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TMI Blog2018 (11) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... /all of the grounds of appeal before or during the course of the hearing of the appeal. ITA No.-3135/Del/2015 i. The Learned CIT(A) erred in fact and in law in confirming the penalty of Rs. 20,15,300 imposed u/s 271 AAA which is not only bad in law but also against the facts and circumstances of the case. ii. That the addition made, based on which penalty was imposed, was protective and not substantive. ITA no. 3136/Del/2015 i. The Learned CIT(A) erred in fact and in law in confirming the penalty of Rs. 2,00,000 imposed u/s 271 AAA which is not only bad in law but also against the facts and circumstances of the case. ii. That the addition made, based on which penalty was imposed, was protective and not substantive. ITA No. -3137/Del/2015 i. The Learned CIT(A) erred in fact and in law in partly confirming the penalty on a addition of Rs. 63,00,000 imposed u/s 271 (1)(c) which is not only bad in law but also against the facts and circumstances of the case. ITA No. 3155/Del/2015 i. The Learned CIT(A) erred in facts and in law in confirming the penalty of Rs. 19,54,700/- imposed u/s 271AAA which is not only bad in law but also against the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any 2. M/s PAN Realtors (P) Ltd. 2012-13 50000000 No incriminating document found an seized, to be telescoped with the addition made, if any 3. M/s Nirala Infratech (P) Ltd. 2012-13 7500000 Reduction of WIP 4. M/s Nirala Housing (P) Ltd. 2011-12 20153000 Advances from customers to be adjusted in PCM 5. M/s Nirala Housing (P) Ltd. 2012-13 2000000 Advances from customers to be adjusted in PCM 6. Others 800000 To be telescoped Total 100000000 (3) In the case of NDPL, While filing the return of income on 21.03.2013 for AY 12- 13, the assessee included the additional business income Rs. 1,95,47,000 that was claimed as part of the surrendered income of Rs. 10 crores. While passing the assessment order, the AO made further additions of Rs. 3,75,387 on account of bogus payment to contractors; Rs. 10,65,117 and Rs. 1,31,27,456 on account of bogus payment to suppliers; Rs. 74,58,064 on account of bogus expenses; Rs. 8,00,000 that was part of the surrendered sum of Rs. 10 crores but had not been reflected as additional business income against any of the companies of the group; and Rs. 8,21,575 as disallowance u/s 14A of the I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antiate the manner in which the undisclosed income was derived, and also pay the tax liability arising thereon, the appellant had not met any of these conditions; that undisclosed income had not been offered in the return of income; that the assessee was trying to 'fool the department' by its offer of undisclosed income in the form of current liabilities; that it had not substantiated the manner in which the unaccounted income had been derived; and that tax had also not been paid by it. With these observations, the AO imposed penalty u/s 271AAA @ 10% on undisclosed income of Rs. 2,01,53,000/- in AY 11-12 and on undisclosed income of Rs. 20,00,000 in AY 12-13, penalty thus imposed amounting to Rs. 20,15,300 and Rs. 2,00,000 respectively. (3.2) In the case of NHPL the AO also levied penalty U/s 271(1)(c) of I.T. Act amounting to Rs. 66,94,323/- in A.Y. 2011-12 and Rs. 25,64,700/- in A.Y. 2012-13. The penalty levied U/s 271(1)(c) of I.T. Act for A.Y. 2011-12, amounting to aforesaid Rs. 66,93,323/- was in respect of the amount of Rs. 2,01,53,000/- which was offered by the Assessee as current liability on account of advances received. This offer was made by the assessee after sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95,47,000 that was claimed as part of the surrendered income of Rs. 10 crores. While passing the assessment order, the AO made additions of Rs. 3,75,387 on account of bogus payment to contractors; Rs. 10,65,117 and Rs. 1,31,27,456 on account of bogus payment to suppliers; Rs. 74,58,064 on account of bogus expenses; Rs. 8,00,000 that was part of the surrendered sum of Rs. 10 crores but had not been reflected as additional business income against any of the companies of the group; and Rs. 8,21,575 as disallowance u/s 14A. He also initiated penalty proceedings u/s 271AAA and 271(l)(c). While adjudicating the appeal filed by the appellant against the assessment order, the additions of Rs. 3,75,387 and Rs. 10,65,117 were deleted. It is a matter of record that no appeal was filed in respect of the addition of Rs. 1,31,27,456, while the appeal relating to the additions of Rs. 74,58,064 and Rs. 8,00,000 was not pressed. Consequently, the additions of Rs. 1,31,27,456, Rs. and Rs. 8,00,000 became final. 