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TMI Blog2018 (8) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon’ble Gujarat High Court the onus would shift on the assessee to specify the manner of earning undisclosed income and substantiation thereof only upon requisite inquiry in this regard. In the absence of any inquiry in this regard, the assessee cannot be blamed for non-satisfaction of the exit clause provide under s. 271AAA(2) of the Act. - No penalty - Decided against the revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... to Q. 9 is not recorded in our books of accounts. Ques 11: During the search at your premises, your partners' premises and various business premises of projects on 9/8/2011, many Agreements (Dastavej) and voluminous documents are found. On close examination of the same, many entries of your income and of your partners and their family members has come to notice. On examination of books of accounts found from yoiir premise, it has been found that the same is not recorded in the books. The some of the document are as under: Party Name Annex No. Pg. No. 1. Prasanna Associates Prop: Himanshu Joshi Prasanna House, Nr. PF Office, Akota Vadodara A/1 4&5 2. Sumati J. Rao B/49, Bhavani Soc., Opp. Water Tank, Karelibaug, Baroda A/2 117 to 121 3. Sumati J. Rao B/49, Bhavani Soc., Opp. Water Tank, Karelibaug, Baroda A/5 167 to 171 Examine this document and explain the same. Ans: I have closely examined the documents found at my and at my partners' residence and at other premises of our group. I have discussed these with my partners and members of the group and have taken them in confidence and state that for any omission of income in the books mode by me an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty have also been perused by me. Upon such perusal, I have noticed as under: 1) Shri Anil Bholabahai has, vide answer to question no. 11 and 12, clearly admitted undisclosed income of ₹ 35 crores for the whole group. This admission is reconfirmed at the bottom of the statement by other 15 individuals of the group, as can be seen on page 7-8 of the statement. 2) Vide answer to question 11, Shri Anil Patel has clearly stated that the admission of ₹ 35 crores is "on behalf of various firms and their partners and other related individuals", and after consultation with respective people, "who have signed this statement as a token of their consent/such consultation" 3) The Q-11 clearly suggests that the admission is based on transaction depicted in seized documents. 4) There is no further probe or query about the manner or substantiation of earning unaccounted income by the Authorized Officer. 5) The statement dated 9-10/8/2011 is further followed up by a clear cut bifurcation of the hands and assessment years in which the undisclosed income is offered, along with clear pointing out of the manner of earning the unaccounted income in respective hands. As per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment and no further query has been raised not only by the Authorized Officer but even by the AO during assessment stage, would clearly establish, ipso facto, that the onus under S. 271AAA(2) with regard to manner and substantiation has been flawlessly discharged by the appellant. Thus, it is indeed incomprehensible, as rightly pleaded by the AR, as to how the Ld. AO has come to the conclusion that the Appellant has not stated the manner of earning unaccounted income. The Assessing Officer has not even found or referred to any loose papers which contradict the statement given or income returned by the appellant. Rather, the assessment is exclusively based on the acceptance of return filed by the appellant, without raising any doubt, conditionality or contradiction with regard to such acceptance, which in turn is based on statement u/s 132(4). The Investigating Officer/ Authorized Officer had not asked any specific question regarding the manner of deriving additional income or substantiating the same. Even the Ld. Assessing Officer had put no further queries before initiating the proceedings u/s 271AAA. The Ld. AR is therefore right in contending that the observation of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablishes that compliance satisfactory to the Investigating Officer has been made by the appellant. Thereafter, once the appellant has filed the return honoring his commitment fully, and "thus which has also been accepted during assessment without any modification to returned income, the Ld. AO's insistence during penalty proceedings for "stating the manner and substantiating the same" is simply superfluous and uncalled for in the circumstances, in the face of clear-cut disclosure of manner of earning and/or purpose of "disclosure" by the appellant, and also in light of Mahendra C. Shah (supra). Such insistence of the AO and "non-compliance thereto" by the appellant pleading "sufficient compliance", cannot culminate into levy of penalty u/s 271AAA. The word 'substantiate' used in clause (ii) of sub-section (2) of Section 271AAA has to be understood only in the sense in which it has been explained by the Hon'ble Gujarat High Court in case of Mahendra C. Shah, [2008] 172 TAXMAN 58 (GUJ. ), which has further been followed in subsequent ITAT decisions in the context of immunity condition 271AAA(2), to the effect that once the income admitted is offered urith due payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income and the tax thereof duly paid, penalty cannot be levied, specifically, in the absence of any question in this respect by the AO. At this juncture, we must admit that the reasons pointed out by the learned CIT(A) are justifiable for deleting the penalty levied by the learned AO u/s 271 AAA of the Act. Therefore, we do not find any hesitation to confirm the order of the learned CIT(A) …………… (iii) Decision of Hon'ble Delhi ITAT "F" Bench Smt. Raj Rani Gupta v/s DCIT (ITA No. 3371/Del/2011): …………………… 11. The clause (2) of explanation 5 of section 271(1)(c) has fallen for consideration before various Hon'ble High Courts. The scope and meaning has been lucidly explained by the Hon'ble Allahabad High Court in the case of Radha Kishan Gael (2OO5) 278 ITR 454. The relevant portion of observations of Hon'ble High Court are as under:- "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of members of AOP that income was derived from trading transactions not recorded in books - Whether penalty under section 271 AAA could not be imposed - Held, yes If disclosure made by one of the members of the group, immunity is available to all. (v) Concrete Developers v. ACIT 34 taxmann. com 62 (Nagpur) Whether where during