2017 (2) TMI 1423 - AT - Income Tax

Assessment u/s 153A - addition of unaccounted profit unearthed by department from Shree Balaji Mall - HELD THAT - The assessee has made a disclosure of ₹ 3 crores in reply to question no.10 recorded under section 132(4) of the Act. Out of this ₹ 3n crores, ₹ 2 crores has been offered for taxation in this year. We have been informed that rest of ₹ 1 crore were offered in individual hands. We have tried our best to persuade both the ld.representatives to show some nexus or reasonable conclusion from all the figures mentioned in these papers. By any scientific means they did not goad adjudicating authority to arrive at a conclusion that unaccounted profits have noticed in these papers. CIT(A) has appreciated these papers and arrived at a conclusion that these are rough work without any clear indication as to what the said numbers really lead to or relates to. On an analysis of complete material including statement of director recorded under section 132(4) and the explanation of the assessee extracted (supra) during the course of assessment proceedings, we are of the view that the ld.CIT(A) has appreciated the facts in right perspective way, and department is unable to goad us to arrive at any other logical conclusion. Therefore, we do not find any merit in this appeal of the Revenue. Penalty u/s 271AAA - addition made on undisclosed income - amount was declared by the assessee in the statement under section 132(4) - HELD THAT - No questions were put to the assessee. As far as assessment proceedings is concerned, the AO himself has treated this income of ₹ 2 crores as a business income and given set off against the alleged unaccounted profit computed by him. This action of the AO impliedly demonstrate that manner of earning of such income from development of Balaji Mall has not been doubted. Thus, the assessee has fulfilled all three conditions contemplated in sub-section 2 of section 271AAA and it could not be visited with penalty qua the alleged ₹ 2 crores disclosed during the course of search and offered them for tax in the return filed by the assessee. CIT(A) has rightly deleted the penalty. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of the addition of ?1,75,89,941/- as unaccounted profit.
2. Deletion of penalty of ?37,58,994/- under section 271AAA of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of the Addition of ?1,75,89,941/- as Unaccounted Profit:

The Revenue's appeal revolved around the deletion of an addition of ?1,75,89,941/- made by the Assessing Officer (AO) on account of unaccounted profit from Shree Balaji Mall. The AO had based the addition on seized documents during a search under section 132 of the Income Tax Act, 1961. These documents, particularly page no. 6 of Annexure A/2, indicated a net profit of ?3,75,89,941/- after deducting ?3.00 crores as land cost. The AO treated this as unaccounted profit and added ?1,75,89,941/- to the total income after giving a set-off of ?2.00 crores disclosed by the assessee during the search.

The assessee contended that the seized documents did not pertain to Balaji Mall or the company and provided a detailed explanation. The CIT(A) accepted the assessee's contentions, noting that the documents appeared to be rough workings and did not conclusively relate to unaccounted profit. The CIT(A) found that only 12 shops were sold up to the date of the search, and some shops were occupied by the assessee, making it improbable for the alleged profit to accrue in FY 2007-08.

The Tribunal upheld the CIT(A)'s findings, emphasizing that the AO failed to establish a clear nexus between the seized documents and the assessee's business transactions. The Tribunal noted that the presumption under section 132(4A) was rebuttable and the AO did not provide sufficient evidence to substantiate the addition. The Tribunal concluded that the CIT(A) had correctly appreciated the facts and dismissed the Revenue's appeal.

2. Deletion of Penalty of ?37,58,994/- under Section 271AAA:

The AO imposed a penalty of ?37,58,994/- under section 271AAA on the ground that an addition of ?1,75,89,941/- was made to the assessee's total income. The CIT(A) deleted the penalty, observing that the AO had already given credit for the ?2.00 crores disclosed by the assessee during the search. The CIT(A) noted that the addition of ?1,75,89,941/- had been deleted, and therefore, there was no basis for the penalty.

The Tribunal upheld the CIT(A)'s order, stating that the deletion of the addition of ?1,75,89,941/- removed the basis for the penalty. The Tribunal also considered that the assessee had fulfilled the conditions under section 271AAA(2), which included admitting the undisclosed income during the search, specifying the manner of earning such income, and paying the due taxes. The Tribunal referenced the Gujarat High Court's decision in CIT Vs. Mahendra C. Shah, which held that if no specific questions were asked about the manner of earning the income during the search, the penalty could not be imposed. The Tribunal found that the AO had implicitly accepted the manner of earning the income as business income from the development of Balaji Mall.

In conclusion, the Tribunal dismissed both appeals of the Revenue, upholding the CIT(A)'s orders on both the deletion of the addition and the penalty.