DCIT, NEW DELHI vs. SH. HARMENDER SINGH SRAN, NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (Through Video Conferencing) ITA No. 4144/Del/2013 (Assessment Year: 2009-10) Amandeep Singh Saran, Vs. ACIT, B-53, B-1, Community Centre, Central Circle-4, Janakpuri, New Delhi New Delhi PAN: AUVPS5370E (Appellant) (Respondent)

ITA No. 2672/Del/2016 (Assessment Year: 2010-11) DCIT, Vs. Amandeep Singh Saran, Central Circle-29, 7/73, Punjabi Bagh West New Delhi PAN: AUVPS5370E

CO No. 53/Del/2018 (In ITA No. 2672/Del/2016) (Assessment Year: 2010-11) Amandeep Singh Saran, Vs. DCIT, 7/73, Punjabi Bagh West Central Circle-29, PAN: AUVPS5370E New Delhi (Appellant) (Respondent) ITA No. 2671/Del/2016 (Assessment Year: 2010-11) DCIT, Vs. Harminder Singh Saran, Central Circle-29, 6/73, Punjabi Bagh West, New Delhi New Delhi PAN: AIGPS2229B (Appellant) (Respondent)

CO No. 52/Del/2018 (In ITA No. 2671/Del/2016) (Assessment Year: 2010-11) Harminder Singh Saran, Vs. DCIT, 6/73, Punjabi Bagh West, Central Circle-29, New Delhi New Delhi PAN: AIGPS2229B (Appellant) (Respondent)

Revenue by : Ms. Sunita Singh, CIT DR Assessee by: Shri Sunil Arora, CA Ms. Gunjan Jain, CA Shri Dev Rath Arora, Adv Date of Hearing 06/10/2021 Date of pronouncement 23/11/2021

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is the bunch of 3 appeals and 2 cross objections concerning the same search of father [ Mr. Harminder singh Saran ] and son [ Mr. Amandeep singh Saran] involving common facts and issues, both the parties argued them together and hence, disposed of by this common order. 2. ITA No. 4144/Del/2013 is filed by Mr. Amandeep Singh Saran for Assessment Year 2009-10 against the order passed by the LD CIT (A)- XXXIII, New Delhi dated 28.03.2013. By this order, the LD CIT (A) has confirmed the addition of Rs. 5 crores made by the LD AO u/s 69 of the Act. 3. The assessee has raised the following grounds of appeal in ITA No. 4144/Del/2013 for the Assessment Year 2009-10:- “1. Under the facts and circumstances of the case, the Id. first appellate authority has grossly erred in affirming the addition of Rs. 5 crores made by the Ld. Assessing Authority u/s 69 of the Act to the returned income of the appellant, which is highly arbitrary, based on surmise and conjectures, against the facts and bad at law. 2. Under the facts and circumstances of the case, the ld. first appellate authority has grossly erred in affirming the additions of Rs. 5 crores made by the Ld. Assessing Authority u/s 69 of the Act on account of unexplained advances for property, completely based on statement recorded u/s 132(4) of the Act which was substantially incorrect and has been established to be so by the appellant, especially in the absence of any material on record brought in by ld. A.O. to substantiate that any such payment was actually made by the appellant during the relevant year. 3. Under the facts and circumstances of the case, the ld. first appellate authority has grossly erred in affirming the addition of Rs. 5 crores made by the ld. Assessing Authority without giving effect to the surrender of Rs. 10 crores made by the appellant in A.Y. 2010-11, to buy peace with the department for the entire period of assessment, i.e., from A.Y. 2004-05 to A.Y. 2010-11.”

assessee and his father as undisclosed income and has offered for taxation for Assessment Year 2010-11 and paid tax due thereon. The ld AO said that when identical entries have been accepted and admitted as correct for Assessment Year 2010-11, the argument of the assessee cannot be accepted for Assessment Year 2009-10 and therefore, he made an addition of Rs. 5 crores on the basis of page no 4 of noting in the seized annexure A- 34. He also rejected the retraction claimed by the assessee. The assessment order u/s 153A of the Act was passed on 28.12.2011 making an addition of Rs. 5 crores total income of the assessee determined at Rs. 5,21,12,940/-. 9. The assessee preferred an appeal before the LD CIT (A) who dismissed the appeal of the assessee. He also rejected the contention of the assessee that addition is made merely based on the statement made u/s 132(4) of the Act in absence of any corroborative material. He held that the addition is made based on noting of seized material, which is accepted as unaccounted investment u/s 132(4) by the appellant and his father. Against the order of the LD CIT (A), the assessee is in appeal before us. 10. The LD AR submitted a paper book containing 166 pages containing written submission of the assessee. The main contention of the assessee is that i. except noting in the diary there are no other evidence available during the course of search which even remotely suggested that there is income in the hands of the assessee. ii. Noting cannot be said to be any material as it was mere scribble. He therefore, submitted the addition of sum of Rs. 5 crores itself is erroneous. iii. Disclosure was made inadvertently without analyzing and understanding proper implication of the documents. iv. On 26.03.2010 the assessee has submitted that the during the course of search, statement u/s 132(4) of the Act was made of disclosure of Rs 140.05 crores without analyzing and understanding the proper implication of the documents. Assessee revised the above surrender to Rs. 73 crores. In the above revised disclosure of Rs. 73 crores, disclosure in the hands of the assessee as well as his father of the assessee was of only Rs. 10 crores each. The disclosure of Rs. 5

crores, which is made in the impugned appeal, was not included in disclosure of Rs 73 Crores. The assessee submitted that previously mentioned surrender of Rs. 73 crores was thus accepted by the assessee as no further enquiry was made and no taxes were collected. Thus, he claimed that the conduct of the Investigation Wing shows that they have accepted the revised disclosure of Rs. 73 crores. In view of this, he submitted that addition confirmed by the LD CIT (A) deserves to be deleted. v. He also submitted that coordinate bench in ITA No. 1573/Del/2012 have decided the issue on 09.09.2015 on identical facts in case of Subash Sharma, which covers the issue in favour of the assessee. vi. He further submitted the decision of the Hon'ble Delhi High Court in CIT vs. Sunil Aggarwal 64 Taxmann.com 107 also covers the issue in favour of the assessee. Thus, the addition of Rs 5 crores made by the LD AO based on seized diary and confirmed by the LD CIT (A) deserves to be deleted. 11. The LD DR vehemently objected to the submission of the assessee. It was submitted that i. Assessee has not retracted the statement at all but he has submitted vide letter dated 26.03.2010 the explanation of the various documents seized during the course of search. Assessee has stated that its disclosure is only Rs 73 crores. He submitted that the Annexure-A- 34 has been explained at page No. 62 of the paper book stating that the noting on the said page are of the scribbling and do not represent any income. He submitted that the same could not be said to be any retraction. Therefore, he submitted that there is no retraction made by the assessee. ii. He further submitted that the LD AO as well as the LD CIT (A) has correctly noted that diary was maintained by Mr. Harminder Singh Saran and is seized from him. He said that he maintained the same. On showing him diary, he said that it is unexplained income and advances are given for properties. He also submitted year wise disclosure of all three pages i.e. page no 4, 5 and 6 of that diary. He also bifurcated disclosure between him and his son, assessee. Page | 5

Assessee, his son also confirmed this statement. The statement was after consultation between father and son. iii. He submitted that the addition has been made based on the noting of the diary, when confronted to the assessee, he confirmed the unaccounted income in his statement u/s 132(4) of the Act. Therefore, claim of the assessee that disclosure is without any material is devoid of merit. iv. He further stated that the decision in the case of Sunil Aggarwal of Hon'ble Delhi High Court are on different facts and cannot be applied in this case. v. With respect to the decision of the Mr. Subash Sharma in ITA NO. 573/Del/2012 there was retraction of the statement of the disclosure made by the assessee during the course of search on 22.11.2006 immediately thereafter on 28.11.2006. He therefore, submitted the facts of that case are also different. 12. We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact clearly shows that during the course of search on 20.11.2009, Annexure A-34 in the form of diary was found form Mr. Harminder Singh Saran, who is father of the assessee. In that diary at page No. 4 „advance for property of Rs. 5 crores to MD‟ was written. When confronted the above documents to Mr. Harminder Singh Saran he confirmed that he marinated this diary, it contains his unaccounted income in the form of advances given for purchase of some properties. He disclosed a sum of Rs. 5 crores for Assessment Year 2009-10 in the hands of his son Mr. Amandeep Singh Saran who is an assessee before us. The statement of Mr. Harminder Singh Saran was shown to the assessee who confirmed the same and stated that the above statement has been given after consultation with the assessee by Mr. Harminder Singh Saran. The assessee did not disclose the above sum in the return of income and stated that the above writing does not have any undisclosed income. The fact shows that based on the same diary the assessee has owned a sum of Rs. 10 crores for Assessment Year 2010-11 and has also paid tax thereon. His father Mr. Harminder Singh Saran has also owned Rs. 10 crores for Assessment Year 2010-11 and paid due tax thereon. Therefore, the argument of the assessee

