TaxTMI 
TaxTMI 
2019 (8) TMI 238
X X X X Extracts X X X X
X X X X Extracts X X X X
....tances of the case, Ld. CIT(A) has erred in law and on facts in confirming the levy of penalty u/s 271 AAA, more so when penalty was initiated & levied by Ld. A.O. only 3. In any view of the matter and in any case, imposition of penalty u/s 271 AAA and confirmed by Ld. CIT(A) is bad in law and against the facts and circumstances of the case. 4. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other. 2. Briefly stated facts of the case are that a search and seizure operation under section 132(1) of the Act was carried out at the business premises of "M/s Imperial Auto Industry Limited Group" on 02/09/2009 along with the residential premises of the assessee. It is the contention of the assessee is that during the course of the search, Rs. 5 lakh on account of jewellery found and Rs. 20 lacs on account of income relating to property transaction/advance for properties given, was surrendered on behalf of the assessee, before the Assistant Director of Income-tax (Investigation). For the year under consideration i.e. assessment year 2010-11, the assessee filed return of inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome. According to Ld. CIT(A) the assessee has merely explained the application of the undisclosed income of Rs. 25 lakh and not the manner in which the undisclosed income was derived. The Ld. CIT(A) has observed that no reference or details of any property transaction or the evidence regarding the ownership of any such property had been furnished by the assessee either before the Assessing Officer or during the appellate proceedings. Aggrieved with the finding of the Ld. CIT(A), the assessee is before the Tribunal raising the grounds as reproduced above. 3. Before us, the Ld. counsel of the assessee filed a paper book containing pages 1-72 and submitted that identical penalty for identical surrendered amount was levied in the case of daughterin- law of the assessee i.e. Mrs Preeti Sardana, which has been deleted by the Tribunal on the ground that when such amount has been disclosed in the return of income and taxes paid and no question was asked, there is no ground for levy of penalty under section 271AAA of the Act. 4. In this reference, the Ld. counsel referred to page 15-18, 18A-18B of the paper book, which is a copy of the surrender letter dated 09/07/2009 indicating i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 15/10/2018. 2. DOT versus Vikas Aggarwal in ITA No. 1099/Del/2015 dated 6 to 2019. 8. On the contrary, the Ld. DR submitted that the assessee has not fulfilled the conditions required to save itself from penalty under section 271AAA of the Act. The Ld. DR submitted that the income surrendered by the assessee was not under section 132(4) of the Act and thus, it does not fulfill the first condition of section 271AAA(2) of the Act. He further submitted that either during the search proceeding or assessment proceeding, the assessee has also neither specified nor substantiated the manner in which the undisclosed income was derived by the assessee. The Ld. DR referred to the decision of the Hon'ble Delhi High Court in the case of the PCIT Vs. Ritu Singhal in ITA 672 of 2016 (2018-TIOL- 438-HC-DEL-IT) wherein it is held that mere statement that sum surrendered during the search was undisclosed income but not disclosing the source of such income, it cannot be construed as a satisfaction of the conditions under section 271AAA of the Act. The Ld counsel submitted that in the case of Mrs. Preeti Sardana (supra) , the decision of the Hon'ble Delhi High Court in the case of Smt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 respect of the undisclosed income." 11.1 The term 'undisclosed income' and 'specified years' have been defined in explanation to section 271AAA of the Act. Whether the year under consideration is a specified year or not, is not in dispute between the parties and the present assessment year is accepted as one of the specified year. The dispute has been raised whether the amount of Rs. 20 lakh surrendered on account of income relating to property transaction/advance for properties given is undisclosed income or not. The term 'undisclosed income' has been defined in Explanation as under: "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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellery found in seized from residence and locker Rs. 5,00,000/- " 11.4 Now, contention of the Ld counsel before us, is that this income of Rs. 20 lakh, which was declared on behalf of the assessee during the course of the search, is not undisclosed income as defined under explanation to section 271AAA of the Act because it is neither any money, bullion, jewellery or other valuable article or things nor based on any entry in the books of accounts or other documents or transactions found in the course of the search. However , in our opinion , this contention of the L.d counsel is not found to be true. On perusal of the statement dated 05/09/2009 of Sh. Jagjeet Singh under section 132(4) of the Act, available on page 18A-18B, we find that Sh Jagjit Singh was shown all the documents seized/impounded from different residential and business premises during the course of the search action and then he was asked to explain the content of those documents. Sh Jagjit Singh gone through all the documents found during the course of the search and stated that against certain documents which were not recorded in the books of accounts, he surrendered Rs. 15 crores. The relevant answe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement u/s 132(4) of the Act and second limb is specifying the manner of deriving said undisclosed income in the statement. As far as far admission of undisclosed income in a statement under section 132(4) of the Act is concerned, the assessee has placed reliance on the letter dated 07/09/2009, which was furnished before the Assistant Director of Income-tax(Investigation) and submitted that said disclosure of Rs. 20 lakh and Rs. 5 lakh against property transaction and jewellery found, satisfies the requirement of first limb of the condition. However, according to the Ld. DR, the assessee has never surrendered the said income of Rs. 25 lakh in a statement recorded under section 132(4) of the Act. We have perused the statement of sh Jagjeet Singh dated 05/09/2009, along with his letter dated 07/09/2009 giving breakup of the surrendered income of Rs. 15 crore and we find that neither the statement dated 05/09/2009 nor the letter dated 07/09/2009 is signed by the assessee, though the statement dated 05/09/2009 has been signed by other three persons of the group, i.e., Sh. S.B. Sardana, Sh. Manav Sardana and Sh. Tarun Lamba, have declared / surrendered the sum mentioned in the detailed l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defences under the explanation 1 to 271 (1) (c) of the Act. It is trite law that the voluntary disclosure does not release the Appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty. 9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in dispute that the assessee has expressed his inability to explain certain seized documents rather stated that those may be included to form part of the amounts surrendered during search and seizure operation. It is also not in dispute that assessee has already paid tax together with interest on the surrendered income of Rs. 21 crores. 6. In the backdrop of the aforesaid facts and circumstances of the case, order passed by ld. Revenue authorities below, arguments advanced by ld. AR for the parties, the sole question arises for determination in this case is :- "as to whether assessee has failed to substantiate the manner in which the undisclosed income of Rs. 21 crores was derived and is liable to be penalized u/s 271AAA of the Act." 7. To proceed further, provisions contained under section 271AAA (2) are reproduced as under for ready perusal :- "271AAA. (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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved at the time of search in its statement recorded u/s 132(4) and not thereafter. 11. However, answer to the question no.43 reproduced above categorically goes to prove that the assessee has shown his inability to reconcile the discrepancy in the stock found and failed to substantiate the manner in which income has been derived by the search team during the course of search, however has made the disclosure only in order to buy peace of mind and to avoid litigation. So, we are of the considered view that the assessee has failed to satisfy the conditions laid down in section 271AAA (2) so as to get the general amnesty u/s 271AAA(2) because the assessee has neither specify the manner nor substantiate the manner in which the undisclosed income was derived. 11. The ld. AR for the assessee relied upon plethora of case laws cited as under :- 1. Pr. CIT Vs. Mukesh Bhai Raman Lal Tax Appeal 434 of2017 2. PCIT Vs. Emirates Technologies Pvt. Ltd. [2017] 399 ITR 189 (Delhi) 3. PCIT V s. Sandeep Gupta (DHC) ITA No. 967-68/2017 dated 13.11.2017 4. PCIT VS. Swapna Enterprise [2018] 401 ITR 488 (Gujrat HC) 5. Smt. Raj Rani Gu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2012, reversed the decision rendered by the Tribunal setting aside the penalty on the ground that in the absence of the query raised by the authorized officer during the course of recording of statement u/s 132 (4) to specify and substantiate the manner in which the undisclosed income was derived by returning the following findings :- "16. That the income which was ultimately brought to tax pursuant to the disclosure made, which was voluntary on the part of the assessee is stating the obvious. The assessee merely stated that the sums advanced were undisclosed income. However, she did not specify how she derived that income and what head it fell in (rent, capital gain, professional or business income out of money lending, source of the money etc). Unless such facts are mentioned with some specificity, it cannot be said that the assessee has fulfilled the requirement that she, in her statement (under Section 132 (4)) "substantiates the manner in which the undisclosed income was derived". Such being the case, this court is of opinion that the lower appellate authorities misdirected themselves in holding that the conditions in Section 271 AAA (2) were satisfied by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uring the course of search and seizure action on 02.09.2009 the assessee has made a voluntary disclosure of Rs. 20,00,000/- on account of income relating to property transaction/advance for property given. This surrendered amount of undisclosed income has been declared by the assessee in her return of income filed for the Asstt. Year 2010-11. Assessee during the course of assessment proceedings was asked to give the detail of property in respect of which she has made a disclosure of Rs. 20,00,000/- and also source of investment made by her. In response to above, assessee in her reply letter dated 01.11.2011 submitted that, "The declaration of undisclosed income at the time of search made by the assessee to get peace and to avoid litigation. All the income declared by the assessee has been duly reflected in the return of income filed at application tax with interest had been fully paid by the assessee Your goodself may kindly appreciate that in spite of the no evidence for undisclosed income/investment relating to assessee found during the search, declaration of undisclosed income was made by the assessee to buy peace. Such income was earned by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Technology P. Ltd (ITA No. 476/Del/2014) the Tribunal vide order dated 28.10.2016 considered the facts, wherein the assessment was also completed u/s 143(3) of the Act The penalty proceedings u/s 271AAA were initiated against surrender of unexplained/undisclosed income found during search. In that case also it was noted that the assessee admitted undisclosed income in his statement recording during search and paid tax alongwith interest on the undisclosed income. The Tribunal considered various decisions and ultimately considering the decision in the case of Neeraj Singhal vs ACIT (ITA No 337/Del/2013) and dismissed the appeal of the Revenue. This matter was carried in appeal before the Hon'ble High Court, wherein vide order dated 18.07.2017 (ITA No. 400/2017) the Hon'ble High Court concurred with the order of the Tribunal identical are the facts before us. Respectfully following the order from Hon'ble Delhi High Court we delete the penalty so imposed u/s 271AAA of the Act. The appeal of the assessee is allowed." 11.14 But the Ld. DR has relied on the decision of the Hon'ble Delhi High Court in the case of Ritu Singhal (supra). In the said case, Hon'ble Delhi High Court has refe....