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2015 (7) TMI 490 - ITAT KOLKATA

2015 (7) TMI 490 - ITAT KOLKATA - TMI - Penalty levied u/s 271AAA - CIT(A) retained part penalty levy - Held that:- Undisclosed income means “any income represented by any documents” found during the course of search, which are not recorded in the books of accounts of the assessee. In the instant case, the additions of cash expenses and payments of ₹ 71,90,623/- is the result of cash available out of the disclosed cash of ₹ 6.84 crores which was included in the disclosure petition. F .....

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tary evidences establishing the falsity of claim of transportation charges paid to Sampoorna Logistics was found in the course of search. According to us the said expenditure cannot be held to be undisclosed income of the assessee for the purpose of levying penalty u/s. 271AAA of the Act.

Penalty cannot be levied merely on the admission of the assessee and there must be some conclusive evidence before the AO that entry made in the seized documents, represents undisclosed income of the .....

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K.Bansal & Shri Mahavir Singh, JJ. For the Petitioner : Shri Ravi Tulsiyan, FCA For the Respondent : Shri Dilip Kr. Mitray, JCIT, Sr. DR ORDER Per Shri Mahavir Singh, JM: These cross-appeal by assessee and Revenue are arising out of common order of CIT(A)-I, Kolkata vide Appeal No. 34/CIT(A)-C-II/CC-X/10-11dated 03.08.2011. Assessment was framed by ACIT, C.C-X, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2008-09 vide order dated 3 .....

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erred in confirming the penalty u/s. 271AAA of the Income-tax Act, 1961, to the extent of ₹ 11,36,560/- without paying due attention to the facts that out of the addition of ₹ 1,13,65,623/- made in this regard, the appellant company had voluntarily accepted the addition of ₹ 86,90,623/- during the scrutiny assessment proceedings and paid due taxes thereon also and that so far as the other amount of ₹ 26,75,000/- is concerned, it has not been proved that the same belongs .....

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not satisfied in this case. 2. This in the facts and circumstances in the case, the Ld. CIT(A) has erred in holding that working of undisclosed income with reference to the seized documents tantamount to specification of manner of earning of the undisclosed income, without considering that what the assessee had done was mere quantification of undisclosed income and not the substantiation of manner of its earning. 3. Briefly stated facts are that a search and seizure operation u/s 132 of the Act .....

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ct 1961, the assessee vide its disclosure petition dated 11.04.2008 had disclosed an amount of ₹ 6.84 crores as net undisclosed income which is as under:- 1) Assessee was confronted with Page no. 1 to 5 of AS/1 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s. S.P.S. Steel & Power Ltd. stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores in which unaccounted .....

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ed income in which ₹ 1,75,65,790/- is being taken as undisclosed trading profit as worked out from various entries of Page 1 to 15. 3) Assessee was confronted with Page no. 16 & 17 of AS/2 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ͅ .....

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ed miscellaneous income and ₹ 72,049/- as undisclosed miscellaneous expenditure as worked out from various entries of Page 4. 5) Assessee was confronted with Page no. 5 to 24 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd sated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 11,20,44 .....

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cellaneous income and ₹ 1,53,608/- as undisclosed miscellaneous expenditure as worked out from various entries of Page 25. 7) Assessee was confronted with Page no. 26 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 34,00,000/- is .....

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re as worked out from various entries of Page 27. 9) Assessee was confronted with page no 28 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ld is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 24,62,114/- is being taken as undisclosed trading profit as worked out from various sentries of .....

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h Page no. 6 of AS/4 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 31,50,000/- is being taken as undisclosed trading profit as worked out from various entries of Page 6. 12) Assessee was confronted with a bag containing torn papers of C/5 fou .....

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nd from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd sated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income of ₹ 6.84 crores as net undisclosed income in which ₹ 7,00,000/- is being taken as undisclosed payment for purchase of coal of 1395 M.T as worked out from various entries of Page 1 to 14. 14) Assessee was .....

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with Page no. 11 & 12 SPSG/13 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ld is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 25,41,155/- is being taken as undisclosed miscellaneous expenditure as worked out from various entries of Page 121 & 12. 16) Assessee was confronted with Page .....

