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Income Tax Appellate Tribunal, ‘ A’ BENCH : CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S.JAYARAMAN
आदेश / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER
This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-16, Chennai in ITA No.53/C.I.T(A)-18/2015-16 dated 13.02.2019 for the assessment year 2011-12 confirming the levy of penalty u/s.271AAA of the Act.
Shri T.Banusekar represented on behalf of the Assessee and Shri AR.V.Sreenivasan represented on behalf of the Revenue.
It was submitted by ld.AR that the assessee is an individual, who is a partner in the firm M/s.Swarna Shilpi. The assessee is also manufacturer and trader in Gold jewellery. There was a search and seizure operation on 06.01.2011. In the course of search, the assessee was found with excess Gold jewellery of 27,645 grams. It was a further submission that the assessee had in the course of search admitted an undisclosed income on account is the said jewellery and had offered the entire Gold jewellery of 27,645 grams @ Rs.1,450/-
per gram amounting to Rs.4,06,94,450/-. In the return of income filed on 30.11.2011. Advance tax already paid at Rs.1,40,00,000/- and the balance tax at the time of filing the return of income. It was submitted that the assessment was completed by applying the rate Rs.1,872/- per gram and accordingly an addition of Rs.1,20,07,385/- came to be made on account of difference in the rate of Gold jewellery. Though appeal had been filed against the addition made by Assessing Officer taking the enhanced rate in respect of valuation of Gold jewellery, the same was confirmed on appeal and no further appeal has been preferred by the assessee. It was a submission that in response to the show cause notice issued by the Assessing Officer, the assessee had categorically given the reasons and had specifically drawn our attention to sub-section (1) of Section 271AAA of the Act.
Ld.AR submitted that as the assessee had complied with all the conditions specified in sub-section (1) of Sec.271AAA of the Act, no penalty U/s.271AA of the Act was liable to be levied on the assessee.
The conditions being (i) In the course of the search, in a statement u/s.132(4) of the Act admits the undisclosed income and specified the manner in which such income has been derived. Admittedly, this condition has been accepted by the Assessing Officer.
(ii) the assessee substantiates the manner in which the income was derived; and (iii) the assessee substantiates the manner in which the undisclosed income was derived; and (iv) the assessee pays the tax, together with interest, if any, in respect of the undisclosed income.
It was submitted that the Assessing Officer had taken the view that condition Nos. 2, 3 & 4 had not been complied with and consequently levy of penalty u/s.271AAA of the Act. The ld.AR drew our attention to the statement recorded u/s.132(4) of the Act which was shown at page-4 of the paper book wherein in reply to Question No.12. The assessee has mentioned as follows:-
“Q.12. During the course of search & seizure operation today at your premise, we have found physical stock of gold of 192.646 Kgs. As per your stock register, your stock as on today is 154.377 Kgs. In this premise. Please explain the difference of stock of 38.269 Kgs available in this premise.
Answer: We maintain our stock in net weight of gold. You have mentioned gross weight in your question. Net wieight of stock available in this premise today is 183.744 Kgs. If you take net weight of gold, difference in stock will come to 29.367 Kgs. I am accepting these 29.367 Kgs of gold as my undisclosed investment in stock. As on today”s rate of Rs.1850/- per gram, I am admitting Rs.5,43,28,950/- as undisclosed income of myself. I shall pay the tax within a short period to avoid interest and penalty. This jewellery of mine has been kept in the shop for safety reason.”
It was further submitted that clearly, this was a statement recorded u/s.132(4) of the Act and in reply to Question No.12, the assessee had accepted the undisclosed income in respect of 29.367 Kgs of gold, though in fact, the same was only 27.645 Kgs of gold. It was submitted that the rate had been mention in the said reply at Rs.1,850/- per gram being the rate as on the date of search, being 06.1.2011. The ld.AR further drew our attention to Auestion No.13 and the answer to Qn.No.13 is as follows:-
“Q.13. How you earned this amount and owned the jewellery?
