Case Law Details
Late Sh. Krishan Kumar Modi Vs ACIT (ITAT Delhi)
ITAT held that penalty under section 271AAA(1) cannot be imposed in a case where the assessee has offered the undisclosed income in the statement recorded under section 132(4) of the Act, specifying the manner in which such income has been derived and if the assessee pays the tax along with interest of such income. In the facts of the present case, undisputedly, the assessee has offered the cash found as income in the statement recorded under section 132(4) of the Act. It is also a fact that the assessee has paid the tax on such income. The only condition, according to the department, which has not been fulfilled is the assessee has not specified the manner in which such income has been derived. On a perusal of the statement recorded under section 132(4) of the Act, we have observed that in response to a question asked by the authority concerned, the assessee came forward to offer the money found in the bank account as well as in cash as income. It is observed, the authority recording statement did not pose any specific query to the assessee to explain the mode and manner in which such undisclosed income was derived. Thus, in course of search and seizure operation when the assessee came forward and offered certain income to show his bonafide and ultimately followed it up by actually offering such income to tax, in our view, the assessee should be given the benefit of the exceptions provided under sub-section (2) of section 271AAA. In any case of the matter, it is a fact on record that the assessee is no more and has been substituted by his legal heir, in course of proceeding before us. Thus, in our considered opinion, a liberal and compassionate view has to be taken qua the imposition of penalty under section 271AAA of the Act. Accordingly, we delete the penalty imposed under section 271AAA of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
Captioned appeal by the assessee arises out of order dated 22.07.2019 of learned Commissioner of Income-tax (Appeals)-29, New Delhi, confirming the penalty imposed of Rs.12,84,631/-under section 271AAA of the Income-tax Act, 1961 (for short ‘the Act’) pertaining to assessment year 2012-13.
2. Though, in the impugned order, learned Commissioner (appeals) has disposed of the appeals relating to three assessment years, however, presently, we are concerned with assessment year 2012-13.
3. Briefly the facts are, the assessee, since deceased, was a resident individual. For the assessment year under dispute, the assessee had filed his return of income on 28.07.2012 declaring income of Rs.9,87,75,340/-. It is relevant to observe, on 09.11.2011, a search and seizure operation under section 132 of the Act was conducted on the assessee, wherein, information was found that the assessee was operating a foreign bank account at HSBC Geneva. Further, in course of search and seizure operation, various incriminating materials were found and seized. Out of cash found of Rs.11,82,500/-, an amount of Rs.11,50,000/- was seized. Similarly, out of jewellery found of Rs.10,24,14,740/-jewellery worth of Rs.1,12,89,616/- was seized. In the statement recorded under section 132(4) of the Act in course of search operation, the assessee offered the cash found amounting to Rs.11,82,500/- as its income. Further, subsequent to the filing of the original return of income, the assessee filed a revised return of income offering the interest income of Rs.29,28,474/- earned on the deposits in the foreign bank accounts. While completing the assessment in case of the assessee, the Assessing Officer determined the total income of Rs.11,29,93,460/- after making the following additions:
(i) Income from undisclosed interest under section 69 of the Act amounting to Rs.29,28,474/-
(ii) Unexplained jewellery of Rs.1,12,89,646/-
4. Further, observing that the assessee would not have surrendered the cash found of Rs.11,82,500/- had search and seizure operation not taken place. The Assessing Officer initiated proceeding for imposition of penalty under section 271AAA of the Act. After issuance of show-cause-notice to the assessee, the Assessing Officer ultimately passed an order on 30.06.2015 imposing penalty under section 271AAA of the Act for an amount of Rs.12,84,631/-. Against the penalty order so passed, assessee preferred an appeal. In course of proceeding before him, learned Commissioner (Appeals) having found that the addition made on account of unexplained jewellery, in the meanwhile, was deleted by the Tribunal, deleted the penalty imposed under section 271AAA of the Act in respect of the additions made of Rs.1,12,89,646/- representing unexplained jewellery. However, insofar as the addition of Rs.11,82,500/- on account of cash found in course of search, learned Commissioner (Appeals) confirmed the penalty imposed with the observation that the manner in which cash was derived was not specified by the assessee. Accordingly, he held that the assessee was unable to satisfy all the criteria laid down in section 271AAA of the Act.
