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2006 DIGILAW 632 (GUJ)

COMMISSIONER OF INCOME TAX v. GULAMRASUL M PATHAN

2006-09-25

D.H.WAGHELA, R.S.GARG

body2006
R. S. GARG, J. ( 1 ) MR B B Naik, learned counsel for the Revenue. None for the respondent assessee, though served. ( 2 ) THE Income Tax Appellate Tribunal, Ahmedabad Bench a has referred the following question under section 256 (1) of the Indian Income Tax Act, 1961 for the opinion of this Court which relates to Assessment Year 1987-88 and arises out of Income Tax Appeal No. 4037/ahd/1990: whether the Appellate Tribunal is right in law and on facts in deleting the penalty levied under section 271 (1) (c) of the Act ?? ( 3 ) THE short facts giving rise to the present Reference are that the assessee is an individual, the assessee and one Shri Mohmed Noormohmed were travelling in a car on 18. 6. 1986, they were apprehended by police authorities and cash of Rs. 12,13,850/- was recovered from their possession and the same was handed over to the Enforcement Authorities. The Income Tax authorities requisitioned the same under section 132a of the Income Tax Act, 1961 and took the money in their custody. During the course of the investigation, it was earlier claimed that the cash of Rs. 8,50,000/- belonged to M/s. Belite Founders of which the assessee was a partner and the balance amount of Rs. 3,63,850/- was belonging to M/s. Amrut Sales India of Rakhial, Ahmedabad. The assessee however, agreed to surrender the said amount as income and submitted that the tax thereon will be paid. ( 4 ) ON 21. 6. 1986, he sent a letter to the A. D. I. submitting inter alia, that the amount of Rs. 12,13,850/- be treated as his personal income from the non-disclosed source for the current financial year 1986-87 relevant to Assessment Year 1987-88 with a further prayer that no penalty be imposed and he be not prosecuted, no action be taken against him for the past years. He also showed his readiness and willingness to submit an estimate of advance tax for the Assessment Year 1987-88. He also prayed that some amount be released in his favour enabling him to pay advance tax. Later, on 26. 6. 1986, he submitted a petition for disclosure of income under Voluntary Disclosure Scheme, 1986. ( 5 ) THE income Tax Officer, vide letter dated 12. 9. He also prayed that some amount be released in his favour enabling him to pay advance tax. Later, on 26. 6. 1986, he submitted a petition for disclosure of income under Voluntary Disclosure Scheme, 1986. ( 5 ) THE income Tax Officer, vide letter dated 12. 9. 1986 informed the assessee that his case would not fall in the Amnesty Scheme and the return would be processed in the normal course. Thereafter a sum of Rs. 5,98,952/- was adjusted by the department towards payment of the advance tax and the receipt was issued in favour of the assessee. The assessment was completed thereafter and subsequent thereto, penalty proceedings under section 271 (1) (c) were also drawn against the assessee. ( 6 ) THE Assessing Officer, after considering the assessee s reply dated 22. 4. 1989, imposed penalty of Rs. 6,00,810/- under section 271 (1) (c ). The CIT confirmed the said order. Therefore, the assessee took up the matter before the Tribunal. The Tribunal observed that explanation 5 appended to Section 271 (1) (c) of the Act would not be applicable to the present case because disclosure of the income was not a result of search or seizure but in fact the amount was already recovered by the police and was thereafter requisitioned by the department under section 132a of the Act. It accordingly held that Explanation 5 would not be applicable and the AO would not be entitled to levy any penalty. As the Revenue is dissatisfied with the said order, it made an application for Reference. The Tribunal, observing that the matter raises a question worth reference, has, therefore, made this Reference. ( 7 ) MR B B Naik, learned counsel for the Revenue submits that the Tribunal went wrong in observing that the amount requisitioned under section 132a cannot be put at par with the amount which is seized in a search. He submits that perusal of section 132a (3) would show that whenever the amount seized by any other authorities is requisitioned by the Income Tax Department, then such requisition is put at par with the seizure and provisions of sub-section (4a) to (14), both inclusive, of section 132 and section 132b so far as may be, shall apply. He submits that the order passed by the Tribunal is contrary to the provisions of law. He submits that the order passed by the Tribunal is contrary to the provisions of law. ( 8 ) SECTION 132 of the Income Tax Act, 1961 ( the Act for short) relates to search and seizure. After the search is over, the authorities would be entitled to seize the incriminating articles which may be books of account, bullion, cash, jewellery, or any valuable thing. According to sub-section (4a) of section 132 where any books of account, other documents, money, bullion, jewellery or other valuable article or things are or is found in the possession or control of any person in the course of a search, it may be presumed that such articles belong to such person, the contents of such books of account and other documents are true, and that signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. Ordinarily, in absence of a deeming fiction as provided under section 132a (3), any article which is requisitioned would not fall within the definition of recovery under a search. Search is a physical act which is to be carried out or taken out by a group of persons or some person who is authorised under the authority of law to enter in the premises and look into the things. When such person or persons find some incriminating articles such as books of account and other documents, money, bullion, jewellery, other valuable articles or things and proposes to take the same in their custody, then taking custody of these articles would amount to seizure for the purposes of the Act. When such person or persons find some incriminating articles such as books of account and other documents, money, bullion, jewellery, other valuable articles or things and proposes to take the same in their custody, then taking custody of these articles would amount to seizure for the purposes of the Act. Section 132a (3) reads as under: (3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4a) to (14) (both inclusive) of section 132 and section 132b shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words ?the authorised officer occurring in any of the aforesaid sub-sections (4a) to (14), the words ?the requisitioning officer? were substituted. ? ( 9 ) A plain reading and understanding of sub-section (3) of section 132a would make it clear that when any books of account or other documents or assets have been delivered to the requisitioning officer, provisions of sub-section (4a) to (14), both inclusive, of sections 132 and 132b shall so far as may be, apply as if such books of account etc. have been seized under sub-section (1) of section 132. If because of the deeming fiction contained in sub-section (3) of section 132a the delivery of the articles on requisition by the requisitioning officer is deemed to be a seizure, then there would be no difficulty in applying provisions of sub-section (4a) to (14), both inclusive, of section 132 and 132b. ( 10 ) IT appears that the Tribunal without adverting itself to sub-section (3) of section 132a came to the conclusion that such articles were not seized after a search but were simply requisitioned, and as such Explanation 5 to section 271 (1) (c) would not apply. ( 11 ) SECTION 271 (1) (c) relates to penalties which can be imposed on an assessee. ( 11 ) SECTION 271 (1) (c) relates to penalties which can be imposed on an assessee. Sub-section (1) clause (c) provides that if the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under the Income Tax Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then such officer may direct that such person shall pay by way of penalty - Explanation 5 ? Where in the course of a search under section 132, 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 purpose 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. ? ? ( 12 ) ONCE it is held that possession of the assets in the hands of the Income Tax authorities would amount to seizure after requisitioning the same, then there is no escape from Explanation 5 appended to section 271 (1) (c) of the Income Tax Act. ( 13 ) SECTION 132a (3) concedes/deems the action of requisition at par of seizure under section 132 (1) and under the circumstances, the provisions contained in section (4a) to (14) of section 132 would apply mutatis mutandis. ( 14 ) FOR the reasons aforesaid and in view of the legal position explained by us, we are of the considered opinion that the Tribunal was unjustified in giving benefit to the assessee. The question is answered in favour of the Revenue. It is accordingly disposed of. No costs.