THE ITO, WARD - 3(3)(8),, AHMEDABAD vs. MOTIBHAI REVABHAI PRAJAPATI,, AHMEDABAD

Sole grievance of the assessee is that the ld.CIT(A) has erred in deleting penalty of Rs.29,50,690/- which was imposed by the AO under section 271AAA of the Income tax Act, 1961.

Brief facts of the case are that a search and seizure action as carried out in the case of Galaxy group on 21.7.2011. Entire group was consisted of four sub-groups. The case of the assessee belongs to Madhav Group. During the course of search certain documents found and seized. Disclose was made at Rs.2,95,06,876/-. In response to the notice under section 153A, the assessee has filed return and included the amount admitted during the course of search in a statement recorded under section 132(4) of the Act. The ld.AO has initiated penalty proceedings under section 271AAA of the Act and imposed penalty of Rs.29,50,690/-. Dissatisfied with the order of the AO, the assessee carried the matter in appeal before the ld.CIT(A). It was contended before the ld.CIT(A) that statement of the assessee was recorded under section 132(4) of the Act. It was admitted in the statement that on-money was received for sale of land at Gatrad which was not accounted in the books. The assessee has paid taxes along with interest on this undisclosed income admitted during the course of search. The ld.CIT(A) was satisfied with the explanation of the assessee and observed that he has fulfilled all the conditions of sub-section (2) of section 271AAA and therefore assessee does not deserves to be visited with penalty.

With the assistance of the ld.representatives, we have gone through the record carefully. For appreciating the controversy involved, it is incumbent upon us to take note of section 271AAA. The relevant part of this section reads as under: “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, the assessee shall pay by way of

A bare perusal of this section would indicate that sub-section (1) authorise the AO to levy penalty at the rate of 10% of the undisclosed income of the specified previous year. Sub-section (2) provides conditions on whose fulfillment the assessee could be absolved from the levy of penalty. A perusal of sub-section (2) would indicate that it postulates three conditions for an assessee on whose fulfillment he will be absolved from levy of penalty. In the present case, we have perused the statement recorded under section 132(4) of the Act at the time of search. Thus, so far as first condition is concerned, the assessee should admit the undisclosed income in a statement given under sub- section (4) of section 132, that condition has been fulfilled The assessee has admitted additional income of Rs.40 crores whose break up has been given in the explanation given before both the Revenue authorities. The assessee has paid taxes as well as interest. The dispute between the assessee and Revenue pertained to condition no.2 that is whether the assessee has disclosed manner and substantiate that manner.

A perusal of the record would indicate that the ld.CIT(A) has recorded a finding that search party did not ask particular question from

In the result, appeal of the Revenue is dismissed. Pronounced in the Open Court on 9th January, 2019.