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2015 (3) TMI 797 - AT - Income TaxPenalty imposed by AO u/s 271AA - surrender of ₹ 50 crores, as the assessee had not substantiated the manner in which the undisclosed income was derived with any corroborative evidence - CIT(A) deleted penalty levy - Held that - Assessee replied all the questions of revenue authorities in the statement recorded on 4.3.2010 u/s 132(4) of the Act. We further note that during the assessment proceedings, the assessee in his reply dated 25.7.2011, further submitted details of the surrendered income of ₹ 50 crore and submitted that he had entered into various speculative transactions and also transaction related to properties during the period from 1.4.2009 to 4.3.2010 i.e. FY 2009-10 relevant to AY 2010-11 and the said transactions were carried out in an unrecognised manner and neither any accounting records nor any documentary evidence/support in respect of these transactions/activities carried out by the assessee were maintained. Under these facts and circumstances of the case and in the light of decision of ITAT Delhi E Bench in the case of Neeraj Singal 2013 (6) TMI 762 - ITAT DELHI , we are of the opinion that the present case is squarely covered in favour of the assessee by the decisions of of CIT vs Radha Kishan Goel (2005 (4) TMI 47 - ALLAHABAD High Court ), by the decision of Hon ble Gujarat High Court in the case of CIT vs Mahendra C. Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) in favour of the assessee and hold that in absence of specific query raised by the authorised officer during the course of recording of statement u/s 132(4) of the Act about the manner in which undisclosed income has been derived and AO was not justified in imposing penalty u/s 271AAA of the Act. We also notice a peculiar fact of the present case that during the course of assessment, replying to the query of the AO, the assessee vide his reply dated 25.7.2011, as reproduced hereinabove, explained the manner in which the undisclosed income has been derived which cannot be ignored. Therefore, we reach to a logical conclusion that the CIT(A) was right in granting relief for the assessee in deleting the penalty and we are unable to see any controversy or any other valid reason to interfere with the same - Decided in favor of assessee.
Issues Involved:
1. Deletion of penalty imposed under Section 271AAA of the Income Tax Act. 2. Substantiation of undisclosed income and its manner of derivation. Issue-wise Detailed Analysis: 1. Deletion of Penalty Imposed under Section 271AAA: The appeal was filed by the revenue against the order of the CIT(A)-I, New Delhi, which deleted the penalty of Rs. 5 crores imposed by the AO under Section 271AAA of the Income Tax Act. The penalty was related to the surrender of Rs. 50 crores of undisclosed income by the assessee during a search and seizure operation conducted on 3.3.2010. The AO imposed the penalty on the grounds that the assessee had not specified or substantiated the manner in which the undisclosed income was earned. The CIT(A) deleted the penalty by relying on the ITAT Delhi Bench's decision in the case of Neerat Singal vs ACIT, which was upheld by the Tribunal. 2. Substantiation of Undisclosed Income and its Manner of Derivation: The revenue argued that the CIT(A) erred in deleting the penalty as the assessee had not provided corroborative evidence to substantiate the manner in which the undisclosed income was derived. The assessee, on the other hand, contended that similar facts and circumstances were considered in the case of Neerat Singal, where relief was granted. The Tribunal noted that the CIT(A) had followed its own decision in the case of Neerat Singal, which was upheld by the ITAT. The Tribunal compared Explanation 5 to Section 271(1)(c) of the Act with Section 271AAA and found similarities, particularly regarding the conditions for non-attraction of penal provisions. Both sections require the assessee to admit the undisclosed income, specify and substantiate the manner in which it was derived, and pay the due tax and interest. The Tribunal observed that the additional requirement under Section 271AAA is the substantiation of the manner in which the income was derived. The Tribunal referred to several judicial precedents, including the Supreme Court's decision in ACIT vs. GEBILAL Kanhialal (HUF) and the Allahabad High Court's decision in CIT vs. Radha Kishan Goel, which held that mere non-statement of the manner in which undisclosed income was derived would not make the provisions inapplicable. The Tribunal also noted that the Gujarat High Court in CIT vs. Mahendra G. Shah held that if the income is declared and tax paid, substantial compliance with the provisions is achieved. In the present case, during the search, the assessee admitted to undisclosed income and specified the manner in which it was derived. The assessee also paid the due taxes. The Tribunal found that the authorized officer did not ask specific questions regarding the manner of derivation during the recording of the statement under Section 132(4). The assessee later explained the manner of earning the undisclosed income in his replies during the assessment proceedings. The Tribunal concluded that in the absence of specific queries by the authorized officer about the manner in which the undisclosed income was derived, the AO was not justified in imposing the penalty under Section 271AAA. The Tribunal upheld the CIT(A)'s decision to delete the penalty, finding no valid reason to interfere with it. Conclusion: The appeal of the revenue was dismissed, and the order pronounced in the open court on 09.03.2015 confirmed the deletion of the penalty imposed under Section 271AAA, as the assessee had substantially complied with the requirements by admitting the undisclosed income, specifying the manner of derivation, and paying the due taxes.
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