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TMI Blog2016 (5) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... ll of the grounds of appeal before or during the course of the hearing of the appeal." 2. The facts in brief are that a search and seizure action under section 132 of the Income-tax Act, 1961, was carried out in the case of M/s. Bhushan Steel group of cases on March 3, 2010. The case of the assessee was also covered under section 132 of the Income-tax Act, 1961. The assessee had filed the return of income for the assessment year 2010-11, electronically, declaring an income of Rs. 20,47,14,190 on July 31, 2010. The notice under section 143(2) was issued and served on the assessee on January 13, 2011. Another notice under section 143(2) was issued on February 11, 2011. Thereafter, order under section 143(3) was passed on December 30, 2011, assessing the total income of Rs. 20,47,14,190 at the returned income. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had made the disclosure of undisclosed income earned during the financial year 2009-10 (relevant to the assessment year 2010-11) to the extent of Rs. 20 crores during the course of search and post-search proceedings on the basis of the seized material found during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the relevant records available with us especially the impugned order passed by the learned Commissioner of Income-tax (Appeals). We find that the learned first appellate authority has elaborately discussed the issue in dispute by considering the submissions of the assessee and adjudicated the issue in dispute, vide paragraphs 3.1 to 3.5 at pages 2 to 14 in his impugned order. The said relevant paragraphs of the impugned order are reproduced as under : "3.1 The only ground of appeal is against the penalty of Rs. 2,00,00,000 imposed under section 271AAA. The submissions filed on behalf of the appellant are as under : 'The reasons and arguments put forth by the learned Assessing Officer for levying the said penalty are reproduced as under : "(1) Smt. Ritu Singal during the course of search disclosed Rs. 20,00,00,000 as her undisclosed income. In the written submissions, the assessee has only vaguely stated that the money was derived out of property transactions and forward market transactions for which no record whatsoever were maintained. However, section271AAA of the Income-tax Act uses the word 'substantiates the manner' with respect to the manner of deriving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on behalf of the appellant : '(1) A search under section 132 of the Income-tax Act, 1961, took place at the residential and other premises of the appellant and various family members of the group on March 4, 2010, wherein an aggregate disclosure of additional income for the assessment year 2010-11 of Rs. 200 crores was made for the entire group out of which Rs. 20 crores was made by the appellant herself. (2) The amount surrendered represented additional income earned by the appellant as a result of various forward/speculative and property transactions carried out by her during the period from April 1, 2009, to March 2, 2010, (relevant to the assessment year 2010-11). (3) During the course of the search at the residential premises of the appellant on March 4, 2010, certain documents relating to transactions in properties undertaken by her were found and seized as per page 81 of annexure A-3 in SR-4. As per the said papers the appellant had an outstanding of a sum of Rs. 16,00,00,000 from various persons which was duly disclosed as additional income for the assessment year 2010-11 while making a statement under section 132(4) of the Income-tax Act, 1961. As per the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It should be specifically and pertinently noted here that that the said documents and the consequent surrender was duly accepted (both with respect to the quantum and the manner in which the income had been earned) during the investigation as well as the assessment proceedings. In fact a review of the entire sequence and record of proceedings would make it undoubtedly and emphatically clear that no further doubt or question arose in the minds of the authorities at any stage to question further the manner in which the income had been earned/derived and the need for any further clarification or enquiries in this regard. (7) The relevant part of section 271AAA of the Income-tax Act, 1961 on the basis of which penalty has been levied against the appellant reads as follows : '271AAA. (1) The Assessing Officer may, notwithstanding anything contained 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, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of levy of penalty is whether the manner in which the, undisclosed income has been derived is specified and substantiated, which question in the instant case is undeniably and undisputedly settled in favour of the appellant, as would be clear from the foregoing discussion and as further amplified hereinafter. (11) In order to escape the rigours of penalty under section271AAA, of the Income-tax Act, 1961, an appellant is required to specify and substantiate the manner in which the undisclosed income has been derived. The question of specifying the manner in which the income has been derived is duly answered with reference to the fact that the same is relatable to undisclosed forward/ speculative transactions and property transactions carried out by him. In so far as the question of substantiating, i.e., providing facts to support the surrender made and the manner in which the income has been derived is considered the said test stands duly affirmed by the