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2015 (5) TMI 992 - ITAT PUNE

2015 (5) TMI 992 - ITAT PUNE - TMI - Penalty u/s. 271AAA - CIT(A) deleted the penalty - Held that:- In view of the conditions laid down for claiming immunity from levy of penalty under section 271AAA of the Act as prescribed in sub-section (2) to the said section, having been fulfilled, we find no merit in the grounds of appeal raised by the Revenue in this regard. We uphold the order of the CIT(A) in deleting the penalty levied under section 271AAA of the Act in respect of income offered to tax .....

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r passed under section 271AAA of the Income Tax Act, 1961. 2. The Revenue has raised the following grounds of appeal :- (i) On the facts and in the circumstances of the case, the learned CIT(A), Nashik has erred in holding that the assessee has fulfilled all the conditions laid down for immunity from penalty u/s. 271AAA of the Act. (ii) On the facts and in the circumstances of the case, the earned CIT(A), Nashik has erred in not noticing that, though the income on account of gold and silver jewe .....

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v) Appellant craves, leave of the Hon'ble Tribunal to add, amend / alter or delete any of the aforesaid ground herein if directed so. (v) Any other ground that may be urged at the time of hearing. 3. The only issue raised in the present appeal is against the deletion of penalty levied under section 271AAA of the Act. 4. Briefly, the facts of the case are that the assessee was engaged in the activity of commodity trading and was also partner in various firms. A search and seizure action was c .....

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he course of search and in view thereof additions were made in the hands of the assessee. The Assessing Officer also initiated the penalty proceedings under section 271AAA of the Act. In response, the assessee explained that it had declared additional income in his hands in the revised return filed and since it had neither concealed any income nor furnished any inaccurate particulars of income and had offered and declared the additional income during the course of search action, no penalty under .....

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ome at ₹ 1,00,08,887/-. 5. The CIT(A) deleted the penalty on the ground that the assessee had offered to tax a sum of ₹ 1,00,08,887/- in its return of income filed for assessment year 2008-09. Further, the assessee had also claimed that the source of the said income was out of speculation business income of commodity trading mainly out of state. The CIT(A) noted that cash amounting to ₹ 1 crore was seized from the assessee during the search action and since the assessee had alr .....

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d to substantiate the character of the additional income and the manner of earning the income and sources thereof. The Ld. Departmental Representative for the Revenue pointed out that in the body of the appellate order, the CIT(A) has not taken note of any explanation of the assessee vis-à-vis income of ₹ 3,04,845/-. 8. The Ld. Authorized Representative for the assessee pointed out that during the course of recording of statement under section 132(4) of the Act, additional income wa .....

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the statement of the assessee recorded in this regard and it was pointed out by the Ld. Authorized Representative for the assessee that the Assessing Officer never questioned the manner of earning such income. Reliance in this regard was placed upon the ratio laid down by the Tribunal in following decisions :- (i) ACIT vs. Munish Kumar Goyal, (2014) 45 taxmann.com 563 (Chandigarh - Trib.); (ii) Neeraj Singal vs. ACIT, (2014) 40 CCH 387 (Delhi - Trib.); and, (iii) Sudha Gupta vs. DCIT in ITA No.5 .....

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al in DCIT vs. Shri Ravindra Champalal Khinvasara in ITA No.1427/PN/2013 relating to assessment year 2010-11, order dated 28.11.2014. 10. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to levy of penalty as provided under section 271AAA of the Act which prescribes that in case where the search under section 132 of the Act has been initiated on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee .....

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substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. 11. Section 271AAA(2) of the Act provides that where the assessee during the course of search under section 132 of the Act, admits to some undisclosed income in the statement recorded under section 132(4) of the Act and also substantiates the manner in which undisclosed income was derived and pays the taxes, together with interest, i .....

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sed income was derived; and, thirdly, pays the taxes, along with interest, if any, on such undisclosed income, then on fulfillment of the above three conditions, no penalty is leviable under section 271AAA of the Act. 12. Coming to the facts of the present appeal, search under section 132 of the Act was carried on at the premises of the assessee on 22.11.2007. During the course of search, the assessee had made the under-mentioned declaration of additional income, as under :- 1. Unrecorded cash R .....

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es trading income at Rajasthan ₹ 57,244/- 5. Commodities trading income at Ahmadabad ₹ 25,051/- 6. Unrecorded Expenditure ₹ 85,000/- 7. Unrecorded investment in Diamond & Jewellery ₹ 1,10,550/- Total Rs.1,00,08,887/- 14. The Assessing Officer has accepted the additional income offered by the assessee at ₹ 1,00,08,887/- and has further made addition on account of household expenses, unexplained expenditure and errors and omissions totaling to ₹ 47 lakhs aga .....

