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2016 (10) TMI 934 - ITAT MUMBAI

2016 (10) TMI 934 - ITAT MUMBAI - TMI - Penalty u/s 271AAA - undisclosed cash credit - Held that- We concur with the Ld. CIT(A)ís observation that the undisclosed income of ₹ 3.55 crores representing various items as cited therein are liable to be considered in terms of the provisions of Explanation (a)(ii) to Section 271AAA of the Act. As per the material on record and as observed by the Ld. CIT(A), we find that it is an undisputed fact that the assessee has, during the course of search p .....

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idences in respect of the undisclosed income have to be produced to substantiate the source of income; a proximate nature of acquisition would be sufficient. We too, agree with the finding of the Ld. CIT(A) that the A.O has not identified which of the conditions have been violated by the assessee, that invite the levy of penalty u/s 271AAA of the Act in the case on hand; Nor has any reason has been rendered for the levy thereof - Decided in favour of assessee - ITA No. 6261/MUM/2014 - Dated:- 5- .....

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n business of real estate as builder and developer. A search and seizure action u/s 132 of the Act was conducted by the I.T. Department in the Gajra group on 19/02/2009, wherein the assessee along with his partner Shri.Ramesh Gajra disclosed collectively additional income of ₹ 15 crores in their individual hands and firm in which he was partner. In the assessee s case the disclosure was as ₹ 4,24,31,099/-. For Asst. year 2009-10, the assessee filed his return of income on 03/05/2010 .....

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ings, the assessee explained the difference of ₹ 43,49,166/- on account of reduced disclosure of cash credit which was accepted by the Assessing Officer ( AO ). In respect of the difference of ₹ 25,00,000/- on account of Miscellaneous income the assessee submitted that this amount was declared by the assessee during search to cover any shortfall in the declaration made u/s 132(4) of the Act and since later on, at the time of filing of the return of income, it was found that there was .....

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71AAA of the Act were initiated simultaneously in this regard. The authorities below have observed that no appeal has been preferred by the assessee against the order of assessment for Asst. year 2009-10 dt. 03/11/2010 and therefore the matter attained finality. 3.1 The A.O initiated penalty proceedings u/s 271AAA of the Act simultaneously in the order of assessment for Asst. year 2009-10 dt. 03/11/2010, requiring the assessee to show cause as to why penalty be not levied there under in the case .....

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dt. 30/05/2011 due to non compliance with the conditions specified u/s 271AAA of the Act. 3.2 Aggrieved by the order levying penalty of ₹ 35,58,193/- u/s 271AAA of the Act for Asst. year 2009-10 vide order dt. 30/05/2011, the assessee preferred an appeal before the Ld. CIT(Appeals)-33, Mumbai. After considering the submissions put forth by the assessee, the AO s views in the matter and the material on record, the Ld. CIT(A) in the impugned order, dt. 15/07/2014, deleted the penalty levied .....

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case of M/s Kanakia Spaces Pvt. Ltd. in ITA No. 6763/Mum/2011 dt. 10/07/2013. 4.1 Revenue, being aggrieved by the impugned order of the CIT(Appeals)-33, Mumbai dt. 15/07/2014 deleting the penalty of ₹ 35,58,193/- levied u/s 271AAA of the Act for Asst. year 2009-10, has preferred this appeal raising the following grounds:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty of ₹ 35,58,193/- levied by the Assessing Officer u/s 2 .....

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er any grounds or add a new ground which may be necessary. 4.2 The Ld. DR for Revenue was heard in support of the grounds raised (supra), submitting that the only issue challenged was the order of the Ld. CIT(A) deleting the penalty of ₹ 35,58,193/- levied by the A.O u/s 271AAA of the Act for Asst. year 2009-10. According to the Ld. DR, who placed strong reliance on the order of the A.O, the Ld. CIT(A) ought not to have deleted the said penalty as the assessee had failed to discharge its o .....

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filled the conditions, as required by the provisions of sec. 271AAA of the Act, and both specified and substantiate d u/s 132(4) of the Act, the manner and source from which the undisclosed income of ₹ 4,24,31,099/- had been earned before the Addl. DIT (Inv.) Kalyan vide letter dt. 12/04/2009, which item wise break up finds mention at pages 1 and 2 of the order of assessment of for Asst. year 2009-10. It was contended that in view of the above, penalty u/s 271AAA of the Act was not leviabl .....

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The facts of the matter as emanate from the record are that in the course of search action in the Gajra group, on 09/02/2009 and thereafter it was, inter alia admitted before the Addl. DIT (Inv), Thane vide letter dt. 12/04/2009 and in the assessee s statement u/s 132(4) of the Act that the declaration/admission of undisclosed income of the assessee in the case on hand for Asst. year 2009-10 was as under:- Sr. No. Description & Details Amount 1 Jewellery ₹ 3,00,000 2 Cash Seizure S .....

