2018 (10) TMI 1673 - AT - Income Tax

Penalty levied u/s 271AAA - cash surrendered during search conducted on the assessee u/s 132 - capital introduced in firms - HELD THAT - Undisputedly the entire surrender made by the assessee on account of capital introduced in firms documents found and cash was accepted and assessed to tax by the Revenue. All taxes thereon had been paid Admittedly no portion of the surrender had been assessed separately under any other head. Therefore the decision of the ITAT in the case of Sanjeev Goyal 2015 (11) TMI 1618 - ITAT CHANDIGARH applied to the entire surrender made, and the CIT(A) ,we hold had wrongly segragated the surrender made on account of cash by stating that the same was assessable u/s 69A of the Act, when the fact was that it had not been so assessed. On going through the order of the ITAT in the case of Sanjeev Goyal (supra) we find that it has been held in the said case that the disclosure of income u/s 132(4) during search having been made and the assessee having surrendered the same and included the same in the returns filed which have been accepted by the Revenue, no penalty u/s 271AAA is leviable for not specifying the manner of earning the income surrendered. All the aforesaid conditions admittedly stood fulfilled in the case of surrender made on account of documents found and capital introduced in the firm as per the CIT(A). The cash was also part of the same surrender and no distinction has been brought out of the same with the rest of the surrender made. We therefore hold that there was no basis for upholding the levy of penalty on the cash surrendered and the same is therefore directed to be deleted. The appeal filed by the assessee is, therefore, allowed.

Summary

Issues Involved:
1. Levy of penalty under Section 271AAA of the Income Tax Act, 1961.
2. Assessment of surrendered cash as deemed income under Section 69A versus business income.

Detailed Analysis:

1. Levy of Penalty under Section 271AAA:
The primary issue in both appeals was the levy of penalty under Section 271AAA of the Income Tax Act, 1961, on cash surrendered during a search conducted under Section 132 of the Act. The search and seizure operation was carried out at the residential and business premises of the Jindal Group on 15.07.2008, and the assessees had surrendered additional income of ?54,87,500/- for the impugned year, comprising various assets and documents.

The surrendered income was disclosed in the returns filed by the assessees and accepted by the Revenue. However, the penalty was levied on the grounds that the assessees failed to substantiate the manner in which the undisclosed income was earned. The CIT(A) followed the ITAT Chandigarh Bench's decision in the case of DCIT Vs. Shri Sanjeev Goyal, which held that if the income was disclosed during the search, tax paid thereon, and shown in the return as "Income from Business," no penalty under Section 271AAA was leviable.

The CIT(A) concluded that the assessees had specified and substantiated the manner of earning the income for the capital introduced in firms and documents relating to Annexure A-10 and A-8, thus deleting the penalty on these amounts. However, the CIT(A) upheld the penalty on the surrendered cash of ?11 lacs, citing the Hon'ble Jurisdictional High Court's decision in Kim Pharma Pvt. Ltd. Vs. CIT, which assessed the cash as deemed income under Section 69A rather than business income.

2. Assessment of Surrendered Cash as Deemed Income under Section 69A versus Business Income:
The CIT(A) held that the surrendered cash of ?11 lacs was assessable as deemed income under Section 69A, following the decision in Kim Pharma Pvt. Ltd. Vs. CIT. The CIT(A) noted that the cash was part of ?44 lacs surrendered by the assessee group and was unexplained, thus not specified and substantiated as required under Section 271AAA.

However, the assessees argued that the surrendered cash had not been assessed as deemed income under Section 69A but was accepted along with other surrendered income. The ITAT found that the entire surrendered amount, including the cash, was accepted and assessed to tax by the Revenue without being separately assessed under any other head. The ITAT referred to its decision in the case of Sanjeev Goyal, which held that no penalty under Section 271AAA is leviable if the income is disclosed during the search, included in the returns, and accepted by the Revenue, even if the manner of earning the income is not specified.

The ITAT concluded that the CIT(A) had wrongly segregated the surrendered cash from the rest of the surrendered income. Since the cash was part of the same surrender and no distinction was brought out, the ITAT directed the deletion of the penalty on the cash surrendered.

Conclusion:
In both appeals, the ITAT held that the penalty under Section 271AAA was not leviable as the entire surrendered income, including the cash, was disclosed, included in the returns, and accepted by the Revenue. The appeals of the assessees were allowed, and the penalty on the surrendered cash was directed to be deleted.