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TMI Blog2017 (9) TMI 1656X X X X Extracts X X X X X X X X Extracts X X X X ..... onal income on which penalty was imposed does not fall under the definition of "undisclosed income" in order to attract penalty u/s 271AAA of the I.T. Act, without appreciating the fact that certain movable and immovable assets were found during the course of search and the assessee had neither filed returns of income nor maintained books of account. On the basis of these assets/entries disclosure of undisclosed income was made by the assessee in the statement recorded u/s 132(4) of the I.T. Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the penalty levied u/s 271AAA of the I.T. Act even though the assessee had earned "undisclosed income" within the meaning of clause(a) of explanation of section 271AAA. 4. The Ld. CIT (A) also erred in not following his previous orders for A.Yrs. 2005-06 to 2010-11 wherein he confirmed penalty holding that it was evident that certain movable and immovable assets did come to the notice during the course of the search based on which disclosure was made by the assessee. 5. The order of Ld. CIT (A) may be vacated and that of the Assessing Officer be restored. 3. The issue ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. In view of the said facts and circumstances, he requested that penalty proceedings initiated under section 271(1)(c) of the Act be dropped. It may be pointed out herein that at the start of letter, he had referred to the provisions of section 271AAA of the Act and had also reproduced the said section. However, at the close, he requested for dropping the penalty proceedings initiated under section 271(1)(c) of the Act. 5. The Assessing Officer however, took note of the conditions laid down in section 271AAA of the Act and noted that the assessee had not filed the return of income till the date of search i.e. 10.02.2011 starting from assessment year 2005-06 onwards. The assessee also did not pay any taxes. For the year under consideration, the return of income was due on 30.09.2011 and though the assessee filed the same on 30.09.2011 but he did not pay taxes due on the income disclosed by him. Therefore, the Assessing Officer held that the contentions of assessee that he had complied with the entire conditions provided in sub-section (2) of section 271AAA of the Act was factually incorrect. Reference was made to questions and answers raised during the course of recording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assessee was entitled to the immunity under sub-section (2) of section 271AAA of the Act or not, does not arise, as threshold limits from brining the case under section 271AAA of the Act were not met with. 7. The Revenue is in appeal against the order of CIT (A). 8. The learned Authorized Representative for the assessee referred to application filed under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, (in short 'the Rules') wherein it had raised the issue and has pointed out that the order of CIT (A) may be supported on the ground that the assessee was eligible for immunity under sub-section (2) of section 271AAA of the Act, wherein the assessee had admitted undisclosed income of Rs. 1.02 crores, filed the return of income declaring additional income and had paid entire taxes together with interest in respect of undisclosed income. He further pointed out that penalty levied was not legally sustainable in view of the definition of undisclosed income under Explanation (a) to section 271AAA of the Act. He further pointed out that where the Assessing Officer had failed to initiate penalty proceedings specifically for particular charge or an offence for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271AAA of the Act. In this regard, he placed reliance on the ratio laid down by the Hon'ble Supreme Court in Asstt. CIT v. Gebilal Kanhaialal HUF [2012] 25 taxmann.com 214/210 Taxman 244/348 ITR 561. He referred to the written submissions filed and pointed out that penalty was not legally sustainable and he also pointed out that penalty was initiated for concealment and furnishing of inaccurate particulars of income and it was levied for undisclosed income. In this regard, he placed reliance on the ratio laid down by the Pune Bench of Tribunal in ACIT v. Shri Vikas Bapurao Takawane in [IT Appeal No.2245 (PUN) of 2014, dated 26.07.2017]. 11. We have heard the rival contentions and perused the record. Penalty under section 271AAA of the Act is attracted where search had been initiated under section 132 of the Act and undisclosed income has been detected, then the assessee is to pay by way of penalty, in addition to tax, if any, payable by him, sum computed @ 10% of undisclosed income. However, sub-section (2) provides exception to levy of penalty under section 271AAA of the Act in case the assessee fulfills the following conditions:- (a) Assessee in the statement recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admitted that the same also relates to the Sanas deal. Then page 42 of diary No.1 was also confronted and pages 39 and 40. Vide question No.14, he was asked to give the details of foreign trip and expenses. Vide question Nos.15, 16 and 17, he was again confronted with the contents of diary. The assessee vide question No.19 was asked to give the details of immovable property which was given by him, bearing serial numbers (a) to (h). He also claimed that he incurred Rs. 10 lakhs for renovation of house and for furniture and fixtures of Rs. 4 lakhs during financial year 2010-11. Search team as per question No.25 asked him How will you explain the above mentioned investments in land / plots and movable and immovable asset, considering the non filing of income tax return. His answer to the said question is I hereby voluntarily declare the amount of Rs. 2,30,00,000/- (Two Crores and Thirty Lacs) towards my capital in Home Corporation, investment in movable and immovable assets, land / plots, and my unexplained expenditure of foreign trip and drawings. Further I will file my return of income on the basis of either source or application whichever is higher, and its yearwise break-up shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of search under section 132 of the Act. The CIT (A) while deciding the issue has referred to part of definition of 'undisclosed income' though in the first part of para 6.4 of the appellate order, he refers that in the assessment order as well as penalty order, there is no whisper either of about any money, bullion, jewelry or other value article or thing or any entry in the books of account or other documents or transactions found in the course of search or books of account maintained in the normal course but in the later part of para 6.4, he restricts the definition of 'undisclosed money' to income represented by any asset found or any entry in either seized books or regular books. He has lost sight of the transactions found as one of the conditions i.e. entry in the books of account or other documents and also transactions found in the course of search. As pointed out by us in the paras hereinabove, during the course of search, diary was found in which there was mention of transactions in white an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e either in the assessment order or the order levying penalty under section 271AAA of the Act and where the Assessing Officer had failed to specify undisclosed income unearthed during the course of search as envisaged under the provisions of section 271AAA of the Act, penalty levied under the said section was deleted. We have already referred to the facts of the present case and order of Assessing Officer while recording satisfaction, wherein he talks about the income unearthed during the course of search and order levying penalty under section 271AAA of the Act, which specifically talks about undisclosed income and consequently, we find no merit in the reliance placed upon by the learned Authorized Representative for the assessee in Vikas Bapurao Takawane (supra). 16. Now, coming to the conditions to be fulfilled. In cases where the assessee claims the immunity from levy of penalty under section 271AAA of the Act, sub- section (2) provides that three conditions to be fulfilled but in actual fact there are four steps are to be undertaken before grant of any immunity under section 271AAA of the Act, which are as under:- (a) Assessee in the statement recorded under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to say anything more. He replied that he voluntarily surrenders sum of Rs. 4 crores for assessment year 2010-11 to cover all the discrepancies in the seized papers. The Tribunal thus, in view thereof, observed that where the Revenue has not asked the assessee to disclose the manner in which said income was earned, then during search, the assessee must have disclosed the manner. However, in the facts of present case, there is variance that vide question No.25, the assessee was specifically asked to explain the investments in land and plots, movable and immovable assets and non filing of return of income. In reply, he did not give an explanation as to manner in which the income was earned and he only surrendered additional income in his hands for the year under consideration. The year before us is the year of search and in view of declaration made by the assessee on account of undisclosed income, then in view of sub-section (1) to section 271AAA of the Act, the assessee is to pay penalty in addition to taxes, if any, payable by him on such undisclosed income. Accordingly, we hold so. 19. Now, coming to the last clause of immunity under sub-section (2) of said section, wherein it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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