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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Rajesh Kumar & Shri Amarjit Singh
O R D E R
Per Rajesh Kumar, Accountant Member
1. The cross appeals by the assessee as well as by the revenue is arising out of the order of Ld. Commissioner of Income-Tax (Appeals)-50 hereinafter called [CIT(A)], Mumbai, in Appeal No.CIT(A)-50/IT-749/2014-15, order dated 26/08/2016. The assessee has challenged the confirmation of penalty u/s 271AAA to the tune of Rs. 2 lacs whereas the revenue has challenged the deletion of penalty of Rs. 30,82,765/-.
The assessee has raised the following grounds in its appeal.
Ld.Commissioner of Income Tax has erred in confirming penalty u/s 271 AAA of Rs. 2,00,000/- without properly considering the facts available on the records. Your Appellant respectfully submits that during the course of appeal proceedings detailed submissions were made along with various judicial decisions. Learned CIT-Appeals after considering detailed submissions of the Appellant concluded that penalty u /s 271AAA will be restricted to the income of Rs. 20,00,000/- as the same as not been disclosed by the Appellant during the course of search and hence provision of sub-section 1 of 271AAA is applicable in respect of the undisclosed income of Rs. 20,00,000/-
Your Appellant respectfully submits that Ld. CIT(A) failed to appreciate the fact that additional income of Rs.20,00,000/- disclosed by the Appellant is in continuation of the declaration of undisclosed income made by your appellant during the course of search.
In view of above Your Appellant respectfully submits that penalty u/s 271AAA will not be applicable on additional declared by your Appellant of Rs. 20,00,000/- and hence needs to be deleted. 2. Your appellant craves leave have to add, alter and/or amend the above grounds of appeal
3. The facts in brief are that the search and seizure action u/s 132 of I.T. Act was carried out at the residence and various premises of Rohan group and related entities on 26/05/2011 by DDIT investigation unit-3, Mumbai. The assessee filed return income on 06/03/2014 declaring income of RS. 3,08,27,650/- for the year under consideration declaring the undisclosed income admitted &7277/Mum/2016 during the course of search action on the assessee. Pertinent to note that during the course of search, the assessee has made a disclosure of Rs. 2,20,00,000/- on the basis of incriminating documents on account of cash and jewellery which was found to be not accounted for in the books of accounts. The AO initiated the penalty u/s 271AAA of the Act on the income declared during the search as well as on the income of Rs. 20,00,000/- which was offered in the return of income over and above the income of Rs.2,20,00,000/- declared during search. The AO issued penalty notice u/s 271AAA of the Act on 31/03/2014 and 26/08/2014 which according to the AO were not replied by the assessee and therefore he concluded that assessee has nothing to say on this account. Thereafter the AO by referring to the provision of section 271AAA of the Act levied the penalty equal 10% of the undisclosed income on the ground that assessee has not substantiated the manner in which the undisclosed income was derived and therefore assessee is not entitled for immunity as per the provision of section 271AAA of the Act. Finally the AO in para 5 of the penalty order stated that assessee has deliberately concealed the income and furnished inaccurate particular of income to the tune of Rs. 3,08,27,650/- and levied a penalty equal to 10% of the undisclosed income at Rs. 30,82,765/- vide order dated 16/09/2014.
4. In the appellate proceedings the Ld. CIT(A) after taking into account the submissions of the assessee and various contentions raised in the appellate proceedings, partly
&7277/Mum/2016 allowed the appeal of the assessee. The Ld. CIT(A) observed that out of total income of Rs. 3,08,27,650/- declared by the assessee, in the return of income, only the income of Rs. 2,40,00,000/- was shown in the return of income and falls under the ambit of undisclosed income. The Ld. CIT(A) further separated the amount of Rs. 2,40,00,000/- into two parts, first component is Rs. 2,20,00,000/- which was declared by the appellate in the return of income and also disclosed in the statement recorded u/s 132(4) of the Act in the search proceedings and second Rs. 20 lacs which was declared by the assessee in the return of income suo-moto but was not disclosed in the statement recorded in the u/s 132(4) of the act qua which no seizer in the form of incriminating document or cash, jeweler was made during the course of search. The Ld. CIT(A) came to the conclusion that the assessee has fulfilled all the three conditions as mentioned in subsection (2) of 271AAA of the Act as the assessee has disclosed the manner in which the income undisclosed income found during the course of search was derived whereas the sustained the penalty in respect of 20.00 lacs which was declared over and above the disclosure made during the course of search as additional income in the return of income for various discrepancies / anomalies in the books of accounts. The Ld. CIT(A) confirmed the penalty by holding that the second component of disclosure of Rs. 20 lacs is not covered by the provisions of section 271 AAA(2)(i) of the ct as the assessee has not substantiated the manner in which the 10% which worked out to Rs. 2 lacs . The assessee is in appeal against the confirmation of penalty on the ground of Rs. 20 lacs which was offered suo-moto by the assessee in the return of income whereas the revenue is in appeal against the deletion of penalty of Rs. 20,00,000/- on the amount of Rs. 2,00,00,000/- which was disclosed during the course of search operation.