documents seized during the course of search which duly prove the fact of undisclosed income having been derived from the forward/ speculative and property transactions. It should be remembered here that the appellant is an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no stage of the investigation or assessment proceedings has any doubt been raised as to the quantum of the amount surrendered, or the manner in which the same has been arrived or further queries raised asking the appellant to substantiate and "specify" and "substantiate" the same further nor do the contents of the assessment order exhibit any such adverse conclusion in this regard specially keeping in mind that it was a block assessment carried out pursuant to a search under section 132 which entailed a complete, thoroughly and exhaustive investigation of the entire case. The fact that the amount surrendered has been accepted suo motu by the Department by itself leads to the irrefutable conclusion that the question of specifying and substantiating the manner in which it has been earned has been answered to the satisfaction of the investigation as were as assessing authorities. Moreover, it needs to be understood that in the absence of any specific format/procedure prescribed in the Act for specifying and substantiating the undisclosed income, the fact that the same has accepted, without any variation by the learned Assessing Officer is by itself enough evidence of the said criteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Gujarat High Court in the case of CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj), followed by the learned Commissioner of Income-tax (Appeals), it has been held that it is not required to specify the manner in which the income was earned in respect of the amount offered to tax in the return of income filed pursuant to search action by paying taxes thereon for availing immunity from penalty under Explanation 5 of section 271(1)(c) of the Act. The same decision has been relied upon by the learned authorised representative before us. Since the issue raised is fully covered by the decision of the hon'ble Gujarat High Court in the case of CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj) followed by the learned Commissioner of Income-tax (Appeals), we are not inclined to interfere with the first appellate order in this regard. The same is upheld. The grounds are accordingly rejected.' (15) It would be relevant to mention here that Explanation 5 to section 271(1)(c) provided that no penalty could be levied in respect of undisclosed income in a case where the appellant "specifies" the manner in which the income has been derived and pays the tax, together with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed method to indicate the manner in which income was generated when the definition of "undisclosed income" has been defined in the Act itself when no income of the specified previous year represented "either wholly or partly" which onus lay upon the assessee stood discharged. In view of the above, we are of the considered view that the levy of penalty under section271AAA in the instant cases are not justified and as such, we cancel the penalty so levied under section 271AAA for the assessment years under consideration in the case of respective assessees. (17) The above view also has been subsequently endorsed by various Benches of the hon'ble Income-tax Appellate Tribunal in the following cases : (i) Mothers Pride Education Personna P. Ltd. v. Deputy CIT (I. T. A. No. 3372/Delhi/2011, dated October 12, 2012). (ii) Deputy CIT v. Smt. Sulochanadevi A. Agarwal (I. T. A. No. 1052/Ahd/2012, dated July 20, 2012). It is respectfully submitted that the appeal against the levying of penalty of Rs. 2,00,00,000 may kindly be decided in favour of the appellant in view of the averments made above.' 3.2 Section 271AAA was introduced with effect from April 1, 2007. Thereafter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law applicable is as per column C in the table given in paragraph 3.3 above. The Assessing Officer has held in this case that the appellant has not substantiated the manner in which the undisclosed income was derived to the extent of Rs. 90,00,00,000 and has also failed to disclose the sum of Rs. 35,00,00,000 in the statement recorded under section 132(4). The Assessing Officer, therefore, imposed penalty at 10 per cent. on the entire amount of Rs. 125,00,00,000. What would constitute "substantiates" in section271AAA(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 January 31, 2010, was found to be Rs. 69 crores and in another documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of recording of statement under section132(4) about the manner in which the undisclosed income has been derived and about its substantiation, the Assessing Officer was not justified in imposing penalty under section 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 Income-tax Appellate Tribunal, I am bound by the ruling. The appeal is, therefore, allowed and penalty imposed is cancelled." 7.1 After going through the aforesaid order passed by the learned Commissioner of Income-tax (Appeals) on the issue in dispute as well as the orders of the Tribunal relied upon by the learned Commissioner of Income-tax (Appeals) while deleting the penalty in dispute, we are of the view that the learned first appellate authority has passed a well reasoned order which does not need any interference on our part. Therefore, respectfully following the precedents of the Income-tax Appellate Tribunal as mentioned in the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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