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2019 (6) TMI 659 - AT - Income TaxPenalty u/s 271(1)(c) - voluntary action of appellant in declaring additional income once in the revised return and again in response to notice u/s 153A - undisclosed expenditure towards capital cost/purchase of land - validity of Documents found and seized during the course of search - owner of the undisclosed income - HELD THAT:- Admission and surrender has been made by the assessee in his individual capacity and not by the companies/firms, the second limb can only be said to be satisfied in the instant case. In the instant case, the first limb is not satisfied, therefore, the penalty cannot be levied as the requirement is satisfaction of both the limbs individually and cumulatively. Admittedly, the assessee is a partner in M/s Manglam Vardhman Developers and also a Director in M/s Richwell Enterprises Pvt. Ltd. However, by merely becoming a partner in a firm or a director in the company, the transactions undertaken by the firm/companies will remain the transactions of the firm/companies even though the same have been executed/undertaken by the partner/director in his fiduciary capacity. The assessee and his son were not doing any construction business in his individual capacity rather the business of construction of residential complex and other related activities have been carried out by the companies/firms wherein the assessee and his son were partner/Director. Therefore, basis the statements of the assessee and his son, other documents/transactions found during the course of search and even as per the tax filings which have been accepted by the Revenue, we find that that it is the companies/ firms and not the assessee and his son which are found to be the owner of the undisclosed income. The fact that the assessee and his son have declared the undisclosed income in their individual return of income and have paid taxes thereon and the fact that the Revenue has also accepted the same, the same is true as far as the quantum proceedings are concerned and which has now attained finality, however, when it comes to penalty proceedings, the provisions have to be read strictly and only where the conditions specified therein are satisfied, the penalty can be held justified. In explanation 5A to section 271(1)(c), it talks about “where in course of search initiated under section 132 on or after 1st day of June, 2007, the assessee is found to be the owner of any income based on any entry in any books of account or other documents or transactions” and in section 271AAB, it talks about “any income of the specified previous year represented wholly or partly by any entry in the books of accounts or other documents or transactions found during the course of search u/s 132” and therefore the reasoning applied therein applies equally in the instant case and therefore, capital expenditure and payment towards purchase of land cannot be held as undisclosed income in the hands of the assessee. Assessee cannot be fastened with the penalty so envisaged under explanation 5A to section 271(1)(c) and the order of the ld CIT(A) directing deleting of penalty is upheld for the reasons as stated above. - Decided in favour of assessee.
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