Ans. I have earned this income from commission business on various commission businesses.” It was submitted that the assessee had categorically explained the manner in which the assessee had derived such income and the same was also substantiated in respect of the source of income and this was also not disputed. It was thus, the submission that Conditions No.2 & 3 had been complied with. In the return filed, the 4th condition being payment of taxes together with the interest was also complied in so far as the assessee had adopted the rate of Rs.1,450/- per gram, being the cost at which assessee had acquired the said jewellery. It was a submission that the rate of Rs.1,850/- was the rate as on the date of search and obviously the undisclosed investments representing the gold jewellery was not purchased or acquired on the same date. It was submitted that the taxes in respect of the said undisclosed investments had also been paid before filing of the return for the relevant assessment year. It was thus a prayer that the penalty u/s.271AAA of the Act was not leviable in so far as the assessee had complied with the conditions prescribed in sub-section (1) of section 271AAA of the Act. Furthermore, it was submitted by ld.AR that ld.CIT(A) did not consider the submissions of the assessee and had confirmed the levy of penalty u/s.271AAA of the Act.
In reply, ld.DR submitted that in respect of fourth condition being taxes should be paid in respect of the undisclosed investments, the condition was not complied with in so far as the assessee had reduced the rate to Rs.1450/- as against Rs.1872/- as has been determined in the course of assessment. To a specific querry from the Bench, as to whether there has been any variation in the quantum of jewellery both personal jewellery and stock in respect of business, which has been treated as unexplained investment. The ld.DR submitted that the variation had taken place only in respect of the rate. The ld.DR vehemently supported the orders of the lower authorities.
We have heard the rival contentions and perused the material available on record. Admittedly, the four conditions required under sub-section (1) of section 271AAA of the Act for non-levy of penalty u/s.271AAA of the Act that (i) the assessee should have admitted the undisclosed income in a statement recorded u/s.132(4) of the Act in the course of search, (ii) he must specify the manner in which the income has been derived and it should be substantiated, (iii) the manner in which the said undisclosed income was derived should be substantiated and (iv) he should pay tax, together with interest, if any, in respect of the undisclosed income. Admittedly, there is no dispute in respect of the first condition, i.e. that the assessee has admitted the undisclosed income in the statement recorded u/s.132(4) of the Act in the course of search. Answer to Qn. No.13 as has been extracted above clearly shows that the assessee has substantiated the manner in which he has derived this income and he has substantiated the manner in which it was derived being the commission income from various commission businesses. Admittedly, no further question has also been asked to further probe or into the issue, as obviously, the search has revealed the various business incomes and source of income of the assessee. Therefore, conditions Nos.2 & 3 have also been complied with. In respect of condition No.4, the fact remains that the assessee has disclosed quantities and substantiated the quantities and the variation in the assessment and the returned income is only on account of rates in respect of the gold jewellery. The quantum of the jewellery representing the undisclosed investment in the jewellery has not been varied and the rate which has been adopted by the assessee is not a rate, which is improbable or unsustainable. In fact, the assessee has given his explanation for adopting the rate of Rs.1450/- as against Rs.1,850/- mentioned in the statement recorded and even the rate of Rs.1850/- as stated by the assessee to be the rate on the date of search, has also been discarded and the Assessing Officer had adopted the rate of Rs.1872/- which is again a higher figure. This has also been accepted by the assessee after the first appeal. The difference is also an admitted fact and taxes and interest in respect of addition representing the undisclosed income in respect of 27.645 Kgs of gold as disclosed by the assessee at Rs.1450/- per gram, has also been paid by the assessee. Taxes on the same has also been paid by the assessee before filing of the return, thus, the condition No.4 also stands complied. This being so, we are of the view that no penalty u/s.271AAA of the Act is liable to be levied on the assessee and consequently, delete the penalty as levied by the Assessing Officer and confirmed by the ld.CIT(A).
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court after conclusion of hearing on 29th August, 2019, at Chennai.