SMT. TRIPAT KAUR,NEW DELHI vs. ACIT, NEW DELHI

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INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ―D‖: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur Vs. The Assistant A-29, Friends Colony, East Commissioner of Income New Delhi Tax PAN: AAAPK8020A Central Circle- 14 New Delhi (Appellant) (Respondent)

Assessee by : Shri Ved Jain, Advocate Ashish Goel & Ashish Chadha CAs Revenue by: Shri Amit Jain, Sr. DR Date of Hearing 25/07/2018 Date of pronouncement 09/10/2018

O R D E R PER PRASHANT MAHARISHI, A. M. 01. This appeal is filed by Smt. Tripat Kaur, (‗Assessee‘, ‗Appellant‘) against the order of The Commissioner Of Income Tax (Appeals) –XXVI , New Delhi ( ‗The CIT –A‘, ‗Commissioner Appeals‘ ) dated 23 March 2015 for A.Y. 2012 – 13 in not only confirming penalty levied u/s 271 AAA of the Income tax Act

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( The Act ) by the learned Assistant Commissioner of Income Tax, Central Circle -14 ( the ld AO ) of Rs. 30 lakhs but also further enhancing the same by Rs 23 Lakhs. In short, assessee is contesting total penalty levied of ₹ 53 lakhs in this appeal. 02. The brief facts are covered in a narrow compass. Search and seizure operation was carried out on Shri Parminder Singh Kalra of M/s Consortium Securities Private Limited and other associated concerns on 28/7/2011. The search at the premises of the assessee was also carried out, as she was Chief Executive Officer of Consortium Securities Private Limited. She was deriving income from house property, income from business of profession, capital gain and income from other sources. Besides, she is also in the business of purchase and sale of painting, artworks, sculptures etc. under the name and Style of ― M/s Gallerie Navya.‖ 03. In return of income filed for the year Assessee of Rs. 5, 89,56,260/–, she included ₹ 3 crores as her business income on account of valuation differences in the inventory

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valuation of artwork, painting and sculptures. Assessment proceedings resulted into an addition of ₹ 3,15,96,224/– on account of unexplained stock which was further reduced to ₹ 3,12,42,729/– on adjustment of valuation on account of price/ invoice . Assessment u/s 143 (3) of the act was passed on 31/3/2014 wherein income of the assessee was assessed at ₹ 6,05,52,484/– against the return filed of ₹ 5,89,56,260/- making an addition of unexplained stock of Rs. 15,96,224/- over and above disclosure of ₹ 3 crores in the return of income. Penalty notices u/s 271AAA of the Act was issued to the assessee as she has disclosed a sum of ₹ 3 crores voluntarily during the course of search and offered the same as income in her return of income. 04. In response to notice, assessee submitted reply on 9/7/2014. Assessee also submitted that a further reduction in the gross profit by 39.2% from the tag price should be granted and therefore application u/s 154 of the Act was moved which was summarily rejected.

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on account of unexplained cash and on account of jewelry found at the time of search, the learned assessing officer has levied penalty only on ₹ 3 crores and forgot to levy on Rs 2.30 crores. He further held that while passing the assessment order on 29/9/2014 in respect of undisclosed income offered during the course of search, the learned AO initiated penalty on total undisclosed income including Rs. 2.30 crores over and above Rs. 3 crores, however, while levying the penalty, she had erroneously not levied penalty on Rs. 2.30 crores. Therefore, he issued a notice for enhancement u/s 251 (2) of the act on 12/3/2015 giving an opportunity to the assessee to show cause why penalty order may not be further enhanced with respect to addition of Rs. 2.30 crores. The assessee did not submit any reply and therefore The Learned Commissioner Appeals proceeded to decide the issue on merits. He held that the appellant and her spouse declared a sum of ₹ 15.40 crores as their undisclosed income of which the share of the appellant was stated to be ₹ 6 crores. The disclosure of ₹ 6 crores were stated to comprise of

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a. Rs. 1.34 crores on account of unexplained cash, b. ₹ 96 lakhs on account of unaccounted jewelry and c. Rs. 3.70 crores on account of unexplained stock of artworks found at the time of search.