6. During the penalty proceedings u/s 271AAA, the AO imposed penalty upon Rs. 2,03,47,000, which comprised of Rs. 1,95,47,000 declared by the appellant in the return of income, and Rs. 8,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271 AAA were met in respect of Rs. 8,00,000 as well. 8. The submissions of the appellant are considered. 8.1 The appellant has sought to claim that sub-section (1) of section 271AAA was not applicable to its case because it was covered by sub-section (2) that prohibits the application of subsection (1). Broadly, sub-section (1) of section 271AAA provides for imposition of penalty @ 10% of the undisclosed income, while sub-section (2) of section 271AAA stipulates that the provisions of sub-section (1) will not apply if the assessee admits to undisclosed income in a statement u/s 132(4) made in the course of search and specifies the manner in which it was derived, substantiates the manner in which such income was derived, and pays the tax and interest thereon. 8.2 The relevant facts of this case is that, while Suresh Kumar Garg disclosed Rs. 10 crores as 'additional business income' of the Nirala group for FY 10-11 and 11-12, in which the cash of Rs. 1,95,47,000 pertaining to the appellant for AY 12-13 was subsequently claimed to be included, the admission was not made u/s 132(4) of the Income Tax Act. The disclosure was in fact made in a typed letter addressed to DDlT(Inv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant, the sum of Rs. 1,95,47,000 was disclosed as its 'additional business income', but no explanation, about the manner in which the quantification had been made, was stated. Most significantly, in the return of income filed on 21.03.2013, Rs. 1,95,47,000 was referred as 'business income declared' in note 20 relating to 'Other Income', and not included in the 'Revenue from Operations', which as per note 19 related to the 'sale of flats' and 'other operating incomes'. Thus, though the appellant used the words 'business income declared' in respect of Rs. 1,95,47,000, it is evident that it did not declare it as income from sale of flats or other such operating income. Therefore, the contention of the appellant, that it had specified and substantiated the manner in which Rs. 1,95,47,000 had been derived, is incorrect. 8.6 It is thus evident from the facts narrated above that neither clause (i) nor clause (ii) of subsection (2) of section 271AAA - requiring admission of undisclosed income u/s 132(4) and substantiation of the manner in which it was derived - are fulfilled. Since it is apparent that a general disclosure of Rs. 10 crores was made for the whole group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely Crossing Infrastructure P Ltd (supra) and Pioneer Marbles & Interiors P Ltd (supra), but these do not help its case. In the case of the former, all the three conditions given in sub section (2) of section 271AAA had been met. The latter decision was in the context of timeline relating to payment of tax. In the case of the appellant, it has already been noted that clauses (i) and (ii) of sub section (2) of section 271AAA were not met. 8.10 However, the imposition of penalty u/s 271AAA in respect of Rs. 8,00,000, is erroneous. It is a matter of record that this sum was not offered by the appellant as its undisclosed income; in fact, the sum of Rs. 8,00,000 was added by the AO during the course of assessment. It is also a matter of record that the appellant accepted the addition and did not press appeal against it. Since Rs. 8,00,000 did not constitute 'undisclosed income' within the meaning of Explanation (a) appended to section 271AAA, and was in fact, the concealed income found and added by the AO during the assessment proceedings, the matter of levy of penalty on Rs. 8,00,000 ought to have been governed by the provisions of section 271(l)(c). Therefore, penalty u/s 271AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 5,00,00,000 3 Nirala Infratech P Ltd. 12-12 75,00,000 Reduction of WIP 4 NiralaHousing P Ltd. 12-13 20,00,000 Advance from customers to be adjusted in PCM 11-12 2,01,53,000 5 Others - 8,00,000 To be telescoped with addition made if any Total 10,00,00,000 5. When confronted with the seized material [pages 47- 48 of annexure A-4 found from H-121, Sector-63, Noida] by DDIT(lnv), Sh Rakesh Mahajan, a director in the appellant company, stated u/s 131(l)(a) on 26.12.2011 in response to query 23 that the 2 pages contained the same details with respect to flat no, customer name, rate, total amount received, mode of receipt, etc; that the amounts received through cheque as reflected in these pages were duly recorded in the books of account of Nirala Housing Pvt Ltd; and that the unaccounted cash portion had 'already been offered for tax being part of additional business income offered'. 