TMI Blog2018 (11) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... d already undergone change from protective additions to substantive additions, the contentions raised by the Ld. Counsel for NHPL has no merit. We are of the view that both the assessees, NHPL and NDPL have failed to comply with Section 271AAA(2)(i) and Section 271AAA(2)(ii). In addition, NHPL has also failed to comply with Section 271AAA(2)(iii). It is readily inferred from perusal of Section 271AAA of I.T. Act that the three requirements U/s 271AAA(2), i.e., Sections 271AAA(2)(i), 271AAA(2)(ii), 271AAA(2)(iii) of I.T. Act are cumulatively required to be fulfilled by an Assessee, to escape penalty U/s 271AAA(1) of I.T. Act. Thus, both the assessees, NHPL and NDPL are hit by Section 271AAA(1) of I.T. Act. However, once penalty U/s 271AAA of I.T. Act has been levied in respect of undisclosed income, the AO was in error of law prescribed U/s 271AAA(3), in imposing further penalty U/s 271(1)(c) in respect of the same undisclosed income. U/s 271AAA(3) of I.T. Act, there is clear embargo on the AO for imposing penalty U/s 271(1)(c) in respect of undisclosed income referred to in Section 271AAA(1). As far as penalty U/s 271(1)(c) in the case of NHPL for A.Y. 2012-13 in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is not only bad in law but also against the facts and circumstances of the case. ii. That the addition made, based on which penalty was imposed, was protective and not substantive. ITA No. -3137/Del/2015 i. The Learned CIT(A) erred in fact and in law in partly confirming the penalty on a addition of ₹ 63,00,000 imposed u/s 271 (1)(c) which is not only bad in law but also against the facts and circumstances of the case. ITA No. 3155/Del/2015 i. The Learned CIT(A) erred in facts and in law in confirming the penalty of ₹ 19,54,700/- imposed u/s 271AAA which is not only bad in law but also against the facts and circumstances of the case. (1.1) In this order, the following abbreviations have been used: a. Assessing Officer as AO b. Commissioner of Income Tax Appeal as CIT(A) c. Departmental Representative as DR d. Dated as dtd. e. Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee A.Y. Amt. (Rs.) Remarks 1. M/s Nirala Developers (P) Ltd. 2012-13 19547000 No incriminating document found an seized, to be telescoped with the addition made, if any 2. M/s PAN Realtors (P) Ltd. 2012-13 50000000 No incriminating document found an seized, to be telescoped with the addition made, if any 3. M/s Nirala Infratech (P) Ltd. 2012-13 7500000 Reduction of WIP 4. M/s Nirala Housing (P) Ltd. 2011-12 20153000 Advances from customers to be adjusted in PCM 5. M/s Nirala Housing (P) Ltd. 2012-13 2000000 Advances from customers to be adjusted in PCM 6. Others 800000 To be telescoped Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge . Accordingly, he added the cash of ₹ 2,01,53,000 and ₹ 20,00,000 in AY 11-12 and AY 12-13 respectively, on a protective basis. He also stated that in the event the NHPL offered the aforementioned cash receipts as income in succeeding years, after due verification, the protective additions in AY 11-12 and AY 12-13 to that extent would stand deleted. NHPL did not file any appeal against the additions made by the AO. Thus, the additions made by the AO became final. The AO also initiated penalty proceedings u/s 271AAA and 271(l)(c) of the I.T. Act. The appellant did not contest the assessment order passed by the AO. In the penalty proceedings u/s 271AAA of I.T. Act, the AO referred to the provisions of section 271AAA of I.T. Act. The AO observed that while the provision required the assessee to offer undisclosed income in its return, substantiate the manner in which the undisclosed income was derived, and also pay the tax liability arising thereon, the appellant had not met any of these conditions; that undisclosed income had not been offered in the return of income; that the assessee was trying to 'fool the department by its offer of undisclosed income in the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala group that was searched on 04.08.2011. The group, including the appellant, is mainly engaged in the business of real estate development. The key persons of the group were Sh Suresh Kumar Garg, Sh Rakesh Mahajan and Sh Iftikhar Ahmed. The search resulted in cash seizure of ₹ 67,79,000 of which cash of Rs was found and seized from the appellant company. A number of incriminating documents were also found and seized. 