TMI Blog2015 (8) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... have held that it is not from business income or not derived from business. Hence, it cannot be held that the assessee is liable for penalty u/s 271AAA on the facts of the present case - Decided in favour of assessee. - ITA No. 6190/Mum/2013 - - - Dated:- 7-8-2015 - G. S. Pannu (Accountant Member) And Amit Shukla (Judicial Member) For the Appellant : Premanand J. For the Respondent : Vijay Mehta ORDER Amit Shukla (Judicial Member) The aforesaid appeal has been filed by the revenue against impugned order dated 23.08.2013, passed by CIT(A) -37, Mumbai in relation to the penalty proceedings u/s 271AAA for the assessment year 2008-09, on the following grounds: 1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied u/s 271AAA without appreciating the fact that the assessee has not fulfilled the pre-requisite conditions for claiming immunity from levy of penalty u/s 271AAA. 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied u/s 271AAA without appreciating the fact that the assessee has not substantiated with documentary evidence as to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of manners in which income was earned reliance was placed on the decision of Allahabad High Court in the case of CIT v Radha Kishan Goel, reported in 278 ITR 454 and CIT v Nem Kumar Jain, reported in 202 CTR 328. However, the Ld. Assessing Officer levied the penalty on the ground that the provision of section 271AAA clearly provides that the assessee not only has to specify the manner in which such income has been derived but also to substantiate the manner in which undisclosed income was derive and pay the taxes. Here in this case, the assessee has not specified the manner and also could not substantiate the manner in which the undisclosed income was derived. Secondly, the assessee has admitted or disclosed the income of ₹ 3.85 crores not on its own, but only after detailed enquiries and investigation was done by the Department. The party who has received the cash has also admitted to have received the cash and has also paid the taxes on the same amount. Thus, the assessee was liable for penalty u/s 271AAA and the exclusion provided in sub-section (2) is not available to the assessee. He also distinguished the decisions relied upon by the assessee on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer had accepted same, it could not be said that assessee had not specified manner or could not substantiate manner in which income was derived and therefore, penalty under section 271AAA was not levied as assessee s case fell under sub-section (2) of section 271AAA . 6. Before us, the Ld. DR strongly relying upon the order of the Assessing Officer submitted that, here in this case, not only the undisclosed income was unearthed during the course of the search based on material found and enquiry by the Investigation Wing, but also same has been admitted by the assessee u/s 132(4). Once that is so, then assessee cannot be absolved from the rigours of penalty u/s 271AAA. More so the assessee could not specify the manner in which such income was derived and also could not substantiate the manner. All the decisions relied upon by the assessee before the CIT(A) are not applicable, because they are based on the decision rendered in the context of Explanation 5 to section 271(1)(c). In support of his contention he relied upon the decision of ITAT Mumbai Bench in Prakash Steelage. ITA No. 5221/Mum/2012, order dated 28.01.2015. 7. Before us, the Ld. Counsel, Shri Vijay Mehta, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantiate the manner in which undisclosed income was derived. Section 271AAA provides that in case of search carried out after 1st Day of June, 2007, the assessee shall pay by way of penalty in addition to tax @ 10% of the undisclosed income of the specified previous year. Sub-section (2) provides the exception and circumstances in which penalty under this section shall not be levied, which are: (2) Nothing contained in sub-section (1) shall apply if the assessee, - (i) in 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 . Thus, three conditions have been laid down to get absolved from the levy of penalty under this section; firstly the assessee must admit the undisclosed income in the course of search in a statement recorded u/s 132(4) and specify the manner in which such income has been derived; secondly, substantiate the manner in which the undisclosed income was derived; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if in the statement the manner in which income has been derived has not been stated but has been stated subsequently, amounts to the compliance of Explanation 5(2) of the Act. We are also of the opinion that in case if there is nothing to the contrary in the statement recorded under Section 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 carrying on or from other source. The object of the provision is achieved by making the statement admitting the non-disclosure of money bullion, jewellery etc. Thus, we are of the opinion that much importance should not be attached to 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 nonstatement of manner in which such income was derived would not make the Explanation 5 (2) inapplicable. This ratio and principles have been upheld in the subsequent decision of the Allahabad High Court in the case of CIT vs Nem Kumar Jain ( supra ) and also by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch if the assessee admits undisclosed income in the statement recorded u/s 132(4) and specify the manners in which such income has been derived . Thus, the same ratio and principles laid down by the Hon ble High Courts will also apply here, because the requirement of specifying the manner is in the course of statement recorded u/s 132(4) at the time of search and at this juncture only, unless the authorised officer pose a specific question with regard to the manner in which income has been derived, then assessee while responding to such question cannot be expected to specify the manner in which such income has been derived. In fact, when the assessee admits any undisclosed income, the authorised officer should immediately put forth specific question for specifying the manner in which the assessee has derived such income or else the presumption is in favour of the assessee. Thus, here in this case also, when the authorised officer has not asked the assessee during the statement recorded u/s 132(4), then the requirement of specifying the manner in which income has been earned is dispensed with. Regarding second requirement, of substantiation, it can be either at stage of recordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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