilization and it cannot be said that seized material has not been utilized while determining the undisclosed income. In fact, these assessees themselves prepared cash flow statements for various assessment years on the basis of seized material and the Assessing Officer proceeded to determine undisclosed income on that basis. Thus, reliance by the ld. AR on the aforesaid decision is totally misplaced.

15.2 As regards decision in the case of Dr. Dharamveer Singh Dhillon (supra), we have gone through the facts of the said case. In the cited case, the issue related to initiation of proceedings under section 263 of the Act on the order of the Assessing Officer, dropping penalty proceedings under section 271(1)(c) of the Act. The ITAT proceeded on the basis that the CIT did not give sufficient opportunity to the assessee in proceedings under section 263 of the Act and the Assessing Officer did not record his satisfaction while initiating proceedings under section 271(1)(c) of the Act. On the basis of facts of that case, it was concluded by the Assessing Officer that the assessee was entitled to concession available. In terms of clause (2) of the Explanation 5 to section 271(1)(c) of the Act and that the assessee had no mens rea in not disclosing the income offered during the search, in the original return filed by him for the assessment year 2005-06. The ITAT affirmed these findings.

15.2-1 But in the case consideration, facts are otherwise. We have already concluded in the light of decision of the Apex Court that mens rea is not an essential ingredient for levy of penalty under section 271(1)(c) of the Act and that in view of decision of Hon'ble Punjab and Haryana High Court in the case of Ashok Kumar Gupta (supra) and view already taken by a co-ordinate Bench in a case of the same group, these assessees are not entitled to concession available in terms of clause (2) of the Explanation 5 to section 271(1)(c) of the Act. The facts in the cited decision being at variance with the facts in the case under consideration, we are not inclined to follow the aforesaid decision.

15.3 As far as decision in the case of Mahendra C. Shah (supra) is concerned, in that case search operations took place at the premises of one M/s. Dinal Gems under section 132 of the Act on 3-7-1987 and assessment proceedings related to assessment year 1988-89. Thus, the assessment year being 1988-89 and the search having taken place on 3-7-1987, the return of income was not due before 31-7-1988. On these facts, Hon'ble High Court, while noting the decision of Hon'ble Allahabad High Court in the case of Radha Kishan Goel (supra), concluded that the assessee having made a declaration under section 132(4) of the Act and paid taxes thereon, had fulfilled all the conditions for availing the benefit of immunity from levy of penalty as provided under Explanation 5 to section 271(1)(c) of the Act. It was also held in the said decision that,—

". . . .Disclosure or otherwise in the return of income post the date of search would not absolve an assessee from the deeming provision, namely, 'deemed concealment' once on assessee is found in possession of a valuable asset at the time of search...".

15.3-1 Apparently, in the aforecited decision as also in the case of Radha Kishan Goel ( supra), concession available in terms of clause (2) of the Explanation 5 to section 271(1)(c) of the Act was being sought for the year of search and not for the years preceding the search. In the case under consideration, concession is being sought for the earlier years preceding the search and in the facts and circumstances of the case, we have already concluded in view of decision of Hon'ble Punjab and Haryana High Court in the case of Ashok Kumar Gupta ( supra) and view already taken by a co-ordinate Bench in a case of the same group that the said concession is not available to the assessees under appeal for the relevant assessment years. Thus, reliance on the aforesaid two decisions is also misplaced.

15.4 We have also gone through the two other decisions relied upon by the ld. AR in the case of Gulabrai V. Gandhi (supra) and Vishwa Nath Agarwal ( supra). We find that in the light of view we have taken, these decisions are not relevant to the facts of the case under consideration.

16. In view of the foregoing, we have no alternative but to vacate the findings of the ld. CIT(A) and restore the orders of the Assessing Officer, levying penalty under section 271(1)(c) of the Act. Therefore, grounds raised by the revenue in these five appeals are allowed.

17. In the result, all these five appeals are allowed.

ORDER

Per I.S. Verma, Judicial Member. - After having gone through the draft order proposed by the learned Brother, Shri A.N. Pahuja, I have found myself not in agreement with the same and, therefore, I proceed to write my separate order.

2. These five appeals by the revenue, relating to the two assessees, arising out of two separate orders dated 30-3-2007 of the ld. Commissioner of Income-tax (Appeals)-I, Ahmedabad, raise the following grounds :—

"1. The CIT(A) has erred in law and on facts in cancelling the penalty of Rs. 2,33,684 in ITA No. 2344, Rs. 4,20,000 in ITA No. 2345, Rs. 3,45,001 in ITA No. 2346, Rs. 11,67,076 in ITA No. 2348 and Rs. 5,15,447 in ITA No. 2389 levied under section 271(1)(c) of the Act, by the Assessing Officer, without considering the fact that the assessee had not voluntarily disclosed the true and correct income.

2. The CIT(A) has erred in law and on facts in not properly considering the Explanation 5 to section 271(1)(c) of the Act, according to which, the assessee is not entitled to immunity from the penalty for the earlier period where the due date of return under section 139(1) of the Act has expired.

3. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer.

4. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the Assessing Officer be restored to the above extent."

3. So far as facts are concerned, there is no dispute as the learned Brother has recorded the same in detail.

4. Coming to the common issue involved in these appeals, which relates to levy of penalty under section 271(1)(c) of the Act on the basis of income returned by the assessee in the returns furnished in response to notices issued under section 153A of the Act and return furnished in normal course under section 139 but before the search.

5. The assessee's case is that return furnished in response to notice under section 153A of the Act being a return as required to be furnished under section 139 of the Act, penalty under section 271(1)(c) of the Act can be levied only if assessment under section 153A is completed on income more than the income returned in such return and that too if the differential income is found to be concealed income or as a result of furnishing of wrong particulars of such income by the assessee, otherwise not.

6. The revenue's case is that if the assessee has already furnished the return of income as required to be furnished under section 139 or 142(1) or 148 of the Act and irrespective of the fact as to whether there has been an assessment under section 143(3) or under section 144 or 147 of the Act or not, no assessment or re-assessment proceedings on the basis of such return or otherwise are pending (because the same gets abated), the return furnished in response to notice issued under section 153A of the Act is an involuntary revised return and if the assessee returns or is assessed under section 153A of the Act on income more income than the income returned in return furnished as required under section 139 or 142(1) or 148 of the Act even if prior to search, then the whole of the returned income in return furnished in response to notice under section 153A or the income assessed under section 153A [if no return has been furnished under section 139/142(1)/148] and if return has been furnished, then the difference in income returned in such return or so assessed will either be concealed income or income as a result of concealment/furnishing of wrong particulars with respect is such income and the assessee shall be liable to penalty under section 271(1)(c).

6.1 The second stand of the revenue is that in cases where search has taken place on or after 1-6-2003, but before 7-2008 (sic) then irrespective of the fact as to whether the assessee discloses the undeclared income found during the search in accordance with Explanation 5 to section 271(1)(c) of the Act read with section 132(4) of the Act, the benefits of Explanation 5 relating to immunity from penalty under section 271(1)(c) of the Act will be available only for the assessment year for which previous year has not ended on the date of search.

7. Keeping in view the complicity of the issue involved in these appeals, I am of the opinion that to resolve the controversy, it is foremost task to resolve the issue as to the "status" of a return furnished as required under section 139 of the Act or under section 142(1) or 148 on one hand and the status of return required to be furnished under section 153A of the Act, on the other hand, and, therefore, first of all, I proceed to consider the status of returns furnished under various sections by considering the sections which are in the following terms :—

"Provision of section 139 as they stood prior to 1-4-2001

139. Return of income.—(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that a person, not furnishing return under this sub-section and residing in such area as may be specified by the Board in this behalf by a notification in the Official Gazette, and who at any time during the previous year fulfils any one of the following conditions, namely :—

(i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or
(ii) is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or
(iii) is a subscriber to a telephone; or
(iv) has incurred expenditure for himself or any other person on travel to any foreign country;
(v) is the holder of the credit card, not being an "add-on" card, issued by any bank or institution; or
(vi) is a member of a club where entrance fee charged is twenty-five thousand rupees or more,

shall furnish a return, of his income during the previous year, on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided further that the Central Government may by notification in the Official Gazette, specify class or classes of persons to whom the provisions of the first proviso shall not apply.