5. Drawing out attention to the statement recorded under section 132(4) of the Act from the assessee on the date of search operation, learned counsel for the assessee submitted, the assessee has clearly and categorically stated that to settle all the disputes, he is willing to offer the additional income found as a result of search and pay tax on the same. He submitted, in addition to the cash seized from the assessee, additional cash was also seized from the room of the assessee’s daughter. He submitted, in a separate statement recorded from assessee’s daughter, she has submitted that cash belongs to the family members to make day to day expenses and also includes cash which came from office. Thus, he submitted, considering the mental state of the assessee at the time of search and seizure operation, whatever logical came to the mind of assessee was stated in the statement recorded. He submitted, the income offered at the time of search and seizure operation was actually followed up by the assessee in the return of income filed for the impugned assessment year. He submitted, in case the departmental authorities found the statement of the assessee deficient with regard to the manner in which the undisclosed income was derived, they should have assisted the assessee in a proper manner to elicit the correct response. He submitted, while recording the statement under section 132(4) of the Act, since, the authority concerned did not put any specific query regarding the mode and manner in which undisclosed income was derived, the assessee did not give any specific answer. He submitted, only because, according to the department, there is no proper explanation by the assessee with regard to the manner in which undisclosed income was derived, penalty under section 271AAA cannot be levied. He submitted, penalty under section 271AAA of the Act is not mandatory. Therefore, if the assessee offers a reasonable explanation, no penalty can be imposed. Further, he submitted, once the department accepts the voluntary disclosure of income made by the assessee, no penalty under section 271AAA can be imposed. In support of his contention, learned counsel for the assessee relied upon a number of judicial precedents as referred to in the written submission filed before us.
6. Strongly relying upon the observations of learned Commissioner (Appeals), learned Departmental Representative submitted, the assessee had full opportunity to explain about the disclosure made. She submitted, a perusal of the statement recorded under section 132(4) would indicate that the assessee was not under any duress. Therefore, the contention of the assessee that proper scope and opportunity was not granted to explain the mode and manner in which the undisclosed income was derived is incorrect.
7. We have considered rival submissions and perused the materials on record. It is evident, at the time of search and seizure operation itself the assessee had offered the cash found of Rs.11,82,500/- as his additional income. This is very much clear from the statement recorded from the assessee under section 132(4) of the Act on the date of search. It is also a fact that the offer made by the assessee in the statement recorded under section 132(4) was followed up by disclosing the cash found of Rs.11,82,500/- as income in the return of income filed for the impugned assessment year. While completing the assessment, the Assessing Officer added back an amount of Rs.1,12,89,646/-representing unexplained jewellery. While imposing penalty under section 271AAA of the Act, the Assessing Officer has considered the cash found of Rs.11,82,500/- as well as the unexplained jewellery of Rs.1,12,89,646/-. It is a fact on record that the addition of unexplained jewellery amounting to Rs.1,12,89,646/-has been deleted by the Tribunal while deciding assessee’s appeal. Thus, the only amount which could have been subjected to levy of penalty under section 271AAA is cash found of Rs.11,82,500/-. The question which arises for consideration is, whether penalty under section 271AAA can be imposed when the assessee has offered the amount as undisclosed income in course of search and seizure operation. For better appreciation, it is necessary to have a look at the provision contained under subsection (2) of section 271AAA of the Act, which reads as under:
“Penalty where search has been initiated.
271AAA. (1)……………………………………
(2) Nothing contained in sub-section (1) shall apply if the assessee,—
(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
(ii) substantiates the manner in which the undisclosed income was derived; and
(iii) pays the tax, together with interest, if any, in respect of the undisclosed income.”
8. A careful reading of the aforesaid provision makes it clear that the penalty under section 271AAA(1) cannot be imposed in a case where the assessee has offered the undisclosed income in the statement recorded under section 132(4) of the Act, specifying the manner in which such income has been derived and if the assessee pays the tax along with interest of such income. In the facts of the present case, undisputedly, the assessee has offered the cash found as income in the statement recorded under section 132(4) of the Act. It is also a fact that the assessee has paid the tax on such income. The only condition, according to the department, which has not been fulfilled is the assessee has not specified the manner in which such income has been derived. On a perusal of the statement recorded under section 132(4) of the Act, we have observed that in response to a question asked by the authority concerned, the assessee came forward to offer the money found in the bank account as well as in cash as income. It is observed, the authority recording statement did not pose any specific query to the assessee to explain the mode and manner in which such undisclosed income was derived. Thus, in course of search and seizure operation when the assessee came forward and offered certain income to show his bonafide and ultimately followed it up by actually offering such income to tax, in our view, the assessee should be given the benefit of the exceptions provided under sub-section (2) of section 271AAA. In any case of the matter, it is a fact on record that the assessee is no more and has been substituted by his legal heir, in course of proceeding before us. Thus, in our considered opinion, a liberal and compassionate view has to be taken qua the imposition of penalty under section 271AAA of the Act. Accordingly, we delete the penalty imposed under section 271AAA of the Act. Grounds are allowed.
9. In the result, the appeal is allowed.
Order pronounced in the open court on 10th June, 2022
