ASHOK GUPTA,FARIDABAD vs. DCIT, FARIDABAD

PER SUCHITRA KAMBLE, JM

are as under:- “1. That the order of the Learned Deputy Commissioner of Income Tax, Central Circle-1, Faridabad is bad in law and on facts.

2. That on the facts and in the circumstances of the case, the assessee denies his liabilities to penalty levied vide Order u/s 271AAA of the Income Tax, 1961 and consequently to pay this penalty based on such order. The notice issued u/s 156 to the assessee is therefore bad in law and deserves to be quashed.

3. That on the facts and in the circumstances of the case, the Learned Deputy Commissioner of Income Tax, Central Circle-1, Fridabad, erred in levy of penalty u/s 271AAA of the Income Tax, 1961.”

3. A search and seizure operation u/s 132(1) of the Act was carried out at the residential premises of Shri Ashok Gupta who is Director of M/s Anchit Ispat Pvt. Ltd., M/s Apolo System and Services (P) Ltd. and of several other companies on 29/1/2009. Return of income was field by the assessee on 29/12/2009 declaring an income of Rs.59,50,860/-. Assessment in the instant case was completed u/s 143(3) r.w.s. 153B (1) (b) of the I.T. Act on 27/12/2010. After hearing the assessee, the income returned at Rs.59,50,860/- was accepted. During the course of search operation, the assessee made a surrendered of Rs.50,00,000/- which was incorporated by the assessee in his return of income under the head income from other sources. In the course of search, in a statement under section 132(4), the assessee admitted the undisclosed income and specified and substantiated the manner in which income was derived by stating that the undisclosed income was earned from trading of steel, therefore, the condition u/s 271AAA stands satisfied particularly when no other specific question was raised by the Authorized Officer while enquiring, recording and concluding statement u/s 132(4). As regard to tax on the income declared, the assessee informed that the tax on total income of Rs.59,51,080/- including income declared of Rs.50,00,000/- was paid together with interest as under as shown in the return of income:- TDS Rs.1,94,678/- Advance Tax Rs.16,18,128/- Paid u/s 140A Rs.1,51,850/- Total Rs.19,64,655/- The advance tax of Rs.16,18,128/- claimed as above included an amount of Rs.16 Lacs, cash seized by the department on 29/1/2009. The issue with regard to credit of said Rs.16 Lacs on account of advance tax payment was settled by the CIT(A) vide order dated 25/4/2012. The order to give appeal effect to the order of the CIT(A) was passed by the Assessing Officer on 4/5/2012. With this no dispute remained with regard to payment of tax and interest on the admitted undisclosed income. Thus, the condition u/s 271AAA with regard to payment of tax together with interest was also satisfied.

(1) Assessee must have admitted, in the statement under Section 132 (4) of Act, 1961, undisclosed income; and, must also have specified the manner in which such income has been derived,

(2) Assessee must also substantiate the manner in which undisclosed income was derived, i.e., must adduce adequate material to support the manner in which undisclosed income was derived by him which he has specified, if any, in his statement under Section 132(4); and,

(3) Assessee pays tax together with interest, if any, in respect to undisclosed income.

If all these steps have been taken by Assessee, besides saving liability of penalty under Section 271AAA (1), he would also himself save from another penalty under Section 271 (a) (c). Sub-section (3) further provides that no penalty under Clause (c) of Sub-section (1) of Section 271 shall be imposed upon Assessee in respect to undisclosed income referred to in Sub-section (1) if Sub-section (2) stands complied. Therefore, when the steps provided in Sub- section (2) of Section 271AAA are observed by Assessee, besides the fact, he shall absolve himself from the liability of penalty under Sub-section (1) of Section 271AAA, he will also legally escape from liability of penalty under Section 271 (1) (c) in respect to undisclosed income vide Sub-section (3) of Section 271AAA.

In the present case, the advance tax of Rs.16,18,128/- claimed as above included an amount of Rs.16 Lacs, cash seized by the department on 29/1/2009. The issue with regard to credit of said Rs.16 Lacs on account of advance tax payment was settled by the CIT(A) vide order dated 25/4/2012. The order to give appeal effect to the order of the CIT(A) was passed by the Assessing Officer on 4/5/2012. With this no dispute remained with regard to payment of tax and interest on the admitted undisclosed income. Thus, the condition u/s 271AAA with regard to payment of tax together with interest was also satisfied.

Section 271AAA and Explanation 5 (2) of Section 271 (1) (c) came to be considered before Hon’ble Apex Court in Assistant Commissioner of Income Tax Vs. Gebilal Kanhailal (supra). The Hon’ble Apex Court said that it provides, where, in the Course of search under Section 132, the Assessee, found to be owner of unaccounted assets, claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous year which has ended before the date of search or which is to end on or after the date of search, then in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed particulars of his income for the purpose of imposition of penalty, but there are two exceptions to such deeming provision or to such a presumption of concealment which are given in sub-clauses (1) and (2) of Explanation (5). Referring to Clause (2) of Explanation 5, the Hon’ble Apex Court said that three conditions have to be satisfied by the Assessee for claiming immunity for payment of penalty thereunder.

Therefore, we are in agreement with the legal proposition stated by the Ld. AR that explanation to Section 271(1)(c) of the Act is similar to that of wordings of Section 271AAA of the Act. Since the assessee made payment of tax along with interest, the penalty u/s 271AAA will not be attracted as per the provisions of Section 274 of the Act.