Commissioner of Income Tax, Kanpur vs Alok Kumar Maheshwari

The income tax Appellate Tribunal, Delhi has referred the following question of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as the Act), for opinion to this Court. Whether on the facts and in the circumstances of the case, was justified In holding that conditions laid down in Explanation 5(2) to section 271(1)(c) were fulfilled and no penalty was leviable u/s 271(1)(c)?

Whether, on the facts and in the circumstance of the case, the Tribunal misdirected itself in law in being its conclusions on irrelevant material and in ignoring other essential material on record?

The reference relates to year 1990-91.

stated the facts giving rise to the present reference are as follows.

A search and seizure was conducted at the residential as well as at business premises of the assessee on 9-5-1989 during the course of which cash amounting to Rs. 82,981 was found out of which cash amounting to Rs. 80,000 was seized. Assessment was, completed on a income of Rs. 40,309 which included unexplained cash amounting to Rs. 30,000. During the course of assessment proceedings, the Assessing Officer observed that all the ingredients of Explanation 5(2) to section 271(1)(c) were not fulfilled and initiated proceedings u/s 271(1)(c) of the income tax Act, 1961 for concealment of income.

While passing the order u/s 271(1)(c), the Assessing Officer observed that in the statement made by the assessee u/s 132(4), it was nowhere explained that the Investment represented cash found during the course of search was made out of the income earned during the period for which return was to be filed after the date of search and also it was not stated how and in which manner such Income was earned. He, therefore, concluded that penalty u/s 271(1)(c) was leviable and accordingly a penalty of Rs. 5,000 was imposed. The assessee went in appeal before the CIT (A) who vide his order dated 15-10-1992 in Appeal No. 711/1(2)/91-92 deleted the penalty following the decision of the income tax Appellate Tribunal, Allahabad in IT Appeal No. 207(All.) of 1992 for the assessment year 1989-90 in the case of Shri Radha Kishan Goel. The Dy. CIT (A) has relied on the findings given by the income tax Appellate Tribunal in the above order as under:-

If we interpret the present Explanation 5 of section 271 then it shall be dear that the main intention behind the Explanation 5 is that the assessee may not escape the penal provisions even if the undisclosed assets are recovered during the assessment year for which the return is yet to be filed. At the same time the legislature did not like to involve in the litigation and to avoid litigation, provided that the assessee can escape the penalty if he surrenders the undisclosed Income during search in his statement u/s 132(4). The paramount Intention of this is that the department may be saved of litigation and the realisation of the tax may be made at the earliest.

The income tax Appellate Tribunal was further of the opinion that the Intention of the legislature to provide this exception was to avoid litigation and to get the revenue at the earliest and thereby the mere disclosure by the assessee that ft was his disclosed income was sufficient to comply with provisions provided In the exceptions without specifying the manner in which income has been earned.

Aggrieved with the order of the Dy. CIT (A), the department filed appeal before the income tax Appellate Tribunal. The income tax Appellate Tribunal vide order dated 25-9-1995 in IT Appeal No. 104 (All.) of 1993 dismissed the departmental appeal following its own order dated 31-7-1993 in the case of Radha Kishan Goel, (supra) as referred to above and upheld the decision of the by CIT (A).

We have heard Shri A.N. Mahajan, learned Standing Counsel appearing for the revenue. Nobody appears on behalf of the respondent assessee.

We find that this Court in the case of Commissioner of Income Tax Vs. Shri Radha Kishan Goel, has upheld the order of the Tribunal where it was held that if the conditions laid down in Explanation 5(2) to section 271(1)(c) of the Act were fulfilled, no penalty was leviable hereunder.

As the Tribunal in the present case has relied upon its earlier decision in the case of Radha Kishan Goel (supra), which has been confirmed by this Court as, we answer the question referred to us in the affirmative, that is, in your of the assessee and against the revenue. There shall be no order as to costs.