9911796707
TMI Blog2015 (7) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the falsity of claim of transportation charges paid to Sampoorna Logistics was found in the course of search. According to us the said expenditure cannot be held to be undisclosed income of the assessee for the purpose of levying penalty u/s. 271AAA of the Act. Penalty cannot be levied merely on the admission of the assessee and there must be some conclusive evidence before the AO that entry made in the seized documents, represents undisclosed income of the assessee. In the instant case, in respect to the amount of 1,13,65,623/-, there is no evidence which proves that the entries recorded in the documents found during the course of search is over and above the income as declared by the assessee at 6.84 crores as undisclosed income and accepted by Revenue. In view of the above, we delete the penalty and allow the appeal of the assessee. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 6.84 crores. This disclosure was explained by assessee by filing detailed working and manner of earning of the above income. The AO considered the disclosure and accepted the disclosure of ₹ 6.84 crores by observing as under:- "Disclosure: During the course of operation u/s. 132(4) of I.T act 1961, the assessee vide its disclosure petition dated 11.04.2008 had disclosed an amount of ₹ 6.84 crores as net undisclosed income which is as under:- '1) Assessee was confronted with Page no. 1 to 5 of AS/1 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s. S.P.S. Steel & Power Ltd. stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores in which unaccounted cash expenses of ₹ 1,77,60,565/- is being taken as unaccounted cash expenses for purchase of imported scrap as worked out from various entries of Page 1 to 5. 2) Assessee was confronted with Page no. 1 to 15 of AS/2 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 34,00,000/- is being taken as undisclosed cash income as worked out from various entries of Page 26. 8) Assessee was confronted with Page no. 27 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 1,06,932/- is taken as undisclosed miscellaneous expenditure as worked out from various entries of Page 27. 9) Assessee was confronted with page no 28 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ld is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 24,62,114/- is being taken as undisclosed trading profit as worked out from various sentries of Page 28. 10) Assessee was confronted with Page no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confronted with Page no. 11 & 12 SPSG/13 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ld is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 25,41,155/- is being taken as undisclosed miscellaneous expenditure as worked out from various entries of Page 121 & 12. 16) Assessee was confronted with Page no. 2 of UKS/1 found from the residential premises of Sri Uttam Kumar Sarawagi. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 1,22,53,900/- is being taken as undisclosed trading profit as worked out from various entries of Page 2. 17) Assessee was confronted with Page no. 21 of UKS/1 found from the residential premises of Sri Uttam Kumar Sarawgi. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has disclosed an amount of ₹ 6.84 crores being its undisclosed income during the course of search. This was duly taken into return filed thereafter. Tax was also paid. Assessee has also specified the manner in which this income was earned as per submission of disclosure of income dated 10.04.2008 before DDIT (Investigation) Unit 1(4), Kolkata. However, assessee was specifically asked to substantiate the manner in which this income was earned. During penalty proceedings assessee was given the opportunity to substantiate the manner of earning this income as mentioned above. In this regard assessee has failed to provide any corroborative evidence whatsoever with regard to disclosed income (as stated in the disclosure working submitted before the Department dated 10.04.2008) amounting to ₹ 6.84 crores which can be taken as substantiation of above specified manner of income. Though assessee has incorporated this amount as undisclosed income for the AY 2008-09, there is no substantiation other than mere admission. Therefore, it can be said that assessee has not been able to satisfy the condition laid down by Sec 271AAA(2)(ii). (b) Further, an addition of ₹ 1,13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- 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 as the tax, together with interest, if any, in respect of the undisclosed income. From the plain reading of the above 271AAA of the Act, it is apparent that if the condition laid down in subsection (2) of section 271AAA is satisfied no Penalty will be imposed. In the case under consideration the assessee declared the undisclosed income of ₹ 6,84,00,000/-. Tax on the undisclosed income was also duly paid. Further the detail working and calculation of the above undisclosed income was also duly filed. On perusal of the same, it is apparent that, the assessee with reference to the seized record has worked out total receipt of ₹ 10,31,22,703/- and corresponding expenses of ₹ 3,47,22,703/- and accordingly undisclosed of ₹ 6,84,00,000/- has been calculated. The AO has not disputed the above disclosure and assessment has been completed accordingly. Hence it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order as is reproduced in above para-2, and also included in the same in the return of income and paid taxes. The AO has not disputed the above disclosure as each and every entry has been explained by the assessee with narrations stating the manner in which this income was earned by assessee. Hence, in this case it cannot be said that the assessee has not specified the manner in which the undisclosed income has been earned because the papers found during the course of search relates to the business of the assessee or debtors relating to business of the assessee. It is clear from the above that the undisclosed income was earned mainly by virtue of trading activities and income from other sources. This has not been disputed by the AO during the course of scrutiny assessment and accepted the same as it is. In this regard, we have gone to the provision of Sec. 292C of the Act which reads as under:- "292[(1)] Where any books of accounts, other documents, money, bullion, jewellery or other valuable articles or thing are or is found in the possession or control of any person in the course of a search under section 132 [or survey under section 133A], it may, in any proceeding under this A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. According to AO, this undisclosed income was merely detection by the Revenue. The assessee before us explained in respect to the payment of ₹ 15,77,307/- which is recorded in page No. 