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TMI Blog2019 (8) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 271AAA(2), the assessee cannot escape the penalty under section 271AAA(1). Since we have already answered that the assessee failed to satisfy the one limb of first condition of section 271AAA(2), i.e., admission of undisclosed income in a statement u/s 132(4), the assessee is liable for penalty under section 271AAA. The grounds of the appeal are accordingly dismissed. - ITA No.4978/Del/2016 - - - Dated:- 31-7-2019 - Shri O.P. Kant, Accountant Member And Shri K.N. Chary, Judicial Member For the Appellant : Dr. Rakesh Gupta And Sh. Somil Aggarwal, Advocates For the Respondent : Sh. S.S. Rana, CIT(DR) ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 08/08/2016 passed by the Ld. Commissioner of Income-tax (Appeals), Gurgaon [in short the Ld. CIT(A) ] for assessment year 2010-11 in relation to penalty under section 271AAA of the Income-tax Act, 1961 (in short the Act ). The grounds raised by the assessee are reproduced as under: 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the position of the additions, the Ld. Assessing Officer issued show cause notice to the assessee as why the penalty in respect of amount of ₹ 25 lakh surrendered by the assessee in the return of income and for the addition of ₹ 19,60,546/- sustained by the Ld. CIT(A), might not be levied. The assessee filed detailed submissions contesting that complete details of the various head relating to which declaration of undisclosed income was made, was already submitted. Regarding the addition of ₹ 19,60,546/- on account of unexplained jewellery, confirmed by the Ld. CIT(A), the assessee submitted that in view of the circular (supra ) of the CBDT in various judicial decisions, the addition itself is unwarranted and therefore no penalty should be levied under section 271AAA of the Act. After considering the submission of the assessee, the Assessing Officer held that the assessee failed to specify the manner of deriving said income declared against investment in jewellery and property and substantiate it, and accordingly he imposed a penalty of ₹ 4,46,055/- under section 271AAA of the Act at the rate of 10 percentile of the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f said amount. 6. The next argument which was taken by the Ld. counsel of the assessee that the assessee had included ₹ 25 lakh surrendered amount in her return of income and has paid taxes and no question was asked during search, regarding the manner of earning of this income and thus, the penalty in terms of section 271AAA could not be levied. The Ld. counsel referred to pages 15- 18, 18A-18B of the paper book and shown copy of surrender letter. The Ld. Counsel also filed a copy of the statement of the assessee dated 08/09/2009 recorded under section 132(4) of the Act. The Ld counsel relied on following decision in support of the proposition that when amount has been surrendered and taxes have been paid and no specific questions have been asked, then there is no question of Levy of penalty under section 271AAA of the Act: 1. Decision of the Tribunal in ITA No.1099/Del/2015 in the case of Sh. Vikas Aggarwal for assessment year 2011-12. 2. Decision dated 5/02/2018 of the Hon ble Gujarat High Court in ITA 823 along with 824 of 2017 in the case of PCIT, Surat Vs. Shahlon Silk Mills Private Limited. 7. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises of the assessee and other sister concerns. He further submitted that contention of the assessee that said surrender was made only in order to buy peace of mind and to avoid litigation is not sufficient to save herself from the penalty under section 271AAA of the Act as held in the decision of the Tribunal in the case of Narsi Iron Steel P Ltd. Vs. DCIT reported in (2019) 102 taxmann.com 333 (Delhi-Trib). 10. The Ld. DR emphasized that the assessee has not fulfilled first two conditions of section 271AAA(2) of the Act and thus the Ld. CIT(A) is justified in upholding the penalty on the amount of ₹ 25 lakh, surrendered on behalf of the assessee. 11. We have heard the rival submissions and perused the relevant material on record. In view of the provisions of section 271AAA(1) of the Act, it is evident that the Assessing Officer may levy penalty under the said section in case of undisclosed income declared during search for specified previous year. But, if the assessee satisfy the three conditions of section 271AAA(2), the assessee can save itself from the from rigours of section 271AAA(1) and save itself from the penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 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; 11.2 Thus, for any item of income to be undisclosed income for the purpose of section 271AAA of the Act it must be represented by any money, Bullion, jewellery or other valuable article or thing or any entry in the books of accounts or other documents or transaction found in the course of the search, which is either not been recorded in the books of accounts or not disclosed to the Income Tax Department, before the date of the search. Similarly any item of expense recorded in books of account or other documents if found to be false, same would also be the undisclosed income. 