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TMI Blog2014 (10) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... /proving anything wrong on record in relation to the additional income. Hence, the penalty levied is uncalled and without any basis. 3. That on the facts and the circumstances of the case and in law, the ld.CIT(A) failed to consider and deliver on ground no. 3 which is as follows: a) That on the facts and circumstances of the case the appellant has to specify and substantiates the manner of deriving the undisclosed income only at the time of statement recorded u/s 132(4) and not otherwise as mentioned by the AO in his order; b) That on the facts and circumstances of the case, the entire recording of oath statement did not provide any opportunity to the appellant to specifies and substantiate the manner in which such income was derived; c) That on the facts and circumstances of the case, it is the duty of the oath administrator to put questions in appropriate form, inform the utility and usefulness of the statement recorded and disclosure of facts vis-à-vis to the Income Tax Act, 1961. d) That on the facts and circumstances of the case, the appellant has deemed to fulfill all the 4 necessary conditions on which penalty cannot be levied. Hence, action of the AO is not jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy could derived the meaning of "SOURCE OF ACQUISITION OF JEWELLERY' in parallel to the words" SPECIFY THE MANNER IN WHICH YOU HAVE DERIVED THE INCOME". The words have different meaning in different context. In any case "acquisition of jewellery" cannot be equated with "manner of deriving of the income. The true disclosure of the additional income by the assessee is being defeated due to wrong questions or non putting of questions by the oath administrator. It seems that he himself was not aware of the section 271AAA as the provisions were newly introduced in the Income Tax Act with effect from 1st June, 2007. When the assessee was ready to disclose and pay taxes on the entire amount of undeclared income and stated that "I shall not be troubled or penalized for the surrendered income" then question of specifying the manner in which such income was derived does not arise at all. If at all, assessee was explained the benefit of manner of deriving of such income or put question at the time of oath then assessee would have certainly disclosed and substantiate the same. When assessee had paid the advance cheques of taxes then there is not question of hiding the information which is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain the source of acquisition of the jewellery stated to have been purchased by me and same may be placed treated as additional income for the year. A plain reading of sec. 271AAA holds the assessee liable for penalty unless the assessee fulfills the following conditions i. In the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; ii. Substantiates the manner in which the undisclosed income was derived; and iii. Pays the tax, together with interest, if any, in respect of the undisclosed income. The argument of the AR that income related to FY 2007-08 cannot be termed as undisclosed income on the date of search i.e. 29.08.2007 is devoid of merit in the light of above provision that disclosure is not enough but the appellant has to specify the manner in which income has been earned and also substantiate the manner in which undisclosed income was derived. These two elements were neither stated before the AO nor at the appellant stage. In view of the above, I find that the appellant had failed to comply with the provisions of the section 271AAA to get immunity ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted that during the course of search and seizure operation the statement of Smt. Sudha Gupta, the assessee was recorded on oath in which she was asked to explain the source of jewellery, vide question no. 14 & 15 of her statement but replying to question no. 15 the assessee told that she cannot explain the source of acquisition of jewellery stated to have been purchased by her, therefore, the AO was justified in levying penalty on failure of the assessee fulfilling the required conditions as stipulated u/s 271AAA of the Act. The DR supported the orders of the authorities below and submitted that the appeal of the assessee is devoid of merits. 8. On a careful consideration of above submissions and contentions of both the parties, we are of the view that admittedly, the assessee surrendered Rs. 20 lakh during search and seizure operation conducted on 28/09/2007 and the department treated the same as income from undisclosed sources. 9. Now as per provisions of section 271AAA of the Act the assessee is liable for penalty unless the assessee fulfills the following conditions: i. "In the course of the search, in a statement under sub-section (4) of section 132, admits the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce jewellery of Rs. 20 lacs was purchased by me. Q. No. 15 Please explain the source of acquisition of jewellery stated to have been purchased by you. Ans. I cannot explain the source of acquisition of the jewellery stated to have been purchased by me. The same may please be treated as my additional income for the year, which has been spent on the purchase of the jewellery and the reference." 13. In written submissions filed by the assessee at page 9 following explanation have been offered for our consideration: "It is my humble submission that the assessee was denied an opportunity to come clean and to specify the manner in which such income was derived. The questions of the Oath administrator was not in appropriate form and nobody could derive the meaning of "SOURCE OF ACQUSITION OF JEWELLERY" in parallel to the words "SPECIFY THE MANNER IN WHICH YOU HAVE DERIVED THE INCOME". The words have different meaning in different context. In any case "acquisition of jewellery" cannot be equated with "manner of deriving of the Income". The true disclosure of the additional income by the assessee is being defeated due to wrong questions or non putting of questions by the Oath Administra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had replied to that. From here it implies that had this question been posed before her during recording of statement u/s 132(4) she might have replied that. The question of penalty as contained in section 271(1)(c) prior to 1.6.2007 has been decided by various High Courts. Before 1.6.2007, the penalty provisions on search and seizure were contained in section 271(1)(c) and immunity was granted to the assessee vide clause (2) of explanation 5 appended to section 271(1)(c). Provisions of clause (2) of explanation 5 appended to section 271(1)(c) are similar to immunity granted to assessee under clause (2) of section 271AAA." 15. In view of foregoing discussions we reach to a conclusion that the AO levied penalty u/s 271AAA of the Act on wrong and unjustified ground which was also confirmed by CIT(A) without any reasonable and cogent ground, hence, orders of the authorities below are not sustainable and we set aside the same by respectfully following the decision of the coordinate bench of the Tribunal in the case of Mrs. Raj Rani Gupta (supra) and AO is directed to delete the penalty. 16. In the result, appeal of the assessee is allowed on all grounds. Order pronounced in the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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