23 of seized document UKS1. According to AO, the assessee has recorded a sum of ₹ 1,54,620/- in its disclosure petition and the balance ₹ 14,22,687/- was not disclosed. It was explained that as per the disclosure petition the assessee had shown an income of ₹ 1,54,620/- with reference to page No. 23 of the seized document UKS1. In arriving at such profits, payment of ₹ 55 lakhs has been considered. Thus, the allegation of the AO that a sum of ₹ 1,54,620/- was only disclosed is completely contrary to the facts of the case. The assessee alternatively argued that the aforesaid payments of ₹ 14,22,687/- were not considered in the disclosure petition, then in that case said payment should reduce the income voluntarily disclosed by the assessee during the course of search i.e. ₹ 6.84 crores. The said income was represented by cash disclosed in the balance sheet of the assessee and as accepted by the AO. Ld. counsel for the assessee before us drew us the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 15 lakh was received back in cash on account of discounts offered by the transporter and accordingly expenses to the tune of ₹ 15 lakh recorded in the books are bogus. He contended that Shri Bipin Vohra, Chairman of the assessee company in his statement obtained in course of search accepted the said allegation. Reliance was also placed on page no. 7 of SPSG/2 and page No. 28 of SPSG/3. Ld counsel explained firstly to the seized documents relied upon by the AO and page No. 7 of SPSG/2 shows the details of cheques issued to various parties. Further, page No. 28 of SPSG/3 shows withdrawal of ₹ 6.50 lakh from bank account of the assessee. The said document is the evidence of payment made to Sampoorna Logistics in cheque as transportation charges. They nowhere suggest cash receipt by the assessee. Hence, no addition can be made based on the said documents. Ld. counsel explained the statement of Shri Bipni Vohra, Chairman of the assessee-company, obtained in course of search, and clarified that his statement was recorded by the search party under duress and coercion. Thus, the statement made in course of search does not have much evidentiary value unless it is cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. He explained that the said document is a dumb document since it is does not specify the period to which it pertains. Thus, it is not possible to trace out as to which set of transactions cumulate to the figures reflected in the page. Further, the seized document nowhere mentions any basis for deciphering the figures recorded in the said document. Thus, the AO was not justified in presuming that the figures in the seized document were in lakhs. Now, since the document is a dumb document no addition could have been made on that basis as already discussed in para 4.4 above. Moreover, the seized document does not constitute books of accounts of the assessee. It is merely a loose sheet of paper, which has no intrinsic value. Attention in this regard is invited to the definition of books of accounts u/s. 2(12A) of the Act: "Books or books of accounts" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc. Tape or any other form of electro-magnetic data storage device;" Thus from the above, according to Ld. counsel of assessee it is clear that books of accounts include le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer through investigations and correlations with other material found either during the course of the search or on investigations. The document was bereft of necessary details about the year of transaction, ownership, nature of transaction, necessary code for deciphering the figu9res. The Assessing Officer presumed that the transaction belonged to the financial year 1988-89 relevant to the assessment year 1989-90, that the figures mentioned in the document were advances made by the assessee, that the transactions belonged to the assessee, and that the transactions were in a code of lakhs and that the unit was the rupee. The Assessing Officer did not carry out any enquiry either during the course of search or during the course of assessment proceedings to find out the nature of transactions and the period in which those transactions were carried out; he had simply presumed that the figures were advances without there being any material on record to support such presumption. The Assessing Officer had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions." In this case also the assessee has explained firstly that the payment of ₹ 55 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts 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 accounts or other documents maintained in the normal course relating to such previous year; or (B) Otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search ; or" From the above, it is clear that undisclosed income means "any income represented by any documents" found during the course of search, which are not recorded in the books of accounts of the assessee. In the instant case, the additions of cash expenses and payments of ₹ 71,90,623/- is the result of cash available out of the disclosed cash of ₹ 6.84 crores which was included in the disclosure petition. Further, addition of ₹ 15 lakh on account of alleged cash receipts from Sampoorna Logistics, which was alleged to be reimbursement, it is clear that expenditure recorded in the books of accounts can be held to be undisclosed income of the assessee if the said expenditure is found to be false. It is the Department on whom, onus of proving that expenditure recorded in the books is bogus or fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipso facto inferred that the penal provisions of section 271(1)© are attracted. In order to apply the penal provisions of section 271(1)© it is to be necessarily inferred that there is positive act of concealment of income or furnishing of inaccurate particulars of such income by the assessee." It is further held that "The Department had simply rested its conclusion on the act of the assessee of having offered additional income in the return filed in response to notice under section 148 of the Act. As noted earlier, the additional income so offered by the assessee was done in good faith and, therefore, in our view, penalty under section 271(1)© of the Act could not be levied." Further Hon'ble Bombay High Court in case of CIT vs. Haji Gaffar Haji Dada Chini 169 ITR 033 (Bom) held that:- "on the facts of the case, the Tribunal had taken a possible view on the question before it and, therefore, there was no reason to interfere with its conclusion that the letter addressed by the assessee to the Income-tax Officer offering credits in respect of hundi loans for assessment and also stating that the penalty under section 271(1)© of the Income-tax Act, 1961, m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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