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TMI Blog2018 (3) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... she did not specify how she derived that income and what head it fell in (rent, capital gain, professional or business income out of money lending, source of the money etc). Unless such facts are mentioned with some specificity, it cannot be said that the assessee has fulfilled the requirement that she, in her statement (u/s 132 (4)) “substantiates the manner in which the undisclosed income was derived”. Such being the case, this court is of opinion that the lower appellate authorities misdirected themselves in holding that the conditions in Section 271AAA (2) were satisfied by the assessee. - Decided in favour of revenue. - ITA 672/2016 - - - Dated:- 12-3-2018 - MR. S. RAVINDRA BHAT AND MR. A.K. CHAWLA JJ. Appellant Through: Mr. Rahul Chaudhary, Sr. Standing Counsel with Mr. Sanjay Kumar, Jr. Standing Counsel. Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mrs. Kavita Jha and Ms. Devika Jain, S. RAVINDRA BHAT, J. 1. The question of law in the present appeal by the revenue, framed in this case reads as follows: Did the ITAT fall into error in deleting the penalty under Section 271AAA of ₹ 20,000,000/- added pursuant to search in the overa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted on 3.3.2010. Therefore, the law applicable is as per Column C in the table given in para 3.3 above. The AO has held in this case that the appellant has not substantiated the manner in which the undisclosed income was derived to the extent of ₹ 90,00,00,000/- and has also failed to disclose the sum of ₹ 35,00,00,000/- in the statement recorded u/s. 132(4). The AO, therefore, imposed penalty @ 10 % on the entire amount of ₹ 125,00,00,000/-. What would constitute substantiates in section 271AAAi(2)(ii) is nowhere indicated and this word itself is not defined anywhere in the Act. The law provides that where a word is not defined, the ordinary and common sense meaning of the word is to be construed. The word 'substantiate' is defined as to provide evidence to support or prove the truth of in the Oxford dictionary (source Internet). In the present case, admittedly, the undisclosed income was on the basis of documents seized during the course of search. On the basis of the seized documents (primary evidence in the case), the advances outstanding to the appellant from various persons as on 31.1.2010 was found to be ₹ 69 crore and in another docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 3.5. The appellant and Sh. Neeraj Singal belong to the same group of cases, and the facts in the two cases are the same. After pronouncement of the above cited ruling by the Hon'ble ITAT, I am bound by the ruling. The appeal is, therefore, allowed and penalty imposed is cancelled. 4. The ITAT affirmed the reasoning of the CIT (A) after noticing that its previous order in Neeraj Singal s case too had affirmed that appellate authority s order, in regard to interpretation of Section 271AAA and the grant of relief. 5. The revenue argues that the interpretation adopted and repeated mechanically by the ITAT- at least in this case, is contrary to the express intent of the provision, which clearly requires that the assessee should not only admits the undisclosed income and specifies the manner in which such income has been derived or substantiates the manner in which the undisclosed income was obtained. Here, the assessee did not in any manner specify the income, its sources or particulars required o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of clause (c) of subsection (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation .-For the purposes of this section,- (a) undisclosed income means- (i) any income of the 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 maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132, which has not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or which has otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the 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. 68.3 For the purposes of this section, specified previous year has been defined, so as to mean 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. 68.4 An appeal to the Commissioner against levy of penalty under the proposed new section 271AAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een acquired by him by utilizing, wholly or partly, his income for any previous year which has ended before the date of search or which is to end on or after the date of search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed particulars of his income for the purpose of imposition of penalty, but there are exceptions to such deeming provision or to such a presumption of concealment. The Court then said: It provides that where, in the course of search under Section 132, the assessee is found to be the owner of unaccounted assets and the assessee claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous year which has ended before the date of search or which is to end on or after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purposes of imposition of penalty under Section 271(1)(c). The only exceptions to such a deeming provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 132(4). For the above reasons, we hold that the assessee was entitled to immunity under Clause (2) of Expln. 5 to Section 271(1)(c). 12. Like in that case, the first condition under Section 271AAA is that the assessee must make a statement under Section 132(4) in the course of search stating that the 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 the return of income to be furnished before expiry of time specified in Section 139(1). The second condition for availing of the immunity from penalty under Section 271(1)(c) is that the assessee should specify, in his statement under Section 132(4), the manner in which such income stood derived. The revenue contended Gebilal Kanhailal that though the second condition stood satisfied, the third condition was not sought. It urged that the assessee was not entitled to immunity under Clause (2) as he did not satisfy the third condition for availing the benefit of waiver of penalty under Section 271(1)(c) as he failed to file his return of income on 31st July, 1987 and pay tax thereon particularly when the assessee conceded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts disclosed during the course of search, the penalty amount is only ten percent of the undisclosed income. Parliament has, therefore, given a different treatment to the latter category. At the same time, if an assessee were to successfully urge the escape route so to say, of Section 271AAA (2), all three conditions mentioned in the provision, (as held in Gebilal Kanhailal in respect of pari material provisions) have to necessarily be fulfilled. In the preset case, the assessee, while declaring the undisclosed income also stated, that the surrender is being made subject to no penal action of Section 271 (1) (c) . 15. While dealing with a case of similar surrender- but made in the course of survey proceedings, by an assessee (which led to imposition of penalty), the Supreme Court, in Mak Data (P) Ltd v Commissioner of Income Tax 358 ITR 539 (SC) held as follows: 7. The AO, in our view, shall not be carried away by the plea of the assessee like voluntary disclosure , buy peace , avoid litigation , amicable settlement , etc. to explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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