cannot be accepted that page No. 4 where the disclosure of Rs. 5 crores is made is merely scribbling whereas page No. 5 and 6 where the disclosure of Rs. 10 crores in the hands of his father are made represents the undisclosed income. Even before the LD DDIT, where the retraction is made, as claimed by the assessee, clearly shows that the assessee has merely stated that there is an adjustment of the disclosure. Page No. 34 to 93 placed before us, which is a letter dated 26.03.2010, as titled as „explanation of various documents seized during the course of search‟. Page No. 62 of the paper book at page No. 52 of that letter, wherein, Annexure A-34 page No. 4, 5 and 6 are explained, the assessee has stated that the noting on the said page are rough scribbling during the telephonic discussion etc and do not reveal any transaction to result any undisclosed expenditure investment or income. This explanation of the assessee is not convincing and plausible for the reason that on the basis of page No. 5 and 6 of the same diary, assessee and his father has disclosed Rs. 10 crores each for AY 2010-11, whereas at page No. 4 where the income of Rs. 5 crores is mentioned for this assessment year, the assessee has denied any unaccounted income. 13. Further, disclosure made by the assessee was based on the diary seized, which is written in the hands of the father of the assessee. This diary was confronted to the father the assessee, who in his statement u/s 132(4) of the Act owned the noting of the diary and made the disclosure of Rs. 25 crore. This disclosure was consulted with the assessee and the assessee owned the same. Based on this in Assessment Year 2009-10 the disclosure of Rs. 5 crores based on page No. 4 of the diary was made. Therefore, it cannot be said that there is no evidence available for the disclosure. The evidence is in the form of diary. When confronted the contents of the diary were owned and accepted. Therefore, there is no reason to say that there is no evidence available with the LD AO. According to us, there is evidence, which was owned by the assessee and his father and therefore, there is no reason to have any further corroboration evidence in such case. 14. The assessee has relied on the decision of the Hon'ble Delhi High Court in case of Sunil Aggarwal 64 Taxmann.com 107 in that particular case where cash was seized from the employee of the assessee during the course of search on 20.06.1996. The assessee owned the same in statement u/s

132(4) of the Act. The statement was retracted. The Hon'ble High Court held that the assessee simply did not retract the statement but explained Rs. 86 lakhs found from his employee. Explanation was with reference to the entries in the books of account of sales made during the year and stock position. In that circumstances, The Hon'ble High Court also held that retracted u/s 132(4) would require some corroborative material for the AO to make an addition. Apparently, in this case there is a source of material in the form of diary maintained by the assessee. Therefore, it cannot be said that the addition is made merely based on the statement. Hence, reliance on the judgment of the Hon'ble Delhi High Court does not apply. 15. Further, reliance on the decision of the coordinate bench in case of Subash Sharma{supra} also do not help the case of the assessee because in that search took place on 22.11.2006, retraction was made on 28.11.2006 and after the retraction there was no material available with the ld AO. In this case, a diary was found which was owned by the assessee. Therefore, the decision of the coordinate bench is also on different facts. 16. In view of the above facts, we do not find any infirmity in the order of the lower authorities. Accordingly, the orders of the lower authorities are confirmed. 17. All the three grounds of appeal of the assessee are dismissed.

ITA No. 2672/Dl/2016 and CO 53/Del/2018

(Assessment Year 2010-11)

levied u/s 271AAA of the Act by holding that all the three conditions of sub-section (2) of section 271AAA are fulfilled. (b) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by ignoring the fact that the assessee has no where during the course of assessment proceedings as well as in penalty proceedings specified and substantiated the manner in which undisclosed income was derived. (c) On the facts and in the circumstances of the case, the Ld. CTT(A) had erred in law and on facts by not appreciating that the assessee has not fulfilled the conditions laid down in sub-section (2) of section 271AAA of the Act for granting immunity from levy of penalty. (d) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in holding that the income was earned from the business of group companies, where assessee is a director and the conditions of specifying the manner of the admitted undisclosed income is satisfied. (e) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in not appreciating that the conditions prescribed under sub-section (2) of section 271AAA have to be cumulatively satisfied. (f) That the order of the CIT(A) is erroneous and is not tenable on facts arid in law. (g) That the grounds of appeal are without prejudice to each other.” 20. The assessee has raised the following grounds of appeal in Cross Objection No. 52/Del/2018 for the Assessment Year 2010-11:- “1. Under the facts and circumstances of the case, the penalty order dated 04.03.2015 u/s 271AAA of the Act passed by the ld Assessing Authority levying penalty of Rs. 94,00,000 is invalid and bad at law as the notice issued for initiating penalty proceedings u/s 271AAA of the Act was vague and was issued without application of mind.” 21. Brief facts of the case shows that the assessment in this case was completed u/s 143(3) read with section 153C of the Act by order dated 28.12.2011 at a total income of Rs. 10,32,56,770/- against the return of income filed by the assessee on 31.03.2011 on the same amount. 22. During the course of search u/s 132 of the Act on 20.11.2009 a diary was found as Annexure A-34 maintained by , found and seized from, owned by Mr Harminder singh Saran, he disclosed a sum of Rs. 24.40 crores bifurcating as Rs. 5 crores for Assessment Year 2009-10 and Rs 9.40 crores for AY 2010-11 in the hands of the Amandeep Singh Saran. A further sum of Rs. 10 crores was also disclosed in the hands of the Mr. Harmander Singh Saran for Assessment Year 2010-11. Therefore, assessee Page | 9

