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TMI Blog2016 (4) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence, no penalty can be levied u/s 271AAA of the Act. On perusal of the facts available on record, it was clear that the assessee has paid the entire self assessment tax admitted in the revised return before initiation of penalty proceedings u/s 271AAA of the Act. Though assessee has not paid the total taxes along with revised return of income, it has explained the reasons for non-payment of taxes before completion of assessment, however, has paid the total taxes before initiation of penalty u/s 271AAA of the Act. Therefore, in our opinion, the assessee has fulfilled the clause (iii) of sub section (2) of section 271AAA of the Act, hence, no penalty can be levied u/s 271AAA of the Act as held by the Hon’ble Supreme Court in the case of ACIT Vs. Gebilal Kanhaialal (HUF) (2012 (9) TMI 297 - SUPREME COURT ). - Decided in favour of assessee - I.T.A.No.738/Vizag/2013, C.O. No.12/Vizag/2014 - - - Dated:- 18-3-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M.N. Murthy Naik,DR For The Respondent : Shri G.V.N. Hari, AR ORDER PER V. DURGA RAO, Judicial Member: This appeal filed by the revenue an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original return. 4. The A.O. issued a show cause notice u/s 271AAA of the Act and asked to explain why penalty shall not be levied for additional undisclosed income disclosed during the course of search. In response to show cause notice, the assessee has filed written submission on 26.10.2010 and contended that no penalty can be levied u/s 271AAA of the Act, as the conditions stipulated under provisions of section 271AAA(1) (2) of the Act have not been fulfilled. The assessee further submitted that it had admitted the undisclosed income during the course of search and also filed revised return disclosing the undisclosed income admitted during the course of search. The A.O. has determined slightly higher total income over and above the returned undisclosed income and the difference is on account of difference in closing stock valuation of ₹ 11,65,418/-, which is not a deliberate concealment of income. Therefore, sub section 1 of section 271AAA of the Act has no application. Similarly, the assessee submitted that it has admitted the undisclosed income during the course of search in the statement u/s 132(4), explained the manner in which such income has been derived, substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it has taken the Xerox copies of the seized books of accounts and other relevant materials and in response to statutory notice, it has filed the revised return and disclosed the undisclosed income admitted in the statement recorded u/s 132(4) of the Act. The assessee further submitted that there was no default on its part in disclosing the additional income as per the seized material. It was further submitted that it had explained the manner in which the undisclosed income was derived and also paid the taxes before initiation of penalty proceedings u/s 271AAA of the Act. The assessee further submitted that sec. 271AAA of the Act does not prescribe any upper time limit for payment of taxes, for which it has placed reliance in the decision of Hon ble Supreme Court in ACIT Vs. Gebilal Kanhaialal (HUF) (2012) 348 ITR 561 (SC). 7. The CIT(A) after considering the submission of assessee, deleted the penalty levied u/s 271AAA(1) of the Act. The CIT(A) held that the only difference as regards the quantum of undisclosed income was the difference in closing stock value ofRs.11,65,418/-. The assessee has explained the reasons for difference in closing stock valuation. However, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have held that initiation of penalty proceedings u/s 271AAA of the Act at a later stage subsequent to receipt of order of ITAT in quantum appeal is not in accordance with law. The A.R. further submitted that the A.O. was not justified in levying penalty u/s 271AAA of the Act, even for the reason that the A.O. has already examined the case u/s 271(1)(c) of the Act for the very same concealment of income alleged by him. Therefore, requested to uphold the order of CIT(A). 10. We have heard both the parties and perused the materials available on record. The factual matrix of the case is that a search and seizure operation u/s 132 of the Act was conducted on 30.1.2008. During the course of search, suppression of sales was detected and which was admitted by the assessee. The assessee has given a statement u/s 132(4) of the Act and disclosed undisclosed income of ₹ 3 crores at the time of search. Subsequently, the case has been notified and accordingly, statutory notice was issued. In response to notice, the assessee has filed revised return and disclosed undisclosed income admitted during the course of search. The assessment was completed u/s 143(3) of the Act on 31.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income has been derived (ii) substantiates the manner in which the undisclosed income was derived and (iii) shall pay tax together with interest, if any in respect of the undisclosed income. If all the three conditions are fulfilled, then the provisions of sub section (1) of section 271AAA of the Act, shall have no application. In the present case on hand, on perusal of the facts, we find that the assessee has admitted the undisclosed income at the time of search, while recording the statement u/s 132(4) of the Act. The assessee has explained the manner in which such undisclosed income has been derived. It was the explanation of the assessee that the undisclosed income was derived because of suppression of sales turnover relates to his business. The assessee further explained that the suppressed sale was on account of sale of flats, which were not disclosed in the regular books of accounts. The assessee explained the undisclosed income even at the time of search while recording statement u/s 132(4) of the Act and also explained before the A.O. at the time of assessment, which was evident from para-5 and 5.1 of the assessment order. Therefore, in our considered opinion, clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r date of search, he shall be deemed to have concealed the particulars of his income for the purposes of imposition of penalty u/s 271(1)(c) Only exceptions to such a deeming provision or to such a presumption of concealment are given In sub-clauses (1) and (2) of Explanation 5 Three conditions have got to be satisfied by assessee, for claiming immunity from payment of penalty under cl (2) of Expl. 5 to S. 271(1)(c), i.e. Condition No 1 Assessee must make a statement u/s 132(4) in course of search stating that unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in return of income to be furnished before expiry of time specified In S 139(1), such statement was made by Karta during search which concluded on August 1, 1987 condition No .1 was fulfilled. Condition No. 2. Assessee should specify, in his statement u/s. 132(4), manner in - which such income stood derived Condition No 2 also satisfied. Condition No 3 Assessee had to pay tax together with interest, if any, In respect of such undisclosed income However, as no time limit for payment of such tax stood -prescribed under cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings or presumptions of furnishing of inaccurate particulars, provides that in respect of unaccounted income in the cases where search is initiated after 1st June, 2007, the assessee is to pay a penalty @ 10 per cent of unaccounted income. Sub-s. (2) of s. 271AAA, however, relaxes, the rigour of this penalty provision in a situation in which assessee (i) in the course of the search, in a statement under s. 132(4), 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. While payment of taxes, along with Interest, by the assessee is one of the conditions precedent for availing the immunity under s 271AAA(2), there is no time-limit set out for such payments by the assessee. Once a time-limit for payment of tax and interest has not been set out by the statute, it cannot indeed be open to the AO to read such a time-limit into the scheme of the section or to infer one. There is thus no legally sustainable basis for the stand of the AO that in a situation in which due tax and int ..... 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