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order : 21.04.2017 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER:
1. 1. This appeal under section 253 of the IT Act (the Act) by Revenue is directed against the order of Ld. Commissioner of Income Tax (Appeals)- 41, for short CIT (A), Mumbai, and dated 31.10.2013. The ld. CIT (A) in the impugned order deleted the penalty levied under section 271AAA of the Act.
2. Brief facts of the case are that assessee filed return of income for the relevant assessment year on 29 September 2010 declaring total income at Rs. Nil after setting off of unabsorbed depreciation. A search and seizure action under section 132 of the Act was carried out at the premises of the assessee on 12 August 2009. During the course of such proceeding the statement of Shri Muralidharan Aggarwal CMD was recorded wherein the assessee admitted an undisclosed income of Rs. 25,57,60,940/-on account of discrepancy in the actual stock in its premises as on 31 July 2009. The director of assessee company further explained ITA N0.520/M/2014 M/s Mudra Life Style that the said discrepancy was on account of the difference in actual physical stock amounting to Rs. 128,59,44,196/- in its premises as on the August 2009 and the stock is reflected in the stock statement submitted to the banks for the month of July 2009 of Rs. 103,01,83,256/-. The assessee also somewhat offered the advances given to Mr. JK Bajaj and Mr Tony Bajaj of Rs.22,32,200/- to be treated as undisclosed income in its statement recorded on 13.08.2009. The assessee deposited the tax along with interest on the said undisclosed income while revising its returns of income for the year under consideration filed on 25 September 2011. Pursuant to the file of return of income the Assessing Officer passed the assessment order under section 143(3) read with section 153A on 30 December 2011. The Assessing Officer while passing assessment order issued show cause notice for levying the penalty under section 271AAA. In response to the said notice the assessee filed its reply dated 15 January 2012 and again on 18January 2012. The assessee in its reply contended that assessee had complied with the provisions of subsection (2) of section 271AAA of the Act and no penalty is liable to be levied on the assessee. The Assessing Officer was not satisfied with the reply of the assessee. The Assessing Officer hold that assessee had not ‘specified’ the ‘manner’ of earning such income and levied the penalty under section 271 AAA at the rate of 10% of the undisclosed income. Aggrieved by the order of Assessing Officer, assessee filed appeal before the Commissioner (Appeals). The learned Commissioner (Appeals) deleted the penalty. Thus, aggrieved by the order of learned Commissioner (Appeals) the Revenue has filed present appeal before us.
The Revenue has raised following grounds of appeal: (1) “Whether on the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in holding that penalty under section 271AAA of the income tax Act is not leviable on the ground that the assessee fulfilled all conditions laid down in section 271AAA while offering additional income in a statement recorded under section 132 (4) of the income tax Act and also admitted during the course of assessment proceedings, whereas the assessee has not been able to substantiate the manure of earning income as laid down under section 271AAA.”
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We have heard learned AR for the revenue and the learned AR of the assessee and perused the material available on record. The learned DR for the revenue supported and relied on the order of Assessing Officer. The learned DR further argued that the assessee has not complied with the condition of the provisions of sub-section (2) of section 271AAA of the Act. The assessee failed to specify the manner in which such undisclosed income was acquired. The funds generated to purchase such undisclosed stock was not specified by the assessee. The provisions of sub-section (2) of section 271 AAA cast a duty upon the assessee to specify the manner in which such undisclosed income was earned by them. It was further argued that mere payment of tax on the undisclosed income would not absolve the assessee from the liability of penalty as prescribed under section 271 AAA of the Act unless the assessee substantiate the manner of earning of such undisclosed income. On the other hand the learned AR of the assessee supported the order of Commissioner (Appeals) would argue that the undisclosed income offered by the assessee was duly accepted by the Assessing Officer, the assessee paid the due tax on the income disclosed in the statement recorded during the action under section 132 of the Act. The assessee has explained that the income offered, the income was derived from its business activity. It was further argued that the case of assessee is covered under the exception clause of sub-section (2) of section 271AAA of the Act. Since assessee have disclosed the concealed income while giving a statement under section 132 (4) during the course of search and paid the due tax thereon. The income from business having been accepted by the department thus no penalty is leviable. The authorised officer has not asked a specific question with regard to a specifying the manner, then it cannot be expected from the assessee to specify the manner, because the assessee only answer the question put forth by the authorised officer. The learned Commissioner (Appeals) considered the facts of the case and after appreciating the provisions of law relating to levy of penalty under section 271AAA deleted the penalty. In support of his submission the learned AR of the assessee relied upon the various decisions of Tribunal and ITA N0.520/M/2014 M/s Mudra Life Style filed the copies of all the decisions in the form of legal paper book. The learned AR relied on the following decisions; (i) Concrete Developer Vs ACIT [34taxman.com 62]ITA No.381 /Nag/2012, (ii) Ashok Sharma Vs DCIT [149 TTJ 33(URO)] (iii) CIT Vs Mahendra C. Shah 299 ITR 305 (Gujarat High Court), (iv) ACIT Vs Phoenix Mills Ltd in /M/2013 dated 7.8.2015. (v) Hemant Kumar Vs ACIT in ITA No.745 /M/2015 dated 19.07. 2016. (vi) Meerat Singal Vs ACIT [161 TT 483], (vii) CIT Vs Radha Kishan Goel [278 ITR 454]Allahabad High Court, (viii) Sunil Kumar Bansal Vs DCIT [37 ITR (Trib) 576], (ix) Pramod Kr Jain Vs DCIT [149 TTJ 36 (URO)] (x) DCIT Vs Neeraj Jindal [293 CTR 298] (xi) Sri KiranShah versus ACIT in ITANo.5919/M/2011,08.01.2014, (xii) DCIT versus Purti Shankar Karkhara [ 23 ITR (T) 667], (xiii) Sh. Dinesh Khanna versus DCIT, ITA No. 4200-4205/M/2010 dated 29 July 2015, (xiv) CIT versus SSP Ltd [302 ITR 43](Punjab and Haryana) and (xv) PMS Diesels versus DCIT [260/Asr/ 2013 dated 31.12. 2016.
