Expl 5 to s. 271(1)(c): Undisclosed income offered in belated return filed u/s 139(4) eligible for immunity from penalty

Pursuant to a search and seizure action u/s 132 on 16.10.2008, the assessee offered undisclosed income of Rs. 1.25 crore to tax in the statement recorded u/s 132(4) for AY 2008-09. The due date for filing of the return of income u/s 139(1) for AY 2008-09 was 30.09.2009. The assessee filed the return of income on 31.10. 2009. The return was accordingly filed u/s 139(4) and not u/s 139(1). The AO held that as the return had been filed late, it was beyond the “due date” specified in clause (b) of Explanation 5A to s. 271(1)(c) and so penalty had to be levied under Explanation 5A to s. 271(1)(c). The CIT(A) reversed the AO. On appeal by the department to the Tribunal HELD dismissing the appeal:

Explanation 5A to s. 271(1)(c) provides that if during the course of search, the assessee is found to be the owner of any asset or income which has not been shown in the return of income which has been furnished before the date of search and the “due date” for filing the return of income has expired, the assessee is deemed to have concealed the particulars of his income or furnish inaccurate particulars of income and liable for penalty u/s 271(1)(c). In other words, if the income is offered in the return is filed by the “due date”, no penalty can be imposed. The question is whether the “due date” in Explanation 5A encompasses a belated return filed u/s 139(4). The “due date” can be very well inferred as due date of filing of return of income u/s 139(4) because wherever the legislature has provided the consequences of filing of the return of income u/s 139(4), then the same has also been specifically provided. E.g., s. 139(3) which denies the benefit of carry forward of losses u/s 72 to 74A if the return of income is not filed within the time limit provided u/s 139(1). In absence of such a restriction, the limitation of time of “due date” cannot be strictly reckoned with s. 139(1). Even a belated return filed u/s 139(4) will be entitled to the benefit of immunity from penalty (Rajesh Kumar Jalan 286 ITR 276 (Gau) & Jagriti Aggarwal 339 ITR 610 (P&H) & Jagtar Singh Chawla (decisions in the context of s. 54) followed)