6. Since search had taken place on 04.08.2011, on which date the return for AY 11- 12 was not due, the appellant showed the unaccounted cash receipts found at the time of search, in its books of accounts for FY 10-11 (at Rs. 2,01,53,000) and FY 11-12 (at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. 8. In the written submissions, the AR has lodged a strong objection to the observation of the AO in para 4.1 of the impugned orders, where it was stated that the assessee was 'trying to fool the department by offering undisclosed income in the form of current liabilities and not paying any tax during the year'. He has requested that this remark of the AO may be deleted. While there is no provision to 'delete' the remarks of the AO in the appellate proceedings, in order to adjudicate upon the ground of appeal filed by the appellant in Form 35, it is essential to refer to the relevant facts of the case, which have already been referred above. Thus, it is an admitted fact that the cash reflected in the seized documents pertained to unaccounted cash, received by the appellant from customers at the time of booking of flats in FY 10-11 and FY 11-12. It is also a matter of record, as emanating from the assessment order of the relevant years, that the unaccounted cash receipts were eventually taken into the books after search and reflected under the head of current liabilities' in the balance sheet. The explanation of the appellant - that the sum was not offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition' had taken place amongst the erstwhile directors of the group, no documents were available with the appellant. Further, referring to the Indian Evidence Act, it was requested that in the event of drawing any adverse inference, the documentary evidence 'specially the appraisal report' may be shown to the appellant. With regard to clause (ii) of sub section (2) of section 271AAA, it was submitted that since the appellant had stated that the income was 'additional business income', the requirement of 'substantiating the manner in which undisclosed income was derived' was met and the condition of clause (ii) satisfied. With regard to clause (iii) of sub section (2) of section 271AAA, the explanation given in the earlier submission was reiterated. 11. The submissions of the AR, as contained in written submissions dated 17.3.2015 and 20.3.2015 are considered. 11.1 The appellant has sought to claim that sub-section (1) of section 271AAA was not applicable to its case because it was covered by sub-section [2) that prohibits the application of subsection (1). Broadly, sub-section (1) of section 271AAA provides for imposition of penalty @ 10% of the undisclosed income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifying the manner in which it had been earned. The bifurcation of Rs. 10 crores came much later, when a letter was filed before the AO on 20/3/2014, specifying the amounts and the companies in which the sums had been offered. The specific admission, about Rs. 2,21,53,000 being the unaccounted cash receipts of the appellant company and its inclusion in the group disclosure of Rs. 10 crores, was made for the first time by Sh Rakesh Mahajan (who continues to be the key person in the appellant company even after 'partition' of the group), only in response to query 23 on u/s 131(1A) in the chamber of DDIT(Inv). Thereafter, while filing the return of income for AY 11-12 and 12- 13 (subsequent to search), the appellant showed the unaccounted cash receipts of Rs. 2,01,54,000 and Rs. 20,00,000 in its books for FY 10-11 and 11-12. These facts are part of the assessment orders of the appellant company for AY 11-12 and 12-13. 