TaxTMI 
TaxTMI 
2015 (7) TMI 490
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....circumstances of the case, the learned CIT(A) erred in confirming the penalty u/s. 271AAA of the Income-tax Act, 1961, to the extent of Rs. 11,36,560/- without paying due attention to the facts that out of the addition of Rs. 1,13,65,623/- made in this regard, the appellant company had voluntarily accepted the addition of Rs. 86,90,623/- during the scrutiny assessment proceedings and paid due taxes thereon also and that so far as the other amount of Rs. 26,75,000/- is concerned, it has not been proved that the same belongs to the appellant company and is its concealed income." And Revenue in ITA No.1414/K/2011 has raised the following grounds No.1 & 2:- "1. This in the facts and circumstances of the case, the Ld. CIT(A) has erred in reducing the penalty levied u/s 271AAA of the Act, to the extent of Rs. 68,40,000/- without considering that the assessee had failed to substantiate the manner in which the undisclosed income was derived and, therefore, all the conditions as stipulated u/s 271AAA of the Act, were not satisfied in this case. 2. This in the facts and circumstances in the case, the Ld. CIT(A) has erred in holding that working of undisclosed income with referenc....
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.... was confronted with Page no. 4 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ld is making a disclosure of Rs. 6.84 crores as net undisclosed income in which Rs. 68,500/- is being taken as undisclosed miscellaneous income and Rs. 72,049/- as undisclosed miscellaneous expenditure as worked out from various entries of Page 4. 5) Assessee was confronted with Page no. 5 to 24 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd sated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of Rs. 6.84 crores as net undisclosed income in which Rs. 11,20,440/- is being taken as undisclosed trading profit as worked out from various entries of Page 5 to 24. 6) Assessee was confronted with Page no. 25 of AS/3 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Pow....
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....ng taken as undisclosed trading profit as worked out from various entries of Page 6. 12) Assessee was confronted with a bag containing torn papers of C/5 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of Rs. 6.84 crores as net undisclosed income in which Rs. 20,00,000/- is being taken as undisclosed payment for purchase of coal of 4000 M./t. as worked out from various entries of torn papers. 13) Assessee was confronted with Page no. 1 to 14 of SPSG/1 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd sated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of Rs. 6.84 crores as net undisclosed income of Rs. 6.84 crores as net undisclosed income in which Rs. 7,00,000/- is being taken as undisclosed payment for purchase of coal of 1395 M.T as worked out from various entries of Page 1 to 14. 14) Assessee was confronted with Page no. 9 & 10 of SPSG/13 found from the residential pre....
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....t the company M/s S.P.S. Steel & Power Ltd is making a disclosure of Rs. 6.84 crores as net undisclosed income in which Rs. 61,00,000/- is being taken as undisclosed miscellaneous income and Rs. 1,01,36,805/- as undisclosed miscellaneous expenditure as worked out from various entries of Page 32. 20) Assessee was confronted with Page no. 11 of RM/1 found from the residential premises of Sri Arjun Kumar Santhalia. In reply Sri Arjun Kumar Santhalia one of the directors of M/s S.P.S. Steel & Power Ltd stated that the company M/s S.P.S. Steel & Power Ltd is making a disclosure of Rs. 6.84 crores as net undisclosed income in which Rs. 1,00,000/- is taken as undisclosed miscellaneous expenditure and Rs. 7,11,589/- is taken as payment made to Kalinga Associates worked out from various entries of Page 11. In support of the disclosure made during the search, the assessee has submitted a detailed working with a cash flow statement which was considered and verified.' The AO initiated penalty proceedings u/s271AAA and 271(1)(c) of the Act in respect to above disclosure. 4. The AO after taking the explanation of the assessee, levied the penalty u/s. 271AAA of the Act for the reason that a....