Explanation 1.—In this sub-section, "due date" means—

(a) where the assessee is a company, the 30th day of November of the assessment year;
(b) where the assessee is a person, other than a company,—

(i) in a case where the accounts of the assessee are required under this Act or any other law to be audited or where the report of an accountant is required to be furnished under section 80HHC or section 80HHD or where the prescribed certificate is required to be furnished under section 80R or section 80RR or sub-section (1) of section 80RRA, or in the case of a co-operative society or in the case of a working partner of a firm whose accounts are required under this Act or any other law to be audited, the 31st day of October of the assessment year;
(ii) in a case where the total income referred to in this sub-section includes any income from business or profession, not being a case falling under sub-clause ( i), the 31st day of August of the assessment year;
(iii) in any other case, the 30th day of June of the assessment year.

Explanation 2.—For the purposes of sub-clause (i) of clause (b) of Explanation 1, the expression "working partner" shall have the meaning assigned to it in Explanation 4 of clause (b) of section 40.

Explanation 3.—For the purpose of this sub-section, the expression "motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988).

Explanation 4.—For the purposes of this sub-section, the expression "travel to any foreign country" does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette.

(3) If any person who has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub-section (1) or sub-section (3) of section 74, or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1).

(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :—

Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.

(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).

(4B) The Chief Executive Officer (whether such Chief Executive Officer is known as Secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).

(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :—

Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.

(6) The prescribed form of the returns referred to in sub-sections (1) and (3) of this section, and in clause (i) of sub-section (1) of section 142 shall, in such cases as may be prescribed, require the assessee to furnish the particulars of income exempt from tax, assets of the prescribed nature, value and belonging to him, his bank account and credit card held by him, expenditure exceeding the prescribed limits incurred by him under prescribed heads and such other outgoing as may be prescribed.

(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returns referred to in this section, and in clause (i) of sub-section (1) of section 142 shall, in the case of an assessee engaged in any business or profession, also require him to furnish the report of any audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, a copy of such report together with proof of furnishing the report, the particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and, if he is a member of an association or body of individuals, the names of the other members of the association or the body of individuals and the extent of the share of the assessee and the shares of all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.

(8) (a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the Assessing Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at fifteen per cent per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source :

Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.

Explanation 1.—For the purposes of this sub-section, "specified date", in relation to a return for an assessment year, means,—

(a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year or the 30th day of June of the assessment year, whichever is later;
(b) in the case of every other assessee, the 30th day of June of the assessment year.

Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section.

(b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of tax on which interest was payable under this sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and—

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(c) The provisions of this sub-section shall apply in respect of the assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to the other provisions of this Act shall be construed as references to the said provisions as they were applicable to the relevant assessment year.

(9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :

Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.

Explanation.—For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :—

(a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in;
(b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return;
(bb )the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;
(c) the return is accompanied by proof of—

(i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid;
(ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);

(d) where regular books of account are maintained by the assessee, the return is accompanied by copies of—

(i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet;
(ii) in the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals;

(e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section;
(f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.

Provision of section 139 as they stood with effect from 1-4-2001

139. Return of income.—[(1) Every person,—

(a) being a company [or a firm]; or
(b) being a person other than a company [or a firm], if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax,

shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that a person referred to in clause (b), who is not required to furnish a return under this sub-section and residing in such area as may be specified by the Board in this behalf by notification in the Official Gazette, and who [during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or] at any time during the previous year fulfils any one of the following conditions, namely :—

(i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or

(ii) is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or

(iv) has incurred expenditure for himself or any other person on travel to any foreign country; or

(v) is the holder of a credit card, not being an "add-on" card, issued by any bank or institution; or

(vi) is a member of a club where entrance fee charged is twenty-five thousand rupees or more,

shall furnish a return, of his income [during any previous year ending before the 1st day of April, 2005], on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided further that the Central Government may, by notification in the Official Gazette, specify the class or classes of persons to whom the provisions of the first proviso shall not apply:

Provided also that every company [or a firm] shall furnish on or before the due date the return in respect of its income or loss in every previous year :

[Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to the provisions of section 10A or section 10B or section 10BA or Chapter VI-A exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.]

Explanation 1.—For the purposes of this sub-section, the expression "motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988).

Explanation 2.—In this sub-section, "due date" means,—

(a) where the assessee is—

(i) a company; or
(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or
(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,
the [ 30th day of September] of the assessment year;
(b) in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year;
(c) in the case of any other assessee, the 31st day of July of the assessment year.

Explanation 3.—For the purposes of this sub-section, the expression "travel to any foreign country" does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette.]

[(1A) Without prejudice to the provisions at sub-section (1), any person, being an individual who is in receipt of income chargeable under the head "Salaries" may, at his option, furnish a return of his income for any previous year to his employer, in accordance with such scheme as may be specified by the Board in this behalf, by notification in the Official Gazette, and subject to such conditions as may be specified therein, and such employer shall furnish all returns of income received by him on or before the due date, in such form (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media) and manner as may be specified in that scheme, and in such case, any employee who has filed a return of his income to his employer shall be deemed to have furnished a return of income under sub-section (1), and the provisions of this Act shall apply accordingly.]

[(1B) Without prejudice to the provisions of sub-section (1), any person, being a company or being a person other than a company, required to furnish a return of income under sub-section (1), may, at his option, on or before the due date, furnish a return of his income for any previous year in accordance with such scheme as may be specified by the Board in this behalf by notification in the Official Gazette and subject to such conditions as may be specified therein, in such form (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media) and in the manner as may be specified in that scheme, and in such case, the return of income furnished under such scheme shall be deemed to be a return furnished under sub-section (1), and the provisions of this Act shall apply accordingly.]

(3) If any person who [***] has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub- section (1) [or sub-section (3)] of section 74, [or sub-section (3) of section 74A], he may furnish, within the time allowed under sub-section (1) [***], a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1).

[(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :

Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.]

[(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).]]

[(4B) The Chief Executive Officer (whether such Chief Executive Officer is known as Secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).]

[(4C) Every—

(a) scientific research association referred to in clause ( 21) of section 10;
(b) news agency referred to in clause ( 22B) of section 10;
(c) association or institution referred to in clause (23A) of section 10;
(d) institution referred to in clause ( 23B) of section 10;
(e) fund or institution referred to in sub-clause ( iv) or trust or institution referred to in sub-clause ( v) or any university or other educational institution referred to in [sub-clause ( iiiad) or] sub-clause ( vi) or any hospital or other medical institution referred to in [sub-clause ( iiiae) or] sub-clause ( via) of clause ( 23C) of section 10;
(f) trade union referred to in sub-clause ( a) or association referred to in sub-clause ( b) of clause ( 24) of section 10,

shall, if the total income in respect of which such scientific research association, news agency, association or institution, fund or trust or university or other educational institution or any hospital or other medical institution or trade union is assessable, without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).]

[(4D) Every university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35, which is not required to furnish return of income or loss under any other provision of this section, shall furnish the return in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).]

[(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :

Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.]

[(6) The prescribed form of the returns referred to [in-sub-sections (1) and (3) of this section, and in clause (i) of sub-section (1) of section 142] shall, in such cases as may be prescribed, require the assessee to furnish the particulars of income exempt from tax, assets of the prescribed nature [, value and belonging to him, his bank account and credit card held by him], expenditure exceeding the prescribed limits incurred by him under prescribed heads and such other outgoings as may be prescribed.

(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returns referred to [in [***] this section, and in clause (i) of sub-section (1) of section 142] shall, in the case of an assessee engaged in any business or profession, also require him to furnish [the report of any audit [referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, a copy of such report together with proof of furnishing the report], the] particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and, if he is a member of an association or body of individuals, the names of the other members of the association or the body of individuals and the extent of the share of the assessee and the shares of all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.]

