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TMI Blog2017 (4) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment u/s 143(3) has been completed on 24-12-2010 on the basis of seized material and penalty initiated u/s 271AAA. During the course of assessment proceedings AO has observed that the assessee had disclosed total additional income of Rs. 2,21,00,000/- on various accounts. Rs. 1,21,00,000/- was disclosed on account of non-verifiable sundry creditors, Rs. 50,00,000/- on account of introduction of share application money in his company Fueico Coal India Ltd., Rs. 30,00,000/- on account of excess cash and Rs. 20,00,000/- on account of cash sales. Notice of penalty requiring assessee to show cause why penalty u/s 271AAA should not be levied was issued on 28-12-2010. During the penalty proceedings AO has held that the assessee could not specify the manner in which the undisclosed income has been derived and further could not substantiate the manner in which such income was derived. Therefore AO has levied penalty u/s 271AAA of Rs. 22,10,000/- being 10% of the undisclosed income of Rs. 2,21,00,000/- for assessment year 2009-10. 3. Upon assessee's appeal learned CIT(Appeals) noted that in a statement recorded u/s 132(4) during the course of search on 30-01-2004 from Shri Nawal Kishore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA NO.711 to 715/Mum/2011 in the case of Shri Uday C. Tamhankar vide order dated 11/09/2015 10. ITAT order in ITA No.1433 and 1432/Pn/2013 in the case of Shri Arun S. Agrawal vide order dated 26/06/2015 11. Hon'ble Bombay High Court order in ITA No. 76 of 2009 in the case of Mukesh Oedutta Gupta vide order dated 03/09/2010 6. Per contra learned D.R. relied upon the orders of the authorities below. 7. Upon careful consideration we find that we may gainfully refer to the provisions of section 271AAA : "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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27-02-2009 has given the admission and given details of undisclosed income to the Addl. Director of Income-tax. In our considered opinion this factual aspect clearly brings out the fact that during the course of period of search when the search was subsisting, the assessee vide letter to the Addl. Director of Investigation has given the details of undisclosed income. Hence in view of the aforesaid facts, inference by the authorities below that the assessee has not disclosed the impugned income at the time of search is not sustainable. It is also noted that there is no dispute that the assessee has duly paid the taxes thereon. Further the learned CIT(Appeals) has drawn adverse inference that the assessee has not substantiated the manner in which the undisclosed income was earned. In this regard we note that the assessee has duly disclosed in the letter regarding the income being offered for taxation as undisclosed income which is as under : i) Share application in Fuelco for FY 2008-09 Rs. 74,50,000 ii) Cash Sales not recorded in Nawalkishor Agraqwal FY 2008-09 Rs. 20,00,000 iii) Assets more than liabilities & capital of Shri Nawal Kishor Agrawal FY 2008-09 Rs. 30,00,000 iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirement is common or non attraction of the penal provisions' under both the sections i.e. (f the assessee in his statements recorded u/s 132(4) of the Act admits the undisclosed income and specifies in the statement the manner in which such income has been derived and pays the tax together with interest, if any, in re pect of such income. The only additional requirement in the ea e of section 271AAA in this regard is that the assessee will also have to substantiate the manner in which the undisclosed income was derived besides specification of the manner in which such income was derived. The other difference is in the application of the provisions under both the sections. The penal provision u/s 271 (l)(c) under Explanation 5 thereto is applicable in such cases where search u/s 132 was initiated before 1.6.2007 whereas u/s 271AAA, the provisions therein are applicable in a case where search u/s 132 of the Act has been initiated on or after 1.6.2007 but before 1.7.2012. Thus the intention of the legislature is clear to this extent that in a case wherein search was initiated before 1.6.2007, provisions u/s 271 (l)(c) will be applicable and in search initiated after 1.6.2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue raised was as to whether mere non- statement of manner in which undisclosed income was derived would make Explanation 5 (2) of section 271(1)(c) inapplicable. The further question raised a as to whether in a case manner in which income has been derived has not been stated in the statement u/s 132(4) but is acted subsequently, that amounts to compliance with Explanation 5 (2) to section 271 (1)(c) and no penalty would be leviable under said section .. Both these questions have been replied in affirmative in the decision of the H on' ble Allahabad High Court. As per the decision mere non statement of manner which undisclosed was derived would not make Explanation to section 271(l)(c) inapplicable. Similarly in a case manner in which income has been ITA No-3371Del/2013 10 derivedd has not been stated in statement uls 132(4) but is sta ted subsequently that amounts to compliance with Explanation 5 (2) to section 271(1)(c) and no penalty would be leviable. Similarly in the case of CIT vs. Mahendra G. Shah before the Hon' ble Gujarat High Court the basic requirement for immunity form the levy of penalty under Explanation 5 to section 271 ( 1) (c) of the Act has been discusse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Mother Pride Education Personna Pvt. Ltd,.vs. DCIT (supra) while placing reliance on , earlier decision in the case of Smt. Raj Rani Gupta (supra) and following the ratio of the decision of Hon'ble High Courts in