Penalty U/s. 271AAA cannot be levied if not asked to substantiate Income Disclosed

ACIT Vs Sh. Bhavi Chand Jindal (ITAT Delhi)

Since no specific query was raised, at the time of recording statement under section 132(4) and during the assessment proceedings, however, the manner was substantiated by filing written submission and also referring relevant documents relating to undisclosed income, which were found and seized. Therefore, assessee was not at fault for substantiating the manner for earning the undisclosed income, in the absence of any specific query raised by AO while recording statement under section 132(4).

FULL TEXT OF THE ITAT JUDGMENT

This appeal by the Revenue is directed against the order dated 20.10.2015 passed by the Ld. CIT(A)-30, New Delhi relating to assessment year 2012-13 on the following grounds:-

1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in cancelling the penalty imposed u/s. 271AAA on unexplained cash payments offered as additional income amounting to Rs. 30,00,00,000/- whereas the assessee did not substantiate the manner in which this undisclosed income was derived in view of the provisions o f section 271AAA(2)(ii) of the I.T. Act, 1961.

2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in cancelling the penalty u/s. 271AAA whereas the conditions laid down in the I.T. Act, 1961 have not been fulfilled.

3. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.

4. That the grounds of appeal are without prejudice to each other.

5. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.

2. The brief facts of the case are that in this case a search and seizure action u/s. 132 of the Income Tax Act, 1961 (hereinafter referred as the Act) was carried out on 14.11.2011. In the statement recorded on 15.11.2011, u/s. 132(4) of the Act, a disclosure of Rs. 30 crores was made, since loose papers were found and seized. The return of income was filed on 31.8.2012 by the assessee, declaring total income of Rs. 30,28,31,503/-, which includes disclosures of Rs. 30 crores also. The due taxes along with interest, were also paid while filing the return of income. The assessment was completed by the AO u/s. 143(3) of the Act on 31.3.2014, at returned income of Rs. 30,28,31,503/-. However, the AO initiated the penalty u/s. 271AAA of the Act r.w.s. 274 separately on 31.3.2014 on the ground that since the assessee has admitted the undisclosed income however he had not substantiated the manner in which the income had been derived. In response to this notice a reply dated 28.4.2014 was filed. AO observed that at the time of search the assessee was confronted on the documents found and seized from his residence premises 20C, Belvedre Alipore, Kolkata, from factory premises of M/s Jindal India Ltd., Jindal Photo Ltd., at 2/1, Ahmed Mamuj Street Liluah, Howrah and Annexure JJ/1 & JJ/7 impounded from factory premises of Jindal India Ltd., Anjul, Howrah. These documents contained details of cash payments made to various parties for acquisition of land. These documents when confronted, the assessee had offered the amount of Rs. 30 crore as undisclosed income and the same was declared in the return of income filed for which the source and manner of deriving such undisclosed income could not be explained. Hence, the quantum of penalty was computed @10% of the amount of disclosure at Rs. 30 Crores and penalty of Rs. 3 crore u/s. 271AAA of the Act was imposed vide order dated 24.9.2014.

3. Against the penalty order, Assessee appealed before the Ld. CIT(A), who in turn elaborately considered the submissions of the assessee, impugned penalty order, the assessment order and statements recorded u/s. 132(4) and deleted the penalty of Rs. 3 Crore vide order dated 20.10.2015.

4. Against the impugned order, Revenue is in appeal before the Tribunal.

5. DR relied upon the penalty order of the AO and reiterated the contentions raised in the grounds of appeal. He however, submitted that penalty u/s. 271AAA levied in this case may be confirmed in view of reason mentioned in detail by the Ld. CIT(A). He further stated that the
assessee, in the course of the search, in a statement under section (4) of section 132, never specified the manner in which such income had been derived and also failed to substantiate the manner in which the undisclosed income was derived during the course of assessment proceedings. To support his contention, he relied upon the following case laws:-

– STC vs. Modi Sugar Mills Ltd. AIR 1961 SC 1047 Pg. 1051

– Anand Sancheti vs. DCIT (ITA no. 305/Nag./2015)

– ACIT vs. Shailesh Gopal Mhaske (2017) 86 taxmann.com 263 (Pune- Trib.)

6. On the contrary, Ld. A.R. of the assessee relied upon the order of the Ld. CIT(A) and stated that he has passed a well reasoned order which does not need any interference.