[(8)(a) [Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the [Assessing] Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at [fifteen] per cent per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source :

Provided that the [Assessing] Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.

Explanation 1.—For the purposes of this sub-section, "specified date", in relation to a return for an assessment year, means,—

(a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year or the 30th day of June of the assessment year, whichever is later;
(b) in the case of every other assessee, the 30th day of June of the assessment year.]

[Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section]

[(b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 [or an order of the Settlement Commission under sub-section (4) of section 245D], the amount of tax on which interest was payable under this sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and—

(i) in a case where the interest is increased, the [Assessing] Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.]]

[(c) The provisions of this sub-section shall apply in respect of the assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to the other provisions of this Act shall be construed as references to the said provisions as they were applicable to the relevant assessment year.]

[(9) Where the [Assessing] Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the [Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :

Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the [Assessing] Officer may condone the delay and treat the return as a valid return.

Explanation.—For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :—

(a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in;
(b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return;
[(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;]
(c) the return is accompanied by proof of—
(i) the tax, if any, claimed to have been deducted [or collected] at source [***] and the advance tax and tax on self-assessment, if any, claimed to have been paid :
[ Provided that where the return is not accompanied by proof of the tax, if any, claimed to have been deducted [or collected] at source, the return of income shall not be regarded as defective if—
[(a) a certificate for tax deducted or collected was not furnished under section 203 or section 206C to the person furnishing his return of income;]
(b) such certificate is produced within a period of two years specified under sub-section (14) of section 155;]
(ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);
(d) where regular books of account are maintained by the assessee, the return is accompanied by copies of—
(i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet;
(ii) in the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals;
(e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report [and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section];
(f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.]

(10) [Omitted by the Finance (No. 2) Act, 1991, with effect from 1-4-1991.]

Provision of section 142(1) as they stood prior to 1-4-1989

142. Inquiry before assessment.—(1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 139 or in whose case the time allowed under sub-section (1) of that section for furnishing the return has expired a notice requiring him, on a date to be therein specified,—

(i) where such person has not made a return within the time allowed under sub-section (1) of section 139, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or
(ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or
(iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require :

Provided that—

(a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts;
(b) the Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.

Provisions of section 142(1) as they stood with effect from 1-4-1989

142. Inquiry before assessment.—(1) For the purpose of making an assessment under this Act, the [Assessing] Officer may serve on any person who has made a return [under section 115WD or section 139 [or in whose case the time allowed under sub-section (1) of section 139] for furnishing the return has expired] a notice requiring him, on a date to be therein specified,—

[(i)where such person has not made a return [within the time allowed under sub-section (1) of section 139] [or before the end of the relevant assessment year], to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or :]

[Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section,]

142(2).........

142(2A)........

142(2B)........

142(2C)........

142(2D)........

142(3).........

142(4).........

Provisions of section 148 as they stood prior to 1-4-1989

148. Issue of notice where income has escaped assessment.— (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.

Provisions of section 148 as they stood with effect from 1-4-1989

148. Issue of notice where income has escaped assessment.—[(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, [***] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:]

[Provided that in a case—

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and
(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice :

Provided further that in a case—

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and
(b) subsequently a notice has been served under clause ( ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause ( ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.]

[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.]

[(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.]

Provisions of section 153A relevant for case where search under section 132 or requisition of 132A has taken place on or after 1-6- 2003

153A. Assessment in case of search or requisition.—Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall—

(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause ( b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years :

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.

Explanation.—For the removal of doubts, it is hereby declared that,—

(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.

Provision of section 153A of the Act, as they stood for assessment year 2008-09

153A. Assessment in case of search or requisition.—[(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall—

(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause ( b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years :

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.

[(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner :

Provided that such revival shall cease to have effect, if such order of annulment is set aside.]

Explanation.—For the removal of doubts, it is hereby declared that,—

(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."

8.1 Having analyzed the provisions of section 139 of the Act, both before the amendment with effect from 1-4-2001 and thereafter, it is observed that so far as requirement of sub-section (1) of section 139 of the Act is concerned, every person covered by the definition of person given under section 2(31) of the Act is under obligation to furnish his or her or its return of income on or before the due date prescribed under sub-section itself and there is no escape.

8.2Consequence for non-compliance of provisions of various sub-sections of section 139 of the Act

(i) The consequences of non-furnishing of return as required under sub-section (1) of section 139 may be as under :—

(a) The assessee may be liable to pay interest under section 234A of the Act if assessed tax is more than the tax paid in advance and deducted at source.
(b) If the total income exceeds the maximum amount which is not chargeable to income-tax, then the same will be considered as having escaped assessment for the purpose of provisions of section 147 of the Act ( Explanation 2 to section 147).
(c) The assessee may be liable to pay penalty as provided under section 271F of the Act.
(d) The assessee may be liable to prosecution as provided under section 276CC of the Act provided the amount of tax on the income is found to be in excess of Rs. 1 lakh.
(e) The assessee may be liable to penalty under section 271(1)( c) of the Act if his case is covered by Explanation 3 to section 271(1)( c) of the Act.
(f) The consequence of non-furnishing of return as required under section 139(4) of the Act will be almost same as for failure to furnish the return as required to section 139(1) of the Act.
(g) The consequence of non-furnishing of return as required under section 139(5) of the Act will be that the assessee will not be able to correct any mistake in the return furnished under section 139(1) or in consequence to under section 142(1) of the Act.

Consequence of non-compliance to notice under section 142(1) for furnishing of the return of income

8.3 The consequence of non-furnishing of return as required under section 142(1) of the Act will also be the same as for failure to furnish the return under section 139(1) of the Act.

Consequence of non-compliance to notice under section 148 for furnishing of the return of income

8.4 Consequence of failure to furnish the return under section 148 of the Act will, in addition to the consequence for failure to furnish the return in response to section 139 or 142(1) of the Act, be that if income returned in such return is found to be more than the income returned in return furnished under section 139 or under section 139(4) or 139(5) or in response to notice issued under section 142(1) of the Act, then the same may be considered as concealed income or as a result of wrong particulars of such income and assessee may be liable to penalty under section 271(1)(c) of the Act.

9.Consequence for failure to furnish the return as required under section 153A of the Act

(i) In view of Explanation 3 to section 234A of the Act, if the assessment for a particular year is made for the first time under section 153A of the Act, then the same shall be regarded as regular assessment for the purpose of section 234A and if an assessee fails to furnish the return within the period prescribed under section 153A of the Act, interest under section 234A will be levied as per provisions of sub-section (3) of section 234A of the Act,
(ii) In cases where search has been initiated on or after 1-6-2007, penalty under section 271AAA is liable to be imposed but in cases where search has been initiated, on or after 1-6-2003 but before first day of July 2007, no penalty as provided under section 271AAA is leviable.
(iii) Immunity available under Explanation 5 to section 271(1)( c) of the Act read with section 132(4) can be claimed by the assessee.

Assessee's obligations

10. So far as assessee's obligation under these sections is concerned, the assessee has no choice but to comply with the requirement of section 139 or 142(1) or 148 or 153 of the Act or face the consequences.

10.1 In a nutshell, I am of the opinion that consequences of not furnishing the return as required under section 139(1) or under section 142(1) or under section 148 of the Act are somewhat similar, but the consequences for failure to furnish the return as required under section 153A of the Act are quite distinct and different; meaning thereby that the result of non-compliance to provisions of section 153A of the Act by the assessee are absolutely distinct and different and, therefore, any proposition of law having so far as being laid down with respect to consequences of non-compliance to the provisions under section 139, 142(1) or 148 of the Act, may or may not be applicable in cases of failure to comply with the provisions of section 153A of the Act.

