TaxTMI 
TaxTMI 
2015 (8) TMI 1388
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.... 3. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied u/s 271AAA by accepting the contention of the assessee that, if the disclosure has been made to buy peace of mind, i.e. under protest, then specifying the manner or substantiating the manner in which the undisclosed income was derived, is not applicable". 2. The brief facts are that, the assessee company is engaged in the business of manufacturing and distribution of cotton textiles and real estate developers. A search & seizure action u/s 132 was carried out at the business premises of the Phoenix Group on 20.02.2008. During the course of search proceedings, Director of the assessee company had disclosed an amount of Rs. 3,85,00,000/- in the statement recorded on oath u/s 132(4) on account of transactions with Runit Creations and Paridhi Udyog for purchase of tenancy rights. The disclosure made at the time of statement u/s 132(4), was offered in the return of income filed u/s 153A, under the head "business income". Such a disclosure under the head "business income" has been accepted by the Assessing Officer in the assessment order passed u/s 143(3) dated 29.12.2010. I....
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....d. Assessing Officer justified the levy of penalty relying on the decision of Hon'ble Supreme Court in the case of Union of India vs Dharmendra Textiles Processors, reported in 174 Taxman 574 and Delhi High Court decision in the case of Zoom Communication P Ltd, reported in 191 Taxman 179. 4. Before the CIT(A), the main plank of the argument of the assessee was that, the assessee was in the business of real estate and the undisclosed income offered by the assessee related to its business only as the same was disclosed under the head "business income" and taxes were paid thereon. The said return of income has been accepted in so far as the income of Rs. 3.85 crores which has been disclosed and have been accepted to be business income. Thus, the requirement of specifying the manner in which income was earned gets satisfied. Reliance was also placed on the decision of ITAT Mumbai, Circuit Bench at Nagpur in the case of Concrete Developers in ITA No. 381/Nag/2012, order dated 20.03.2013. 5. The Ld. CIT(A) deleted the penalty after following the said decision of the Tribunal and on the ground that the Assessing Officer has himself accepted the undisclosed income earned by the asse....
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.... at the time of recording the statement u/s 132(4), authorised Officer has not asked a specific question with regard to specifying the manner, then it cannot be expected from the assessee to specify the manner, because the assessee only answers the questions put forth by the authorised officers. In support of his contention, he strongly relied upon the decision of Radha Kishan Goel (supra) CIT vs. Mahendra C Shah, reported in 299 ITR 305 (Guj). Catena of other case laws on this point have also been filed before us. Other limb of his argument was that, here in this case, the penalty has been levied on account of investment made outside the books of accounts, because the payment was made for purchase of tenancy rights. Such an addition if at all can be made, would be u/s 69. This inter alia means to give the manner of deriving the income, even when the assessee has made only investment and not earned any income. It would amount to causing impossible burden on the assessee to specify the manner of deriving the income when assessee has merely invested the money and not derived any income. In support, he relied upon the judgment of Hon'ble Kerala High Court in the case of CIT vs W. S. (....
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....sclosed income. 9. Though there is a paradigm shift in the penalty provisions in respect of unaccounted income unearthed as a result of search operation carried out on or before 1st June, 2007 in as much as provision of Explanation 5A, and section 271AAA have been brought in the statute, which are mostly deeming in nature and strict conditions have been put forth. However, so far as clause of "specifying the manner in which income has been derived", was also enshrined in sub-clause (2) of Explanation 5 to section 271(1)(c), the relevant provision reads as under: (2) "he, in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing 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 income has been derived and pays the tax, together with interest, if any, in respect of such income." While interpreting the aforesaid provisions of clause 2 of Ex....
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....ra), wherein the Hon'ble Court observed and held as under: 15. In so far as the alleged failure on the part of the assessee to specify in the statement under Section 132(4) of the Act 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 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 for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by Allahabad High Court in case of CIT v. Radha Kishan Goel (supra). Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Excep....
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....r in this case the requirement of substantiation has been done or not has to be seen. 11. In the present case, it is an undisputed fact that the assessee has disclosed the amount of Rs. 3,85,00,000/- under the head "business income", i.e. income derived from business of real estate and other business activities, which has been assessed as such by the Assessing Officer. If that is so, then it can be taken as implied substantiation of the manner of deriving of the income, which stands accepted by the Assessing Officer in the assessment proceedings. At the state of penalty proceedings, the Assessing Officer cannot turn around and say that the manner of deriving of income has not been substantiated. Regarding payment of taxed on such income there is no dispute. if that is so, then it can be taken as implied specification of the manner of earning of income and also the substantiation of the same. This offer of business income has been accepted by the Assessing Officer also. At the stage of recording of statement u/s 132(4) and assessment stage, nowhere the revenue officials have held that it is not from business income or not derived from business. Hence, it cannot be held that the a....