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2019 (10) TMI 446
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.... of the said appeal are narrated hereinbelow: 3.01. Assessment order u/s.143(3) r.w.s. 153 of the Income Tax Act, 1961 ("the Act" for short) was finalized on 26/3/2013 for A.Y. 2011-12 determining total income at Rs. 15,59,55,240/-. While finalization of the assessment order, penalty proceedings u/s.271AAA of the Act was initiated in respect of undisclosed income of Rs. 15,00,00,000/- for year under consideration. Thereafter, penalty u/s.271AAA of the Act was levied on 27/9/2013 at Rs. 1.50,00,000/-. 3.02. A search operation u/s. 132 of the Act was carried out in the case of Builder Group on 8/6/2010. During the course of search, Patdi Commercial & Investment was also covered u/s. 132 of the Act. During the course of search of Mr.Jerambhai Patel, the director of the assessee company had admitted undisclosed income of Rs. 15,00,00,000/- as unaccounted cash receivable, for the year under consideration. 3.03. Penalty notice was served on the assessee and demand notice was issued to the assessee. The assessee filed reply and contended that he had already disclosed the additional income during the search in a statement under section 132(4) substantiating the manner in which the....
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....assessee failed to substantiate the manner of earning of undisclosed income. The assessee has not kept any separate account for undisclosed income and consequently the manner of earning and substantiation of offered undisclosed income is not proved and therefore, the assessee has not entitled to immunity from penalty under section 271AAA of the Act. 4.02. Mr.Raval further contended that the tribunal failed to consider that the assessee has not satisfied condition Nos.(i) and (ii) and the assessee has satisfied condition No.(iii) only of section 271AAA of the Act and therefore, the assessee is not entitled for immunity from penalty. 4.03. Mr.Raval further contended that the tribunal has wrongly relied on the decision in the case of Mahendra C. Shah reported in [2008] 299 ITR 305 (Gujarat), because penalty imposed on the assessee in the said case was not under section 271AAA of the Act but penalty under section 271(1)C) of the Act. 4.04. Mr.Raval contended that the impugned order passed by the tribunal is illegal, bad in law and contrary to the settled legal position. 4.05. Mr.Raval, learned counsel for the revenue in support of his contentions and case, has relied on the....
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....of the case on hand. 5.02. Mr.Hemani also relied on the decision of the Coordinate Bench of this Court in the case of PCIT Vs. Backbone Enterprise Ltd. rendered in Tax Appeal No.836 of 2018 dated 10/7/2018. It is contended that in the said case, the Co-ordinate Bench of this Court followed its decision in the case of PCIT vs. Mukeshbhai Ramanlal Prajapati rendered in Tax Appeal No.434 of 2017 to delete the penalty. It is contended that in the said decision it has been held that where the revenue had failed to question the assessee while recording the statement under section 132(4) of the Act as regards the manner of deriving such income, it cannot jump to the consequential or laster requirement of substantiating the manner of deriving the income. It is contended that in the decision in the case of Mahendra C. Shah would not hold the field even in case of section section 172AAA(2) of the Act. It is only when the officer elicits a response that such a requirement, the assessee's responsibility to substantiate manner of deriving such income would commence. When the base requirement itself fails, the question of denying the benefit of no penalty would not arise. Mr.Hemani theref....
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....sufficiently complied with the conditions laid down under section 271AAA of the Act, no interference of this Court in the impugned order is required and both the appeals deserve to be dismissed. 6.00. Having heard the learned counsel for the respective parties and considering the material on record, the relevant section 271AAA is required to be considered and it is to be considered whether the assessee has complied with the conditions laid down under section 271AAA of the Act or not. Section 271AAA reads thus :- "Section 271AAA : "Penalty where search has been initiated. 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 addition to tax, if any, payable by him, a sum computed at the rate of ten percent 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-....
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.....Jerambhai Patel, the Director of the assessee company had admitted undisclosed income of Rs. 15,00,00,000/- as unaccounted cash receivable, for the year under consideration i.e. F.Y. 2010-2011. The said director of the assessee in his statement, in response to Question Nos.7 and 8, which are at page Nos.23 & 24 of the Paper Book, has explained that the income was earned out of booking / selling shops and has specified the buildings. The relevant Question and Answer Nos.7 and 8 reads thus : "Question No.7 : We are once again showing you BS-7, 8 & 9 and after viewing the same, please explain that which type of and related to which project these diaries contains booking transactions? Answer No.7 : BS-7 contains details of booking in cash of Financial Year 2010-11 of flats of Krish Enclave Project, which is organized by the Vinodbhai Jearambhai Patel. BS-8 contains details of cash transaction towards booking / selling of R, T & U wings of RKTM Market. The selling after the construction work is done by M/s. Krish Corporation. This related to financial year 2010-11. BS-9 contains details of booking in cash of Patdi Commercial and Investment of RKT Mar....
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....ause (i) and (ii) of subsection (2) of section 271AAA suffers from any infirmity. 6.02. The tribunal while dismissing the appeal has observed and held under :- "10. Therefore, on vigilant and careful reading and analysis of the questions poser to Shri Jerambhai Patel by the statement recording authority, it is clear that there was no occasion for Shri Jerambhai Patel to state and make averments in the exact format as stipulated and required under clauses (i) & (ii) of sub-section (2) of section 271AAA of the Act and in this scenario and considering the environment in which statement u/s. 132(4) of the Act is recorded, it is not practically possible and correct to expect from the assessee, whether educated or uneducated, to specify and to point out the facts complying with the requirement of conditions stipulated in the clauses (i) and (ii) of sub-section(2) of Section 271AAA of the Act. In this situation, and on the basis of foregoing discussion, we reach to a logical conclusion that the ld. CIT(A) was right in granting relief to the assessee by following ratio of the decision of Hon'ble Gujarat High Court in the case of Mahendra C. Shah (supra), which has been refe....
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....Thus, the language employed in both the sections is similar. Therefore, the Tribunal as well as the Commissioner (Appeals) were wholly justified in applying the principles enunciated by this High Court in Mahendra C. Shah's case (supra) while interpreting the provisions of sub-section (2) of section 271AAA of the Act. Accordingly, the assessee has also satisfied the third condition laid down under sub-section (2) of section 271AAA of the Act. The Tribunal was, therefore, wholly justified in upholding the deletion of penalty under section 271AAA of the Act." 6.06. The Delhi High Court in the case of Smt. Ritu Singal (supra) in paras 11 to 15 has observed thus : "11. Explanation 5(2) of Section 271(1)(c) was considered by the Supreme Court in Assistant Commissioner of Income Tax v. Gebilal Kanhailal [2012] 25 taxmann.com 214/210 taxmann.com 244/348 ITR 561. It was held that Explanation 5 (2) to Section 271 (1) (c) provides, where, in the course of search under Section 132, the assessee, found to be owner of unaccounted assets, claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous year which has ended before the d....
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....efit of waiver of penalty under Section 271(1)(c) as the assessee failed to file his return of income on July 31, 1987, and pay tax thereon particularly when the assessee conceded on August 1, 1987 that there was concealment of income. The third condition under clause (2) was that the assessee had to pay the tax together with interest, if any, in respect of such undisclosed income. However, no time limit for payment of such tax stood prescribed under clause (2). The only requirement stipulated in the third condition was for the assessee to "pay tax together with interest". In the present case, the third condition also stood fulfilled. The assessee has paid tax with interest up to the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income up to the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4). For the above reasons, we hold that the assessee was entitled to immunity under Clause (2) of Expl....
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....the basis of Page 81 of Exhibit A-3 was sought to be questioned. To the next question, the assessee replied that the said amount of Rs. 16 crores is my unaccounted income for the Financial Year 2009-2010 relevant for AY 2010-2011. However, the requirement of the assessee having to "(ii) substantiates the manner in which the undisclosed income was derived" was satisfied. Although a general statement that the undisclosed income was the source of 16 crores was disclosed, no "substantiation" of the "manner" of deriving such undisclosed income was revealed. 14. In construing Section 271AAA one must not lose sight of its essential purpose which resulted in its enactment. There is a penalty at the rate of 10% of the undisclosed amount declared, if the conditions in Section 271AAA (2) are not met with. This is quite different from the penal provision under Section 271 (1) (c) of the Act, which directs that if income is concealed or inaccurate returns are filed, which are disallowed by the AO, the penalty shall be "three times the amount of tax sought to be evaded". In the case of amounts disclosed during the course of search, the penalty amount is only ten percent of the undisclos....