TMI Blog2017 (4) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... gly we set side the orders of the authorities below and delete the penalty. See Neerat Singal vs. ACIT [2013 (6) TMI 762 - ITAT DELHI] - Decided in favour of assessee. - I.T.A. No. 32/Nag/2013 - - - Dated:- 29-3-2017 - Shri Shamim Yahya, Accountant Member And Shri Ram Lal Negi, Judicial Member Appellant by : Shri K.P. Dewani Respondent by : Shri A.R. Ninawe ORDER Per Shamim Yahya, A. M. This appeal by the assessee is directed against the order of learned CIT(Appeals)-I, Nagpur dated 15-10-2012 and pertains to assessment year 2009-10. The grounds of appeal read as under : 1. The order imposing penalty u/s 271AAA is illegal, invalid and bad in law. 2. That on the fact and circumstances of the case the Learned Commissioner of Income Tax (Appeals) -1 erred in confirming penalty imposed u/s 271AAA of Income Tax Act, 1961 by Assistant Commissioner of Income Tax, Central Circle-1(1), Nagpur. 3. The penalty imposed u/s 271AAA is unjustified, unwarranted excessive. 2. Brief facts of the case are as under : A search and seizure operation u/s 132(1) of the Income-tax Act, 1961 was carried out on 28-01-2009 at the business premises of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd paid taxes along with interest. Learned counsel further referred to the assessment order where it is mentioned that the search commenced on 28-01-2009 and date of conclusion was mentioned on 26-03-2009. Hence learned counsel submitted that the disclosure by letter dated 27-02-2009 is very much within the period of search. Hence learned counsel submitted that adverse inference cannot be drawn against the assessee for levying penalty u/s 271AAA. Further learned counsel placed reliance upon several case laws in this regard as under : 1. (2008) 299 ITR 0305 (Guj.) CIT vs. Mahendra C. Shah 2. ITAT order in ITA NO.5261/0e1/2013 in the case of Brij Bhushan Singal vide order dated 09/03/2015 3. ITAT order in ITA NO.1835/0e1/2013 in the case of Sita Ram Gupta vide order dated 30/06/2014 4. ITAT order in ITA NO.3372/0e1/2011 in the case of Mothers Pride Education Personna P. Ltd. vide order dated12/1 0/2012 5. ITAT order in ITA NO.6763/Mum/2011 in the case of M/s. Kanakia Spaces Pvt. Ltd. vide order dated 10/07/2013 6. (2012) 149 TTJ 0033 (Ctk.) Ashok Kumar Sharma vs. OCIT 7. (2015) 152 ITO 0453 (Chd.) ACIT vs. Munish Kumar Goyal 8. (2015) 37 ITR (Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed to the Chief Commissioner or Commissioner before the date of the 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 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 return of income for the previous year before the said date; or (ii) in which search was conducted. . A reading of the above makes it clear that penalty u/s 271AAA would not be attracted if the assessee in the course of search makes a statement regarding the admission of undisclosed income, specifies and substantiate the manner in which the income has been earned and has paid tax along with the interest thereon. In the present case we find that the search commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. As per Explanation 5 to section 271 (1) of the Act if he assessee in the course of search makes a statement under sub section (4) of section 132 that any money, bullion, iewellery or other valuable article or things found in his possession or under his control has been acquired out of his income which has not been disclosed so far in his return of . icome to be furnished before the expiry of time specified in sub section (1) of section 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income, then the assessee for such income will not be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income to attract the penalty therein. Similarly under the provisions of section 271AAA of the Act penalty is not leviable where search has been ITA No-3371Del/2013 8 initiated u/s 132 on or after 1.6.2007 but before 1.7.2012, and the assessee in the course of search, in a statement under the sub section 4 of section 132,(i), admits the undisclosed income (ii) specifies and substantiates the manner in which such income has been derived, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue tax on the surrendered income. Later on he also retracted from his statement recorded uls 132(4) about surrender. The Hon' ble Supreme Court after deliberating in detail on different Explanations to section 271 ( 1) has been pleased to hold that the assessee was entitled to immunity under clause (2) of Explanation 5 to section 271 (1) of the Act. In that case failure to file return of income on 31 st July 1987 and failure to pay tax thereon was the mere reason relied upon by the department to deny to the assessee the benefit of immunity under clause (2) of Explanation 5 to section 271 ( 1) of the Act. According to the department the assessee had complied with all the conditions of clause 2 of Explanation 5 except payment of tax in time. Hon'ble Supreme Court pleased to hold that no time limit has been prescribed for payment of tax under clause 2 of Explanation 5 and the assessee having paid tax upto the date of payment in respect of the undisclosed income surrendered by it in the course of search, all the three conditions laid down in clause 2 of Explanation 5 to section 271( 1) stood fulfilled and therefore the assessee is entitled to immunity under clause (2) of Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order. Penalty u/s 271AAA was levied. It was held that undisputedly the assessee had 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 case of the assessee falls exactly within the purview of sub section 2 of section 271AAA. Thus the impugned