Out of the undisclosed income of ₹ 6 crores, the appellant declared only ₹ 5.30 crores in the return of income, which in turn was made up of ₹ 3 crores relating to stock discrepancy and Rs. 2.30 crores relating to unaccounted cash ( Rs 1.34 Crores ) and unexplained jewelry ( Rs 96 Lakhs) . He further held that disclosure of ₹ 3 crores is an undisclosed income and further sum of Rs. 2.30 crores representing cash and jewelry is also undisclosed income not recorded in the books of assessee on or before the date of search maintained in the normal course of business and nor has been disclosed before the date of search. Therefore, he held that the conditions specified in subsection (2) of section 271AAA are not met with in respect to ₹ 3 crores as well as with respect to Rs. 2.30 crores. Therefore he held that penalty at the rate of 10% is imposed on the undisclosed income of Rs 2.30 Crs over and

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above of 10% on ₹ 3 crores imposed by the learned AO. He supported his decision by the decision of the Hon‘ble Supreme Court in case of MakData private Ltd versus CIT [358 ITR 593] rendered in context of section 271 (1) (c ) of the act , where the assessee surrendered additional income claiming it is a voluntary disclosure to avoid litigation and buy peace etc. Consequently, he passed an appellate order where he confirmed the penalty of ₹ 30 lakhs on disclosure of Rs. 3 crores and further enhanced the penalty by Rs 23 lakhs on addition of undisclosed income not considered by AO for penalty of Rs 2.30 crores u/s 271 AAA of the act. Therefore, assessee aggrieved with the order of the learned commissioner appeals has preferred an appeal before us.

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(A). He further submitted that assessee has also paid the full tax on the disclosure. He further submitted that disclosure was made in the statement u/s 132 (4) of the act by the group and only the bifurcation of disclosure was given later on that too before the search officers. He therefore submitted that assessee has complied with all the conditions of subsection 2 and hence no penalty can be levied u/s 271AAA of the act. He further referred to the statement recorded on 20/9/2011 u/s 132 (4) of the act. He stated that in Q. No. 13 she has offered the cash amount of ₹ 10 lakhs to be seized which may be adjusted against the tax liability of the group as well as owning the disclosure of Rs 15.40 crores which is undisclosed income of the assessee. Further, it was also stated that no penalty proceedings could be initiated on the consolidated disclosure of the group/family of ₹ 15.40 crores. He further referred to the letter dated 28/11/2011 filed to show manner of the entire disclosure which has already been accepted by the learned AO. Therefore, according to him all the three

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conditions have been met by the assessee. Hence penalty u/s 271 AAA levied by the ld AO is erroneous. 08. With respect to the order of the learned CIT (A) , he submitted that that assessee has disclosed the manner in which the income has been derived and assessee has substantiated by the manner in which the undisclosed income was earned. He stated that it is explained in statement recorded on 20/9/2011 and as well as letter dated 28/11/2011. He further relied upon the several decisions to state that, if the searched person is not asked to substantiate the manner of earning undisclosed income during the course of the search or during the course of assessment proceedings, the burden cannot lie upon assessee to disclose it suo motto. He stated that if in the statement the revenue cannot demonstrate that assessee was asked the manner and required to substantiate the undisclosed income, penalty u/s 271AAA cannot be levied. He further submitted a paper book wherein the submission dated 9/7/2014 before the assessing officer was relied upon. He further referred to the copy of statement-recorded u/s 132

