AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1311
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.... income had admittedly offered the aforesaid undisclosed income declared at the time of search and paid taxes thereon. Consequent upon the return filed by including the additional income as aforestated, the return was subjected to scrutiny assessment. The disclosure so made was accepted by AO as such. While passing the assessment order, the AO thereafter included provisions of Section 271AAA of the Act and imposed penalty @10% of the undisclosed income of the specified previous year at Rs. 2, 41, 50, 000/-. Consequently, the penalty of Rs. 24, 15, 000/- was imposed under s. 271AAA of the Act vide penalty order dated 26. 09. 2014 concerning AY 2012-13 in question. 3. Aggrieved by the imposition of penalty, the assessee preferred appeal before the CIT(A). 4. The CIT(A) however found merit for non imposition of penalty as pleaded by the assessee. The CIT(A) accordingly deleted the penalty imposed after analyzing the factual position in the light of judicial precedents. The relevant operative para of the order of the CIT(A) is reproduced hereunder: "4. I have given very careful consideration to the facts and rival contentions available before me. The statement u/s 132(4)....
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....lose unaccounted income of Rs. 35 crore on behalf of our entire group which includes me, my family members, my partners and other related parties. I will submit the breakup of this income after examination of records seized and operation of bank lockers. I have taken consent of all my family members, partners and other related parties before declaring the above undisclosed income of Rs. 35 crore and the all of them have signed this statement in acceptance. Ques 12: Do you want to say anything else? Ans: Yes, I once again agree that I and my partners and my family members have unaccounted income of Rs. 35 Crore which is not recorded in our books and we agree to pay applicable tax thereon. We request you not to levy penalty on this income as statement is recorded u/s 132(4) of the Act. Signed (by all on W/8/20U) Akshay Arvindbhai Kothari Anil B Patel Nikhil K Patel, Bharat D Patel, Harish Shah, Ravi Rao, Devang Desai, M J Shah, Dilip A Shah, S J Shah Bipjn B Shah, Navirl J Patel, Shashikant C Shah, Himanshu B Jgshi, Jayesh A Brahmbhatt, Kirit Vadalia 4. 2 Letter addressed to adit: Anilbhai B. Patel 1-2, ....
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.... with clear pointing out of the manner of earning the unaccounted income in respective hands. As per the said letter, the appellant has made a total discosure of Rs. 2, 66, 50, 000/- for AYs 11-12 and 12-13. There also does not appear to be any query or follow-up about the manner or substantiation of earning accounted income by the concerned Investigating Officer after receipt of the letter of allocation/head as reproduced above. (6) There is no further specific query during assessment proceedings so as to elicit any further information about the manner of earning unaccounted income or substantiation thereof. No addition to income returned has been made by the AO. As such, the very satisfaction of the AO for initiation of the penalty confirms that the satisfaction is based entirely on the return of income and particulars contained therein without any reference to any seized or other documents. "The assessee in his return of income has offered additional income of Rs. 2, 41, 50, 000/- which is as per the disclosure of additional income made during the course of search proceedings. This additional income has been offered due to search action and the findings thereof....
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....tiating the proceedings u/s 271AAA. The Ld. AR is therefore right in contending that the observation of the Ld. AO that the appellant has not discharged the onus of stating the manner of earning the unaccounted income or of substantiating the same for claiming benefit of s. 271AAA(2) is not based on facts and evidences lie on record. 4. 5 Moreover, as is clear from the various judicial ruling relied upon by the AR and further as perused by me and considered in other appeal proceedings involving the issue of penalty u/s 271AAA, (below), the onus to put a specific question with regards to the manner in which the income had been derived is on the person who recorded statement in this regards i. e. authorized officer, Thus, simply because the authorized officer fails to put the question to ask the manner of deriving additional income, the appellant cannot be denied the benefit provided under section 271AAA(2) of the Act. In the facts before me, as can clearly be seen, even in the face of a reply by the appellant vide answer 11 reproduced above pleading for immunity from penalty in conjunction with and in consideration of disclosure being made, as the "statement is u/s 132(4)",....
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....e context of immunity condition 271AAA(2), to the effect that once the income admitted is offered urith due payment of taxes thereon, and the manner of earning as stated during 1 32(4) or subsequently has been accepted by the Authorized Officer without warning about non-fulfillment of immunity condition of 271AAA(2)(ii), and further acted upon or acquiesced by the Assessing Officer during assessment, there is sufficient compliance to the condition of271AAA(2)(ii) made by the assessee, as under:. (i) Decision of Hon'ble Gujarat High Court in case of Commissioner of Income-tax v. Mahendra C. Shah[20O8] 172 TAXMAN 58 (GUJ. ) ". . . Insofar as the alleged failure on the part of the assessee to specify in the statement under section 132(4) regarding the manner in which such income had been derived, when the statement was being recorded by the authorized officer, it was incumbent upon him to explain the provision of the Explanation 5 in its entirety to the assessee concerned and the authorized officer could not stop short at a particular stage so as to permit the revenue to take advantage of such a lapse in the statement. The reason was not far to seek. In the first....