After hearing both the sides and perused the material on record, we observe that the CIT(A) has passed the correct and speaking order in respect of the deletion of penalty on the undisclosed income of Rs. Rs. 2,20,00,000/- as surrendered during the course of search in the statement recorded u/s 132(4) of the Act and clearly gave a finding that the assessee substantiated the manner in which the income Rs. 2,20,00,000/- was derived by the assessee by referring to the source of income as finance & brokerage business undertaken by the assessee and also as substantiated by inventories of note books, papers, diaries, computer Printouts and electronic data. Thus we are in agreement with the conclusion drawn by the CIT(A) that the case of the assessee is squarely covered by the provisions of section 271AAA(2)(ii) and thus rightly deleted the penalty on the on the income of Rs. 2,20,00,000/. We are of the view that the appeal of the department does not have any merit as the penalty was rightly deleted by the Ld. CIT(A). The case of the assessee is squarely covered by the various decisions referred by the Ld. AR in the case of Piyush A. Vora vs ACIT ITA 3224/M/2017 AY 2011-12, the coordinate bench has held that &7277/Mum/2016 no penalty was issued to be levied where the assessee has substantiated the manner in which the income disclosed during the course of search is derived by the assessee. The case of the assessee is also squarely covered by the decision in the case of Pr. CIT vs Sapna Enterprise( 2018) 91 taxmann.com 2012 Guj., Promod kumar jain vs DCIT 2013 33 taxmann.com 651 Cuttak Trib. Concrete Developers vs. ACIT 2013 34 taxmann.com 62 Nagpur Trib. Accordingly we uphold the order of CIT(A) on this issue and appeal of the revenue is dismissed.
So far as the appeal of the assessee is concerned challenging the confirmation of the penalty of Rs. 2,00,000/- on an income of Rs. 20 lacs which was suo-moto disclosed by the assessee in the return of income filed after the conclusion of search, we notice that the assessee has suo-moto disclosed Rs. 20 lacs in the return of income which was over and above the disclosure of income made in the statement recorded u/s 132(4) of the Act and is not based on the incriminating material found during the course of search. In our opinion the department was not having any incriminating material qua the said income shown by the assessee suo motto in the return of income for the possible discrepancies in the books of accounts of the assessee. In this case the assessee has not surrendered the said amount during search but offered the said income in the return of income filed in pursuance notice issued u/s 153A of the income tax Act. In our opinion the penalty cannot be levied on the said amount as the assessee has duly paid taxes on the amount of income. Moreover there was no incriminating materials in the hands of the revenue which was found during the course of search and seizure.
The case of the assessee squarely covered by the decision of Kolkatta bench in the case of DCIT vs Salasar stock broking limited 2016 47 ITR Tribunal 616 (kol) and Mahavir Prasad Vs ACIT CC ,New Delhi (2017) 86 taxmann.com 264 Delhi Trib in which identical issue has been decided by the coordinate bench in favour of the assessee by holding that income which was not surrendered during the course of search operation , no penalty u/s 271AAA of the Act could be invoked. In the both the cases it has been decided the income not disclosed during search operation but disclosed thereafter would be entitled to immunity from levy of penalty and in the second case it has been held that even the income declared by the assessee in the proceeding u/s 143(3) after the conclusion of search , penalty u/s 271AAA of the Act would not be attracted. We therefore, respectfully following the decisions of coordinate benches set aside the CIT(A) on this issue and direct the AO to delete the penalty.
In result the appeal of the revenue is dismissed and that of the assessee is allowed.
Order pronounced in the open court on this day of 24th May, 2019.