disclosed a sum of Rs. 10 crores in his return of income. However, according to the ld AO the assessee has not specified the manner of deriving income and also failed to substantiate such manner in which the assessee has derived the undisclosed income of Rs. 10 crores. Therefore, he issued notice u/s 271AAA of the Act. The assessee responded with a request that penalty proceedings may be kept in abeyance till the quantum appeal filed by the assessee before the ld CIT(A) gets decided. Later on The ld CIT(A) dismissed the appeal of the assessee and therefore, the penalty proceedings were reinitiated. The ld AO issued notice on 08.12.2014 and 17.02.2014. The assessee merely requested for adjournment and therefore, the ld AO proceeded to finalise penalty proceedings. 23. He found that to save the penalty as per provision of section 271AAA the assessee has to specify and substantiate the manner in which the undisclosed income has been derived. The assessee has during the course of assessment proceedings as well as during the search proceedings has disclosed the same. Therefore, he levied penalty of Rs Rs. 94 lakhs leviable @ 10% of the undisclosed income of Rs. 9.40 Crores by order u/s 271AAA of the Act on 04.03.2015. 24. On Appeal , The ld CIT(A) allowed the appeal of the assessee. He stated that assessee has admitted the undisclosed income. He further stated that the admitted income was earned from the business of the group company where the appellant is a Director and such company are engaged in marketing of diary product, tea and spice and real estate development. Therefore, he held that the condition of specifying the manner of the admitted undisclosed income is also fulfilled. He further held that the assessee has already paid the tax along with interest. Hence according to him all the three conditions specified u/s 271AAA (2) are fulfilled and penalty cannot be sustained. Therefore, he deleted the penalty. 25. The ld AO is aggrieved with that and has preferred this appeal. The assessee has also filed a cross objection which merely supports the order of the ld CIT(A) and challenges that notice issued for initiating penalty was void and issued without application of mind. 26. With respect to the Cross objection the assessee has relied on the decision of the Chandigarh Bench in case of Gillco Developers and builders Pvt. Ltd

Vs. DCIT in 85 Taxmann. Com 339 (Chandigarh). It was submitted that penalties have been levied in the case of the assessee on identical facts and circumstances on the basis of invalid notice and therefore, it deserves to be quashed. The ld AR referred to page No. 31 of the paper book which is notice issued u/s 271AAA of the Act. He submitted that the notice dated 28.12.2011 issued to the assessee is a notice u/s 274 read with section 271 of the Act contains twin limbs of section 271(1) ( C) of the act. Therefore, the penalty levied is void ab initio. 27. Coming to the appeal of the AO, ld DR submitted that the case is squarely covered by the decision of the Hon'ble Delhi High Court in case of Ritu Singh Vs. Cit 403 ITR 97 and following decision of the coordinate bench:- i. ACIT Vs. SSA International Ltd. ii. ITA No. 50 and 51/Del/2013 iii. Anand Sing Vs. DCIT 305 Nagpur 2015 iv. ACIT Vs. Sailesh Gopal 86 Taxmma.Com 263 v. Naresh Iron and Steel Vs. DCIT 102 Taxmann.com 333 28. She also referred to the assessment order as well copy of the statement which is placed at page NO. 25 of the paper book . she referred to the answer to the question No. 4 wherein, the above disclosure was made by the assessee. She submitted that there is no manner of earning of the undisclosed income was mentioned and same was also not substantiated. She submitted that the ld CIT(A) has not read the statement and has wrongly stated that the assessee has disclosed the manner of earning undisclosed income. She further state that merely the nature of the business of the company were stated which cannot be equated with the manner of the earning of undisclosed income and its substantiation. She therefore, submitted that the order of the ld CIT(A) deserves to be set aside and the penalty need to be confirmed. 29. With respect to the decision of the coordinate bench in case of Jillco Developers Pvt. Ltd she submitted that the in view of the decision of the Hon'ble Delhi High Court the same does not apply so far as manner of earning of undisclosed income is concerned. 30. With respect to the notice she referred extensively the para NO. 19 of the decision in case of Gillco development [ supra] where the notice is

