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TMI Blog2017 (11) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... On review and examination of above statement of the assessee recorded u/s 132(4) of the Act, we find that no specific question(s) were raised to the assessee drawing his attention to the provisions of section 271AAB which require the assessee to specify the manner of earning of undisclosed income as well as to substantiate the manner in which the undisclosed income was derived. In absence of a specific query raised during the course of search drawing assessee’s attention to the provisions of section 271AAB where the statement of the assessee was recorded u/s 132(4) about the manner in which the undisclosed income has been derived and its substantiation thereof, the AO was not justified in invoking the residuary provisions of clause (c) of section 271AAB(1) instead of clause (a) of section 271AAB(1) of the Act. The assessee having satisfied the other conditions specified in section 271AAB(1)(a), which remain undisputed, in terms of admission of undisclosed income in the statement recorded u/s 132(4), payment of taxes together with interest, if any in respect of undisclosed income on or before the specified date and declaring the undisclosed income in the return of income for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness premises of Jain Agarwal Group at Kishangarh including the assessee Sh. Mahesh Kumar Jain on 19.12.2013. During the course of search and seizure operation, statement of Sh. Mahesh Kumar Jain was recorded u/s 132 (4) of the Act on 20.12.2013 wherein he surrendered undisclosed income of ₹ 1,40,41,210/- for taxation as his undisclosed income for A.Y. 2014-15. The assessee subsequently filed his return of income disclosing income of ₹ 1,48,24,560/- which included the undisclosed income of ₹ 1,40,41,210/- declared during the course of search in the statement recorded u/s 132(4) of the Act. During the course of assessment proceedings, the Assessing Officer referred to the statement recorded u/s 132(4) of the Act and stated that the assessee was asked to explain the source of cash found at the office amounting to ₹ 22,28,710/- as per question no. 18 and in response the assessee has stated that he is unable to state anything about the source of such cash found at the office and he surrendered the same for taxation as his undisclosed income for A.Y. 2014-15. Further, during the course of search, various incriminating documents including Annexure AS Ex-3 were fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eace and avoid litigation with the department and was made on the condition that no penalty can be levied. It was further submitted that the assesses disclosed the said income in the return filed u/s 139(1) of the Act and is accordingly entitled to immunity against the levy of penalty. It was further submitted that the penalty u/s 271AAB is not applicable as the assessee during the course of search in his statement admitted the additional income and specifies the manner in which such income has been derived, substantiates the manner in which the additional undisclosed income was derived and paid the taxes along with the interest in respect of such additional income. It was further submitted that provisions of section 271AAB(1)(a) are applicable in case of the assessee as the assessee has admitted the undisclosed income in his statement recorded u/s 132(4) of the Act and the provisions of section 271AAB(1)(c) are not applicable as the latter provisions have been introduced by the Finance Act 2012 to penalize those assessees who neither declared undisclosed income u/s 132(4) nor surrender/report the same in their return of income. 5. The assessee s contention however did not find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases are different with the facts and circumstances of the assessee s case in as much as the assessee s case is covered u/s 271AAB of the Act which has been introduced by the Finance Bill 2012 in order to strengthen the penal provision which are applicable for search conducted on or after 01.07.2012. It was finally held by the Assessing Officer that the provisions of section 271AAB(1)(c) are applicable in the case of the assesee as he has not substantiated the manner in which the undisclosed income was derived. He accordingly levied penalty @ 30% of undisclosed income amounting to ₹ 42,12,360/-. 6. Being aggrieved with the action of the AO in levying the penalty, the assessee carried the matter in appeal before the ld. CIT(A). In his order, the ld. CIT(A) noted that while completing the assessment, the AO was of the opinion that the assessee failed to furnish the name with address of the persons from whom the above transactions have been made and failed to substantiate the manner in which undisclosed income have been arrived at and the AO initiated the penalty u/s 271 AAB(1)(c) of the Act for which he issued a show cause dated 23.03.2016. The ld. CIT(A) further noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I agree with the submission of the A/R of the appellate that in the present case, all these assessee have satisfied all the above conditions 271AAB(1)(a). 4.4 I also find from the underlined provisions of section 271AAA and 271AAB reproduced in para 4.1 4.2 above that the provisions of section 271AAA(2) and 271AAB(1) (a) are pari-materia with a minor modification of a token penalty of 10% of undisclosed income provided in section 271AAB(1)(a) which was absent in section 271AAA(2) and therefore the ratios of case laws cited by the assessee are relevant with a minor modification as categorised above to the facts of the case of assessee though the same are decided in the context of 271AAA(2). 