We have considered the level contention of the parties and have gone through the orders of authorities below. The assessing officer while passing assessment order has not specified as to why the penalty proceeding under section 271 AAA is being initiated against the assessee. However, during the penalty proceeding the Assessing officer noted that merely offering income under section 132(4) did not give the assessee the relief from levy of penalty under section 271AAA. The Assessing Officer recorded that the assessee had not “specified” the “manner” in which such undisclosed stock was acquired from unaccounted sources. Assessee has not explained as to how unaccounted funds were generated to produce such undisclosed stock. The assessing officer further concluded that the assessee has not submitted any details and specify the manner in which Rs22,32,200 /- was given to Mr JK Bajaj and Mr. Punit Bajaj. With the above ITA N0.520/M/2014 M/s Mudra Life Style
observation the Assessing Officer levied the penalty@ 10% of the undisclosed income. During the appellate proceedings before learned Commissioner (Appeals) the assessee submitted that entire addition in the assessment order dated 30.12.2011passed under section 143(3) rws 153A have been made by Assessing Officer on the basis of inventory sheet which was prepared at the time of search and without any actual inventory being verified. The inventory of such a stock during the course of search could not have been verified inasmuch as the stocks were located at different location in Mumbai, Bhiwandi, Tarapur and Bangalore etc. The assessee had offered income of Rs.25,57,60,940/- on account discrepancy in the physical stock in the premises of assessee as on 31 July 2009. Since, there was actual stock of Rs.128,59,44,196/- against Rs. 103,14,83,256/- as shown in the stock statements submitted to the bank for the month of July 2009. The assessee specifically pointed out that there were neither discrepancies found in the books of account nor any incriminating document found during the search, which may suggest the purchase of unaccounted stock. The contention of assessee and the income offered voluntary was accepted by the assessing officer. The stock statement given prior to 30 July 2009 has not been found to be false by Assessing Officer. The assessee had submitted that all condition of section 271 AAA(2) has been satisfied. The assessee disclose the additional income and paid the due tax along with interest before date of filing of the return of income the snow penalty was leviable against the assessee. The assessee also relied upon the statement recorded by the authorised person under section 132(4) of the Act. After considering the contention of the assessee the landed Commissioner appeals observed that the provisions of section 271 AAA A have been inserted in the act with effect from first appellate 2007 and are applicable in respect of undisclosed income an artist as a result of search operation carried out on or after 1 June 2007. The perusal of provisions of section 271 AAA will not be attracted if in the statement under section 132(4), the assessee admits the undisclosed income and specifies the manner in which such income has been derived and also substantiates the manner in which undisclosed income was derived and pays ITA N0.520/M/2014 M/s Mudra Life Style the tax, together with interest, if any in respect of the said undisclosed income the scheme under section 271 AAA is a complete paradigm so far as penalty in respect of unaccounted income and at as a result of search operation carried out on or after 1 June 2007 is concerned. Unlike a case of penalty under section 271(1) (c), section 271 AAA, without any reference to the finding or presumptions of concealment of income etc. However, sub-section (2) of section 271 AAA, relaxes the rigour of this penalty provision. The learned Commissioner (Appeals) examined whether the assessee satisfied the conditions laid down under sub-section (2) of section 271AAA. The learned Commissioner (Appeals) observed that Assessing Officer had accepted the statement of assessee and assessed the undisclosed income at business income. Further, there is no dispute that the assessee has paid due tax in respect of the amount disclosed during the course of such. Therefore, it cannot be said that assessee has not specified the manner or could not substantiates the manner in which income was derived.
Before, us it was argued by learned AR of the assessee that at the time of recording of the statement under section 132(4), the authorised officer has not asked a specific question with regard to a specifying the manner, then it cannot be expected from the assessee to specify the manner, because the assessee only answer the question put forth by the authorised officer. As the assessee has no occasion when the additional income offered was accepted by the assessing officer without any variation to explain further. Even otherwise the assessee has explained that unaccounted stock was generated due to the business activities of the assessee. We have seen that the learned Commissioner (Appeals) after considering the decision of various High Courts and Tribunal deleted the penalty levied by Assessing Officer. The ld Commissioner followed the decisions of Hon’ble Gujarat High Court in Mahendra C. Shah, Allahabad High Court in Radha Kishan Goel and further the decision of Delhi High Court in Neeraj Jindal (supra). We have seen that decision of Commissioner (Appeal) is based ITA N0.520/M/2014 M/s Mudra Life Style