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TMI Blog2015 (3) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... derived and about its substantiation, the AO was not justified in imposing penalty u/s 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting aside orders of the authorities below in this regard direct the AO to delete the penalty of ₹ 12,50,00,000/- levied u/s 271AAA of the Act. - Decided in favour of assessee. - ITA No. 337/Del/2013 - - - Dated:- 24-6-2013 - SHRI G.D. AGRAWAL AND SHRI I. C. SUDHIR, JJ. For the Appellant : Shri Ashwani Kumar, CA For the Respondent : Shri A.K. Mishra, CIT, DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER The assessee has impugned first appellate order whereby the Ld. CIT(A) has upheld the action of the Ld. Asstt. Commissioner of Income Tax in imposing penalty of ₹ 12,50,00,000/- u/s 271AAA of the Income Tax Act 1961. 2. We have heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 3. The relevant facts are that search operation u/s 132 of the Act was carried out at the premises of the assessee on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was further specified and substantiated the manner in which the undisclosed income has been earned. He submitted that the documents seized and the consequent surrender was duly accepted both with respect to the quantum and the manner in which the income had been earned. In view of the entire sequence and record of proceedings would make it undoubtedly and emphatically clear that no further doubt or question arose in the minds of the authorities at any stage to question further the manner in which the income had been earned/derived and the need for any further clarification or enquires in this regard. 5. Ld. AR submitted that section 271AAA inserted into the Income Tax Act 1961 by the Finance Act, 2007 provides that in a case where search has been initiated u/s 132 on or after 1.6.2007, the assessee shall be liable to pay by way of penalty, in addition to tax, if any payable by him, a sum computed @10% of the undisclosed income of the specified period. However the said penalty is not leviable, if an assessee in a statement recorded during the course of search admits the undisclosed income ,specified and substantiated the manner in which it has been derived and pays the taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od Kumar Jain vs. DCIT and others, ITA No. 131 to 133/CTK/2012 viii) DCIT vs. Shri Inderchand Surajmal Brothers ITA No. 139/Pune/2010 6. Ld. DR on the other hand tried to justify orders of the authorities below. He submitted that provisions u/s 271AA and u/s 271(1) are substantially different since the provision laid down u/s 271AAA are applicable in the case of search only. U/s 271AAA (2) onus lies on the assessee to specify and substantiate the manner in which undisclosed income was derived whereas no such requirement is there under the provisions of section 271(1) of the Act. He submitted that during the course of statement recorded u/s 132(4) of the Act the assessee accepted the unaccounted income but did not reply its source. In this regard, he referred contents of question Nos. 4,5 and 6 raised to the assessee while recording his statement u/s 132(4) of the Act and his answer thereto. He submitted further that the decisions relied upon by the Ld. AR having distinguishable facts and these are not helpful to the assessee. 7. In the rejoinder Ld. AR referred contents of para No. 6 of the penalty order wherein the submission of the assessee specifying the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hief Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b) specified previous year means the previous year___ (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of Section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.] 9. Thus it is clear that in a case where search has been initiated u/s 132 on or after 1.6.2007, the assessee shall be liable to pay by way of penalty in addition to tax if any payable by him the sum computed @10% of the undisclosed income of the specified previous year. However the said penalty is not leviable if an assessee in his statement recorded during the course of search u/s 132 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. The only additional requirement in the case of section 271AAA in this regard is that the assessee will also have to substantiate the manner in which the undisclosed income was derived besides specification of the manner in which such income was derived. The other difference is in the application of the provisions under both the sections. The penal provision u/s 271(1) under Explanation 5 thereto is applicable in such cases where search u/s 132 was initiated before 1.6.2007 whereas u/s 271AAA, the provisions therein are applicable in a case where search u/s 132 of the Act has been initiated on or after 1.6.2007 but before 1.7.2012. Thus the intention of the legislature is clear to this extent that in a case wherein search was initiated before 1.6.2007, provisions u/s 271(1) will be applicable and in search initiated after 1.6.2007 (but before 1.7.2012) provisions u/s 271AAA of the Act will be applicable. These provisions are thus not applicable simultaneously but these are period specific. As discussed above, the only additional requirement for non attraction of penal provision u/s 271AAA of the Act in comparison to this u/s 271(1) is that besides specifying the manner