4. Post search, Sh Suresh Kumar Garg, one of the directors and shareholders in the Nirala group, disclosed before the DDIT Inv, Unit 1(3), New Delhi, a sum of ₹ 10,00,00,000 as additional income of the entire group for FYs relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the bifurcation of the 'surrendered income amongst 4 companies of the group was provided, as follows: 5. While filing the return of income on 21.03.2013 for AY 12-13, the appellant included the additional business income ₹ 1,95,47,000 that was claimed as part of the surrendered income of ₹ 10 crores. While passing the assessment order, the AO made additions of ₹ 3,75,387 on account of bogus payment to contractors; ₹ 10,65, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, a 'partition' had taken place amongst the erstwhile directors of the group, no documents were available with the appellant. Further, referring to the Indian Evidence Act, it was requested that in the event of drawing any adverse inference, the documentary evidence specially the appraisal report' may be shown to the appellant. In furtherance to its arguments against the impugned order, the appellant placed reliance on the cases of Crossing Infrastructure P Ltd v CIT 267 CTR 519 (All); and DCIT v Pioneer Marbles Interiors P Ltd 144 TTJ 663 (Kol). As regards ₹ 8,00,000, the AR stated that, though this sum had not been included in the return of the appellant, it was part of the disclosure and tax thereon, amounting to ₹ 2,40,000 also stood paid, since excess tax had been paid by the appellant while filing the return of income, resulting in refund claim of ₹ 5,47,810, which 'takes care of payment of tax of ₹ 2,40,000. In this manner, according to the appellant, all the 3 conditions provided in sub-section (2) of section 271 AAA were met in respect of ₹ 8,00,000 as well. 8. The submissions of the appellant are considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Kumar Garg on 4.8.2011, 5.8.2011 and 30.9.2011; Sh Rakesh Mahajan on 4.8.2011 andl2.9.2011; and Sh Iftikhar Ahmed on 4.8.2011, none of which refer to any disclosure at all. 8.4 It is also noted that the disclosure of ₹ 10 crores was an omnibus declaration made by Sh Suresh Kumar Garg in respect of the entire group, without bifurcation and without specifying the manner in which it had been earned. The specific admission, about ₹ 1,95,47,000 being the undisclosed income of the appellant company and its inclusion in the group disclosure of ₹ 10 crores, was made for the first time while filing the return of income for AY 12-13. The bifurcation of ₹ 10 crores came much later, when a letter was filed before the AO on 20/3/2014, specifying the amounts and the companies in which the sums had been offered. 8.5 Moreover, while disclosing ₹ 10 crores, Sh Suresh Kumar Garg, Director of the appellant company, did not specify the manner in which it had been derived, instead, the reason given was 'to avoid litigation and to buy peace of mind . In the letter of 20.03.2014, against the name of the appellant, the sum of ₹ 1,95,47,000 was disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as defined in the Explanation appended to section 271AAA. As per Explanation (a) appended to section 271 AAA, undisclosed income means any income of specified previous year, represented wholly or partly by money, bullion, jewellery or other valuable article or thing or documents or transactions found in the course of search and which is not recorded in the books of accounts maintained in the normal course, or has not been disclosed to the CCIT or CIT before the date of search. Also, any income of specified previous year, represented wholly or partly by any entry in respect of expense recorded in the books of accounts maintained in the normal course, but which is found to be false because of search, is also defined as 'undisclosed income . Since the declaration by the appellant of ₹ 1,95,47,000 was the outcome of search, and it was not recorded in the books of accounts maintained in the normal course, and had also not been disclosed to the CCIT or CIT before the date of search, it constituted 'undisclosed income' of the appellant within the meaning conferred by Explanation (a) appended to section 271AAA. 8.9 The appellant has referred to some decisions, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh Rakesh Mahajan and Sh. Iftikhar Ahmed. The search resulted in cash seizure of ₹ 53,98,000 and jewellery seizure of ₹ 10,52,124. A number of incriminating documents were also found and seized. Specific mention is made to pages 47-48 of annexure A-4 found from H-121, Sector-63, Noida, the corporate office of the group, which inter alia referred of cash receipts of ₹ 2,21,53,000 in addition to cheques, received against booking for flats from various customers by Nirala Housing Pvt. Td. (the appellant company). Out of the total cash of ₹ 2,21,53,000, cash of ₹ 2,01,53,000 pertained to FY 10-11 and ₹ 20,00,000 to FY 11-12. 