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2016 (4) TMI 949 - ITAT VISAKHAPATNAM

2016 (4) TMI 949 - ITAT VISAKHAPATNAM - TMI - Penalty levied u/s 271AAA - assessee has not explained the manner in which the undisclosed income has been derived - Held that:- In the present case on hand, on perusal of the facts, we find that the assessee has admitted the undisclosed income at the time of search, while recording the statement u/s 132(4) of the Act. The assessee has explained the manner in which such undisclosed income has been derived. It was the explanation of the assessee that .....

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order. Therefore, in our considered opinion, clause (i) & (ii) of sub section (2) of section 271AAA of the Act is fulfilled and hence, no penalty can be levied u/s 271AAA of the Act.

On perusal of the facts available on record, it was clear that the assessee has paid the entire self assessment tax admitted in the revised return before initiation of penalty proceedings u/s 271AAA of the Act. Though assessee has not paid the total taxes along with revised return of income, it has expla .....

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.738/Vizag/2013, C.O. No.12/Vizag/2014 - Dated:- 18-3-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M.N. Murthy Naik,DR For The Respondent : Shri G.V.N. Hari, AR ORDER PER V. DURGA RAO, Judicial Member: This appeal filed by the revenue and cross objection filed by the assessee, are directed against the order of CIT(A), Visakhapatnam dated 22.10.2013 and it pertains to the assessment year 2008-09. 2. By way of ITA.No. 738/V/2013, the .....

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of the I.T. Act without appreciating that the assessee did not pay tax on the revised income. 3. The brief facts of the case are that the assessee is a partnership firm, which is engaged in the business of real estate development. A search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter called as the Act ) was conducted in the case on 30.1.2008. During the course of search and seizure proceedings, suppression of sales was detected and which was admitted by the assessee. W .....

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ed return on 17.8.2009 admitting a total income of ₹ 4,35,64,790/- including undisclosed income of ₹ 4,28,72,020/-. The assessment was completed u/s 143(3) of the Act, on 31.12.2009 and determined total income of ₹ 5,21,30,208/-. On appeal by the assessee, the CIT(A)-1, Hyderabad restricted the total income to ₹ 4,70,80,208/-. On further appeal before the ITAT, the ITAT had given further relief and accordingly, the total income was reduced to ₹ 4,47,30,210/-. Finall .....

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can be levied u/s 271AAA of the Act, as the conditions stipulated under provisions of section 271AAA(1) &(2) of the Act have not been fulfilled. The assessee further submitted that it had admitted the undisclosed income during the course of search and also filed revised return disclosing the undisclosed income admitted during the course of search. The A.O. has determined slightly higher total income over and above the returned undisclosed income and the difference is on account of difference .....

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, the conditions prescribed under clause (i) & (ii) of sub section 2 of section 271AAA of the Act are not fulfilled to levy the penalty u/s 271AAA(1) of the Act. 5. The A.O. after considering the explanations furnished by the assessee, levied the penalty of ₹ 44,03,744/- u/s 271AAA(1) of the Act. While doing so, the A.O. held that it is true that the assessee has admitted the undisclosed income in the statement recorded under sub section 4 of section 132, but failed to specify the mann .....

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conducted on 30.1.2008, the assessee has not admitted the undisclosed income declared during the course of search in the regular return filed for the assessment year on 28.9.2008, which shows the assessee s intention of not to disclose the income and pay taxes. The A.O. further held that assessee admitted undisclosed income in the revised return, but not paid the taxes as per the revised return and paid taxes after the completion of assessment. Therefore, in view of the above facts and circumst .....

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the regular return filed on 28.9.2008, as at the time of filing the original return, it s case was not notified and also it did not have the seized documents, therefore, not disclosed the additional income declared during the course of search. The assessee further submitted that it has taken the Xerox copies of the seized books of accounts and other relevant materials and in response to statutory notice, it has filed the revised return and disclosed the undisclosed income admitted in the statem .....

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ced reliance in the decision of Hon ble Supreme Court in ACIT Vs. Gebilal Kanhaialal (HUF) (2012) 348 ITR 561 (SC). 7. The CIT(A) after considering the submission of assessee, deleted the penalty levied u/s 271AAA(1) of the Act. The CIT(A) held that the only difference as regards the quantum of undisclosed income was the difference in closing stock value ofRs.11,65,418/-. The assessee has explained the reasons for difference in closing stock valuation. However, the AO has adopted a different met .....

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disclosed income, at the time of statement u/s 132(4) of the Act. The conditions specified under sub clause (i) & (ii) of sub section (2) of section 271AAA of the Act are fulfilled, therefore, no penalty can be levied under sub section (1) of section 271AAA. The CIT(A) further held that the assessee has paid the entire taxes on the undisclosed income after the completion of the assessment and before initiation of penalty proceedings u/s 271AAA of the Act. The Act does not specify any upper t .....

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us. 8. The ld. D.R. submitted that the order of the CIT(A) is erroneous on facts and circumstances of the case. The Ld. D.R. further submitted that the Ld. CIT(A) ought to have upheld the order of the A.O. in holding that the assessee has not explained the manner in which the undisclosed income was derived as required in sub section (2) of section 271AAA of the Act. The Ld. D.R. further submitted that the CIT(A) erred in holding that the assessee has satisfied the condition of payment of taxes .....