reproduced. She submitted that in that notice there was no reference of any undisclosed income during the course of search, whereas in the notice at page No. 31 dated 20.08.2011 there is a specific reference to undisclosed income in the case of search therefore, same do not apply. She also submitted that at the top of the notice learned AO has also mentioned section 271 AAA of the Act. Hence according to her here is no infirmity in the notice. 31. We have carefully considered the rival contentions and perused the orders of the lower authorities. In this case the assessee has disclosed a sum of Rs. 10 crores for Assessment Year 2010-11. The statement of father of assessee is available before us which is placed at page No. 25 to 33 in the case of the assessee for Assessment Year 2009-10. The statement of Mr. Harminder Singh S Saran shows that disclosure was made in response to the Question No. 4. In Question No. 4 he voluntarily disclosed a sum of Rs. 140.05 crores and has given the details of the company, heads of income and assessment orders. According to page No. 5 of Annexure A-34 he disclosed Rs. 10 crores for Assessment Year 2010-11 undisclosed advance against property. In the case of the assessee as per page No. 4 and 6 of Annexure A-34, he disclosed Rs. 5 crores for Assessment Year 2009-10 and Rs. 9.40 cores for Assessment Year 2010-11 the assessee has owned this disclosure for AY 2010-11 and paid due tax thereon. For the purpose of avoiding the penalty u/s 271AAA, subsection (2) provides three different conditions. The condition NO. 1 says that the assessee admits the undisclosed income and specified the manner in which such income has been derived. Conditions No. 2 says that the assessee substantiate the manner in which undisclosed income was derived. Conditions No. 3 with respect to payment of tax. In case of the assessee the assessee has admitted the income and has paid the tax thereon. However, the assessee has not specified the manner in which such income has been derived and also did not substantiate the manner in which the undisclosed income was derived. Therefore, two conditions of section 271AAA were not specified. The ld CIT(A) has incorrectly mentioned that the assessee has disclosed the manner of earning of such income and has substantiated it. He merely stated the nature of income of the company, with which assessee has no

concern. Those income would be of those companies and not of the assessee. The disclosure is made in the hands of the assessee and his father and not the company. The statement recorded u/s 132(4) also does not show this. Therefore, the case of the assessee is squarely covers by the decision of the Hon'ble Delhi High Court in case of Ritu Singhal Vs. CIT 403 ITR 97 where in it has been held that :- “Analysis and conclusions 7. Section 271AAA, which is involved in the present case, reads as follows: "Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,— (i) 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; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub- section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.—For the purposes of this section,— (a) "undisclosed income" means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has— (A) not been recorded on or before the date of search in the books of account or

other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b) "specified previous year" means the previous year— (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted." 8. This provision was brought into force with effect from 01-04-2007. Its scope and effect was explained by Circular of the Central Board of Direct Taxes (CBDT) dated 12-03-2008 (Circular No.3) in the following terms: "68. Provision for penalty for concealment in search and seizure cases.-68.1 A new section 271AAA has also been inserted so as to provide that, in a case where search has been initiated under section 132 on or after 1st June, 2007, the assessee shall be liable to pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. However, provisions of this section shall not be applicable if the assessee- (i) in a statement under sub-section (4) of section132 in the course of the search, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. It is further provided that no penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be levied or imposed upon the assessee in respect of the undisclosed income referred to in this section. It is also provided that the provisions of section 274 and section 275 shall, so far as may be, apply in relation to the penalty leviable under the new section. 68.2 For the purposes of this section, undisclosed income has been defined to mean- (i) any income of the specified previous years represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous Page | 14

year; or which has otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted. 68.3 For the purposes of this section, specified previous year has been defined, so as to mean the previous year — (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted. 68.4 An appeal to the Commissioner against levy of penalty under the proposed new section 271AAA has also been provided. 68.5 Applicability- This amendment will take effect from the 1st day of June, 2007 and will accordingly apply in relation to assessment year 2007-2008 and subsequent years in cases where search under section 132 is initiated on or after 1st June, 2007." 9. Section 271AAA was amended by the Finance Act, 2012 with effect from 01-04- 2012. The effect of the amendment was that it became applicable in all cases where search was initiated under Section 132 on or after 01-06-2007 but before 01-07- 2012.Section 271AAA and its amendments are part of series of amendments with respect to the effect of presumption in the case of search cases under Section 132(4A). These were introduced simultaneously with the omission of Explanation 5 to Section 271(1)(c) on the one hand and insertion of Explanation 5A as well as Section 292C. The provision applies to income of the specified period, i.e. period for which return had not yet become due and the broken periods starting from the beginning of the financial years till the date of the search. It provides for 10% penalty of such income through a statutory inference or presumption that such amount or income was not intended to be disclosed as they were not reflected in the books, soon at the time of the search. 10. One of the conditions that results in the inapplicability of Section 271AA is payment of tax. Since the assessability and quantification of the amount of undisclosed income can be legitimately computed only at the stage of assessment, it was held by the Tribunal concurring with the first appellate authority, that the outer time limit for payment of tax is not prior to the conclusion of assessment proceedings. Where there was a short payment by way of self-assessment tax but made good in response to the notice of demand on completion of the assessment it was held that there was no scope for penalty under section 271AAA as was held in Mahendra C. Shah (supra) while interpreting Explanation 5 to Section 271(1)(c). 11.Explanation 5(2) of Section 271(1)(c) was considered by the Supreme Court in Asstt. CIT v. Gebilal Kanhaialal [2012] 25 taxmann.com 214/210 Taxman 244/348 ITR 561. It was held that Explanation 5 (2) to Section 271 (1) (c) 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, 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 Page | 15

