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2015 (3) TMI 797 - ITAT DELHI

2015 (3) TMI 797 - ITAT DELHI - TMI - Penalty imposed by AO u/s 271AA - surrender of ₹ 50 crores, as the assessee had not substantiated the manner in which the undisclosed income was derived with any corroborative evidence - CIT(A) deleted penalty levy - Held that:- Assessee replied all the questions of revenue authorities in the statement recorded on 4.3.2010 u/s 132(4) of the Act. We further note that during the assessment proceedings, the assessee in his reply dated 25.7.2011, further s .....

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> Under these facts and circumstances of the case and in the light of decision of ITAT Delhi “E” Bench in the case of Neeraj Singal[2015 (3) TMI 680 - ITAT DELHI], we are of the opinion that the present case is squarely covered in favour of the assessee by the decisions of of CIT vs Radha Kishan Goel (2005 (4) TMI 47 - ALLAHABAD High Court ), by the decision of Hon’ble Gujarat High Court in the case of CIT vs Mahendra C. Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) in favour of the assessee and .....

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sclosed income has been derived which cannot be ignored. Therefore, we reach to a logical conclusion that the CIT(A) was right in granting relief for the assessee in deleting the penalty and we are unable to see any controversy or any other valid reason to interfere with the same - Decided in favor of assessee. - ITA NO.5261/DEL/2013 - Dated:- 9-3-2015 - Shri Pramod Kumar And Shri Chandramohan Garg JJ For the Appellant : Shri A. Misra, CIT DR For the Respondent : Shri Ashwani Kumar, CA & Adi .....

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the assessee had not substantiated the manner in which the undisclosed income was derived with any corroborative evidence. 3. We have heard arguments of both the sides and carefully perused the relevant material placed on record. Briefly stated, the facts giving rise to this appeal are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 was carried out in the case of Bhushan Steel Group of cases on 3.3.2010. On the basis of material seized during search, the assessee appella .....

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ee preferred an appeal before the CIT(A) which was allowed by passing the impugned order by relying upon the order of ITAT Delhi Bench E in ITA No. 337/D/2013 for AY 2010-11 in the case of Neerat Singal vs ACIT dated 24.6.2013. Now, the revenue is before this Tribunal against the order of the first appellate authority which deleted the penalty and allowed the appeal of the assessee with the sole grounds as reproduced hereinabove. 5. Ld. DR submitted that the CIT(A) has erred in deleting the pena .....

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resent case is squarely covered in favour of the assessee by the order of the Tribunal (supra). 6. On careful consideration of above submissions of both the parties, we note that the CIT(A) has granted relief for the assessee by following his own decision dated 17.12.2012 in the case of Shri Neerat Singal (supra) which was upheld by ITAT E Bench Delhi by order dated 24.6.2013. The relevant operative part of this order reads thus:- 11. When we compare Explanation 5 to section 271(1)© of the .....

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sclosed so far in his return of income to be furnished before the expiry of time specified in sub section (1) of section 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income, then the assessee for such income will not be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income to attract the penalty therein. Similarly under the provision .....

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nal provisions we find that one requirement is common for non attraction of the penal provisions under both the sections i.e. if the assessee in his statements recorded u/s 132(4) of the Act admits the undisclosed income and specifies in the statement the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. The only additional requirement in the case of section 271AAA in this regard is that the assessee will also have to substan .....

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but before 1.7.2012. Thus the intention of the legislature is clear to this extent that in a case wherein search was initiated before 1.6.2007, provisions u/s 271(1)© will be applicable and in search initiated after 1.6.2007 (but before 1.7.2012) provisions u/s 271AAA of the Act will be applicable. These provisions are thus not applicable simultaneously but these are period specific. As discussed above, the only additional requirement for non attraction of penal provision u/s 271AAA of the .....

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Del/2013 9 concealed income in the course of search and specified the manner in which such income stood derived. In this statement the Karta also surrendered an amount of ₹ 42,32,000/-. The Karta however neither filed return of income u/s 139 (1) on due date nor paid due tax on the surrendered income. Later on he also retracted from his statement recorded u/s 132(4) about surrender. The Hon ble Supreme Court after deliberating in detail on different Explanations to section 271(1)© has .....

