TaxTMI 
TaxTMI 
2021 (10) TMI 406
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.... following concise grounds:- "1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the action of the assessing officer in issuing notice and passing the penalty order under section 271AAA of the Act dated 26.12.2016 which is bad and invalid in the eyes of law. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the action of the assessing officer in levying penalty of Rs. 22,50,000/- under section 271AAA of the Act." 3. The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty under section 271AAA of the Act. 4. Briefly stated facts are that a survey was conducted on the business premises of the assessee on 13.08.2008 and consequent to this survey, a search under section 132 of the Act was conducted on 14.08.2008. During the course of search, due to discrepancies in stock-in-trade, cash-in-hand and other discrepancies assessee disclosed a sum of Rs.2.25 crore as an additional income for the Financial Year 2008-09 relevant to this assessment year 2009-10. The relevant disclosure in view of statement given by Jayendra P. Jhaveri on 27.10....
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.... discrepancy in Business and Acc. Records 2,25,00,000 Gross Total Income (-)4,65,88,453 Total Taxable Income (-)4,65,88,453 Total Taxable Income Rounded Off (-)4,65,88,450 7. There is no change in the income declared by the assessee accepted in the above computation of income by the AO at item II as income from various sources as income offered to taxation in response to action under section 132(1) of the Act to cover up any and every discrepancy accounts and records. The disclosure accepted was at Rs.22,50,000/- as declared by assessee. The Assessing Officer initiated the penalty proceedings under section 271AAA of the Act read with section 274 of the Act. The Assessing Officer levied the penalty by stating that assessee during the course of statement has neither specified the manner in which such income was derived nor substantiate the manner in which the undisclosed income was derived. Therefore, according to Assessing Officer, the assessee has not fulfilled the conditions stipulated in Section 271AAA of the Act and levied the penalty at 10% of the amount of income disclosed and thereby....
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....e for Financial Year 2008-09 pertaining to AY 2009-10. I promise to pay the tax of Rs.76.50 lacs and I request that I.T. authorities to adjust the seized cash of Rs.12.80 lacs as advance tax for AY 20099-10 and I will pay the remaining tax of Rs.63.70 lacs in three installments and the 1st Installment of Rs.20 lacs will be paid on or before 15th Dec 2008 and the balance of Rs.18.70 lacs on or before 15th March, 2009. I am giving this declaration under the bonafide belief that because of my coming forward with the above disclosure of Rs.2.25 crores that I will be protected fully from penalty proceedings and prosecution under the Income Tax Act, 1961 (hereinafter referred to as 'Act'), 1961. Q4. Do you have anything else to say? Ans. That my above referred additional income of rs.2.25 crores over and above my current years regular income for AY 2009-10 includes my excess above my current years regular income for AY 2009-10 includes my excess cash balance of Rs. 12.8 lacs, gold ornaments lying in locker No.14 at M/s Siddhi Safe Fault Pvt. Ltd. of Rs.3.2 lacs, the amounts of Rs.34 lacs spent on renovation of 12 bungalow at lonavala which I want to sell after c....
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....nt is debited to our Janghad stock for specific purposes of giving the same on hire basis and I have to mention that these excess gold bars and biscuits were not accounted for in our books of accounts. Vi. That I promise to pay the Income tax voluntarily on the above referred declaration of Rs. 2.25 Crores in due course of time for which I have already handed over to you the post dated cheques for such advance tax payment and I hereby requetst you to adjust the seized cash of Rs.12.80 lacs towards Advance Tax payment" 11. We also noted that the assessee is engaged in the business of trading in rough cut and polished diamonds, gold bars jewellery and property. The assessee purchases property, carries out renovation thereon, makes the title of the property marketable and sale the same in the market for consideration. The assessee also gives its property on rent till the sale is affected. The assessee has huge stock of gold hence, they also gives its gold stock on rent popularly known as on Janghad Basis for earning Jhangad Rent/ Jhangad Commission in Metal Terms. The assessee maintains Composite Books of Accounts of the company on computer at its Accounting office away fr....
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....also explained to the Survey party its nature of business and the manner in which the said income is received by them for the period under consideration. The assessee has explained that they are giving their Gold Stock on Rent / Commission popularly known as Janghad basis for earning Rent/ Commission in Metal Terms which results in accumulation of Gold under Janghad system which is to be accounted for at the end of the year as a Janghad Stock representing the Rent / Commission Income in Metal Terms receivables. The assessee also explained that the renovation is under process at Lonavala Twelve Bunglow Project by contactor/Supervisor for which the payment is pending and the said renovation is accounted for at the end of the year as a renovation expense which increase the value of the property which is to be sold at higher price after renovation is completed in due course of time. The assessee also explained that there is some cash sales by our Outdoor salesman who sends cash to the office through Angadia and then reports the details of cash sales transactions to the accounts department. The cash balance of Rs. 12.80 lakhs is on account of cash sales etc. The assessee has explained t....
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....f the above facts and circumstances, now question arises whether the assessee has complied with all the three conditions as prescribed under the provision of section 271AAA of the Act. We noted that the three conditions mentioned in the provision of section 271AAA are (i) that the assessee should admit the undisclosed income in a statement made under section 132(4) of the Act. (ii) The assessee specify the manner in which such income has been derived and substantiate the manner in which the undisclosed income was derived. (iii) The assessee should pay the taxes together with interest in respect of undisclosed income. In term of the above provision, in the present case the assessee has disclosed the entire source of income and manner of undisclosed income earned, which is noted in Para 14 and 15 of this order. The assessee has also paid the taxes and the details are noted in Para 13 of this order. The assessee has admitted the undisclosed income of Rs. 2.25 crores and voluntarily declared the same under section 132 (4) of the Act on the basis of accounting records consisting of its income from all the sources. It means that the assessee has complied with all the conditions mentioned....
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....had not offered the said income in return filed u/s 139(1) of the Act thereby levy of penalty is in order is to be accepted, then it would make the immunity provisions contemplated u/s 271AAA(2) of the Act redundant. The legislature in its wisdom had given a thoughtful consideration on the facts and circumstances under which the assessee would not be invited with the levy of penalty pursuant to the search subject to fulfillment of certain conditions stipulated in the said section . Hence in view of the above, we hold that the levy of penalty is not automatic and assessee is clearly entitled for immunity from levy of penalty. 8.2. We also find that the decision of the Hon'ble Supreme Court in the case of Sudarshan Silks & Sarees v. CIT [2008] 300 ITR 205/169 Taxman 321 supports the case of the assessee. The brief facts of this are as below:- "3. A search was conducted on the premises of the assessee on 14 and 15-10- 1987 and incriminating documents evidencing concealment of income by the assessee were unearthed apart from cash and jewellery found at the time of search. It was found that the appellant was maintaining double set of books and was accounting for on....
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....gest that such an inducement must have been given by the searching party. When only partial evidence in support of concealment for a very limited period was detected during the search, why would a man go to offer much higher amounts for a large number of years unless he was promised some reciprocal benefit like not being visited with penalty? The learned DR has tried to argue before us that a change of heart might have taken place as a result of which Sri Ramesh came forward with all the disclosures for different years voluntarily. But looking into the hard facts of life and the general experience of mankind, especially with regard to financial affairs, it would be difficult to accept such a proposition. Evidently, huge amount of unexplained investments including unexplained stock was found at the time of search. Ultimately, almost the same amount of income was offered by the assessees over a number of years. As the tax rates over the entire period was more or less the same, the tax effect, either from the point of view of the Department, or the assessee would have more or less the same, had the entire undisclosed assets been subjected to tax in the year of search or the entire inc....
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.... about inducement having been given by the departmental authorities for not levying penalty in case of disclosure of income over the earlier years, no penalty can actually be levied by the Department." These findings have been finally approved by the Hon'ble Supreme Court by observing as under:- 17. Accordingly, the orders under appeal are set aside and that of the CIT(Appeals) and Tribunal restored. It is held that in the facts and circumstances of the case, penalty under section 271(1)(c) was not exigible. The appeals are accepted with costs. 8.3. We find that the following decisions support the case of the assessee :- (a)Decision of co-ordinate bench of Cuttack Tribunal in the case of Pramod Kumar Jain v. Dy. CIT [2013] 33 taxmann.com 651 (Cuttack - Trib) '6. We have heard the rival contentions and perused the material available on record. On consideration of the facts and circumstances of the case, we are inclined to hold that no definition could be given to the "specified manner" insofar as the very statement on oath u/s. 132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the ....