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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI INTURI RAMA RAO
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER: This is an appeal filed by the Assessee directed against the Order of the Commissioner of Income Tax (Appeals)-II, Coimbatore (‘CIT(A)’ for short) dated 06.03.2013 for the Assessment Year (AY) 2008-09 confirming the penalty levied u/s. 271AAA of the Income Tax Act, 1961 (for short ‘the Act’).
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 2 -: 2. The Assessee raised the following grounds of appeal:
“1. The order of The Commissioner of Income Tax (Appeals) II, Coimbatore dated 6-3-2013 in l.T.A.No.59/10-11 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
The CIT (Appeals) erred in confirming the levy of penalty u/s 271 AAA of the Act with reference to the facts of the present case without assigning proper reasons and justification.
The CIT (Appeals) failed to appreciate that the provisions of section 271 AAA of the Act had no application to the facts of the case inasmuch as ought to have appreciated that the conditions prescribed therein were not satisfied cumulatively to justify such levy of penalty.
The CIT (Appeals) failed to appreciate that having accepted the provisions in section 271 AAA of the Act were pan matenia to the provisions in section 271(1)(c) of the Act, the levy of penalty on the rejection of explanation as well as on the wrong presumption of facts was erroneous and invalid.
The CIT (Appeals) failed to appreciate that the basis of additional income earned and offered even though explained repeatedly was considered erroneously as inadequate on the factual matrix of the case.
The CIT (Appeals) went wrong in recording the findings in this regard in paras 7.0 to 11.0 of the impugned order without assigning proper reasons and justification.
The CIT(Appeals) failed to appreciate that sub-section (2) to the main provision in section 271 AAA of the Act was wrongly interpreted and understood and ought to have appreciated that the exception to the levy of penalty as envisaged therein would be applicable to the facts of the present case.
The CIT (Appeals) failed to appreciate that the order of penalty under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.
The CIT (Appeals) failed to appreciate that the detailed Written Submissions filed before him was not taken into account and ought to have appreciated that non consideration of the crucial facts and legal position emerging in relation thereto forming part of the said Written Submissions would vitiate his action in sustaining the levy of penalty.
The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.”
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 3 -: 3. The brief facts of the case are as under:
The assessee is an individual and carrying on the business of
dealing in milk products as a Proprietor of “Balu Dairy Farm”. There was
a search and seizure operation under the provisions of s. 132 of the Act
in the resident premises of the assessee on 13.03.2008. During the
course of search and seizure operations, certain incriminating documents
and materials were found and seized by the Department. Therefore,
notice u/s. 153A of the Act was issued to the assessee, in response to
which the assessee filed the return for the AY 2008-09 admitting income of ₹ 3,06,36,630/-. Against the said return of income, assessment was completed by the Assessing Officer (AO) after making addition of only ₹
15,000/- vide order dated 31.12.2009 passed u/s. 143(3) of the Act, the
AO also initiated the penalty proceedings u/s. 271AAA of the Act and
issued show cause notice, in response to which it was submitted by the
assessee that since the undisclosed income had been admitted in the
statement given u/s. 132(4) of the Act during the course of search and
seizure proceedings and the tax due thereon has been paid in
installment no penalty can be levied under the provisions of s. 271AAA of
the Act. However, the AO had rejected the above explanation and levied penalty of ₹ 30,65,163/- by holding that the assessee had failed to
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 4 -: substantiate the manner in which undisclosed income was derived and
had not paid the tax due thereon vide order dated 30.06.2010.
Being aggrieved, an appeal was preferred before ld. CIT(A), who
vide impugned order had confirmed the levy of penalty as the assessee
had not complied with the provisions of sub s. (2) to s. 271AAA of the
Act. Being aggrieved, the assessee is before us in the present appeal.
Before us also, the ld. Counsel vehemently argued that no penalty
can be levied as the assessee had disclosed undisclosed income
voluntarily and further it is submitted that in the show cause notice issued
by the AO, had not strike off the column under which limb of section of
penalty was being levied and placed reliance on the decision of
Karnataka High Court in the case of CIT vs. Manjunatha Cotton and
Ginning Factory [2013] 359 ITR 565 (Kar.) and also the decision of
Hon’ble High Court of Madras in the case of CIT vs. Original Kerala
Jewellers in Tax Case (Appeals) No.717 of 2018 dated 18.12.2018
(Mad), wherein the ratio of the decision of Hon’ble High Court of
Karnataka High Court in the case of Manjunatha Cotton and Ginning
Factory (supra) was followed. On the other hand, the ld. DR submitted
that the conditions mentioned in sub s. (2) of s. 271AAA of the Act were
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 5 -: not met and therefore, the levy of penalty u/s. 271AAA of the Act is
justified.
