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TMI Blog2015 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, the assessee in principle has not accepted the result of such unaccounted sale which has been categorically stated by Shri Ghanshyam C. Goyal in his reply to Question No.4. As per the provisions of Explanation 5A to section 271(1)(c) penalty cannot be levied if search took place on or after 01-06-2007 and the assessee is found to be the owner of any asset such as money, bullion, jewellery or other valuables etc or owner of any income based of any entry in books of account and he claims that such entry in the books of accounts represents his income.In the instant case the income declared and accepted by the assessee in the return filed in response to notice u/s.153A as undisclosed income is actually belongs to the company and he is not the owner of such income. The Ld. Counsel for the assessee also made a statement at the Bar that the assessee has not taken any benefit out of the amount disclosed. The tax paid on such undisclosed income has gone waste as no benefit out of such income has been availed by the assessee. Therefore, we are of the considered opinion that this is not a fit case for levy of penalty u/s.271(1)(c) read with Explanation 5A - Decided in favour of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me declared in search u/s.132 . He noted that this income is in addition to the income declared originally in return of income filed u/s.139 of the I.T. Act. On being questioned by the Assessing Officer the assessee vide submission filed on 18-10-2011 has stated as under : The assessee has accepted income u/s.132 during the year though there is no such direct evidence of such sales were noticed or such sales were made by the assessee company/Director. The assessee has declared income in order to buy peace, to avoid litigation and paid the tax according honoured the declaration. The Assessing Officer therefore noted that this income declared by the assessee was resultant of search action. Had the search not taken place the assessee would not have shown this income. He therefore held that the assessee has concealed the particulars of income to the extent of ₹ 19,57,468/-. He therefore initiated penalty proceedings u/s.271(1)(c) of the I.T. Act read with Explanation 5A. 4. In response to the penalty notice the assessee submitted as under : 5.1 The assessee group has declared income during the course of search to cover all deficiencies mistakes honoured the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Reliance Petro Products Pvt. Ltd., (Supra) cited before him the Assessing Officer levied penalty of ₹ 6,58,884/- u/s.271(1)(c) of the I.T. Act being 100% of tax sought to be evaded. 6. Before CIT(A) the assessee submitted that the income of ₹ 19,57,468/- has been offered to tax in the hands of the assessee only to avoid protracted litigation and to buy peace of mind. The said income represents profit on alleged suppressed sale of Kalika Steel Alloys Pvt. Ltd., in which the assessee is a Director. Therefore, as held by the CIT(A), Aurangabad while deciding the appeals in the cases of Kalika Steel Alloys Pvt.Ltd. for A.Ys.2004-05 to 2010-11 and Kalika Steel Jalna Pvt. Ltd. for A.Ys.2006-07 to 2010-11 vide orders dated 14/05/2012, the income from manufacturing activity of the companies is to be assessed in the hands of the said companies and not in the hands of the Directors. It was further argued that the CIT(A), Aurangabad has not allowed telescoping of profit of the said companies on account of alleged suppressed sale against the same profit offered to tax in the hands of the Directors as the status of the companies and Directors are different. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unaccounted income would be as follows Sr. No. Name of company F.Y. F.Y. Amount of goods removed GP% as Undisclosed income 1 Kalika Steel Alloys Pvt.Ltd. 06-07 11185330.00 @35-3914936 11107800.00 @35-3887730 2 Kalika Steel Jalna Pvt. Ltd. 06-07 16167552.00 @15-2425133 39954004.00 @i5-5993101 56810071.00 @15-8521511 3. Giriraj Re-Rolls Pvt. Ltd. 05-06 2225850.00 @35-779048 3794717.00 @35-1328151 4 Bhoomi Re-Rolls Pvt. Ltd. 07-08 3514942 @35-1230230 TOTAL 144760566.00 28079840 I want to state tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be income of the assessee in respect of which particulars have been concealed. If the amount on which the penalty u/s 271(1)(c) has been levied is not in fact the income of the assessee, the penalty u/s 271(1)(c) cannot be levied by invoking either Explanation-1 or Explanation-5A to section 271(1)(c) of the Act. In view of the above facts and discussion, I am of the considered view that as the income of ₹ 19,57,468/- is not assessable in the hands of the appellant but is assessable in the hands of the manufacturing companies, penalty u/s 271(1)(c) is not leviable in the case of the appellant. In view of the above facts and discussion, I am of the considered view that the A.O. is not justified in levying penalty u/s 271(1)(c) on the amount of ₹ 19,57,468/-. The penalty u/s 271(1)(c) of ₹ 6,58,884/- on the amount of ₹ 19,57,468/- is, therefore, cancelled. The A.O. is directed accordingly. The appellant has also raised another contention without prejudice to above contention that the A.O. has invoked Explanation-5A for levying penalty u/s 271(1)(c) of the I.T. Act which is applicable only when the ownership of any asset such as money, bullion, jewel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of the same. Therefore, the penalty u/s.271(1)(c) of the I.T. Act is clearly attracted. He accordingly submitted that the order of the CIT(A) be reversed and that of the order of the Assessing Officer be restored. 