4. Post search, Sh Suresh Kumar Garg, one of the directors and shareholders in the Nirala group, disclosed before the DDIT Inv, Unit 1(3), New Delhi, a sum of ₹ 10,00,00,000 as additional income of the entire group for FYs relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the bifurcation of the surrendered income' amongst 4 companies of the group was provided as follows: S.N o. Premises of Assessee A.Y. Additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was received as advances from customers for its project, would be offered to tax in the succeeding financial years, based on AS-7 and the percentage completion method. While passing the assessment order, the AO rightly noted that the assertion of the appellant - that it will offer the cash receipts as income in succeeding years - cannot be verified at this stage . Accordingly, he added the cash of ₹ 2,01,53,000 and ₹ 20,00,000 in AY 11-12 and AY 12-13 respectively, on a protective basis. He also stated that in the event the appellant offered the aforementioned cash receipts as income in succeeding years, after due verification, the protective additions in AY 11-12 and AY 12-13 to that extent would stand deleted. The AO also initiated penalty proceedings u/s 271AAA and 271(l)(c). The appellant did not contest the assessment order passed by the AO on 28.03.2014. 7. In the penalty proceedings u/s 271AAA, the AO referred to the provisions of section 271AAA. , Stating that while the provision required the assessee to offer undisclosed income in its return, substantiate the manner in which the undisclosed income was derived, and also pay the tax liability arising ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued as per submission dated 17.3.2015, that the levy of penalty is against law, since the appellant's case 'comes squarely within the ambit of 271AAA(2)(i) and (hi)'. It was submitted that complete disclosure was made during the course of search and seizure proceedings, that the source was disclosed, and that the sum was in the nature of advance payments received from customers, an d shown as current liabilities in FY 10-11 and FY 11-12 since the prescribed percentage of completion had not been achieved then. Reference was made to clause (iii) of sub-section (2) of section 271AAA, where the payment of tax and interest on undisclosed income was qualified by the phrase 'if any . It was argued that tax and interest on the undisclosed income became payable only when the income of the appellant from its project became taxable, based on the accounting standard AS-7 followed by it and accepted by the AO while passing the assessment order. It was further stated that the project was delayed and was started only in FY 14-15, and that accordingly, advance tax of ₹ 76.50 lakhs was paid for FY 14-15. Reference was made to the case of Crossing Infrastructure P Ltd v CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the Nirala group for FY 10-11 and 11-12, in which the cash of ₹ 2,21,53,000 pertaining to the appellant was subsequently claimed to be in eluded, the admission was not made u/s 132(4) of the Income Tax Act. The disclosure was in fact made by a typed letter addressed to DDIT(Inv), Unit-1(3), New Delhi, following search action on the Nirala group. This is evident from page 2 of the assessment order of the appellant for AY 11- 12 and 12-13, where the AO has reproduced the letter of Sh S K Garg to the DDIT. The said letter refers to the search on the group and seizure of certain valuables and documents and goes on to state that 'in order to avoid litigation and to buy peace of mind', disclosure of ₹ 10 crores was being made by the group as additional business income' for FY 10-11 and 11-12. 11.3 Now since the letter of disclosure, stands reproduced in the assessment order of the appellant itself, it dispels all doubt about whether the disclosure of ₹ 10 crores was made u/s 132(4) or not. Section 132(4) entails statement of any person who is found to be in possession or control of books of accounts, documents, money, bullion, jewellery or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (ii) of sub-section (2) of section 271AAA, that requires substantiation of the manner in which the undisclosed income was derived by the assessee, is met, since the seized material itself referred to it as cash advance received from customers against their booking of flat. In this regard, it is noted that since the appellant admitted about_Rs 2,21,53,000 being the unaccounted