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2016 DIGILAW 1373 (GUJ)

Mahendra R. Patel v. Income Tax Officer

2016-07-19

G.R.UDHWANI, K.S.JHAVERI

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JUDGMENT : K.S. Jhaveri, J. 1. By way of this Appeal, the Appellant - assessee has challenged the judgment and order dated 31.07.2008 of the Income Tax Appellate Tribunal, Ahmedabad 'A' Bench in ITA No. 906/Ahd/2004 for the Assessment Year : 1987-88. 2. While admitting the matter on 20.11.2009, the following substantial questions of law were framed by the Court for consideration:- "(2) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the order of the respondent in not granting set off wealth tax of Rs. 3,76,558/- paid for the A.Ys. 1978-79 to 1986-87 against the income tax for the A.Y. 1987-88? (3) Whether, in the facts and circumstances of the case, double taxation is permissible under the Scheme of the Act?" 3. The above Tax Appeal was ordered to heard with Tax Appeal No. 56/2004 as the issues raised in the present Tax Appeal were interconnected with those of Tax Appeal No. 56/2004. Tax Appeal No. 56/2004 was admitted by this Court vide order dated 01.11.2004 and vide judgment of this Court dated 09.12.2004 rendered in the above and allied matters, the issue was answered in favour of the assessee and against the revenue and relevant paragraphs of the above judgment reads as under:- "9. We have heard learned counsel appearing for both the parties and perused the material on record. We find that the Tribunal while deciding the appeals considered the issue in depth and given cogent and convincing reasons in arriving at the conclusion and there is concurrent finding of facts of all the authorities. Therefore, we would not like to disturb the order of the Tribunal regarding quantum. Therefore, for quantum, we are in complete agreement with the view taken by the Tribunal. However, we find that the penalty imposed in Tax Appeal No. 1452 of 2005 and 1453 of 2005 is erroneous. It appears that the revenue has accepted the Income Tax and Wealth Tax from the appellants-assessee for the relevant years and after ten years, the revenue has taken the matter under review. Therefore, it will be difficult for us to uphold the penalty imposed on the appellants-assessees. 10. Further, the Apex Court in the case of Gebilal Kanbhaialal (HUF) (supra), has observed in paragraph No. 6 as under:- "6. Explanation 5 is a deeming provision. Therefore, it will be difficult for us to uphold the penalty imposed on the appellants-assessees. 10. Further, the Apex Court in the case of Gebilal Kanbhaialal (HUF) (supra), has observed in paragraph No. 6 as under:- "6. Explanation 5 is a deeming provision. It provides that where, in the course of search under Section 132, the assessee is found to be the owner of unaccounted assets and the assessee claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous Year which has ended before the date of search or which is to end on or after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purpose of imposition of penalty under Section 271(1)(C). The only exceptions to such a deeming provision or to such a presumption of concealment are given in sub-clauses (1) and (2) of Explanation 5. In this case, we are concerned with interpretation of clause (2) of Explanation 5, which has quoted above. Three conditions have got to be satisfied by the assessee for claiming immunity from payment of penalty under clause (2) of Explanation 5 to Section 271(1)(C). The first condition was that the assessee must make a statement under Section 132(4) in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1). Such statement was made by the Karta during the search which concluded on August 1, 1987. It is not in dispute that condition No. 1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(C) was that the assessee should specify, in his statement under Section 132(4), the manner in which income stood derived. Admittedly, the second condition, in the present case also stood satisfied. It is not in dispute that condition No. 1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(C) was that the assessee should specify, in his statement under Section 132(4), the manner in which income stood derived. Admittedly, the second condition, in the present case also stood satisfied. According to the department, the assessee was not entitled to immunity under Clause (2) as he did not satisfy the condition for availing the benefit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on 31st July, 1987 and pay tax thereon particularly when the assessee concealed on August 1, 1987 that there was concealment of income. The third condition under clause (2) was that the assessee had to pay the tax together with interest, if any, in respect of such undisclosed income. However, no time limit for payment of such tax stood prescribed under clause (2). The only requirement stipulated in the third condition was for the assessee to "pay tax together with interest". In the present case, the third condition also stood fulfilled. The assessee has paid tax with interest upto the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income upto the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4)." 11. For the forgoing reasons, Tax Appeal No. 56 of 2004 is hereby dismissed. Both the questions raised in Tax Appeal No. 56 of 2004 are answered in affirmative i.e. favour of the revenue and against the assessees. Accordingly, we hold that the Tribunal was right in law in holding that the agriculture income earned by the appellant in the past and duly declared in the Amnesty Scheme amounting to Rs. 25.50 lakhs, is not agriculture income and agriculture income of Rs. 25.50 lakhs earned by the appellant from A.Ys. 1978-79 to 1986-87 is required to be assessed in the year under consideration as undisclosed income. 12. So far as Tax Appeal Nos. 1452 of 2005 and 1453 of 2005 are concerned, the same are allowed. 25.50 lakhs, is not agriculture income and agriculture income of Rs. 25.50 lakhs earned by the appellant from A.Ys. 1978-79 to 1986-87 is required to be assessed in the year under consideration as undisclosed income. 12. So far as Tax Appeal Nos. 1452 of 2005 and 1453 of 2005 are concerned, the same are allowed. The question of law raised in these appeals is answered in negative i.e. in favour of the assessee and against the revenue. Therefore, we hold that the Tribunal was not right in upholding the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961." 4. Considering the ratio laid down in the above decision in Tax Appeal No. 56/2004 and in the facts of the present case, we are of the view that the issues raised in this Appeal will be governed by the above decision and hence, the same are required to be answered in favour of the assessee and against the Department.