In support of the impugned order, he draw our attention towards page no. 2 of the Paper Book filed by the assessee’s counsel i.e. computation of income showing the income from other sources amounting to Rs. 30 cores for the assessment year in dispute. He further draw our attention towards page no. 8 to 10 of the Paper Book which is the detail of disclosure of Rs. 30 crores in assessment year 2012-13 i.e. assessment year in dispute. He further stated that Ld. CIT(A) in para no. 4.4 of the impugned order has carefully considered the written submissions, oral arguments and the other documentary evidences filed by the assessee and rightly deleted the penalty in dispute by holding that since no specific query was raised at the time of recording the statement u/s. 132(4) of the Act and during the course of assessment proceedings, the manner was substantiated by filing the written submissions and also referring the relevant documents relating to undisclosed income, which were found and seized and also rightly held that assessee is not at fault for substantiating the manner for earning the undisclosed income, in the absence of any specific query raised by the Authorised Officer while recording the statement u/s. 132(4) of the Act and therefore, rightly cancelled the penalty in dispute. Hence, he requested that the impugned order may be upheld by dismissing the appeal of the Revenue. In support of his aforesaid contentions, he relied upon the following case laws:-

– Decision of the Hon’ble Supreme Court in the case of ACIT vs. Gebilal Kanhaialal HUF : 348 ITR 561.

– Decision of Hon’ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel : 278 ITR 454.

– Decision of Hon’ble Gujarat High Court in the case of Mahendra C Shah : 299 ITR 305.

– Decision of Hon’ble Delhi High Court in the case of Pr. CIT (Central-1) vs. M/s Emirates Technologies Pvt. Ltd. ITA No. 400/2017.

– Decision of Hon’ble Delhi High Court in the case of Pr. CIT, Central-I vs. Sandeep Gupta ITA No. 967/2017.

– Decision of the Hon’ble Gujarat High Court in the case of Pr. CIT vs. Mukeshbhai Ramanlal Prajapati : ITA No. 434 of 2017.

– Decision of ITAT, Delhi Bench in the case of Neerat Singal vs. ACIT 146 ITD 152.

– Decision of ITAT, Delhi Bench in the case of M/s Spaze Tower Pvt. Ltd. vs. DCIT : ITA No. 2296/Del/2012.

– Decision of ITAT, Delhi Bench in the case of DCIT vs. M/s NKG Infrastructure Ltd. : ITA No. 2730/Del/2014.

– Decision of ITAT, Delhi Bench in the case of Sita Ram Gupta vs. ACIT : ITA No. 1835 & 1836 of 2013.

– Decision of Delhi, ITAT, in the case of ACIT vs. Sh. Sandeep Yadav ITA No. 6551/Del/2013.

7. We have heard both the parties and perused the records especially the assessment order; penalty order and the impugned order as well as the statement recorded u/s. 132(4) of the Act and the case laws relied by both the parties, especially the Hon’ble Jurisdictional High Court decisions referred by the Ld. Counsel of the assessee in the cases of Pr. CIT (Central-1) vs. M/s Emirates Technologies Pvt. Ltd. ITA No. 400/2017 and Pr. CIT, Central-I vs. Sandeep Gupta ITA No. 967/2017. However, the case laws relied upon the Ld. DR are on distinguished facts, because the assessee has substantiated the manner by referring the relevant documents relating to undisclosed income of Rs. 30 crores, on which due taxes alongwith interest have been paid while filing the return. But in the case laws cited by the Ld. Counsel of the assessee i.e. Pr. CIT (Central-1) vs. M/s Emirates Technologies Pvt. Ltd. passed in ITA No. 400/2017, we find that Hon’ble High Court has dismissed the appeal of the Revenue by holding as under:-

“3. The CIT(A) in para 4.7 of the order dated 4.11.2013 noted that no specific query had been put to the Assessee by drawing his attention to Section 271AAA of the Act asking him to specify the manner in which the undisclosed income, surrendered during the course of search, had been derived. The CIT(A), therefore, relying on the decisions of this Court held that the jurisdictional requirement of Section 271AAA was not met.

4. The above view has been concurred with by the ITAT.

5. In the facts and circumstances of the case, the Court is of the view that the concurrent decision of the CIT(A) and the ITAT represent a plausible view which cannot be said to be perverse.

6. No substantial question of law arises for consideration.

7. The appeal is accordingly dismissed.”

7.1 We find that during the assessment proceedings, the assessee has stated that the undisclosed income in dispute has been earned from transactions in land / properties and from other speculative activities and for this claim, papers and correspondence was also found and seized. The breakup of the disclosure of Rs. 30 crore was also submitted before the AO vide letter dated 25.3.2014 which states as under:-

7.2 We further observe that since no specific query was raised at the time of recording statement u/s. 132(4) and during the assessment proceedings, however, the manner was substantiated by filing written submission and also referring relevant documents relating to undisclosed income, which were found and seized. Therefore, the Ld. CIT(A) has rightly held that assessee is not at fault for substantiating the manner for earning the undisclosed income, in the absence of any specific query raised by the Authorised Officer while recording statement u/s. 132(4) of the Act. However, it is clear that the assessee has substantiated the manner, during the assessment proceedings, therefore, the Ld. CIT(A) has rightly deleted the penalty in dispute.

7.3 Keeping in view of the facts and circumstances of the case as explained above and respectfully following the precedents, as relied upon by the Ld. Counsel of the assessee, we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same and reject the grounds raised by the Revenue.

8. In the result, the appeal of the Revenue stand dismissed.