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2016 (8) TMI 685 - ITAT DELHI

2016 (8) TMI 685 - ITAT DELHI - TMI - Penalty levied by the AO u/s 271AAA - Held that:- In the present case, it is an admitted fact that excess stock of gold & diamond amounting to ₹ 1,24,40,928/- and excess cash of ₹ 54,81,173/- were found which the assessee offered for taxation during the course of search in the statement recorded u/s 132(4) of the Act. The AO levied the penalty u/s 271AAA of the Act for the reason that the manner in which the undisclosed income was derived was not .....

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ellery, therefore, the source of the unaccounted excess cash, gold & diamond jewellery was the business activity of the assessee. In the present case, no specific query was raised by the authorized officers during the course of recording of statement u/s 132(4) of the Act about the manner in which the undisclosed income had been derived and about its substantiation. - The said query was raised during the course of recording the statement of Sh. Surender Kumar Jain Son of Late Sh. Suraj Park .....

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. K. Saini, AM And Smt. Beena Pillai, JM For The Assessee : Sh. Kapil Goel, Adv. For The Revenue : Sh. Sunil Chandra Sharma, CIT DR ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 07.08.2015 of ld. CIT(A)-XVI, New Delhi. 2. The only grievance of the assessee in this appeal relates to the confirmation of penalty levied by the AO u/s 271AAA of the Income Tax Act, 1961 (hereinafter referred to as the Act). 3. Facts of the case in brief are that the assessee is a .....

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cash, gold and diamond for taxation. Accordingly, a sum of ₹ 1,79,22,101/- (Rs.54,81,173/- + ₹ 45,52,548/- + ₹ 78,88,380/-) was offered for taxation. The AO however, initiated the penalty proceedings u/s 271AAA of the Act on the ground that had the search was not conducted at the business premises of the assessee, the difference in cash and stock would not have been detected. 4. The submission of the assessee before the AO was as under: With respect to your above said notice fo .....

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for ₹ 54,81,173/- has been shown as "Miscellaneous Income (Amount offered voluntarily for taxation)" in the Profit and Loss Account. The sale of surrendered stock is included in the sales turnover of the assessee and has been highlighted as "Sales includes amount offered voluntarily for taxation for ₹ 1,24,40,928/-)". The same facts were also mentioned in the Notes to Accounts with Financial Statements, already filed with your honor. Moreover, the assessee has als .....

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cified previous year. b. Nothing contained in sub section (1) shall apply the assessee. i) In the course of search in a statement u/s (4) of section 132 admits the undisclosed income and specifics the manner in which such income has been derived. ii) Substantiates the manner in which the undisclosed income was derived, and pays the tax, together with interest if any in respect of the undisclosed income. iii) No penalty under the provisions of clause (c) of sub section (i) of section 271 shall be .....

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such income has been derived and also has paid the tax together with interest in respect of undisclosed income. 5. Details of nature of undisclosed income and manner of earning was recorded in the statement of Sh. Surender Kumar Jain at the time of search. Assesses has admitted the undisclosed income in the statement u/s 132(4) and also specified the manner in which such income has been derived in the same. 6. Taxes and applicable interest have already been paid on the undisclosed Income by the .....

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sum of 1.79 Cr. On behalf of M/S. S.K. Impex vide statement u/s 132 at the time of search to cover all leakages in revenue on account of cash and stock for financial year 2011-12. The Income has been earned form out of books transactions of sales and purchase of bullion/jewelry. The cash amounting to ₹ 55 lakhs seized during the search operations may kindly be used to meet the tax liabilities. The surrender has been made with the clear understanding that no penalty and interest will be imp .....

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year 2012-13. 9. It is further stated that in the course of search no incriminating documents were found which could lead to the conclusion that the appellant had earned the undisclosed income. 10. The assessee had substantiated the disclosure by furnishing all the related and matching documents during the course of assessment proceedings. 11. That the assessment u/s 143/153A has been completed at the returned income vide order dtd. 28.02.2014 and all the facts provided by the assessee have been .....

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d tax along with the interest and the provision of section 271AAA(1) will not be applicable as the assesses complied with the conditions mentioned u/s 271AAA(2) of the Act. The assessee admitted the undisclosed income in the course of search in the statement recorded u/s 132(4) of the Act and also specific manner in which the income has been derived by him. The manner disclosed by the assessee had been accepted by the AO. The assessee has also paid the tax and interest in respect of undisclosed .....

