TaxTMI 
TaxTMI 
2015 (3) TMI 680
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....s also paid before the filing of the return and the same has been accepted. In his statement u/s 132 (4) the assessee had stated that the said income was derived from forward / speculative and property transactions carried out by him during the period 1.4.2009 to 4.3.2010 i.e. financial year 2009-10. The AO being not satisfied with the explanation of the assessee has imposed penalty u/s 271AAA of the Act at Rs. 12,50,00,000/- @ 10% of the undisclosed income of Rs. 125 crore. The same has been upheld by the Ld. CIT(A) against which the assessee is in appeal before the Tribunal. 4. In support of the ground the Ld. AR submitted that the assessee had duly specified the manner in which the undisclosed income had been derived which was also duly substantiated by the documents seized during the course of search. As such all the conditions for exemption from levy of penalty u/s 271AAA of the Act were duly satisfied. The AO has however injudiciously rejected the explanation of the assessee regarding the actual position. The averments made on behalf of the assessee as well as duly accepted legal position has been ignored by the A.O while proceeding for imposing the penalty of Rs. 12,50,00....
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....transactions carried out by him. In so far as the question of substantiating i.e. providing facts to support the surrender made and the manner in which the income has been derived is concerned the said test stands duly prove the fact of undisclosed income having been derived from the forward/speculative and property transactions. The Ld. AR submitted that the assessee is an individual who took decisions on his own and was, accordingly, neither obliged to nor had the necessary infrastructure to maintain detailed records. The amount surrendered represented the undisclosed income relatable to the abovementioned activities and the department was itself suo moto convinced as to the quantum of undisclosed income attributable to such activities and the manner of its earning as would be evident from it being accepted as such in the assessment proceedings. Ld. AR submitted further that in the absence of any specific format/procedure prescribed in the Act for specifying and substantiating the undisclosed income, the fact that the same has been accepted, without any variation by the AO is by itself enough evidence of the said criteria having been made and satisfied. The Ld. AR referred page n....
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....ts and these are not helpful to the assessee. 7. In the rejoinder Ld. AR referred contents of para No. 6 of the penalty order wherein the submission of the assessee specifying the manner in which the undisclosed income has been derived and substantiated has not been rebutted by the AO despite the fact that submissions in detail having been made by the assessee before him. 8. Considering above submissions we find that the only issue involved in the present case is as to whether the manner in which the undisclosed income derived was specified and substantiated by the assessee to avoid the application of penal provision u/s 271AAA of the Act. For a ready reference the provisions u/s 271 AAA are being reproduced herein:- "(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated u/s 132 on or after the 1st day of June, 2007[but before the 1st day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten percent of the undisclosed ....
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....which search was conducted.] 9. Thus it is clear that in a case where search has been initiated u/s 132 on or after 1.6.2007, the assessee shall be liable to pay by way of penalty in addition to tax if any payable by him the sum computed @10% of the undisclosed income of the specified previous year. However the said penalty is not leviable if an assessee in his statement recorded during the course of search u/s 132 of the Act, i) admits the undisclosed income ii) specifies and substantiates the manner in which it has been derived ; and iii) pays the taxes due thereon together with interest 10. In the present case there is no dispute that the assessee has paid due tax together with interest on the admitted undisclosed income. The only dispute is as to whether while doing so the assessee has specified and substantiated the manner in which it was derived . 11. When we compare Explanation 5 to section 271(1)(c) of the Act with the provisions laid down u/s 271AAA of the A....
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....n or after 1.6.2007 but before 1.7.2012. Thus the intention of the legislature is clear to this extent that in a case wherein search was initiated before 1.6.2007, provisions u/s 271(1)(c) will be applicable and in search initiated after 1.6.2007 (but before 1.7.2012) provisions u/s 271AAA of the Act will be applicable. These provisions are thus not applicable simultaneously but these are period specific. As discussed above, the only additional requirement for non attraction of penal provision u/s 271AAA of the Act in comparison to this u/s 271(1)(c) is that besides specifying the manner in which the admitted an undisclosed income has been derived, the assessee will also have to substantiate this manner. In view of this relative study of both the provisions when we go through the decisions relied upon by the Ld. AR, we find that in the case of ACIT vs. GEBILAL Kanhialal (HUF) (supra) before the Hon'ble Supreme Court the Karta of the asseseee HUF had made a statement u/s 132 (4)admitting concealed income in the course of search and specified the manner in which such income stood derived. In this statement the Karta also surrendered an amount of Rs. 42,32,000/-. The Karta however nei....