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..... 7,97,65,623/- for AY 08-09) is 271AAA of the I.T. Act, 1961 Aggrieved, assessee preferred appeal before CIT(A). 5. The CIT(A) deleted the penalty in respect to the disclosure of Rs. 6.84 cr. and restricted penalty on the balance undisclosed income of Rs. 1,13,65,623/- by observing as under:- "4. I have carefully considering the submission of the L.d A.r. In this case the A./O has imposed penalty on undisclosed income of Rs. 7,97,65,623/-. There is no disputed on the act of the case. In the penalty order the AO has not disputed that out of total undisclosed income of Rs. 7,97,65,623/- the statement recorded under sub-section (4) of section 132 of the Act. It has been also not disputed that the assessee has duly included the said undisclosed income in the return and also paid the tax due on the income disclosed. The only reason for imposing penalty is that the assessee failed to substantiates the manner in which the undisclosed income was derived, (2) is not fully satisfied. Accordingly the assessee was liable for penalty as per provision of section 271AAA(1) of the Act. 4.1 Section 271AAA reads as under- 271AAA.(1) The Assessing Officer may, notwithstanding anything contain....
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....ty on the undisclosed income of Rs. 1,13,65,623/- as per provision of the section 271AAA of the Act. Accordingly out of total penalty imposed of Rs. 79,76,560/- penalty of Rs. 11,36,560/- is confirmed. The appellant will get necessary relief accordingly." Aggrieved, against the order of CIT(A) deleting the penalty levied by AO u/s. 271AAA of the Act, Revenue came in appeal before Tribunal and against retention of penalty, assessee came in appeal before Tribunal. 6. We have heard rival contentions and gone through the facts and circumstances of the case. Coming to Revenue's appeal, we find that the AO has accepted the disclosure made vide petition dated 11.04.2008 amounting to Rs. 8.64 crores. The AO also admitted that assessee filed a detailed working of disclosure with cash flow statement which was verified. The AO discussed the disclosure in his assessment order and the same is reproduced in above para-2. The AO has not disputed that out of the total undisclosed income of Rs. 7,97,65,623/-, a sum of Rs. 6.84 crores was admitted as undisclosed income in the statement u/s 132(4) of the Act and duly included the same as undisclosed income in the return of income and also paid tax....
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....paid tax thereon and showed the said undisclosed income in return filed under the head 'income from business' and Department has accepted these returns and accordingly passed assessment orders. It is not a case of revenue that assessee has not satisfied the manner in which income is derived and assessee has not paid tax with interest on undisclosed income. Undisputedly, assessees have shown undisclosed income under head "income from business" in returns filed by them, and the same was accepted by Department by passing assessment orders accordingly. Therefore, cases of assessee fall exactly within purview of section 271AAA(2). Therefore provisions contained in subsection 1 of section 271AAA are not applicable." In view of the above factual and legal position, in the instant case, the income disclosed by the assessee and also the return has been accepted by the assessee, no penalty u/s 271AAA of the Act can be levied and CIT(A) has rightly deleted the same. We confirm the order of CIT(A) deleting the penalty. 7. Coming to assessee's appeal, as regard to the penalty imposed by the AO u/s 271AAA of the Act on undisclosed income of Rs. 1,13,65,623/-, the entire premises of the AO was....
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....aid sum was already considered in its disclosure petition, wherein Miscellaneous cash expense of Rs. 25,41,155/- was disclosed to have been paid to Liberty Marine. But the assessee accepted the addition just to avoid lingering litigation but this is not subject-matter of penalty u/s 271AAA of the Act. 8. Similarly, w.r.t the addition of Rs. 44,17,936/- being cash expenses as per the aforesaid seized document, Ld. counsel for the assessee explained that the said amount was considered in the disclosure petition of the assessee, wherein miscellaneous expenditure of Rs. 101,36,805/- in connection with miscellaneous receipts of Rs. 61 lakh was disclosed by the assessee. He argued that, if for the sake of argument, it is assumed that the aforesaid expenses of Rs. 57,7,936/- were not disclosed in the return, then, in that case said expense should reduce the income voluntarily disclosed by the assessee in curse of search i.e. Rs. 6.84 crores. As already explained in para 4.3 above, the assessee had enough cash available to meet the said expense. Accordingly, no addition u/s. 69C of the Act can be made. 9. In respect to addition of Rs. 15 lakh the assessee explained that during the releva....
