SH. ROSHAN LAL JINDAL,CHANDIGARH vs. DCIT, CC-1, CHANDIGARH

आदेश/ORDER Per Sanjay Garg, Judicial Member :

The present appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-3, Gurgaon (in short CIT(A) dated 29.8.2017, upholding the penalty levied u/s 271AAA of the Income Tax Act, 1961 (in short ‘Act’).

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u/s 271AAA of the Act on cash surrendered during search

conducted on the assessees u/s 132 of the Act.

out at the residential and business premises of Jindal Group of

cases of Panchkula on 15.7.2008 and the assessee was one of

the persons covered under the search action. During the year

under consideration, the assessee had surrendered an

additional income of Rs.38,87,500/- on account of the following

assets/documents:-

(i) Cash found from the residential premises of the assessee group amounting to Rs.11 lacs. (ii) Pages 54 to 59, of Annexure A-10 of Delta-I, amounting to Rs.60,000/-. (iii) Capital introduced in firms and purchase of shares of companies amounting to Rs.19,77,500/-. (iv) Jewellery amounting to Rs.7,50,000/-. 4. The above surrender was disclosed in the return of income

filed by the assessee and was accepted by the Revenue also.

However, penalty u/s 271AAA was initiated and thereafter

levied for the reason that the assessee had failed to

substantiate the manner in which the undisclosed income had

been earned by him.

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followed the decision of ITAT Chandigarh Bench in the case of

DCIT Vs. Shri Sanjeev Goyal in ITA No.109/Chd/2015 for

assessment year 2011-12, as per which if the assessee had

disclosed income while giving statement u/s 132(4) during the

course of search and paid tax thereon and showed the said

undisclosed income in the return under the head “Income from

Business” no penalty u/s 271AAA was leviable . In view of the

aforesaid decision, surrender of cash of Rs.11 lacs, the

Ld.CIT(A) held that as per the decision of the Hon'ble

Jurisdictional High Court in the case of Kim Pharma Pvt. Ltd.

Vs. CIT (P&H) (2003) 258 CTR 458, the same was assessable as

deemed income of the assessee u/s 69A of the Act and not

business income and since no explanation with regard to the

same has been furnished, penalty u/s 271AAA on the same was

upheld. The relevant findings of the Ld.CIT(A) at para 5- 5.4 of

his order are as under:

“5. Decision:- I have considered the basis of penalty imposed by the AO and the submissions made by the AR of the appellant. The perusal of the provisions of the section 271AAA make it clear that the penalty can be levied on undisclosed income of the specified year if the conditions specified in the sub-section (2) of section 271AAA are not satisfied. It, therefore, follows that first thing to determine is what is the amount of undisclosed income under the given circumstances. The concept of undisclosed income has been clearly defined by Explanation to section 271AAA. However, the AO has imposed the penalty on the

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ground that the appellant had not substantiated the manner in which the income was earned. 5.1 The AO has made following observations in this case: (i) The assessee made a surrender of Rs. 38,87,5007- for the year under consideration. (ii) This disclosure was declared in the return of income. (iii) The assessee failed to substantiate the manner in which the income has been earned. (iv) In view of the same, penalty u/s 271AAA was imposed. 5.2 The appellant during the appellate proceedings has submitted as follows:- (i) The appellant admitted the undisclosed income of Rs. 38,87,500/- during the year under consideration and disclosed the same in return filed. (ii) The income tax alongwith interest was paid on this surrendered amount. (iii) The appellant has substantiated the manner of earning undisclosed income. 5.3 I have gone through the order of Hon'ble ITAT, Chandigarh Bench in case of DCIT vs Shri Sanjeev Goyal ITA No. 109/Chd/ 2015 for AY 2011-12 referred to by the appellant and the relevant part of the judgment is as follows:- "9. The undisputed facts in the present case are that during the course of search and seizure operations u/s 132, the assessee had surrendered an amount of Rs. 1,50,00,000/-. It is also not in dispute that assessee had attributed this income as being derived from speculative dealings in commodities outside the books of accounts. It is I further not in dispute that the assessee had disclosed the surrendered income in its return of income and paid the taxes thereon. In the above factual background, it is to seen whether penalty u/s 271AAA is leviable.