11. The earlier analysis of various provisions for furnishing the return, in my opinion, makes it clear that a return furnished under sections 139(1), 142(1) and 148 of the Act is quite different than a return furnished under section 153A of the Act because:—

(i) The return furnished under section 139(1), 139(4) or 139(5) may result in making of an assessment under section 143(3) or under section 144 of the Act or not.
(ii) If the Assessing Officer, before making an assessment under section 143(3) or under section 144 on the basis of return furnished by the assessee, detects any concealed income or furnishing of wrong particulars with respect to any income, such income is taxed as concealed income and assessee is liable to penalty under section 271(1)( c) of the Act and such action can be initiated only after assessing such income under section 147 of the Act.
(iii) Under section 139(4), if assessee fails to furnish the return within the period prescribed section 139(1) of the Act, he has right to furnish the belated return under section 139(4) of the Act, though, of course, subject to payment of interest under section 234A of the Act.
(iv) In addition to above, if the assessee, after having furnished the return under section 139(1) of the Act, detects any discrepancy or mistake in such return, he has right to correct the same by furnishing a revised return as prescribed under section 139(5) of the Act.
(v) So far as return furnished under section 142(1) of the Act is concerned, the Assessing Officer is free to make an assessment under section 143(3) of the Act or under section 144 of the Act as the circumstances may require.
(vi) The assessee has similar rights as after furnishing return under section 139(1) of the Act.
(vii) So far as return furnished in response to notice under section 148 of the Act is concerned, I would like to once again to reproduce the provisions of sub-section 148(1) of the Act which are in the following terms :—
148. Issue of notice where income has escaped assessment.—(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. [Emphasis mine]
(vii) [ a]In the aforesaid provisions, the words " and the provisions of this Act, shall so far as may be, applied accordingly as if such return were a return required to be furnished under section 139 of the Act, are very crucial and important and since the terminology "so far as may be" or "as if such return were a return required to be furnished under section 139 of the Act" have not been defined specifically in the Act, one has to seek assistance from the decided cases and for that purpose the decision of ITAT Delhi Bench (Special Bench) in the case of Raj Kumar Chawla v. ITO [2005] 94 ITD 1 comes to help.
[a ( i)]In the case before the ITAT Delhi Special Bench, the question was "as to whether, where a return has been furnished in response to notice under section 148 of the Act, the provisions of section 143(2) of the Act read with section proviso prescribing the limit of 12 months for issuing notice under section 143(2) of the Act were applicable to such return or not", and the Hon'ble Bench, after considering almost all relevant material/law in this respect has held, with respect to the terminology "so far as may be", as under :—
"The phrase "so far as may be" in section 148 has been used so as to provide that the provision would be generally applicable, but to the extent, it is not inconsistent with the express provisions of the adopting legislation." (paragraph No. 35).
[ a( ii)]The Hon'ble Bench has, further, while considering the status of return of income furnished in response to notice under section 148 of the Act held that " It is a settled principle that a legal fiction has to be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148." The relevant paragraph in details contained in paragraph No. 31, reads as under :—

"31. In contrast, section 148 does not provide any methodo- logy for computing the income on reassessment or assess- ment. On the contrary, it creates a legal fiction that such return shall be treated as one made under section 139. By the creation of such legal fiction all the procedures prescribed in and subsequent to section 139 automatically apply in toto. It is a settled principle that a legal fiction has to be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148. Therefore, the proviso will apply to a return filed in response to notice under section 148. It is pertinent to note that clause (b) of section 158BC specifically talks of the applicability of section 142, sub-sections (2) and (3) of section 143. There is an omission of sub-section (1) to section 143. This chapter clearly prescribes its own return, form of own methodology for computation of income but all back on the provisions of sections 142, 143, 144 etc. only for procedural aspect. If the proviso is made applicable, then a clash erupts between the provisions of Chapter XIV-B with section 143(2) as the assessment is mandatory under this chapter. This would be clear by reading the provision of sub-section (1) of section 158BA, which states as under":

"the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this chapter".

11.1 The effect of aforesaid decision of Special Bench, so far as return furnished in response to notice under section 148 of the Act, is concerned, in my opinion, is that the return so furnished has to be considered a return furnished under section 139 of the Act for all intends and purposes; meaning thereby that after having furnished such return, the assessee as well as revenue can exercise their respective rights to deal with such return.

11.2 (i) For example, the assessee could revise the same by exercising the powers vested by virtue of section 139(5) or can furnish a belated return as per section 139(4); whereas the revenue could exercise the powers to make the assessment under section 143(3) or 144 of the Act, as the case may be, and also to charge interest under section 234A (for belated furnishing of the return) impose penalty under section 271F for not furnishing return within time allowed in notice under section 148, penalty under section 271(1)(c) of the Act, if the revenue detects concealed income or income as a result of furnishing or wrong particulars as well as can initiate of prosecution proceedings, if the facts and circumstances of the case so require.

11.3 So far as penalty under section 271(1)(c) of the Act is concerned, the revenue can invoke these provisions while dealing with the return furnished in response to notice under section 148 of the Act only if the assessee is found to have furnished a return under section 139(1) or 142(1) of the Act and revenue had detected concealed income, subject, however, to the provisions of section 147 of the Act, on the basis of such returns.

11.4 Coming to the status of a return furnished under section 153A of the Act, I am of the opinion that as the language of section 153A of the Act is, verbatim to the language used in section 148 of the Act (so far as 'status' of return is concerned), I have no hesitation to have opinion that a return furnished under section 153A of the Act is a return as furnished under section 139 which will include a return furnished under section 139(1), 139(4) and 139(5) for all intends and purposes and this is clear from the language of the section itself, which reads as under:—

"Section 153A. Assessment in case of search or requisition.—(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall,—

(a)issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly, as if such return were a return required to be furnished under section 139 ;

(b)assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :

Provided that the Assessing Officer shall assess or reassess total income in respect of each assessment year falling within such six assessment years:

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.

(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:

Provided that such revival shall cease to have effect, if such order of annulment is set aside.

Explanation.—For the removal of doubts, it is hereby declared that,—

(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." [Emphasis mine]

12. Before coming to the issue as to whether under what circumstances, a penalty under section 271(1)(c) of the Act, in a case covered by provisions of section 153A of the Act can be imposed, I am of the opinion that so far as status of return furnished under section 153A of the Act is concerned, the same being as of a return and under section 139 of the Act and, consequently, the assessee has all the rights and obligation as are envisaged in the provisions of section 139; whereas revenue has all powers to deal with such return by considering the same as having furnished under section 139 of the Act.

13.1 From the above discussion, what transpires is that a return furnished in response to notice under section 153A/153C of the Act, as the case may be, can only be a return as furnished under section 139(1) or 139(4) or 139(5), as the case may be, and, therefore, cannot, in any case, be considered.

(i) Either an involuntary return, or
(ii) A revised return of the Return furnished under sections 139(1)/139(4)/139(5)/142(1)/148 in the normal course (not in response to notice under section 153A or "153C/153A" of the Act) after the search.

13.2 The aforesaid findings are based on the basis of language used in provisions of sections 148 and 153A of the Act on one hand and the decision of Hon'ble ITAT Special Bench in the case of Raj Kumar Chawla (supra) on the other hand.

13.3 The aforesaid findings, so far as applicability of provisions of section 271(1)(c) of the Act or other provisions, such as, section 271F or section 234A, go to show that these provisions will be applicable only on the basis of return furnished under section 153A or under section 153C, read with section 153A of the Act and on the basis of earlier regular return furnished as required by section 139 or 142(1) or 148 of the Act.

13.4 Having held as above, I am of the opinion that the status of return, furnished in response to notice issued under section 153A/153C of the Act being a return as required to be furnished under section 139 of the Act, can be as under:

(i) As that of a return having been furnished under section 139(1), if furnished within the time prescribed in notice issued under section 153A of the Act, or
(ii) A belated return as envisaged in the provisions of the section 139(4) of the Act, if furnished after the expiry of the period allowed in the notice under section 153A but before completion of assessment under section 153A or 153C/153A, as the case may be, or
(iii) A revised return as envisaged in the provisions of section 139(5) of the Act, provided the assessee had furnished a return under section 153A of the Act within the time prescribed in the notice under section 153A of the Act.

