P.C. JAIN & SONS HUF,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

PER VIJAY PAL RAO, J.M. These two appeals by the assessee are directed against two separate orders of ld. CIT (A)-4, Jaipur dated 04.09.2017 arising from penalty order passed under section 271AAA of the IT Act for the assessment years 2011-12 and 12-13 respectively. The assessee has raised the common grounds in these appeals. The ground raised for the assessment year 2011-12 are reproduced as under :-

“ 1. That he learned CIT (A) has seriously erred by upholding the levy of penalty u/s 271AAA by A.O. No search u/s 132 was ever initiated against the assessee and the assessments were completed u/s 53C, therefore, initiation & levy of penalty u/s 271AAA is not justified as it can be levied only in the case of initiation of search U/s 132 of I.T. Act, 1961.

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and levy of penalty under section 271AAA was not raised before the authorities

below, therefore, the assessee has filed an application seeking leave of the Tribunal

to raise this ground as an additional ground in both the appeals.

additional ground. The assessee has challenged the validity of levy of penalty under

section 271AAA on the ground that there was no search and seizure action under

section 132 of the IT Act in the case of the assessee and, therefore, the provisions

of section 271AAA cannot be invoked in the case of the assessee for levy of penalty

in respect of the disclosure made by the assessee in the statement recorded under

section 131 of the Act. Thus the issue raised by the assessee in this additional

ground is purely legal in nature and all relevant facts required for adjudication of this

issue are already on the record and no new facts or material is required to be

examined or investigated for the purpose of adjudication of the issue raised by the

assessee. Accordingly in view of the decision of the Hon’ble Supreme Court in the

case of CIT vs. NTPC, 229 ITR 383 (SC), the additional ground raised by the

assessee which is purely legal in nature and does not require any examination or

investigation of new facts is admitted for adjudication on merits.

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On merits :

and a survey under section 133A of the IT Act was carried on in the case of M/s.

Ganpati Lockers Pvt. Ltd. on 29.06.2011. The assessee was having a locker no. 239

at Ganpati Lockers Pvt. Ltd. Accordingly, the assessee in his statement recorded under section 131 on 11th July, 2011 disclosed an undisclosed sincome of Rs. 89,600/-. The assessee filed its return of income under section 139(1) on 30th July,

2011 declaring total income of Rs. 5,25,230/- including Rs. 89,600/- as undisclosed

income which was accepted by the AO. Therefore, when the said disclosure of the

undisclosed income was not in the proceedings under section 132 or in the

statement recorded under section 132(4), then the provisions of section 271AAA are

not applicable in the case of the assessee. The ld. A/R has thus contended that the

penalty levied under section 271AAA is not sustainable in the case of the assessee

and the same may be deleted. The ld. A/R has relied upon the following decisions :-

ACIT vs. Pravin S. Jain ITA No. 4005/M/2014 (ITAT Mumbai Bench)

DCIT vs. Sam India Abhimanyu Housing ITA No. 1257/Del/2015 (ITAT Delhi Bench)

Hiral Himanshu Kanakia vs. ACIT ITA No. 2028/Mum/2012.

DCIT vs. K.G. Developers ITA No. 1139/Ahd/2012 (Ahmedabad Bench)

PCIT vs. Mukeshbhai Raman Lal Prajapati Tax Appeal No. 434 of 2017.

4.1. On the other hand, the ld. D/R has relied upon the orders of the authorities

below and submitted that the assessee itself has disclosed the undisclosed income

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which was detected by the department in the course of search and seizure action in

case of Ganpati Lockers Pvt. Ltd. Hence the penalty levied under section 271AAA is

justified.

record, we note that there was no search and seizure action in the case of the

assessee but the search was carried out in the case of Ganpati Lockers Pvt. Ltd. on 29th June, 2011. Subsequent to the search, the statement of the assessee was recorded under section 131 on 11th July, 2011 wherein the assessee has disclosed

an income of Rs. 89,600/-. Therefore, there is no dispute that the assessee

disclosed the income in the statement recorded under section 131 and not in the

statement recorded under section 132(4) of the Act. Hence the provisions of section

271AAA cannot be resorted to levy the penalty when there was no search and

seizure action resulting in disclosure of income by the assessee in the statement

recorded under section 132(4) of the Act. The assessee has relied upon a series of

decisions on this point including the decision of Hon’ble Gujarat High Court in the

case of PCIT vs. Mukesh Bhai Raman Lal Prajapati in Tax Appeal No. 434 of 2017 dated 24th July, 2017. The Hon’ble High Court has held in para 13 & 14 as under :-

“ 13. Sub section (2) of Section 271AAA thus while retaining the other requirements of avoiding penalty as provided in clause (ii) of Explanation 5 has now introduced an additional requirement of the assessee having to substantiate the manner in which, the undisclosed income was derived. It is this requirement which the counsel for the Revenue would place great emphasis on. According to her, onus is now entirely shifted on the assessee not only to make a disclosure of the undisclosed income but also to specify the manner, in which, the

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income has been derived and to substantiate the same. It was therefore, contended that the earlier decisions of this Court in case of Commissioner of Income Tax vs. Mahendra C. Shah and the decision of Allahabad High Court in case of Commissioner of Income Tax vs. Radha Kishan Goel rendered in backdrop of different statutory provisions would not automatically apply. 14. We do not reject this contention totally. However, insofar as the facts of the present case are concerned, the field would still be held by the decision of this Court in case of Commissioner of Income Tax vs. Mahendra C. Shah (supra). Sub section (2) of section 271 AAA imposes an additional condition of the assessee having to substantiate the manner in which, the undisclosed income was derived. This requirement, however, must be seen as consequential to or corollary to the base requirement of specifying the manner, in which, the undisclosed income was derived. It is only when such declaration is made, the question of substantiating such disclosure or claim would arise. If, as in the present case, the Revenue failed to question the assessee while recording his statement under section 132(4) of the Act as regards the manner of deriving such income, the Revenue cannot jump to the consequential or later requirement of substantiating the manner of deriving the income. In the context of the requirement of the assessee specifying the manner of deriving the income the decision of this Court in case of Commissioner of Income Tax vs. Mahendra C. Shah (supra) would hold the field even in the context of sub-section (2) of section 271AAA of the Act. It is only when the officer of the raiding party recording the statement of the assessee under section 132(4) of the Act elicits a response from the assessee’s this requirement, the assessee’s responsibility to substantiate the 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.”

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In view of the facts and circumstances of the case when the disclosure was not made during the search and seizure action and in the statement recorded under section 132(4) and by following the decision of Hon’ble Gujarat High Court in the case of Mukesh Bhai Raman Lal Prajapati (supra), the provisions of section 271AAA are not attracted for levy of penalty in respect of the disclosure of income made by the assessee in the statement recorded under section 131 of the Act. Accordingly, we delete the penalty levied by the AO under section 271AAA for both the assessment years. 6. In the result, appeals of the assessee are allowed.

Order pronounced in the open court on 03/05/2018. Sd/- Sd/- ¼ HkkxpUn½ ¼ fot; iky jkWo ½ (BHAGCHAND) ( VIJAY PAL RAO ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated :- 03/05/2018. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- P.C. Jain & Sons HUF, Jaipur. 2. izR;FkhZ@ The Respondent-The ACIT Central Circle-2, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 927 & 928/JP/2017} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

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