DCIT, NEW DELHI vs. SH. M.L. SEHAJPAL, CHANDIGARH

By way of above grounds of appeal, the Revenue has challenged the deletion of penalty imposed against the assessee u/s. 271AAA of the Act. The brief facts of the case are that the assessment in the case of assessee was completed 153A/143(3) of the Act at a total income of Rs.2,46,41,303/-, as returned by the assessee. As per AO, the assessee had disclosed an additional income of Rs.1,75,00,000/- , but the assessee did not specify the manner in which the said additional income had been derived. The AO, therefore, being not satisfied with the detailed submissions of the assessee, imposed a penalty of Rs.17,50,000/- u/s. 271AAA of the Act representing to 10% of the undisclosed income shown as additional income in the return of income. The first appellate authority deleted the penalty vide impugned order observing as under : “3.3 Decision:- I have perused the penalty order, written submission and arguments of Ld. AR. The Ld. Assessing Officer has levied penalty u/s 271AAA on the sole ground that during the sworn statement recorded during the search and seizure operation, the appellant has no where mentioned about mode and manner in which such income was derived. The Ld. AR has argued that question was never asked during the recording of statement as to how undisclosed was earned i.e. manner and mode of earning such disclosed income. Ld. AR argued that the appellant has paid tax on such undisclosed income. Under these circumstances, the penalty u/s 271AAA is not leviable. Ld. AR relied on following judicial pronouncements:- 1. Neeraj Singhal Vs. ACIT (2013) 37 Taxman.com (Delhi-Trib.) 2. ACIT Vs. A.N. Annamalaisamy HUF 38 Taxman.com 440(Chennai- Trib) I have perused these decisions. Relevant portion of the judgment is reproduced as under :- a) Neeraj Singhal Vs. ACIT (2013) 37 Taxmann.com 189 (Delhi-Trib.) "16. In view of above facts of the present case wherefrom it is evident that during the course of search proceedings the authorized officer of the department had not raised any specific query regarding the manner in which the undisclosed income has been derived and on the contrary the assessee has tried to explain the earning of the undisclosed income in question in its reply during the course of recording of his statement u/s 132(4) of the Act and thereafter. We thus respectfully following the ratio of above cited decisions of Hon’ble Allahabad High Court and Hon'ble Gujarat High Court hold that in absence of query raised by the authorized officer during the course of recording of statement u/s 132(4) about the manner in which the undisclosed income has been derived and about u/s 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting aside orders of the authorizes below in this regard direct the AO to delete the penalty of Rs. 12,50,000/- levied u/s 271AAA of the Act. The ground is accordingly allowed. " b) ACIT vs. A.N. Annamalaisamy HUF (2013) 38 Taxmann.com 440 (Chennai Trib.) ''We find that the AO was carried away by the original return filed by the assessee, wherein originally the income admitted in the course of search was not returned by it. But the fact is that the assessee had filed a revised return before completing the assessment. When that it the case, the first return filed by the assessee is non est. The only valid return, the amount admitted by the assessee at the time of search was offered for taxation. The assessee at the time of search was offered for taxation. The assessee has paid the tax: he has paid the interest. He has not preferred any quantum appeal He has also explained about the business and stated that the jewellery was acquired over a period of time. When all the pieces are put together, we find that the CIT(A) is justified in holding that there is no ground to levy penalty in the present case under s. 271AAA. Accordingly, the order passed by the C1T(A) is upheld. " In present case, above decision is applicable as there was no question u/s 132(4) regarding manner of earning the undisclosed. Further, Ld. AR argued that there was no specific documents or unaccounted assets found, during the search and relied by the assessing officer in the penalty order in support of undisclosed income, therefore, penalty u/s 271AAA(1) is not applicable. I have perused the penalty order, there is no mention of any specific unaccounted asset or documents in the penalty order. Considering the entire facts and circumstances of the case, I hereby cancel the penalty levied.”

The ld. DR reiterating the contents of penalty order, submitted that the ld. CIT(A) was not justified in canceling the penalty ignoring the fact that the conditions envisaged under sub-sec. (2) of Section 271AAA had to be cumulatively satisfied for granting immunity from the penal provisions. On the other hand, the ld. AR relied on the impugned order and the case laws cited by the ld. CIT(A). Before us, the ld. AR also relied on the decision of co- ordinate Bench in the case of ACIT vs. Emirates Technologies Pvt. Ltd. (ITA No. 476/Del/2014 – Order dated 28.10.2016), which stood confirmed by Hon’ble jurisdictional High Court vide order dated 18.07.2017 in ITA No. 400/2017.