in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty would be leviable under said section.. Both these questions have been replied in affirmative in the decision of the Hon ble Allahabad High Court. As per the decision mere non statement of manner in which undisclosed was derived would not make Explanation 5 (2) to section 271(1) inapplicable. Similarly in a case manner in which income has been derived has not been stated in statement u/s 132(4) but is stated subsequently that amounts to compliance with Explanation 5 (2) to section 271(1) and no penalty would be leviable. Similarly in the case of CIT vs. Mahendra G. Shah before the Hon ble Gujarat High Court the basic requirement for immunity form the levy of penalty under Explanation 5 to section 271(1) of the Act has been discussed as per which the first requirement is disclosure in statement made u/s 132(4) and payment of tax before the assessment was completed. Following ratio laid down in this decision of Hon ble Gujarat High Court, Pune Bench of the Tribunal in the case of DCIT vs. Shri Inderchand Surajmal Bothra (supra) wherein penalty u/s 271(1) was levied held that it is not required to specify the manner in which the income was earned in respect of the amount offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 1961 unless the authorized officer puts 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) to Section 271 (1) (C) of the Act. It was further held that in case there is nothing to the contrary in the statement recorded u/s 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. It was thus held that much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in absence of anything to the contrary. Therefore, mere non statement of the manner in which such income was derived would not make E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded it was inadvertently mentioned as Bhushan Energy Ltd.) which was also declared as additional income for the asstt. year 2010-11 while making a statement u/s 132(4) of the Act. As per the said statement the assessee had admitted that he had entered into various forward/speculative and property transaction during the period from 1.4.2009 to 4.3.2010. Keeping in view the same an income of ₹ 125 crores arising out of the said transactions was declared in the statement recorded during the course of search which included the said amount as undisclosed. Subsequently the taxes due thereon were also paid and the same income declared in the return of income filed for the assessment year 2010-11 was also accepted by the Department. 14. On having gone through the query raised while recording the statement of assessee u/s 132(4) of the Act, we find substance in the contention of the Ld. AR that nowhere the authorized officer has asked a specific question with regard to the manner in which the undisclosed income has been derived. The relevant questions are question Nos. 4,5,6 and 7. For a ready reference these questions and reply by the assesee thereto are being reproduced hereunde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your attention towards anneuxre-A-3 at page NO-4 found from your residence. Please explain to whom this paper belongs and under whose hand writing this has been written. Please go through the same and explain the content thereof? Ans. Yes, I accept that this sheet of paper belongs to me, I own this paper and all the contents of this paper have been written by me only. The notings on the paper depicts the fact that I had advanced an amount of ₹ 3.0 cr on 9.6.2009 for the purpose of purchase of property at Q1- A, Hauz Khias Enclave, New Delhi. In respect of this amount I hereby state that this amount is my unaccounted income not offered for taxation for the current financial year. On the basis of my reply to questions numbers 5, 6 and 7 I reiterate to have accepted a total amount of ₹ 90Cr (Rupees Ninety crores only) to be my unaccounted income for the current financial year, which I hereby offer for taxation. 15. We find further that vide its reply dated 03.6.2010, addressed to the Asstt. Director of Income Tax (Investigation) and dated 25/7/2011, 8/6/2012 and 20/6/2012 to the Asstt. Commissioner of Income Tax the assessee has tried to explain the undisclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y 2010-11. 16. In view of above facts of the present case where from it is evident that during the course of search proceedings the authorized officer of the department had not raised any specific query regarding the manner in which the undisclosed income has been derived and on the contrary the assessee has tried to explain the earning of the undisclosed income in question in its reply during the course of recording of his statement u/s 132(4) of the Act and thereafter. We thus respectfully following the ratio of above cited decisions of Hon ble Allahabad High Court and Hon ble Gujarat High Court hold that in absence of query raised by the authorized officer during the course of recording of statement u/s 132 (4) about the manner in which the undisclosed income has been derived and about its substantiation, the AO was not justified in imposing penalty u/s 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting aside orders of the authorities below in this regard direct the AO to delete the penalty of ₹ 12,50,00,000/- levied u/s 271AAA of the Act. The ground is according ..... X X X X Extracts X X X X X X X X Extracts X X X X
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