13.5 The aforesaid view is further supported by the fact that the Legislature has later on brought the provisions of section 271AAA on statute providing for levy of penalty in cases where search has been initiated and the same are in the following terms:—

"271AAA. Penalty where search has been initiated.—(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year.

(2) Nothing contained in sub-section (1) shall apply if the assessee,—

(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
(ii) substantiates the manner in which the undisclosed income was derived; and
(iii) pays the tax, together with interest, if any, in respect of the undisclosed income.

(3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1).

(4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.

Explanation.—For the purposes of this section,—

(a) "undisclosed income" means—

(i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has—

(A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or
(B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search; or

(ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted;

(b) "specified previous year" means the previous year—

(i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or
(ii) in which search was conducted."

13.6 According to these provisions, an assessee in whose case search under section 132 of the Act has been initiated on or after first day of June-2007, he or she shall pay by way of penalty a sum at the rate of 10 per cent of undisclosed income and the specified previous year. These provisions, however, are subject to immunity provided in sub-section (2) of section 271AAA of the Act which is similar to the immunity provided under Explanation 5 to section 271(1)(c) of the Act and read with section 132(4). Bringing of these provisions, on the statute, by the Legislature, clearly goes to show that Legislature was conscious of the fact that prior to these provisions there were no provisions for levy of penalty in cases covered by section 153A of the Act and so far as provisions of section 271(1)(c) of the Act were concerned, though the same were on the statute but could not be invoked because return furnished under section 153A or under section 153C read with section 153A was a return as furnished under section 139 of the Act. This was the position, subject, however to the detection of concealment or furnishing of wrong particulars by the revenue after furnishing of return under section 153A or under section 153C read with section 153A of the Act; meaning thereby that the provisions of section 271(1)(c) will be applicable, if the income assessed under section 153A of the Act is found to be in excess of the income declared in the return furnished under section 153A, or under section 153C read with section 153A and that too due to detection of concealment of income or due to furnishing of wrong particulars of such concealed income by the revenue, otherwise not.

In other words, the provisions of section 271(1)(c), in cases covered by section 153A, or under section 153C, cannot be invoked on the presumption that the return furnished under section 153A or under section 153C read with section 153A, is an involuntary revised return of a return furnished under sections 139(1)/139(4)/139(5)/142(1)/148 in the normal course which results in normal assessment under section 143(1)/143(3)/144/147 and if that is the law, then provisions of section 271(1)(c) cannot be applied in a case where assessed income under section 153A or under section 153C read with section 153A is same as has been returned in return furnished in response to under section 153A or under section 153C of the Act.

13.7 In view of above facts and circumstances of the case, I am of the opinion that so far as present case is concerned, the assessment under section 153A of the Act having been framed by accepting the returned income declared in the returns furnished in response to notice issued under section 153A of the Act, there was neither concealment nor furnishing of wrong particulars and, therefore, the CIT (Appeals) was justified in cancelling the penalties in all these cases.

14. Without prejudice to the above, I would like to further clarify that provisions of section 153A of the Act, if interpreted in the strict sense, itself clarify that -

(i) Any right or obligation of the assessee as envisaged in the provisions of sections 139, 147, 148, 149, 151 and 153 of the Act and also the powers of revenue available under these sections available under ordinary circumstances, i.e., had there been no search; have no effect on the cases covered by section 153A of the Act; meaning thereby that all such rights/obligations or powers are rendered non est (analysis of words "notwithstanding anything containing in sections 139, 147, 148, 149, 151 and 153 of the Act") and, consequently, the return furnished or assessments made, before the search, are not to be taken into account for any purpose - while making assessment under section 153A of the Act. At the same time, if any proceeding has been initiated on the basis of exercise of powers/obligations as envisaged in these sections, which in my opinion, can be proceedings for making assessment or reassessment, also gets abated as has been provided by second proviso to sub-section (1) of section 153A itself; meaning thereby that the Legislature has been quite aware and wise of the complications which could arise as a result of application of provisions of sections 139, 147, 148, 149, 151 and 153 on one hand and of section 153A of the Act on the other hand, and that is why the provisions of section 153A starts with non obstante clause with reference to sections 139, 147, 148, 149, 151 and 153 of the Act and second proviso prescribes for abatement of any pending assessment or reassessment for any of the assessment years covered by the period prescribed in section 153A of the Act.

14.1 In arriving at the hereinbefore interpretation with respect to status of a return of income furnished in response to notice issued under section 153A or under section 153C read with section 153A of the Act, I have followed the law laid down by the Hon'ble Supreme Court in the case of Commissioner Of Income Tax, Delhi v. S. Teja Singh [1959] 35 ITR 408 , wherein the Hon'ble Apex Court while considering the Rule of interpretation for construing a scope of a legal fiction has held that "it is a rule of interpretation well-settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate." And that a construction which defeats very object sought to be achieved by the Legislature must, if possible, be avoided.

14.2 The Hon'ble Apex Court came to the aforesaid conclusion after referring to the oft-quoted observations of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] A.C. 109 (HL), at page 413 of the 35 ITR. The relevant part of the order of the Hon'ble Apex Court as contained at page Nos. 412 and 413, reads as under:—

Extract from 35 ITR at page Nos. 412 and 413

In the case of S. Teja Singh (supra)

"In the first place, a person who fails to send an estimate under section 18A(3) cannot be said to have failed to furnish the return of his total income which he was required to furnish in response to a notice issued under section 22 or section 34; secondly, the said person cannot be said to have failed to furnish it within the time allowed and in the manner required by such notice, for estimates under section 18A(3) must be furnished before the 15th March in the financial year immediately preceding the year of assessment whereas the returns required by the notices under sections 22 and 34 can be furnished at later dates.

With respect, the error in this reasoning lies in this that it fails to give due effect to the fiction contained in section 18A(9)(b) of the Act. Under that provision, when an assessee has failed to comply with section 18A(3) he "shall be deemed to have failed to furnish the return of his total income and the provisions of section 28, so far as may be, shall apply accordingly". In other words, by a legal fiction the failure to send an estimate of the tax under section 18A(3) is treated as a failure to furnish return of income under section 22. It is a necessary implication of this fiction that the estimate of tax on the income to be submitted under section 18A(3) is, in fact, different from the return to be furnished under section 22, and to appreciate the full significance of this fiction, it is necessary to examine what the distinction is. Under section 3 of the Act, the tax is payable on the income of the previous year. A statement of that income can be furnished only after that year ends, and section 22 enacts provisions as to when it is to be furnished in the assessment year. Sub-sections (1) and (2) provide for notices being given and the assessee is required to file his statement of income within the period provided therein, and it is this statement that is termed "return". Section 18A(3), however, relates to the sending of a statement of tax on the income of the accounting year before the 15th day of March of that year itself, and that statement is termed not a return but an estimate and quite rightly, because in the very nature of it, it can only be that. A person who sends an estimate under section 18A(3) has also to send a return of his income for the accounting year under section 22, and sub-sections (4) and (5) of section 18A provide for adjustment of advance tax paid under section 18A(3) towards the tax as finally computed under section 23. Thus, there is a clear distinction between a return of income under section 22, which can only be during the year of assessment, and an estimate of tax on income under section 18A(3) which can only be in the year of account.

It is in the light of this distinction that the effect of the legal fiction enacted in section 18A(g)( b) that when a person fails to send an estimate of tax on his income under section 18A(3) he shall be deemed to have failed to furnish return of his income, will have to be judged. The respondent contends that its effect is only to place the estimate to be sent under section 18A(3) on the same footing as the return under section 22 for purposes of section 28, and that does not abrogate the other conditions laid down in that section on which alone action could be taken thereunder and penalty imposed, and one of those conditions is the issue of notice under section 22(1) or section 22(2). But it must be noted that section 18A(g)( b) does not merely say that an estimate under section 18A(3) shall be deemed to be a return. It enacts that the failure to send an estimate in accordance with section 18A(3) is to be deemed to be a failure to make a return. Now, there can be no failure to make a return, unless notice had been issued under section 22(1) or section 22(2) and there has been a default in complying with that notice. Therefore, the fiction that the failure to send an estimate is to be deemed to be a failure to send a return necessarily involves the fiction that notice had been issued under section 22, and that had not been complied with. It is a rule of interpretation well-settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. The following oft-quoted observations of Lord Asqiuth in East End Dwellings Co. Ltd. v. Finsbury Borough Council may appropriately be referred to :

'If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs: it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.'