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....re the Hon'ble Gujarat High Court the basic requirement for immunity form the levy of penalty under Explanation 5 to section 271(1) (c) of the Act has been discussed as per which the first requirement is disclosure in statement made u/s 132(4) and payment of tax before the assessment was completed. Following ratio laid down in this decision of Hon'ble Gujarat High Court, Pune Bench of the Tribunal in the case of DCIT vs. Shri Inderchand Surajmal Bothra (supra) wherein penalty u/s 271(1)(c) was levied held that it is not required to specify the manner in which the income was earned in respect of the amount offered to tax in the return of income filed to search action by paying taxes thereon for adopting immunity from penalty under Explanation 5 of section 271(A) (C) of the Act. The Cuttack Bench of the Tribunal in the case of Shri Ashok Kumar Sharma (HUF) and others vs. DCIT (supra) wherein penalty u/s 271 AAA was levied the assesee had disclosed concealed income while giving statement u/s 132 of the Act during the course of search and had paid the tax thereon and showed the said undisclosed income filed under the head "income from business" and department had accepted these retu....
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....ich such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources. The object of the provision is achieved by making the statement admitting the non-disclosure of money, bullion, jewellery etc. It was thus held that much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in absence of anything to the contrary. Therefore, mere non statement of the manner in which such income was derived would not make Explanation 5 (2) inapplicable, held the Hon'ble High Court. 12. The Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah has been pleased to held as under :- " In so far as the alleged failure on the part of the assessee to specify in the statement u/s 132(4) of the Income Tax Act 1961 regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain ....
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....d amount as undisclosed. Subsequently the taxes due thereon were also paid and the same income declared in the return of income filed for the assessment year 2010-11 was also accepted by the Department. 14. On having gone through the query raised while recording the statement of assessee u/s 132(4) of the Act, we find substance in the contention of the Ld. AR that nowhere the authorized officer has asked a specific question with regard to the manner in which the undisclosed income has been derived. The relevant questions are question Nos. 4,5,6 and 7. For a ready reference these questions and reply by the assesee thereto are being reproduced hereunder:- 4 For facility of reference and as in aid for further analysis and discussion the relevant part of the statement recorded during the course of search is as follows:- Q 4. I am drawing your attention to annexure A-3 at Page No-6. Please go through the same and explain the content thereof? Ans. This paper depicts details regarding purchase of various lands on various dates by M/s Bhushan Energy Ltd in Kolkata. As mentioned in this paper in the entire transa....
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.... reiterate to have accepted a total amount of Rs. 90Cr (Rupees Ninety crores only) to be my unaccounted income for the current financial year, which I hereby offer for taxation. 15. We find further that vide its reply dated 03.6.2010, addressed to the Asstt. Director of Income Tax (Investigation) and dated 25/7/2011, 8/6/2012 and 20/6/2012 to the Asstt. Commissioner of Income Tax the assessee has tried to explain the undisclosed income of Rs. 125 crore surrendered by the asseseee in his statement recorded u/s 132(4) of the Act. The contents of para No. 1 & 2 of the letter dated 25.7.2011 are being reproduced hereunder :- (1) With regard to Your Honour's query regarding income of Rs. 125 crores for F.Y 2009-10 disclosed during the course of search u/s 132, it is submitted that during the course of the said search at the residential premises of the Assessee on 04 March 2010 certain documents relating to transactions in properties undertaken by him were found as per page Nos. 4 & 5 of Annexure A-3 in SR- 4. As per the said papers the Assessee had an outstanding of a sum of Rs. 3,00,00,000/- and Rs. 69,00,00....