THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA-1 vs. M/S SUN COPORATION

Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 23.02.2018 raising following question for our consideration: “Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on fact indeleting the penalty of Rs. 1,00,00,000/- levied u/s. 271AAA of the Act by holding that the condition provided u/s. 271AAA(2) stood satisfied as assessee was not asked to specify the manner in which such income was earned and substantiate the manner in which income was derived, even though as per the provisionit was for the assessee to voluntarily state the above even if no such query was put to the assessee?”

The issue pertains to penalty levied by the Assessing Officer under section 271AAA of the Income Tax Act, 1961 ['the Act' for short]. On the ground that though the assessee had made the firm asking him to elaborate on the details “of undisclosed income of Rs. 35 crores and how it is earned by you and your group.” In his opinion thus, this is not a case where the the Act and the claim of the assessee's immunity from such penalty under Explanation 5 to the said provision, the Court had held that:

In case of Principal Commissioner of Income Tax vs. Mukesh ITR 454 observed as under:

In the present case however, as noted, counsel for the Revenue desired to make a slight distinction. In his opinion, this was not a case where no queries were raised by the Assessing Officer during the process of recording a statement of the assessee under section 132(4) of the Act. In this context, we may note that one of the questions put to a partner of the firm was “kindly elaborate on the details of undisclosed income of Rs. 34 crores and how it is earned by you and your group”. In the answer to this question, the partner had stated that the undisclosed income of Rs. 35 crores declared by him and his group was earned out of land related transaction and the same was not recorded in the books of accounts. He further added that the breakup of such income person wise and firm wise will be submitted after opening the bank locker and operation of prohibitory order. He stated that such disclosure was made with the consent of the family members and all partners.

The answer of the partner thus, in addition to confirming the disclosure of undisclosed income, further stated that the income was earned by the group out of land related transactions which was not previously recorded in the books. This was thus specifically in compliance with the requirement of establishing the manner, in which, the income was earned. It is true that at this stage, he could not give the break up of such income person wise or firm wise citing the reason of sealing of the bank locker. In our opinion, this would not be of much relevance. Firstly as noted, the answer was in sufficient compliance of requirement of manner of earning income. Secondly, as recorded by the CIT (A), the Assessing Officer had made additions taxing the admitted amounts in respective hands. In view of such facts, we are primarily of the view that there is substantial compliance by the assessee. We do not see any reason to disturb the Tribunal's order, however, for the reasons somewhat different from those recorded by the Tribunal. The addition outside of the disclosures by the assessee are not significant. The penalty in relation to such additional component also not being very large, such question is kept open.

In the result, tax appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI