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2016 (8) TMI 207 - ITAT MUMBAI

2016 (8) TMI 207 - ITAT MUMBAI - TMI - Penalty u/s. 271AAA - failure to explain the manner in which undisclosed income is derived as required u/s. 271AAA(2)(ii) - CIT(A) deleted the penalty - Held that:- If we examine the answer of the questions of specifying the manner in which the income has been derived, the answer is yes. No question was posed by authorised officer while recording the statement of Subash Vincent u/s132(4) in respect income of ₹ 1.33Crore (approx) . Thus the alleged fai .....

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the Revenue itself leads to the irrefutable conclusion that the question of specifying and substantiating the manner in which it has earned has been answered to the satisfaction of the authorised person as well as assessing officer. Moreover it needs to be understood that in absence of any specific procedure prescribed in the Act, for specifying and substantiating the undisclosed income, the fact that the same has been accepted without any variation by the AO is by itself enough evidence of the .....

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inst the order of CIT(A)-26, Mumbai dated 04.08.2014 for Assessment Year (AY) 2011-12. The Revenue has raised the following Ground of appeal:- 1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the penalty u/s. 271AAA of ₹ 13,29,634/- without appreciating the fact that the assessee has failed to explain the manner in which undisclosed income is derived as required u/s. 271AAA(2)(ii) of the I.T. Act, 1961? 2. Whether on the f .....

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l was seized from the premises of the assessee. The assessee made a statement u/s 132(4) of the Act and made a disclosure of additional income of ₹ 3,00,00,000/-.. Thereafter, the assessee filed return of income on 30.09.2011, declaring total income of ₹ 26,13,92,237/-. The assessment was completed u/s. 143(3) of the Act on 22.03.2013 computing total income at ₹ 26,13,92,237/-. While framing assessment no further addition was made by AO. 3. During the course of assessment proce .....

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ssee-company made a disclosure of ₹ 3,00,00,000/- u/s 132(4) of the Act during the search & seizure action. The undisclosed income was offered for taxation. The assessee-company offered ₹ 3,00,00,000/- for tax out of which ₹ 1.67 Crore was substantiated with document, seized during the course of search & seizure. The remaining amount of ₹ 1.33 Crore (approx) was to be considered for any other issue which may arise later and just to buy peace with the department an .....

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- being 10% of undisclosed income ₹ 1,32,96,340/-, which was not substantiated. Aggrieved by the order of AO, the assessee filed an appeal before the CIT(A), and succeeded vide impugned order dated 04.08.2014. Against the order of CIT(A), the Revenue filed the present appeal before us. 4. We have heard the Departmental Representative (DR) of the Revenue and Authorised Representative (AR) for assessee and perused the material available on record. DR for Revenue argued that during the search .....

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sclosed income of ₹ 1.33 Crore (Approx) was derived, the AO levied the penalty as prescribed under sub-section (1) of section 271AAA. Ld. DR for Revenue vehemently argued that when Shri Subhash Vincent Joseph was confronted with the incriminating material seized during the search and was asked to explain the nature of receipt in the books of account, Shri Subhash Vincent Joseph only could explain about ₹ 1.67 Crore. It was argued that CIT(A) wrongly deleted the penalty levied by AO. .....

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in respect of amount of ₹ 1.33 Crore (approx) was posed. The amount of ₹ 1.67 Crore was duly substantiated with the document seized during the course of search & seizure. Ld. AR of the assessee further argued that the assessee voluntarily disclosed the amount of ₹ 3,00,00,000/- which included ₹ 1.33 Crore(approx). The question of specifying the manner in which the income has been derived is duly answered and substantiated with the document impounded/seized during the .....

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tu Singhal (ITA No. 5257/Del/2013) and ITAT, Kolkata in SPS Steel & Power Ltd. vs. ACIT (ITA No. 1391/Kol/2011). 5. We have considered the rival contentions of the parties and perused the material available on record. We have gone through the various decisions referred by ld. Representative of the parties. Ld. DR relied upon the decision of Mumbai Tribunal in ACIT vs. Prakash Steelage Ltd. (supra) wherein the Co-ordinate Bench while dealing with the levy of penalty u/s 271AAA held as under: .....

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not warranting any further denial of benefit of Explanation 5A to section 271(1)(c) - whether Commissioner (Appeals) having examined levy on basis and anvil of a different provision, matter was to be restored back to him for consideration afresh. On the other hand Ld. AR for assessee relied upon the decision of ACIT, Chennai vs. Kishore Kumar Gokul Das, ITAT, Delhi Tribunal, in Smt. Raj Rani Gupta vs. DCIT (ITA No. 3371/Del/2011, ACIT vs. Ritu Singhal (ITA No. 5257/Del/2013) and ITAT, Kolkata in .....

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had not taken into consideration the specific provision i.e. section 271AAA of the "Act". Apart from that, it also emanates from the case file that in the course of 'search', the assessee admitted undisclosed income of ₹ 53.55 lakhs. The same was 'returned' on 13.09.2010 in furtherance to notice under section 153A of the 5 I.T.A. Nos.716 & 717/M/ 717/M/13 /M/13 "Act". We make it clear that earlier, he had disclosed income of ₹ 2,30,900/-. Post .....

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ings of the CIT(Appeals) regarding admission of undisclosed income by way of statement recorded under section 132(4), explanation of its source and also payment of taxes by the assessee. Therefore, in our view, the present case is covered by section 271AAA(2) of the "Act" and the penalty has been rightly deleted by the CIT(Appeals). Further, the ITAT, Delhi in Raj Rani Gupta Vs. DCIT (supra) it was held as under: 5. The appellant truthfully answered every question being asked and fulfi .....

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whereas Oath Administrator was representing Income Tax Department and conducting search with many officers. In a way he must be very well aware of the 5 ITA No3371/Del/11 provisions of the law and especially provisions related to search and seizure. 8. framing of the questions were not in the scope of the appellant. 9. The appellant rely the decision of CIT v. Radha Kishan Goel 278 ITR 454 where the Hon'ble Allahabad High Court accepted that unless the authorized officer puts a specific que .....

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of Orissa (1972) 83-ITR 26 (SC) He particularly made reference to the following observation of Hon'ble Supreme Court:- "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceedings and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed m .....

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om a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." The Hon'ble Gujarat High Court also in the case of CIT v. Mahendra C. Shah 299 ITR 305 held as under:. "Insofar as the alleged failure on the part of the assessee to specify in the statement under s. 132(4) of the Act regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is incumbent u .....

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sidering the setting in which such statement is being recorded, as noted by Allahabad High Court in case of Radha Kishan Goel (supra). Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Exception No. 2 while making statement under s. 132(4) of the Act In view of the above, the penalty is deleted. Further, in ACIT, Delhi vs. Ritu Singhal,(supra) it was he .....

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levy of penalty u/s 271AAA of the Income Tax Act, 1961 gets answered in the negative. In SPS Steel & Power Ltd versus ACIT(supra) it was held: penalty under section 271 AAA could not be levied nearly on admission of assessee during search proceedings and there must be some conclusive evidence before assessing officer that Antrim eight in seized documents represented undisclosed income of assessee Further Co-ordinate Bench of Mumbai Tribunal in ITA No. 807/Mum/2012 titled as Shri Purnandu Ja .....

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de into the manner of deriving of the income which is a subject matter of penalty. These aspects are analyzed by the Tribunal in the assessee's own case in the later assessment years and the issue was decided in favour of the assessee. For the sake of completeness of this order, we reproduce the said paras 6.1 to 6.3 of the said order of the Tribunal (supra) dated 23.9.2013, which read as under: "6.1. The construction of the provisions of Explanation 5 put-forth by Ld DR on the basis of .....

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was unable to cite any such decision. It was only argued that instructions issued by CBDT are in the nature contemporanea exposition and for such purpose reliance was mainly placed on the decision of Hon'ble Supreme Court in the case of K.P. Varghese (supra). We have carefully considered such submissions of Ld CIT DR and we found that such contention of Ld DR has no force as the law regarding bindingness of circulars issued by CBDT has been later on explained by Larger Bench of Hon'ble S .....

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ly no existence in law. It has been clarified that the clarifications I circulars issued by the Central Government and of the State Government represent merely understanding of the statutory provision. They are not binding upon the court. It is for the Court to declare what the particular provision of the statute says and it is not for the executive. Thus, the law on this issue is very much clear that wherever question regarding interpretation of a provision is applicable the interpretation adop .....

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endered by Madras High Court, in absence of decision of jurisdictional High Court on the issue will have persuasive value and view has been taken after considering the relevant provisions. Accordingly, we hold that Ld CIT (A) did not commit any error in deleting the penalty by following the aforementioned decision of Hon 'ble Madras High Court and penalty cannot be sustained on the interpretation of provisions adopted by the CBDT. 6.2. Before, parting with the appeals of the Revenue, for the .....

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n which it was held that where assessee has not been asked with such question that in what manner such income has been derived and the income has been offered and taxes have been paid then it will be sufficient compliance of Explanation 5 to section 271(1)(c). He in this regard referred to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C Shah [2008] 299 ITR 305/172 Taxman 58 and the decision of Allahabad High Court in the case of CIT vs. Radha. Kishan Goesl [2005] .....

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d. 6. Now coming to the facts of the present case, we have noticed that the AO while levying the penalty, out of total undisclosed declared income of ₹ 3,00,00,000/- , the sum of ₹ 1.67 Crore was duly substantiated and supported the same with the documentary evidence. Therefore AO did not levied penalty u/s 271AAA. However the remaining ₹ 1.33 Crore (approx) was further offered for an ambiguity that may arise in any proceeding . The CIT(A) while considering this ground observed .....

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or undisclosed income despite the fact that huge refund was due to the assessee. The CIT(A) while relying upon the decision of Co-ordinate Bench reported in [2013] 59 SOT 36 Mum(Trib.) titled as Marathon Nextgen Reality & Textiles Lt. Vs. DCIT wherein it was held that: when a statement is recorded from the assessee and addition is made on the basis of the statement recorded then the same statement has to be accepted in full or rejected in full . The revenue cannot pick-up and chooses the por .....

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hile recording the statement of Subash Vincent u/s132(4) in respect income of ₹ 1.33Crore (approx) . Thus the alleged failure on the part of the assessee to specify and substantiate in respect of undisclosed income of ₹ 1.33 Crore(approx) , was due to the reason that no such question was posed to Subash Vincent. So it was not expected from the person who has once voluntarily offered the income and substantiated part of it, so far as confronted to him and remaining was neither pose to .....

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