TMI Blog2014 (10) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... come has been derived - mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable. Penalty u/s 271AAA is not leviable if an assessee, in his statement recorded during the search u/s 132 of the Act, admits the undisclosed income, specifies and substantiates the manner in which it has been derived and pays the taxes due thereon, together with interest - the assessee has paid due tax on the admitted undisclosed income - there is no specific format/procedure prescribed in the Act for specifying and substantiating an undisclosed income - The statement of the assessee, specifying the manner in which the undisclosed income was derived and substantiated, did not face any rebuttal or rejection at the hands of the AO - the assessee had entered into various transactions of sale/purchase of land during the concerned period - The income arising out of the transactions was declared - This included the undisclosed amount - the assessee has substantiated the manner in which the undisclosed income was derived and that being so, the condition laid down by Section 271AAA (2) (ii) has been duly met - CIT (A) erred in deciding this issue against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner by way of preparing the books of accounts and obtaining the Tax Audit Report. 2. The facts are that in this case, a search and seizure operation was conducted on 29.1.2009 covering the business premises of the assessee. The assessee submitted that the return filed for the instant assessment year u/s 139(1) of the Act on 30.6.2009 declaring total income of ₹ 6,46,60,107/- be considered as return filed in response to Section 153A. Assessment was completed u/s 153B r.w.s. 143 (3) of the Income Tax Act at a total income of ₹ 6,49,36,707/- on 31.12.2010. While completing the assessment, penalty proceedings u/s 271AAA of the Act was initiated in respect of surrender of ₹ 6,40,00,000/- made by the assessee on account of cash found at different places belonging to the assessee. The penalty was levied u/s 271AAA at ₹ 64,00,000/-. 3. While levying the penalty, the AO observed, inter alia, that in the present case, penalty u/s 271AAA of the IT Act can be avoided, if all the following conditions are satisfied:- (a) If the assessee in a statement u/s 132 (4) in the course of the search admits the undisclosed income; (b) Further, he specifies the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income had been derived, had also not been substantiated; that when he was asked to furnish the evidence regarding these admitted transactions, the assessee had stated that the dealings were in cash and the transactions stood completed; that this statement was not sufficient; that cash of ₹ 7,20,90,395/- had been found at the premises of the a ssessee, apart from incriminating documents containing transactions and sale/purchase of land; that therefore, something more was required on the part of the assessee to elucidate the manner of earning such a large income not disclosed in his return of income; and that therefore, the provisions of Section 271AAA of the Act stood correctly applied. Applying Dy. CIT vs. Pioneer Marbles Interiors (P) Ltd. (2012) 144 TTJ (Kol) 663, the ld. CIT (A) held that the assessee had not discharged the onus of substantiating the manner in which the income had been derived, due to which the condition laid down in Section 271AAA (2) (ii) remained unfulfilled. 6. The ld. Counsel for the assessee, challenging the impugned order, has contended that the ld. CIT (A) has erred in upholding the imposition of penalty levied on the assessees u/s 271AAA o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an amount of ₹ 540 lacs earned as profit from land transactions. It has been submitted that the statement recorded u/s 132 (4) of the Act was not that of the assessee but of his son. Dr awing attention to page 57 of the assessee s paper book ( APB for short), the ld. DR has pointed out that in the chart showing the bifurcate on of the amount of income surrendered, as filed before the AO in the assessment proceedings, in the column particular source of income, if any , the assessee had merely stated that he had earned this money by way of unde rtaking transactions of purchase sales of land/agricultural lands. In all such cases written documents are not available. Furthermore, the entire transactions was in cash. The modus operandi normally employed was to enter into an agreement for purchase and even before the final exe cution of the document transferred the amount by way of direct agreement be tween the original seller and the purchaser. And the difference on these facts is taken as income. It has been thus contended by the ld. DR tha t so, nowhere was the manner of deriving the undisclosed income explained by the assessee; that no details were given; that whereas u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Annexure A-2, at page-5 shows that Star Wire has paid ₹ 200 lakhs for the purchase of 25 acres agricultural land at village Prithla The. Palwal Distt. Faridabad. The rate agreed upon is ₹ 56 lakhs per acre. The said land has been sold in two parts, five acres land @ ₹ 75 lacs per acre and 20 acre land was sold @ ₹ 70 lacs per acre. The transaction was completed. The Profit earned at ₹ 375 lacs only in cash. The other transactions are also of the same nature. Ques.4 Do you have any evidence that these transaction relate to sale/purchase of land i.e. if any agreement to sale, sale/purchase deed available with you? Ans: No. The dealings were in cash and the transactions stands completed. 10. It is evident on record that in the return filed for the year under consideration, the assessee had declared income of ₹ 6,46,60,000/-. An amount of ₹ 6.40 crores was surrendered. The income was assessed at ₹ 6,49,39,700/-, or, say, at around the income declared. 11. It is correct, as, again, patent on record that the particulars of the transactions, i.e., the names and addresses of the parties to the transactions and the details of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd surrender of his income, during the course of search further litigation may be avoided and the Revenue may get the tax and interest, etc., at an earliest and the assessee may be saved from further litigation. 10. Under section 132 (4) of the Act, it is the authorized 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 authorized 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 authorized 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. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured, harassed and put to a mental agony that he loses his normal mental state of mind and at that stage it cannot be expected from a person to preempt the statement required to be given in law as a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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. 15. In Neerat Singal (supra) (CLPB 60-77), following Radha Kishan Goel (supra) and Mahendra C. Shah (supra), penalty levied u/s 271AAA of the Act was deleted. While doing so, it was held, inter alia, that: 16. In view of above facts of the present case wherefrom it is evident that during the course of search proceedings the authorized officer of the department had not raised any specific query regarding the manner in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and the names and addresses of the parties to the transactions. In both the matters, the declared income was accepted as such by the department itself. In both the matters, due taxes were paid. In both the matters, surrenders were made. In both the matters, what was inquired of the assessees was duly replied to by them. The answer to the question of specifying the manner in which the undisclosed income had been derived and substantiated, was not rejected by the AO. In both the matters the authorized officer did not ask any other specific question of the assessees. No decision contrary to the above decisions has been cited before us. 18. Sections 271AAA (1) and (2) of the Act reads as follows:- (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 u/s 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 percent of the undisclosed income of the specified previous year. (2)Nothing contained in sub-sec. (1) shall apply if th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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