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na devi Agarwal Vs Department of income Tax (ITA No. 1052/Ahd/2012). V. Shilpa M. Gupta Vs. Department of Income Tax (ITA No. 1784/Ahd/2012). 13. Reliance is placed upon order of ITAT Delhi in the case of Sh. Virendara Kumar Gupta, Vs ACIT, CC-9, ITA No. 552/Del/2013. Wherein it was decided as: ……….. The taxes had been paid along with the interest in all these individual hands. Since a statement was given during the course of search u/s 132 Income Tax Act, 1961 admitting the .....

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ee of the Groups have also paid the taxes applicable along with interest. In such a situation, the CIT (A) was not justified in sustaining the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer. Considering all these facts and circumstances, we set aside the orders of the authorities below the and direct to delete the penalty u/s 271AAA." Which has been upheld by the honorable DELHI HIGH COURT vide Income Tax Appeal Nos. 563/2013, 564/2013, decided on November 22, 2013 standin .....

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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 merely because it is lawful to do so. Whether penalty should he imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exorcised judicially and on a consideration of all the relevant circumstances. Even .....

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e humbly requested to drop the penalty proceedings against the assessee and oblige." 5. The AO however did not find merit in the submissions of the assessee and levied the penalty of ₹ 17,92,210/- by observing as under: The assessee's above noted reply has been considered by the undersigned very carefully. The explanation put forth by the assessee is not correct and is therefore, not acceptable. Provisions of the section 271AAA(2) clearly stipulate that:- Nothing contained in sub .....

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ndisclosed income referred to in sub section (1). Thus in order to absolve himself from the imposition of penalty u/s 271AAA of the I.T. Act, 1961, the assessee has not only to admit the undisclosed income in a statement u/s 132(4) of the I.T. Act, 1961 but also he has to specify the manner in which such income has been derived and he has to substantiate the manner in which the undisclosed income was derived and he has to pay the tax, together with interest, if any, in respect of undisclosed inc .....

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1AAA(2) of the I.T. Act as discussed above. It is noted that the assesses, infact, has simply submitted that "I have surrendered a sum of 1.79 Cr. on behalf of M/S. S.K. Irnpex (vide statement u/s 132) at the time of search to cover all leakages in revenue on account of cash and stock for financial year 2011-12. The income has been earned form out of books transactions of sales and purchase of bullion/jewelry." This submission cannot be held to tantamount to specify the manner in which .....

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, by any stretch of logic, tantamount to specifying the manner & obviously the assessee has not substantiated such manner. It is also noted that the conditions envisaged in section 271AAA(2) of the I.T. Act, 1961 are cumulative and have to be fulfilled simultaneously. Thus, mere payment of tax together with interest in respect of the undisclosed income without fulfilling other two conditions at the same time cannot confer upon the assessee the impunity form imposition of penalty envisaged u/ .....

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6.05.2015 Pramod Kumar Jain Vs DCIT (2013) 33 Taxmann.com 651 (Cuttack-Trib) SPS Steel & Power Ltd. in ITA No. 1391 & 1414/Kol/2011 order dated 30.06.2015 Ashok Kumar Sharma Vs DCIT 149 TTJ 33 (Cuttack) SVP Builders (India) Ltd. Vs DCIT in ITA No. 4674/Del/2014 order dated 19.02.2015 7. The ld. CIT(A) however did not find merit in the submissions of the assessee by observing as under: 5) Whether the plea of the assessee like voluntary disclosure , buy peace , avoid litigation etc. have a .....

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e Hon ble Supreme Court has further observed that the AO has to satisfy whether the penalty proceedings be initiated or not during the course of assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduced it into writing. The scope of section 271(1)(c) has also been elaborated and discussed by this court in Union of India Vs Dharmendra Textiles Processors (2008) 13 SCC 369 and CIT Vs Atul Mohan Bindal (2009) SCC 589. In view of the principles la .....

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271AAA of the Act was not leviable. It was further submitted that the AO never asked the manner of deriving the income during the course of search or in the assessment proceedings and the partner of the assessee in reply to the question no. 11 clearly stated the he offered the amount of ₹ 1,24,40,928/- for taxation on account of excess stock found during the search operation. A reference was made to page no. 7 of the assessee s paper book which is the copy of the statement of the partner o .....

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ty on the basis of statement u/s 132(4) of the Act for not levying the penalty was not available to the assessee and the penalty u/s 271AAA of the Act was rightly levied by the AO and the ld. CIT(A) was fully justified in confirming the penalty. 10. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that excess stock of gold & diamond amounting to ₹ 1,24,40,928/- and excess .....

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