cash receipts of the appellant company on 26.12.2011 u/s 131(1A) in the chamber of DDIT(Inv), the fulfillment towards clause (ii) of sub-section (2) of section 271AAA - the substantiation 'about the manner in which the undisclosed income was derived - came about on that date. 11.7 The appellant has also claimed that clause (iii) of sub-section (2) of section 271AAA, relating to the payment of tax and interest, is applicable only if these were due and that since this was not so in its case, the condition was not applicable to it. But this contention does not appear to be correct, since the words if any' is evidently used in the clause in connection with 'interest' and not tax . It may be mentioned that undisclosed income' in all instances will suffer tax, but interest thereon, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not recorded in its books of accounts maintained in the normal course, and had also not been disclosed to the CCIT or CIT before the date of search, it constituted its undisclosed income within the meaning conferred by Explanation (a) appended to section 271AAA. 11.11 It is also relevant that the penalty u/s 271AAA applies only to 'specified previous year', which has been defined in Explanation (b) appended to section 271 AAA. Thus, the year in which search is conducted, and the year which had ended before the date of search but the date for filing the return of income u/s 139(1) had not expired before the date of search and the assessee had not furnished the return for that previous year, are 'specified previous year . Since the date of search on the appellant was 4.8.2011, the previous year 10-11 had ended and the date for filing return u/s 139(1) had not expired and the appellant had not furnished the return for previous year 10-11, the previous year 10-11 and previous year 11-12 relevant to AY 11-12 and AY 12-13 respectively come within the meaning of specified previous year , as defined by Explanation (b) appended to section 271AAA. 11.12 Pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A), for A.Ys. 2011-12 and 2012-13 respectively. (4.1.1) NHPL separately filed appeal against the levy of penalty U/s 271(1)(c) of I.T. Act for A.Y. 2011-12. Vide order dated 20th March, 2015 in appeal no. 424/2014-15, the Ld. CIT(A) deleted this penalty and allowed the assessee s appeal. The Relevant portion of order of the Ld. CIT(A) is reproduced as under: 3. The appellant is one of the companies of the Nirala Group that was searched on 04.08.2011. The group, including the appellant, is mainly engaged in the business of real estate development. The key persons of the group were Sh. Suresh Kumar Garg, Sh Rakesh Mahajan and Sh. Iftikhar Ahmed. The search resulted in cash seizure of ₹ 53,98,000 and jewellery seizure of ₹ 10,52,124. A number of incriminating documents were also found and seized. Specific mention is made to pages 47-48 of annexure A-4 found from H-121, Sector-63, Noida, the corporate office of the group, which inter alia referred of cash receipts of ₹ 2,21,53,000 in addition to cheques, received against booking for flats from various customers by Nirala Housing Pvt. Td. (the appellant company). Out of the total cash of ₹ 2,21,53, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its books of accounts for FY 10-11 (at ₹ 2,01,53,000) and FY 11-12 (at ₹ 20,00,000), under the head current liabilities' on one side of the balance sheet and as cash available on the other. Since the appellant was following percentage completion method for revenue recognition as per the accounting standard AS-7, and in FY 10-11 and FY 11-12, the percentage of completion was below the bench mark of 25%, no income was declared for these years. When queried by the AO during the assessment proceedings, it was stated by the appellant that the unaccounted cash receipts of ₹ 2,21,53,000, which was received as advances from customers for its project, would be offered to tax in the succeeding financial years, based on AS-7 and the percentage completion method. While passing the assessment order, the AO rightly noted that the assertion of the appellant - that it will offer the cash receipts as income in succeeding years - cannot be verified at this stage . Accordingly, he added the cash of ₹ 2,01,53,000 and ₹ 20,00,000 in AY 11-12 and AY 12-13 respectively, on a protective basis. He also stated that in the event the appellant offered the aforementioned ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head of current liabilities' in the balance sheet. The explanation of the appellant - that the sum was not offered as income in AYs 11-12 and 12-13 because it was following the percentage completion method and AS-7, and less than the bench mark of 25% of the project had been completed in those years - is also recorded and accepted in the assessment orders. Therefore, the observation of the AO in the impugned order about the appellant trying to fool the department' is not consistent with the facts and observations made in the assessment order. 