TaxTMI 
TaxTMI 
2017 (8) TMI 1468
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....ion, the assessee had surrendered a sum of Rs. 20.75 Crores as additional undisclosed income on account of unexplained advances and payments to certain land owners as named in the penalty order. The statement of Shri Ranjit Singh Gill was recorded u/s 132(4) regarding the disclosure of additional income. The assessee duly reflected the surrendered amount in its return of income as business income. However, during the course of assessment proceedings, the Assessing officer observed that in the statement of Sh. Ranjit Singh Gil, recorded during the course of search and also from the subsequent submission before the Department, the assessee was not able to substantiate the manner of earning of undisclosed income declared by it during the course of search. He, therefore, initiated penalty proceedings u/s 271AAA of the Act. In the penalty proceedings, the assessee submitted that since it had complied with the requisite conditions of exception provisions as provided under section 271AAA (2), the penalty could not be levied upon it. It was submitted that the manner and source of deriving the surrendered income stood explained as the surrendered income has been offered under the head '....
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....5 of the impugned order. So far as the contention raised by the assessee that it was evident from the statement of the assessee recorded at the time of search and also from the surrender letter, that no question requiring the assessee to substantiate the manner in which the undisclosed income was derived was raised, the Ld. CIT (A) after recording the above contention and also recording that the assessee in this respect has relied upon the decision of the Tribunal in the case of Munish Kumar Goyal and Sunil Kumar Bansal (supra) proceeded to discuss the another aspect of the case regarding the payment of taxes together with interest in respect of undisclosed income to be eligible to get the immunity from penalty u/s 271AAA of the Act. He thereafter observed that the assessee had paid only part payment of the taxes along with due interest as on the date of penalty order dated 28.9.2015. He, therefore, held that the assessee had not fulfilled the condition of clause (iii) of section 271AAA(2) of the Act requiring the payment of tax together with interest to get immunity from the levy of penalty. He ultimately held that since the assessee had paid the taxes much beyond the date of pena....
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....the Act and hence, the very initiation of the penalty was bad in law. The Ld. Counsel has further submitted that Ld. CIT (A) has wrongly and illegally extended the scope of penalty so levied by the Assessing officer. Though the Assessing Officer had levied the penalty observing that the assessee had failed to comply with the provisions of section 271AAA(2)(i) and (ii) of the Act, however, the Ld. CIT(A) has confirmed the penalty for non-compliance of provisions of section 271AAA(2)(iii) of the Act by wrongly and illegally extended the scope of the levy of penalty. He therefore has submitted that the impugned penalty levied by the AO and further confirmed by the CIT (A), but on a different ground, is liable to be deleted. 7. On the other hand, the Ld. DR has relied upon the findings of the lower authorities and has submitted that the penalty has been rightly initiated and levied in the case of assessee. That the assessee had surrendered the income because he could not explain the source of income. Even that the Ld. CIT (A) was authorized to take a different stand from that of Assessing officer. Further, that initiation of penalty in this case was dependent upon the assessment pro....
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.... not been disclosed to the Chief Commissioner or Commissioner before the date of the 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) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.' 9. The perusal of the above provisions of section 271AAA of the Act, reveals that the penalty under the said provisions can be levied by the Assessing officer in a case where search has been initiated u/s 132 on or after first day of June 2007 but before first day of July 2012. Admittedly, the search in this case was initiated on 2.....
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...., to stress the point that the question about the manner and substantiating the manner of earning of surrendered income should come from the search party during the course of search action; if no such question is being asked to the assessee during the search action, the assessee was not supposed to disclose the manner in which the surrendered income was derived. He has further submitted that since the surrendered amount has been declared in the return of income, and due taxes have been paid and the returned income has been accepted by the Assessing officer, hence, the condition of disclosing the manner of deriving of the undisclosed income and further substantiation of the said manner stood complied with. The Ld. counsel for the assessee has further invited our attention to the copy of the relevant part of the assessment order dated 13.1.2014 wherein the Assessing officer has reproduced the statement of the assessee recorded u/s 132(4) of the Act as well as surrender letter dated 3.9.2011 of the assessee declaring the surrendered income. The said part of the assessment order for ready reference, is reproduced as under:- "The statement of the assessee recorded u/s 132(4) re....