11.5 It is thus evident from the facts narrated above that clause (i) of sub- section (2) of section 271AAA, requiring admission of undisclosed income u/s 132(4), is not fulfilled. Since it is apparent that the issue of disclosure of 'undisclosed income' of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii] of sub-section (2) of section 271AAA are not met. 11.9 It may be also mentioned that penalty u/s 271AAA is rightly levied upon the appellant in AY 11-12 and AY 12-13, even though the additions made on account of seized material in the relevant assessment orders are made on protective basis. This is because the unaccounted receipt of Rs. 2,21,53,000 constitutes 'undisclosed income' for 'specified previous year' as defined in the Explanation appended to section 271AAA. 11.10 As per Explanation (a) appended to section 271AAA, 'undisclosed income' means any income of specified previous year, represented wholly or partly by money, bullion, jewellery or other valuable article or thing or documents or transactions found in the course of search and which is not recorded in the books of accounts maintained in the normal course, or has not been disclosed to the CCIT or CIT before the date of search. Also, any income of specified previous year, represented wholly or partly by any entry in respect of expense recorded in the books of accounts maintained in the normal course, but which is found to be false because of search, is also defined as 'undisclosed income'. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions given in sub section (2) of section 271 AAA had been met. The latter decision was in the context of timeline relating to payment of tax. In the case of the appellant, it has already been noted that clauses (i) and (ii) in sub section (2) of section 271AAA were not met. The claim of the appellant about payment of Rs. 76.50 lakhs as advance tax for FY 14-15 is not relevant to the matter of 'undisclosed income' relating to previous years 10-11 and 11-12. 11.14 In view of the discussion above and the facts of the case - where document containing details of undisclosed income of Rs. 2,01,53,000 and Rs. 20,00,000, received from customers as part of advance against purchase of flats, was found during search; where these cash receipts were not recorded in the books of accounts maintained in the normal course, and had also not been disclosed to the CCIT or CIT before the date of search; where subsequently these sums were reflected in the balance sheet; but where no admission of the undisclosed income was made under section 132(4) and tax thereon was not paid till the passing of the impugned orders, - the appellant is liable for penalty u/s 271AAA. Accordingly, the AO was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Others - 8,00,000 To be telescoped with addition made if any Total 10,00,00,000 5. When confronted with the seized material [pages 47- 48 of annexure A-4 found from H-121, Sector-63, Noida] by DDIT(lnv), Sh Rakesh Mahajan, a director in the appellant company, stated u/s 131(l)(a) on 26.12.2011 in response to query 23 that the 2 pages contained the same details with respect to flat no, customer name, rate, total amount received, mode of receipt, etc; that the amounts received through cheque as reflected in these pages were duly recorded in the books of account of Nirala Housing Pvt Ltd; and that the unaccounted cash portion had 'already been offered for tax being part of additional business income offered'. 6. Since search had taken place on 04.08.2011, on which date the return for AY 11- 12 was not due, the appellant showed the unaccounted cash receipts found at the time of search, in its books of accounts for FY 10-11 (at Rs. 2,01,53,000) and FY 11-12 (at Rs. 20,00,000), under the head 'current liabilities' on one side of the balance sheet and as cash available on the other. Since the appellant was following percentage completion method for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying to fool the department by offering undisclosed income in the form of current liabilities and not paying any tax during the year'. He has requested that this remark of the AO may be deleted. While there is no provision to 'delete' the remarks of the AO in the appellate proceedings, in order to adjudicate upon the ground of appeal filed by the appellant in Form 35, it is essential to refer to the relevant facts of the case, which have already been referred above. Thus, it is an admitted fact that the cash reflected in the seized documents pertained to unaccounted cash, received by the appellant from customers at the time of booking of flats in FY 10-11 and FY 11-12. It is also a matter of record, as emanating from the assessment order of the relevant years, that the unaccounted cash receipts were eventually taken into the books after search and reflected under the head of current liabilities' in the balance sheet. The explanation of the appellant - that the sum was not offered as income in AYs 11-12 and 12-13 because it was following the percentage completion method and