It is the contention of the Revenue that though admittedly, the assessee has surrendered an income of Rs. 1,50,00,000/- during

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the course of search and seizure operation, disclosed the manner of earning the same being from speculative dealings in commodities and also disclosed the income in its return of income, the assessee had not substantiated the manner of earning the undisclosed income and hence not fulfilled all the conditions specified u/s 2 71AAA for grant of immunity from penalty.

The issue therefore is whether admission of undisclosed income and a description of the nature of the same could be treated as compliance with the condition of specifying and substantiating the manner in which the undisclosed income is earned as required by the section 271AAA(2)(i)and (ii).

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notice under section 153A and which returns have been accepted by the AO, levy of penalty under section 271AAA was not justified on the ground that the assessee has though made disclosure but failed to specify the manner in which such income had been derived. Hon'ble Tribunal further held that no definition could be given to the 'specified manner' and there is no prescribed method given in the statute to indicate the manner in which income was generated.

It has been held in the case of Ashok Kumar Sharma v Dy. CIT [2013] 33 taxmann.com 652 (Ctk) that when assessee disclosed concealed income while giving statement under section 132(4) during the course of search and paid tax thereon and showed the said undisclosed income in the return under the head "Income from business" and which undisclosed income has been accepted by the Department, penalty under section 271AAA is not leviable.

5.4 In view of the facts of the case, submissions made by the appellant and judicial pronouncement of the Hon'ble ITAT Chandigarh on this issue discussed above, it is held that the appellant has specified and substantiated the manner of earning the income with regard to following income disclosed:-

(i) Capital introduced in firms and purchase of shares of companies amounting to Rs.19,77,500/-.

(ii) Documents page 54-59 of annexure A-10 of delta 1 amounting Rs. 60,000/-

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However with regard to disclosure on account of cash found from residential premises of the assessee group amounting Rs. 11,00,000/-, it is held that manner of earning this income-has not been specified and substantiated because:- (i) Cash of Rs. 11 lakh surrendered by the appellant was part of Rs. 44 lakh cash surrendered by the assessee group vide letter dated 22.07.2008 and it was in the surrender letter itself stated as unexplained cash found in residential premises during search operations.

It has been held by the Hon'ble Jurisdictional High Court in the case of Kim Pharma (P) Ltd vs CIT (P&H) [2013) 258 CTR 458 that where amount surrendered during survey was not reflected in books of accounts and no source from where it was derived was declared by the assessee, it was assessable as deemed income of assessee u/s 69A and not business income.

In view of the above referred judgement, cash found is held as unexplained as no from which it is derived. Thus, with regard to the same, it is held that the appellant has not specified and substantiated the manner of earning income during the course of search and hence Penalty u/s 271AAA of the Act is leviable on this amount.

Similarly, the appellant has also not specified and substantiated the manner of earning income invested in jewellery amounting Rs.7,50,000/- nor was the disclosure of the same made by the appellant in statement u/s 132(4) of the Act, during the course of search. In view of the same, penalty u/s 271AAA is leviable on this amount also.

In view of the above discussion, penalty u/s 271AAA amounting to Rs.1,85,000/- related to surrender related to cash and jewellery amounting to Rs.18,50,000/- is confirmed and the appellant gets relief on the balance amount. 6. As a result, appeal of the appellant is partly allowed.” 6. Aggrieved by the same, the assessee has come up in

appeal before us, raising the following grounds:

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“1 That the Worthy Commissioner of Income Tax (Appeals)-3, Gurgaon has erred in upholding penalty amounting to Rs.1,85,000/- relating to surrender of cash found during the course of search from the residential premises of the assessee group and jewelery amounting to Rs.18,50,000/-. 2. That the Worthy CIT (A)-3, has erred in holding that with regard to cash found during search and jewellery, the appellant has not specified and substantiated the manner of earning the income during the course of search and hence penalty u/s 271 AAA of the Act is leviable on this amount. 3. That the Worthy CIT (A) while confirming the penalty u/s 271AAA with regard to cash found during the search and jewellery, has erred in assessing the income of assessee as deemed income u/s 69A and not business income by following the judgment of Jurisdictional High Court in the case of M/s Kim Pharma (P) Ltd. vs CIT (P&H) (2013) 258 CTR 458. 4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.” 7. During the course of hearing before us, the Ld. counsel for

assessee stated that the CIT(A) had upheld the levy of penalty

on cash for the reason that the same was assessable as deemed

income u/s 69A of the Act and not business income as per the

decision of the Hon'ble Jurisdictional High Court in the case of

Kim Pharma Pvt. Ltd.(supra). The Ld. counsel for assessee

stated that this finding of the Ld.CIT(A) was contrary to the

facts of the case since the surrender made on account of cash

had not been assessed as deemed income u/s 69A of the Act

but had been accepted alongwith the other income surrendered

by the assessee, penalty on which had been deleted by the

CIT(A).

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time relied on the findings of the CIT(A) that the assessee had

not been able to specify and substantiate the manner of

earning the cash surrendered and therefore penalty u/s

271AAA had been rightly upheld by the CIT(A).

gone through the order of the CIT(A). A similar issue had come

up before the ITAT Chandigarh Bench in the cases of Shri

Ashok Jindal Vs. DCIT & Others in ITA No.1556/Chd/2017 &

Shri Amit Jindal Vs. DCIT in ITA No.1557/Chd/2017 (Jindal

Group of cases), dated 15.10.2018 and the Tribunal vide

consolidated order allowed the appeal of the assessees. The

relevant findings of the Tribunal in para 9 are reproduced as

under:

“9. We have considered the rival contentions and have also gone through the order of the CIT(A).Undisputedly the entire surrender made by the assessee on account of capital introduced in firms, documents found and cash , amounting in all to Rs.54,87,500/- was accepted and assessed to tax by the Revenue. All taxes thereon had been paid. Admittedly, no portion of the surrender had been assessed separately under any other head. Therefore the decision of the ITAT in the case of Sanjeev Goyal (supra) applied to the entire surrender made, and the CIT(A), we hold had wrongly segregated the surrender made on account of cash by stating that the same was

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assessable u/s 69A of the Act, when the fact was that it had not been so assessed. In fact on going through the order of the ITAT in the case of Sanjeev Goyal (supra) we find that it has been held in the said case that the disclosure of income u/s 132(4) during search having been made and the assessee having surrendered the same and included the same in the returns filed which have been accepted by the Revenue, no penalty u/s 271AAA is leviable for not specifying the manner of earning the income surrendered. All the aforesaid conditions admittedly stood fulfilled in the case of surrender made on account of documents found and capital introduced in the firm ,as per the CIT(A). The cash was also part of the same surrender and no distinction has been brought out of the same with the rest of the surrender made. We therefore hold that there was no basis for upholding the levy of penalty on the cash surrendered and the same is therefore directed to be deleted. The appeal filed by the assessee is, therefore, allowed.” 10. The issue involved in this appeal is squarely covered by

the above findings of the Tribunal, following which, we delete

the penalty upheld by the CIT(A). and allow the appeal of the

assessee.

therefore, allowed.

Order pronounced in the Open Court on 06.05.2019.

डा. बी.आर.आर. संजय गग� (Dr.B.R.R.Kumar) (SANJAY GARG ) लेखा सद�य उपा�य�/Accountant Member �याय�क सद�य/ Judicial Member

�दनांक /Dated: 6th May, 2019 *रती*

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आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar