The DCIT, Vijayawada v. Sri Karumuri Siva Sankara Rao, Guntur

ITA 307/VIZ/2010 | 2001-2002
Pronouncement Date: 11-03-2011 | Result: Dismissed

Appeal Details

RSA Number 30725314 RSA 2010
Bench Visakhapatnam
Appeal Number ITA 307/VIZ/2010
Duration Of Justice 9 month(s) 17 day(s)
Appellant The DCIT, Vijayawada
Respondent Sri Karumuri Siva Sankara Rao, Guntur
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 11-03-2011
Date Of Final Hearing 15-12-2010
Next Hearing Date 15-12-2010
Assessment Year 2001-2002
Appeal Filed On 24-05-2010
Judgment Text
ITA 306 TO 310/10 K.S.S. RAO GNT IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 306 TO 310 /VIZAG/ 20 10 ASSESSMENT YEAR S : 2000 - 01 TO 2004 - 05 R ESPECTIVELY DCIT CENTRAL CIRCLE VIJAYAWADA VS. SRI KARUMURI SIVA SANKARA RAO GUNTUR (APPELLANT) (RESPONDENT) PAN NO.ADSPK 7380A APPELLANT BY: SHRI R.K. SINGH DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINS T THE ORDER OF THE CIT(A) DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. THE BRIEF FACTS RELATED TO THE IMPUGNED ISSUE BORNE OUT FROM THE RE CORD ARE THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 19.9.2005 DURING WHICH INCRIMINA TING DOCUMENTS RELATING TO UNACCOUNTED ADVANCES TO FARMERS WERE FOUND WHIC H WERE NOT DISCLOSED BY THE ASSESSEE TO THE DEPARTMENT. DURING THE COURSE OF SEARCH ASSESSEE ACCEPTED THE FACT THAT AMOUNTS ADVANCED BY HIM WERE NEITHER DISCLOSED NOR THE TRANSACTIONS RECORDED IN HIS BOOKS OF ACCOUNTS AND ACCORDINGLY HE OFFERED THE SAME AS UNDISCLOSED INCOME IN THE STATEMENT REC ORDED U/S 132(4) OF THE I.T. ACT ON 19.9.2005 AND 16.11.2005. 2. WHILE ADMITTING THAT THE TRANSACTIONS RELATING T O THE ADVANCES MADE TO THE FARMERS WERE TOTALLY OUTSIDE THE BOOKS OF ACCOU NTS THE ASSESSEE ACCEPTED THAT IT REPRESENTED THE UNACCOUNTED INCOME GENERATED IN THE PAST AND AFTER QUANTIFYING THE PEAK UNACCOUNTED INCOME A VAILABLE AT RS.51 41 186/- THE ASSESSEE DISTRIBUTED THE UNDISC LOSED INCOME TO THE RELEVANT PERIODS PERTAINING TO ASSESSMENT YEAR 1999 -2000 TO 2006-07. THE A.O. ACCEPTED THE DISCLOSURE OF PEAK CASH AVAILABLE DURING THE RELEVANT PERIODS BUT OBSERVED THAT METHOD ADOPTED BY THE ASS ESSEE TO ARRIVE AT THE ITA 306 TO 310/10 K.S.S. RAO GNT 2 PEAK UNACCOUNTED INCOME WAS NOT ACCEPTABLE. THE PE AK WAS RECOMPUTED BY THE A.O. ON THE BASIS OF THE CASH BOOK AND OTHER MA TERIAL AVAILABLE. THE TOTAL CASH BOOKS PEAK WAS QUANTIFIED AT RS.54 49 961/- AS AGAINST RS.51 41 186/- RETURNED BY THE ASSESSEE. THE EXPLANATION OF THE A SSESSEE IN THIS REGARD WAS REJECTED AND THE PEAK QUANTIFYING METHOD FOLLOWED B Y THE A.O. WAS ADOPTED IN THE ASSESSMENT ORDER. THE VARIATION IN THE ASSE SSED INCOME ON ACCOUNT OF REVISED CALCULATION OF PEAK CASH FOR THE RELEVANT P ERIODS IS AS UNDER: 3. THE A.O. ACCORDINGLY INITIATED THE PENALTY PROCE EDINGS. DURING THE PENALTY PROCEEDINGS THE ASSESSEE HAS SUBMITTED THA T IN VIEW OF THE VOLUNTARY DECLARATION U/S 132(4) OF THE ACT FOLLOWED BY THE F ILING OF RETURN AND PAYMENT OF TAX THERE ON NO PENALTY WAS LEVIABLE. IT WAS S UBMITTED THAT ASSESSEE ACCEPTED THE SOURCE OF INCOME AND HAD ADMITTED THE SAME IN THE RETURN FILED. THEREFORE THERE WAS NO INTENTION ON HIS PART TO CO NCEAL ANY FACTS REGARDING THE ADVANCES AND HE HAD ALSO COOPERATED WITH THE DE PARTMENT DURING THE SEARCH PROCEEDINGS AND ASSESSMENT PROCEEDINGS. THE REFORE THE BENEFIT OF IMMUNITY FROM PENALTY U/S 271(1)(C) WAS DUE TO HIM. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT INTENTION TO CONCEAL THE INCOME FROM MONEY LENDING TO FARMERS WAS EVIDENT FROM THE FACT THAT THE ENTIRE BUSINESS ACTIVITY OF MONEY LENDING WAS DONE OUTSIDE THE BOOKS OF ACCOUNTS. HE WAS ALSO OF THE VIEW THAT BUT FOR SEARCH OPERATI ON THE ASSESSEE WOULDNOT HAVE DISCLOSED THE PEAK CASH IN THE RETURNS OF INCO ME. ASST. YEAR ADDL. INCOME AS PER THE APPELLANT (IN RS.) ADDL. INCOME AS PER THE A.O. (IN RS.) 1999 - 2000 5 090 NIL 2000 - 2001 4 905 21 000 2001 - 2002 29 120 29 1 20 2002 - 2003 4 000 5 000 2003 - 2004 66 170 1 03 170 2004 - 2005 5 78 118 17 99 318 2005 - 2006 20 36 355 15 82 173 2006 - 2007 24 15 128 19 10 180 TOTAL 51 41 186 54 49 961 ITA 306 TO 310/10 K.S.S. RAO GNT 3 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) AND FILED THE WRITTEN SUBMISSIONS AND THE RELEVANT EXTRACTS OF TH E SAME ARE AS UNDER: THE ASSESSEE SUBMITS THAT THE INCOME ADMITTED IN TH E RETURNS OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A WAS ACC EPTED SUBJECT TO THE RE- WORKING OF THE PEAK AMOUNTS. THE ASSESSEE ACCEPTED THE SOURCE OF INCOME VOLUNTARILY AND ADMITTED THE SAME IN THE RETURNS OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE I.T. ACT. IT CAN BE SEEN THAT THE DIFFERENCE AROSE ONLY ON A CCOUNT OF ARITHMETICAL CALCULATION OF THE PEAK. IT IS BECAUSE THERE WAS A DIFFERENCE IN THE SYSTEM OF ARRIVING AT THE PEAK ADOPTED BY THE ASSESSING OFFIC ER. AS THE APPELLANT VOLUNTARILY OFFERED THE INCOME WHILE FILING THE RET URNS OF INCOME THERE IS NO CONCEALMENT OF INCOME. ON THE FACTS OF THE CASE IT IS SUBMITTED THAT WHE N THE NOTICE U/S 153A WAS ISSUED THE SOURCE OF INCOME AND THE INVESTMENT MADE IS PROPERLY OFFERED IN THE RETURNS OF INCOME FILED. THE ASSESSEE NEITH ER CONCEALED THE INCOME NOR FURNISHED THE INACCURATE PARTICULARS OF INCOME. IT IS ALSO SUBMITTED THAT THE ASSESSEE HAS CLEARLY PROVED THAT THERE IS NO IN TENTION TO CONCEAL THE PARTICULARS OF INCOME. THE OFFER MADE WAS VOLUNTAR Y. THEREFORE THE ASSESSEE REQUESTS THE ASSESSING OFFICER TO KINDLY D ROP THE PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT. IN THIS REGARD THE ASS ESSEE RELIES ON THE FOLLOWING DECISIONS: A) THE DECISION OF THE SUPREME COURT IN THE CASE OF CI T VS. SURESH CHANDRA MITTAL REPORTED IN 251 ITR 9. IN THIS CASE THE ASSESSEE FILED REVISED RETURNS OF INCOME SHOWING HIGHER INCO MES IN RESPONSE TO NOTICE U/S 148. SUCH NOTICE U/S 148 WAS ISSUED AFTER THE SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE I.T. ACT. TH E APEX COURT IN THE SAID CASE HELD THAT NO PENALTY IS LEVIABLE FOR CONCEALMENT OF ANY INCOME. B) THE DECISION OF THE MADHRA PRADESH HIGH COURT IN TH E