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Suresh J Patel, Shiv Sadan Versus ACIT, Central Circle-3, Surat

Levy of penalty u/s. 271AAA - whether the manner in which such income has been derived and whether it has been substantiated was explained by the assessee - Held that:- Wherever and whenever there is a voluntary offer of undisclosed income during the course of the search operation, the same should have a nexus with the unaccounted wealth unearthed. In the case in hand, the declaration of the undisclosed income is far more in excess of the undisclosed and unexplained wealth found during the cours .....

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restrict the penalty to the extent of ₹ 7,22,967/- being 10% of ₹ 72,29,667/-. Assessee will get a relief of ₹ 35, 10,172/-. Appeal filed by the Assessee is partly allowed. - ITA. No: 97/AHD/2016 - Dated:- 3-4-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri R. B. Shah, AR For The Respondent : Shri K. Madhusudan, Sr. D.R. ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. Aggrieved and not satisfied with the order of the .....

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s carried out on 08.06.2010 in the case of Builder Group of Surat. One of the persons of the group is the assessee. 5. During the course of the search operations, the statement of the assessee was recorded u/s. 132(4) of the Act in which he made a disclosure of ₹ 5 crores. Out of this disclosure, ₹ 4,23,31,392/- was offered by the assessee for the year consideration. 6. Subsequently, the disclosure of ₹ 5 crores was bifurcated between the assessee and his father Shri Jayantibha .....

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oluntarily in the return of income for A.Y. 2011-12 to make up total disclosure of ₹ 5 crores. Thus, the total disclosure for A.Y. 2011-12 was at ₹ 4,23,31,392/- and after claiming depreciation on motor vehicles, the disclose taxable income was at ₹ 4,10,61,220/-. 8. The A.O. issued show cause notice to the assessee and asked the assessee to show cause why penalty u/s. 271AAA should not be levied on the undisclosed income of ₹ 4,23,31,392/-. 9. Assessee filed a detailed r .....

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tly rejected the claim of agriculture income of the assessee stating that there was no documentary evidence. The A.O. further observed that the assessee has not fulfilled all the mandatory conditions mentioned in Section 271AAA of the Act. The A.O. was of the opinion that the assessee has failed to specify and substantiate the manner in which the undisclosed income was derived in spite of the opportunity given at the time of assessment proceedings also. 11. The A.O. concluded by stating that tho .....

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ails of the holding of the agricultural land along with the details of the agricultural income derived there from. It is the say of the ld. counsel that there is no undisclosed income in the sense that the assessee has declared the income voluntarily and has also complied with the conditions specified under clause 2 of Section 271AAA and, therefore no penalty should be levied. 14. The ld. counsel further contended that since no specific question was asked during the course of the recording of th .....

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e assessment order. There is no dispute that the assessee had voluntarily offered undisclosed income of ₹ 4,23,31,392/- in his return of income for the year under consideration. Before proceeding further, les us understand the provisions of Section 271AAA of the Act which read as under:- 271AAA. (1) Te 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 da .....

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ubstantiates 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. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) the provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.- For t .....

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year; or (B) otherwise not been disclosed to the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner before the date of 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 sea .....

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tioned hereinabove:- (i) There is no dispute that in his statement recorded u/s. 132(4) of Act, the assessee has admitted the undisclosed income of ₹ 4,23,31,392/- for the year under consideration. (ii) It is true that the assessee did not substantiate the manner in which the undisclosed income was derived. (iii) It is equally true that the assessee has paid the taxes along with interest thereon in respect of the undisclosed income. 17. Now the question arises is whether the manner in whic .....

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2010 Income Tax Officer (Inv.), Surat 09.06.2010 Q:22 You have not prepared any accounting records of yourself as well as your family members. During the course of search proceedings at your residence, cash amounting to ₹ 52,75,900 has been found. Other than this, I am showing you Annexure A-1 to Annexure A-4. After considering all these things do you want to say anything? A:22 According to my knowledge majority of cash out of the amount of ₹ 52,75,900 is from agricultural activities .....

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Accordingly, I am making voluntary declaration of total amount of ₹ 5,00,00,000/- as unaccounted income and I assure to pay on time tax on it. Q:23 You have answered in Q. No. 2 that you are engaged in the agricultural activities so tell us that what you have grown during the year ? A:23 Me and my family members are mainly engaged in growing mangoes, chikoo, sugarcane, dangar and vegetables. 18. If the aforementioned statement is considered in the light of the decision of the Hon ble Juris .....

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the assessee has tried to explain the source as agricultural income but this seems to be illogical and not acceptable. For the simple reason that no prudent person will accept undisclosed income derived from agricultural sources and offer the same for taxation knowing fully well that agricultural income is totally exempt from tax. Therefore, this theory of the assessee is not acceptable. 20. However, if we consider the definition of undisclosed income given in the explanation to Section 271AAA .....

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ments maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner before the date of 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 foun .....

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ed income is considered in the light of the facts of the case in hand, the unaccounted wealth unearthed during the search operation, relate to the investment in the cars to the tune of ₹ 63,66,842/- out of which investment up to ₹ 31,24,175/- was duly explained balance remained unexplained. Out of which ₹ 25,50,000/- was declared in A.Y. 2010-11 and the balance of ₹ 6,92,667/- pertained to the year under consideration. Further a sum of ₹ 3.87 lacs was on account of .....

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