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2016 (9) TMI 102 - ITAT AHMEDABAD

2016 (9) TMI 102 - ITAT AHMEDABAD - TMI - Penalty u/s 271AAA - undisclosed income was admitted during search - According to the AO, bifurcation of the income, head-wise and year-wise, was not given in this statement under section 132(4) of the Act. Year-wise and assessee-wise break up was given by the group subsequently - Held that:- Sub-section 2 provides that sub-section 1 of Section 271AAA would not be applicable upon an assessee if he fulfills the following conditions viz. (a) that the asses .....

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rse of search. The dispute between the parties is whether the assessee has specified manner in which such income has been derived and substantiate the manner in which undisclosed income was derived. The AO has simply observed that the assessee has not admitted the income himself and has not disclosed the manner. The income was disclosed by the son of the assessee. It is pertinent to say that the statement of Shri Rajesh M. Shah was recorded on behalf of group itself. He has specified the income .....

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ICIAL MEMBER For The Revenue : Shri Sanjay Kumar, Sr.DR For The Assessee : Shri P.M. Mehta, AR ORDER Revenue is in appeal before the Tribunal against the order of the ld.CIT(A)-12, Ahmedabad passed for the Asstt.Year 2012-13. 2. Solitary grievance of the Revenue is that the ld.CIT(A) has erred in deleting the penalty of ₹ 15.00 lakhs imposed by the AO under section 271AAA of the Income Tax Act, 1961. 3. Brief facts of the case are that a search and seizure operation was carried out in the .....

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urn of income on 25.3.2013 declaring total income at ₹ 1,50,52,490/-. The assessee has disclosed unaccounted income of ₹ 1.50 crores in his hand. The AO has passed assessment order under section 143(3) on 31.1.2014, and he accepted disclosed income of the assessee. The ld.AO has initiated penalty proceedings under section 271AAA of the Act. He issued a show cause notice under section 274 r.w.s. 271AAA. In response to the show cause notice, the assessee has filed written submissions, .....

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or the year under consideration been duly shown in the return of income & accepted in the assessment order passed u/s. 143(3) of the I.TAct by the assessing officer. The due taxes on this disclosed income were also paid by the assessee. 2. Now the question of levy of penalty u/s. 271AAA of the Act has been raised by your good self on this disclosed income figure which is not appreciable considering the factual & legal aspects of the case. The relevant section 271AAA reads as under: (i) T .....

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see,- ; (i) in the course of the 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; (ii) substantiates the manner in which the undisclosed income was derived; and (Hi) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-section (i) of section 271 shall be imposed upon the assessee in respect of the undiscl .....

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course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents mainta .....

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the said date; or (ii) in which search was conducted.]" 3. From the above clauses of the section it becomes clear that no penalty on the income disclosed & pertaining to the search year can be levied if the same is accepted by the assessee & due taxes on the same are paid by him. Regarding the issue of manner of deriving of disclosed income & accepting the same in 132(4) statement is not at all relevant if specific question for the same has not been raised during the course of .....

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where during course of search assessee admitted undisclosed income, paid tax together with interest, filed return showing said income as business income and Assessing Officer had accepted same, it could not be said that assessee had not specified manner or could not substantiate manner in which income was derived - Held, yes - Whether, therefore, penalty under section 271AAA was not leviable as assessee 's case fell under sub-section (2) of section 271AAA - Held, yes" ii) Pramod kumar .....

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101 DTK 238 (Del. Trib.) Head Note: "Penalty under s. 271AAA- Conditions precedent- Surrender of income vis-a-vis manner of earning - Assessee undisputedly admitted undisclosed income in his statement under s. 132(4), paid tax there on & the same was accepted by the department- Penalty levied u/s. 271AAA for the reason that assessee had not substantiated the manner in which the undisclosed income was derived as required by cl. (ii) of sub s. (2) of s. 271AAA- Not justified-Unless the AO .....