AS-7, and less than the bench mark of 25% of the project had been completed in those years - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Iftikhar Ahmed. The search resulted in cash seizure of Rs. 53,98,000 and jewellery seizure of Rs. 10,52,124. A number of incriminating documents were also found and seized. Specific mention is made to pages 47-48 of annexure A-4 found from H-121, Sector-63, Noida, the corporate office of the group, which inter alia referred of cash receipts of Rs. 2,21,53,000 in addition to cheques, received against booking for flats from various customers by Nirala Housing Pvt. Td. (the appellant company). Out of the total cash of Rs. 2,21,53,000, cash of Rs. 2,01,53,000 pertained to FY 10-11 and Rs. 20,00,000 to FY 11-12. 4. Post search, Sh Suresh Kumar Garg, one of the directors and shareholders in the Nirala group, disclosed before the DDIT Inv, Unit 1(3), New Delhi, a sum of Rs. 10,00,00,000 as additional income of the entire group for FYs relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the 'bifurcation' of the 'surrendered income' amongst 4 companies of the group was provided as follows: S.N o. Premises of Assessee A.Y. Additional business income Remarks 1 Nirala Developers P.Ltd. 12-13 1,95,47,000 To be telescoped 2 PAN Realtors P 12-13 5,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve additions in AY 11-12 and AY 12-13 to that extent would stand deleted. The AO also initiated penalty proceedings u/s 271AAA and 271(l)(c). The appellant did not contest the assessment order passed by the AO on 28.03.2014. 7. In the penalty proceedings u/s 271AAA, the AO referred to the provisions of section 271AAA. , Stating that while the provision required the assessee to offer undisclosed income in its return, substantiate the manner in which the undisclosed income was derived, and also pay the tax liability arising thereon, the appellant had not met any of these conditions. It was stated that undisclosed income had not been offered in the return of income; that the assessee was trying to 'fool the department' by its offer of undisclosed income in the form of current liabilities; that it had not substantiated the manner in which the unaccounted income had been derived; and that tax had also not been paid by it. With these observations, the AO imposed penalty u/s 271AAA @ 10% on undisclosed income of Rs. 2,01,53,000 in AY 11-12 and on undisclosed income of Rs. 20,00,000 in AY 12-13, amounting to Rs. 20,15,300 and Rs. 2,00,000 respectively. Aggrieved by these orders, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rase 'if any'. It was argued that tax and interest on the undisclosed income became payable only when the income of the appellant from its project became taxable, based on the accounting standard AS-7 followed by it and accepted by the AO while passing the assessment order. It was further stated that the project was delayed and was started only in FY 14-15, and that accordingly, advance tax of Rs. 76.50 lakhs was paid for FY 14-15. Reference was made to the case of Crossing Infrastructure P Ltd v CIT 267 CTR 519 (All)-, and DCIT v Pioneer Marbles & Interiors P Ltd 144 TTJ 663 (Kol). 10. In the written submission filed on 20.3.2015, it was stated that the AO had only commented upon the appellant's conduct with reference to clauses (ii) and (iii) of sub section (2) of section 271AAA and that since he had 'not commented anything' as far as clause (i) was concerned, it may be 'assumed that he had accepted that the declaration/surrender was made u/s 132(4)'. It was submitted that in the event of any doubt, all IT records along with the appraisal report of the Investigation wing may be summoned to ascertain if the disclosure was made u/s 132(4) or not. Stating that since the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosure of Rs. 10 crores was being made by the group as 'additional business income' for FY 10-11 and 11-12. 11.3 Now since the letter of disclosure, stands reproduced in the assessment order of the appellant itself, it dispels all doubt about whether the disclosure of Rs. 10 crores was made u/s 132(4) or not. Section 132(4) entails statement of any person who is found to be in possession or control of books of accounts, documents, money, bullion, jewellery or other valuable article or thing, upon examination on oath by the authorized officer during the course of search or seizure. It is thus crystal clear that the aforesaid disclosure of Rs. 10 crores was not made before the authorised officer upon examination on oath during the course of search as contemplated in section 132(4). This is also evident from the various statements recorded u/s 132(4) of Suresh Kumar Garg on 4.8.2011, 5.8.2011 and 30.9.2011; Sh Rakesh Mahajan on andl2.9.2011; and Sh Iftikhar Ahmed on 4.8.2011, none of which refer to any disclosure at all. 11.4 It is also noted that the disclosure of Rs. 10 crores was an omnibus declaration made by Sh S K Garg in respect of the entire group, without bifurcat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the payment of tax and interest, is applicable only if these were due and that since this was not so in its case, the condition was not applicable to it. But this contention does not appear to be correct, since the words 'if any' is evidently used in the clause in connection with 'interest' and not 'tax'. It may be mentioned that 'undisclosed income' in all instances will suffer tax, but interest thereon, may or may not apply, depending upon the facts and circumstances of each case. In case of Pioneer Marbles & Interiors P Ltd (supra), the Hon'ble Tribunal noted that though no time limit had been set out in the statute, for immunity under sub section (2) of section 271AAA, tax and interest should have been paid well before the conclusion of the impugned penalty proceedings. In the case of the appellant, it is an admitted fact that tax was not paid on the undisclosed sums before the date of the impugned penalty orders. Therefore, clause (iii) of sub- section (2) of section 271AAA, requiring payment of tax, is also not fulfilled by the appellant. 11.8 Thus, the appellant cannot escape from the penalty envisaged in sub-section (1) of section 271AAA because claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.8.2011, the previous year 10-11 had ended and the date for filing return u/s 139(1) had not expired and the appellant had not furnished the return for previous year 10-11, the previous year 10-11 and previous year 11-12 relevant to AY 11-12 and AY 12-13 respectively come within the meaning of' 'specified previous year', as defined by Explanation (b) appended to section 271AAA. 11.12 Penalty u/s 271AAA is applicable in respect of previous years relevant to AY 11-12 and AY 12-13 since the documents relating to undisclosed income of Rs. 2,01,53,000 and Rs. 20,00,000 had been found in the course of search on the Nirala group and the unaccounted cash receipts were in respect of the specified previous years. In this manner, with all the ingredients referred in the definition of 'undisclosed income' and 'specified previous year', as per Explanation appended to section 271AAA, fulfilled, the imposition of penalty u/s 271AAA is confirmed in respect of AY 11-12 and AY 12-13. 11.13 The appellant has referred to some decisions, namely Crossing Infrastructure P Ltd (supra) and Pioneer Marbles & Interiors P Ltd (supra), but these do not help its case. In the case of the former, all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of Section 271AAA(2)(i) of I.T. Act and the disclosure made by Nirala Group should also be treated as sufficient compliance of requirements of Section 271AAA(2)(ii) of I.T. Act. He also contended that the NHPL followed Project Completion Method of accounting, and no tax was payable because no income was recognized under this method of accounting by NHPL for either of the two Assessment Years, viz A.Y 2011-12 and A.Y. 2012-13; and further, that no penalty was leviable either U/s 271(1)(c) or U/s 271AAA for either A.Y. 2011-12 or A.Y. 2012-13 because no income was recognized in accordance with Project Completion Method of accounting and no tax was payable. Thus, he submitted that assessee, NHPL and NDPL, were not liable for penalty U/s 271AAA of I.T. Act. He also relied on decisions reported in the following case laws: 1. Concrete Developers Vs ACIT C(C)-2(2) (Nagpur ITAT) 2. Sita Ram Gupta v. Gupta ACIT, [2014] 151 ITD 449 (Delhi-Trib.) 3. PCIT v. Swapna Enterprise, [2018] 401 ITR 488 (Gujarat)/ [2018] 302 CTR 504 (Gujarat) 4. ACIT vs. Akshar Developers, [2017] 86 taxmann.com 251 (Mumbai- Trib.) 5. M/s Kanakia Spaces Pvt. Ltd. v. AcIT, ITAT Mumbai (IT Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Counsel for assessee. We have also carefully perused the impugned orders of Ld. CIT(A) and the orders of the AO and we have further taken into consideration the case laws and judicial precedents referred therein. (8) The two side (NHPL and NDPL on one side and Revenue on the other side) have disputed whether the disclosures made by the assessees as part of the overall disclosures of Rs. 10,00,00,000/- by Nirala Group was disclosure