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(4) of the act of assessee on 20/9/2011 as well as the copy of reply filed before The Deputy Director of Income Tax (Investigation) on 28/11/2011. He further referred extensively the copy of statement recorded u/s 131 (1A) of the assessee and the details of Modus operandi of the operation of the art gallery disclosed before The Deputy Director (Investigation) . He extensively read all these documents and further referred to the letter dated 18/10/2011 written by The Deputy Director of Income Tax (Investigation) to Sri Parminder Singh Kalra regarding bifurcation of disclosure of ₹ 15.40 crores. In view of this, he submitted that the penalty u/s 271AAA levied by the learned assessing officer on Rs. 3 crores, enhanced, and confirmed by the learned CIT – A on disclosure of Rs. 2.30 crores is not sustainable. 09. He further relied upon the various decisions as under:- i. SVP builders India Ltd versus DCIT [ ITA 4674/Del/2014] [dt. 19/2/2015] ii. Mother‘s pride education persona private Ltd versus DCIT CC-5 New Delhi { ITA No 332/Del/2011]

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iii. Sudha Gupta Versus Deputy Commissioner Of Income Tax { ITA 5445/Del/2012] [Dt 22/8/2014] iv. ACIT versus Brij Bhushan Singhal [ITA 5276/Del/2013] [Dt. 9/3/2015] v. CIT versus Emirates Technologies Pvt Ltd [ 2017] [399 ITR 189 (Delhi)] vi. The Principal Commissioner Of Income Tax Versus Sundeep Gupta and Samir Gupta (2017) [11) TMI – 806 Delhi High Court] vii. ACIT versus Sushil Gupta [ ITA 3856 & 3857/Del/2013] [dt. 14/8/2014] viii. The Deputy Commissioner of income tax versus Asoka Nagreth [ ITA 2839/Del/2013] [ dt 24/2/2015] ix. Shri Pramodkumar Jain V Deputy Commissioner of income tax [ ITA 131 – 133/CTK/2012 – 2012 (12) – TMI – 629 – ITAT] x. The Deputy Commissioner Of Income Tax versus Smt Sulochanaa Devi A Agarwal [ ITA 1052/Ahd/2012]

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deposited the tax together with the interest in respect of the undisclosed income in the return filed by her. Therefore, the learned lower authorities have correctly levied the penalty. He further relied upon the decision of i. The Asst Commissioner of income tax versus SSA International Ltd [94 Taxmann.com 17 (Delhi)] ii. The Principal Commissioner Of Income Tax versus Smt Ritu Singhal (2018) [ 92 taxman.com 224 (Delhi)] 12. He submitted that the decision of the Hon‘ble Delhi High Court in Smt. Ritu Singhal squarely covers the issue in favour of the revenue. 13. In rejoinder, the learned authorized representative submitted that it is not, the allegation of the revenue that assessee has not paid tax thereon. He further submitted that assessee has also disclosed the manner of earning such income as far as the discrepancy of ₹ 3 crores in the valuation of artwork and sculpture as well as cash of Rs 1.34 Crores is concerned. He submitted that though these incomes are derived from the business of the assessee. He further stated that assessee has

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also disclosed the manner and substantiate the disclosure of cash found during the course of search. With respect to jewelry, he submitted that that assessee is a woman having strong faith in traditional and Indian cultural values. He further stated that according to the common prevalent tradition in the family since long, she is accumulating jewelry and it is a practice common in Indian families that such jewelry is passed on from one generation to other; the jewelry found also included the jewelry, which is received by the family members from their ancestors. She therefore has clearly explained that the jewelry found is not undisclosed income of assessee but is received by her from the ancestral persons as well as other family members from who the jewelry received. Therefore, it was stated that the manner of ownership of the jewelry has already been disclosed by the assessee. He therefore submitted that all the conditions specified under subsection (2 ) of section 271AAA has been satisfied by the assessee and therefore the penalty levied by the learned

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assessing officer and further enhanced by the learned Commissioner of income tax appeals is not sustainable. 14. We have carefully considered the rival contention, orders passed by the lower authorities; various judicial precedents relied up on by the parties before us. The Provision of section 271AAA of the act provides as under : a. Assessing officer is authorized to levy the penalty. b. It applies to search initiated on or after 1/6/2007 but before 1/7/2012. c. Penalty is payable @ 10 % of Undisclosed income. d. Penalty can be avoided if the assessee in the statement u/s 132 (4) admits the undisclosed income e. Assessee has to further specify the manner in which it has been earned., substantiate the manner of earning it and pay the tax on such undisclosed income. f. The disclosure of the sum has to be with some specificity of facts and backed with some evidences to support those facts .

