SANJAY MANAKCHAND KOTECHA,,JALGAON vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER

PER S.S. VISWANETHRA RAVI, JM :

Both these appeals by the assessee against separate orders dated 22-12-2015 and 23-12-2015 passed by the Commissioner of Income Tax (Appeals)-12, Pune, [„CIT(A)‟] for assessment years 2011-12 and 2012-13.

ITA No.435/PUN/2016, A.Y. 2011-12 2. The ground No.1 raised by the assessee is general in nature. The ground Nos.2 to 4 raised by the assessee are similar on same identical

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facts with grounds raised in ITA No.203/PUN/2016 in the case of Dellip V. Kotecha for A.Y. 2011-12. There is no dispute by both the parties that the issues raised in this appeal are identical to the issues in the case of Dellip V. Kotecha. The relevant issue in the case of Dellip V. Kotecha is discussed in para Nos.9 to 11 in ITA No.203/PUN/2016 for A.Y. 2011-12 is reproduced herein below: “9. Ground of appeal no.2 and 3 challenges the decision of the ld. CIT(A) in upholding the action of the Assessing Officer in making the addition of Rs.1,38,38,000/- on account of expenditure incurred out of undisclosed sources and Rs.6,20,00,000/- as investments out of undisclosed sources. The ld. AR submitted that the loose sheets found as result of search and seizure actions cannot form the basis for making the assessment and without bringing on record any corroborative evidence, the Assessing Officer was not justified in making the addition of Rs.1,38,38,000/- and Rs.6,20,00,000/- as unexplained expenditure as well as investments made out of undisclosed sources. He submitted that the cash had found and seized of Rs.32,00,000/- was not given credit against the tax liability determined. 10. On the other hand, ld. CIT-DR on merits of the addition, submitted that the assessee had failed to explain the source of unexplained investments of Rs.1,38,38,000/- and Rs.6,20,00,000/- as unexplained expenditure. Therefore, he submitted that the lower authorities were justified in drawing adverse inference against the assessee. 11. We heard the rival submissions and perused the material on record. As regards to the addition of Rs.1,38,38,000/-, the ld. AR submitted that the impugned addition was made based on the loose papers found and seized from the residential premises of the appellant as a result of search and seizure operations. We have carefully gone through the said loose documents which is also extracted by the Assessing Officer vide para no.8 of the assessment order, wherein, the documents dated 31.01.2011 indicates total payment of Rs.1,38,38,000/-. Obviously contents of the notings clearly indicate the payment of interest which means the appellant either repaid the loan with interest or made advance of loan for interest. Notings found therein represents the unexplained income out of which the loan or advance was made warranting addition under the provisions of section 69 of the Act. When this information/material was confronted to the appellant, the appellant had failed to explain the contents of the documents. Therefore, the Assessing Officer was justified in making the addition. Thus, we confirm the addition of Rs.1,38,38,000/-. Thus, the ground of appeal no.2 raised by the appellant stands dismissed. Similarly, as regards to the addition of Rs.6,20,00,000/-, the ld. AR submitted that this addition is based on the contents of page no.62 found and seized during the course of search and seizure operations marked as Annexure- A/5. We have carefully gone through the said page which is

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placed at page no.33 of the Paper Book, which clearly indicates the receipts and payments made in connection with the purchase and sale of share of M/s S.V. Electricals and it reflects the name of Shri Deelip V. Kotecha, the appellant before us, had paid cash of Rs.6,20,00,000/- to the agent involving in booking of accommodations entries. The ld. CIT(A) had clearly narrated the transaction that would have taken place the findings recorded by CIT(A) remains uncontroverted by the appellant. When this matter was confronted to the appellant, he gave vague answers and, therefore, presumption created u/s 132(4A) remains un-rebutted. In the circumstances, the lower authorities were justified in making the addition as undisclosed investments u/s 69 of the Act. Thus, the ground of appeal no.3 raised by the appellant stand dismissed.”

