Itr/3/2003 Of The Commissioner Of Income Tax,Kzd v. S.j.prasad,Advocate,Kasaragod

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR MONDAY, THE 3RD MARCH 2008 / 13TH PHALGUNA 1929 ITR.No. 3 of 2003() ------------------- AGAINST THE ORDER IN RA.49/COCH/1998 IN ITA.924/COCH/1992 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------- THE COMMISSIONER OF INCOME-TAX, CALICUT. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- SHRI.S.J.PRASAD, ADVOCATE POWER OF ATTORNEY HOLDER OF SHRI.M.K.ALI, GOKUL BUILDINGS, KASARAGOD. BY ADV. SRI.P.BALACHANDRAN (SR.) SMT.PREETHA S.NAIR THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 03/03/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -------------------------------------------- I.T.R. No. 3 OF 2003 -------------------------------------------- Dated this the 3rd day of March, 2008 JUDGMENT C.N. Ramachandran Nair,J. This is a reference at the instance of the revenue against the orderof the Income-tax Appellate Tribunal cancelling penalty levied on theassessee under Section 271(1)(c) of the I.T. Act for the assessment year1990-91. The respondent is an advocate and Power of Attorney Holderof the assessee by name M.K. Ali. A search was conducted in theassessee's premises on 14.2.1990 and during search cash for Rs.5,75,000/- was seized by the department. In the course of search theassessee gave a statement declaring that the amount belonged to oneSri. M.G. Abdul Rahiman, Poochakad House, poochakad P.O.,Pallikkara. However, later the assessee failed to estsablish his case thatthe amount belonged to the said Sri. Abdul Rahiman, and therefore hefiled a return on 27.9.1990 declaring the amount as income from othersources. The assessing officer initiated penalty proceedings underSection 271(1)(c) of the Act for concealment of income. The assessee claimed immunity from penalty because of filing of return and paymentof tax on the income declared. However, the assessing officer noticedthat there is concealment of income by virtue of operation ofExplanation 5 to Section 271(1)(c) of the Act. However, he limited thepenalty levied under Section 271 (1)(c) of the Act to the minimumamount. Even though assessee filed appeal against penalty order, thesame was rejected by the first appellate authority, namely, CIT(Appeals). However, on second appeal by the assessee, the Tribunalcancelled the penalty on the assumption that prior to the due date forfiling of return, the assessee returned the income and paid tax thereon.It is against this order of the Tribunal cancelling the penalty thatdepartment has filed this reference. 2. We have heard senior counsel Sri.P.K.R. Menon appearing forthe revenue and senior counsel Sri. P. Balachandran appearing for therespondent-assessee. The revenue's counsel rightly pointed out that theassumption of the Tribunal that for the year 1990-91 the return was dueon 30.6.1991 is obviously incorrect. In fact return was due on30.6.1990 and search having been made on 14.2.1990, the assessee hadenough opportunity to file return and remit tax on the income so 2. We have heard senior counsel Sri.P.K.R. Menon appearing forthe revenue and senior counsel Sri. P. Balachandran appearing for therespondent-assessee. The revenue's counsel rightly pointed out that theassumption of the Tribunal that for the year 1990-91 the return was dueon 30.6.1991 is obviously incorrect. In fact return was due on30.6.1990 and search having been made on 14.2.1990, the assessee hadenough opportunity to file return and remit tax on the income so declared. Besides this, the assessee in the course of search could havesaved penalty by accounting the income at least on the date of searchand then paid tax by declaring it. Even after search and seizure of cashby the department, the assessee proceeded to contend that the amountbelonged to another person, but failed to prove the same. Even thoughcounsel for the assessee relied on the decisions of the Supreme Court inDILIP N. SHROFF V. JOINT. COMMISSIONER OF INCOME TAX,291 I.T.R. 519 AND T. ASHOK PAI V. CIT., 292 I.T.R. 11 (SC), wenotice that facts in these two decisions are different and in either of thecases the Supreme Court has not considered the scope of Explanation 5to Section 271(1)(c) of the Act. Penalty arising out of search iscovered under Explanation 5 to Section 271(1)(c) of the Act whichprovides that if the assessee in the course of search does not discloseincome and offer payment, the assessee is deemed to have concealedparticulars of income even in the course of search. Obviously there isconcealment of income by the assessee by virtue of operation ofExplanation 5 to Section 271(1)(c) of the Act because assessee not onlydid not disclose income in the course of search, but even offeredexplanation that it belonged to another person which the assessee could not establish or prove. In the circumstances, concealment standsproved beyond any doubt by operation of presumption available underExplanation 5 to Section 271(1)(c) of the Act and consequently theassessee is liable for penalty under the said Section. Therefore theorder of the Tribunal to the contrary is liable to be reversed. So far asthe quantum of penalty is concerned, the Officer has levied onlyminimum penalty and therefore there is no scope for interference withthe quantum of penalty levied. In the circumstances we dispose of thereference by answering the question referred in favour of the revenueand against the assessee. A copy of this judgment under the seal of the High Court andsignature of the Registrar shall be forwarded to the Income-taxAppellate Tribunal, Cochin Bench, Cochin. (C.N.RAMACHANDRAN NAIR)Judge.Judge. (T.R.RAMACHANDRAN NAIR) Judge.