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g. Disclosure of manner and it substantiation may be at the stage of admission or assessment proceedings. h. Taxes are also not necessarily to be paid at the stage of admission. It can be along with the return or even before completion of assessment. i. The onus is on the assessee to admit u/s 132 (4) of the act and to disclose the manner of earnings and its substantiation. j. All the conditions of section 271 AAA (2) are cumulative and non fulfillment of one of them leads to inescapable route of penalty. k. No Penalty can be further imposed on the person u/s 271(1) ( C ) of the act on undisclosed income. l. Undisclosed income is defined in explanation (a) to that section . It means income of the specified Previous Year represented by assets or transactions or documents which is not recorded in the books of the assessee

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the course of search when the basis of page 81 of Exhibit A-3 was sought to be questioned. To the next question, the assessee replied that the said amount of "Rs. 16 crores is my unaccounted income for the financial year 2009-10 relevant for the assessment year 2010-11." However, the requirement of the assessee having to "(ii) substantiates the manner in which the undisclosed income was derived" was satisfied. Although a general statement that the undisclosed income was the source of Rs. 16 crores was disclosed, no "substantiation" of the "manner" of deriving such undisclosed income was revealed.‖

―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 Page No : 0110

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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, 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 the opinion that the lower appellate authorities misdirected themselves in holding that the conditions in section 271AAA(2) were satisfied by the assessee.‖ [ Underline supplied by us]

―14. In construing section 271AAA one must not lose sight of its essential purpose which resulted in its

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enactment. There is a penalty at the rate of 10 per cent. 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 Assessing Officer, 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 per cent. 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 in respect of pari materia provisions) have to necessarily be fulfilled. In the present case, the assessee, while declaring the "undisclosed income" also stated, that "the

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surrender is being made subject to no penal action of section 271(1)(c)".

"The Assessing Officer, 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 con cealment of particulars of income or furnishing inaccurate particulars of income. Explanation to section 271(1) ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur Vs The Assistant Commissioner of Income Tax Central Circle- 14 New Delhi

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raises a presumption of con cealment, when a difference is noticed by the Assessing Officer, 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.

The assessee has only stated that he had surrendered the addi tional 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. The statute does not recognize those types of defences under Expla nation 1 to section 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

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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. 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 Assessing Officer 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. The Assessing Officer during the course of assessment proceedings has noticed that certain documents comprising 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 pro ceedings under section 133A

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conducted on December 16, 2003, in the case of a sister concern of the assessee."

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to disclose the manner of earning income i.e. how it has been earned and further to substantiate it means ‗to prove it by the production of necessary evidence‘. The income disclosed are to be tested to ascertain whether manner is disclosed and substantiated or not. We deal with each of them as under :- a. Disclosure of Rs 3 Crores on account of undervaluation of closing stock b. Disclosure of cash of Rs. 1.34 Crores c. Disclosure of jewelry of Rs 96 lakhs. 20. With respect to disclosure of ₹ 3 crores made by the assessee, it is part of the combined disclosure of Rs. 15.40 crores made by the group. This fact is narrated in the statement under section 132 (4) of the income tax Act recorded on 20/9/2011. In answer to question number 13, it has been stated that she has offered Rs 15.40 crores as part of the group disclosure and requested to not to take any panel action on the Consolidated disclosure. Subsequently the disclosure was bifurcated amongst the family members. With respect to the

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disclosure of Rs 3 Crores on account of undervaluation of stock of artwork, painting and sculptures, She has given her reply to The Deputy Director Of Income Tax (Investigation) on 28/11/2011 as under:-

“5.1.1 Background and History Mrs. Tripat Kaur is Proprietor of Gallerie Nvya ,an art gallery , incorporated and commenced its business operations of dealing in the business of purchase, sale and making investments in all forms of art works including paintings, sculptures, photographs, prints and installations. The firm came into existence and started its business Mrs. Tripat Kaur, belonging to a family of intellectuals is herself well educated holding post graduate qualifications in Textiles and designing. As such right from inception she had an aptitude and interest in artistic designing and designs. She was grown up in a family having interest in art and collecting paintings regularly prior to her marriage. During the year 1979, she got married to Sh Paraminder Singh Kalra, who fortunately also belonged to well placed family of intellectuals. Since her marriage , governed by her aptitude and a flair for art she started collecting paintings primarily to decorate her house as well as a mark of status symbol in society . However, later such collection became hobby and as such she had been consistently collecting paintings out of her hobby. 5.1.2 Commencement of Business Activities ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur Vs The Assistant Commissioner of Income Tax Central Circle- 14 New Delhi

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Subsequently, over the years when the primary responsibility towards educating and upbringing her two sons was over, she considered seriously to convert her avocation into vocation and as such driven by force of her hobby, the idea of business activities of dealing in paintings and other art works germinated and finally initiated during 2004. 5.1.3 Business Premises The activities were initially started from her residence at A-29, Friends Colony east, New Delhi-110065, later shifted to 4/6, Sirifort Institutional Area, New and presently being conducted at Shop No. 101-103, Square One Mall, Saket, New Delhi. 5.1.4 Peculiarities and complexities of Business However, being inexperienced in business and matters incidental thereto as the activities started with honest introspection with a hobby and a passion, she was dependent upon number of persons like artists, staff and other skilled persons to help her in running the business activities. Thus the peculiarities of the business conducted can be broadly classified in two categories: (a) Peculiarities attached with nature of trade , market. (b) Other complexities specifically attributed to business conducted 5.1.5 Peculiarities attached with nature of trade , market

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(a) Competition The Art work is being exhibited and sold by various persons i.e. from a street vendor to highly reputed international competitors. (b) Dependence upon skill of the artists The art work is normally sold on the name fame of the artist at the same time such art work of famous artists is not easy to obtain. Thus the market price which an art work can fetch is largely governed by the name, fame and goodwill of the artist as well as the historical, cultural and social importance of the paintings. For example the paintings of historical or archeological interest and importance normally fetch extraordinary price whereas corresponding painting of lesser known importance/artist will fetch many times lower price irrespective its quality etc. The art work of other artists is dependent upon their, imagination, creativity and innovation, which is again very3 subjective and risky matter. (c) The business/trade mostly in unorganized sector As the business involves dealing with Individual artists , and the customers are also mostly individuals the business is mostly with the persons in unorganized sectors as such they either do not maintain proper records or if the same is maintained it is in an unorganized manner.

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(d) sale purchase price subjected to bargain The prices at both levels i.e. acquiring the art work and selling it to customers are subjected to huge bargain and negotiation at all levels. (e) No benchmark/yardstick, criteria, scientific/commercial method to fix prices of any art work even those belonging to same artists. (f) Competitions from pirated/duplicate paintings and similar parallel activities (g) Art work prone to damage and oxidation due to inappropriate environments. Majority of such factors are natural and can not be avoided. This includes display or storage in areas where there is excessive exposure to light, high and/or fluctuating temperature and humidity levels, dirt or insects, handling cleaning etc which can be caused at any stage 5.1.6, Other complexities specifically attributed to business conducted (a) Dealing with Artists Dealing with artists is not an easy matter for reason as explained above that most of the artists are governed by their moods and emotions operating in unorganized manner rather than in planned manner as such there were difficult to tackle. (b) Difficulty in executing sales/purchase activities Being a new entrant was thus in the eyes of artists she was the new, untried, untested, and unproven organization as such they were reluctant to deal with ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur Vs The Assistant Commissioner of Income Tax Central Circle- 14 New Delhi

