TMI Blog2015 (5) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 jewellery of ₹ 3,75,257/- and cash of ₹ 89,65,875/- found at the residence during search, has been offered to tax but the assessee at not stage substantiated the manner in which such income has been derived. (iii) On the facts and in the circumstances of the case, the learned CIT(A), Nashik has erred in holding that interest receivable of ₹ 3,61,500/- from M/s Nikki Agro is covered by statement u/s 132(4) of the Act, whereas the assessee has not offered this income for taxation. (iv) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax, the taxes were paid and there was no merit in levying penalty under section 271AAA of the Act. 6. The Revenue is in appeal against the order of the CIT(A). 7. The Ld. Departmental Representative for the Revenue pointed out that the second condition prescribed in section 271AAA of the Act has not been fulfilled by the assessee where the assessee was required 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- -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 was offered on account of different items, whereas the declaration made in the return of income was on certain different items. It was further pointed out by the Ld. Authorized Representative for the assessee that on account of the first three items which were offered as additional income under section 132(4) of the Act, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAA(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, if any, on such undisclosed income then no penalty under sub-section (1) of section 271AAA of the Act can be levied to the assessee. The assessee has, in other words, to fulfill the three conditions laid down in sub-section (2) of section 271AAA of the Act. Firstly, in the statement recorded under section 132(4) of the Act, assessee admits the undisclosed income and specifies the manner in which such income has been derived; secondly, if the assessee substantiates the manner in which the undisclosed 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 cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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. CIT(A) has deleted the additions by holding that the first condition stands fulfilled as the assessee admitted the undisclosed income in the statement recorded under section 132(4) of the Act. The CIT(A) in para 8.2 admits that income on account of Gold, Diamond and Silvery Jewellery ₹ 3,75,257/-, cash found at the residence ₹ 89,65,875/- and interest receivable from M/s Nikky Agro ₹ 3,61,500/- is specifically covered by the items offered to tax in statement recorded under section 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of being derived from its business of commodity trading, outside the books of account, the condition No.1 and 2 provided in sub-section (2) of 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 ₹ 4 crore 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 Sec 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, the Assessing Officer was not justified in imposing the penalty under section 271AAA of the Act. 20. The third condition of payment of taxes together with interest, if any, is also fulfilled in the case of the assessee where the assessee had made a request for adjustment of the cash seized of ₹ 1 crore against his tax and interest liability, both during the course of search and after the completion of the assessment. Merely because the adjustment was made after the completion of assessment in the hands of the assessee has no merit to levy of penalty under section 271AAA of the Act in view of non 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 Court in the case of Gebilal Kanhaialal HUF (supra) while examining the cond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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