ITA No.436/PUN/2016, A.Y. 2012-13 4. The ground No.1 raised by the assessee is general in nature. The ground Nos.2 and 3 raised by the assessee against the order of CIT(A) in confirming the penalty imposed by the Assessing Officer (AO) u/s 271AAA of the Act. Both the parties are in agreement that the issue relating to levy of penalty u/s 271AAA of the Act is similar to the grounds raised in ITA No.1494/PUN/2015 for A.Y. 2012-13. This Tribunal discussed the issue of confirming the penalty imposed by the AO u/s 271AAA of the Act from paras 21 to 25 in ITA No.1494/PUN/2015 of which is reproduced herein below:

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“21. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the levy of penalty u/s 271AAA of the Act. The provisions of section 271AAA provides that in a case where the search has been initiated u/s 132 on or after first day of June, 2007 but before the first day of July, 2007, the Assessing Officer shall levy the penalty, in addition of tax at the rate of 10% of the undisclosed income. Sub- section (2) of section 271AAA provides that no penalty shall be levied u/s 271AAA in a case where the assessee, during the course of statement recorded under sub-section (4) of section 132 admits undisclosed income, substantiate manner in which the undisclosed income was derived, the tax together with interest on such undisclosed income was paid. We have carefully gone through the statement recorded during the course of search and seizure operations u/s 132(4), wherein, in reply to question no.3 recorded u/s 132(4) the appellant had agreed to disclose a sum of Rs.1 crore voluntarily in the name of all family members and business concern of family members for the assessment year under consideration. There was no query posed by the Investigation Officer as to the manner in which the undisclosed income offered by the assessee. Reference can be made on the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah, 299 ITR 305 (Guj.) and the decision of the Hon’ble Allahabad High Court in the case of CIT v. Radha Kishan Goel, 278 ITR 454 (All.). 22. In such circumstances, the Hon’ble Gujarat High Court and the Hon’ble Allahabad High Court took a view that conditions stipulated u/s 271AAA stands satisfied and question of levy of penalty u/s 271AAA does not arise. When there is no specific query was raised to the assessee during the course of statement recorded u/s 132(4), as to the manner in which the undisclosed income was derived, the Assessing Officer is not justified in imposing the penalty u/s 271AAA of the Act. However, the Hon’ble Delhi High Court in the case of Smt. Ritu Singal (supra) considering the above two decisions of the Hon’ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah, 299 ITR 305 (Guj.) and the decision of the Hon’ble Allahabad High Court in the case of CIT v. Radha Kishan Goel, 278 ITR 454 (All.) and the decision of the Hon’ble Supreme Court in the case of (i) ACIT vs. Gebilal Kanhaialal HUF, 348 ITR 561 (SC) and (ii) MAK Data P. Ltd. vs. CIT, 358 ITR 593 (SC) held that since the assessee did not satisfy in such proceedings as to how an assessee derived undisclosed income and under what head it fell in, it cannot be said that the he had fulfilled requirements of section 271AA of the Act vide para 14, 15 and 16 held as under :- “14. In construing Section 271AAA one must not lose sight of its essential purpose which resulted in its enactment. There is a penalty at the rate of 10% of the undisclosed amount declared, if the conditions in Section 271AAA (2) are not met with. This is quite different from the penal provision under Section 271 (1) (c) of the Act, which directs that if income is concealed or inaccurate returns are filed, which are disallowed by the AO, the penalty shall be "three times the amount of tax sought to be evaded". In the case of amounts disclosed during the course of search, the penalty amount is only ten percent of the undisclosed income. Parliament has, therefore, given a different treatment to the latter category. At the same time, if an assessee were to successfully urge the "escape route" so to say, of Section 271AAA (2), all three conditions mentioned in the provision, (as held in Gebilal Kanhaialal's case (supra) in respect of pari material

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provisions) have to necessarily be fulfilled. In the preset case, the assessee, while declaring the "undisclosed income" also stated, that "the surrender is being made subject to no penal action of Section 271 (1) (c)". 15. While dealing with a case of similar surrender- but made in the course of survey proceedings, by an assessee (which led to imposition of penalty), the Supreme Court, in Mak Data (P) Ltd. v CIT [2013] 38 taxmann.com 448/358 ITR 539 held as follows: '7. The AO, in our view, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to 271 raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise. 8. Assessee has only stated that he had surrendered the additional sum of Rs.40,74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defences under the explanation 1 to 271 (1) (c) of the Act. It is trite law that the voluntary disclosure does not release the Appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty. 9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16-12- 2003, in the case of a sister concern of the assessee.' 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 advanced were undisclosed income. However, she did not specify how she derived that income and what head it fell in (rent,