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on 5 except payment of tax in time. Hon ble Supreme Court pleased to hold that no time limit has been prescribed for payment of tax under clause 2 of Explanation 5 and the assessee having paid tax upto the date of payment in respect of the undisclosed income surrendered by it in the course of search, all the three conditions laid down in clause 2 of Explanation 5 to section 271(1)© stood fulfilled and therefore the assessee is entitled to immunity under clause (2) of Explanation 5 to sectio .....

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on 5 (2) to section 271(1)© and no penalty would be leviable under said section.. Both these questions have been replied in affirmative in the decision of the Hon ble Allahabad High Court. As per the decision mere non statement of manner in which undisclosed was derived would not make Explanation 5 (2) to section 271(1)© inapplicable. Similarly in a case manner in which income has been ITA No-337/Del/2013 10 derived has not been stated in statement u/s 132(4) but is stated subsequently .....

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decision of Hon ble Gujarat High Court, Pune Bench of the Tribunal in the case of DCIT vs. Shri Inderchand Surajmal Bothra (supra) wherein penalty u/s 271(1)© was levied 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 to search action by paying taxes thereon for adopting immunity from penalty under Explanation 5 of section 271(A) (C) of the Act. The cuttak Bench of the Tribunal in the cas .....

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undisclosed income under the head income from business in the returns filed by them and that was accepted by the department by passing the assessment orders accordingly, therefore the case of the assessee falls exactly within the purview of sub section 2 of section 271AAA. Thus the impugned penalty levied contrary to the provisions contained in section 271AAA (2) is not sustainable. The penalty was accordingly deleted. In the case of Shri Pramod Kumar Jain and another vs. JCIT (supra) before the .....

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ned 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. The Delhi Bench of the Tribunal in its recent decision in the case of Mother Pride Education Personna Pvt. Ltd,.vs. DCIT (supra) while placing reliance on its earlier decision in the case of Smt. Raj Rani Gupta (supra) and following the ratio of the decision of Hon ble High Courts in the case of CIT vs. Radhi Kishan Goel (supra) (All) and CIT .....

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subsequently, that amounts to the compliance with Explanation 5 (2) to Section 271 (1) (C) of the Act. It was further held that in case there is nothing to the contrary in the statement recorded u/s 132(4) of the Act in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources. The object of the provision is achieved by making the statem .....

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ase of CIT vs. Mahendra C. Shah has been pleased to held as under :- In so far as the alleged failure on the part of the assessee to specify in the statement u/s 132(4) of the Income Tax Act 1961 regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in its entirety to the assessee concerned and the Authorized Officer .....

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Goel (2005) 278 ITR 454. Secondly, considering the illiterate, to be specific and to the point regarding the conditions stipulated by exception no.2 while making statement u/s 132(4) of the Income tax Act, 1961. The view taken by the Tribunal as well as the 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 .....

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income for asstt. year 2010-11 while making statement u/s 132(4) of the Act. In addition, as per page No. 6 of Annexure A3 in SR4 the assessee had paid in cash a sum of ₹ 17,86,57,781/- for purchase of land by Bhushan Steel Limited (however at the time of statement recorded it was ITA No-337/Del/2013 13 inadvertently mentioned as Bhushan Energy Ltd.) which was also declared as additional income for the asstt. year 2010-11 while making a statement u/s 132(4) of the Act. As per the said sta .....

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0-11 was also accepted by the Department. 14. On having gone through the query raised while recording the statement of assessee u/s 132(4) of the Act, we find substance in the contention of the Ld. AR that nowhere the authorized officer has asked a specific question with regard to the manner in which the undisclosed income has been derived. The relevant questions are question Nos. 4,5,6 and 7. For a ready reference these questions and reply by the assesee thereto are being reproduced hereunder:- .....

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was paid in cash on 02/05/2009. This cash was paid out of my own unaccounted ITA No-337/Del/2013 14 funds which was never l disclosed for taxation purpose. I hereby accept the above amount to be my unaccounted income in the shape of investment in the current financial year and the same is offered for taxation. Q5. I am drawing your attention towards annexure A-3 at Page NO-5 found from your residence, please explain to whom this paper belongs and under whose hand writing this has been written. P .....

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r Kundan Singh Negi 9.5 Cr Prembir Singh 5.5 Cr Sureinder Singh 5 Cr 69.0 Cr This is the amount given by me to the above persons during the current financial year outstanding as on 31.01.2010. Q.6 What is the source of this amount of ₹ 69 Crores? Ans. The above amount of ₹ 69 crores is my unaccounted income for the current financial year generated from undisclosed sources. By means of ITA No-337/Del/2013 15 t his statement I hereby accept the above amount of ₹ 69 Cr to be my un .....

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at I had advanced an amount of ₹ 3.0 cr on 9.6.2009 for the purpose of purchase of property at Q1- A, Hauz Khias Enclave, New Delhi. In respect of this amount I hereby state that this amount is my unaccounted income not offered for taxation for the current financial year. On the basis of my reply to questions numbers 5, 6 and 7 I reiterate to have accepted a total amount of ₹ 90Cr (Rupees Ninety crores only) to be my unaccounted income for the current financial year, which I hereby o .....

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r Honour s query regarding income of ₹ 125 crores for F.Y 2009-10 disclosed during the course of search u/s 132, it is submitted that during the course of the said search at the residential premises of the Assessee on 04 March 2010 certain documents relating to transactions in properties undertaken by him were found as per page Nos. 4 & 5 of Annexure A-3 in SR- 4. As per the said papers the Assessee had an outstanding of a sum of ₹ 3,00,00,000/- and ₹ 69,00,000/- from vario .....

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2(4) of the Income-tax-Act, 1961. (2) As per the statement recorded during the course of search the Assessee himself had admitted that he had entered into various forward/speculative transactions and also transactions related to properties during the period from 1/4/2009 to 4/3/2010 i.e. Financial Year 2009-2010 relevant to Assessment Year 2010-2011. The said transactions were carried out in an unorganized manner and neither any accounting records nor any documentary evidence/support in respect .....

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e said amount as per page Nos. 4, 5 & 6 of Annexure A-3 in Sr-4. Subsequently, the taxes due thereon were also paid and the said income declared in the return of income filed for A.Y 2010-11. 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 the undisclosed income has been derived and on the contrary the assessee has tried .....

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on, the AO was not justified in imposing penalty u/s 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting aside orders of the authorities below in this regard direct the AO to delete the penalty of ₹ 12,50,00,000/- levied u/s 271AAA of the Act. The ground is accordingly allowed. 7. Turning to the facts of the present case from Paper Book page no.16, we observe that in the statement recorde .....

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ssee submitted and explained the following facts:- (1) With regard to Your Honour's query regarding income of ₹ 50 crores for FY 2009-10 disclosed during the course of search u/s 132, it is submitted that during the course of the said search at the residential premises of the Assessee on 04 March 2010 certain documents relating to transactions in properties undertaken by him were found as per page No. 17 of Annexure A-3 in SR-4. As per the said papers the Assessee had an outstanding of .....

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0-11. The said transactions were carried out in an unorganized manner and neither any accounting records nor any documentary evidence/support in respect of transactions/activities carried out were maintained. The only documentary evidence in respect of the said transactions was as per the page No. 17 of Annexure A-3 in SR-4 and no other detailed record of transactions were either maintained or preserved. Keeping in view the the income of ₹ 50,00,00,000/- arising out of the said transaction .....

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a. to j. thereunder recorded in the course of survey operations u/s 133A it is submitted that all these persons are working as Directors of some companies. They have already clarified that on the date of search due to tension and mental pressure certain observations were made by them which did not reflect the actual state of affairs. In any case all such companies are existing Assessees and whatever transactions have taken place between the Assessee and these companies stand duly reflected in t .....

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