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2020 (9) TMI 622 - AT - Income TaxPenalty u/s 271AAB - surrender of cash and jewellery pursuant to search - HELD THAT - When the Department has not made any efforts to ascertain the year of acquisition of the jewellery and then to apply the rates as prevailing in the year of acquisition and some of the jewellery even not acquired by the assessee or the family members but is inherited, then the manner in which the disclosure is obtained on account of the jewellery would not represent the undisclosed income as defined in explanation to Section 271AAB. We find that the order of the AO u/s 271AAB. We find that the order of the AO u/s 271AAB as well as the order of the ld. CIT(A) are silent on the issue of incorrect valuation as well as the timing of acquiring of the personal jewellery of the assessee and the family members. Personal jewellery of the assessee and the family members acquired in the past and some part of which was also inherited, will not fall in the ambit of undisclosed income . Statement recorded u/s 132(4) of the Act itself would not either constitute an incriminating material or undisclosed income in the absence of any corresponding asset or entry in the seized documents representing the undisclosed income . Accordingly, the penalty levied by the AO on account of cash found and on account of unexplained jewellery stand deleted. Thus the appeal of the assessee is allowed. Therefore, while applying the principles in the case of Shri Gopal Das Sokhiya 2019 (4) TMI 1300 - ITAT JAIPUR wherein the facts were similar, we are of the considered view that penalty levied by the AO against such disclosure is not sustainable. It may be pertinent to mention that the statement recorded u/s 132(4) of the Act itself would not either constitute an incriminating material or undisclosed income in the absence of any corresponding asset or entry in the seized documents representing the undisclosed income . Penalty levied by the AO on account of cash found and on account of unexplained jewellery stand deleted. Penalty u/s 271AAB(1)(c) - advances paid by the assessee - HELD THAT - In the definition of undisclosed income where it talks about income by way of any entry in the books of account or other documents or transactions found in the course of a search under section 132 , what perhaps has been envisaged by the legislature is an inflow of funds in the hands of the assessee which has been found by way of any entry in the books of accounts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course and not vice-versa. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein such amounts may be deemed as income in absence of satisfactory explanation. No new facts or circumstances have been brought before us by the Revenue in order to controvert or rebut the lawful findings so recorded by the ld. CIT(A). - Decided against revenue.
Issues Involved:
1. Validity of the order passed under Section 271AAB of the Income Tax Act, 1961. 2. Penalty on surrender of cash and jewellery. 3. Classification of income as undisclosed income. 4. Deletion of penalty on advances. Detailed Analysis: 1. Validity of the Order Passed Under Section 271AAB: The assessee challenged the validity of the order passed under Section 271AAB, claiming it to be void ab initio. The Tribunal focused on whether the order was legally sustainable and found that the order was validly passed under the provisions of the Income Tax Act, 1961. 2. Penalty on Surrender of Cash and Jewellery: - Cash Found (?1.7 Crores): The assessee argued that the cash found was the savings of all family members over several years, disclosed during the statement recorded under Section 132(4). The Tribunal noted that the cash was found in individual rooms of family members, who had declared substantial incomes over the years. The Tribunal relied on the precedent set in the case of Shri Gopal Das Sokhiya, where it was held that past savings of family members cannot be ignored while considering the amount as undisclosed income. Consequently, the penalty levied on the cash found was deleted. - Jewellery Found (?1.5 Crores): The assessee contended that the jewellery was old, inherited, and acquired over several years, with no incriminating material suggesting it was purchased during the year under consideration. The Tribunal observed that in Indian families, jewellery often belongs to women and is received on various occasions. The department did not provide evidence that the jewellery was acquired in the year under consideration. Citing the case of Shri Gopal Das Sokhiya, the Tribunal concluded that the jewellery did not constitute undisclosed income and deleted the penalty. 3. Classification of Income as Undisclosed Income: The Tribunal examined whether the income surrendered by the assessee during the search operation could be classified as undisclosed income under Section 271AAB. The Tribunal found that the cash and jewellery did not meet the criteria for undisclosed income as defined in the Act, particularly since the department failed to establish that these assets were acquired during the specified year. Therefore, the penalties on these items were not justified. 4. Deletion of Penalty on Advances: - Advances (?4.85 Crores): The Revenue challenged the deletion of the penalty on advances given for land purchases. The Tribunal referred to the decision in Rajendra Kumar Gupta vs. DCIT, where it was held that advances do not represent undisclosed income as they signify an outflow of funds, not an inflow. The Tribunal emphasized that the definition of undisclosed income under Section 271AAB pertains to inflows of funds not recorded before the date of the search. The Tribunal upheld the CIT(A)'s decision to delete the penalty, as the advances did not qualify as undisclosed income. Conclusion: The Tribunal allowed the assessee's appeal, deleting penalties on cash and jewellery, and dismissed the Revenue's appeal regarding the penalty on advances. The Tribunal concluded that the penalties were not sustainable as the assets in question did not constitute undisclosed income under the provisions of the Income Tax Act, 1961. The judgment was pronounced on 14/09/2020.
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