4.5 However, I do not agree with the arguments of the A/R for the appellants that since the AO has levied penalty u/s 271AAB(1)(c) which is not applicable provision it would be not proper for appellate authority to sustain any penalty u/s 271AAB(1)(a). The controversy in the name of provisions of section 271AAB(1)(c) or provisions of section 271 AAB (1)(a) is uncalled for as the entire section 271 AAB is concerning penalty in search cases and the different clauses of 271AAB(1) namely (a), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified previous year, if such assessee- (i) in the course of the search, in a statement under sub- section (4) of section 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) on or before the specified date (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein;--- We may submit that all the conditions which has been stipulated above in section 271AAB(1)(a) of the Act, has been satisfied by the assessee. The assessee admitted undisclosed income in statement recorded during the course of search, paid taxes thereon and filed return. The manner of deriving income as well as substantiation of the same is very much clear from the statement itself. However, the only objection of the ld. AO is that the assessee could not substantiate the manner in which the undisclosed income has been derived as appearing in para 9 last page of the order of the ld. AO, which reads as under: 9. Sub sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income and its substantiation is not defined in the Act. So it was otherwise incumbent upon the ld. AO to explain to the assessee what constituted these terms. In the entire search proceedings or assessment proceedings or penalty proceedings, it is not stated by the department that what exactly constituted these terms and what was expected from the assessee to have complied with these terms, absence of which has completely jeopardize the penalty proceedings in as much as there was no opportunity for the assessee to give its stand. Therefore, the penalty levied was also bad in law and as such rightly deleted by the ld. CIT(A). 8.6 It was further submitted that the assessee himself has surrendered the income, paid taxes and filed return of income. There has been no further probe by the investigating team during the course of search after surrender of income by the assessee. Even more, this surrender has been accepted by the ld. AO on the same income without any modification as has been declared by the assessee in its return of income. The ld. AO simply stated in its order that the assessee did not make surrender voluntarily but it is a fact on record that the alleged non discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). We may submit that the provisions of section 271AAB are applicable on the searches initiated on or after 1-7-2012 and before that section 271AAA was in force for the period from 1-6-2007 to 30-6-2012 and the language and interpretation of section 271AAB is in pari materia to section 271AAA of the Act. The conditions for non levy of penalty including disclosure of the manner of deriving of undisclosed income and substantiating the same u/s 271AAA(2) is identical to section 271AAB(1)(a) which speaks of levying of penalty @10% in case of certain conditions being satisfied. It is also notable that the provisions of both the sections are period specific and not applicable simultaneously. As such the decisions and interpretation given by various courts with respect to section 271AAA would be equally applicable to the provisions of section 271AAB in which the penalty has been levied in the case of the assessee. Similar observations have been made by the Hon ble Delhi ITAT in the matter of Neeraj Singal vs. ACIT 146 ITD 152 (Del) at para 11 when interpretin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consistent view as has been taken by the Hon ble Delhi High Court in its recent decision in Emirates Technologies Pvt. Ltd. (supra). In case of Late Sudha Patni vs. ACIT in ITA No. 963/JP/2015 dt.9-8-2016 (Jp)(Tri), it was held as under: 4. After considering the rival submissions, we do not see any reason to interfere with the order of CIT(A). The order is in tune with the principles laid down by various co-ordinate Benches and High Courts particularly with reference to disclosure made under section 132(4). In the case of CIT Vs. Mahendra C. Shah (299 ITR 305) the Hon ble Gujarat High Court considered similar statement under section 132(4) to grant immunity under section 271(1)(c). The Hon ble High Court held as under:- When the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Motawat ITA No.93/JU/2014 dt.7-5-2014 (Jodh)(Tri) DCIT vs. Piyush Maru ITA No.21/Jodh/2014 dt.9-6-2014 (Jodh)(Tri) DCIT vs. Sulochana Devi A Agarwal ITA No. 1052/Ahd/2012 (Ahd)(Tri) ACIT vs. Ajit Singh ITA No.714/JP/2014 dt.26-9-2016 (Jp)(Tri) ACIT vs. Kanakia Spaces Pvt. Ltd. 6763/Mum/2011 dt.10-7-2013 (Mum)(Tri) Pramod Kumar Jain vs DCIT (2012) 77 DTR 0244 (Cuttack Tri) 8.12 Further, reliance was placed on the following High Court decisions: CIT vs. Mahendra C Shah (2008) 215 CTR 0493 (Guj)(HC) CIT vs. Radha Kishan Goel (2006) 200 CTR 0300 (All)(HC) 8.13 It was further submitted that without prejudice to our foregoing submission, even if it is held that the assessee failed to specify the manner and substantiation thereof then still penalty @20% could only be levied as per the provisions of 271AAB(1)(b)which reads as under: --- (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub- section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date (A) decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced by the assessee before, or the results of the inquiry held or evidence recorded by the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;] (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.