course of search assessee admitted undisclosed income, paid tax together with interest, filed return showing said income as business income and Assessing Officer had accepted same, it could not be said that assessee had not specified manner or could not substantiate manner in which income was derived - Held, yes (vi) Ashok Kumar Sharma v. DCIT 33 taxmann. com 652 (Cuttak) Undisputedly, the assessee had shown the undisclosed income under the head 'income from business' in the returns filed by him and that was accepted by the department. Therefore, the cases of the assessee fell exactly within the purview of sub-section (2) of section 271 AAA. Income disclosed as business income accepted. (vii) Pramod Kumar Jain v. DCIT 33 taxmann. com 651 (Cuttack) Held that no definition could be given to the 'specified manner' insofar as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee made statement that he had earned undisclosed income from various transactions of sale/purchase of land and said statement did not face any rebuttal or rejection at hands of Assessing Officer - It was also undisputed that asses'see had paid due tax on admitted undisclosed income - Whether on facts, impugned penalty order passed by authorities below deserved to be set aside -Held, yes (xi) Ahmedabad ITAT "B" Bench in case of Sandeep Navnitlal Shah v/s. ACIT (vide ITA No. 506, 507&508/Ahd/2011): "4. In view of above discussion, we find there is no difference between returned income and assessed income and as such there is no undisclosed income. It is undisputed that assessee has paid all the taxes due on returns filed in lieu of notices u/s. 153A. Under these facts and circumstances, we hold that it is not relevant whether return of income was filed by assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the Income Tax Act, return of income filed in response to notice u/s. 153A of the Act is to be considered as return filed u/s. 139 of the Act as Assessing Officer has ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by the Exception No. 2 while making statement under section 132(4). The view taken by the Tribunal to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon is paid, there would be substantial compliance not warranting any further denial of the benefit under the Exception No. 2 in the Explanation 5 was commendable. [Para 15][emphasis supplied] 9. The above view of the Hon'ble Gujarat HC has also been reiterated by Hon'ble Allahabad HC in connection with clause (2) of Explanation 5 to s. 271(1)(c) in CIT v. Sidh Nath Goel 359 ITR 481: 7. The ITAT relied upon judgments of Madras High Court in C/7~v. S. D. V. Chandru [2004] 266 ITR 175/136 Taxman 537;and Rajasthan High Court in CIT v. MishrimalSoni [2007] 289 ITR 77/162 Taxman 53 and Gujarat High Court in CITv. Mahendra C. Shah [2008] 299 ITR 305/172_Taxman58, which have explained the extent and scope of Explanation 5 to Section 271(l)(c) of the Act, which deals with a situation in which any assets are found to be in the owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial requirement of following one's own decision, I have therefore no hesitation in holding, on the basis of cumulative facts as discussed above, that the appellant has disclosed the amount u/s 132(4), stated and substantiated the manner of earning the same within the meaning of s 271AAA(2) (i) and (ii). As such, in my considered opinion in this particular case, the disclosure, followed by detailed note, was based on seized documents not only thus substantiating the manner of earning but forming the sole basis of assessment made by the Ld. AO. In view of this discussion, it is further held that the objections 1-3 of the Ld AO ' (page 2 of this order) have no merits as the scope of "substantiation" as per s. 271AAA(2)(ii) is clearly misread by him. As held in Mahendra C shah, the appellant cannot be expected to provide graphic and complete details of the source of each unaccounted rupee earned by him, and thus, the findings based on absence of such details do not survive. Similarly, objections 4-5, being conclusions drawn on the basis of wrong notion of requirement of s. 271AAA(2) also do not survive. Objection 6 regarding bonafides is completely irrelevant. Thus, on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sandeep Navnitlal Shah v/s. ACIT (vide ITA No. 5O6, 507&508/Ahd/2011): "4. In view of above discussion, we find there is no difference between returned income and assessed income and as such there is no undisclosed income. It is, undisputed that assessee has paid all the taxes due on returns filed in lieu of notices u/s. 153A. Under these facts and circumstances, we hold that it is not relevant whether return of income was filed by assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the Income Tax Act, return of income filed in response to notice u/s. 153A of the Act is to be considered as return filed v/s. 139 of the Act as Assessing Officer has made assessment on the said return and therefore, return is to be considered for the purpose of penalty u/s. 271(1)(c) and penalty is to be levied on income assessed. As there is no difference between return of income and assessed income, so, in view of case of Kirit Dahyabhai Patel [supra], no penalty u/s. 271(1)(c)/271AAA is leviable and accordingly, order of levy penalty for all the three years are quashed. Assessing Officer is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by the CIT(A) appealed against and case law cited across the bar. The sole issue that arises for determination in the present case is whether the assessee in the facts of the case has fulfilled the conditions for exclusion from clutches of penalty under s. 271AAA of the Act or not. The thrust of the case of the AO is that the assessee has failed to specify the manner in which the income has been derived as well as failed to substantiate the manner as contemplated under s. 271AAA(2) of the Act. In this regard, we find that the issue is squarely covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of Mahendra C Shah (supra). In the absence of any evidence or record to show that any specific query made to the assessee and in the absence of any query on the manner and substantiation thereof, the allegation for non-fulfillment of condition of Section 271AAA(2) of the Act does not survive. In view of the binding precedent delivered by Hon'ble Gujarat High Court the onus would shift on the assessee to specify the manner of earning undisclosed income and substantiation thereof only upon requisite inquiry in this regard. In the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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