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2015 (7) TMI 333 - ITAT AHMEDABAD

2015 (7) TMI 333 - ITAT AHMEDABAD - TMI - Penalty u/s.271(1)(c) - non fulfilment of conditions u/s. 271AAA(2)(i) and manner of deriving of the impugned undisclosed income was neither specified nor substantiated in this case - CIT(A) deleted the addition - Held that:- It is evident that the assessee has attributed this undisclosed income to be on-money on sale of residential properties throughout. The CIT(A) holds that the Assessing Officer accepted the above stated source and undisclosed income .....

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. Mahindra C. Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) in holding that when an assessee admits undisclosed income in course of search, offers it to be taxed in the return, pays tax thereupon, no penalty can be levied particularly in the absence of any question being raised in respect thereof by the Assessing Officer. The Revenue fails to point out any exception to the same. It also does not rebut the CIT(A) crucial findings that the assessee had not been put to specific question specifying an .....

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2010-11 and CIT(A)-II/CC.1/76/2010-11, deleting penalties of ₹ 30 lacs and ₹ 70 lacs; respectively, in proceedings under section 271AAA of the Income Tax Act, 1961, in short the Act . 2. Both parties inform us at the outset that facts involved in the two cases are identical. We find that these two appeals seek restoration of the impugned section 271AAA penalties arising from the same search conducted on 14.2.2008 and the former assessee s statement record on behalf of himself as well .....

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penalty proceedings u/s.271(1)(c) of the Act alleging concealment and furnishing of inaccurate particulars of income at the assessee s behest. The assessee does not seem to have filed any appeal. Quantum proceedings attained finality accordingly. 4. The Assessing Officer took up the penalty proceedings. The assessee inter alia quoted section 271AAA(2)(i)-(iii) and claimed to have admitted the aforesaid undisclosed income of ₹ 3 crores, specified as well as substantiated manner of deriving .....

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d in the impugned penalty of ₹ 30 lacs @ 10% of the undisclosed income amounting to ₹ 3 crores being levied in the assessee s case. 5. The assessee preferred appeal. The CIT(A) has accepted his contention on merits as under: 5. I have considered the facts of the case mentioned by the AO, the basis of levy of penalty, submissions made by Ld. AR on behalf of the assessee and the case laws relied upon. 5.1 The Ld. AR's argument that the income disclosed by the assessee could not be .....

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8377; 3,00,00,000/-, is clearly covered under the definition of 'undisclosed income' as per Expl.(a) to section 271AAA of the I.T. Act. 5.2 On perusal of assessment order it is found that in para 6 of the order the assessing officer issued notice for initiating penalty under section 274 r.w.s. 271 (1)(c) of the income tax act and not under section 271 AAA. I also perused the statement of the assessee recorded under section 132 (4) of income tax act. The AO has levied the penalty u/s 271A .....

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y, in respect of the undisclosed income. Clause (i) lays down the first condition that undisclosed income should have been admitted by the assessee in the statement u/s. 132(4) and assessee should specify the manner in which it has been derived. Shri Jaiprakash K. Aswani in his statement recorded u/s 132(4) before Deputy DIT in course of search on 19 & 20.2.2008, stated in reply to question no.11, and disclosed total income of ₹ 20.23 crores out of which undisclosed income of ₹ 3 .....

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s down the second condition that assessee should substantiate the manner in which undisclosed income has been derived. Shri Jaiprakash K. Aswani in his statement recorded u/s.132(4) on 19 & 20.2.2008, in reply to question no. 11, made disclosure of total income of ₹ 20.23 crores and has provided bifurcation of undisclosed income in different hands and made disclosure of ₹ 3.00 crores in the hands of the assessee. In the same question the Authorized Officer mentioned that it was e .....

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Court has observed that When the statement is being recorded by the authorized Officer, it is incumbent upon the authorized officer to explain the provision of explanation 5 in entirely to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the revenue to take advantage of such 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 occ .....

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derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit. In the case of CIT v. Radha Krishna Goel [2005] 278 ITR 454, the Hon'ble Allahabad High Court gave similar findings and laid down similar principles as under:- "...From a perusal Explanation 5, it is evident that the circumstances which otherwise did not attract the penalty provisions of section 271(1j(c), now by a deeming provision attract pen .....

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rest, if any, in respect of such income....under section 132(4) of the Act, unless the authorized officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, it amounts to compliance with Explanation 5(2). If there is nothing to the contrary in the statement recorded un .....

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n the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make explanation 5(2) inapplicable."(P.454)." 5.4 After going through the statement recorded under section 132 (4) of the IT Act and the. principles laid down by the Honourable Gujarat High Court and Allahabad High Court, it is held that the AO has wrongly rejected the assessee's arguments on the ground that th .....

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0.2.2008, the authorized Officer has not asked any further question but was satisfied with the manner the income was earned by the assessee. Clause (iii) lays down the third condition regarding the payment: of tax along with interest on undisclosed income admitted in the course of search. It is undisputed fact that the tax and interest had been paid by the assessee. The Assessing Officer himself stated the same in the penalty order. The assessee has made disclosure of unaccounted income while re .....

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the statement of Shri Jaiprakash K. Aswani recorded u/s. 132(4) on the ground of 'on money' collected on booking of residential properties in their projects. In view of the above circumstances and on the basis of principles laid down by the Honourable jurisdictional High Court and by the Allahabad High Court in the above cited cases the assessee can be said to have substantially discharged the onus of explaining and substantiating the manner of earning undisclosed income because the Ass .....

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r observation about the source and nature of income, manner in which income was derived or substantiating the manner. This shows that the A.O. himself was satisfied about the income offered in return of income, therefore, he did not initiate penalty in view of these facts and circumstances of the case and the principles laid down in the decisions by the Hon ble High Courts narrated above in paras 4.1 and 5.3 of this order, it is held that the Assessing Officer was not justified in levying the pe .....

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