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by the assessee" 4. In the background of the above legal position, if the facts of the case before hand are considered the statement u/s. 132(4) of the assessee was recorded on 10/08/2011 wherein in answer to question no. 7 it was clearly stated that the detail explanation of the loose paper found as per Annexure - 2 Page No. 1 to 169 will be given by his son Shri Rajeshbhai M. Shah. On very same day Shri Rajeshbhai M. Shah has also given statement u/s. 132(4) in which he had after consider .....

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f ₹ 1,50,00,000/- on the date of the search which was included in the total disclosure amounting to ₹ 25,00,35,469/-. Thus, condition of accepting the undisclosed income in statement 132(4) gets fulfilled. Now, as far as manner of earnings of this income is concerned no such question was raised during the course of recording statement & so, it does not become necessary for getting the immunity from the section of provision 271AAA of I.T Act as per the legal position explained bef .....

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was of the view that the assessee failed to disclose manner of earning undisclosed income and also failed to substantiate the alleged manner, as to how the income was earned. 5. Dissatisfied with the order of the AO, the assessee carried the matter in appeal before the ld.First appellate Authority. He filed detailed written submissions, which has been reproduced by the ld.CIT(A). The ld.First Appellate Authority on analysis of the submissions of the assessee arrived at conclusion that the asses .....

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ant to "explain the manner of earning undisclosed income" and also to "substantiate the manner in which the undisclosed income was derived", in response to which the appellant has merely relied on disclosure made in the return of income and has, as mentioned earlier, relied on the decision of Hon'ble Gujarat High Court in case of Commissioner of Income-tax v. Mahendra C. Shah [2008] 172 TAXMAN 58 (GUJ.), and further decisions as reproduced above to contend that "suff .....

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up other notings, leakages etc". Having given careful consideration, I agree with the Ld. ARs, that there is no definition of "stating the manner and substantiating the same" laid down in s. 271AAA, as indeed it is to be gathered from not only the statement u/s 132(4) but also the seized documents/assets which are confronted to the appellant. When seen in the light of Mahendra C Shah (supra), I find force in the contention of the ARs that subsequent to admission u/s 132(4), clearl .....

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ppellant or without referring to seized documents. As such, in light of various authorities cited by the AR and also otherwise perused by me, I am of the considered opinion that the fact that the Authorized Officer during search and Investigating Officer thereafter has acquiesced in the reply given by the appellant, without any further probe at that time, clearly brings out that compliance satisfactory to the Investigating Officer has been made by the appellant. Thereafter, once the appellant ha .....

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liance thereto" by the appellant pleading "sufficient compliance", has obviously not impacted the quantification of income and assessment thereof. 4.3 The Id. ARs have also brought my attention to and taken me through the operative portions of the Authorities relied upon by the ARs. It is further very vehemently contended that the appellant's facts are far stronger than the facts obtaining in the following cases wherein the Jursdiction HC and Tribunal found in favour of the ap .....

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course of search the assessee makes a statement under Section 132 (4) and owns that he acquired any of such assets out of his undisclosed income, not so far returned, and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income, no presumption of concealment has to be drawn, notwithstanding the admission to that effect. In other words to the extent the assessee makes a clean breast of his undisclosed income represented .....

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o, it was vehemently contended, go to establish that the manner as stated by the appellant u/s 132(4) stands not only substantiated as required u/s 271AAA(2)(ii) but the AO is also satisfied about such substantiation right at the assessment stage, and the AO is not expected to suddenly hold otherwise during penalty proceedings unless he brings positive material to disprove the already accepted substantiation by the appellant. I find considerable force in the contentions raised as above and have .....

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nd there is no further material brought by the Ld. AO to hold otherwise. Thus, I find, as argued by the Ld. ARs that the appellant's case is squarely covered by the ratios of Mahendra C Shah and Sidh Nath Goel (supra), and thus it is to be held that the appellant has made effective and sufficient compliance to immunity condition of s. 271AAA(2)(ii) also. 6. With the assistance of the ld.representatives, I have gone through the record. Area of dispute between both the parties is whether the a .....

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