TaxTMI 
TaxTMI 
2018 (3) TMI 950
X X X X Extracts X X X X
X X X X Extracts X X X X
....al pronouncements on the subject. In this case, action u/s 132(1) was taken on 11.02.2010 and the same is covered u/s 271AAA(1) of the Act. There is no dispute regarding the nature and quantum of the "undisclosed income" declared by the assessee in his Return of Income for the year under consideration. It is also not in dispute that the undisclosed income of Rs. 1,98,30,000/- was declared by the assessee in his statement u/s 132(4), at the time of the search. It is also not in dispute that the Assessment Year under consideration is part of the "Specified Previous Year", as defined in Explanation (b) to section 271 AAA. It is matter of record that the assessee has paid necessary taxes on the undisclosed income declared by him in his statement u/s 132(4) and offered the undisclosed income to tax in his Return of Income for the relevant year. The only ground on which the Assessing Officer has imposed penalty u/s 271 AAA in this case is on that the assessee has failed to comply with the provisions of sub clauses (j) and (ii) of section 271(2) of the Act, viz. he has failed to specify the manner in which such income was derived and had also failed to substantiate the same. 5.4 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "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 a search under section 132, which has- (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 7[Principal Chief Commissioner or] Chief Commissioner or [Principal 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 boo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... compliance not warranting denial of benefit under exception 2 in Explanation 5 to section 271(1)(c) of the Act. Applying the analogy to penalty u/s 271 AAA in the present case where income has been declared in statement u/s 132(4) and taxes have been paid on the same, even though the statement u/s 134(4) does not specify the manner in which income is derived, there is substantial compliance with sub clauses (i) and (ii) of section 271 AAA(2) of the Act. 5.9 In view of the above discussion and keeping in view the decision of Hon'ble ITAT in Rajendra Prasad, Dokania (supra) and also other cited judicial precedents, penalty of Rs,19,83,000/- levied u/s 271AAA for the year under consideration is directed to be deleted. The assessee succeeds on this ground of appeal. 3. Learned Departmental Representative vehemently contends that the CIT(A) has erred in law and on facts in deleting the impugned penalty as imposed by the Assessing Officer on account of assessee's failure in specifying the manner of having derived the above undisclosed income as well as substantiation thereof during the course of search as well as assessment proceedings. He however fails to rebut the CIT(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of section 132 admitting such undisclosed income and specify in such statement the manner, in which, such income was derived and to pay tax tax, if any, on such income. 8. This provision came-up for consideration before Allahabad High Court in case of Commissioner of Income Tax vs. Radha Kishan Goel reported in 278 ITR 454. The Revenue was in appeal before the High Court challenging judgement of the Income Tax Appellate Tribunal. Grievance of the Revenue was that the assessee had not disclosed the manner of deriving such income. Despite which, the Tribunal had deleted the penalty. The High Court rejected the Revenue's appeal primarily on the ground that a statement under section 132(4) of the Act is recorded by the departmental authorities and if in such statement no question is asked about the disclosure of manner in which the income is derived, the Revenue cannot impose penalty on the premise that the assessee did not make nay such disclosure. It was held and observed as under: "10. Under Section 132(4) of the Act, it is the authorised officer, who examine on oath any person, who is found to be in possession or control of any books of account, document, mone....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Vs. 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 Exception No.2 while making statement under Section 132(4) of the Act. The vie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndisclosed income and specifies 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 undisclosed income." 13. Sub section (2) of Section 271AAA thus while retaining the other requirements of avoiding penalty as provided in clause (ii) of Explanation 5 has now introduced an additional requirement of the assessee having to substantiate the manner in which, the undisclosed income was derived. It is this requirement which the counsel for the Revenue would place great emphasis on. According to her, onus is now entirely shifted on the assessee not only to make a disclosure of the undisclosed income but also to specify the manner, in which, the income has been derived and to substantiate the same. It was therefore, contended that the earlier decisions of this Court in case of Commissioner of Income Tax vs. Mahendra C.Shah and the decision of Allahabad High Court in case of Commissioner of Income Tax vs. Radha Kishan Goel rendered in backdrop of different statutory provisions would not automatically apply. 14. ....