9. Coming to the contentions of the AR, it has been argued as per submission dated 17.3.2015, that the levy of penalty is against law, since the appellant's case 'comes squarely within the ambit of 271AAA(2)(i) and (hi)'. It was submitted that complete disclosure was made during the course of search and seizure proceedings, that the source was disclosed, and that the sum was in the nature of advance payments received from customers, an d shown as current liabilities in FY 10-11 and FY 11-12 since the prescribed percentage of completion had not been achieved then. Reference was made to clause (iii) of sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ys relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the bifurcation of the surrendered income' amongst 4 companies of the group was provided as follows: S.N o. Premises of Assessee A.Y. Additional business income Remarks 1 Nirala Developers P.Ltd. 12-13 1,95,47,000 To be telescoped 2 PAN Realtors P 12-13 5,00,00,000 with Ltd. Addition made if any 3 Nirala Infratech P Ltd. 12-12 75,00,000 Reductio of WIP 4 NiralaHousing P Ltd. 12-13 20,00,000 Advance from customers to be adjusted in PCM 11-12 2,01,53,000 5 Others - 8,00,000 To be telescoped with addition made if any Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceedings u/s 271AAA, the AO referred to the provisions of section 271AAA. , Stating that while the provision required the assessee to offer undisclosed income in its return, substantiate the manner in which the undisclosed income was derived, and also pay the tax liability arising thereon, the appellant had not met any of these conditions. It was stated that undisclosed income had not been offered in the return of income; that the assessee was trying to fool the department' by its offer of undisclosed income in the form of current liabilities; that it had not substantiated the manner in which the unaccounted income had been derived; and that tax had also not been paid by it. With these observations, the AO imposed penalty u/s 271AAA @ 10% on undisclosed income of ₹ 2,01,53,000 in AY 11-12 and on undisclosed income of ₹ 20,00,000 in AY 12-13, amounting to ₹ 20,15,300 and ₹ 2,00,000 respectively. Aggrieved by these orders, the appellant is in appeal. 8. In the written submissions, the AR has lodged a strong objection to the observation of the AO in para 4.1 of the impugned orders, where it was stated that the assessee was 'trying to foo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and accepted by the AO while passing the assessment order. It was further stated that the project was delayed and was started only in FY 14-15, and that accordingly, advance tax of ₹ 76.50 lakhs was paid for FY 14-15. Reference was made to the case of Crossing Infrastructure P Ltd v CIT 267 CTR 519 (All)-, and DCIT v Pioneer Marbles Interiors P Ltd 144 TTJ 663 (Kol). 10. In the written submission filed on 20.3.2015, it was stated that the AO had only commented upon the appellant s conduct with reference to clauses (ii) and (iii) of sub section (2) of section 271AAA and that since he had not commented anything as far as clause (i) was concerned, it may be 'assumed that he had accepted that the declaration/surrender was made u/s 132(4) . It was submitted that in the event of any doubt, all IT records along with the appraisal report of the Investigation wing may be summoned to ascertain if the disclosure was made u/s 132(4) or not. Stating that since the search, a 'partition' had taken place amongst the erstwhile directors of the group, no documents were available with the appellant. Further, referring to the Indian Evidence Act, it was requested that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order of the appellant itself, it dispels all doubt about whether the disclosure of ₹ 10 crores was made u/s 132(4) or not. Section 132(4) entails statement of any person who is found to be in possession or control of books of accounts, documents, money, bullion, jewellery or other valuable article or thing, upon examination on oath by the authorized officer during the course of search or seizure. It is thus crystal clear that the aforesaid disclosure of ₹ 10 crores was not made before the authorised officer upon examination on oath during the course of search as contemplated