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....inarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation . Penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. " The Hon'ble Gujarat High Court also in the case of CIT v. Mahendra C. Shah 299 ITR 305 has also followed Allahabad High Court and has observed under the similar circumstances. "Insofar as the alleged failure on the part of the assessee to specify in the statement under s. 132(4) of the Act regarding the manner in which such income has been derived, suffice it to state t....
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.... Kumar Jain v. DCIT 33 taxmann. com 651 (Cuttack) Held that no definition could be given to the 'specified manner' insofar as the very statement on oath under section 132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the account was taken care of by the assessee when he filed the returns in pursuance of notice under section 153A accounting the assets. Therefore, the penalty is not automatic if one of the purported conditions is not fulfilled although all the conditions have been agreed to of having fulfilled by the Assessing Officer insofar as the tax and interest have been recovered. In view of the above the levy of penalty under section 271AAA was not justified No Specific definition of compliance of manner. (viii) Neerttt Singal v. ACIT 37 taxmann, com 189 (Delhi) On basis of certain documents found and seized during search at his pre assesses surrendered certain amount as undisclosed income and also paid tax due thereon - In statement under section 132(4), assessee stated that income was derived from forward/speculative and property transactions carried out in financial year 200910- Being not s....
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....on of Section 153A of the Income Tax Act, return of income filed in response to notice u/s. 153A of the Act is to be considered as return filed u/s. 139 of the Act as Assessing Officer has made assessment on the said return and therefore, return is to be considered for the purpose of penalty u/s. 271(1)(c) and penalty is to be levied on income assessed. As there is no difference between return of income and assessed income, so, in view of case of Kirit Dahyabhai Patel [supra], no penalty u/s. 271(1)(c)/271AAA is leviable and accordingly, order of levy penalty for all the three years are quashed. Assessing Officer is directed accordingly. " 4. 6 In view of the above, thus, I find, as argued by the Ld. ARs that the appellant's case is squarely covered by the ratios of Mahendra C Shah and Sidh Nath Goel (supra), and other authorities and thus it is to be held that the appellant has made effective and sufficient compliance to immunity condition of s. 271AAA(2)(ii) also. Such a view has also and already, respectfully following these Authorities, been taken by me in Shanti Builders [CIT(A)-12/7/CC2(2)/14-15 dated 31/08/2015], wherein I have observed, opined and held that the....
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.... Mahendra C. Shah [2008] 299 ITR 305/172_Taxman58, which have explained the extent and scope of Explanation 5 to Section 271(l)(c) of the Act, which deals with a situation in which any assets are found to be in the ownership of the assessee in the course of search under Section 132 of the Act. Clause (2) of Explanation 5 makes it clear that where in the course of search the assessee makes a statement under Section 132 (4) and owns that he acquired any of such assets out of his undisclosed income, not so far returned, and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income, no presumption of concealment has to be drawn, notwithstanding the admission to that effect. In other words to the extent the assessee makes a clean breast of his undisclosed income represented by assets found to be in the possession of the assessee he is not deemed to have concealed his income or concealed particulars thereof. The explanation is not confined to physical possession but extends to other forms of possession, [emphasis supplied] 10. Thus, the judicial opinion is unambiguous to the effect that what section 271AA....
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.... such details do not survive. Similarly, objections 4-5, being conclusions drawn on the basis of wrong notion of requirement of s. 271AAA(2) also do not survive. Objection 6 regarding bonafides is completely irrelevant. Thus, on facts, the appellant has qualified for immunity as provided u/s 271AAA(2)(i) and (ii). There is no controversy with regard to fulfillment of immunity condition contained in 271AAA(2)(iii). Thus, as discussed above in para 3 and para 4, all the three immunity conditions as prescribed u/s 271AAA(2) are thus held to be complied with in law by the appellant and thus it is to be held that appellant clearly qualified for immunity. This conclusion, apart from the discussion as above, is also clearly supported by the decision of the Tribunal in Sulochanadevi Agarwal (supra). The penalty u/s 271AAA levied by the AO is thus held not sustainable in view of immunity available to the appellant u/s 271AAA(2). 5. Moreover, I also find that the proposition of law laid down in Kirit Dahyabhai (supra) to the effect that penalty, post-search, can be levied or sustained only on the income which has been assessed "over and above" that returned by the assessee after the....
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....sed income, so, in view of case of Kirit Dahyabhai Patel [supra], no penalty u/s. 271(1)(c)/271AAA is leviable and accordingly, order of levy penalty for all the three years are quashed. Assessing Officer is directed accordingly. " 6. Respectfully following the same, also, it is to be further held that the Ld. AO erred in levying the penalty u/s 271AAA on the "undisclosed income" already returned in the income filed v/s 153A after search, and on this count also the levy penalty is held not sustainable. Thus, penalty needs to be cancelled and is thus cancelled. The appellant gets relief as under: A. Y. Relief 2011-12 Rs. 2, 50, 000/- 2012-13 Rs. 24, 15, 000/- 5. Aggrieved by the action of CIT(A) towards cancellation of penalty imposed by AO, the Revenue preferred appeal before the Tribunal. 6. The learned DR for the Revenue submitted that the conditions with regard to providing the 'manner' in which the undisclosed income has been derived and 'substantiation' thereof has not been done by the assessee as contemplated by Section 271AAA(2) of the Act. The learned DR thus submitted that in view of the nonfulfillment of mandatory conditions as provided in....