We heard the rival submissions and perused the material on
record. The solitary issue in the present appeal is whether the levy of
penalty u/s. 271AAA of the Act was justified in the facts and
circumstances of the case. Admittedly, the assessee disclosed his
undisclosed income in the return of income filed pursuant to notice
issued u/s. 153A of the Act. This income was brought to tax by the AO, after making reasonable addition of ₹ 15,000/-. The provision of s.
271AAA of the Act provides that the assessee shall pay penalty in
addition to the tax payable by him @ 10% of the undisclosed income and
an exception to this ruling provided in case the assessee admits the
undisclosed income in the statement recorded under the provision of sub
s. (4) of s. 132 during the course of search and seizure proceedings and
also specifies and substance the manner in which such income has been
derived and the tax is together interest on the undisclosed income is
paid. In the present case, no doubt the assessee has admittedly
undisclosed income but there is nothing shown to us that the assessee
also discharged the onus of specifying the manner in which the income
has been derived and also substantiate the manner in which the
undisclosed income was derived. It is not even the case of the appellant
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 6 -: that he discharged this onus lying upon him. The conditions imposed
under sub s. (2) of the s. 271AAA of the Act are mandatory in nature and
failure to meet this condition shall automatically attract the levy of
penalty. The contention of the ld. Counsel for the assessee that in non
striking off relevant column in the show cause notice would render
penalty proceedings laid cannot be accepted, in as much as, the
provisions of s. 271AAA of the Act and s. 271C of the Act stand on
different footings. Further, the consideration under the provisions of s.
271AAA of the Act had come up before Hon’ble High Court of Delhi in
the case of PCIT vs. Smt. Ritu Singal 92 taxmann.com 224 (Del.),
wherein it was held as follows:
“12. Like in that case, the first condition under Section 271AAA is that the assessee must make a statement under Section 132(4) in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1). The second condition for availing of the immunity from penalty under Section 271(1)(c) is that the assessee should specify, in his statement under Section 132(4), the manner in which such income stood derived. The revenue contended Gebilal Kanhailal that though the second condition stood satisfied, the third condition was not sought. It urged that the assessee was not entitled to immunity under Clause (2) as he did not satisfy the third condition for availing the benefit of waiver of penalty under Section 271(1)(c) as he failed to file his return of income on 31st July, 1987 and pay tax thereon particularly when the assessee conceded on 1st Aug., 1987 that there was concealment of income. The third condition under Clause (2) was that the assessee had to pay the tax together with interest, if any, in respect of such undisclosed income. The court held that no time-limit for payment of such tax stood prescribed under Clause (2) and that the only requirement stipulated in the third condition was for the assessee to "pay tax together with interest". It was held in Gebilal Kanhailal (supra) that the third condition was also fulfilled as the assessee paid tax with interest upto the date of payment. The only condition which was required to be fulfilled for securing the immunity,
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 7 -: after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income upto the date of payment. Explanation 5 (2) did not prescribe the time-limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4).
In the present case, during the course of the statement made by the assessee, during the course of the search on 4 March, 2010, that she had lent ' 16 crores in aggregate to three individuals during financial year 2009-2010. This was in response to a query by the revenue officials during 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 16 crores is my unaccounted income for the Financial Year 2009-2010 relevant for AY 2010-2011”. 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 ' 16 crores was disclosed, no “substantiation” of the “manner” of deriving such undisclosed income was revealed.
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 Kanhailal in respect of pari material 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)”.
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 Commissioner of Income Tax 358 ITR 539 (SC) 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
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 8 -: 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.
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.
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. ”
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, 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.”
In the present case also the appellant had not disclosed the
manner in which the undisclosed income was derived therefore, the
question of substantiation of the same also does not arise. Thus, the
ITA No.816/Chny/2013 (AY: 2008-09) Shri P.K. Duraisamy :- 9 -: appellant had failed to satisfy the conditions laid down in sub s. (2) of s. 271AAA of the Act. In the circumstances, we uphold the levy of penalty
u/s. 271AAA of the Act. Therefore, appeal filed by the assessee is
dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced on the 30th day of January, 2019 in Chennai. Sd/- Sd/- (एन.आर.एस. गणेशन) (इंटूर� रामा राव) (N.R.S. GANESAN) (INTURI RAMA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
चे�नई/Chennai, �दनांक/Dated: 30th January, 2019. EDN, Sr. P.S
आदेश क� ��त�ल�प अ�े�षत/Copy to: 4. आयकर आयु�त/CIT 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 5. �वभागीय ��त�न�ध/DR 3. आयकर आयु�त (अपील)/CIT(A) 6. गाड� फाईल/GF