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Shri Narpat Mehta Versus ACIT – CC-23, Mumbai

Penalty u/s.271AAA - cash amount surrendered during course of search for which due taxes were deposited with interest - Held that:- The amount of ₹ 4 crore which was surrendered during search has been declared by the assessee in the return and taxes have been paid accordingly. Therefore the assessee is normally entitled for the immunity provided in section 271AAA itself. However, the revenue has raised further dispute that whether the assessee has disclosed the manner in which income has b .....

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ear 2011-12, in the matter of penalty of ₹ 1.00 lakh imposed u/s.271AAA of the IT Act. 2. Following grounds have been taken by the assessee. 1. The Learned Commissioner of Income Tax, Appeal - 40 erred in law & on facts confirming penalty u/s. 271AAA of the Income Tax Act @ 10 % on cash amounting to ₹ 10,00,000/- 2. The Learned Commissioner of Income Tax, Appeal - 40 erred in law & on facts in stating that the appellant's AR reliance on the decision of the Hon'ble Guj .....

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arch for which due taxes were deposited with interest. 5. The facts in brief are that during course of search on the Kanakia Group on 29/03/2011 at assessee s premises, assessee was found to be owing jewellery and cash. The assessee, in his statement dated 12.05.2011, declared and offered ₹ 10,00,000/- cash and valuables worth ₹ 75,110/- to tax under section 132(4). The same was filed in his return for the specified previous year . During the assessment proceedings, the disclosure ma .....

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vt. Ltd., wherein during the same search, the amount was surrendered as per the statement recorded u/s. 132(4). AO levied penalty with respect to the surrendered amount u/s.271AAA. The Tribunal in its order dated 10/07/2013 in ITA No.6763/Mum/2011 has confirmed the deletion of penalty after observing as under:- 4. After 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 Bench .....

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cerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. Secondly, considering the social envi .....

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the entries in the 'work-in-progress sheet' and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived. The provision of clause-2 of Explanation-V appended to section 271(1)(c) are similar to section 271AAA(2). The scope and meaning has been lucidly explained by the Hon'ble Allahabad Hi .....

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No.5445/Del/2012 dated 22/08/2014, wherein similar penalty imposed for the amount surrendered during course of search was deleted by Tribunal. 9. Reliance was also placed on the decision of ITAT Mumbai in the case of Gulabrai V Gandhi vs. ACIT, reported as 84 ITD 370 (ITAT Mumbai), wherein it was held that when the statement u/s 132(4) was recorded in question and answer form, the benefit of immunity from penalty cannot be denied to the assessee on the ground of not specifying the manner in whic .....

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eclared and tax thereon has been paid, there would be substantial compliance not warranting any further denial of the benefit under exception no. 2 in Explanation 5 attached to section 271(1) of the Act. 11. We have considered rival contentions and carefully gone through the orders of the authorities below as well as decision cited by us. In this case of Mrs. Rajrani Gupta vs. DCIT the penalty imposed u/s 271AAA has been deleted with following conclusion and findings: 10. From the above statemen .....

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e replied that. The question of penalty as contained in section 271(1)(c) prior to 1.6.2007 has been decided by various High Courts. Before 1.6.2007, the penalty provisions on search and seizure were contained in section 271(1)(c) and immunity was granted to the assessee vide clause (2) of explanation 5 appended to section 271(1)(c). Provisions of clause (2) of explanation 5 appended to section 271(1)(c) are similar to immunity granted to assessee under clause (2) of section 271AAA. 12. Similarl .....

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that the assessee has not satisfied the manner in which the income is derived and the assessee has not paid the tax with interest on the undisclosed income. Undisputedly the assessees have shown the undisclosed income under the head "income from business" in the returns filed by them and that was accepted by the Department by passing the assessment orders accordingly. Therefore, the cases of the assessees fall exactly within the purview of sub‐section (2) of Section 271AAA. Ther .....

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lled. 13. Similar penalty was deleted by ITAT-Cuttack Bench in case of Pramod Kumar Jain vs DCIT - 149 TTJ 36 after observing as under:- No definition could be given to the "specified manner" insofar as the very statement on oath u/s.132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance to notice u/s.153A accounting the assets. Therefore, the case .....

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