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ITAT in quantum appeal is not in accordance with law. The A.R. further submitted that the A.O. was not justified in levying penalty u/s 271AAA of the Act, even for the reason that the A.O. has already examined the case u/s 271(1)(c) of the Act for the very same concealment of income alleged by him. Therefore, requested to uphold the order of CIT(A). 10. We have heard both the parties and perused the materials available on record. The factual matrix of the case is that a search and seizure opera .....

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earch. The assessment was completed u/s 143(3) of the Act on 31.12.2009 and determined total income of ₹ 5,21,30,208/-. On appeal by the assessee, finally the undisclosed income was determined at ₹ 4,47,30,210/-. Subsequently, the A.O. has levied penalty u/s 271AAA of the Act for the reason that the assessee has not explained the manner in which the undisclosed income was derived and also not substantiated the manner in which such income has been derived. The A.O. was of the opinion .....

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d also paid the taxes before initiation of penalty proceedings u/s 271AAA of the Act. Therefore, the conditions specified in sub section (2) are fulfilled and hence, no penalty can be levied u/s 271AAA of the Act. 11. The A.O. levied the penalty for the sole reason that the assessee has not explained the manner in which the undisclosed income has been derived. The A.O. further held that the assessee has not paid the taxes as per the revised return on the undisclosed income. The condition specifi .....

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efore first day of July, 2012), the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed @ 10% of the undisclosed income of the specified previous year. Sub section (2) of section 271AAA of the Act, provides that nothing contained in sub section (1) shall apply if the assessee, (i) in the course of search, in a statement under sub section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived (i .....

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assessee has explained the manner in which such undisclosed income has been derived. It was the explanation of the assessee that the undisclosed income was derived because of suppression of sales turnover relates to his business. The assessee further explained that the suppressed sale was on account of sale of flats, which were not disclosed in the regular books of accounts. The assessee explained the undisclosed income even at the time of search while recording statement u/s 132(4) of the Act a .....

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ee submitted that the Act did not specify any upper limit for payment of taxes. Therefore, if tax and interest payable by him has been paid before initiation of penalty proceedings u/s 271AAA of the Act, then no penalty can be levied under clause (iii) of sub section (2) of section 271AAA of the Act. We find force in the arguments of the assessee for the reason that on perusal of the facts available on record, it was clear that the assessee has paid the entire self assessment tax admitted in the .....

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the Act as held by the Hon ble Supreme Court in the case of ACIT Vs. Gebilal Kanhaialal (HUF) (2012) 348 ITR 561 (SC). 12. It is pertinent to mention here the case laws relied upon by the assessee. The assessee relied upon the Hon ble Supreme Court judgement in the case of ACIT Vs. Gebilal Kanhaialal (HUF) (2012) 348 ITR 561 (SC). The Hon ble Supreme Court, in the above case, held that clause (2) did not prescribed any time limit within which the assessee should pay tax on income disclosed in t .....

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e is declared by him U+-any return of income-furnished on or after date of search, he shall be deemed to have concealed the particulars of his income for the purposes of imposition of penalty u/s 271(1)(c) Only exceptions to such a deeming provision or to such a presumption of concealment are given In sub-clauses (1) and (2) of Explanation 5 Three conditions have got to be satisfied by assessee, for claiming immunity from payment of penalty under cl (2) of Expl. 5 to S. 271(1)(c), i.e. Condition .....

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4), manner in - which such income stood derived Condition No 2 also satisfied. Condition No 3 Assessee had to pay tax together with interest, if any, In respect of such undisclosed income However, as no time limit for payment of such tax stood -prescribed under clause (2), third condition also stood fulfilled. Assessee has paid tax with interest upto date of payment. Therefore, assessee was entitled to immunity under cl (2) of Expl 5 to S 271(1)(c). Appeal dismissed. 13. The assessee relied upon .....

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is reproduced hereunder: The AO was carried away by the original return filed by the assessee, wherein originally the income admitted in the course of search was not returned by it But the fact is that the assessee had filed a revised return before completing the assessment. When that is the case, the first return filed by the assessee is a non est. The only valid return is the revised return filed by the assessee. In that return, the amount admitted by the assessee at the time of search was off .....

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case of DCIT Vs. Pioneer Marbles & Interiors Pvt. Ltd. (2012) 144 TTJ 663. The coordinate bench of this Tribunal, while deleting the penalty u/s 271AAA of the Act, held that no time limit is set out for payment of taxes for availing the immunity u/s 271AAA(2) of the Act. Therefore, once the entire tax and interest has been duly paid well before the completion of the penalty proceedings, the assessee cannot be denied immunity u/s 271AAA (2) of the Act. The relevant portion is reproduced hereu .....

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essee (i) in the course of the search, in a statement under s. 132(4), 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; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. While payment of taxes, along with Interest, by the assessee is one of the conditions precedent for availing the immunity under s 271AAA(2), there is no time-limit se .....

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