ACIT, NEW DELHI vs. M/S SSA, INTERNATIONAL LTD.,, NEW DELHI

The appellant, Assistant Commissioner of Income-tax, Central Circle – 7, New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal, sought to set aside the impugned order dated 03.06.2013 passed by Ld. CIT (Appeals)-1, New Delhi qua the assessment year 2010-11 deleting the penalty levied u/s 271AAA on the grounds inter alia that :-

Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee is into the business of rice milling and processing. During the search and seizure operation conducted at the business and residential premises of SSA International Group of companies wherein they have admitted Rs.21 crores as undisclosed income. AO completed the assessment at the returned income of Rs.25,52,64,410/-, however directed to initiate the penalty proceedings u/s 271AAA of the Income-tax Act, 1961 (for short ‘the Act’). AO initiated the penalty proceedings u/s 271AAA but declined to accept the contention of the assessee that the assessee has surrendered additional income of Rs.21 crores at the time of search to buy peace and to avoid any protracted litigation and has deposited the tax on the additional income in AY 2010-11 and levied the penalty of Rs.2,10,00,000/- u/s 271AAA.

Assessee carried the matter by way of appeal before the ld. CIT (A) who has deleted the penalty by accepting the appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Undisputedly, during the search and seizure operation conducted at the business and residential premises of the assessee u/s 132(1) on 11.12.2009, assessee surrendered additional income of Rs.21 crores. It is also not in dispute that in the return filed by the assessee for AY 2010-11, assessee declared undisclosed income of Rs.21 crores which includes Rs.9.25 crores on account of excess stock and Rs.11.75 crores as income from other sources in the computation of income annexed with the tax return. It is also not in dispute that the assessee has expressed his inability to explain certain seized documents rather stated that those may be included to form part of the amounts surrendered during search and seizure operation. It is also not in dispute that assessee has already paid tax together with interest on the surrendered income of Rs.21 crores.

In the backdrop of the aforesaid facts and circumstances of the case, order passed by ld. Revenue authorities below, arguments advanced by ld. AR for the parties, the sole question arises for determination in this case is :-

To proceed further, provisions contained under section 271AAA (2) are reproduced as under for ready perusal :-

Under section 271AAA(2)(i) of the Act, penalty @ 10% of the undisclosed income shall not be imposed if the assessee, “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” substantiates the manner in which the undisclosed income was derived and pays the tax together with interest if any on the undisclosed income.

During the course of search, a specific question was put to Shri Anil Mittal, MD of the assessee company to explain certain seized documents and discrepancies in the stock who has answered as under :-

The ld. CIT (A) deleted the penalty on the premise that if no specific question was put to assessee u/s 132(4), it cannot be concluded that the assessee has failed to reply or specify/ substantiate the manner of concealment. It is settled principle of law that assessee has to specify the manner in which income has been derived and substantiated the manner in which the undisclosed income was derived at the time of search in its statement recorded u/s 132(4) and not thereafter.

However, answer to the question no.43 reproduced above categorically goes to prove that the assessee has shown his inability to reconcile the discrepancy in the stock found and failed to substantiate the manner in which income has been derived by the search team during the course of search, however has made the disclosure only in order to buy peace of mind and to avoid litigation. So, we are of the considered view that the assessee has failed to satisfy the conditions laid down in section 271AAA (2) so as to get the general amnesty u/s 271AAA(2) because the assessee has neither specify the manner nor substantiate the manner in which the undisclosed income was derived.

More particularly, the decision of Hon’ble High Court of Gujarat cited as Pr. CIT-2 vs. MukeshBhai Ramanlal Prajapati – Tax Appeal No.434 of 2017 order dated 24.07.2017 wherein decision rendered in CIT vs. Mahendra C Shah – 299 ITR 307 and CIT vs. Radha Kishan Goel – 278 ITR 454 (All.) have been discussed and in the case cited as PCIT vs. Emirates Technologies Pvt. Ltd. – (2017) 399 ITR 189 (Delhi) relied upon by the Ld. AR also wherein Hon’ble Delhi High Court held that when no query raised by the AO regarding manner of derivation of such income and its substantiation, penalty u/s 271AAA is not sustainable.

However, Hon’ble High Court of Delhi in a case relied upon by the ld. CIT DR cited as Pr.CIT vs. Smt. Ritu Singal – (2018) 92 taxmann.com 224 (Delhi) after discussing the decisions relied upon by the ld. AR rendered by Hon’ble Apex Court in ACIT vs. Gebilal Kanhaialal 348 ITR 561 (SC) and Mak Data (P.) Ltd. vs. CIT 358 ITR 539 (SC), Hon’ble High Court of Gujarat in CIT vs. Mahendra C. Shah – 299 ITR 305 (Guj.), Hon’ble Allahabad High Court in CIT vs. Radha Kishan Goel - 278 ITR 454 (All.), Hon’ble Delhi High Court in Mothers Pride Education Personnel (P.) Ltd. vs. DCIT (Delhi of 2011 dated 12.10.2012, reversed the decision rendered by the Tribunal setting aside the penalty on the ground that in the absence of the query raised by the authorized officer during the course of recording of statement u/s 132 (4) to specify and substantiate the manner in which the undisclosed income was derived by returning the following findings :-