The fiction under section 18A(g)( b) therefore that failure to send an estimate under section 18A(3) is to be deemed to be a failure to send a return must mean that all those facts on which alone there could be a failure to send the return must be deemed to exist, and it must I accordingly be taken that by reason of this fiction, the notices required to be given under section 22 must be deemed to have been given, and in that view, section 28 would apply on its own terms."

14.3 In view of aforesaid facts and circumstances of the case and the law laid down by the Hon'ble Supreme Court in the case of S. Teja Singh (supra), I am of the opinion that case relating to the issue under reference weighs in favour of the assessee and against the revenue, i.e., if the assessed income as a result of assessment under section 153A, or under section 153C read with section 153A is the same as has been returned in the return furnished in response to notice issued under section 153A, or 153C read with section 153A, provisions of section 271(1)(c) of the Act will not be applicable.

14.4 So far as present case are concerned, I am of the opinion that the assessed income as result of assessment under section 153 of the Act in these cases being the same as has been returned by the respondents in their returns furnished in response to notice issued under section 153A of the Act, there is no justification for levy of penalty under section 271(1)(c) of the Act. Consequently, orders of the CIT (Appeals) on this point re-upheld.

14.5 Without prejudice to the above, I am, further, of the opinion that the revenue admittedly, having dropped the similar penalty proceedings in these very cases for assessment years 1998-99, 1999-2000, 2001-02 and 2002-03, there was no justification for levying penalty for the assessment years under reference without bring any material distinguished in the facts for the assessment years for which penalty proceedings were dropped and the facts for the assessment years under appeal before us. The respondents are not liable to penalize under section 271(1)(c) of the Act on this point also.

14.6 Before ending with the matter, I am, further of the opinion that after the insertion of provisions of section 271AAA with effect from 1-4-2007, whereby a mandatory penalty at the rate of 10 per cent in cases where search proceedings under section 132 of the Act have been initiated on or after 1-7-2007 and the undisclosed income of the specified previous year has to be paid (clearly go to show that the provisions of section 153A of the Act) are noting but a disclosure scheme to enable a defaulter to come clear by declaring the true income in the returns furnished in response to notice issued under section 153A or under section 153C read with section 153A, as the case may be, because had it been so, then the Legislature would not have made provisions for adjustment for opening assessment or reassessment and also would not have made these provisions subject to non obstante clause. In my opinion, the penal provisions of section 271AAA have been brought on record, to avoid criticism or struck down of the provisions of section 153A of the Act on the ground that a dishonest taxpayer is permitted to go such fee just by paying normal tax; whereas a law abiding citizen is made to suffer fear of penal provisions of section 271(1)(c) of the Act.

15. Coming to the decision of ITAT Delhi Special Bench in the case of Shri Rupesh Builders, I am of the opinion that in this case the Bench has proceeded with a view that the return furnished under section 153A of the Act, is an involuntary revised return and question of concealment or furnishing of wrong particulars and consequential question of levy of penalty under section 271(1)(c) of the Act is to be considered on the basis of any earlier return furnished under section 139(1) or 139(4) or 139(5) or 142(1) or under section 148 of the Act.

15.1 The fact that the return furnished under section 153A of the Act on the basis of language of the section itself, which is further supported by the decision of ITAT Delhi Special Bench in the case of Raj Kumar Chawla ( supra), is neither a revised return under section 139(5) not a belated return under section 139(4) nor a return under section 142(1) nor, a return under section 148 of the Act, therefore, this decision is distinguishable and not applicable to the present case.

15.2 Under Explanation 5 to section 271(1)(c) read with section 132(4) of the Act being available only for the assessment year relevant to the previous year which has either not ended by the date of search or it has ended, the due date for furnishing the return has not expired and the concealed income stands recorded in the books of account and not to any other assessment year.

16. On the other hand, I am of the opinion that without prejudice to my earlier findings, that even the return furnished under section 153A is considered as involuntary revised return, then also, so far as paid tax is concerned, the assessee having disclosed the additional income at the time of search itself, and has paid the tax, they were earlier to immunity available under Explanation 5 to section 271(1)(c) read with section 132(4) of the Act.

17. So far as revenue's second stand referred to in paragraph No. 6.1, of this order is concerned, I am of the opinion that in view of my decision with respect to status of return furnished in response to notice under section 153A of the Act (supra), revenue's this stand does not survive and, therefore, is rejected.

18. Without prejudice to the aforesaid discussion, analysis of the provisions and the conclusion, I am of the opinion that the aforesaid conclusion is further supported by the fact that analysis of provisions of section 153A of the Act go to show that issuance of notice under section 153A of the Act requiring the assessee to furnish the returns of income of six assessment years covered by the provisions, is dependent neither on -

(a) Detection of any undisclosed income.
(b) Nor on detection of any concealed income (as envisaged in the provisions of section 271(1)( c) of the Act.
(c) Nor to tax the income which has or might have escaped assessments (as envisaged in the provisions of sections 147 to 151 of the Act.
(d) Nor on the basis of material or income or valuables or assets or books of account or documents found and seized during the search action under section 132 or in consequence upon the requisition made under section 132A of the Act.
(e) Nor on the satisfaction or choice of the Assessing Officer.
(f) Nor on the basis of Assessing Officer's having reason to believe or not to believe.

18.1 In other words, notice under section 153A of the Act has to be issued by the Assessing Officer in every case, where search action under section 132 of the Act has been carried on or requisition under section 132A has been made after 31-5-2003 requiring the assessee to furnish the returns of income of previous six assessment years as specified in the provisions of section 153A itself.

18.2 Not only the Assessing Officer is bound to issue notice under section 153A (supra), but is bound, after having issued such notice, to make assessments for all those six assessment years and charge the tax as was chargeable in the respective assessment year.

18.3 Since the provisions of section 153A, in my opinion, are bound to be interpreted only as above, the provisions are in the shape of self-contained code subject, are mandatory in nature.

18.4 If the issuance of notice under section 153A as well as consequential furnishing of return by the assessee as well as completion of assessment under section 153A are mandatory requirements, then how the compliance of such provisions, at least by the assessee, can make out a case for levy of penalty under section 271(1)(c) of the Act on the ground of concealment of income or furnishing of wrong particulars of income. The assessment under section 153A meant for the assessing the assessee's income for relevant assessment years (six), the question of penalty under section 271(1)(c) of the Act, in my opinion will arise only if the assessed income is found to be in excess of the income returned by the assessee in the return furnished in response to notice under section 153A of the Act, otherwise not. On this ground also, the present defendants are not liable to penalty under section 271(1)(c) of the Act.

19. In the result, orders of the CIT (Appeals) are confirmed and revenue's appeals are dismissed.

ORDER UNDER SECTION 255(4) OF THE Income-tax Act, 1961

As there is a difference of opinion between the Judicial Member and the Accountant Member with respect to outcome of revenue's appeals under reference, the matter is being referred to theHon'ble President of ITAT with a request that following question may be referred to a Third Member or pass such order as the Hon'ble President may think fit.

(1) Whether on the facts and circumstances of the case and in law, the respondents are liable to penalty imposable under section 271(1)(c) of the Act.

THIRD MEMBER ORDER

Per R.V. Easwar, Vice President. - The Hon'ble President has referred the following point of difference to me under section 255(4) of the IT Act:

"Whether on the facts and circumstances of the case and in law, the respondents are liable to penalty imposable under section 271(1)(c) of the Act".