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tial premises of Sri Uttam Kumar Sarawgi. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 10,46,550/- is being taken as undisclosed trading profit as worked out from various entries of Page 21. 18) Assessee was confronted with Page no. 22 of UKS/1 found from the residential premises of Sri Uttam Kumar Sarawgi .....

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of the directors of M/s S.P.S. steel & Power Ltd sated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of ₹ 6.84 crores as net undisclosed income in which ₹ 61,00,000/- is being taken as undisclosed miscellaneous income and ₹ 1,01,36,805/- as undisclosed miscellaneous expenditure as worked out from various entries of Page 32. 20) Assessee was confronted with Page no. 11 of RM/1 found from the residential premises of Sri Arjun Kumar Santhalia. In re .....

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orking with a cash flow statement which was considered and verified. The AO initiated penalty proceedings u/s271AAA and 271(1)© of the Act in respect to above disclosure. 4. The AO after taking the explanation of the assessee, levied the penalty u/s. 271AAA of the Act for the reason that assessee could not substantiate the manner of earning of income other than mere admission. The AO after considering the submissions of assessee levied the penalty by observing as under:- The submissions of .....

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ssee was specifically asked to substantiate the manner in which this income was earned. During penalty proceedings assessee was given the opportunity to substantiate the manner of earning this income as mentioned above. In this regard assessee has failed to provide any corroborative evidence whatsoever with regard to disclosed income (as stated in the disclosure working submitted before the Department dated 10.04.2008) amounting to ₹ 6.84 crores which can be taken as substantiation of abov .....

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lanation of Sec. 271AAA(4). Applicability of penalty provisions 271AAA is invocable as the search was conducted after 1st June 2007. In this regard also, assessee could not give any substantiation of manner of income other than mere admission. Therefore, it can be said that assessee has not been able to satisfy the condition laid down by Sec. 271AAA(2)(ii). In view of the above, I am satisfied that it is a fit case for imposition of penalty u/s 271AAA of the I.T. Act, 1961. Considering the total .....

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ng as under:- 4. I have carefully considering the submission of the L.d A.r. In this case the A./O has imposed penalty on undisclosed income of ₹ 7,97,65,623/-. There is no disputed on the act of the case. In the penalty order the AO has not disputed that out of total undisclosed income of ₹ 7,97,65,623/- the statement recorded under sub-section (4) of section 132 of the Act. It has been also not disputed that the assessee has duly included the said undisclosed income in the return a .....

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een initiated under section 132 on or after the 1st day of June, 2007, 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 per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- 132 admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived .....

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ncome was also duly filed. On perusal of the same, it is apparent that, the assessee with reference to the seized record has worked out total receipt of ₹ 10,31,22,703/- and corresponding expenses of ₹ 3,47,22,703/- and accordingly undisclosed of ₹ 6,84,00,000/- has been calculated. The AO has not disputed the above disclosure and assessment has been completed accordingly. Hence it cannot be said that the assessee has no specified the manner in which the \undisclosed income has .....

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the statement recorded under sub-section (4) of section 132 of the Act nor the same was subsequently included in the return filed by the assessee. The undisclosed income was deducted by the AO during the course of assessment proceeding. Hence taking all the facts into consideration it is held that the assessee is liable for penalty on the undisclosed income of ₹ 1,13,65,623/- as per provision of the section 271AAA of the Act. Accordingly out of total penalty imposed of ₹ 79,76,560/- .....

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ed 11.04.2008 amounting to ₹ 8.64 crores. The AO also admitted that assessee filed a detailed working of disclosure with cash flow statement which was verified. The AO discussed the disclosure in his assessment order and the same is reproduced in above para-2. The AO has not disputed that out of the total undisclosed income of ₹ 7,97,65,623/-, a sum of ₹ 6.84 crores was admitted as undisclosed income in the statement u/s 132(4) of the Act and duly included the same as undisclos .....

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y the assessee with narrations stating the manner in which this income was earned by assessee. Hence, in this case it cannot be said that the assessee has not specified the manner in which the undisclosed income has been earned because the papers found during the course of search relates to the business of the assessee or debtors relating to business of the assessee. It is clear from the above that the undisclosed income was earned mainly by virtue of trading activities and income from other sou .....