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....ain confession as to undisclosed income. Any action on the contrary will be viewed adversely." In view of the above, Ld. counsel for the assessee argued that the Board recognizes that forced statements are taken by the Authorities from assessee during search admitting or confessing to undisclosed income but according to him, such confession by an oral statements would not suffice unless there is enough evidence to corroborate such confession. In view of these, he argued that no document supporting cash receipt of Rs. 15 lakh was found during the course of search and the entire statement of Shri Bipin Vohra. Accordingly, the penalty levied by the AO cannot be sustained. 10. In respect to addition of Rs. 26.75 lakh, Ld. counsel for the assessee argued that this addition relates to seize document enclosed at page 65 of paper book. A perusal of the same shall clarify that the document nowhere mentions the period of the transaction. It merely records some transactions in the cash and bank column. Solely on this basis, the AO presumed that entries of Rs. 640.25 on right hand side are cash payments of Rs. 6.4025 crores and entries on the left hand side of Rs. 667 represent cash receipt....
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.... and added on the basis of the statement of Shri Bipin Vohra has never been confronted to the assessee and the statement is without any corroborative evidences. Moreover, the assessee has furnished explanation of the above entries added by the AO during the course of scrutiny proceedings and even in penalty proceedings. This was also explained before CIT(A) during the appellate proceedings qua the levy of penalty. In view of the above, now we have to discuss the case law of coordinate of ITAT Jabalpur Bench in the case of ACIT v. Satyapal Wassan 295 ITR (AT) 352 held that:- "A charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The document should be clear and unambiguous in respect of all the four components of the charge of tax. If it is not so, the document is only a dumb document. No charge can be levied on the basis of a dumb document. A document found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in t....
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....In such a case, when the managing director or any other persons were not found to be in possession of any incriminating material, the question of examining them by the authorised officer during the course of each and recording any statement from them by invoking the powers under section 132(4) did not arise. The Explanation to section 132(4) permitting such examination came into effect only from April 1, 1980. Even if it were held that he statement of the managing director fell under the Explanation to section 132(4), the Tribunal had recorded a finding of fact to the effect that the statement of the managing director or that of the other partners had no evidentiary value as they were not supported by any documentary proof. No question of law arose from the order of the Tribunal." 13. In view of the above facts and circumstances, and legal position discussed above, the penalty to be levied for undisclosed income as per the provision of Sec. 271AAA of the Act, we have to understand the meaning of undisclosed income and the relevant provision define undisclosed income as under:- "(a) "undisclosed income" means- (i) Any income of the specified previous year represented, either wh....
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....g the course of survey would not empower the Assessing Officer to levy the penalty under section 271(1)(c) of the Income-tax Act, 1961 ... The fact that the assessee had agreed to additions to income was not proof of concealment." Even Hon'ble Kerala High Court in the case of CIT vs. M. George & Brothers 59 CTR 298 (Kel) held that:- "where the assessee for one reason or the other agrees or surrenders certain amounts for assessment, the imposition of penalty solely on the basis of the assessee's surrender will not be well-founded. Depending upon the facts and circumstances of each case the Court has to decide whether penalty is justified. It is always for the Revenu9e to bring the case under the ambit o sec. 271(1)(c) by establishing there is concealment on the part of the assessee. The Explanation to sec. 271(1)(c) inserted w.e.f. 1std April, 1964 merely raises a rebuttable presumption but the basic principle that there should be have been concealment still remains." Further Hon'ble Punjab & Haryana High Court in case of Commissioner of Income-tax v. Rajiv Garg 313 ITR 256 (P&H) upheld the order of the Tribunal where it was observed that - "Merely because an inc....