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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 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.” 23. Thus, we find that there is a clear cleavage of judicial opinion among above three High Courts. In the circumstances, the Hon’ble Jurisdictional High Court in the case of CIT vs. Thana Electricity Supply Ltd., 206 ITR 727 held that it is satisfaction of the Court interpreting the law, language of the taxing provisions ambiguous or capable of more meaning than once which is material. If the court does not think so, the fact that two different opinions have been expressed by the parties or accepted by some Tribunal or High Court by itself not been sufficient to attract the principle of beneficiary interpretation. The relevant para of the Hon’ble Bombay High Court’s decision in the case of CIT vs. Thana Electricity Supply Ltd., 206 ITR 727 is reproduced hereunder :- “Before we proceed to decide the question of law referred to us on the merits, it is necessary also to decide the second submission of learned counsel for the assessee that on interpretation of section 33(6) of the Act, even if this court takes a view which is against the assessee, in view of the fact that the Tribunal has taken a view in favour of the assessee and the Calcutta High Court has also taken a view in its favour we should adopt a view beneficial to the assessee following the decisions of the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 and CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 . We have considered the submission. We have also carefully considered the decisions of the Supreme Court. We, however, find it difficult to accept this submission, as in our opinion, the observations of the Supreme Court in those decisions have been stretched too far. The Supreme Court in CIT v. Vegetable Products Ltd, [1973] 88 ITR 192 (at page 195), merely observed : "If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty." Similarly, in CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 , at page 240, the Supreme Court had observed as follows : "If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee, has got to be accepted. This is a well-accepted view of law." The above observations will be applicable only if the court which is called upon to decide the issue is satisfied that two views are reasonably possible, one of them being favourable to the assessee. As observed by the Supreme Court in Escorts Ltd. v. Union of India [1993] 199 ITR 43 (at page 60) :

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"In our view, there was no difficulty at all in the interpretation of the provisions. The mere fact that a baseless claim was raised by some over-enthusiastic assessees who sought a double allowance or that such claim may perhaps have been accepted by some authorities is not sufficient to attribute any ambiguity or doubt as to the true scope of the provision. ..." It is, therefore, clear that it is the satisfaction of the court interpreting the law that the language of the taxing provision is ambiguous or reasonably capable of more meanings than one, which is material. If the court does not think so, the fact that two different views have been advanced by parties and argued forcefully, or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation. In the instant case, as we are not satisfied with the interpretation given by the Tribunal or the Calcutta High Court to section 33(6) of the Act, in our opinion, accepting those decisions by applying the test of beneficial interpretation does not arise.” 24. We now turn to the facts of the present case. It is admitted position that the appellant during the course of giving statement u/s 132(4) had not disclosed the manner in which the undisclosed income had been derived and its substantiation nor was there any query posed by the Investigating Officer of the Department during recording of such statement. We have carefully gone through the provisions of section 271AAA which clearly stipulates that in case search had been initiated u/s 132 on or after 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income. Sub-section (2) of the said provisions carves out the exceptions to the said provisions of section 271AAA in the following circumstances :- “(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.” 25. Admittedly, in view of the fact that the assessee had failed to disclose the manner in which the undisclosed income has derived and its substantiation, the requirements stipulated in sub-section (2) of section 271AAA does not stand specified. There is nothing in the provisions of section 271AAA to say that an assessee is required to disclose the manner in which the undisclosed income is derived and its substantiation only on a query posed to him by the Investigation Officer. Such construction only amount to adding words to the statute which is not a permissible rule of interpretation. In view of this, we find it difficult to agree with the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah, 299 ITR 305 (Guj.) and the decision of the Hon’ble Allahabad High Court in the case of CIT v. Radha Kishan Goel, 278 ITR 454 (All.). In our considered opinion, the decision of the Hon’ble Delhi High Court in the case of Smt. Ritu Singal (supra) is more reasoned and considered decision and, therefore, we

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prefer to follow the view of the Hon’ble Delhi High Court in the case of Smt. Ritu Singal (supra) and, accordingly, uphold the levy of penalty u/s 271AAA of the Act.”

Order pronounced in the open court on 15th June, 2022.

Sd/- Sd/- (Inturi Rama Rao) (S.S. Viswanethra Ravi) ACCOUNTANT MEMBER JUDICIAL MEMBER पपणे / Pune; ददनधंक / Dated : 15th June, 2022. GCVSR आदेश की प्रनतनलनप अग्रेनषत / Copy of the Order forwarded to : अपऩलधथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(A)-12, Pune Nashik-3 4. The PCIT-Central, Nagpur 5. DR, ITAT, “B” Bench, Pune. गधर्ा फ़धइल / Guard File. 6. आदेशधनपसधर / BY ORDER, //True Copy//

वरिष्ठ निजी सनिव / Sr. Private Secretary आयकि अपीलीय अनिकिण ,पुणे / ITAT, Pune