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,00,000 3 Brokerage 7,50,000 4 Cash credit by way of loan 3,35,31,933 Total 3,55,81,933 The difference between the declaration u/s 132(4) of the Act and that admitted in the return of income filed was; (i) ₹ 43,49,100/- on accounts of cash credit by way of loan, the assessee s explanation for which was accepted by the A.O; and (ii) an amount of ₹ 25,00,000/- on account of Miscellaneous which was added to the assessee s income when the order of assessment was finalized u/s 153A rws 14 .....

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A of the Act for non-levy of penalty there under. On appeal by the assessee, we find that the Ld. CIT(A) after considering the submissions of the assessee, the A.O s views and the material on record, has deleted the penalty levied u/s 271AAA holdings under at paras 2.6 to 2.8 of the impugned order :- 2.6 I have considered the details on record filed by the A.O as well as by the appellant on various dates. I have also perused the assessment order and the impugned penalty order. The first contenti .....

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so provided to AO during assessment and find mention in the assessment order date wise. Thereof, this contention of the appellant is not frivolous and deserves to be held as such. 2.7 Coming to the next contention of the appellant it is an undisputed fact that the appellant has during the course of search proceedings declared the income and the manner thereof. This is evident from the perusal of the Assessment Order wherein these facts are recorded. The AO has on page 3 of the assessment order r .....

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condition has been violated by the appellant as provided u/s 271AAA and why. He has merely reproduced the conditions u/s 271AAA and made a bald statement that the appellant has not satisfied the conditions. The penalty order seems to have been passed mechanically without dealing with each condition separately. The appellant's case is squarely covered by the decision of the jurisdictional ITAT in the case of M/s Kanakia Spaces Private Limited (supra) wherein the Hon ble ITAT has held as unde .....

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e regular income being disclosed by him The requirement as per' Section (2) of Section 271AAA is only that the manner of earning income should be specified so that undue advantage of telescoping or some other income being brought within the total ambit of undisclosed income surrendered does not happen. From the order of the Ld. A.0 also, it is apparent that the penalty is not levied by him on account of some conviction but has been just levied to complete the proceedings. In fact there are n .....

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.4.4 The provisions of Section 271AAA of the Act read as under:- 271AAA (Penalty where search has been initiated. (1). The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 the assessee shall pay by way of penalty, in addition to tax, if, any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specifie .....

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271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be apply in relation to the penalty referred to in this section. Explanation.- For the purposes of this section,- (a) undisclosed income means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery, or other valuable article or thing or any entry in the books of a .....

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rded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b) specified previous year means the previous year- (i) which has ended before the date of search, but the date of filing the return of income under sub-section(1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the retu .....

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ial on record and as observed by the Ld. CIT(A), we find that it is an undisputed fact that the assessee has, during the course of search proceedings, apart from declaring the undisclosed income; has also given the detailed break up of the same, item wise and giving the proximate manner in which and source the same have been earned/derived from. This is therefore, in our view, substantiated. The above facts find mention by the A.O in the order of assessment at 2 to 4 thereof, inter alia giving t .....

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ase on hand; Nor has any reason has been rendered for the levy thereof. On a careful appreciation of the factual and legal matrix of the case on hand, we are of the considered view that the assessee s case is squarely covered by the decision of the co-ordinate bench of this Tribunal in the case of Kanakia Spaces Pvt. Ltd.(supra) wherein the Hon ble Tribunal at paras 3.1 to 4.1 has observed and held as under:- 3.1 …………………………&he .....

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nces in the respect has to be produced. The very fact that the disclosure is made in respect of undisclosed income, all that can be required of an assessee is that the proximate nature of acquisition can be mentioned by him. It cannot be the case that very minute detail thereof would be preserve with evidence which is possible only for the regular income being disclosed by him. The requirement as per Section (2) of Section 271AAA is only that the manner of earning income should be specified so t .....

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considering the rival submissions, we do not see any reason to interfere with the order of CIT(A). The order is in tune with the principles laid down by various co-ordinate Benches and High Courts particularly with reference to disclosure made under section 132(4). In the case of CIT vs. Mahendra C. Shah (299 ITR 305) the Hon ble Gujarat High Court considered similar statement under section 132(4) to grant immunity under section 271(1)(c). The Hon'ble High Court held as under:- When the sta .....

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make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. 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 in the second exception while making statement under section 132(4). Even if the statement does not specify the manner in which the income is derived, if the income is declared .....

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