penalty, but there are exceptions to such deeming provision or to such a presumption of concealment. The Court then said: "It provides that where, in the course of search under Section 132, the assessee is found to be the owner of unaccounted assets and the assessee 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 the particulars of his income for the purposes of imposition of penalty under Section 271(1)(c). The only exceptions to such a deeming provision or to such a presumption of concealment are given in Sub-Clauses (1) and (2) of Expln. 5. In this case, we are concerned with interpretation of Clause (2) of Expln. 5, which has been quoted above. Three conditions have got to be satisfied by the assessee for claiming immunity from payment of penalty under Clause (2) of Expln. 5 to Section 271(1)(c).The first condition was 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). Such statement was made by the Karta during the search which concluded on 1-8-1987. It is not in dispute that condition No. 1 was fulfilled. The second condition for availing of the immunity from penalty under Section 271(1)(c) was that the assessee should specify, in his statement under Section 132(4), the manner in which such income stood derived. Admittedly, the second condition, in the present case also stood satisfied. According to the Department, 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 the assessee failed to file his return of income on July 31, 1987, and pay tax thereon particularly when the assessee conceded on August 1, 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. However, no time limit for payment of such tax stood prescribed under clause (2). The only requirement stipulated in the third condition was for the assessee to "pay tax together with interest". In the present case, the third condition also stood fulfilled. The assessee has paid tax with interest up to the date of payment. The only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income up to the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4). For the above reasons, we hold that the assessee was entitled to immunity under Clause (2) of Expln. 5 to Section 271 (1)(c)." 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 Kanhaialal's case (supra) 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 Page | 16

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 Kanhaialal's case (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, 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). 13. 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 Rs.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 Rs.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 Rs.16 crores was disclosed, no "substantiation" of the "manner" of deriving such undisclosed income was revealed. 14. 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 Kanhaialal's case (supra) 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)". 15. 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 CIT [2013] 38 taxmann.com 448/358 ITR 539 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 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. 8. 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. 9. 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.' 16. 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.”

infirmity in the notice issued by the ld AO. Coming the decision of the coordinate bench in case Jilco Developers Pvt. Ltd.[supra] The notice is reproduced at page NO. 19 of that case. That notice did not mention anything about the „undisclosed income during the course of search‟ but merely referred to twin limbs of section 271 (1) © of the act. Therefore, penalty was also quashed on the basis of such notice. In the present case, in notice the provision of the act are stated correctly i.e. 271AAA and the assessee was also show cause for penalty with respect to the undisclosed income in the case of the search. Thus, no infirmity exists in the notice. 35. We are aso conscious of deciosion Honourable Delhi High court in case of Principal Commissioner of Income-tax Central-3 v. Bhavi Chand Jindal [2019] 105 taxmann.com 77 (Delhi)against which the sLP of departmet is dismissed in [2019] 105 taxmann.com 78 (SC)/[2019] 263 Taxman 241 (SC), However the facts of the case in that decision were quite different. In that case honourable Delhi high court has held as under:- “6. We are concerned for we notice that surrender of Rs.30 crores was made by Mr. Punit Jatia, one of the directors of M/s Jindal (India) Limited in his statement recorded on oath under Section 132(4) of the Act on 15th November, 2011 on the basis of seized documents. The surrender was made by the respondent-assessee by way of letter dated 25th March, 2014. This has been treated as valid surrender and statement under Section 132(4) of the Act. Nature and manner of surrender and whether it would satisfy requirement of sub-section (2) to Section 271AAA is not examined either in the assessment order or in the penalty order under Section 271AAA. It is also apparent that this contention was not raised by the Revenue in the appeal preferred by them before the Tribunal against the order passed by the Commissioner of Income Tax (Appeals) deleting the penalty under the said Section. Even in the grounds of appeal raised before us, this contention is not raised. 7. A perusal of the order passed by the Commissioner of Income Tax (Appeals) deleting penalty would indicate that the respondent-assessee during the course of the assessment proceedings had submitted several letters to substantiate the manner in which the undisclosed income of Rs.30 crores was derived. Reference in this regard can be made to the following submissions made before and relied by the Commissioner of Income Tax (Appeals):— '1.1 A search and seizure operation under section 132 of the Income Tax Act, 1961was carried out in the case of Jindal Group on 14/11/2011 and during the course of search and seizure operation certain documents were found and seized from the premises of M/s Jindal (India) Limited at 2/1, Ahmed Mamuji Street, Liluah, Howrah - 711204 and from residential premises of the appellant at 20C, Belvedre Alipore, Kolkata and from premises Anjul Howrah. 1.2 During the course of search and seizure operation Mr. Punit Jatia one of the directors of M/s Jindal (India) Limited has made to offer additional income of Rs Page | 19

