Penalty u/s 271AAA not justified, if A.O. makes assessment on actual income disclosed u/s 132(4)

DCIT Vs M/s Evergreen Industries (P) Ltd., (ITAT Ahmedabad)

Brief fact of case

The assessee was engaged in the business of construction of residential flats on contract basis. During the course of search carried out in the business premises of assessee, it disclosed unaccounted income of Rs.25 crore for F.Y. 2007-08 and also offered for tax. On this undisclosed income, A.O. vide penalty order, levied penalty of Rs.2.5 crore u/s 271AAA mainly for the reason of non disclosure of the particulars of income in the statement filed u/s 132(4) by the assessee. Against the order, assessee filed the appeal before CIT(A) who deleted the penalty order holding that the Assessing Officer has computed undisclosed income on the basis of evidences referred in the assessment order and on the other hand in the penalty order he contends that there is no evidence available in support of the manner of earning the income by way of on-money receipts which is contradictory. Aggrieved revenue, filed the appeal before ITAT.

Contention of the Revenue

Ld. DR supported view of Assessing officer.

Contention of the Assessee

In reply to Q.14 in the statement recorded u/s 132(4), it was stated that “Rs.25 crores is being disclosed in the name of assessee for projects of Ashirwad Palace for F.Y. 07-08 representing net on money receipts as income from undisclosed sources being understatement of income earned from receipts on sale of flats in the form on money”. Accordingly, assessee admitted Rs.25 crores as undisclosed, specified the manner in which it has been derived and also paid the tax alongwith interest thereon, so condition mentioned in clause 271AAA(2) is satisfied.

Held by ITAT

After hearing the rival submissions and on perusal of material placed on the record, ITAT uphold the view of Ld. CIT(A) that Assessee can be considered to have discharged the onus of substantiating the manner of earning undisclosed income where the AO makes assessment of disclosure made by assessee on the basis of actual income and not on the basis of the investment/expenditure under the deeming provision of section 69.69A, 69B & 69C. The requirement of section 271AAA(2) has been complied by the assessee as it had disclosed the amount in the statement made u/s 132(4) and also substantiated the undisclosed income by quantifying the amount of Rs.25 crore which is not been refuted by Revenue. Considering the facts, appeal of revenue dismissed.