THE DCIT, CENTRAL CIRCLE-3(1), BARODA vs. SHRI BHAVANBHAI RUKHABHAI BHARWAD, BARODA

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ITA 166/AHD/2017Status: DisposedITAT Ahmedabad03 December 2018AY 2012-134 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee had broadly specified the manner of earning the undisclosed income and fulfilled the conditions of Section 271AAA(2). Therefore, the penalty levied by the AO was deleted by the CIT(A) and the Revenue's appeal was dismissed.

What were the facts?

During a search operation, the assessee declared unexplained income of Rs. 2.50 Crores which was offered for taxation. The Assessing Officer (AO) initiated penalty proceedings under Section 271AAA for failure to substantiate the manner in which the income was earned.

What were the issues?

Whether the assessee fulfilled the conditions under Section 271AAA(2) to be absolved from penalty, specifically regarding specifying and substantiating the manner of deriving undisclosed income.

Which sections of the Income-tax Act were involved?

Section 271AAA,Section 132(4),Section 253

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMADABAD

Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH

Hearing: 05/12/2018

PER : Rajpal Yadav, Judicial Member

The Revenue is in appeal before the Tribunal against the order of the learned CIT(A)-12, Ahmedabad, dated 25.10.2016 passed for A.Y. 2012-13. On receipt of notice in the Revenue’s appeal, assessee has also filed Cross Objection bearing no. 30/Ahd/2017.

ITA No.166/Ahd/17 with CO No. 30/Ahd/2017 A.Y.2012-13 (DCIT vs. Shri Bhavanbhai R. Bharvad) Page 2

2.

The grievance of the Revenue is that learned CIT(A) has erred in deleting the penalty of Rs.25Lakhs levied under s.271AAA of the Income Tax Act.

3.

The brief facts of the case are that a search and seizure operation was carried out on 09th August, 2011 in the Anil Bholabhai Patel Group of cases. The assessee was also covered in the search action. Statement of Shri Anil Bholabhai Patel was recorded under s.132(4) of the Income Tax Act. He has declared an unexplained income of Rs.35 Crores on behalf of the Firms and other group members. The other group members concurred with his statement and undertaking. Thus, a sum of Rs.2.50Crore was allocated to the assessee as unexplained income which was offered for taxation. The AO has accepted the declaration made by the assessee and inclusion of this amount in return of income. However, he initiated the penalty proceedings under s.271AAA of the Income Tax Act. According to the AO, the assessee failed to substantiate the manner in which income was earned and therefore, he levied penalty under s.271AAA of the Income Tax Act.

4.

Dissatisfied with the levy of penalty, assessee carried the matter before the CIT(A). The learned CIT(A) satisfied with the explanation of the assessee that he has fulfilled all the conditions of sub-clause (2) of Section 271AAA of the Income Tax Act. The learned CIT(A) has deleted the penalty.

5.

With the assistance of learned representatives, we have gone through the records carefully. Sub-section (1) of Section 271AAA contemplates that penalty @ 10% will be levied upon an assessee in addition to tax, if any payable by him on undisclosed income of the specified previous year. Explanation to this Section gives meaning of unexplained income as well as specified years.

ITA No.166/Ahd/17 with CO No. 30/Ahd/2017 A.Y.2012-13 (DCIT vs. Shri Bhavanbhai R. Bharvad) Page 3

There is no dispute about these terms in the present case. The dispute is that sub-section (2) carved out exceptions which absolve the assessee from levy of penalty under s.271AAA of the Act. These conditions read as under:

“(2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) In the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income.”

As far as fulfillment of conditions at 3 are concerned there is no dispute between the assessee and Revenue. The dispute relates with regard to condition nos. (i) & (ii). According to the AO, assessee failed to specify the manner in which such income has been derived and failed to substantiate that manner. A perusal of the record would indicate that income was earned from land transaction, capital gains etc. This was disclosed during the course of search. As far as substantiation of the manner is concerned, it was not asked during course of search nor during course of assessment proceedings. The learned first appellate authority has categorically recorded a finding that assessee has broadly specified the manner in which the undisclosed income has been earned and fulfilled the conditions. To our mind, learned first appellate authority has appreciated the controversy in right perspective and no interference is called for in the order of the CIT(A), hence appeal of the Revenue is dismissed.

6.

As far as cross objection is concerned, sub-section (iv) of Section 253 contemplates that on receipt of notice respondent can file cross objection within 30 days against any part of the impugned order. The cross objection is

ITA No.166/Ahd/17 with CO No. 30/Ahd/2017 A.Y.2012-13 (DCIT vs. Shri Bhavanbhai R. Bharvad) Page 4

maintainable if assessee is aggrieved with any part of the impugned order. We find that assessee has not expressed his grievance against any part rather cross objection has been filed in support of CIT(A)’s order which is no maintainable, hence, this cross objection is also dismissed.

7.

In the result, appeal of the Revenue as well as cross objection of the assessee is dismissed.

This Order pronounced in open Court on 05/12/2018

Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 05/12/2018 True Copy S.K.Sinha आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ� / Appellant 2. ��यथ� / Respondent 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

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