10. The Ld. Counsel for the assessee while supporting the order of the CIT(A) drew the attention of the Bench to Question Nos. 46, 47 and 48 of the said statement and submitted that these statements are in respect of alleged clandestine removal of goods in the case of Kalika Steel Alloys Pvt. Ltd. and Kalika Steel Jalna Pvt. Ltd. Referring to the statement of Shri Ghanshyam Goyal recorded u/s.131 of the I.T. Act by the search party on 17-08- 2009, a copy of which is placed at pages 18 to 30 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply of the assessee to Question No.4 wherein the gross profit of various companies are worked out on alleged clandestine removal of goods for the F.Yrs. 2005-06, 2006-07 and 2007-08 at ₹ 2,80,79,840/-. Referring to the said statement he drew the attention of the Bench to the income declared in the respective financial years by respective individuals. Referring to Question N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .50 put by the search party and the reply thereof he submitted that no such facts existed and the assessee in his statement recorded u/s.132(4) has categorically stated that he is offering the income to buy peace of mind and to avoid protracted litigation. Relying on various decisions the Ld. Counsel for the assessee submitted that if the assessee filed return of income in response to notice u/s.153A, declared undisclosed income and the return was accepted by the Assessing Officer (except small amount of bank interest of ₹ 1,769/- which was not offered by mistake which is bonafide one since it is exempt u/s.80L which was previously there in the statute) penalty u/s.271(1)(c) of the I.T. Act cannot be levied. For the above proposition he relied on the following decisions : 1. Smt. Pramila D. Ashtekar Vs. ITO (2014) 61 SOT 113 2. Dilip Kedia Vs.ADIT (2013) 40 taxmann.com 102 3. DCIT Vs. Purti Sekhar Karkhana (2013 59 SOT 29 4. Devidas Sukhani Vs. DCIT (2013) 158 TTJ 42 5. CIT Vs. Mahendra Shah (2008) 299 ITR 305 6. CIT Vs. Kirit Dahyabhai Patel (2009) 121 ITD 159 7. CIT Vs. Shri Inderchand Surajmal Bothra ITA No.137/PN/2010 order dated 30-11-2011. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Supreme Court in the case of Mak Data P. Ltd. reported in 358 ITR 593 and submitted that the Hon ble Supreme Court has already decided the issue under such situation which is against the assessee. Therefore, the order of the CIT(A) should be reversed and that of the order of the Assessing Officer be restored. 15. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a search took place in the residential premises of different persons/associate concerns of the Kalika group of Jalna. The statement of Shri Ghanshyam C. Goyal, who is the main person of the group, was recorded u/s.132(4) of the I.T. Act in which he has declared undisclosed income of ₹ 14 crores in the name of 4 persons @ ₹ 3.5 crores each, the details of which are as under : 1 Shri Ghanshyam Chunilal Goyal Rs.3.50 Crores 2 Shri Arun Shrikishan Agrawal Rs.3.50 Crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56810071.00 @15-8521511 3 Giriraj Re-Rolls Pvt. Ltd. 05-06 2225850.00 @35-779048 3794717.00 @35-1328151 4 Bhoomi Re-Rolls Pvt. Ltd. 07-08 3514942 @35-1230230 TOTAL 144760566.00 28079840 I want to state that I am disclosing the said amounts to buy peace of mind, however in principle, I am not accepting such result unaccounted sale. The details of the same are as follows Sr.No Name of company Directors FY 05-06 FY 06-07 FY 07-08 1 Kalika Steel Alloys Pvt.Ltd. Ghanshyam G Goyal -- 1957468 1943865 Arun Agrawal -- 1957468 1943865 2 Kalika Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed income for the impugned assessment year which is a part of unaccounted sale of the companies at ₹ 2,80,79,844/- and which has been accepted by the Assessing Officer in the return of income. However, he initiated penalty proceedings u/s.271(1)(c) of the I.T. Act read with Explanation 5A and levied penalty of ₹ 6,58,884/-. We find the Ld.CIT(A) deleted the penalty holding that the profit offered to tax by the directors of the different companies including the assessee in their hands in fact belongs to the said companies which have been earned by the said companies from their manufacturing activity. Therefore, such income has to be taxed in the hands of the respective companies and not in the hands of the directors. According to the Ld.CIT(A) it is the settled proposition of law that in order to levy penalty u/s.271(1)(c) there has to be income of the assessee in respect of which particulars have been concealed. Since in the instant case it is not the income of the assessee and the income belongs to that of the respective companies, therefore, penalty u/s.271(1)(c) of the I.T. Act cannot be levied by invoking either Explanation 1 or Explanation 5A to provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income declared Penalty levied Shri Ghanshyam C. Goyal 2007-08 27,56,978/- 6,79,388/- Shri Ghanshyam C. Goyal 2008-09 32,72,017/- 11,13,338/- Shri Anil Goyal 2007-08 12,12,567/- 4,01,967/- Shri Anil Goyal 2008-09 48,25,871/- 16,67,256/- 18. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 19. After hearing both the sides, we find the facts of the above appeals are identical to the facts in ITA No.1433/PN/2013. We have already decided the issue and the order of the CIT(A) deleting the penalty has been upheld. Following the same reasoninigs, the order of the CIT(A) in the above appeals are also upheld and the grounds raised by the Revenue are dismissed. ITA No.1439/PN/2013 - Shri Gopal Ghanshyam Goyal (A.Y. 2010-11) : 20. Facts of the case, in brief, are that the assessee is an individual. A search u/s.132 of the I.T. Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income from other sources. This according to the Assessing Officer shows that the income declared was not supported by any asset on the date of search, therefore, the income declared has to be considered as not substantiated. The Assessing Officer accordingly imposed penalty of ₹ 16,35,875/- u/s.271AAA of the I.T. Act. 22. Before CIT(A) the assessee submitted that the group has declared major amount of ₹ 7,39,74,375/- in the hands of the different assessees which is as under : Name of the appellant Hundi, petty loans, sales receivable Rs. Badla income Rs. Total Rs. 1) Sunil Goyal 1,13,58,750 21,27,500 1,34,86,250 2) Nandkishor Goyal 50,00,000 - 50,00,000 3) Narendra Agrawal 1,63,88,125 21,27,500 1,85,15,625 4) Jaibhagwan Jindal 1,13,58,750 21,27,500 1,34,8 6,250 5) Banarasidas Jindal 50,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been initiated u/s 132 on or after the 1st day of June 2007, the assessee shall 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 previous year (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of 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 to Whether with interest, if any, in respect of the undisclosed income. (3) . . . . . Explanation.-For the purpose of this section,- (a) undisclosed income means (i) any income of specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has - (A) not been recorded on or before the date of search in the books of account or other documents mentioned in the normal course relating to such pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O., levy of penalty u/s 271AAA was not justified on the ground that the assessee has made disclosure but failed to specify the manner in which such income had been derived. (c) DCIT Vs. Rajendra Prasad Dokania (2012) 32 CCH 260 I Ahd.Trib.) In this case, the Hon'ble ITAT has laid down that, neither at the stage of recording the statement of the assessee nor at the stage of assessment proceedings, the assessee was asked, either by authorized officer or by the A.O., to substantiate manner in which such undisclosed income was derived. Under these circumstances, the assessee be deemed to have discharged his onus of substantiating the manner in which the undisclosed income was derived by him. 8.3 It is worth mentioning here that the Hon'ble Cuttack Bench of ITAT in the case of Pramod Kumar Jain Vs. DCIT (2012) 77 DTK 244 has laid down that the Ld. Counsel for the assessee supported the views expressed by the Tribunal in both the orders in so far as conditions for invoking the provisions of section 271AAA as noted in sub-section (2) thereof have to be considered together and not in isolation. The condition with respect to the manner specific for the purpose of invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of search, the income declared by the assessee was not represented by any asset. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the decisions of Hon'ble ITAT, Cuttack Bench, and Hon'ble ITAT, Ahmedabad Bench, the facts of which are distinguishable from the facts of the assessee's case. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that penalty u/s 271AAA could be initiated only when all three conditions together are not satisfied, which is contrary to the extant provisions of Section 271AAA of the Act, since the penalty can be imposed even if one of the conditions is not fulfilled, which renders the decision perverse on facts and in law. 5) The appellant craves leave to add, alter, modify, delete, and amend any of the grounds, as per the circumstances of the case. 6) The appellant prays leave to adduce such further evidence to substantiate its case, as the occasion may demand. 26. The Ld. Departmental Representative heavily relied on the order of the Assessing Officer. 27. The Ld. Counsel for the assessee while supporting the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that during the course of search an amount of ₹ 14 crores was declared by Shri Ghanshyam Goyal the main person of the group in the hands of 4 different persons @ ₹ 3.5 crores each, the details of which are already given at para 15 of the impugned order. In response to Question No.16 the bifurcation of the declared income was given which amounts to ₹ 14,01,61,595/-. The break-up of ₹ 6,54,35,000/- and ₹ 85,10,000/- totalling to ₹ 7,39,74,375/- has already been given at para 22 of this order. Accordingly, the assessee had declared an amount of ₹ 1,63,68,750/- as his undisclosed income being income from Hundi, petty loans, sales receivable etc. It is an undisputed fact that the assessee has paid the taxes and interest due thereon in the return filed in response to notice u/s.153A. It is the case of the revenue that assessee has not substantiated the manner in which the undisclosed income was derived and has not specified the manner in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated in the second exception while making statement under section 132(4). Even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit. 4.1 In this case, the assessee was asked to explain the entries in the 'work-in-progress sheet' and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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