penalty levied contrary to the provisions contained in section 271AAA (2) is not sustainable. The penalty was accordingly deleted. In the case of Shri Pramod Kumar lain and another vs. lCfT (supra) before the Cuttak Bench of the Tribunal, the assesee had disclosed the unaccounted income but had failed to specify the manner in which such income had been derived. The department accordingly levied penalty u/s 271AAA of the Act. The same ITA No-337/Del/2013 11 was upheld by the first appellate authority. The Tribunal has however deleted the penalty on the basis that there is no prescribed method to inidicate the manner in which income was generated where the definition of undisclosed income has been defined in the Act it elf when no income of the specified previous year represented either who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 of an assessee to stage and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by the Allahabad High Court in the case of CIT Vs. Radha Kishan Goel (2005) 278 ITR 454. Secondly, considering the illiterate, to be specific and to the point regarding the conditions stipulated by exception no.2 while making statement u/s 132(4) of the Income tax Act, 1961. The view taken by the Tribunal as well as the Allahabad High Court to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under exception no.2 in Explanation 5 is commendable. 13. In the present case before us during the course of search at the residential pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09. This cash was paid out of my own unaccounted ITA No-3371De112013 14 funds which was never I disclosed for taxation purpose. I hereby accept the above amount to be my unaccounted income in the shape of investment in the current financial year and the same is offered for taxation. Q5. I am drawing your attention towards annexure A-3 at Page NO-5 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 was found from my bed room at this premise, I own this paper and all the contents of this paper are written by me only. The notings on this paper depicts the fact that I have advanced certain amounts to some person on different dates. The details of which is furnished below:- List of advances outstanding on 31.01.2010 Atma Ram 11.0 Cr Shhiv Prakash 15.0 Cr Devender Kumar 17.0 Cr Prem Singh 6.0 Cr Kundan Singh Neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in documents relating to transactions in properties undertaken by him were found as per page Nos. 4 - of Annexure A-3 in SR- 4. As per the said papers the Alssessee had an outstanding of a sum of ₹ 3,00,00,000/- and ₹ 69,00,000/- from various persons which were declared as additional income of AIY 2010- 1\2011 while making a statement u/s 132(4) of the Income-tax Act, 1961. In addition, a per page No-6 of Annexure A-3 in SR-4, the Assessee had paid in cash a sum of ₹ 17,86,57,7811- for purchase of land by M/s Bhushan Steel Limited however, at the time of statement recorded it was inadvertently mentioned as M/s Bhushan Energy Ltd, which was also declared as additional income for A. Y 2010-2011 while making a statement u/s 132(4) of the Income-tax-Act, 1961. (2) As per the statement recorded during the course of search the Assessee himself had admitted that he had entered into various forward/speculative transactions and also transactions related to properties during the period from 1/4/2009 to 4/3/2010 i.e. Financial Year 2009-2010 relevant to Assessment Year 2010-2011. The said transactions were carried out in an unorganized manner and neither any accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to record the statement in his own way. Therefore, it is not expected from the person to state those things, which are not asked by the authorized officer. It is a matter of common knowledge, which cannot be ignored that the search is being conducted with the complete team of the officers consisting of several officers with the police force. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured harassed and put to a mental agony that he loses his normal mental state of mind and at that stage it cannot be expected from a person to pre-empt the statement required to be given in law as a part of his defence. In these circumstances, we are of the view that under Section 132(4) of the Income Tax Act, 1961 unless the authorized officer puts a 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) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re would be substantial compliance not warranting any further denial of the benefit under exception no. 2 in Explanation 5 is commendable. 11. We may also refer to the decision of ITAT, Nagpur Bench in the case of M/s Nandini Realitors Pvt. Ltd. in ITA No. 415/Nag/2014 wherein vide order dated 05-052016 it was held as under : We have heard both the sides at some length The facts narrated herein above are not in dispute that a search uls 132 was conducted and thereupon it was found that the assessee has purchased a land as per the registered deed wherein the consideration money was ₹ 2,75,65,0001-. A statement uls 132(4) was recorded and after confronting with the evidences an amount of ₹ 2 crores was offered being cash consideration over and above the sale consideration mentioned in the registered deed. As a consequence a revised return was filed. The assessment was completed u/s 143(3) and the income was assessed at ₹ 2,15,60,6201-. We have been informed that the surrendered amount u/s 132(4) was accepted as such by the AO. There is no dispute that the tax on the amount offered had also been paid by the assessee. In the light of the above mentioned adm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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