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TMI Blog2016 (12) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28.01.2009 and cash, jewellery, books of account and certain loose papers were found and seized from the residential and business premises of the assessee and the groups concerns. During the course of search, statements of the assessee and his family members were recorded, wherein certain undisclosed income was admitted. The return of income for the year under appeal was filed u/s 139(1) declaring total income of Rs. 1,28,55,850/- on 20.09.2010 which included a sum of Rs. 1,16,31,103/- offered by assessee as additional income as a result of search pertaining to the year under appeal. Assessment was completed u/s 143(3) of Income-Tax Act, 1961 at a total income of Rs. 2,71,20,669/- by making various additions to the tune of Rs. 1,42,64,819/-. The assessee had preferred appeal before the Ld. CIT(A), Central, and thereafter, before the Tribunal whereby all the additions were deleted excepting for an amount of Rs. 50,000/- in respect of unexplained investment in furniture and fixture. The AO thereafter proceeded to levy penalty u/s 271AAA on the income remained assessed after allowing the necessary appeal effect and accordingly levied penalty of Rs. 11,93,110/-. Against the said pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall 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 specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (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 (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. Manifestly, this sub-section lays down the certain circumstances which, if fulfilled, can absolve the assessee from any liability under section 271AAA of the Income Tax Act, 1961. It is submitted that all of the three conditions have been satisfied in the facts and circumstances of the present case. However, the Ld. AO has proceeded to pass the penalty order on the basis of wrong factual considerations and misunderstanding of the provisions of law. The Ld. AO has wrongfully observed that the assessee has failed to establish the mode and manner of acquisition of undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the statements rendered by assessee as well as of family members of assessee. More particularly, the statements of son of assessee Sh. Ravinder Singh have specifically been relied upon by the assessee and Sh. Ravinder Singh has rendered his statement on behalf of all his family members, wherein, he has admitted and surrendered the undisclosed income for taxation and has also explained the mode and manner of acquisition of the said undisclosed income which stood admitted by assessee and declared in his return of income. In view of the statements of Sh. Ravinder Singh, it is absolutely clear that while admitting the undisclosed income, he has very well explained the mode and manner of acquisition of this income. It is pertinent to mention that such declaration of additional income by Shri Ravinder Singh was duly honored by assessee who owned entire transactions found recorded in loose papers / documents seized during the course of search and also accepted by Ld. AO while completing the assessment and no adverse inference whatsoever was taken in the case of Shri Ravinder Singh. Secondly, the Ld. AO has not allowed assessee the protection of sub-section (2) to section 271AAA witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Thus, since the mode and manner of acquisition of undisclosed income stands explained, no penalty was leviable in view of sub-section(2) to section 271AAA of Income Tax Act, 1961. Further, the undisclosed income as represented by the seized papers was duly admitted in the statements recorded u/s 132(4) and the assessee had agreed to pay tax on the income which will be arrived at after deriving the exact amount of income represented by seized papers. Thus, the income on the basis of seized papers was calculated vide a fund flow statement and was duly submitted before the Ld. AO during assessment proceedings, and tax thereon was paid accordingly. A copy of the said fund flow statement has been placed at paper book page no. 98. Since all the three conditions as enumerated in sub section (2) to section 271AAA have been fully satisfied as the assessee has offered the additional income and duly substantiated the manner as to how it has been worked out, the Ld. AO has not doubted the additional income declared and mode and manner of such income and due taxes alongwith interest has been paid while filing the return of income. Therefore there was no basis at all on which penalty u/s 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the proceedings. In fact there are no material facts warranting the levy of penalty and, accordingly, the penalty of Rs. 55,00,000/- levied under section 271AAA is directed to be deleted." Here, the facts and circumstances of the present case are thus to be read in light of the legal position as enumerated above: 1. The assessee has admitted the undisclosed income on the basis of papers found and seized during the course of search as his undisclosed additional income in the statements recorded during the course of search u/s 132(4). 2. The manner of deriving such income and substantiation thereof has already been made as apparent from the statements of assessee recorded during search u/s 132(4). 3. All the tax due on such additional undisclosed income was paid by the assessee. Thus, all the three conditions laid down under sub-section (2) to section 271AAA stand satisfied and therefore the immunity under the said sub-section is available to the assessee, thus, the penalty cannot be levied in the facts and circumstances of the present case. With regard to the addition sustained by Hon'ble ITAT to the tune of Rs. 50,000/- on account of unexplained investment in furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made on an adhoc basis. It is also observed that the assessee has made disclosure of Rs. 1.16 crores towards undisclosed investment inter alia in furniture(s) and fixture(s). After considering the other additions made, we are of the considered view that electronics items and / or fixtures found at the premises of the assessee could be said to have been procured from the said undisclosed income declared and / or withdrawal made in the preceding assessment years. Since assessee could not furnish details as to when those items were purchased and valued thereof, we are of the considered view that it will be fair and reasonable to sustain the addition to Rs. 50,000/- as against Rs. 3.00 lacs sustained by the Ld. CIT(A). Hence, Ground No. 2 of the appeal taken by the Department is rejected and C.O. of the assessee is allowed in part." From the perusal of the observations of this Hon'ble Tribunal as narrated above, it is evident that the Hon'ble Bench has sustained the additions solely for the reason that the assessee could not furnish details as to when those items were purchased and value thereof and further accepted the investment made in furniture etc. from additional income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he final income by the AO in his order u/s 143(3). (iv) The AO made additions to the extent of Rs. 1,42,64,819/- under various heads. The quantum order went up for adjudication before Hon. ITAT who vide its order ITA No.453/JP/2012 dated 23.02.2013 deleted the entire additions made by the AO and those confirmed by the CIT(A) except for an amount of Rs. 50,000/-. While confirming this addition is observed as follows: "However it is a fact that at the time of preparing inventory no valuation report was obtained by the Department and only an estimated addition has been made for Rs. 5 lakh by the AO which has been reduced to Rs. 3 lakh by the CIT(A). The said addition has been made on an adhoc basis. It is also observed that the assessee has made disclosure of Rs. 1.16 crores towards undisclosed investment inter alia in furniture(s) and fixture(s). After considering the other additions made, we are of the considered view that electronic items and /or fixtures found at the premises of the assessee could be said to have been procured from the said undisclosed income declared and/or withdrawal made in preceding assessment years. Since assessee could not furnish details as to when tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of section 271AAA there is a complete paradigm shift as far as penalty in respect of unaccounted income unearthed as a result of search operations carried out on or after 1.07.2007 is concerned. Unlike in the case of penalty u/s 271(1)(c) sec. 271AAA without any reference to findings of presumptions of concealment of income of the findings or presumptions of furnishing of inaccurate particulars, provides that in respect of unaccounted income in the cases where search initiated after 1.7.2007, the assessee is to pay a penalty @ 10% of unaccounted income. Sub sec. 2 to sec.271AAA however, relaxes the rigour of this penalty provisions in a situation in which (i) in the course of the search, in a statement u/s 132(4), admits the undisclosed income and specifies the manner in which such income has been derived ': (ii) substantiates the manner in which such income was derived; and(iii) pays the tax, together with interest, if any in respect of the undisclosed income. Therefore even though the assessee declared the undisclosed income in the "specified year" pursuant to search he would still be entitled to immunity under sec. 2 of sec.271AAA if he fulfils the conditions. viii) From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh on account of furniture and fixtures. The matter went up for adjudication before Hon. ITAT who sustained the addition of Rs. 50,000/- with the following observations: " However it is a fact that at the time of preparing inventory no valuation report was obtained by the Department and only an estimated addition has been made for Rs. 5 lakh by the AO which has been reduced to Rs. 3 lakh by the ld. CIT(A). The said addition has been made on an adhoc basis. It is also observed that the assessee has made disclosure of Rs. 1.16 cr. Towards undisclosed investment inter alia in furniture(s) and fixture(s). After considering the other additions made, we are of the considered view and electronics items and/or fixtures found at the premises of the assessee could be said to have been procured from the aid undisclosed income declared and/or withdrawal made in the preceding assessment years. Since assessee could not furnish details as to when those items were purchased and valued thereof , we are of the considered view that it will be fair and reasonable to sustain the addition of Rs. 50,000/- as against Rs. 3 lakhs sustained by the ld. CIT(A). Hence ground No.2 of the appeal taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was confronted with these documents who have gave specific answer regarding the details of accounted and non accounted transactions with reference to the projects Southern Heights, Unique Harmony, Unique Builders (Reality) and Unique Builders and Developers (Ajit) and RNB Investment. Given the above fact, I am not inclined to agree with the observations of the AO that the appellant did not substantiate or describe the manner in which the unaccounted income was earned." "From the above statement it is clear that the main source of his undisclosed income was admitted as being from the real estate business in which there were unaccounted receipts on sale of property. This was admitted and explained by in detail by Shri Ravindra Singh during the course of search and post search enquiries when confronted with the incriminating documents. During the course of these statements of the manner of earning of this income was also explained and specific names were also mentioned. Thus it is seen that during the course of statements u/s 132(4) and subsequently in statement u/s 131, the appellant was confronted with specific documents with reference to income from his professio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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