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TMI Blog2016 (10) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... f penalty of Rs. 1,81,07,047/- levied under section 271AAA of the Income Tax Act, 1961 (hereinafter referred to as the Act). The facts as narrated by the ld. CIT (A) in para 3 of his order are as under :- "3. The brief facts of the case are that search and seizure operations were carried out on 24.08.2009 at the business and residential premises of the assessee group. Incriminating evidence was gathered during the search operations. A return of income was filed 12.05.2010 declaring income at Rs. 10,16,16,517/-. The assessment u/s 143(3) was completed on 23.11.2011 at total income of Rs. 25,40,53,070/-. The penalty proceedings u/s 271AAA were initiated at the time of completion of assessment proceedings for levy of penalty on undisclosed income and show cause was issued on 23.11.2011 and the penalty of Rs. 1,81,07,047/- was imposed by the AO vide order dated 11.12.2013." The assessee aggrieved by the order of AO, preferred an appeal before ld. CIT (A), who after considering the submissions deleted the penalty. 3. Now the revenue is in appeal before us. 4. The ld. D/R vehemently argued that ld. CIT (A) was not justified in deleting the penalty. He submitted that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Bench, Jaipur vide their decision in ITA No. 829/JP/2013 (Assessee's appeal) and 847/JP/2013 (Departmental Appeal) dated 26.02.2014 at page 34 in para 11.4 by observing as under (APB-111) : After considering carefully above explanation and further considering that the assessee has duly shown the cash found and admitted as his business income from his regular business activities and further having paid tax and explaining the mode and manner of acquisition of such income in his return of income and during the assessment proceedings, the entire addition made on the basis of appreciation of these documents which are mainly on presumption and assumptions without there being any corroborative material on record deserves to be deleted, especially when the AO has neither appreciated the statements of the assessee properly as well as additional income offered by him. Accordingly , we are left with no option but to delete this entire addition which has been found to have been made based on no corroborative material thereby we allow Ground No. 2 to 2.2 of the assessee and dismiss Ground No. 1 of the Revenue's appeal. Based on these facts the Ld. CIT(A) has deleted the penalty by holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "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 course relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation to section 271AAA. With regard to above stated conditions as enumerated in sub-section (2) of section 271AAA, the assessee had fulfilled the same in following manner thus the penalty could not be levied in the present case as: i) It has not been disputed by the Ld. AO that the assessee has admitted the cash found during the course of search as his undisclosed additional income in the statements recorded during the course of search u/s 132(4) which is very much evident from the observations made in para 4.1 to 4.3 at page 2 of the assessment order. Further in the statements recorded u/s 132(4) the assessee has categorically stated the manner in which such additional undisclosed income was derived. The Question No. 19 and its answer as appearing in para 4.1 of the assessment order is reproduced herein below in this regard and ready reference (APB 133):- प्रश्न 19: आपके व:32, सुभाष मार्ग, सी-स्कीम, जयपुर स्थित निवास ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2;ें। उत्तर 19: मैंने अपने परिवार की विभिन्न व्यावसायिक फर्मों, कम्पनियों एवं प्रोपराइटरषिप कन्सर्न की बै इववो को दिनांक 24.08.2009 तक अपडेट कर लिया है। ऐसे अपडेटेड बे इंसंदबमे की अलग से डीटेल उपलब्ध करवा रहा हूँ जिस ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... जित आय को मानकर करारोपण हेतु समर्पित करता हूँ। From the perusal of the statements, it is crystal clear that the first condition given in sub clause (i) to sub section (2) of section 271AAA has duly been satisfied by the assessee. However, the Ld. AO failed to properly appreciate the statements of the assessee, which has been remarked even by this Hon'ble Tribunal in its order dated 26.02.2014 wherein, the Tribunal in para 11.4 at page 34 (APB-111) has categorically observed that assessee has declared additional income from his regular business activities. Thus, it is seen that even the Hon'ble Tribunal has taken cognizance of the fact that the Ld. AO has failed to consider the statements of the assessee in an appropriate manner. Hence, Ld. AO has grossly erred in alleging that the assessee could not specify the manner of deriving the undisclosed income. ii) With regard to substantiating the manner of deriving such undisclosed income assessee in clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure of undisclosed income and even the manner of deriving such income has been explained by assessee in his statements recorded u/s 132(4), to which, kind attention of the Hon'ble Bench has already been brought in the previous paras. It may kindly be noted that the Hon'ble ITAT, Mumbai Bench, Mumbai in the case of ACIT Vs. Kanakia Spaces Pvt. Ltd. ITA No. 6763/Mum/2011, in an appeal filed by department, has made the following observations: 3.1 Ld. CIT(A) after considering the submission deleted the penalty by stating as under: I have carefully considered the submissions made by the appellant in respect of the penalty levied by the ld.AO. It is seen that the ld.AO has written two sentences at para- 8 to conclude that the appellant has not been able to substantiate the source of acquisition of the movable assets. The fact of the matter is that the requirement on the part of an assessee to substantiate the source of income cannot be taken to mean that all evidences in the respect has to be produced. The very fact that the disclosure is made in respect of undisclosed income, all that can be required of an assessee is that the proximate nature of acquisition can be mentioned by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther denial of the benefit. 4.1 In this case, the assessee was asked to explain the entries in the work-in progress sheet and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived. The provision of clause -2 of Explanation-V appended to section 271(1)(c) are similar to section 271AAA(2). The scope and meaning has been lucidly explained by the Hon'ble Allahabad High Court in the case of CIT v. Radha Kishan Goel (2005) 278 ITR 454 (All), which was followed by the Honb'le Gujarat High Court in the above referred case. In view of the above principles laid down, we are of the opinion that immunity provided under s/s.(2) of section 271AAA is applicable and accordingly, the order of CIT(A) does not require any modification. Revenue's grounds are rejected. In the case of CIT v. Radha Kishan Goel (supra), it has been held as under: Penalty - Search & Seizure - Concealment of Income - Law Applicable - Effect of Explanation 5 to section 271(1)(c) - Assets found during search deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied in the facts and circumstances of the present case, more particularly in view of the judicial pronouncements set out as above wherein it has specifically been held that mere non-statement of manner of deriving undisclosed income does not make assessee liable for penal action u/s 271AAA, though in the case in hand assessee has duly stated and proved the manner of deriving such undisclosed income. Reliance is also placed on the following ITAT decisions: 155 TTJ 98 Asstt. CIT Vs. A.N. Annamalaisamy (HUF) (Chennai 'C') Penalty u/s 271AAA - Conditions precedent - Disclosure of income in revised return - Assessee having offered the whole of undisclosed income admitted by him at the time of search in the revised return filed by him before the completion of assessment, and paid the tax thereon along with interest and explained that the undisclosed jewellery was acquired over a period of time, penalty u/s 271AAA was not leviable. 14 ITR (Trib.) 608 DCIT Vs. Pioneer marble & Interior Pvt. Ltd. (Kol.) Penalty--Search and seizure--Assessee making payment within permissible time upon receiving notice under section 156--Penalty cannot be imposed--Incometax Act, 1961, s. 271AAA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly found and annexurized as AS-1. These documents contained specific notings regarding names or persons and amounts advanced or received. Given this evidence found during course of search and admitted to by the assessee u/s 132(4), it cannot be said that information was not available with the Department regarding specific transactions, names of persons etc. to whom the amounts related. Therefore, in absence of any specific finding or evidence with reference to the seized material or lacuna in these statements with reference to the specific information in the seized documents it cannot be said that the manner of earning the income was not substantiated. Thus, the imposition of penalty u/s 271AAA appears to be arbitrary on part of the AO. Reliance is placed on the finding of the Hon. ITAT, Cuttack Bench, in the case of Pramod Kumar Jain vs. DCIT (2012) 77 DTR 244. The facts of the case are that the AO initiated penalty proceedings in AY 2008-09. The AO after issuing show cause u/s 271AAA observed that the assessee has made disclosure for respective amounts but failed to specify manner in which such income had been derived and therefore imposed penalty being 10% of amount surrendere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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