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2014 (10) TMI 494 - AT - Income TaxPenalty u/s 271AAA - Undisclosed income in pursuance of search - particulars of transactions furnished or not Held that - U/s 132 (4) of the Act unless the authorized officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5 (2) of the Act - in case there is nothing to the contrary in the statement recorded under section 132 (4) of the Act, in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources - The object of the provision is achieved by making the statement admitting the non-disclosure of money, bullion, jewellery, etc. - much importance should not be attached to the statement about the manner in which such income has been derived - mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable. Penalty u/s 271AAA is not leviable if an assessee, in his statement recorded during the search u/s 132 of the Act, admits the undisclosed income, specifies and substantiates the manner in which it has been derived and pays the taxes due thereon, together with interest - the assessee has paid due tax on the admitted undisclosed income - there is no specific format/procedure prescribed in the Act for specifying and substantiating an undisclosed income - The statement of the assessee, specifying the manner in which the undisclosed income was derived and substantiated, did not face any rebuttal or rejection at the hands of the AO - the assessee had entered into various transactions of sale/purchase of land during the concerned period - The income arising out of the transactions was declared - This included the undisclosed amount - the assessee has substantiated the manner in which the undisclosed income was derived and that being so, the condition laid down by Section 271AAA (2) (ii) has been duly met - CIT (A) erred in deciding this issue against the assessee Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under Section 271AAA of the Income Tax Act, 1961. 2. Specification and substantiation of the manner in which undisclosed income was derived. 3. Requirement of disclosing particulars of transactions and names of parties involved. 4. Misinterpretation of Section 271AAA by the Assessing Officer and Commissioner of Income Tax (Appeal). Detailed Analysis: 1. Imposition of Penalty under Section 271AAA: The case revolves around the imposition of a penalty of Rs. 64,27,700/- under Section 271AAA of the Income Tax Act, 1961. The penalty was levied on the assessee following a search and seizure operation conducted on 29.1.2009. The assessee had surrendered Rs. 6,40,00,000/- as undisclosed income, which was included in the return filed under Section 139(1) and assessed under Section 153B read with Section 143(3). The Assessing Officer (AO) initiated penalty proceedings under Section 271AAA, concluding that the assessee did not satisfy all the conditions required to avoid the penalty. 2. Specification and Substantiation of the Manner in Which Undisclosed Income Was Derived: The AO observed that the assessee did not specify or substantiate the manner in which the undisclosed income was derived. The AO highlighted that the assessee failed to provide details of land transactions, names, and addresses of parties involved, and sources of cash deposits in bank accounts. The Commissioner of Income Tax (Appeal) [CIT(A)] upheld this view, stating that the assessee's statement during the search was insufficient and lacked necessary details to substantiate the manner of deriving the undisclosed income. 3. Requirement of Disclosing Particulars of Transactions and Names of Parties Involved: The assessee contended that Section 271AAA does not mandate the disclosure of particulars of transactions or names of parties involved. The assessee argued that by preparing books of accounts, obtaining a Tax Audit Report, and filing the same, they had substantiated the manner in which the undisclosed income was derived. The AO and CIT(A) disagreed, insisting that the assessee needed to provide detailed information about the transactions and parties involved to comply with Section 271AAA. 4. Misinterpretation of Section 271AAA by the Assessing Officer and Commissioner of Income Tax (Appeal): The assessee argued that the AO and CIT(A) misinterpreted Section 271AAA. The assessee relied on several case laws, including 'DCIT vs. Shri Inderchand Surajmal Bothra' and 'CIT vs. Mahendra C. Shah', to support their claim that specifying the manner of deriving undisclosed income does not require disclosing the particulars of parties to the transactions. The Tribunal noted that the AO did not ask specific questions regarding the manner of deriving the income during the search, and the assessee's statements were accepted without further inquiry. Conclusion: The Tribunal concluded that the assessee had substantiated the manner in which the undisclosed income was derived by preparing and submitting relevant financial documents. The Tribunal held that the AO and CIT(A) erred in interpreting Section 271AAA, as the section does not explicitly require disclosing particulars of transactions or names of parties. Consequently, the Tribunal allowed the appeals, setting aside the penalty imposed under Section 271AAA. The Tribunal emphasized that the assessee's compliance with the conditions of Section 271AAA was sufficient, and the penalty was unjustified.
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