- In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant. The above makes it clear that the Commissioner (Appeals) may only confirm, cancel, reduce or enhance the penalty which is under appeal and it is no where provided that the ld. CIT(A) may pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court and hence, sustenance of penalty under different section was bad in law 8.20 It was further submitted that even the ld. CIT(A) could not have levied the penalty in a different section. It has been held by some of the benches of Hon ble ITAT that the ld. CIT(A) can only vary or cancel the penalty but cannot sustain it in some different section and reliance was placed on following decisions: Ajit Ramchandra Jadhav vs. ACIT 178 TTJ 204, 135 DTR 1 (Pune)(Tri) Ashwani Kumar Arora vs. ACIT 50 ITR 37 (Delhi)(Tri) Dr. Sarita Milind Davare vs. ACIT ITA No. 2187 1789 /Mum/2014, dt. 21-12-2016 (Mum)(Tri) K.N. Dadina (P) ltd. vs. DCIT (1997) 60 ITD 0010 (Kol)(Tri) Indian Standard Metal Co. Ltd vs. ITO (1982) 14 TTJ 0335 (Mum) (Tri) 9. The ld DR is heard who has vehemently argued the matter, took us through the findings of the AO in assessment and penalty proceedings and submitted that the AO has rightly levied the penalty u/s 271AAB(1)(c) of the Act. 10. The first and foremost question that arises for consideration is the nature of penalty provisions as contained in section 271AAB(1)(a) and 271AAB(1)(c). In other words, whether these provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty referred to in this section. Explanation.-For the purposes of this section,- (a) specified date means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be; (b) specified previous year means the previous year- (i) which has ended before the date of search, but the date of furnishing 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 date of search; or (ii) in which search was conducted; (c) 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is noted that the provisions of section 271AAB overrides section 271(1)(c) which infact contain provisions for levy of penalty under two separate limbs- concealment of particulars of income or furnishing inaccurate particulars of income. Further, the decision of the Hon ble Supreme Court in case of SAS Emerald Meadows (supra) rendered in the context of two separate limbs/charges under section 271(1)(c) therefore does nt support the case of the assessee company. In our considered view, both the provisions of section 271AAB(1)(a) and 271AAB(1)(c) provides for levy of penalty for an identical charge i.e, undisclosed income for the specified previous year which is found during the course of search initiated under section 132 on or after the 1st day of July, 2012. Therefore, we are unable to accede to the contention of the ld AR that the ld CIT(A) has erred in confirming the levy of penalty u/s 271AAB(1)(a) which provides for a separate and independent charge and comes under different section than the provisions of section 271AAB(1)(c) which has been specifically invoked by the AO. 14. The second issue that arise for consideration is whether the ld CIT(A) was well within his pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder clause (c) and levied the penalty under clause (a). All he has done is vary and reduced the levy of penalty for the same charge which remain undisputed. The Coordinate Bench decisions cited by the ld AR in this regard therefore doesn t support the case of the assessee. In our view, the ld CIT(A) acted well within his powers and jurisdiction in varying and reducing the penalty @ 10% as against levy of penalty @ 30% by the AO under section 271AAB of the Act. 16. The next issue that arise for consideration is whether the conditions specified in section 271AAB(1)(a) are satisfied in the instant case and the ld CIT(A) has rightly invoked the said provisions as against residuary provisions of section 271AAB(1)(c) invoked by the AO. 17. The provisions of section 271AAB(1)(a) provides for satisfaction of the following conditions: (a) if such assessee, in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (b) substantiates the manner in which the undisclosed income was derived; and (c) on or before the specified date- (A) pays the tax, together wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its substantiation, the ld. AO would not be justified in levy of penalty u/s 271AAA of the Act. It was submitted that the legal proposition so laid down continues to apply in context of section 271AAB(1)(a) with a variation of levy of penalty @ 10% as against discharge from levy of penalty under section 271AAA(2) of the Act. In this regard, we refer to the various authorities on the subject. 23. The Hon ble Allahabad High Court in case of Radha Kishan Goel reported in 278 ITR 454 in context of explanation 5 to section 271(1)(c) has held as under: 10. Under section 132(4) of the Act, it is the authorised officer, who examines on oath any person, who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing, therefore, it is for the authorised officer to record the statement in his own way. Therefore, it is not expected from the person to state those things, which are not asked by the authorised officer. 11. It is a matter of common knowledge, which cannot be ignored that the search is being conducted with the completed team of the officers consisting of several officers with the police force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by Allahabad High Court in case of Radha Kishan Goel (supra). Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Exception No. 2 while making statement under section 132(4) of the Act. The view taken by the Tribunal as well as Allahabad High Court 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 paid, there would be substantial compliance not warranting any further denial of the benefit under Exception No. 2 in Explanation 5 is commendable. 25. The Hon ble Delhi High Court in case of Emirates Technologies (in ITA No. 400/2017 dated 18.7.2017) in context of section 271AAA has held as under: 3. The CIT(A) in para 4.7 of the order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1000000 Advance Dt.27/04/2013 4 Rs.811000 Advance Dt.14/05/2013 5 Rs.750000 Advance Dt.30/05/2013 6 Rs.200000 Advance Dt.06/06/2013 7 Rs.721000 Advance Dt.29/06/2013 8 Rs.571000 Advance Dt.09/07/2013 9 Rs.300000 Advance Dt.09/07/2013 10 Rs.631000 Advance Dt.23/07/2013 11 Rs.455000 Advance Dt.01/08/2013 12 Rs.1172500 Advance Dt.26/09/2013 13 Rs.600000 Advance Dt.14/10/2013 14 Rs.350000 Advance Dt.28/10/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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