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her and the competitors in the market were always preferred by them over her. However over a period of time as relationships improved artists started giving works on consignments gradually. (c) Nature of dependency on other persons Thus on account of complexities, peculiarities and inexperience the proprietor had no choice but to depend on various persons like employees, persons having contract with artists, for recording day to day business activities , to get art work on consignment etc. Due to such persistent problems accentuated by her non accounting back ground finally created a total mess in business and records. (d) Difficulty in locating permanent/trustworthy staff (e) Artist dictating terms. (f) Artists not willing or opposing maintenance of such records and documents. As such either such documents not furnished by artists and wherever furnished these are not even proper containing all particulars and details. (g) Frequent visits of the artist at business place which leads to development of a relation between them and employees as such there is always a risk that such artists may collate with employees in many manner injurious and prejudicial to the business of proprietor. (h) The Proprietor also not having any accounting knowledge or background. As such not only the business but the documents as required were also in

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total mess. Such complexities and mess was even noticed by the investigating authorities as well. It is a fact on record as borne out by record of search proceedings that proper records were not found to be maintained : * Indicating the stock with source and cost whereas the major stock is on consignment. * The entire stock was found with grossly exaggerated tag price which is estimated considering competition, bargain, negotiation and other risk factors as well as profit margin. * The improper records even led the investigating authorities to make inadvertent error of substantial Rs. 10 crores caused by clerical mistake in the input of the price of one of the works. * Multiple sets of noting of the prices prepared by staff on various occasions i.e. for exhibitions, sales etc indicating different prices. * Records with respect to exchange of paintings with the artists and vice-versa where damaged paintings are either exchanged or removed. 5.1.7 Thus, forced by exigencies and the complexities .peculiarities of the business , Mrs. Tripat Kaur out of her business and other activities earned income in cash accumulated to Rs.13,398,500/- including kept at residential premises, in the custody of family members and relative found/seized during operation is offered to tax with bilateral stipulation as stated above to exonerate from penal provisions of the Act.

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5.1.8 As a matter of fact after search, the records of the company are in total disarray, the problem is aggravated because consequences of search on the company there is a real possibility that some of the persons may not come forward which is accentuated by employees deserting the organisation. Further considering the nature of complexities and dependency on employees it is not possible by the proprietor to keep an eye or -'personally look after every transaction. Under the circumstances the other persons execute the transactions, though the responsibility for such expenditure and onus thereof primarily lies upon the management. Under the circumstances considering that the persons we have dealt are mostly operating in unorganised sector and after the search it is quite likely that certain parties from whom purchases/sales/investments etc were made or other expenditure were incurred or services obtained may not come forward. 5.1.9 Thus the possibility that the onus of expenditure and investment so made though genuine but will not be possible to be discharged cannot be ruled out. In addition there may also be arising out of certain transaction which upon our interprets: may not be taxed but may be viewed or interpreted different: revenue. As such we may not be in the position to discharge onus irrespective and notwithstanding genuineness of transactions and credits involved. This may thus lead to unnecessary litigation in the matters. 5.1.10 Thus in order to buy peace a sum of Rs. 370 lakhs is being on higher side towards paintings,