11.3 In the instant case, in search proceedings, Sh. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Que. 2 - I am sharing you all the documents seized/impounded from different residential and business premises during the course of search operation on 02.09.2009 and 03.09.2009. Your are requested to explain the contents and nature of these documents. Ans.- I have seen all the documents and most of these are recorded in the books of account. However, there are certain documents, cash and jewellery found which are not recorded in the books of account and therefore I am surrendering an amount of ₹ 15.01 crores (Rs. Fifteen crores one lakh) as undisclosed income. This disclosure is on behalf of all group companies and all individuals where search operation have been undertaken of our group except Sh. Darsh Mehtani Sh. Aman Mehtani relating to the property transaction and other personal matters which are not part of any business person-wise or year-wise details of the above surrender shall be submitted later on. I am making this disclosure in the presence and with the consent of sh. S.B. Sardana, Sh. Manav Sardana and Sh. Tarun Lamba and who are also signing the statement. Further, it is submitted that the above disclosure is being mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / surrendered the sum mentioned in the detailed letter dated 07/09/2009. We have also seen the statement of the assessee recorded under section 132(4) of the Act filed separately before us. From these statements and the letter filed before the Assistant Director of the Income-tax (investigation), it cannot be inferred that the assessee has admitted the undisclosed income of ₹ 25 lakh in a statement under section 132(4) of the Act. The requirement of law as mentioned section 271AAA of the Act is that the assessee should admit the undisclosed income, in a statement u/s 132(4) of the Act. The statement made by another person can t substitute the statement by the assessee. 11.9 We also note that Shri Jagjeet Singh in his letter dated 07/09/2009, in relation to the assessee has only explained the application of the income in property or advanced for the property and in the jewellery, but not explained the manner of deriving the said income. The Tribunal in the case of Narsi Iron Steel P. Ltd. Vs. DCIT (supra) has relied on the decision of the Hon ble High Court in the case of Smt. Ritu Singhal (supra) wherein it is observed that disclosure to buy peace on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16-12-2003, in the case of a sister concern of the assessee.' 16. That the income which was ultimately brought to tax pursuant to the disclosure made, which was voluntary on the part of the assessee is stating the obvious. The assessee merely stated that the sums advanced were undisclosed income. However, 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 (under Section 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. 17. For the above reasons, it is held that the impugned order is in error; the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the 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) pays the tax, together with interest, if any, in respect of the undisclosed income 8. Under section 271AAA(2)(i) of the Act, penalty @ 10% of the undisclosed income shall not be imposed if the 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 substantiates the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Pr. CIT Vs. Mukesh Bhai Raman Lal Tax Appeal 434 of2017 2. PCIT Vs. Emirates Technologies Pvt. Ltd. [2017] 399 ITR 189 (Delhi) 3. PCIT V s. Sandeep Gupta (DHC) ITA No. 967-68/2017 dated 13.11.2017 4. PCIT VS. Swapna Enterprise [2018] 401 ITR 488 (Gujrat HC) 5. Smt. Raj Rani Gupta VS. DCIT (Delhi I.T. Trib.) ITA No. 3371/De1/2011 dated 30.03.2012 6. ACIT V s. Shreenarayan Sitaram Mundra [2017] 83 taxmann.com 231 (Ahmedabad- Trib) 7. Neerat Singal Vs. ACIT [2013] 37 Taxmann.Com 189 (Delhi- Trib.) 8. ACIT Vs. Bhavi Chand Jindal (Delhi I.T. Trib.) ITA No. 6810/De1/2015 dated 17.04.2018 9. DCIT Vs. Ashok Nagrath [2015] 57 taxmann.com 15 (Delhi-Trib.) 10. Ashwani Kumar Arora Vs. ACIT [2017] 81 taxmann.com 440 (Delhi-Trib.) 11. Concrete Developers Vs. ACIT [2013] 34 taxmann.com 62 (Nagpur- Trib.) 12. Sita Ram Gupta Vs. ACIT [2014] 48 taxmann.com 327 (Delhi- Trib.) 13. CIT Vs. Radha Kishan Goel [2005] 278 ITR 454 (Allahabad- Trib.) 14. CIT Vs. Mahendra C. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 (under Section 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 271 AAA (2) were satisfied by the assessee. 14. However, the instant case is on better footing than Smt. Ritu Singhal (supra) case because in reply to the specific query raised by the AO during search proceedings, assessee has expressed his inability to explain the discrepancy in the stock in order to substantiate the manner in which income in question has been derived rather categorically stated that he has made voluntary 9 ITA No.5051/Del./2013 surrender of ₹ 21 crores in order to buy peace of mind and avoid litigation. So, when the assessee has failed to specify the manner and substantiate the manner in which the undisclosed income was derived rather embark upon the mercy plea that he is making surrender to buy peace of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.11.2011 submitted that, The declaration of undisclosed income at the time of search made by the assessee to get peace and to avoid litigation. All the income declared by the assessee has been duly reflected in the return of income filed at application tax with interest had been fully paid by the assessee Your goodself may kindly appreciate that in spite of the no evidence for undisclosed income/investment relating to assessee found during the search, declaration of undisclosed income was made by the assessee to buy peace. Such income was earned by the assessee from the property / real estate transactions which remain unrecorded and the total income surrendered / declared was appropriated in the case of company Imperial Auto Industries Ltd. . Mr. Jagjit Singh, Mr. S.B. Sardana and other family members. In view of the above submission, evidence found during search and declaration made by the assessee and other family members. No penalty provision u/s 271 AAA of the I.T. Act, 1961 are attracted in case of the assessee. Your goodself is requested that under such circumstances no penalty u/s 271 AAA may kindly be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /undisclosed income found during search. In that case also it was noted that the assessee admitted undisclosed income in his statement recording during search and paid tax alongwith interest on the undisclosed income. The Tribunal considered various decisions and ultimately considering the decision in the case of Neeraj Singhal vs ACIT (ITA No 337/Del/2013) and dismissed the appeal of the Revenue. This matter was carried in appeal before the Hon ble High Court, wherein vide order dated 18.07.2017 (ITA No. 400/2017) the Hon ble High Court concurred with the order of the Tribunal identical are the facts before us. Respectfully following the order from Hon ble Delhi High Court we delete the penalty so imposed u/s 271AAA of the Act. The appeal of the assessee is allowed. 11.14 But the Ld. DR has relied on the decision of the Hon ble Delhi High Court in the case of Ritu Singhal (supra). In the said case, Hon ble Delhi High Court has referred to the decision of the Hon ble Gujarat High Court in the case of Mahendra C Shah (supra), however, held that by mere statement that sum surrendered during the search was undisclosed income without disclosing the source of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... views are possible on an issue the view which is favourable to the assessee has to be accepted in view of the decision of Hon'ble Supreme Court in the case of Vegetable Products Ltd. (supra). Since the assessee in the instant case has surrendered additional income and paid the taxes due thereon and no specific query was raised by the search party at the time of search to substantiate the manner of earning such income, therefore, following the decision of the Hon ble Gujarat High Court cited (supra) and various other decisions relied on by the Id. CIT(A), we are of the considered opinion that the penalty u/s 271 AAA is not leviable in the instant case. 11.17 Respectfully following the above decision of the Tribunal and the decision of the Hon ble Gujarat High court in the case of Sh. Mahendra Shah (supra), we are the view that the assessee cannot be said to have not satisfied the condition of specifying the manner of deriving undisclosed income as per section 271AAA of the Act in respect of surrender of amount of ₹ 20 lakh and ₹ 5 lakh against investment in property and jewellery respectively. 11.18 But, if the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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