in section 132(4). This is also evident from the various statements recorded u/s 132(4) of Suresh Kumar Garg on 4.8.2011, 5.8.2011 and 30.9.2011; Sh Rakesh Mahajan on andl2.9.2011; and Sh Iftikhar Ahmed on 4.8.2011, none of which refer to any disclosure at all. 11.4 It is also noted that the disclosure of ₹ 10 crores was an omnibus declaration made by Sh S K Garg in respect of the entire group, without bifurcation and without specifying the manner in which it had been earned. The bifurcation of ₹ 10 crores came much later, when a letter was filed before the AO on 20/3/2014, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable to it. But this contention does not appear to be correct, since the words if any' is evidently used in the clause in connection with 'interest' and not tax . It may be mentioned that undisclosed income' in all instances will suffer tax, but interest thereon, may or may not apply, depending upon the facts and circumstances of each case. In case of Pioneer Marbles Interiors P Ltd (supra), the Hon ble Tribunal noted that though no time limit had been set out in the statute, for immunity under sub section (2) of section 271AAA, tax and interest should have been paid well before the conclusion of the impugned penalty proceedings. In the case of the appellant, it is an admitted fact that tax was not paid on the undisclosed sums before the date of the impugned penalty orders. Therefore, clause (iii) of sub- section (2) of section 271AAA, requiring payment of tax, is also not fulfilled by the appellant. 11.8 Thus, the appellant cannot escape from the penalty envisaged in sub-section (1) of section 271AAA because clauses (i) and [ii] of sub-section (2) of section 271AAA are not met. 11.9 It may be also mentioned that penalty u/s 271AAA is rightly levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant had not furnished the return for previous year 10-11, the previous year 10-11 and previous year 11-12 relevant to AY 11-12 and AY 12-13 respectively come within the meaning of specified previous year , as defined by Explanation (b) appended to section 271AAA. 11.12 Penalty u/s 271AAA is applicable in respect of previous years relevant to AY 11-12 and AY 12-13 since the documents relating to undisclosed income of ₹ 2,01,53,000 and ₹ 20,00,000 had been found in the course of search on the Nirala group and the unaccounted cash receipts were in respect of the specified previous years. In this manner, with all the ingredients referred in the definition of 'undisclosed income and specified previous year , as per Explanation appended to section 271AAA, fulfilled, the imposition of penalty u/s 271AAA is confirmed in respect of AY 11-12 and AY 12-13. 11.13 The appellant has referred to some decisions, namely Crossing Infrastructure P Ltd (supra) and Pioneer Marbles Interiors P Ltd (supra), but these do not help its case. In the case of the former, all the three conditions given in sub section (2) of section 271 AAA had been met. The latter decision was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losure made by Nirala Group should also be treated as sufficient compliance of requirements of Section 271AAA(2)(ii) of I.T. Act. He also contended that the NHPL followed Project Completion Method of accounting, and no tax was payable because no income was recognized under this method of accounting by NHPL for either of the two Assessment Years, viz A.Y 2011-12 and A.Y. 2012-13; and further, that no penalty was leviable either U/s 271(1)(c) or U/s 271AAA for either A.Y. 2011-12 or A.Y. 2012-13 because no income was recognized in accordance with Project Completion Method of accounting and no tax was payable. Thus, he submitted that assessee, NHPL and NDPL, were not liable for penalty U/s 271AAA of I.T. Act. He also relied on decisions reported in the following case laws: 1. Concrete Developers Vs ACIT C(C)-2(2) (Nagpur ITAT) 2. Sita Ram Gupta v. Gupta ACIT, [2014] 151 ITD 449 (Delhi-Trib.) 3. PCIT v. Swapna Enterprise, [2018] 401 ITR 488 (Gujarat)/ [2018] 302 CTR 504 (Gujarat) 4. ACIT vs. Akshar Developers, [2017] 86 taxmann.com 251 (Mumbai- Trib.) 5. M/s Kanakia Spaces Pvt. Ltd. v. AcIT, ITAT Mumbai (IT Appeal No. 6763 (Mum.) of 2011]) 6. ACIT v. Shreenarayan Sita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refully perused the impugned orders of Ld. CIT(A) and the orders of the AO and we have further taken into consideration the case laws and judicial precedents referred therein. (8) The two side (NHPL and NDPL on one side and Revenue on the other side) have disputed whether the disclosures made by the assessees as part of the overall disclosures of ₹ 