TMI Blog2018 (3) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the Act elicits a response from the assessee's this requirement, the assessee's responsibility to substantiate the manner of deriving such income would commence. When the base requirement itself fails, the question of denying the benefit of no penalty would not arise. - Decided against revenue - ITA No. 1552/Ahd/2016 - - - Dated:- 16-3-2018 - SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER For The Revenue : Shri Prasoon Kabra, Sr. D. R. For The Assessee : Shri M. J. Shah, A. R. ORDER PER S. S. GODARA, JUDICIAL MEMBER This Revenue s appeal for assessment year 2010-11 arises from the CIT(A)- 5, Vadodara s order dated 09.03.2016 in case no. CAB/5-192/2014-15, reversing Assessing Officer s action levying penalty of ₹ 19,83,000/- @ 10% of assessee s undisclosed income of ₹ 1,98,30,000/-, in proceedings u/s.271AAA of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. We notice at the outset that the CIT(A) s elaborate discussion on the above sole penalty issue reads as under: 5.3 I have considered the facts and circumstances of the case, the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted income was derived or to substantiate the same. Even the Assessing Officer has failed to provide any specific opportunity to the assessee requiring him to comply with the provisions of sub clauses (i) and (ii) of section 271AAA(2) of the Act. 5.5 The provisions of section 271 AAA read as under- [ Penalty where search has been initiated. 271AAA. (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 [but before the 1st day of July, 2012], 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 income has been derived; ( ii) substantiates the manner in which the undisclosed income was derived; and ( iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus of substantiating the manner in which the undisclosed income was derived and it cannot be said during penalty proceedings that the assessee had not fulfilled this condition. 5.7 Hon'ble ITAT, Chandigarh has, in the case of Sunil Kumar Bansal vs DCIT [2015] 62 taxmann.com 78 (Chandigarh-Trib), held that where no question was asked during statement recorded u/s 132(4), in respect of manner of earning income surrendered, assessee could not be expected to substantiate the same later on and penalty could not be levied u/s 271AAA. Similarly, Hon'ble Delhi ITAT has, in the case of Neerat Singhal vs ACIT [2013] 37 taxmann.com 189 (Delhi-Trib), held that penalty levied under section 271 AAA was not justified in absence of query raised by authorized officer during course of recording of statement under section 132(4), about manner in which undisclosed income has been derived and about its substantiation. Similar views have also been expressed by Hon'ble Chandigarh ITAT in ACIT vs Munish Kumar Goyal [2015] 152 ITD (Chandigarh). 5.8 Hon'ble Gujarat High Court has, in the case of CIT vs Mahendra C.Shah (2008) 299 ITR 0305 (Guj) , held that even if the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiate the manner of earning the income. However, CIT (Appeals), as noted, concluded that no question was asked by the departmental representatives (in the course of recording the statement under section 132(4) of the Act) regarding the manner of earning such income. It was, on this basis, that the CIT (Appeals) as well as the Tribunal found that the Assessing Officer committed an error in imposing penalty. 6. As is well known, section 271, providing for penalty for concealment of income etc., contained an Explanation 5 inserted w.e.f. 01.10.1984 and held the field till introduction of Explanation 5A w.e.f 01.06.2007. Under this Explanation 5, prevailing at the relevant time, an assessee could avoid payment of penalty on the assessee being found to be the owner of any money, bullion, jewellery or other valuable article or thing acquired by undisclosed income, if in the course of search, the assessee made a statement under sub section (4) of section 132 admitting acquisition of such asset out of his income not disclosed in the return and also specifies in the statement the manner, in which, such income has been derived and pays the tax together with interest in respect of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement in this regard and in case 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 non- statement of manner in which such income was derived would not make the Explanation 5 (2) inapplicable. 9. Similar situation arose before this Court. Division Bench in case of Commissioner of Income Tax vs. Mahendra C Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 132(4) of the Act. The Court went on to observe that if the income is declared and tax is paid thereon, there would be substantial compliance. 11. It is this principle which the CIT (Appeals) and the Tribunal have applied in the present case. As noted, CIT (Appeals) was specific that no question was put to the assessee while recording statement under section 132 regarding the manner of deriving the undisclosed income. Counsel for the Revenue, however, vehemently contended that in the present case, the penalty was being imposed under section 271AAA of the Act and the statutory provisions enabling the assessee to avoid such a penalty are entirely different as compared to Explanation 5 to section 271. 12. Sub section (1) of section 271AAA provides for a penalty in addition to tax at the rate of ten percent of the undisclosed income in case where the search has been initiated under section 132 of the Act on or after 1st day of June 2007 but before 1st day of July 2012. Such penalty may, however, be avoided if the conditions specified under sub section (2) are satisfied which are as under: ( 2) Nothing contained in sub section (1) shall apply if the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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