2. The facts have been stated in great detail in the dissenting orders and there is no need to repeat them. I have heard both the sides at length. I may straightaway say that though initially the learned counsel for the assessees attempted to argue that the provisions of section 271(1)(c) are not applicable at all to assessments made under section 153A and in fact addressed elaborate arguments on the point, later he submitted that he would not continue this line of argument further and also fairly stated that it may be recorded that the provisions of section 271(1)(c) are applicable to assessment made under section 153A. Accordingly, this part of the dissenting orders need not detain me any longer and I hold, agreeing with the learned AM, that section 271(1)(c) is applicable to an assessment made under section 153A. The learned JM has dealt with this issue from paragraphs 1 to 14.5 of his dissent, but having regard to the stand taken before me on behalf of the assessee I do not feel compelled to discuss this point any further.

3. The next submission of the assessees was that Explanation 5( 2) to section 271(1)(c) is applicable to the case and the benefit thereof was available to the assessees. On this aspect, the learned AM has held that the benefit cannot be extended because admittedly the income declared by the assessees in the returns filed under section 153A had not been declared in the returns filed by them originally on 30-6-1998, 30-6-1999, 30-6-2000, 30-6-2001, 30-6-2002 and 30-6-2003 respectively for the assessment years 1998-99, 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04 res-pectively. The search took place on 4-9-2003 and the returns under section 153A were all filed on 31-5-2004 only. According to the learned AM, prior to the amendment of Explanation 5 by the Taxation Laws (Amendment) Act, 1986 with effect from 10-9-1986 an assessee who was found to be the owner of any money, bullion, etc. during the search was entitled to explain that they were acquired by him by utilising the income relating to any previous year, whether it ended before the date of search or is to end after the date of search. By doing so, he could escape liability to pay penalty for concealment. It is only in order to plug this loophole that the aforesaid amendment was carried out to the Explanation to provide that notwithstanding that the assessee has declared income in the returns filed after the date of search he shall be liable to penalty, except in cases where such income is, or the transactions resulting in such income are, recorded on or before the date of the search in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the CIT before the date of the search. The learned Accountant Member has concluded that by the amendment the assessee is required to pay penalty in case he explains the acquisition of assets recovered during the search from out of income of a previous year which has already ended before the date of search or which is to end on or after the date of search.

4. In support of the above conclusion, the learned Accountant Member has relied on the order of the Ahmedabad Bench of the Tribunal in the case of Rupesh Bholidas Patel (supra). This is a case of the same group as the assessees before me. The order was put by the learned Accountant Member to the assessee who pointed out that it was an ex parte order, suggesting that it was not binding on the Bench. The learned Accountant Member however, held that though it was decided ex parte, the Tribunal has discussed the merits of the levy of penalty with reference to the plea that Explanation 5(2 ) was applicable and has also considered the judgment of the Bombay High Court in Sheraton Apparels' case (supra) and that of the Madras High Court in S.D.V. Chandru's case (supra). He further found in paragraph 13 of his order that the present assessees belong to the same group as Rupesh Bholidas Patel (supra) and the facts and circumstances are similar to those in the cited order. Accordingly, he held that the assessees are not entitled to the benefit of Explana- tion 5(2) to section 271(1)(c). He also noted that a similar view has been taken by the Punjab and Haryana High Court in Ashok Kumar Gupta's case (supra) where the benefit of the said Explanation was held confined to the year in respect of which the due date for filing the return is yet to come. The learned AM also noticed the judgment of the Hon'ble Gujarat High Court in Mahendra C. Shah's case (supra) and held that in that judgment the immunity was granted because the search took place on 3-7-1987 and the return for the assessment year 1988-89, which was the year before the High Court, was due only on 31-7-1988 and, accordingly, it was held that penalty cannot be imposed under Explanation 5(2) to section 271(1)(c). Thus in the case before the Gujarat High Court the immunity was sought for the year of search and not for the earlier years.

5. In the aforesaid view of Explanation 5(2), the learned AM reversed the order of the CIT(A) and restored the penalties.

6. The learned JM, as already noticed, has discussed the question from an entirely different perspective inasmuch as he has proceeded to first decide the "status" of a return filed under section 153A vis-a-vis the return filed under section 139 or section 142(1) or section 148. He has held that a return filed in response to notice issued under section 153A was either (i) that of a return filed under section 139(1) or (ii) if not filed within the time allowed by section 153A but filed before the assessment was made under section 153A, was that of a belated return as in section 139(4) or (iii) that of a revised return filed under section 139(5) if a return had already been filed within the time in response to the notice under section 153A. In the above line of reasoning, he held that if in such a return the assessee has, as in the present case, disclosed his true income and the assessment is made under section 153A accepting the said return, then there is no question of levying penalty for concealment because the returned income and the assessed income are the same. The learned JM has discussed this issue in great detail to support his ultimate conclusion that it was never intended that section 271(1)(c) should apply to search assessments under section 153A. He has buttressed his view by pointing out that section 271AAA was brought in by the Finance Act, 2007 with effect from 1-4-2007 only to cover assessments made under section 153A. The learned AM has also mentioned a few further points in support of his basic conclusion. However, as noticed in the beginning of my order, this aspect need not be examined further because the learned counsel for the assessee has given up before me that line of reasoning adopted by the learned JM and has stated that the provisions of section 271(1)(c) do apply to search assessments made under section 153A.

7. The learned JM has, however, added that since the revenue has dropped the penalty proceedings initiated for the assessment years 2003-04 and 2004-05 there is no justification for imposing penalty for the years under appeal without bringing any further material. As regards the question of immunity under Explanation 5(2) to section 271(1)(c) read with section 132(4) the learned JM held in paragraph 16 of his dissent, without prejudice, that even if the returns filed under section 153A are considered to be involuntary revised returns (i.e., returns prompted by the search), since the assessees have disclosed additional incomes even at the time of the search and also paid the tax, they were entitled to the immunity.

8. The learned JM ultimately concluded that penalty under section 271(1)(c) can be levied with reference to assessments made under section 153A only if the assessed income is found to be in excess of the income returned by the assessee in the returns filed in response to the notice issued under section 153A and not otherwise. Since in the present case the returned income and the assessed income under section 153A were the same, he held that no penalty was imposable.

9. The arguments on behalf of the department, which is the appellant in these appeals, are as follows : (a) the learned JM has overlooked the binding order of the Ahmedabad Bench of the Tribunal in the case of Rupesh Bholidas Patel (supra) belonging to the same group [since reported in 309 ITR (AT) 271] which is a serious flaw in his order; (b) that the learned JM was wrong in holding that section 271(1)(c) was not applicable at all to an assessment made under section 153A; (c) the Explanation 5(2) cannot be availed of by the assessees because the returns were filed on 31-5-2004, after the date of the search, and in any case the immunity was available, if at all, only in respect of the return to be furnished before the expiry of the time prescribed by section 139(1) and that too only in respect of the money, bullion, jewellery etc., acquired out of the income for the year for which time was still available to file the return as above and only if such income had been declared in the statement made under section 132(4) during the search. According to the department, since this condition is not satisfied, the immunity was not available.

10. Before me the main argument on behalf of the assessees was that since section 271(1)(c) was applicable to an assessment made under section 153A, the immunity from penalty given by Explanation 5(2) to section 271(1)(c) was available to the assessees. Reliance is placed on the judgment of the Madras High Court in the case of S.D.V. Chandru (supra) and the Rajasthan High Court in Commissioner Of Income-Tax v. (1) Kanhaiyalal [2008] 299 ITR 19 and the order of the Allahabad Bench of the Tribunal in Shyam Biri Works (P.) Ltd. v. Asstt. CIT [2001] 70 TTJ 880 . It is submitted that the assessees have declared additional income under section 132(4) in the course of the search, have paid the taxes and interest thereon and offered the same for taxation in the returns filed in response to notices issued under section 153A and since the returns have been accepted by the Assessing Officer in the assessments made under section 153A the immunity is available. Further, my attention has been drawn to the statement of objects and reasons (1986) (161 ITR St. 63) for introducing the Taxation Laws (Amendment and Miscellaneous Provisions) Bill, 1986 and the CBDT Circular No. 469, dated 23-9-1986 (1986) (162 ITR St. 21). It is contended that since these aspects have not been considered in the order of the Tribunal, Ahmedabad Bench, in the case of Rupesh Bholidas Patel (supra), or by the learned AM, the said order cannot be said to govern the present appeals. Written submissions and case-law compilation have been filed which have also been considered by me.

