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2015 (8) TMI 874 - ITAT AHMEDABAD

2015 (8) TMI 874 - ITAT AHMEDABAD - TMI - Penalty under section 271AAA - CIT(A) deleting the penalty noted that the disclosure of undisclosed income of ₹ 1 crore made was covered under the definition of "undisclosed income" as per Explanation (a) to section 271AAA of the Act - Held that:- Ld. CIT(A) with respect to the satisfaction of the requirement of clause (i) of sub section 2 to section 271AAA has given a finding that Shri Dipesh shah, the brother of the assessee, in the statement rec .....

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the manner in which income was derived, but however the assessee had clearly mentioned in the statement recorded under section 132(4) that the undisclosed income was current year's business income. Ld. CIT(A) has also noted that clause (iii) of subsection 2 of section 271AAA was also satisfied by the assessee as the assessee had paid the tax along with interest. Ld. CIT(A) has thus given a finding that that the 3 conditions specified under section 271AAA were satisfied by the assessee in the li .....

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e. - I.T. A. No. 1145/AHD/2012 - Dated:- 13-8-2015 - SHRI RAJPAL YADAV AND SHRI ANIL CHATURVEDI, JJ. For The Appellant by : Shri Pravin Kumar, D.R For The Respondent by : Shri Rasesh Shah, A.R. PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. This appeal filed by the Revenue is against the order of CIT(A)-II, Ahmedabad dated 19.03.2012 for A.Y. 2009-10. Th 2. The relevant facts as culled out from the material on record are as under. 3. A search under section 132 of the Act was carried out at the premis .....

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was determined at ₹ 1,34,82,050/- which included the undisclosed income of ₹ 1 crore. On the aforesaid undisclosed income of ₹ 1 crore A.O was of the view that during the course of search, assessee had failed to specify the manner in which such income has been derived and therefore vide order dated 20.6. 2011 levied penalty of ₹ 10 lacs under section 271AAA(1) of the Act. Aggrieved by the order of AO, assessee carried the matter before ld. CIT(A) who vide order dated 19t .....

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ed because Dipesh L. Shah (brother of assessee) himself made disclosure of unaccounted income while recording the statement u/s.132(4) of the I.T. Act. He has also admitted that undisclosed income was represented by receivables and other discrepancies and undisclosed income was not recorded in the books of account. The disclosure made by the assessee for undisclosed income of ₹ 1,00,00,000/-, is clearly covered under the definition of 'undisclosed income' as per Expl.(a) to section .....

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was derived and (iii) Pays the tax together with interest, if any, in respect of the undisclosed income. Clause (i) lays down the first condition that undisclosed income should have been admitted by Dipesh L. Shah (brother of assessee) in the statement u/s 132(4) and assessee should specify the manner in which it has been derived. Shri Dipesh L Shah, in the statement recorded on 20.01.2009, in the course of search stated in reply to questions no.34 that he was disclosing ₹ 1 crore for the .....

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n the second condition that assessee should substantiate the manner in which undisclosed income has been derived. The authorised officer did not ask any specific question on substantiating the manner in which income was derived, however the assessee clearly mentioned in a statement recorded in sector 132(4) that undisclosed income was current year business income. It is further argued that the principles laid down by the Hon'ble High Courts in the cases of CIT v. Mahendra C. shah [2008] 299 .....

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t 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 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 .....

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rt 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(1)(c), now by a deeming provision attract penalty provisions. But an exception is provided in clause (2) of Explanation 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-section (4) of section 132 that the money, bul .....

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tement 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 under section 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. The obj .....

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oing through the statement recorded under section 132 (4) of the IT Act and the principles laid down by the Honorable Gujarat High Court and Allahabad High Court, it is held that the AO has wrongly rejected the assessee's arguments. The Honorable Courts have laid down the principle that the authorized Officer is to explain the provision to the assessee and ask the relevant questions on the manner in which the undisclosed income was earned and in the present case it is applicable for section .....

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he unaccounted income has been derived by the appellant. Therefore, in absence thereof, it is a constructive and undisputed acceptance of the said disclosure, the specific manner thereof and the substantiation thereof by the appellant. 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 .....

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t or 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. 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 penalty u/s 271AAA of the Act and .....

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rd the rival submissions and perused the material on record. The issue in the present case is with respect to levy of penalty under section 271AAA. We find that ld. CIT(A) while deleting the penalty has noted that the disclosure of undisclosed income of ₹ 1 crore made was covered under the definition of "undisclosed income" as per Explanation (a) to section 271AAA of the Act. Ld. CIT(A) with respect to the satisfaction of the requirement of clause (i) of sub section 2 to section .....

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