30,00,00,000/- in his statement recorded on oath under section 132(4) of the Income Tax Act, 1961 on 15/11/2011 on the basis of some seized documents. Later on, it is clarified that the said offer of income of Rs 30,00,00,000/- relatable to the appellant. (Pages 30 to 31 of the Paper book) 1.3 During the course of assessment proceedings, the learned assessing officer vide notice dated 05/03/2014 asked the appellant to specify the nature of undisclosed income, its bifurcation along with supporting evidences. (Page 7 of the Paper book) 1.4 In response, the appellant vide replies dated 19/03/2014, 25/03/2014 and 26/03/2014 filed the nature of undisclosed income, bifurcation of undisclosed income of Rs 30,00,00,000/- along with relevant documentary evidence as required by the learned assessing officer. The appellant further submitted that the said undisclosed income has primarily been earned from transactions in land / properties and from other speculative activities. (Pages 9 to 18 of the Paper book) 1.5 The learned assessing officer issued notices under section 271AAA of the Income tax Act, 1961 dated 31/03/2014 and 03/09/2014, to show cause as to why an order imposing a penalty should not be made under section 271AAA of the Income tax Act, 1961 as the appellant has not substantiated the manner in which undisclosed income admitted during search was derived. (Pages 8 to 8A of the Paper book) In response, the appellant vide replies dated 28/04/2014 and 08/09/2014 submitted that no specific query was raised by the authorized officer during the course of recording statement under section 132(4) of the Income tax Act, 1961 in relation to the manner in which the undisclosed income was derived by the appellant. The appellant further submitted that since during the course of search undisclosed income is admitted and the same was offered for tax, together with interest has been paid, return showing said income has been filed and the same is also been accepted as it is in the assessment, merely because the appellant had not specified the manner in which the said undisclosed income was derived, could not be the basis for denying the benefit of immunity from penalty under sub-section (2) of section 271AAA of the Income-tax Act, 1961. (Pages 19 to 28 of the Paper book) 1.7 The appellant also submitted that the said offer of additional income of Rs30,00,00,000/- was made merely to buy peace and to avoid litigation and was subject to there being no penalty and prosecution under the provisions of the Act. (Pages 19 to 28 of the Paper book) 1.8 However, the learned assessing officer imposed penalty under section 271AAA of the Income tax Act, 1961 only on the basis that the appellant failed to substantiate the manner in which the undisclosed income was derived without appreciating the fact that no specific question was asked by the authorized officer during the course of recording statement under section 132(4) about the manner of deriving undisclosed income and also without appreciating the fact that the appellant has substantiated the manner in which undisclosed income was derived Page | 20

before the learned assessing officer during the course of assessment proceedings. The learned assessing officer alleged in the impugned order that: "However, in order to escape from the penalty under section 271AAA the assessee is required to fulfill all these conditions laid down under the Act and as reproduced above. In the present case, the assessee has not been able to substantiate the manner in which the undisclosed income was derived; hence conditions laid down in the Act have not been fulfilled. Although the tax has been paid yet the assessee has not been able to present the manner to derive this income. The Penalty proceedings are getting barred by limitation on 30.09.2014, hence the penalty is decided on the basis of material on record. (Pages 1 to 2 of the Paper book) 1.9 On perusal of the impugned order, it is quite evident that the learned assessing officer has imposed penalty under section 271AAA of the Income-tax Act, 1961 only on the basis that the appellant has not been able to substantiate the manner in which the undisclosed income was derived. 1.10 It is pertinent to note that a search and seizure operation under section 132 of the Income tax Act, 1961 was carried out in the case of Jindal Group on 14/11/2011. It is pertinent to note that during the course of search and seizure operation Mr. Punit Jatia, one of the directors of M/s Jindal (India) Limited has made to offer of income of Rs30,00,00,000/- in his statement recorded on oath under section 132(4) of the Income tax Act, 1961 on 15/11/2011 on the basis of certain seized documents. It is also pertinent to note that the appellant filed his return of income for the said assessment year on 31/08/2012 declaring income of Rs 30,28,31,563/-, which inter alia includes income of Rs 30,00,00,000/-, which was surrendered by Mr. Punit Jatia one of the directors of M/s Jindal (India) Limited in his statement recorded on oath under section 132(4) of the Income tax Act, 1961 on 15/11/2011, which was relatable to the appellant. It is also pertinent to note that the said disclosure was made to buy peace of mind, avoid litigation with the department and penal provisions under the Income tax Act, 1961. (Pages 5 to 6 and Pages 29 to 31 of the Paper book) 1.11 It is pertinent to note that the learned assessing officer vide notice dated 05/03/2014 asked the appellant to specify the nature of income, bifurcation with the supporting evidences. (Page 7 of the Paper book) 1.12 It is also pertinent to note that in response the appellant. vide reply dated 19/03/2014 submitted that the income of Rs 30,00,00,000/- declared under the under the head of Income from other sources has been earned during the year relevant to the assessment year 2012-13, from transactions in land / properties and also from other speculation activities. It is also pertinent to note that the appellant vide reply dated 25/03/2014 and 26/03/2014 also furnished the break-up of Rs 30,00,00,000/- along with documentary evidence earned from transactions in land / properties / speculation activities. Thus, the appellant during the course of assessment proceedings has filed detail of nature and bifurcation of the undisclosed income of Rs 30,00,00,000/- as asked by the learned Assessing Officer. (Pages 9 to 18 of the Paper book) 1.13 It is pertinent to note that the learned assessing officer alleged in the impugned order that the appellant has not fulfilled one of the condition of 271AAA Page | 21

(2) of the Income tax Act, 1961 i.e. "substantiate the manner in which the undisclosed income was derived", which is essential to be complied in order to get immunity from the imposition of penalty under section 271AAA of the Income-tax Act, 1961. (Pages 1 to 2 of the Paper book) 1.14 It is pertinent to note that the appellant has disclosed the manner by which the undisclosed income was earned vide his replies dated 19/03/2014, 25/03/2014 and 26/03/2014 submitted before the learned assessing officer during the course of assessment proceedings in which he has stated that the income of Rs 30 Crores declared under the head of Income from other sources has been earned during the year relevant to the A. Y. 2012-13, from transactions in land/ properties and also from other speculation activities. The appellant has also furnished the documentary evidences in respect of transaction in properties. (Pages 9 to 18 of the Paper book) 1.15 It is also pertinent to note that the appellant has voluntarily offered the amount of Rs 30,00,00,000/- for taxation with the understanding with the income tax department that no penalty/prosecution proceedings will be initiated. It is also pertinent to note that the learned assessing officer accepted the amount offered by the appellant for taxation in toto, without any variation in the amount offered by the appellant for taxation on this account, this fact substantiated that the appellant has passed the test of Section 271 AAA(2) of the Income-tax Act, 1961. Therefore, penalty of Rs 3,00,00,000/- imposed under section 271AAA of the Income-tax Act, 1961 is liable to be deleted. 1.16 It is also pertinent to note that the authorized officer during the course of recording statement under section 132(4) of the Income tax Act, 1961 has not asked the appellant / directors of M/s Jindal (India) Limited to specify or to substantiate the manner in which the undisclosed income of Rs 30,00,00,000/- was derived and thus the. appellant / directors of M/s Jindal (India) Limited has not specified the manner in which the said undisclosed income of Rs 30,00,00,000/- was earned at the time of recording statement under section 132(4) of the Income tax Act, 1961. However, during the course of assessment proceedings the appellant has specified and substantiated the manner in which the said undisclosed income of Rs 30,00,00,000 was derived as required by the learned assessing officer. (Pages 9 to 18 and Pages 29 to 31 of the Paper book)' 8. The aforesaid communications written by the respondent-assessee to the Assessing Officer during the course of the assessment proceedings have not been placed on record in the present appeal. The penalty order also does not mention and refer to the said communications and the documents enclosed. Communications written and documents furnished are not denied. 9. Plea and contention of the Revenue in the present appeal is to the effect that the statement made under Section 132(4) did not indicate and state the manner in which the undisclosed income was derived. This is different from the ground and reason given by the Assessing Officer to impose penalty of Rs.3 crores under Section 271AAA of the Act, which was that the respondent-assessee had not been able to substantiate the manner in which the undisclosed income of Rs.30 crores had been derived. The two aspects are different as is clear from clauses (i) and (ii) to sub-section (2) to Section 271AAA of the Act. The Assessing Officer had not relied upon or claimed that there was violation of clause (i) to sub-section (2) to Page | 22

Section 271AAA, but had imposed penalty on account of the fact that there was violation and non-compliance of clause (ii) to sub-section (2) to Section 271AAA of the Act, i.e., assessee was not able to substantiate the manner in which the undisclosed income was derived. 10. In view of the aforesaid position, there is no merit in the present appeal and the same is dismissed, without any order as to costs.”

ITA No. 2671/Del/2016 & CO No. 53/Del/2018 for Assessment Year 2010-11 Shri Harminder singh Saran

confirming levy of penalty u/s 271 AAA of the Act of Rs. 94 lakhs and dismissed the Cross Objections of the assessee. Therefore, following the same reason, we allow the appeal of the ld AO in ITA NO. 2671/Del/2016 for Assessment Year 2010-11 and confirm the levy of penalty of Rs. 1 crore and dismiss the CO of the assessee holding that the penalty u/s 271AAA were validly initiated. 42. Thus, the appeal of the ld AO is allowed and CO of the assessee is dismissed. 43. Accordingly all 3 appeals and cross objections are disposed off. Order pronounced in the open court on 23/11/2021.

-Sd/- -Sd/- (SUCHITRA KAMBLE) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23/11/2021 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi