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2016 (1) TMI 304 - ITAT AHMEDABAD

2016 (1) TMI 304 - ITAT AHMEDABAD - TMI - Penalty u/s.271AAA - undisclosed income under the head 'business' - Held that:- The assessees in search statement had already claimed the impugned undisclosed income to have been earned from their business activities. He concludes that the same was never rebutted at any stage right from search till assessment. We find that a coordinate bench in DCIT vs. Bharat L. Shah [2015 (8) TMI 874 - ITAT AHMEDABAD ] arising from the very search dated 20.01.2009 upho .....

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ITA No. 1141, 1146, 1147/Ahd/2012 - Dated:- 6-11-2015 - Pramod Kumar, AM And S. S. Godara, JM For the Appellant : Shri Samir Vakil, Sr. DR For the Respondent : None (Written Submission) ORDER Per S. S. Godara, Judicial Member These three Revenue's appeals for assessment year 2009-10 in case of different assessees arise from separate orders of the CIT(A) - II, Ahmedabad, dated 19.03.2012 passed in proceedings u/s.271AAA of the Income Tax Act, 1961, hereinafter 'the Act'. 2. The Revenu .....

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accordingly. 4. It transpires from the case file that the department conducted a search action in case of M/s. Visahl Fashion Pvt. Ltd. on 20.01.2009. Shri Dipesh Shah, One of its Director got recorded its statement on the same day making total disclosure of ₹ 7.5 crores including a sum of ₹ 4,11,02,053/- in the first appeal and ₹ 1 crore each in latter two cases. The Assessing Officer thereafter framed regular assessments in the three cases on 31.12.2010 in first two appeals .....

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irst and second conditions in the exemption provision u/s.271AAA(2) had not been fulfilled in these three cases. This resulted in imposition of impugned penalties amounting to ₹ 41,10,205/- in the first case and ₹ 10lacs each in the latter two i.e. @ 10% of the undisclosed incomes hereinabove. 5. These assessees preferred appeal. We find that the CIT(A) deletes the impugned penalties. We treat ITA No.1141/Ahd/2012 as the lead case comprising the lower appellate order as under: " .....

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(4) of the I.T.Act. He has also admitted that undisclosed income was represented by unaccounted grey stocks, 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 ₹ 4,11,02,053/-, is clearly covered under the definition of "undisclosed income" represented by unaccounted assets as per Expl.(a) to section 271AAA of the I.T.Act. The Ld. AR further argued that the assessee cas .....

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me and specifies the manner in which such income has been derived; (ii) Substantiates the manner in which the undisclosed income was derived; and (ii) 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 the 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, i .....

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ce of mind so assessee specified the manner in which undisclosed income was earned. Clause (ii) lays down 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 .....

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o explain the provision of explanation 5 in entirety 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 occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which .....

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the benefit. 5.3 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(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 .....

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n 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 under section 132(4) of the Act, in the absence of any specific statement about the manner in which such income has been derived, i .....

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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 1 32 (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 .....

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only and not from any other activity which was not disclosed by the assessee during search. The learned DCIT has never given the appellant any show cause notice or an opportunity during the course of ^assessment proceedings with regard to his reservation and contrary opinion about the explanations, information and specific manner in which the unaccounted income has been derived by the appellant. Therefore, in absence thereof, it is a constructive and undisputed acceptance of the said disclosure, .....

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the basis of principles laid down by the Honorable jurisdictional High Court and by the Allahabad High Court in the above cited cases the assessee has made disclosure of unaccounted income while recording a statement under section 132(4) of the Income tax Act and paid the taxes with interest. The returned income included disclosure amount of ₹ 4,11,02,053/- made during search while recording statement u/s. 132(4) of the Act which represented by unaccounted stock and receivables. The A.O. h .....

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