TaxTMI 
TaxTMI 
2016 (5) TMI 1547
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.... 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 2. The facts in brief are that a search and seizure action under section 132 of the Income-tax Act, 1961, was carried out in the case of M/s. Bhushan Steel group of cases on March 3, 2010. The case of the assessee was also covered under section 132 of the Income-tax Act, 1961. The assessee had filed the return of income for the assessment year 2010-11, electronically, declaring an income of Rs. 20,47,14,190 on July 31, 2010. The notice under section 143(2) was issued and served on the assessee on January 13, 2011. Another notice under section 143(2) was issued on February 11, 2011. Thereafter, order under section 143(3) was passed on December 30, 2011, assessing the total income of Rs. 20,47,14,190 at the returned income. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had made the disclosure of undisclosed income earned during the financial year 2009-10 (relevant to the assessment year 2010-11) to the extent of Rs. 20 crores during the course of search and post-search proceedin....
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....be dismissed. 7. We have heard the both parties and perused and considered the relevant records available with us especially the impugned order passed by the learned Commissioner of Income-tax (Appeals). We find that the learned first appellate authority has elaborately discussed the issue in dispute by considering the submissions of the assessee and adjudicated the issue in dispute, vide paragraphs 3.1 to 3.5 at pages 2 to 14 in his impugned order. The said relevant paragraphs of the impugned order are reproduced as under : "3.1 The only ground of appeal is against the penalty of Rs. 2,00,00,000 imposed under section 271AAA. The submissions filed on behalf of the appellant are as under : 'The reasons and arguments put forth by the learned Assessing Officer for levying the said penalty are reproduced as under : "(1) Smt. Ritu Singal during the course of search disclosed Rs. 20,00,00,000 as her undisclosed income. In the written submissions, the assessee has only vaguely stated that the money was derived out of property transactions and forward market transactions for which no record whatsoever were maintained. However, section271AAA of the Income-t....
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....00 for the assessment year 2010- 11. Hence, a penalty of Rs. 2,00,00,000 is hereby imposed. In this connection, the following submissions are being made for and on behalf of the appellant : '(1) A search under section 132 of the Income-tax Act, 1961, took place at the residential and other premises of the appellant and various family members of the group on March 4, 2010, wherein an aggregate disclosure of additional income for the assessment year 2010-11 of Rs. 200 crores was made for the entire group out of which Rs. 20 crores was made by the appellant herself. (2) The amount surrendered represented additional income earned by the appellant as a result of various forward/speculative and property transactions carried out by her during the period from April 1, 2009, to March 2, 2010, (relevant to the assessment year 2010-11). (3) During the course of the search at the residential premises of the appellant on March 4, 2010, certain documents relating to transactions in properties undertaken by her were found and seized as per page 81 of annexure A-3 in SR-4. As per the said papers the appellant had an outstanding of a sum of Rs. 16,00,00,000 f....
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....lhi, during the assessment proceedings to which replies dated June 30, 2010, and July 25, 2011, were duly filed (copies enclosed). The replies further duly specify and substantiate the manner in which the undisclosed income has been earned. (6) It should be specifically and pertinently noted here that that the said documents and the consequent surrender was duly accepted (both with respect to the quantum and the manner in which the income had been earned) during the investigation as well as the assessment proceedings. In fact a review of the entire sequence and record of proceedings would make it undoubtedly and emphatically clear that no further doubt or question arose in the minds of the authorities at any stage to question further the manner in which the income had been earned/derived and the need for any further clarification or enquiries in this regard. (7) The relevant part of section 271AAA of the Income-tax Act, 1961 on the basis of which penalty has been levied against the appellant reads as follows : '271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where se....
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....mits the undisclosed income ; * specifies and substantiates the manner in which it has been derived; and * pay the taxes due thereon together with interest. (10) In the given case, while the issue of payment of taxes together with the applicable interest thereto is not in dispute, the only issue that can, if at all, give rise to the question of levy of penalty is whether the manner in which the, undisclosed income has been derived is specified and substantiated, which question in the instant case is undeniably and undisputedly settled in favour of the appellant, as would be clear from the foregoing discussion and as further amplified hereinafter. (11) In order to escape the rigours of penalty under section271AAA, of the Income-tax Act, 1961, an appellant is required to specify and substantiate the manner in which the undisclosed income has been derived. The question of specifying the manner in which the income has been derived is duly answered with reference to the fact that the same is relatable to undisclosed forward/ speculative transactions and property transactions carried out by him. In so far as the question of substantiating, i.e., provid....
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....me has been earned also gets emphatically answered in the affirmative upon a review of the entire assessment records and investigation proceedings. The very fact that the amount surrendered was duly accepted as such by the various authorities and assessment completed on that very basis leads to the unimpeachable conclusion as to authentication, veracity and genuineness of the same. At no stage of the investigation or assessment proceedings has any doubt been raised as to the quantum of the amount surrendered, or the manner in which the same has been arrived or further queries raised asking the appellant to substantiate and "specify" and "substantiate" the same further nor do the contents of the assessment order exhibit any such adverse conclusion in this regard specially keeping in mind that it was a block assessment carried out pursuant to a search under section 132 which entailed a complete, thoroughly and exhaustive investigation of the entire case. The fact that the amount surrendered has been accepted suo motu by the Department by itself leads to the irrefutable conclusion that the question of specifying and substantiating the manner in which it has been earned has been answer....
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....ot specified in its statement under section 132(4) the manner in which such income had been derived. We do not find substance in such view of the Assessing Officer since undisputedly, the additional income of Rs. 10,00,000 was declared by the assessee in his statements under section 132(4) of the Act and also offered the same to tax in its return of income filed under section 139 of the Act. The hon'ble Gujarat High Court in the case of CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj), followed by the learned Commissioner of Income-tax (Appeals), it has been held that it is not required to specify the manner in which the income was earned in respect of the amount offered to tax in the return of income filed pursuant to search action by paying taxes thereon for availing immunity from penalty under Explanation 5 of section 271(1)(c) of the Act. The same decision has been relied upon by the learned authorised representative before us. Since the issue raised is fully covered by the decision of the hon'ble Gujarat High Court in the case of CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj) followed by the learned Commissioner of Income-tax (Appeals), we are not inclined to interfe....
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....ome redundant was not the intention of the legislation. The manner, during the search operation, is noted by the search party which the Assessing Officer has acceded to. Therefore, following the decisions as relied upon by the learned counsel for the assessee, wherein the Tribunal was pleased to consider cancelling the penalty so levied are also applicable to the assesses case before us in so far as there is no prescribed method to indicate the manner in which income was generated when the definition of "undisclosed income" has been defined in the Act itself when no income of the specified previous year represented "either wholly or partly" which onus lay upon the assessee stood discharged. In view of the above, we are of the considered view that the levy of penalty under section271AAA in the instant cases are not justified and as such, we cancel the penalty so levied under section 271AAA for the assessment years under consideration in the case of respective assessees. (17) The above view also has been subsequently endorsed by various Benches of the hon'ble Income-tax Appellate Tribunal in the following cases : (i) Mothers Pride Education Personna P. Ltd. v. D....
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....-13), vide my order dated December 17, 2012, I have held as under : 'I have considered the assessment order and submissions filed by the appellant. From the chart given in paragraph 3.3 above, it is clear that to escape the penalty of 10 per cent. on the undisclosed income admitted during the course of search, the taxpayer has to fulfil the clause "substantiates the manner in which the undisclosed income was derived." Search in the case was conducted on March 3, 2010. Therefore, the law applicable is as per column C in the table given in paragraph 3.3 above. The Assessing Officer has held in this case that the appellant has not substantiated the manner in which the undisclosed income was derived to the extent of Rs. 90,00,00,000 and has also failed to disclose the sum of Rs. 35,00,00,000 in the statement recorded under section 132(4). The Assessing Officer, therefore, imposed penalty at 10 per cent. on the entire amount of Rs. 125,00,00,000. What would constitute "substantiates" in section271AAA(2)(ii) is nowhere indicated and this word itself is not defined anywhere in the Act. The law provides that where a word is not defined, the ordinary and common sense meaning of....