11. I have considered the arguments. Since the learned counsel for the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under section 153A, it is not necessary for me to examine that position. The main question before me, which was debated at length, was whether the immunity under Explanation 5(2) to section 271(1)(c) is available to the assessees. No judgment of the Hon'ble Gujarat High Court on this question was brought to my notice by either side. The Madras High Court in S.D.V. Chandru's case (supra) has held that the words in Explanation 5(2) "....has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in sub-section (1) of section 139" are not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of the search and that the words which refer to the time-limit under section 139(1) are "only a reiteration of the legal requirement regarding the time within which returns should normally be filed". In this view of the matter it was held that no penalty can be imposed on the basis of the returns filed after the date of the search, pursuant to declaration under section 132(4), in which additional income was shown by the assessee though such returns related to earlier assessment years. To the same effect is the judgment of the Rajasthan High Court in Kanhaiyalal (supra). In fact, in this case the High Court has observed that it is not merely the right of the assessee to file returns for the earlier assessment years after the date of the search pursuant to declarations made under section 132(4) but it is his obligation to do so and the immunity conferred by Explanation 5(2) cannot be taken away or watered down. The view taken by the Madras High Court in S.D.V. Chandru's case (supra) has been noticed by the Ahmedabad Bench of the Tribunal in the group case of Rupesh Bholidas Patel (supra) but the Bench has preferred to follow the judgment of the Bombay High Court in the case of Sheraton Apparels (supra), a decision which has also been followed by the learned AM in the present appeals. The learned AM has also referred to the order of the Tribunal in the group case of Rupesh Bholidas Patel (supra) and in paragraph 13 of his order has held that since it is a case of the same group and the facts and circumstances of the assessees' cases are similar to those in the case before the Tribunal, he would draw support for his view from the said order. The learned JM does not appear to have referred to the order of the Tribunal in the case of Rupesh Bholidas Patel (supra). Since a view has already been taken as to the availability of the immunity under Explanation 5(2) to section 271(1)(c) by an order of the Ahmedabad Bench, that too in a case belonging to the same group and after referring to the judgment of the Madras High Court in S.D.V. Chandru's case (supra), judicial discipline requires that I should not deviate from that view. I accordingly, uphold the view of the learned AM that the immunity under the above Explanation is not available to the present assessees.

12. The statement of objects and reasons to the Taxation Laws (Amendment and Miscellaneous Provisions) Bill, 1986 (161 ITR St. 63), and the Circular No. 469 (162 ITR St. 21) to which my attention was drawn do not advance the case of the assessees. The statement of objects and reasons says that the amendment was being made "to remove an anomaly in the existing provisions in respect of cases where penalty is imposable for concealment of income even if the taxpayer has no intention to fabricate evidence or to conceal his undisclosed income after search and seizure". The anomaly and the remedial amendment made are explained by the above circular in the following words :

"As per the existing Explanation 5 to section 271(1) of the Income-tax Act, if at the time of search, assets which are not recorded in the books of account are found, a taxpayer is liable to penalty for concealment even if he declares the full value of those assets as his income in the return filed after the search. This provision has been found to operate even in cases where the assessee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have 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 prescribed in clause (a) or (b ) of section 139(1) and specifies in the statement the manner in which such income has been derived and pays the taxes that are due thereon, no penalty shall be leviable." (pages 38 & 39 of 162 ITR St.)

The above circular explaining the amendment shows that the benefit of immunity conferred by the Explanation 5(2), as amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 10-9-1986, is confined to the return for the year in respect of which the previous year is yet to end or even though ended, the time for filing the return under section 139(1) is yet to expire. In the present case, the search took place on 4-9-2003. In respect of the assessment year 2003-04, for which the previous year would have ended on 31-3-2003, the return under section 139(1) would be due latest by 31-10-2003. In respect of all the earlier years, needless to add, the due dates for filing returns under section 139(1) would have ended much earlier. Returns were filed by the assessees after the search, in response to notices issued under section 153A on 31-5-2004. The additional income declared in these returns do not fall under the category of the return mentioned in Explanation 5(2) to section 271(1)(c). Therefore, the assessees are not entitled to the immunity from penalty.

13. I accordingly, agree with the view taken by the learned AM on this aspect of the matter and hold that the immunity is not available to the assessees under Explanation 5(2) to section 271(1)(c).

14. The other contention raised on behalf of the assessees is that except the motor car valued at Rs. 2,50,000 none of the other items of income represents any "money, bullion, jewellery or valuable article or thing" found in the possession of the assessees during the search and, therefore, these items of income cannot be held to concealed income. These items are investment in post office, cash deposited in banks, lottery amount received, donations made, consultancy income offered for tax, household expenses etc. (page 7 of the written submissions filed on 26-5-2009 before me). Similar details of the items offered in the returns are given in the following pages of the written submissions. My attention has been drawn to the judgment of the Hon'ble Gujarat High Court in Bhagwandas Narayandas v. CIT [1975] 98 ITR 194 and some orders passed by the Cochin and Ahmedabad Benches of the Tribunal and reported as South Indian Finance's case (supra), Asstt. CIT v. Mrs. K. Vasantha [1999] 68 ITD 39 (Coch.) and Smt. Pushpaben P. Sonarupawala v. Asstt. CIT [1998] 61 TTJ 486 (Ahd.) wherein similar view was taken. The learned AM has discussed this contention in paragraph 10.6 of his order and has held that the assessees were found to be the owner of cash, jewellery and admitted to have deposited cash in bank or post office or utilised the undisclosed income and became owners of the articles or things and, therefore, Explanation 5 is attracted. He has further noted that the assessees themselves have claimed that the assets were acquired out of undisclosed income and have also accepted the assessments made under section 153A. In this view, he has not accepted the contention. The learned JM, however, does not appear to have touched this aspect at all. Thus, I do not have the benefit of his views. There being no difference on this aspect of the matter for the reason that the learned JM did not express any views on the same, I am unable to proceed further and decide this point. The learned counsel for the assessee contended that the Bench should be directed to consider this issue when the matter goes back to them for giving effect to my opinion, but that it is a matter on which I have no jurisdiction to give directions to the Bench, except observing that the assessees may, if so advised, raise this issue before the Bench.

15. As regards dropping of the penalty proceedings for some of the years are concerned, I agree with the learned AM that it may not be conclusive and the fate of these appeals cannot depend on the same. The question whether penalty is leviable for the years under appeal has to be independently decided in the light of the controversies raised by both the sides. In this regard, I am unable to agree with the learned JM (para. 14.5 of his dissent) that the dropping of the penalty proceedings for some of the years is a material consideration.

16. In the result, I agree with the learned AM that penalties were rightly imposed on the assessees under section 271(1)(c). The point of difference referred to me is answered in the affirmative.

17. The appeals will now go back to the Division Bench for passing orders in conformity with my view.

ORDER

Per H.L. Karwa, Judicial Member. - Consequent upon difference of opinion between the Members constituting 'B' Bench which had head in this appeal, the Hon'ble President referred the following question for the opinion of the Third Member and for that purpose appointed the Hon'ble Vice President Shri R.V. Easwar :

"Whether on the facts and circumstances of the case and in law, the respondents are liable to penalty imposable under section 271(1)(c) of the Act."

2. The Hon'ble Vice President has now decided, as per order dated 25-6-2009, the issue referred to in the question in favour of the revenue and against the assessee after concurring with the order of the Accountant Member. The relevant portion of the order of the Hon'ble Vice President (Third Member), as contained in Para 16 of the order read as under :

"16. In the result, I agree with the learned AM that penalties were rightly imposed on the assessees under section 271(1)(c). The point of difference referred to me is answered in the affirmative."

3. In view of the above facts and circumstances of the case, all the appeals of the revenue are allowed.

4. In the result, the revenue's appeals are allowed.

236/536