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The first condition for such immunity is that the assessee in the course of search itself admits the undisclosed income and specifies the manner in which such income has been derived. Second aspect is that the assessee is to substantiate the manner in which undisclosed income was derived and thirdly, the assessee is to pay taxes together with interest, if any, on such undisclosed income. As per the Assessing Officer, the assessee had not fulfilled the said conditions. On the other hand, the Ld. .....

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tion 132(4) of the Act. The CIT(A) further observed that remaining income of ₹ 3,04,845/- on account of commodities trading, unrecorded expenditure and unrecorded investment in diamond are not covered by the items of income stated in statement recorded under section 132(4) of the Act. The conclusion of the CIT(A) was that the first condition laid down in subsection (2) of section 271AAA of the Act is fulfilled in respect of income offered to tax to the extent of ₹ 97,02,632/-. 16. Th .....

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an application for adjustment of the cash seized of 1 crore against the taxes and interest liability, the third condition mentioned in sub-section (2) to section 271AAA of the Act was fulfilled and as such there was no merit in the levy of penalty under section 271AAA of the Act to the extent of ₹ 97,02,632/-. The balance penalty levied in the hands of the assessee was confirmed to the extent of ₹ 30,625/-. The Ld. Authorized Representative for the assessee has not pointed any appea .....

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Act, stands fulfilled in the case of the assessee where originally the assessee had offered additional income to the extent of ₹ 1.69 crores but on account of four items had restricted the declaration in the return of income to three of the said items. Even though, there was difference in the quantum originally declared during the course of search and those offered in the return of income, but the first condition of sub-section (2) to section 271AAA of the Act stands fulfilled. The perusal .....

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section 271AAA of the Act are applicable. 18. For the said proposition, we find support from the ratio laid down by the Chandigarh Bench of the Tribunal in ACIT vs. Munish Kumar Goyal (supra), wherein it was held as under :- 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-sec (1) of this Section. In the case before us, the amount of .....

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nything more? Ans. I voluntarily surrender a sum of ₹ 4.00 crore (Rs. Four crore) for current financial year i.e. 2009-10 relevant to A. Y. 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 the Revenue has not asked the assessee to disclose the manner in which such income was earned. In any case once the income is surrendered during the course of search u/s .....

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s considered all these issues in detail and the D.R. for the Revenue has not referred to any material or decision which can controvert the findings of the CIT(A). In the following cases which have been relied on by the Ld. Counsel for the assessee which was clearly held that penalty is not leviable. 12. Further the assessee has relied on the following decisions: Kanakia Spaces (P.) Ltd. (supra) A.N. Annamalaisamy (HUF) (supra) Prarnod Kumar Jain (supra) Srnt. Raj Rani Gupta (supra) 13. The Ld. D .....

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the manner in which the undisclosed income have been derived and where the assessee had tried to explain the earning of the undisclosed income in question, in its reply, during the recording of the statement under section 132(4) and in the absence of any query raised by the Authorized Officer about the manner in which the undisclosed income have been derived and about its substantiation, the Assessing Officer was not justified in imposing the penalty under section 271AAA of the Act. 20. The thir .....

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fulfillment of third condition provided under sub-section (2) of the said section. In this regard, we find merit in the reliance placed upon by the Ld. Authorized Representative for the assessee on the ratio laid down by the Pune Bench of the Tribunal in DCIT vs. Shri Ravindra Champalal Khinvasara (supra) wherein it was held as under :- 10. We have carefully considered the rival submissions. In our opinion, the CIT(A) made no mistake in applying the ratio of the judgement of the Hon ble Supreme .....

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the Act with respect to an income surrendered in a statement u/s 132(4) of the Act. One of the conditions prescribed therein is to the effect that assessee pays the tax, together with interest, if any, in respect of such income . The Revenue had contended before the Hon ble Supreme Court that assessee therein had failed to make payment of tax in time. In this context, the Hon ble Supreme Court noted that the condition did not prescribe any time limit for payment of such tax and that the only req .....

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, the condition prescribed in clause (iii) of sub-section (2) of section 271AAA of the Act is pari-materia to the third condition prescribed in clause (2) of Explanation 5 to section 271(1)(c) of the Act. Therefore, in our considered opinion the ratio of the judgement of the Hon ble Supreme Court in the case of Gebilal Kanhaialal HUF (supra) is squarely applicable in the present case also. 11. In this background, even if we were to go along with the stand of the Assessing Officer that the credit .....

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