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sculptures, other things etc investment in gallerie business and matters incidental thereto for the financial year relevant to the A.Y. 2012-13. The offer as made with stipulation to grant immunity from penalty is sufficient to cover up any discrepancy or any other matter or any inference as a result /outcome of search pertaining to my business activities stated above. However, the exact details shall be filed dur.ng the course of assessment proceedings.” 21. As per her statement recorded under section 131 (1A) of the Act on 5/12/2011 vide question number 2 onwards , She has explained about the source of the income and the nature of the profile of the artwork, painting and sculpture business. She has also explained the modus operandi of the art gallery business. With respect to the evidence in support of the modus operandi , she has also replied question number 4 onwards to substantiate the modus operandi of the whole business. She has further referred to various annexure found during search related to the artwork dealt by the gallery. In response to question number 5-11 , She further answered the difference in the documents found as well as the hard disk seized from her residence to show that what is the stock of

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painting and artwork etc which has been valued as per the books of accounts and as per the computer hard disk. It is explained in answer to question number 12 about the details of the inventory submitted and the difference in the valuation. She has also replied the statement in response to question number 13 , which has already been discussed above about the total disclosure of Rs 15.40 crores. With respect to question number, 15 she has disclosed a sum of ₹ 3.70 crores towards her investment in undervaluation of stock of artwork etc in her business. Out of this ₹ 3.70 crores, she owned the ₹ 3 crores in her return of income. Further, she has also submitted by letter dated 10/3/2014 before The Deputy Commissioner of Income Tax about the reconciliation of the total tag price of paintings and artwork along with the relevant annexure found during the course of search. She has explained the functional profile of the business, physical inventory carried out during the course of the search with respect to its reconciliation with the excel sheets seized from the computer. She has further explained the contents of those

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electronic documents as well as explained the difference about the incorrect serial number and format prints. In answer to Q. NO 14 She has reconciled the physical inventory and the inventory recorded in the seized documents. She has further in answer to q. no 15 explained the statement made by her as well as the statement of the manager of the store Ms Meher Anand. According to the statement, in answer to q. no number 17 it has further been substantiated that what is the manner of the carrying on of the business of the assessee. She further stated that certain paintings are also received on consignment basis and consignment accounting is being carried out in altogether different manner. In then the rational for higher price tag to the actual value of the stock was also explained. She further stated that in letter dated 28 February 2014 she has already submitted with respect to the artwork owned by the family members and the associated concerns of the family members whose names are mentioned before the assessing officer. The proof of ownership of that artwork was also given. In para no 24 of the letter, she has also given the

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breakup of ₹ 3.70 crores with respect to the various years in which the income as been earned. In view of the above facts, we are of the opinion that the assessee has disclosed the manner of earning of the income with respect to ₹ 3 crores on account of undervaluation of the closing stock found during the course of search of various artworks/sculptures/ paintings. 22. Similarly, the assessee has also explained the ownership of the cash from the business of the assessee of ₹ 1.34 crores, which is part of the overall disclosure made by the group of ₹ 15.40 crores. She has explained in para number 5.1.7 of the letter dated 28/11/2011 that the cash of ₹ 13398500/– is on income in cash accumulated out of her business. She has also enumerated detail of her business and how the income is earned. In view of this, we are also of the opinion that assessee has disclosed the manner of funding of the income from sale of artwork, paintings, and sculptures in her business and cash generated wherefrom. In view of this, it is apparent that assessee has disclosed the manner of earning of cash from the

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business of sale of artwork. She has also given source of cash generated in her hand that is the business of proprietary concern run by her form ― Gallaerie Nvya.‖ Hence, we are of the opinion that assessee has given the manner of earning cash on hand of ₹ 1.34 crores and substantiated the same. 23. For both the above-undisclosed income, assessee has disclosed the manner and stated that both are the business income of the assessee from the artwork/ paintings and Sculpture business . She has also shown how the same has been earned .Hence, it cannot be said that disclosure of these two income can be said to be disclosed with some ‗ Specificity‘. Therefore on this two undisclosed income the assessee is eligible for pardon u/s 271AAA (2) and hence, penalty u/s 271AAA cannot be levied. 24. Now we come to the third item of the undisclosed income earned by the assessee in the form of undisclosed jewelry added as unexplained assets of the assessee of ₹ 96 lakhs. The assessee has merely stated that this jewelry has been received by her from the various family members and from

