TaxTMI 
TaxTMI 
TaxTMI 
2013 (6) TMI 762
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.... 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. 12,50,00,000/- u/s 27....
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....ried out by him. Insofaras 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 numbers 1 to 45 of t....
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.... 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 income of the specified previous year. (2) Nothing contained in sub- section (1) shall apply if the assesssee, (i) in the course of the search, in a statement under sub-section (4) of Section 132, admits the undisclosed income and specified 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 u....
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....disclosed 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 Act we find a lot of similarity therein under which penalty is not attracted in a case of search on the undisclosed income. As per Explanation 5 to section 271(1)(c) of the Act if the assessee in the course of search makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or things found in his possession or under his control has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in sub-section (1) of section 139 and also specifies in the statement the manner in which such inco....
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....come 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 Gebilal Kanhialal (HUF) (supra) before the Hon'ble Supreme Court the Karta of the assessee 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 neither filed return of income u/s 139 (1) on due date nor paid due tax on the surrendered income. Later on he also retracted from his statement recorded u/s 132(4) about surrender. The Hon'ble Supreme Court after deliberating in detail on different Explanations to section 271(1)(c) has been pleased to hold that the assessee was entitled to immunity under clause (2) of Explanation 5 to section 271(1)(c) of the Act. In that case failure to file return of income on 31st July, 1987 and failure to pay tax thereon was the mere reason relied upon by the department to deny to the assessee the benefit of immunity under clause (2) of Expla....
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....turn 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 cutter Bench of the Tribunal in the case of Ashok Kumar Sharma (HUF) (supra) wherein penalty u/s 271 AAA was levied the assessee 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 returns and accordingly passed the assessment order. Penalty u/s 271AAA was levied. It was held that undisputedly the assessee had shown the undisclosed income under the head "income from business" in the returns filed by them and that was accepted by the department by passing the assessment orders accordingly, therefore the case of the assessee falls exactly within the purview of sub-section 2 of section 271AAA. Thus the impugned penalty levied contrary to the provisions contained in section 271AAA (2) is not sustainable. The penalty was accordingly deleted. In the case of Pramod Kumar Jain (supra) before the Cutter Bench of the Tribunal, the assessee had disc....
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....in the case of Mahendra C. Shah (supra) has been pleased to held as under : "Insofaras 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 the provisions of Explanation 5 in its entirety to the assessee concerned and the Authorized Officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion of an assessee to stage and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by the Allahabad High Court in he case of CIT Vs. Radha Kishan Goel (2005) 278 ITR 454. Secondly, considering the illiterate, to be specific and to the point regarding the conditions stipulated by exception No.2 while making statement u/s 132(4) of the I....
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.... 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 transaction an amount of Rs. 178657781/- was paid in cash on 02/05/2009. This cash was paid out of my own unaccounted funds which was never l disclosed for taxation purpose. I hereby accept the above amount to be my unaccounted income in the shape of investment in the current financial year and the same is offered for taxation. Q5. I am drawing your attention towards annexure A-3 at Page NO-5 found from your residence, please explain to whom this paper belongs and under whose hand writing this has been written. Please go through the same and explain the content thereof? Ans. Yes, I accept that this sheet of paper was found from my bed room at this premise, I own this paper and all the contents of this paper are written by me only. The notings on this paper depicts the fact that I have advanced certain amounts to some person on different dates. The details....
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....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. 69,00,000/- from various persons which were declared as additional income of A/Y 2010-2011 while making a statement u/s 132(4) of the Income-tax Act, 1961. In addition, as per page No-6 of Annexure A-3 in SR-4, the Assessee had paid in cash a sum of Rs. 17,86,57,781/- for purchase of land by M/s Bhushan Steel Limited however, at the time of statement recorded it was inadvertently mentioned as M/s Bhushan Energy Ltd., which was also declared as additional income for A.Y 2010-2011 while making a statement u/s 132(4) of the Income-tax-Act, 1961. (2) As per the statement recorded during the course of search the Assessee himself had admitted that he had entered into various forward/speculative transactions and also transactions related to properties during the period from 1/4/2009 to 4/3/2010 i.e. Financial Year 2009-2010 relevant to Assessment Year 2010-2011. The said transactions were carried out....