TMI Blog2014 (11) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) has erred in law and facts in confirming penalty of ₹ 8,50,000 in the assessment year 2009-10 and ₹ 50,000 in the assessment year 2010-11 under section 271AAA of the Income-tax Act. 2. That the penalty under section 271AAA as confirmed by the learned Commissioner of Income-tax (Appeals) is against the facts and circumstances of the case and by not considered our submissions properly. 3. After hearing both parties we find that a search was conducted in this group of cases and total surrender of ₹ 6.5 crores was made and in the hands of the various individuals and firms, etc. Out of this total surrender, ₹ 90 lakhs was surrendered in the hands of the assessee consisting of ₹ 85 lakhs in the assessment year 2009-10 and ₹ 5 lakhs in the assessment year 2010-11. The income was assessed on returned income after considering surrendered income and penalty proceedings under section 271AAA were initiated. In response to the show-cause notice for levy of penalty it was mainly submitted that the assessee was director of M/s. Hill View Infrastructure Pvt. Ltd. and partner in Hill View Promoters. By virtue of working with these comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hon'ble Gujarat High Court in the case of CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj) has made following observations in this regard. When the statement is being recorded by the authorised officer it is incumbent upon the authorised officer to explain the provisions of Explanation 5 in entirety to the assessee concerned and the authorised officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. 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 the second exception while making state ment under section 132(4). Even if the statement does not specify the manner in which the income is derived if the income is declared and tax thereon pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the date of search in the books of account or other documents maintained in the normal course relating to such previous year ; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search ; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted ; . . . ' The perusal of the above detailed definition shows that it is exhaustive definition and there is clear identification of the income 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 of transactions found in the course of search under section 132'. It is seen that there is clear and direct association between the income on one hand and assets/documents on the other hand found during the course of search. It follows that if certain income is not represented by any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation and specified the manner of earning such income and it also substantiated the same on the basis of seized documents to the tune of ₹ 19,87,500. The Assessing Officer's view that the assessee is required to substantiate the quantum of undisclosed income does not seem logical from the bare reading of the provisions of sub-section (2) of section 271A. The requirement of the law is that the assessee should state the manner of earning undisclosed income and also substantiate the same. It would not be correct interpretation of the provisions to stretch the requirement to substantiate the quan tum as well. There is no doubt with regard to the fact that the asses see's manner of earning undisclosed income being financing activities has been substantiated by the seized documents. The requirement of the law has therefore been fulfilled as the assessee had stated the manner of earning unaccounted income, substantiating the same and also paid the due taxes along with the interest within the specified time limit. Even if the entire income by any logic is included in the definition of undisclosed income, the penalty under section 271AAA would not be leviable because of fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' 10. Plain reading of sub-section would show that if the assessee during the course of search in a statement admits to some undisclosed income and pay taxes on the same then penalty cannot be levied in terms of sub-section (1) of this section. In the case before us, the amount of ₹ 4 crores which was surrendered during search, has been declared by the assessee in the return and taxes have been paid accordingly. Therefore the assessee is normally entitled for the immunity provided in section 271AAA itself. However, the Revenue has raised further dispute that whether the assessee has disclosed the manner in which income has been earned. In the penalty order passed by the Assessing Officer following questions and answers have been extracted : 'Q. Do you want to say anything more ? Ans. I voluntarily surrender a sum of ₹ 4 crores (Rs. four crores) for current financial year i.e., 2009-10 relevant to the assessment year 2010-11 in any (should be 'my') individual capacity. They cover all the discrepancies in the seized papers during the course of search proceedings.' 11. Therefore clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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