U/s 132(4) of I.T. Act or not. The two sides (NHPL and NDPL on one side and Revenue on the other side) have also disputed whether though disclosure was made by Nirala Group, whether the two assessees had substantiated the manner in which undisclosed income for the two Assessment years 2011-12 and 2012-13, was derived. We notice that NHPL, instead of substantiating the manner in which undisclosed income for A.Y. 2011-12 and 2012-13 was derived; actually took a contrary stand during assessment proceedings that the income disclosed had not accrued to the assessee in accordance with Project Completion Method of accounting by the assessees. The surrendered income was not included in Return of income of NHPL for A.Ys. 2011-12 and 2012-13. (8.1) It will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if an assessee fails to substantiate the manner in which the undisclosed income was derived, the assessee is hit by section 271AAA(1) of I.T. Act read with 271AAA(2)(ii) of I.T. Act. In the appeals before us, one of the two assessees, NHPL, instead of substantiating the manner in which undisclosed income was derived, actually took a contrary stand, in contradiction of the disclosures made by Nirala Group during assessment proceedings, that the disclosed income had not accrued in accordance with Project Completion Method and thus was in clear default of Section 271AAA(2)(ii) of I.T. Act whereby it was hit by Section 271AAA(1) of I.T. Act. The relevant portions of orders of Ld. CIT(A), which have already been reproduced earlier in this Order have clearly established that both the assessees, NHPL and NDPL, had failed to substantiate the manner in which the undisclosed income was derived; and for the detailed reasons given in her Orders, we agree with her finding on this issue. Further, to claim the benefit U/s 271AAA(2) Of I.T. Act, the admission of undisclosed income by an assessee is required to be made in a statement U/s 132(4) of I.T. Act and the assessee is further required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter year in the hands of the same assessee. The uncertainty in the case of NHPL before us was not in respect of the assessee in whose hands the income was to be added. The uncertainty was as to the year in which the addition is to be made. This uncertainty arose because of the changed stand of the assessees, who initially surrendered undisclosed income after search U/s 132 of I.T. Act for the years under consideration; but later took a contrary stand by filing return showing nil income and taking the stand during assessment proceedings that the income will be recognized in later years in accordance with Project Completion Method of Accounting. Thus, the precedents cited on behalf of the assessees by the Ld. Counsel are on entirely distinguishable facts and do not advance the case of NHPL. When a protective addition is made because an assessee changes its stand leading to uncertainty about the year in which the income is to be assessed, the assessee cannot be permitted to benefit from uncertainty created by its own conduct. Further, we also note that in response to a query made by the Bench, at the time of hearing before us, the Ld. Counsel for assessees informed that the undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive additions, the contentions raised by the Ld. Counsel for NHPL has no merit. (9) In view of the aforementioned legal position as discussed earlier and also in view of the facts of the case as discussed earlier, we are of the view that both the assessees, NHPL and NDPL have failed to comply with Section 271AAA(2)(i) and Section 271AAA(2)(ii) of I.T. Act. In addition, NHPL has also failed to comply with Section 271AAA(2)(iii) of I.T. Act. It is readily inferred from perusal of Section 271AAA of I.T. Act that the three requirements U/s 271AAA(2) of I.T. Act, i.e., Sections 271AAA(2)(i), 271AAA(2)(ii), 271AAA(2)(iii) of I.T. Act are cumulatively required to be fulfilled by an Assessee, to escape penalty U/s 271AAA(1) of I.T. Act. Thus, both the assessees, NHPL and NDPL are hit by Section 271AAA(1) of I.T. Act. However, once penalty U/s 271AAA of I.T. Act has been levied in respect of undisclosed income, the AO was in error of law prescribed U/s 271AAA(3) of I.T. Act, in imposing further penalty U/s 271(1)(c) of I.T. Act in respect of the same undisclosed income. U/s 271AAA(3) of I.T. Act, there is clear embargo on the AO for imposing penalty U/s 271(1)(c) in respect of undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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