ABOVE CASE REPORTED IN 241 ITR 124. A DETAILED ORDER AS TO WH Y PENALTY U/S 271(1)(C) IN THE CIRCUMSTANCES EXPLAINED ABOVE IS N OT LEVIABLE IS PASSED BY THE MADHYA PRADESH HIGH COURT AND THE SAM E IS CONFIRMED BY THE SUPREME COURT IN THE ABOVE MENTION ED ORDER. C) THE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS . SHYAMLAL SONI REPORTED IN 276 ITR 156 HELD THAT WHERE AS REV ISED RETURN OF INCOME HAD BEEN ACCEPTED BY THE DEPARTMENT NO PENA LTY U/S 271(1)(C) CAN BE LEVIED. D) THE DECISION OF THE MADHYA PRADESH HIGH COURT IN TH E CASE OF CIT VS. S.V. ELECTRICALS PVT. LTD. REPORTED IN 274 ITR 334 WHEREIN IT IS HELD THAT WHEN THE ASSESSEES SURRENDER THEIR FULL I NCOME THERE IS NO QUESTION OF ANY PENALTY. E) THE DECISION OF THE HONBLE ITAT HYDERABAD IN THE CASE OF K. DEEDAR AHMED VS. ITO REPORTED IN 97 ITD 240. F) THE DECISION OF THE SUPREME COURT IN THE CASE OF DI LIP N. SHROFF VS. JCIT REPORTED IN 291 ITR 519 ITA 306 TO 310/10 K.S.S. RAO GNT 4 G) THE LUCKNOW BENCH OF THE ITAT IN THE CASE OF ITO VS . SAMEER KANT AGARWAL REPORTED IN 113 TTJ 252 HELD THAT SIMP LY BECAUSE THE ASSESSEE SURRENDERED CERTAIN INCOME PENALTY SHOULD NOT BE LEVIED. H) THE CHENNAI BENCH OF THE ITAT IN THE CASE OF GEM GR ANITES (KARNATAKA) VS. DCIT REPORTED IN 31 SOT 21 OBSERVED THAT PENALTY CANNOT BE LEVIED MERELY ON THE GROUND THAT ADDITION WAS SUSTAINED. THE APPELLANT HUMBLY SUBMITS THAT HE ACCEPTED THE N OTINGS TO BE THE AMOUNT ADVANCED BY HIM AND OFFERED THE SAME TO TAX. THE A PPELLANT OFFERED THE AMOUNT VOLUNTARILY WITHOUT THE DEPARTING FINDING OU T ANY MATERIAL TO SHOW THAT THE NOTINGS REPRESENT THE INCOME OF THE APPELL ANT. THEREFORE THE APPELLANT REQUESTS THE HONBLE COMMISSIONER OF INCO ME-TAX (APPEALS) TO KINDLY CANCEL THE PENALTY LEVIED FOR ALL THE ASSESS MENT YARS UNDER CONSIDERATION. 5. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF PROVISIONS OF EXPLANATION 5 AND VARIOUS JUDICIAL PRONOUNCEMENTS R ENDERED ON THIS ASPECT AND HAS COME TO THE CONCLUSION THAT SINCE THE ASSES SEE HAS DISCLOSED THE INCOME DURING THE COURSE OF SEARCH HE WILL GET THE BENEFIT OF IMMUNITY ENSHRINED IN EXPLANATION 5 TO SECTION 271(1)(C) OF THE I.T. ACT. THE RELEVANT OBSERVATIONS OF THE CIT(A) ARE ALSO EXTRACTED HEREU NDER: THE FACT THAT THE INCOMES DECLARED IN THE STATEMENT U/S 132(4) WERE DISCLOSED IN THE RETURNS FILED SUBSEQUENTLY AND THE TAXES THEREON HAVE BEEN PAID BY THE APPELLANT IS NOT IN DISPUTE. CONSEQUEN T TO THE ASSESSMENT ORDERS PASSED U/S 143(3) R.W.S. 153A DATED 26.10.2007 THE ADDITIONAL INCOMES BROUGHT TO TAX FOR THE A.YS 2000-01 TO 2004-05 ARE RS.16 095/- RS.NIL RS.1 000/- RS.37 000/- AND RS.12 21 200/- RESPECTIV ELY. THE DIFFERENCE IN THE PEAK CREDITS CALCULATED BY THE APPELLANT AND IN THE ASSESSMENT ORDER IS RS.3 08 775/-. THIS HAS BEEN DISTRIBUTED BETWEEN T HE EIGHT ASSESSMENT YEARS FROM A.YS 1999-2000 TO 2006-07. THE ISSUE FOR ADJUDICATION IS WHETHER THE VARIATIO N IN THE INCOMES OFFERED AND ASSESSED CONSTITUTES CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS. THE VARIATION IN