10,00,00,000/- by Nirala Group was disclosure U/s 132(4) of I.T. Act or not. The two sides (NHPL and NDPL on one side and Revenue on the other side) have also disputed whether though disclosure was made by Nirala Group, whether the two assessees had substantiated the manner in which undisclosed income for the two Assessment years 2011-12 and 2012-13, was derived. We notice that NHPL, instead of substantiating the manner in which undisclosed income for A.Y. 2011-12 and 2012-13 was derived; actually took a contrary stand during assessment proceedings that the income disclosed had not accrued to the assessee in accordance with Project Completion Method of accounting by the assessees. The surrendered income was not included in Return of income of NHPL for A.Ys. 2011-12 and 2012-13. (8.1) It will be useful to refer to provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner in which the undisclosed income was derived, the assessee is hit by section 271AAA(1) of I.T. Act read with 271AAA(2)(ii) of I.T. Act. In the appeals before us, one of the two assessees, NHPL, instead of substantiating the manner in which undisclosed income was derived, actually took a contrary stand, in contradiction of the disclosures made by Nirala Group during assessment proceedings, that the disclosed income had not accrued in accordance with Project Completion Method and thus was in clear default of Section 271AAA(2)(ii) of I.T. Act whereby it was hit by Section 271AAA(1) of I.T. Act. The relevant portions of orders of Ld. CIT(A), which have already been reproduced earlier in this Order have clearly established that both the assessees, NHPL and NDPL, had failed to substantiate the manner in which the undisclosed income was derived; and for the detailed reasons given in her Orders, we agree with her finding on this issue. Further, to claim the benefit U/s 271AAA(2) Of I.T. Act, the admission of undisclosed income by an assessee is required to be made in a statement U/s 132(4) of I.T. Act and the assessee is further required to specify the manner in which such income have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The uncertainty in the case of NHPL before us was not in respect of the assessee in whose hands the income was to be added. The uncertainty was as to the year in which the addition is to be made. This uncertainty arose because of the changed stand of the assessees, who initially surrendered undisclosed income after search U/s 132 of I.T. Act for the years under consideration; but later took a contrary stand by filing return showing nil income and taking the stand during assessment proceedings that the income will be recognized in later years in accordance with Project Completion Method of Accounting. Thus, the precedents cited on behalf of the assessees by the Ld. Counsel are on entirely distinguishable facts and do not advance the case of NHPL. When a protective addition is made because an assessee changes its stand leading to uncertainty about the year in which the income is to be assessed, the assessee cannot be permitted to benefit from uncertainty created by its own conduct. Further, we also note that in response to a query made by the Bench, at the time of hearing before us, the Ld. Counsel for assessees informed that the undisclosed income declared after search but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions raised by the Ld. Counsel for NHPL has no merit. (9) In view of the aforementioned legal position as discussed earlier and also in view of the facts of the case as discussed earlier, we are of the view that both the assessees, NHPL and NDPL have failed to comply with Section 271AAA(2)(i) and Section 271AAA(2)(ii) of I.T. Act. In addition, NHPL has also failed to comply with Section 271AAA(2)(iii) of I.T. Act. It is readily inferred from perusal of Section 271AAA of I.T. Act that the three requirements U/s 271AAA(2) of I.T. Act, i.e., Sections 271AAA(2)(i), 271AAA(2)(ii), 271AAA(2)(iii) of I.T. Act are cumulatively required to be fulfilled by an Assessee, to escape penalty U/s 271AAA(1) of I.T. Act. Thus, both the assessees, NHPL and NDPL are hit by Section 271AAA(1) of I.T. Act. However, once penalty U/s 271AAA of I.T. Act has been levied in respect of undisclosed income, the AO was in error of law prescribed U/s 271AAA(3) of I.T. Act, in imposing further penalty U/s 271(1)(c) of I.T. Act in respect of the same undisclosed income. U/s 271AAA(3) of I.T. Act, there is clear embargo on the AO for imposing penalty U/s 271(1)(c) in respect of undisclosed income referred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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