TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 797
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....e of Bhushan Steel Group of cases on 3.3.2010. On the basis of material seized during search, the assessee appellant admitted undisclosed income of Rs. 50 crore which was declared in the return of income filed for AY 2010-11 and taxes paid thereon. The AO initiated penalty proceedings u/s 271AAA of the Act during the assessment proceedings on the ground that the assessee had not specified the manner in which the undisclosed income was earned and also failed to substantiate it and imposed penalty of Rs. 5 crore on the assessee for such failure. 4. Being aggrieved by the said penalty order, the assessee preferred an appeal before the CIT(A) which was allowed by passing the impugned order by relying upon the order of ITAT Delhi Bench "E" in ITA No. 337/D/2013 for AY 2010-11 in the case of Neerat Singal vs ACIT dated 24.6.2013. Now, the revenue is before this Tribunal against the order of the first appellate authority which deleted the penalty and allowed the appeal of the assessee with the sole grounds as reproduced hereinabove. 5. Ld. DR submitted that the CIT(A) has erred in deleting the penalty amounting to Rs. 5 crore on the surrender of Rs. 50 crore as the assessee had not subs....
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....enal provisions we find that one requirement is common for non attraction of the penal provisions under both the sections i.e. if the assessee in his statements recorded u/s 132(4) of the Act admits the undisclosed income and specifies in the statement the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. The only additional requirement in the case of section 271AAA in this regard is that the assessee will also have to substantiate the manner in which the undisclosed income was derived besides specification of the manner in which such income was derived. The other difference is in the application of the provisions under both the sections. The penal provision u/s 271(1)(c) under Explanation 5 thereto is applicable in such cases where search u/s 132 was initiated before 1.6.2007 whereas u/s 271AAA, the provisions therein are applicable in a case where search u/s 132 of the Act has been initiated on 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....
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....aised was as to whether mere non-statement of manner in which undisclosed income was derived would make Explanation 5 (2) to section 271(1)(c) inapplicable. The further question raised was as to whether in a case manner in which income has been derived has not been stated in the statement u/s 132(4) but is stated subsequently, that amounts to compliance with Explanation 5 (2) to section 271(1)(c) and no penalty would be leviable under said section.. Both these questions have been replied in affirmative in the decision of the Hon'ble Allahabad High Court. As per the decision mere non statement of manner in which undisclosed was derived would not make Explanation 5 (2) to section 271(1)(c) inapplicable. Similarly in a case manner in which income has been ITA No-337/Del/2013 10 derived has not been stated in statement u/s 132(4) but is stated subsequently that amounts to compliance with Explanation 5 (2) to section 271(1)(c) and no penalty would be leviable. Similarly in the case of CIT vs. Mahendra G. Shah before 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 whi....
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.... Education Personna Pvt. Ltd,.vs. DCIT (supra) while placing reliance on its earlier decision in the case of Smt. Raj Rani Gupta (supra) and following the ratio of the decision of Hon'ble High Courts in the case of CIT vs. Radhi Kishan Goel (supra) (All) and CIT vs. Mahendra C. Shah (supra) (Guj) has deleted the penalty. The Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel (supra) has been pleased to hold that u/s 132(4) of the I.T. Act 1961 unless the authorized officer puts specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5 (2) to Section 271 (1) (C) of the Act. It was further held that in case there is nothing to the contrary in the statement recorded u/s 132(4) of the Act in the absence of any specific statement about the manner in which 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 source....
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....e A3 in SR4. As per such papers the assessee had an outstanding sum of Rs. 3 crore and Rs. 6 crore from various person which was duly disclosed as additional income for asstt. year 2010-11 while making statement u/s 132(4) of the Act. In addition, as per page No. 6 of Annexure A3 in SR4 the assessee had paid in cash a sum of Rs. 17,86,57,781/- for purchase of land by Bhushan Steel Limited (however at the time of statement recorded it was ITA No-337/Del/2013 13 inadvertently mentioned as Bhushan Energy Ltd.) which was also declared as additional income for the asstt. year 2010-11 while making a statement u/s 132(4) of the Act. As per the said statement the assessee had admitted that he had entered into various forward/speculative and property transaction during the period from 1.4.2009 to 4.3.2010. Keeping in view the same an income of Rs. 125 crores arising out of the said transactions was declared in the statement recorded during the course of search which included the said 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 h....
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....5 t his statement I hereby accept the above amount of Rs. 69 Cr to be my unaccounted income from the current F.Y and offer it for taxation. Q.7. I am drawing your attention towards anneuxre-A-3 at page NO-4 found from your residence. Please explain to whom this paper belongs and under whose hand writing this has been writtteen. Please go through the same and explain the content thereof? Ans. Yes, I accept that this sheet of paper belongs to me, I own this paper and all the contents of this paper have been written by me only. The notings on the paper depicts the fact that I had advanced an amount of Rs. 3.0 cr on 9.6.2009 for the purpose of purchase of property at Q1- A, Hauz Khias Enclave, New Delhi. In respect of this amount I hereby state that this amount is my unaccounted income not offered for taxation for the current financial year. On the basis of my reply to questions numbers 5, 6 and 7 I 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 (Inves....
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..... Subsequently, the taxes due thereon were also paid and the said income declared in the return of income filed for A.Y 2010-11. 16. In view of above facts of the present case wherefrom it is evident that during the course of search proceedings the authorized officer of the department had not raised any specific query regarding the manner in which the undisclosed income has been derived and on the contrary the assessee has tried to explain the earning of the undisclosed income in question in its reply during the course of recording of his statement u/s 132(4) of the Act and thereafter. We thus respectfully following the ratio of above cited decisions of Hon'ble Allahabad High Court and Hon'ble Gujarat High Court hold that in absence of query raised by the authorized officer during the course of recording of statement u/s 132 (4) about the manner in which the undisclosed income has been derived and about its substantiation, the AO was not justified in imposing penalty u/s 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting aside orders of the authorities below in this regard direc....
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....4. Subsequently, the taxes due thereon were also paid and the said income declared in the return of income filed for Assessment Year 2010-11. (3) Regarding Your Honour's query asking the Assessee to furnish his explanation with respect to the facts emerged from the statement of the persons listed at serial nos. a. to j. thereunder recorded in the course of survey operations u/s 133A it is submitted that all these persons are working as Directors of some companies. They have already clarified that on the date of search due to tension and mental pressure certain observations were made by them which did not reflect the actual state of affairs. In any case all such companies are existing Assessees and whatever transactions have taken place between the Assessee and these companies stand duly reflected in the books of accounts and no adverse inference need to be drawn only on the basis of the statements recorded during the course of survey u/s 133A as none is drawable." 9. In view of above, we are of the considered opinion that the assessee replied all the questions of revenue authorities in the statement recorded on 4.3.2010 u/s 132(4) of the Act. We further note that during the a....