No Penalty for non disclosure of Income manner, if same was not asked during statement recorded U/s/ 132(4)

Briefly the facts of the case are that in this case, search & seizure operation was conducted on 11.09.2009 in business and residential premises of Sahni Group of cases. The assessment was completed under section 153B(1)(b) read with Section 143(3) of Income Tax Act at a total income of Rs. 49.46 Cr on 29.12.2011 against the total returned income of Rs.2,55,49,150/-. Penalty under section 271AAA of Rs. 28 lacs was initiated and subsequently levied on surrendered amount of Rs. 2.80 Cr as the assessee failed to substantiate the manner of earning the same.

The assessee challenged the levy of penalty and written submission of the assessee is reproduced in the appellate order, in which the assessee briefly explained that Assessing Officer accepted the returned income. Three statements of the assessee were recorded. The assessee relied upon several judgements in support of his contention that aforesaid penalty cannot be levied in this case. The ld. CIT(Appeals), on going through the record found that statements were recorded under section 132(4) of the Act on 23.09.2009 and 25.09.2009 in which assessee has made total surrender of Rs. 3 Cr before ADIT, Chandigarh to cover up discrepancies/unaccounted transactions mentioned in the seized documents and unaccounted cash seized.

The break-up of the initial income surrendered for Rs.2.80 Cr in the hands of the assessee and Rs. 20 lacs in the hands of his wife Smt. Rashmi. It was submitted that surrendered income was disclosed in the return of income with bifurcation and additional income was declared under the head income from other sources’which was accepted in the assessment order. It was also noted by the ld. CIT(Appeals) that surrender in the instant year was of Rs. 2.20 Cr whereas penalty was imposed under the assumption of surrender of Rs.2.80 Cr. The assessee also contended that it is evident from the statements recorded under section 132(4) that no specific question was asked with regard to the manner in which income surrendered was earned in order to levy the penalty under section 271AAA of the Act. The ld. CIT(Appeals) found that the issue is identical as have been decided by ITAT, Chandigarh Bench in the case of Munish Kumar Goyal 45 Taxman.com 563 and following the same, cancelled the penalty.

The ld. counsel for the assessee, at the outset contended that issue is covered by order of ITAT Chandigarh Bench in the case of Sunil Kumar Bansal V DCIT 62 com 78 in which it was held as under ~

“IT : Where no question was asked during statement recorded under section 132(4), in respect of manner of earning income surrendered, assessee could not be expected to substantiate same later on; penalty could not be levied under section 271AAA”

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