2014 (3) TMI 1013

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....r be restored." 3. After hearing both the parties we find that a search was conducted in the premises of the assessee wherein assessee surrendered a sum of Rs. 4 crore. This surrender was honoured and the assessee filed a return accordingly by including a sum of Rs. 4 crore and declared total income of Rs. 4,18,11,330/-. Taxes were also paid accordingly. Penalty proceedings u/s 217AAA were initiated. In response to show-cause notice for levy of penalty it was submitted that the assessee has already surrendered a sum of Rs. 4 crore and therefore all the conditions of Sec 132(4), read with sub-sec (2) of Sec 271AAA are complied and no penalty should be levied. The Assessing officer after considering the submissions observed that for allowing immunity it was not sufficient to disclose the income but the assessee was duty-bound to specify the manner in which the income has been earned. Since this was not done he excluded a sum of Rs. 1987500/- out of total sum of Rs. 4 crore and levied penalty @ 10% on the balance amount amounting to Rs. 3801250/-. 4. On appeal, it was mainly submitted that undisclosed income has been defined as any money, bullion, jewellery, other valuable articles ....

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....) of section 271AAA are not satisfied. It, therefore, follows that first thing to determine is what is the amount of undisclosed income under the given circumstances. The concept of undisclosed income has been clearly defined by Explanation to section 271AAA and the same reads as under:- "Undisclosed income" means- (i)  any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of search under section 132, which has-A (a)  not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (b)  otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or (ii)  any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have be....

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....g the assessee to fulfil the condition as specified in sub-section (2) of 271AAA. I am of the clear view that income to the extent of Rs. 3,80,12,500/- does not come under the definition of undisclosed income as defined under section 271AAA and therefore no penalty u/s 271AAA could be levied. The second aspect of the penalty order passed by the Assessing Officer is that whether the assessee had fulfilled the requisite conditions as specified under sub-section (2) of section 271AAA. The Assessing Officer has accepted that the assessee had made the disclosure under section 132(4) during the course of search operation and specified the manner of earning such income and it also substantiated the same on the basis of seized documents to the tune of Rs. 19,87,500/-. The AO's view that the assessee is required to substantiate the quantum of undisclosed income does not seem logical from the bare reading of the provisions of section 271A of sub-section (2). The requirement of the law is that the assessee should state the manner of earning undisclosed income and also substantiate the same. It would not be correct interpretation of the provisions to stretch the requirement to substantiate....

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....rch in the books of account or other documents maintained in the normal course relating to such previous year; or (B)  otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or (ii)  any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b)  Not relevant..........' 10. Plain reading of sub-section would show that if the assessee during the course of search in a statement admits to some undisclosed income and pay taxes on the same then penalty cannot be levied in terms of sub-sec (1) of this Section. In the case before us, the amount of Rs. 4 crore which was surrendered during search, has been declared by the assessee in the return and taxes have been paid accordingly. Therefore the assessee is normally entitled for the immunity provided in Sec 271AAA itself. However, the Revenue has raised further dispute that whether the assessee....