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investors. It was further stated that the family members of the assessee were also continuously acquiring jewelry as per their financial capabilities. Therefore according to the family status, age, tradition in the family, economic status of the assessee, jewelry held since marriage, gifted to her by other family members and married status of the assessee, she disclosed the unaccounted income to the tune of ₹ 9555637/–. However, assessee neither gave the names of the persons who gifted her jewelry and she could not show sources of such excess jewelry found. In view of this, we are of the view that assessee has failed to disclose the manner of the earning of undisclosed income and failed to substantiate the same further. Hence, on the undisclosed income of ₹ 96 lakhs on account of unexplained jewelry, assessee is correctly held to be liable for payment of penalty at the rate of @ 10 percent on the undisclosed income. 25. In view of the above facts , we uphold levy of penalty under section 271AAA of the Act on undisclosed income found during the course of such of ₹ 96 lakhs on unexplained

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jewelry. We also direct ld AO to delete the penalty with respect to the disclosure of ₹ 3 crores on account of undervaluation of the closing stock of artwork/ paintings/ sculptures etc. and cash of ₹ 1.34 crores found during the search, for which the manner of earning was disclosed and substantiated. 26. Further on plain look at penalty order, Ld AO has levied penalty of ₹ 30 lakhs stating that since in this case the penalty under section 271 (1) (c ) is being imposed on substantive basis on the same issue, therefore, he held that penalty under section 271AAA would be on protective basis. We do not find any provision under the act to levy penalty under this section in the manner ld AO has envisaged. According to the provisions of section 271AAA (3) of the act provides that no penalty under the provisions of section 271 (1)(c ) shall be imposed upon the assessee in respect of the undisclosed income referred to in subsection 1 of that section. Therefore, if the penalty has already been levied under section 271AAA of the Act , no further penalty on it can be levied u/s 271 (1) (c) of the act. Penalty u/s 271AAA and 271 (1) (c) are mutually

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exclusive. Even on this ground, too penalty of Rs. 30 lakhs levied by the AO on protective basis is unsustainable. 27. Penalty of ₹ 23 lakhs initiated and levied by the learned CIT – A is otherwise unsustainable in law as only the assessing officer is authorized to levy it. CIT A is not an ‗assessing officer‘ as defined u/s 2 (7A) of the act. Therefore, according to us the penalty initiated by the learned commissioner appeals and levied by him of ₹ 23 lakhs is not sustainable, as he is not authorized to levy the same. If authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorized under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to perform an action on any particular issue, then it is that authority alone who should do that action. We draw support from various decision of Honorable High courts in 346 ITR 343 ( Bom) , 345 ITR 223 ( del ) and also of the Honourable supreme court Anirudhsinhji

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Karansinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 where in hon. Supreme court held as under :- ― 13. It has been stated by Wade and Forsyth in ‘Administrative Law‘, 7th Edition at pages 358 and 359 under the heading ‘SURRENDER, ABDICATION, DICTATION‘ and sub- heading "Power in the wrong hands" as below:- "Closely akin to delegation, and scarcely distingushable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with some one else, or may allow some one else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they

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condemn some administrative arrangements which must seem quite natural and proper to those who make them.....". "Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise...." 28. In view of the above facts on the merits of the case, we delete the penalty on the undisclosed income of ₹ 3 crores on account of undervaluation of closing stock of artwork, paintings, and sculptures, on cash found of Rs. 1.34 crores, and uphold penalty on unexplained jewelry of Rs. 96 lakhs. 29. Accordingly, the appeal filed by the assessee is partly allowed. 30. Order is pronounced in open court on 09/10/2018.

-Sd/- -Sd/- (AMIT SHUKLA) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:09/10/2018 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur Vs The Assistant Commissioner of Income Tax Central Circle- 14 New Delhi

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