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t, be presumed- (i) That such books of accounts , other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) That the contents of such books of accounts and other documents are true; and (iii) That the signature and every other pat of such books of accounts and other documents which purport ….. section 132]. In view of the above, Section which deems that all recordings in the seized documents are correct unless proved to the contra .....

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rn filed under the head income from business and Department has accepted these returns and accordingly passed assessment orders. It is not a case of revenue that assessee has not satisfied the manner in which income is derived and assessee has not paid tax with interest on undisclosed income. Undisputedly, assessees have shown undisclosed income under head income from business in returns filed by them, and the same was accepted by Department by passing assessment orders accordingly. Therefore, c .....

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the penalty imposed by the AO u/s 271AAA of the Act on undisclosed income of ₹ 1,13,65,623/-, the entire premises of the AO was that none of the conditions specified u/s. 271AAA(2) of the Act is not satisfied. According to AO, the undisclosed income is neither admitted or disclosed u/s. 132(4) of the Act nor subsequently included in the return of income filed by the assessee. According to AO, this undisclosed income was merely detection by the Revenue. The assessee before us explained in r .....

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Thus, the allegation of the AO that a sum of ₹ 1,54,620/- was only disclosed is completely contrary to the facts of the case. The assessee alternatively argued that the aforesaid payments of ₹ 14,22,687/- were not considered in the disclosure petition, then in that case said payment should reduce the income voluntarily disclosed by the assessee during the course of search i.e. ₹ 6.84 crores. The said income was represented by cash disclosed in the balance sheet of the assessee .....

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Further, he stated that page No. 23 of the UKS1 is a dumb document. The document merely has some figures written on it. The document nowhere mentions the nature of the transactions, the parties to the transaction, the period of transaction etc. Nothing can be gathered from the said document. Thus no addition can be made on the said document. He explained the aforesaid seized document that it is apparent that cash expenses of ₹ 13.50 lakh was incurred and paid to Liberty Marine. The same w .....

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. counsel for the assessee explained that the said amount was considered in the disclosure petition of the assessee, wherein miscellaneous expenditure of ₹ 101,36,805/- in connection with miscellaneous receipts of ₹ 61 lakh was disclosed by the assessee. He argued that, if for the sake of argument, it is assumed that the aforesaid expenses of ₹ 57,7,936/- were not disclosed in the return, then, in that case said expense should reduce the income voluntarily disclosed by the asse .....

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received back in cash on account of discounts offered by the transporter and accordingly expenses to the tune of ₹ 15 lakh recorded in the books are bogus. He contended that Shri Bipin Vohra, Chairman of the assessee company in his statement obtained in course of search accepted the said allegation. Reliance was also placed on page no. 7 of SPSG/2 and page No. 28 of SPSG/3. Ld counsel explained firstly to the seized documents relied upon by the AO and page No. 7 of SPSG/2 shows the detail .....

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that his statement was recorded by the search party under duress and coercion. Thus, the statement made in course of search does not have much evidentiary value unless it is corroborated with other documentary evidences. For this Ld. counsel for the assessee drew our attention to Departmental issued by CBDT vide Board s letter No. F No.286/2/2003/IT(Inv) dated 11.03.2003 and the extract of which is as under:- Instances have come to the notice of the Board where the assessee have claimed that the .....

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as not been disclosed or is not likely to be disclosed before income tax department. Similarly while recording statements during curse of search and seizures and survey operations, no attempt should be made to obtain confession as to undisclosed income. Any action on the contrary will be viewed adversely. In view of the above, Ld. counsel for the assessee argued that the Board recognizes that forced statements are taken by the Authorities from assessee during search admitting or confessing to un .....

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elates to seize document enclosed at page 65 of paper book. A perusal of the same shall clarify that the document nowhere mentions the period of the transaction. It merely records some transactions in the cash and bank column. Solely on this basis, the AO presumed that entries of ₹ 640.25 on right hand side are cash payments of ₹ 6.4025 crores and entries on the left hand side of ₹ 667 represent cash receipts of ₹ 6.67 crores. Accordingly he treated the net amount of S .....

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the seized document were in lakhs. Now, since the document is a dumb document no addition could have been made on that basis as already discussed in para 4.4 above. Moreover, the seized document does not constitute books of accounts of the assessee. It is merely a loose sheet of paper, which has no intrinsic value. Attention in this regard is invited to the definition of books of accounts u/s. 2(12A) of the Act: Books or books of accounts includes ledgers, day-books, cash books, account-books an .....

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ed by any entry in the documents found in course of search which are not recorded in the books of the assessee. However, in the instant case of assessee, the addition I & II i.e. of cash expenses and payments of ₹ 71,90,623/- was included in the disclosure petition and the return filed after search and accordingly recorded in the books of accounts of the assessee. Thus no penalty u/s 271AAA can be imposed on the said amount. 11. From the above explanation of the assessee in regard to t .....

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ces. Moreover, the assessee has furnished explanation of the above entries added by the AO during the course of scrutiny proceedings and even in penalty proceedings. This was also explained before CIT(A) during the appellate proceedings qua the levy of penalty. In view of the above, now we have to discuss the case law of coordinate of ITAT Jabalpur Bench in the case of ACIT v. Satyapal Wassan 295 ITR (AT) 352 held that:- A charge can be levied on the basis of document only when the document is a .....

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out the transaction of the assessee in the relevant assessment year. Any gap in the various components for the charge of tax must be filled up by the Assessing Officer through investigations and correlations with other material found either during the course of the search or on investigations. The document was bereft of necessary details about the year of transaction, ownership, nature of transaction, necessary code for deciphering the figu9res. The Assessing Officer presumed that the transactio .....

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actions were carried out; he had simply presumed that the figures were advances without there being any material on record to support such presumption. The Assessing Officer had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions. In this case also the assessee has explained firstly that the payment of ₹ 55 lakh is out of the availability of cash generated out of disclosure of ₹ 6.84 crores. Even otherwise, the document page No. 23 of UKS/1 b .....

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ossession of any undisclosed money or books of accounts. But, in this case, it was admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion or any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other pers .....

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of fact to the effect that the statement of the managing director or that of the other partners had no evidentiary value as they were not supported by any documentary proof. No question of law arose from the order of the Tribunal. 13. In view of the above facts and circumstances, and legal position discussed above, the penalty to be levied for undisclosed income as per the provision of Sec. 271AAA of the Act, we have to understand the meaning of undisclosed income and the relevant provision defi .....

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ious year; or (B) Otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search ; or From the above, it is clear that undisclosed income means any income represented by any documents found during the course of search, which are not recorded in the books of accounts of the assessee. In the instant case, the additions of cash expenses and payments of ₹ 71,90,623/- is the result of cash available out of the disclosed cash of ₹ 6.84 crores which was .....

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h. Here in the present case, no documentary evidences establishing the falsity of claim of transportation charges paid to Sampoorna Logistics was found in the course of search. According to us the said expenditure cannot be held to be undisclosed income of the assessee for the purpose of levying penalty u/s. 271AAA of the Act. 14. Hon'ble Calcutta High Court in the case of CIT v. Sarda Rice and Oil Mills 117 ITR 917 (Cal) held:- the ITO and the IAC had proceed entirely on the basis of the di .....

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d to by the assessee during the course of survey would not empower the Assessing Officer to levy the penalty under section 271(1)© of the Income-tax Act, 1961 … The fact that the assessee had agreed to additions to income was not proof of concealment. Even Hon'ble Kerala High Court in the case of CIT vs. M. George & Brothers 59 CTR 298 (Kel) held that:- where the assessee for one reason or the other agrees or surrenders certain amounts for assessment, the imposition of penalt .....

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concealment still remains. Further Hon'ble Punjab & Haryana High Court in case of Commissioner of Income-tax v. Rajiv Garg 313 ITR 256 (P&H) upheld the order of the Tribunal where it was observed that - Merely because an income has been offered by the assessee in response to the notice under section 148, it cannot be ipso facto inferred that the penal provisions of section 271(1)© are attracted. In order to apply the penal provisions of section 271(1)© it is to be necessari .....

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