TaxTMI 
TaxTMI 
2017 (11) TMI 1760
X X X X Extracts X X X X
X X X X Extracts X X X X
....lead case. With the consent of both the parties, the matter pertaining Sh. Mahesh Kumar Jain has been taken as a lead case for the purpose of present discussion and adjudication of the issues that have been raised before us. In this case, the respective grounds of appeal taken by the assessee and the Revenue are as under:- Assessee's Grounds of appeal (ITA No. 630) "1.1 The penalty order passed u/s 271AAB is bad in law as well as on facts and hence, the same may please be quashed. 1.2 The ld. AO erred in law as well as on the facts of the present case in levying penalty u/s 271AAB (1)(c) @ 30% of undisclosed income and the ld. CIT(A) has also erred in modifying the same @ 10% of undisclosed income u/s 271 AAB (1)(a) of the Act, the same may please be deleted in toto." Revenue's Ground of appeal (ITA No. 651) "1. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the penalty of Rs. 42,12,360/- imposed by the AO u/s 271AAB (1)(c) of the Income Tax Act, 1961 on undisclosed income disclosed during the search." 3. The facts of the case are that the search and seizure operation was carried out at the residential ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iate the manner in which the undisclosed income have been arrived at. It was further held by the AO that above discloser was discovered by action u/s 132(4) and otherwise it could never be disclosed by the assessee. It was held that since the discloser was not voluntarily but based on seized documents as well as search action, the assesses is liable for penalty u/s 271AAB (1)(c) and accordingly penalty proceedings u/s 271 AAB(1)(c) were being initiated separately. The assessed income was determined at Rs. 1,48,24,560/-, the same as the returned income which includes the undisclosed income of Rs. 1,40,41,210/- and the assessment order u/s 143(3) was passed on 29.03.2016 and on the same date, notice u/s 274 r.w. sec 271 AAB (1)(c) was issued to the assessee to show cause why penalty u/s 271 AAB(1)(c) should not be imposed upon the assessee for the undisclosed income found and finally assessed in his hands. 4. During the course of penalty proceedings, the assessee submitted that no penalty can be levied since the assessee during the course of search in his statement recorded u/s 134(2) specifically mentioned that the said surrendered was made to buy peace and avoid litigation wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rned and to substantiate the manner in which the undisclosed has been arrived at. But during the course of assessment as well as penalty proceedings, the assessee has completely failed to furnish desires details, sources of undisclosed income and failed to substantiate the manner in which undisclosed income was arrived at as required u/s 271AAB of the Act. It was further held that even otherwise the assessee has failed to explain the sources and manner of deriving of above undisclosed income as appearing in the seized material while recording statement u/s 132(4) of the Act and offered the same for taxation. It was further held that during the course of penalty proceedings the assessee has also not submitted any evidences to substantiate his claim on record. It was accordingly held that the assessee has completely failed to explain the issues raised during the assessment as well as penalty proceeding, therefore penalty u/s 271 AAB (1)(c) of the Act is imposable in respect of the unaccounted income. Regarding reliance placed by the assessee on case laws in the context of section 271AAA, the Assessing Officer held that the facts and circumstances in those cases are different with the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome, specified in the said statement the manner of earning of such income by doing the business, the manner of earning income is substantiated from the fact that the assessee is in the business and has paid tax together with interest on the income disclosed by him. It was accordingly contended that the penalty levied @ 30% instead of 10% is not justifiable in the present case. It was further contended that since the AO has levied penalty u/s 271AAB(1)(c) which are not applicable provision, it would not be proper for the appellate authority to sustain any penalty even u/s 271AAB(1)(a) of the Act. 7. The ld. CIT(A) considered the above contentions raised by the assessee as well as the comparative position of provisions contained in section 271AAA and 271AAB, and thereafter, confirmed the levy of penalty @ 10% of undisclosed income u/s 271AAB(1)(a) of the Act and his relevant findings are contained at para 4.3 to 4.8 of his order which are reproduced as under:- "4.3 There is no dispute as to the fact that assessee has offered the income in the statement recorded u/s 132(4), offered the same in the return and paid the due tax thereon. Therefore, I agree with the submissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ayment of due taxes in accordance with the provisions of section 271AAB(1)(a) of IT Act as invoked above. 4.8 Thus, the action of the AO levying penalties at the rate of 30% of undisclosed income disclosed during search in all these cases u/s 271AAB(1)(c) of IT Act stand modified/ reduced 10% of undisclosed income disclosed during search 271AAB(1)(a) of IT Act. In nut shell the penalty levied by the AO are confirmed to the extent of one-third and cancelled to the extent of two-third. Accordingly the Ground of appeal in all these appeals are partly allowed." 8. During the course of hearing, ld. AR submitted that the assessee has admitted the undisclosed income, paid taxes and filed returns. The provisions of section 271AAB (1)(a) read as under: "271AAB Penalty where search has been initiated (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 under section 132 on or after the 1st day of July, 2012 the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,-- (a) a sum computed at the rate of ten per cent of the und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o explained in response to question no.3. 8.3 It was further submitted that it is important to note that the income declared by the assessee has been accepted by the ld. AO as it is without disturbing the same by making assessment at the returned income and further as stated that the ld. AO has also observed that the assessee is earning income from capital gain and other sources. Therefore, this clearly suggests that the ld. AO was completely satisfied with manner and substantiation of the undisclosed income declared by it. Therefore, the ld. AO was incorrect in giving finding that the assessee failed to substantiate the undisclosed income. 8.4 It was further submitted that as already explained that the assessee made a surrender of undisclosed income and the same was assessed by the ld. AO on the same figure. Now once there is quantification of amount of undisclosed income by the assessee followed by acceptance by the investigation team and subsequent assessment of the same amount by the ld. AO, it is full proof evidence that the undisclosed income was duly substantiated by the assessee. Hence, no question could be raised by the ld. AO in the order of penalty. 8.5 It was f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... levy of penalty u/s 271AAA. 8.8 It was further submitted that the provisions of Section 271AAB is pari materia to Section 271AAA existed earlier. The provisions of section 271AAA which was applicable for the searches carried out before 1-7-2012 read as under: "SECTION 271AAA Penalty where search has been initiated (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 under section 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 per cent. of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntiation, it is our considered view that the AO was not justified in imposing penalty u/s 271AAA specially when the offered undisclosed income was accepted by the AO and tax due thereon had been paid by the assessee. We draw our strength from the decision of the ITAT Delhi Bench in case of Neeraj Singal vs. ACIT in ITA No.337/Del/2013 reported in 2015(3)-TMI-680-ITAT, Delhi which is identical to the present case. Accordingly, we uphold the order of ld. CIT(A). 6. In the final result, the appeal filed by the department is dismissed." Thus the case of the assessee is squarely covered by the above decision of Hon'ble Delhi High Court in as much as in the present case also, absolutely no question was asked by the ld. AO regarding the manner of deriving of undisclosed income & substantiating the same. As would appear from the statement, after making of surrender of undisclosed income by the assessee, the ld. AO stopped and on this issue, the ld. AO did not ask any further question from the assessee. Therefore, there being identical facts, following the verdict of Hon'ble Delhi High Court penalty u/s 271AAB(1)(c) cannot be sustained and as such the ld. CIT(A) was fully justif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ended to section 271(1)(c) are similar to section 271AAA(2). The scope and meaning has been lucidly explained by the Hon'ble Allahabad High Court in the case of CIT Vs. Radha Kishan Goel (2005) 278 ITR 454 (All.), which was followed by the Hon'ble Gujarat High Court in the above referred case. In view of the above principles laid down, we are of the opinion that immunity provided under s/s. (2) of section 271AAA is applicable and accordingly, the order of CIT(A) does not require any modification. Revenue's grounds are rejected. " Respectfully following the decision of the coordinate benches, we set aside the orders of the authorities below. The AO is directed to delete the addition. The appeal of the assessee is allowed. 5. In the result, appeal of the assessee is allowed. Thus the case of the assessee is squarely covered by the decisions of Hon'ble Jaipur ITAT in as much as there being identical facts in the present case and hence, the penalty u/s 271AAB(1)(c) rightly deleted by the ld. CIT(A) 8.11 It was further submitted that there is almost consensus between various benches of Hon'ble ITAT that no adverse inference could be taken where the department has....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section. 8.15 Otherwise also, it was submitted that Section 271AAB(1)(b) could only be invoked as per finding in penalty order. We may also submit that it is clear from the facts and findings given by the ld. AO in the penalty order that the assessee duly admitted the undisclosed income in the statement taken during the course of search and further that it paid taxes and filed return of income. So even in worst case scenario maximum a penalty u/s 271AAB(1)(b) could have been levied as has also been discussed in para 1.4 above. Therefore the penalty order passed by the ld. AO was bad in law and on the facts of the present case. So once the order itself is held to be bad in law, the same cannot be revived by the ld. CIT(A) so as to bring in penalty with some different section. 8.16 Reference was drawn by the ld AR to section 251 which deals with the power of Commissioner (Appeals) while disposing of an appeal, reads as under: Powers of the Commissioner (Appeals) (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment he may confirm, reduce, enhance or annul the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anation to section 251 cannot be extended to levy penalty u/s 271AAB(1)(a) when this was never considered by the ld. AO and the order of the ld. AO itself was out of jurisdiction. In view of the above, the ld. CIT(A) could not have proceeded to levy penalty u/s 271AAB(1)(a) of the Act and hence, the appeal of the assessee deserves to be allowed 8.19 It was further submitted that in a recent judgement the Hon'ble Supreme Court has dismissed an appeal filed by the revenue in the case of CIT vs. SSA EMERALD MEADOWS SLP 11485/2016 DT.5-8-2016 (SC) wherein the Hon'ble Karnataka High Court has dismissed the following substantial question of law filed by the department in the case of CIT vs. SSA EMERALD MEADOWS ITA NO.380/2015 DT.23-11-2015 (Kar)(HC) wherein the Hon'ble High Court has followed the judgement of the same court in the case of CIT vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar): "Whether, omission of assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed 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) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty percent but which shall not exceed ninety percent of the undisclosed income of the specified pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a case where search has been initiated under section 132 on or after 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 10% of the undisclosed income of the specified previous year, if such assessee, in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and satisfies other conditions as provided in 271AAB(1)(a). It further provides that where the declaration of undisclosed income is not made by the searched person in the course of search but is declared in the return of income furnished for the specified previous year and subject to satisfaction of other conditions, penalty @ 20% is payable by him. It further provides that where the declaration of undisclosed income is neither made by the searched person in the course of search nor declared in the return of income furnished for the specified previous year and additions are made during the course of assessment proceedings, penalty which can vary from 30% to 90% is payable by him. 13. Both the provisions as contained in section 271AAB(1)(a) and 271AAB(1)(c) thus provides for levy of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of other conditions. The ld CIT(A) who was ceased of the whole penalty matter under section 271AAB, after detailed examination, came to a conclusion that levy of penalty @ 10% under clause (a) is more appropriate as against levy of penalty @ 30% under clause (c) and he accordingly, varied and reduced the penalty and confirmed the levy of penalty @ 10%. In any case, where the ld CIT(A) has come to a conclusion that levy of penalty under clause (a) and not under clause (c) is more appropriate in the facts of the present case, he couldn't have cancelled the penalty order merely because the AO has invoked clause (c) specifically. Our view is fortified by the decision of the Hon'ble Supreme Court in case of CIT vs Assam Travel Shipping Services reported in 199 ITR 1 where the Hon'ble Supreme Court was pleased to held that "In view of section 251(1)(b) it was also clear that the AAC was wrong in taking the view that he had no power to enhance the penalty in accordance with law on reaching the conclusion that the computation of penalty made by the ITO was illegal, and that he could only cancel even the lesser penalty which had been imposed by the ITO." Drawing support from the said lega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome filed on 28.07.2014 declaring the undisclosed income of Rs. 1,40,41,210 which has been accepted and the assessment completed at the returned income without any further additions made by the AO. 19. The only dispute which has also been specifically raised by the AO relates to whether in the statement recorded under section 132(4) during the course of search, the assessee has specified the manner in which such undisclosed income has been derived and substantiates the manner in which the undisclosed income was derived. 20. In this regard, the principle contention of the ld AR is that from the perusal of the statement of the assessee recorded u/s 132(4), it may be noted that while recording the said statement, no specific questions were asked from the assessee to explain the manner of earning of income or to substantiate the undisclosed income declared by the assessee. It was submitted that the assessee surrendered the undisclosed income in response to question no.18, 21 & 22 and afterwards, there is no further question for the manner of earning the same or to substantiate the same. 21. It was further submitted that, and to which we agree, the provisions of Section 271AA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5(2) of the Act. We are also of the opinion that in case there is nothing to the contrary in the statement recorded under section 132(4) of the Act, in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources. The object of the provision is achieved by making the statement admitting the non- disclosure of money, bullion, jewellery, etc. Thus, we are of the opinion that much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable." 24. The Hon'ble Gujarat High Court in case of Mahendra C Shah reported in 299 ITR 305 in context of explanation 5 to section 271(1)(C) has held as under: "15. Insofar as the alleged fai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... discussions, it is clear that the legal proposition which has been laid down by the Courts in the context of explanation 5 to section 271(1)(c) has been followed in the context of section 271AAA as apparent from the recent decision of the Hon'ble Delhi High Court in case of Emirates Technologies. Similar view has been taken by this Bench in case of Late Sudha Patni (ITA No. 963/JP/2015 dated 9.8.2016), Ajit Singh (ITA No. 714/JP/2014 dated 26.09.2016) and others. As we have noted above, the provisions of Section 271AAB(1)(a) are pari materia to Section 271AAA(2) so far as it relates to satisfaction of condition whereby it requires specifying the manner of earning of undisclosed income as well as to substantiate the manner in which the undisclosed income was derived. The legal proposition so laid down in context of section 271AAA(2) thus equally applies in context of section 271AAB(1)(a) of the Act. 27. In light of above legal proposition, let's examine the statement of the assessee, recorded during the course of search, under section 132(4) of the Act with a view to determine whether any specific question(s) were raised to the assessee drawing his attention to the provisions of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the specified date, we are of the view that the ld CIT(A) has rightly varied the levy of penalty and confirm the levy of penalty @ 10% in terms of section 271AAB(1)(a) of the Act. In the result, we affirm the order of the ld CIT(A) and dismiss the appeal of the assessee as well as the revenue. 29. In ITA No. 629/JP/2017 in case of Sh. Jai Kumar Bakliwal Vs. ACIT, in ITA No. 648/JP/2017 in case of DCIT Vs. Sh. Jai Kumar Bakliwal, in ITA No. 631/JP/2017 in case of Sh. Prakash Chand Jain Vs. ACIT, in ITA No. 650/JP/2017 in case of DCIT Vs. Prakash Chand jain, in ITA No. 632/JP/2017 in case of Sh. Suresh Chand Mittal vs. ACIT, in ITA No. 633/JP/2017 in case of Sd. Dinesh Kumar Mittal vs. ACIT, in ITA No. 649/JP/2017 in case of DCIT Vs. Sh. Dinesh Kumar Mittal, in ITA No. 634/JP/2017 in case of Smt. Alka Jain Vs. ACIT, in ITA No. 635/JP/2017 in case of Sh. Puneet Jain vs. ACIT and in ITA No. 652/JP/2017 in case of DCIT vs. Sh. Puneet Jain, which are cross appeals filed by the revenue and the respective assesses, both the parties submit and agree that under identical fact and circumstances of the case, the penalty has been levied by the AO under section 271AAB(1)(c) which has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....तर पà¥à¤°à¤¶à¥à¤¨ 20 नकद राशि के सà¥à¤¤à¥à¤°à¥‹à¤¤ का पूरà¥à¤£ बयौरा पà¥à¤°à¤¸à¥à¤¤à¥à¤¤ करें। जी हाठà¤à¥Œà¤¤à¤¿à¤• तलाशी की कारà¥à¤¯à¤µà¤¾à¤¹à¥€ के दौरान पायी गयी नकदी मेरी ही है। यह राशि मेरी लेखा पà¥à¤¸à¥à¤¤à¤•à¥‹à¤‚ में दरà¥à¤œ नही है। मैं इनके सà¥à¤¤à¥à¤°à¥‹à¤¤ के बारे में अà¤à¥€ व à¤à¤µà¤¿à¤·à¥à¤¯ में कà¥à¤› à¤à¥€ बतà....
X X X X Extracts X X X X
X X X X Extracts X X X X
....¸à¤®à¥‡à¤‚ मेरे वà¥à¤¯à¤µà¤¸à¤¾à¤¯ से संबधि पà¥à¤°à¤µà¤¿à¤·à¥à¤Ÿà¤¿à¤¯à¤¾à¤ है । जो मेरी लेखा पà¥à¤¸à¥à¤¤à¤•à¥‹à¤‚ में दरà¥à¤œ है। मैं आपको आपके आवास से à¤à¥Œà¤¤à¤¿à¤• तलाशी के दौरान पà¥à¤°à¤¾à¤ªà¥à¤¤ हà¥à¤ˆ Anand Exercise Note Book दिखा रहा हॅू जिसमें कà¥à¤² पृषà¥à¤ 155 है व लिखे हà¥à¤ पृषà¥à¤ 41 है। कृपया इसमें लिखे पृषà¥à¤ ों का पूरà¥à....
X X X X Extracts X X X X
X X X X Extracts X X X X
....…ंकित पà¥à¤°à¤µà¤¿à¤·à¥à¤Ÿà¤¿à¤¯à¤¾à¤ à¤à¥€ देख ली है। यह डायरी मेरे आवास से मिली है इसमें अंकित पà¥à¤°à¤µà¤¿à¤·à¥à¤Ÿà¤¿à¤¯à¤¾à¤ की कà¥à¤² राशि रूपये 1,18,12,500/- होती है जो मैनें कई वà¥à¤¯à¤•à¥à¤¤à¤¿à¤¯à¥‹à¤‚ को जमीन हेतॠअगà¥à¤°à¤¿à¤® दे रखी है। यह लेखा पà¥à¤¸à¥à¤¤à¤•à¥‹à¤‚ में दरà¥à¤œ नही हैं à¤à¤µà¤‚ इसका कोई अनà¥à¤¯à¤¾ हिà....
X X X X Extracts X X X X
X X X X Extracts X X X X
....¤®à¥ˆà¤‚ जमा करा दूà¤à¤—ा । आपने पà¥à¤°à¤¶à¥à¤¨ 18 के उतà¥à¤¤à¤° में रूपये 22,28,710/7 नकद राशि को आयकर हेतॠसमरà¥à¤ªà¤¿à¤¤ किया है व पà¥à¤°à¤¶à¥à¤¨ 21 के उतà¥à¤¤à¤° में रूपये 1,18,12,500/- - अतः कà¥à¤² समरà¥à¤ªà¤¿à¤¤ राशि (रू. 11812500+2228710) रूपये 1,40,41,210/- (à¤à¤• करोड़ चालीस लाख इकतालिस हजार दो सौ दस होती है इस बारे में आपको कà¥à¤....