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....business income for the said F. Y. Q.4 As per the trial balance of the company GDBPL, (the cash in hand is Rs. 45 Lakhs. But no cash (only around Rs. 6000) was found there. Please explain the cash of Rs. 3,615007 found at your home. Ans. Sir, the trial balance was prepared as on 27.08.2011, as the books are not fully updated, The cash belongs to the company but I do not know the cash in hand situation today. (For lack of a satisfactory explanation, cash of Rs. 3 Lakhs is being seized) Q.5 Do you want to state anything else. Ans. Sir, on account of the various documents found and seized at various premises of my business concern which I have not seen completely, (except for the documents as shown by you to me). I hereby surrender a total amount of Rs. 21 Crores to tax as per the surrender letter submitted today. GDBPL : Rs. 20.75 Cr GCPL : Rs. 15 lakhs Jewellery in hands of myself : Rs. 10 lakhs (expected to be found in the locker) I wish to clarify that in the surrender letter submitted by me the total advances/amounts paid to Satnam and others is 3.3 Cr out of which 3 Cr is on account of cas....
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....y subsequent proceedings also relating to search. The offer made by the group during the course of the above proceedings is with an understanding that the said income will not be liable to any penalty or prosecution and thus, the offer is made to buy peace and avoid any future litigations arising on account of any noting or jotting etc. which we may not be able to fully explained to the satisfaction of the department. I on my behalf and the companies undertake to pay the taxes due on income of Rs. 21 Crore being declared as undisclosed income." 11. The Ld. Counsel has therefore, stated that no specific question as to the source of income and manner of making and substantiation of the manner was asked to the assessee in the course of recording of statement u/s 132(4) of the Act. He has further stated that the assessee in his letter has duly explained that the disclosure was made to cover up various discrepancies in the seized/impounded records and inventories made and statement recorded during the course of search. He has further stated that surrendered amount was duly reflected in the return of income and the Assessing Officer has accepted the said surrendered income as the '....
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....ed with. 13. Now coming the condition provided under clause (ii) of section 271AAA(2) requiring the substantiation of the earning of income, the Assessing officer has neither doubted nor rejected to the returning of the said surrendered income by the assessee under the head "Income from business or profession". Rather, the AO has accepted the said income as business income of the assessee. Under the circumstances, the substantiation of the manner of earning of income from the business activity of the assessee also stood accepted by the Assessing officer. We are not in agreement with the observations of the Assessing officer that assessee had to explain all the deposits and the withdrawals along with documentary evidences. In our view, it is manner which is to be substantiated and not the each and every penny out of the undisclosed income earned or each or every transaction. The Assessing officer has accepted that assessee has made the disclosure u/s 132(4) of the Act during the course of search operation, and as observed above, the assessee has also specified the manner of earning as its business activity and further since the said contention has been accepted which may be found....
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.... 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 view taken by the Tribunal as well as Allahabad High Court to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under Exception No. 2 in Explanation 5 is commendable." In the case of CIT v. Radha Krishan Goel [2005] 278 ITR 454/[2006] 152 Taxman 290, the Hon'ble Allahabad High Court gave similar findings and laid down similar principles as under:- "...From a perusal Explanation 5, it is evident that the circumstances which otherwise did not attract the penalty provisions of section 271(1)(c), now by a deeming provision attract penalty provisions. But an exception is provided in clause (2) of Explanation 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-section (....
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....eal No. 400 of 2017, dated 18-7-2017] has upheld the findings of the Delhi Bench of the Tribunal given on the similar line in relation to the matter of levy of penalty u/s 271AAA, observing as under: "The CIT (A) in para 4.7 of the order dated 4th November, 2013 noted that no specific query had been put to the Assessee by drawing his attention to Section 271AAA of the Act asking him to specify the manner in which the undisclosed income, surrendered during the course of search, had been derived. The CIT (A), therefore, relying on the decisions of this Court held that the jurisdictional requirement of Section 271AAA was not met. 4. The above view has been concurred with by the ITAT. 5. In the facts and circumstances of the case, the Court is of the view that the concurrent decision of the CIT (A) and the ITAT represent a plausible view which cannot be said to be perverse." 16. Even otherwise, the Ld. CIT (A) has not confirmed the penalty on account of non-compliance of provisions of clauses (i) and (ii) to sub-section (2) to section 271AAA of the Act. Rather he has confirmed the penalty on different issues of non-payment of entire taxes and interest ther....
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....ng taxes along with interest for the year under consideration were paid after the penalty order was passed by the Assessing officer. S. No. Date Amount 1 04.12.2015 26,00,000 2 04.12.2015 26,00,000 3 07.12.2015 26,00,000 4 20.01.2016 26,00,000 5 01.02.2016 26,00,000 6 05.02.2016 26,00,000 7 30.03.2016 26,00,000 8 04.05.2016 26,00,000 Total 2,08,00,000 Thus, it is apparent from the above that the appellant has not fulfilled the condition specified in sec. 271AAA(2)(iii) with respect to payment of taxes, together with interest, in respect of the undisclosed income for the year under consideration so as to get immunity from penalty as Rs. 2,08,00,000/- was paid after the date of penalty order by the appellant. The appellant while seeking immunity from penalty cannot be given unlimited time for payment of taxes along with interest because the same will not in the spirit of law. In the context of penalty under section 271AAA, it has been held in the case of DCIT v. Pioneer Marbles & Interiors (P.) Ltd. (2012) 68 DTK 1 (Kol. 'A') / 144 TTJ 663 (Kol....
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....usal of the said notice, it reveals that there is no mention of tax dues for the assessment year 2012-13 in the said letter, but of the impugned penalty levied u/s 271AAA of the Act; which means that the post dated cheques tendered by the assessee along with its letter dated 29.7.2015 have been got encashed by the Assessing officer. This letter shows that there was no intention on the part of the assessee to avoid the payment of tax dues for the year under consideration; rather, it proves the bona fide intention of the assessee to pay the tax dues. It is also a fact that the date of filing of the said letter along with post dated cheques is 29.7.2015 whereas the impugned penalty order has been passed on 28.9.2015 i.e after the tendering of post dated cheques. The Assessing officer has not levied the penalty on account of non-compliance of the conditions of clause (iii) of section 271AAA(2) of the Act, rather, for non-compliance of the provisions of clause (i) and clause (ii) of section 271AAA(2) of the Act, which means that the Assessing officer had accepted the request of the assessee to deposit the tax through instalments considering the bona fide request of the assessee which wa....
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....other two requirements of section 271AAA(2) of the Act, the assessee is entitled to get immunity from levy of penalty. Admittedly, in this case also the assessee had also deposited tax due along with interest. Since no time limit has been prescribed for deposit of such dues and even, as discussed above, there was no overt act on the part of the assessee to avoid taxes, as his request for deposit of taxes through instalments has been accepted and the assessee has already tendered post-dated cheques before the conclusion of the penalty, hence, in the light of the observations of the Hon'ble Supreme Court in the case of Gebilal Kanhialal HUF (supra), in our view, the third condition of payment of taxes as per provisions of section 271AAA(2)(iii) of the Act stood complied with. The assessee succeeds on this issue also. 19. Now coming to the legal issues raised by the assessee, the Ld. Counsel for the assessee has contended that even the notice served upon the assessee u/s 274 of the Act is also invalid. We have gone through the show cause notice issued to the assessee. The Ld. Counsel for the assessee has invited our attention to the letter / notice issued u/s 274 read with s....