THE ASSES SED INCOME AS AGAINST THE UNDISCLOSED INCOME RETURNED IS ONLY ON ACCOUNT OF T HE CHANGE IN THE METHOD OF QUANTIFYING THE PEAK AVAILABLE. IN OTHER WORDS THE HEAD OF INCOME AND THE SOURCE DECLARED BY THE APPELLANT HAVE BEEN ACCE PTED BY THE A.O. BUT FOR THE PURPOSES OF QUANTIFYING THE PEAK AVAILABLE THE A.O. DIFFERED WITH THE METHOD EMPLOYED BY THE APPELLANT. WHEN THE VARIATI ON IS ATTRIBUTABLE ONLY TO THE REVISED METHOD ADOPTED BY THE A.O. THE ENHANCED INCOME IS DEEMED TO HAVE BEEN COVERED U/S 132(4). THE INCOME ASSESSED FOR ALL THE ASSESSMENT YEARS IN EXCESS OF AMOUNT OFFERED U/S 132(4) IS DUE TO DIFFERENT INTERPRETATION OF THE METHOD OF COMPUTATION OF PEAK AND NOT BECAUS E THE APPELLANT HAD CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTIC ULARS. ACCORDINGLY IT CANNOT BE SAID THAT THE APPELLANT HAD CONCEALED PAR TICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS FOR THE A.YS 2000- 01 TO 2004-05 BEYOND THE ITA 306 TO 310/10 K.S.S. RAO GNT 5 INCOME OFFERED U/S 132(4). THE APPELLANT HAD GIVEN EFFECT TO THE STATEMENT RECORDED U/S 132(4) BY WAY OF DISCLOSING THE INCOME DECLARED IN THE RETURN FILED IN RESPONSE TO THE PROCEEDINGS U/S 153A AND A S THE TAXES AND INTEREST THEREON HAVE BEEN PAID AT THE TIME OF FILING OF THE RETURN THE APPLICABILITY OF EXPLANATION-5 TO SEC. 271(1)(C) CANNOT BE DENIED. IT WOULD BE RELEVANT TO REFER TO THE JUDICIAL PRON OUNCEMENTS IN THIS REGARD. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V S. S.D.V. CHANDRU (2004) 266 ITR 175 (MAD) HAS CLEARLY HELD THAT THE EXPLANATION-5 DOES NOT MAKE ANY DISTINCTION BETWEEN ASSESSMENT YEARS. IT HAS BEEN OBSERVED THAT IN CASES WHERE THE ASSESSEE HAD NOT DISCLOSED HIS I NCOME IN THE RETURNS FILED FOR THE PREVIOUS YEAR WHICH HAVE ENDED PRIOR TO THE DATE OF THE SEARCH AND IN THE STATEMENT GIVEN UNDER SECTION 132(4) THE ASSES SEE ADMITS THE RECEIPT OF UNDISCLOSED INCOME FOR THOSE YEARS AND ALSO SPECIFI ES THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AND THEREAFTER PAYS T HE TAX ON THAT UNDISCLOSED INCOME WITH INTEREST SUCH UNDISCLOSED INCOME WOULD GET IMMUNIZED FROM THE LEVY OF PENALTY. THE FACTS AS DISCUSSED IN THE CASE OF CIT VS. MISH RIMAL SONI [2007] 289 ITR 0077 (RAJ) ARE THAT A SEARCH UNDER SECTION 132(1) OF THE ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESS EE AND HIS FAMILY MEMBERS. DURING THE COURSE OF SEARCH THE STATEMEN TS OF THE ASSESSEE UNDER SECTION 132(4) OF THE ACT WERE RECORDED. IN THE ST ATEMENT UNDER SECTION 132(4) OF THE ACT THE ASSESSE ADMITTED AMONGST OTH ER THINGS UNEXPLAINED INCOME FROM MONEY LENDING BUSINESS BY PROMISSORY NO TES. PENALTY WAS IMPOSED ON THE ASSESSEE AND HIS SON. THE ASSESSE C LAIMED IMMUNITY UNDER EXPLANATION-5 TO SECTION 271(1)(C). THE ASSESSING OFFICER HELD THAT SINCE MONEY INVESTED IN MONEY LENDING BUSINESS WAS NOT AC TUALLY SEIZED DURING THE COURSE OF SEARCH OPERATION AND WAS TO BE FOUND FROM THE INCRIMINATING DOCUMENTS DURING THE COURSE OF SEARCH AND SEIZURE IT COULD NOT FORM PART OF THE DISCLOSURE UNDER SECTION 132(4) AND HENCE COULD NOT BE CONSIDERED FOR IMMUNITY FROM LEVY OF PENALTY FOR CONCEALMENT OF PA RTICULARS OF INCOME IN TERMS OF EXPLANATION-5 TO SECTION 271(1)(C). AS DISCUSSED IN THE ABOVE JUDGEMENT EXPLANATION-5 TO SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 DEALS WITH A SITUATION IN WHICH ANY ASSETS ARE FOUND TO BE IN THE OWNERSHIP OF THE ASSE SEE IN THE COURSE OF SEARCH UNDER SECTION 132 OF THE INCOME-TAX ACT 196 1. IT MAKES NO DISTINCTION BETWEEN TANGIBLE ASSETS AND INTANGIBLE ASSETS. CLAUSE (2) OF EXPLANATION-5 MAKES IT CLEAR THAT WHERE IN THE COUR SE OF SEARCH THE ASSESSEE MAKES A STATEMENT UNDER SECTION 132(4) AND OWNS THA T HE ACQUIRED ANY OF SUCH ASSETS OUT OF HIS UNDISCLOSED INCOME NOT SO F AR RETURNED AND FURTHER STATES THE MANNER IN WHICH SUCH HAS BEEN DERIVED AN D PAYS TAX TOGETHER WITH INTEREST IF ANY IN RESPECT OF SUCH INCOME NO PRESU MPTION OF CONCEALMENT HAS TO BE DRAWN NOTWITHSTANDING THE ADMISSION TO THAT EFFECT. IN OTHER WORDS TO THE EXTENT THE ASSESSEE MAKES A CLEAN BREAST OF HIS UNDISCLOSED INCOME REPRESENTED BY ASSETS FOUND TO BE IN THE POSSESSION OF THE ASSESSEE HE IS NOT DEEMED TO HAVE CONCEALED HIS INCOME OR CONCEALE D PARTICULARS THEREOF. ITA 306 TO 310/10 K.S.S. RAO GNT 6 EXPLANATION 5(2) IS NOT CONFINED TO PHYSICAL POSSES SION BUT EXTENDS TO OTHER FORMS OF POSSESSION. AN AMOUNT INVESTED IN MONEY-L ENDING BUSINESS AND LOANS ADVANCED REPRESENTED BY PROMISSORY NOTES FOUN D IN THE POSSESSION OF THE ASSESEE ARE CAPITAL INVESTMENTS OF THE ASSESSEE AND ARE ALL ACTIONABLE CLAIMS. WHEN SUCH A LOAN IS REPRESENTED BY A PROMI SSORY NOTE IT COULD GIVE RISE TO A PRESUMPTION THAT THE MONEY REPRESENTED BY THE PROMISSORY NOTES BELONGS TO THE PERSON AS HELD BY THE PERSON IN WHOS E FAVOUR THE PROMISSORY NOTE HAS BEEN EXECUTED. AS PER HEAD-NOTES IN THE CASE OF CIT VS. RADHA KIS HAN GOEL REPORTED IN [2005] 278 ITR 0454 [ALLAHABAD]: EXPLANATION-5 TO SECTION 271(1)(C) OF THE INCOME-T AX ACT 1961 HAS BEEN ADDED BY THE TAXATION LAWS (AMENDMENT) ACT 19 84 WITH EFFECT FROM OCTOBER 1 1984. FROM A PERUSAL OF EXPLANATION 5 IT IS EVIDENT THAT THE CIRCUMSTANCES WHICH OTHERWISE DID NOT ATTRACT THE P ENALTY PROVISIONS OF SECTION 271(1)(C) NOW BY A DEEMING PROVISION ATTRA CT PENALTY PROVISIONS. BUT AN EXCEPTION IS PROVIDED IN CLAUSE (2) OF EXPLANATI ON-5 WHERE THE DEEMING PROVISION WILL NOT APPLY IF DURING THE COURSE OF SE ARCH THE ASSESSEE MAKES THE STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 THAT THE MONEY BULLION JEWELLERY ETC. FOUND IN HIS POSSESSION HAS BEEN ACQ UIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN O F INCOME AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HA S BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IF ANY IN RES PECT OF SUCH INCOME. THE EXCEPTION APPEARS TO BE TO PROVIDE AN OPPORTUNITY T O THE ASSESSEE TO MAKE A CLEAN AND FAIR CONFESSION AND TO SURRENDER HIS INCO ME AND ALSO TO DEPOSIT THE TAX AND INTEREST THEREON WHICH MAY RESULT IN AN AGR EED ASSESSMENT. THE PARAMOUNT INTENTION APPEARS TO BE THAT IN THE CASE OF FAIR AND CLEAR CONFESSION AND SURRENDER OF HIS INCOME DURING THE C OURSE OF SEARCH FURTHER LITIGATION MAY BE AVOIDED AND THE REVENUE MAY GET T HE TAX AND INTEREST ETC. AT THE EARLIEST AND THE ASSESSEE MAY BE SAVED FROM FURTHER LITIGATION. UNDER SECTION 132(4) OF THE ACT IT IS THE AUTHORIZED OFF ICER WHO EXAMINES ON OATH ANY PERSON WHO IS FOUND TO BE IN POSSESSION OR CON TROL OF ANY BOOKS OF ACCOUNT DOCUMENTS MONEY BULLION JEWELLERY OR OT HER VALUABLE ARTICLE OR THING AND THEREFORE IT IS THE AUTHORIZED OFFICER WHO HAS TO RECORD THE STATEMENT IN HIS OWN WAY. IT IS NOT EXPECTED FROM THE PERSON TO STATE THINGS WHICH ARE NOT ASKED BY THE AUTHORIZED OFFICER. UND ER SECTION 132(4) OF THE ACT UNLESS THE AUTHORIZED OFFICER PUTS A SPECIFIC Q UESTION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED IT IS NOT EXPECTED FROM THE PERSON TO MAKE A STATEMENT IN THIS REGARD AND IN CASE IN T HE STATEMENT THE MANNER IN WHICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATE D BUT HAS BEEN STATED SUBSEQUENTLY IT AMOUNTS TO COMPLIANCE WITH EXPLANA TION 5(2). IF THERE IS NOTHING TO THE CONTRARY IN THE STATEMENT RECORDED U NDER SECTION 132(4) OF THE ACT IN THE ABSENCE OF ANY SPECIFIC STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED IT CAN BE INFERRED THAT SU CH UNDISCLOSED INCOME WAS DERIVED FROM THE BUSINESS WHICH HE WAS CARRYING ON. THE OBJECT OF THE PROVISION IS ACHIEVED BY MAKING THE STATEMENT ADMIT TING THE NON-DISCLOSURE OF MONEY BULLION JEWELLERY ETC. THUS MUCH IMPOR TANCE SHOULD NOT BE ATTACHED TO THE STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. IT CAN BE INFERRED ON THE FACTS AND CIRCU MSTANCES OF THE CASE IN THE ITA 306 TO 310/10 K.S.S. RAO GNT 7 ABSENCE OF ANYTHING TO THE CONTRARY. THEREFORE ME RE NON-STATEMENT OF THE MANNER IN WHICH SUCH INCOME WAS DERIVED WOULD NOT M AKE EXPLANATION 5(2) INAPPLICABLE. AS PER HEAD-NOTES IN THE CASE OF CIT VS. SDV CHAND RU REPORTED IN [2004] 266 ITR 0175 [MADRAS]: EXPLANATION 5 TO SECTION 271(1)(C) OF THE INCOME-T AX ACT 1961 PROVIDES THAT IN THE CIRCUMSTANCES SET OUT IN PARAS (1) AND (2) OF THAT EXPLANATION THE ASSESSEE IS NOT TO BE REGARDED AS HAVING CONCEALED HIS INCOME. WHILE CLAUSES (A) AND (B) MAKE A CLEAR DIS TINCTION BETWEEN THE PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF TH E SEARCH AND A PREVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF THE SE ARCH PARA (2) IN EXPLANATION 5 DOES NOT MAKE ANY SUCH DISTINCTION. IT REFERS TO THE STATEMENT GIVEN BY THE ASSESSEE AT THE TIME OF THE SEARCH UND ER SECTION 132(4) WITH REGARD TO THE ASSETS FOUND AT THE TIME OF SEARCH BE ING THE STATEMENT TO THE EFFECT THAT SUCH ASSETS HAVE BEEN ACQUIRED OUT OF H IS UNDISCLOSED INCOME AND THE SPECIFICATION BY THE ASSESSEE IN SUCH STATEMENT WITH REGARD TO THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AND T HE SUBSEQUENT PAYMENT BY THE ASSESSEE OF THE TAX ON SUCH UNDISCLO SED INCOME TOGETHER WITH INTEREST. THE WORDS IN PARA (2) .HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED IN HIS RETURN OF INCOM E TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SECTION 139 IS 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. THE WORDS USED ARE INCOME WHICH HAS NOT BEEN SO FAR DISCLOSED IN HIS RETURN OF INCOME. THE ADDITIONAL WORDS WHICH REFER TO THE TIME SPECIFIED IN SECTION 139(1) ARE ONLY A REITERATION OF THE LEGAL REQUIREMENT REGARDING THE TIME WITHIN WHICH RETURNS SHOULD NORMALLY BE FILED. IN CASES WHERE THE ASSES SEE HAD NOT DISCLOSED HIS INCOME IN THE RETURNS FILED FOR THE PREVIOUS YEAR W HICH HAD ENDED PRIOR TO THE DATE OF THE SEARCH AND IN THE STATEMENT GIVEN UNDER SECTION 132(4) THE ASSESSEE ADMITS THE RECEIPT OF UNDISCLOSED INCOME F OR THOSE YEARS AND ALSO SPECIFIES THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AND THEREAFTER PAYS THE TAX ON THAT UNDISCLOSED INCOME WITH INTERE ST SUCH UNDISCLOSED INCOME WOULD GET IMMUNIZED FROM THE LEVY OF PENALTY . IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS ABOVE AND THE CASE LAWS RELIED UPON BY THE APPELLANT AND CONSIDERING THE FA CTUAL POSITION I AM OF THE VIEW THAT THE BENEFIT OF IMMUNITY ENSHRINED IN EXPL ANATION-5 TO SEC.271(1)(C) IS AVAILABLE TO THE APPELLANT. CONSEQUENTLY THE P ENALTY LEVIED FOR THE ASSESSMENT YEARS 2000-01 TO 2004-05 CANNOT BE UPHEL D AND THEREFORE THE PENALTIES LEVIED ARE CONCELLED. 6. NOW THE REVENUE IS BEFORE US WITH THE SUBMISSION THAT THE INCOME WAS SURRENDERED FROM THE UNACCOUNTED SOURCE BY THE ASSE SSEE ONLY ON ACCOUNT OF SEARCH CONDUCTED UPON HIM. HAD IT NOT BEEN CONDUCT ED HE WOULD NOT HAVE DISCLOSED THE ADDITIONAL INCOME. THEREFORE THE AS SESSEE IS GUILTY OF ITA 306 TO 310/10 K.S.S. RAO GNT 8 CONCEALMENT OF INCOME FOR WHICH PENALTY U/S 271(1)( C) WAS RIGHTLY LEVIED. BESIDES HE HAS ALSO PLACED A HEAVY RELIANCE UPON T HE ORDER OF THE A.O. 7. THE LD. COUNSEL FOR THE ASSESSEE BESIDES PLACING A RELIANCE UPON THE ORDER OF THE CIT(A) HAS CONTENDED THAT ASSESSEES C ASE SQUARELY FALLS WITHIN THE PURVIEW OF EXPLANATION 5 TO SECTION 271(1)(C) O F THE I.T. ACT. ACCORDING TO ITS CLAUSE 2 IF AN INCOME IS DECLARED DURING TH E COURSE OF SEARCH THROUGH STATEMENT MADE UNDER SUB-SECTION 132(4) AND ANY MON EY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND UNDER HIS POSSESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH H AS NOT BEEN DISCLOSED SO FAR IN ITS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF THE TIME SPECIFIED AND ALSO SPECIFYING THE STATEMENT THE MAN NER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAY THE TAX TOGETHER WITH INTE REST IF ANY IN RESPECT OF SUCH INCOME THAT INCOME SHALL NOT BE DEEMED TO HAVE BEEN CONCEALED U/S 271(1)(C) OF THE ACT. THEREFORE THE PENALTY U/S 2 71(1)(C) CANNOT BE LEVIED AGAINST THE ASSESSEES. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND CAREFUL P ERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW WE FIND THAT UNDISPUTEDLY DU RING THE COURSE OF SEARCH ASSESSE HAD MADE A STATEMENT U/S 132(4) ADMITTING T HE TRANSACTIONS RELATING TO ADVANCES MADE TO FARMERS OUTSIDE THE BOOKS OF AC COUNTS. ACCORDINGLY HE HAS ALSO QUANTIFIED THE PEAK UNACCOUNTED INCOME AVA ILABLE AT RS.51 41 186/- WHICH WERE DISTRIBUTED AS UNDISCLOSED INCOME TO THE RELEVANT PERIODS PERTAINING TO A.Y. 1999-2000 TO 2006-07. THE ASSES SING OFFICER HAS SIMPLY RECALCULATED THE PEAK UNACCOUNTED INCOME AT RS.54 4 1 961/- AS AGAINST RS.51 41 186/-. 9. THE CIT(A) DELETED THE PENALTY HAVING RELIED UPO N THE PROVISIONS OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE I.T. ACT AND ALSO UPON THE VARIOUS JUDGEMENTS OF DIFFERENT HIGH COURTS RENDERED ON THI S SUBJECT. OUR ATTENTION WAS ALSO INVITED TO THE ORDER OF THE TRIBUNAL IN TH E CASE OF ACIT VS. K.Y.N. PUNNA RAO ITA NO.6/VIZAG/2008 IN WHICH THE TRIBUNAL HAS EXAMINED THE SCOPE OF EXPLANATION 5 TO SECTION 271 OF THE I.T. A CT. WE HAVE ALSO CAREFULLY EXAMINED THE PROVISIONS OF EXPLANATION 5 TO SECTION 271(1) AND ITS CLAUSE 2 ITA 306 TO 310/10 K.S.S. RAO GNT 9 DEALS WITH THE SITUATION WHERE ANY STATEMENT IS MAD E DURING THE COURSE OF SEARCH U/S 132(4) OF THE ACT THAT ANY MONEY BULLIO N JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION O R UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCL OSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF THE TIME SPECIFIED AND ALSO SPECIFIES IN THE STATEMENT THAT MANNER IN WHICH SUC H INCOME HAS BEEN DERIVED AND PAY THE TAX TOGETHER WITH INTEREST IF ANY IN RESPECT OF SUCH INCOME THE SAID INCOME SHALL NOT BE CONSIDERED TO BE THE DEEMED CONCEALMENT FOR THE PURPOSE OF SECTION 271(1)(C) OF THE ACT. ASSESSEES CASE STRICTLY FALLS WITHIN THIS SITUATION AS THE ASSESSE E HAS MADE THE DISCLOSURE DURING THE COURSE OF SEARCH WHILE MAKING STATEMENT U/S 132(4) OF THE ACT ADMITTING THAT TRANSACTIONS RELATING TO ADVANCES MA DE TO FARMERS WERE TOTALLY OUTSIDE THE BOOKS OF ACCOUNTS AND HE ACCORDINGLY QU ANTIFIED THE PEAK UNACCOUNTED INCOME AVAILABLE AT RS.51 41 086/- WHIC H IS TO BE SPREAD OVER OVER THE RELEVANT PERIOD PERTAINING TO A.Y. 1999-20 00 TO 2006-07. THOUGH THE A.O. HAS MADE SOME SLIGHT VARIATIONS IN THIS PE AK UNACCOUNTED INCOME BUT THAT DOES NOT CHANGE THE NATURE OF DISCLOSURE M ADE BY THE ASSESSEE DURING THE COURSE OF SEARCH. WE HAVE ALSO EXAMINED THE VARIOUS JUDGEMENTS OF DIFFERENT HIGH COURTS REFERRED BY THE CIT(A) IN HIS ORDER AND WE FIND THAT ASSESSEES CASE STRICTLY FALLS WITHIN THE EXCEPTION CLAUSE 2 OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. THEREFORE THE INCOM E DISCLOSED BY THE ASSESSEES DURING THE COURSE OF SEARCH PROCEEDINGS C ANNOT BE TERMED TO BE THE DEEMED CONCEALMENT OF INCOME. WE HAVE ALSO CAR EFULLY EXAMINED THE ORDER OF THE CIT(A) BUT WE DO NOT FIND ANY INFIRMIT Y THEREIN THEREFORE WE CONFIRM THE SAME. 10. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11.3.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 11 TH MARCH 2011 ITA 306 TO 310/10 K.S.S. RAO GNT 10 COPY TO 1 DCIT CENTRAL CIRCLE VIJAYAWADA 2 SRI KARUMURI SIVA SANKARA RAO F.NO.11 KANCHAN TOW ERS NEAR SWAMY THEATRE PATTABHIPURAM GUNTUR 3 THE CI T VIJAYAWADA 4 THE CIT (A) VIJAYAWAD A 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM