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Income Tax Appellate Tribunal, INDORE BENCHE, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: This is an appeal filed by the Revenue against the order of CIT(A)-I, Indore dated 29/09/2014 pertaining to assessment year 2009-10. The Revenue has raised following grounds of appeal:
Kalani Industries P. ltd.
“On the facts and in the circumstances of the case, the CIT(A):- (i) Erred while deleting penalty of Rs.1,52,28,000/- levied u/s 271AAA of the IT Act, in not appreciating the fact that the conditions laid down in sub-section (2) of section 271AAA were not fulfilled by the assessee while giving statement on oath u/s. 132(4) of the Act. (ii) Erred in not appreciating the fact that the assessee has failed to furnish assessee-wise break-up of undisclosed income surrendered during the course of search and seizure operation in the group cases. (iii) Erred in not appreciating the fact that the assessee while giving statement u/s 132(4) during the course of search had failed to substantiate the manner through which the undisclosed income was earned.”
Only effective ground in this appeal is against deleting the penalty of Rs.1,52,28,000/- u/s. 271AAA of the Income Tax Act 1961( hereinafter called as ‘the Act’). 3. Briefly stated the facts are that a search action was carried out at the assessee’s business premises on 16.04.2009. Subsequently, proceedings u/s 153A of the Act was initiated and assessment u/s 143(3) r.w.s. 153A of the Act was framed. During the course of assessment, the assessing officer initiated proceedings u/s 271AAA of the Act in respect of unaccounted income of Rs.15,22,80,000/-. Subsequently, vide penalty order dated 29.06.2012 the Assessing Officer imposed the penalty at 2
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10% of undisclosed income of Rs.15,22,80,000/-. Hence, penalty in sum of Rs.1,52,28000/- was imposed.
Aggrieved against this the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions deleted the penalty. 5. Ld. Departmental Representative (DR) vehemently argued that the Ld. CIT(A) was not justified in deleting the penalty. He submitted that the Ld. CIT(A) failed to appreciate the fact that the assessee failed to state in the statement recorded u/s 132(4) about the manner in which income was derived and also substantiate the same. He submitted that the law is clear. There is no ambiguity under the law therefore, the liberal interpretation of the provision is not to be adopted. The Ld. DR has placed reliance on the judgment of Hon'ble Supreme Court rendered in the case of IPCA Laboratory Ltd. vs. Deputy Commissioner of Income Tax 266 ITR 521 and also in the case of CIT vs. N.C. Budharaja & CO. 204 ITR 412 (SC) further reliance is placed on the judgment of Hon'ble High Court of Delhi in the case of Pr. CIT vs. Smt. Ritu Singal 403 ITR 97(Del).
Kalani Industries P. ltd.
On the contrary Ld. Authorized Representative of the assessee supported the order of the ld. CIT(A). He submitted that during the course of recording of statement it was duly stated about the manner of undisclosed income was derived and substantiate, therefore, the ld. CIT(A) has rightly deleted the penalty. The ld. counsel further submitted that the case laws as relied by the Ld. DR is not applicable on the facts of the present case. He reiterated the submissions as made in the written submissions. 7. We have heard the rival contention and perused the relevant material record and gone through the orders of the authorities below. The basis of levy of penalty u/s 271AAA is recorded by the AO is stated as under: “5.1.2 Still proceeding further in the matter it would be pertinent to mention that the assessee had given the details of unaccounted income and its manner of earning the income only vide his letter dated 08.12.2012 during the course of assessment proceedings under section 153A of the I.T. Act. From entire sequence of events it is quite evident that the assessee had not made the disclosure of the undisclosed income u/s 132(4) referred above within the periphery of the provisions of sub-section (2) to section 271AAA of the I.T. Act to get immunity from the penalty under this section. Thus the assssee had not fulfilled all the pre-requisite conditions specified in sub- section (2) of section 271AAA of the I.T. Act of the I.T. Act. Therefore, it would rather be incorrect on the part of 4
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the assessee to assert that her case was fully covered within the parameters of the provisions of sub-section (2) of section 271AAA of the I.T. Act. In view of this assessee’s aforesaid argument is found to be devoid of any merit. 5.2 As regard the assessee’s much reliance on the Hon'ble I.T.A.T. Kolcutta’s order in ITANo.1326/Kol/2011 in the case of DCIT Central Circle III Kolcutta vs. Pioneer Marbles & Interiors Pvt. Ltd. it would suffice to say the facts of this case are entirely different to that of assessee. In this context it would be pertinent to mentioned that in the aforesaid case, the assessee had not made the payment of taxes on the admitted undisclosed income within a specified time. Contrary to this in the instant case the issue is with regard to the non-disclosure of undisclosed income u/s 132(4) of the I.T. Act r.w.s. 271AAA of the I.T. Act as discussed in the preceding para. Hence the ratio of the decision as relied upon by the assessee in the aforesaid case is not applicable here.” However, the ld. CIT(A) deleted the penalty by giving finding on fact as under: “5. In this case the only reason given by AO for imposition of penalty u/s 271AAA is that disclosure of unaccounted income of Rs.30 Crores was made by the appellant during search, in a statement recorded u/s 132(4) of the Income Tax Act, but bifurcation of such unaccounted income and its manner of earning was given later vide letter dated. 13.10.2009. Therefore, disclosure of income of Rs.15,22,80,188/- made by the appellant for A.Y. 2009-10, through this letter dated 13.10.2009 could not be said to be discussed in a
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statement recorded during search u/s 132(4) of the Income Tax Act. 6. The basis of levy of penalty u/s 271AAA of the Income Tax Act, is not at all justified. There is no dispute that appellant disclosed additional income of Rs.30 crores in a statement recorded during search u/s 132(4) of the Income Tax Act. Only the bifurcation of such disclosure year wise and party wise, was furnished later. In that bifurcation, an amount of Rs.15.22 crores was disclosed for the year under consideration. The AO has accepted the same amount of disclosure of Rs.15.22 crores, without any further addition. There is also no dispute that such income was duly incorporated in the return filed u/s 153A of the Income Tax Act and tax and interest on such disclosed income was duly paid before passing of this order. Such income was stated to be earned from appellant’s business. Hence conditions laid down u/s 271AAA(2) of the Income Tax Act were fulfilled and penalty u/s 271AAA of the Income Tax Act, was therefore not attracted in the present case. In this regard reliance is placed on decisions in cases of Concrete Developers (3013) 22 ITJ 103 (Nagpur Tribunal) and M/s Pioneer Marbles and Interiors P. Ltd. (income Tax A. No.1326/Kol/2011). The levy of penalty of Rs.1,52,28,000/- u/s 271AAA is hereby deleted.”
The ld. counsel for the assessee has pointed out that in the statement recorded u/s 132(4), assessee had stated in response to question No.10 that the amount has been derived from the business activities of the assessee. This fact is not rebutted by the Revenue by placing any adverse 6
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material on record. The judgment as relied by the Ld. Departmental Representative in support of the contention that provisions are construed as they are, if there is no ambiguity in interpretation of the same. The Ld. DR emphasized on the requirement of law u/s 132(4) of the Act that immunity would be available if the assessee in statement recorded u/s 132(4) during the course of search, admits the undisclosed income and specifies the manner in which such income has been derived. Further the assessee is required to substantiate the manner in which the undisclosed income was derived and pays the tax, together with interest, if any, in respect of the undisclosed income. The Ld. DR submitted that even if it is assumed that the statement u/s 132(4) recorded during the course of search stated the manner in which the undisclosed income was derived and also the tax had been paid thereon but nothing is on record suggesting that the assessee had substantiated the manner in which the undisclosed income was derived. He relied upon the judgment of Hon'ble Delhi High Court rendered in the case of CIT vs. Ritu Singal(supra). 9. We have given our thoughtful consideration to this argument of Ld. DR in the statement recorded u/s 132(4), 7
Kalani Industries P. ltd.
Shri Manish Kalani of the assessee company stated that additional amount of income of Rs.30,00,00,000/- to cover and represent any undisclosed income, receipts, discrepancy or disallowance or any valuable article or things, money jewellery, documents of paper found and seized during the search operation, such amount has been derived from our business activities. From the statement, it is clear that representative of the assessee company stated to have explained the manner in which income was derived. However, there is no material on record suggesting that the assessee has substantiated the manner in which income was derived as per section 132(4)(ii). Further, Ld. Counsel for the assessee submitted that no query was raised by the AO calling upon the assessee to substantiate the manner in which the income was derived. The Ld. counsel for the assessee submitted that in the cases of Smt. Padma Kalani, Smt. Manisha Kalani, Smt. Namita Kalani in ITA Nos.105 to 108/Ind/2014 under the identical facts this tribunal was placed to confirm the order of the Ld. CIT(A). He submitted that the case is squarely covered by the decision of this Tribunal in the case of DCIT vs. Smt. Padma Kalani L/H of late Shri Prem Swroop Kalani. We
Kalani Industries P. ltd.
find that this Tribunal in ITANo.105/Ind/2014 in the case of DCIT vs. Smt. Padma Kalani held as under: “We have heard the rival submissions and have gone through the orders of the lower authorities, and perused the material available on record. We find that during the course of search and seizure operation a statement under section 132(4) of the Act was recorded on 27.04.2009 from Shri Manish Kalani, wherein in reply to question No. 10 , he on behalf of all the individuals of Kalani family group and Kalani group of companies had made a disclosure of additional income of Rs. 30 Crores, by stating that this amount covers and represent any undisclosed income receipts , discrepancy or disallowances or any valuable article or things , money , jewellery, documents or papers found / or seized during the search operation. Such amount has been derived from our business activity. Accordingly, we will declare the amount/income in respective assessee` s return for the respective years as per and subject to deduction available under the provisions of Income Tax Act. Further, in continuation to this disclosure, Shri P. S. Kalani, main person of the group has filed a letter dtd. 13.10.2009 to Addl. DIT(Inv.) Indore for on behalf of the assessee and companies giving bifurcation of undisclosed income in the individuals hand and companies . The ld. CIT (A) appeal observed this letter was an extension of statement u/s. 132(4) recorded during search. We also of the view that the assessee has already disclosed undisclosed income in search proceeding and also specified manner in which the said income derived by claiming that said income was earned from business activities. Thus, the assessee had disclosed the income under section 132(4) 9
Kalani Industries P. ltd.
and disclosed the same in their return of income filed in response to notice under section 153A of the Act. We also note that the assessee has paid due taxes with interest thorn. It is also relevant to mention that the income declared by the assessee has been duly accepted by the AO and no addition has been made. In view of such circumstances, we are of the considered opinion that the assessee had duly fulfilled the condition laid down under section 271AAA (2) of the Act. We also find that the assessee made disclosure during search and specified manner in which income was earned in the statement under section 132(4) recorded from Shri Manish Kalani on behalf of the assessee group. Our view is also supported by decision of coordinated bench in the case of Shri Ashok Kumar Sharma vs. DCIT (2012)31 CCH310 (Cuttack-Trib)/77 DTR241/149 TTJ33 wherein it was held that ‘where the assessee has disclosed concealed income while giving statement u/s. 132 during course of search and paid tax thereon and showed said undisclosed income in return filed under head ‘income from business’’ and Department has accepted these returns and accordingly passed assessment orders. It is not a case of revenue that the assessee has not satisfied the manner in which income is derived and the assessee has not paid taxes with interest on undisclosed income. Therefore, case of assessees fall exactly within purview of sub-section (2) of S. 271AAA. Therefore, the provisions contained in sub-section (1) of Section 271AAA are not applicable. The Departmental Authorities have not considered this aspect of the issue and passed the impugned orders contrary to the provisions contained in Section 271AAA (2), they are not sustainable for legal scrutiny. Hence, we hereby set-aside the impugned orders of the 10
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authorities below and cancel the penalty levied u/s. 271AAA of I T Act in the cases of the assessee `s by allowing their appeals. In the light of above facts and judicial decisions as relied by the assessee, we do not find any infirmity of the orders of ld. CIT (A). Accordingly, all the appeals of the revenue in the above cases are dismissed. 8. In the result, appeal of revenue is dismissed.
In the present case that there is no dispute with regard to the fact that the assessee has stated the manner in which the undisclosed income was derived. It is also transpired from record that the AO has not made any query calling upon the assessee to substantiate the same. Ld. DR has relied upon the judgment of Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax vs. Smt. Ritu Singal (supra) wherein the Hon'ble High Court held as under: “16. That the income which was ultimately brought to tax pursuant to the disclosure made, which was voluntary on the part of the assessee is stating the obvious. The assessee merely stated that the sums advances were undisclosed income. However, she did not specify how she derived that income and what head it fell in (rent, capital gain, professional or business income out of money lending, source of the money etc.). Unless such facts are mentioned with some specificity, it cannot be said that the assessee has fulfilled the requirement that she, in her statement (under section 11
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132(4) “substantiates the manner in which the undisclosed income was derived”. Such being the case, this court is of opinion that the lower appellate authorities misdirected themselves in holding that the conditions in section 271AAA(2) were satisfied by the assessee.
However, in the present case the assessee has specifically stated that undisclosed income pertains to the business of the assessee. Therefore, in view of the Judgment of Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah (2008) 172 taxman 58. We do not seen any reason to disturb the finding of the Ld. CIT(A). Grounds of the revenue are dismissed.
In the result, the appeal of the Revenue is dismissed.
Order was pronounced in the open court on 17 .08.2018.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; �दनांक Dated : 17/ 08/2018 ctàxÄ? P.S/.�न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Private Secretary/DDO, Indore