the case of CIT vs. Radhi Kishan Goel (supra) (All) and CIT vs. Mahendra C. Shah (supra) (Guj) has deleted the penalty. The Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel (supra) has been pleased to hold that u/s 132(4) of the I. T. Act 1961 unless the authorized officer puts specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5 (2) to Section 271 (1) (C) of the Act. It was further held that in case there is nothing to the contrary in the statement recorded u/s 132(4) of the Act in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized as per page nos. 4 & 5 of Annexure A3 in SR4. As per such papers the assessee had an outstanding sum of Rs. 3 crore and Rs. 6 crore from various person which was duly disclosed as additional income for asstt. year 2010-11 while making statement u/s 132(4) of the Act. In addition, as per page No. 6 of Annexure A3 in SR4 the assessee had paid in cash a sum of Rs. 17,86,57,781/- for purchase of land by Bhushan Steel Limited (however at the time of statement recorded it was ITA no-337/Del/2013 13 inadvertently mentioned as Bhushan Energy Ltd.) which was also declared as additional income for the asstt. year 2010-11 while making a statement u/s 132(4) of the Act. As per the said statement the assessee had admitted that he had entered into various forward/speculative and property transaction during the period from 1.4.2009 to 4.3.2010. 2010. Keeping in view the same an income of Rs. 125 crores arising out of the said transactions was declared in the statement recorded during the course of search which included the said amount as undisclosed. Subsequently the taxes due thereon were also paid and the same income declared in the return1 of income filed for the assessment year 2010-11 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from undisclosed sources. By means of ITA No.337/Del/2013 15 t his statement I hereby accepted the above amount of Rs. 69 Cr to be my unaccounted income from the current F Y and offer it for taxation. Q.7. I am drawing your attention towards annexure-A-3 at page NO-4 found from your residence. Please explain to whom this paper belongs and under whose hand writing this has been written. Please go through the same and explain the content thereof? Ans. Yes, I accept that this sheet of paper belongs to me, I own this paper and all the contents of this paper have been written by me only. The notings on the paper depicts the fact that I had advanced an amount of Rs. 3.0 cr on 9.6.2009 for the purpose of purchase of property at Q1- A, Hauz Khias Enclave, New Delhi. In respect of this amount I hereby state that this amount is my unaccounted income not offered for taxation for the current financial year. On the basis of my reply to questions 5,6 and 7 I reiterate to have accepted a total amount of Rs. 90Cr (Rupees Ninety crores only to be my unaccounted income for the current financial year, which I hereby offer for taxation. 15. We find further that vide its reply dated 03.6.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per page Nos. 4, 5 & 6 of Annexure A-3 in Sr-4. Subsequently, the taxes due thereon were also paid and the said income declared in the return of income filed for A.Y 2010-11. 16. In view of above facts of the present case wherefrom it is evident that during the course of search proceedings the authorized officer of the department had not raised any specific query regarding the manner in which the undisclosed income has been derived and on the contrary the assessee has tried to explain the earning of the undisclosed income in question in its reply during the course of recording of his statement u/s 132(4) of the Act and thereafter. We thus respectfully following the ratio of above cited decisions of Hon'ble Allahabad High Court and Hon'ble Gujarat High Court hold that in absence of query raised by the authorized officer during the course of recording of statement uls 132 (4) about the manner in which the undisclosed income has been derived and about its substantiation, the AO was not justified in imposing penalty uls 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable." 10. Again Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah 298 ITR 305 has held as under : "In so far as the alleged failure on the part of the assessee to specify in the statement under Section 132(4) of the Income Tax Act, 1 961 regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in its entirety to the assessee concerned 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 stage and make averments in the exact format stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-been brought on record that the income offered was duly disclosed in the books of accounts of the assessee and the manner in which the investment was made has also been duly incorporated in the accounts, moreover the tax was paid Hence we hereby hold that the learned CIT(Appeals) has rightly held that the' question of levy of penalty u/s 271AAA was out of the scope of sub-section (1) but within the ambits of the exception prescribed under sub-section (2) of the said section. Resultantly the view taken by the learned CIT(Appeals) IS hereby confirmed." 12. Now we examine the present case on the touch stone of above said case laws. We find that during the course of search the assessee has duly disclosed the undisclosed income. The nature thereof has been duly exhibited as mentioned above. No further query whatsoever has been asked by the Revenue regarding further clarifying the manner of earning of income or substantiating the source thereof. In these circumstances, the ratio from the above case laws is clearly applied. In the above cases the ratio clearly emanates that where the assessee was not asked about the manner in which the income was earned and when he was not asked to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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