SRI MAYANK DAGA,KOLKATA vs. DCIT, CC-XI, KOLKTA, KOLKATA

2 Sri Mayank Daga A.Yr.2011-12 was found out of which Rs 2,40,00,000/- was seized by the department. Apart from the above, there were seizure of incriminating documents No. MD/1 & MD/2 and inventory of several bank accounts in the name of third parties. In the course of post search operation, the assessee owned up four bank accounts in the name of third parties as under assessee’s control and management. The assessee made a statement in response to summons u/s 131 of the Act on the date of search under confused mind because the same premises was searched previously in November 2009 when his father Man Mohan Daga made confessional statement to disclose Rs 2 crores u/s 132(4) of the Act. However, in the course of post search enquiry, ADI (Inv.) obtained further statements u/s 131 of the act from the assessee as well as from his father Man Mohan Daga. During such post search enquiry, the assessee made a disclosure of Rs 1,05,10,500/- u/s 132(4) of the Act including clarification of various points of controversies which was confirmed by his father’s statement also. The return of income for the Asst Year 2011- 12 was filed on 23.2.2012 admitting total income of Rs 2,45,02,260/- which included the cash found at the time of search amounting to Rs 2,41,10,500/-. In other words, even though the assessee made disclosure of undisclosed income u/s 132(4) of the Act to the tune of Rs 1,05,10,500/-, at the time of filing the return, the assessee had offered the entire cash found in the sum of Rs 2,41,10,500/- at the time of search. It was also explained that the cash found on search and offered to tax u/s 132(4) of the Act represented commission earned in providing accommodation entries. Moreover, affidavits of the assessee as well as Man Mohan Daga duly notarized were filed in support of the same. The assessment was completed u/s 143(3) of the Act on 25.3.2013 determining total income at Rs 62,11,79,480/- and the same was later reduced to Rs 2,45,18,678/- after appeal effect u/s 251 of the Act vide order dated 30.9.2013. In other words, the total income determined in the sum of Rs 2,45,18,678/- admittedly included a sum of Rs 2,41,10,500/- returned by the assessee, representing the cash found at the time of search. The ld AO levied penalty u/s 271AAA of the Act in the sum of Rs 24,11,050/- for the said sum of Rs 2,41,10,500/- on the ground that the assessee had not 2

3 Sri Mayank Daga A.Yr.2011-12 made correct disclosure u/s 132(4) of the Act pursuant to the search and had also not substantiated the manner in which the said cash was found at the time of search. Accordingly the ld AO held that the assessee is not entitled for immunity u/s 271AAA(2) of the Act as the cumulative three conditions stipulated therein were not satisfied by the assessee.

It was also stated that in fact the assessee is in a much better footing in as much as the assessee had offered a sum of Rs 2,41,10,500/- as his undisclosed income in the return filed. The said pleading was not accepted by the ld AO and also by the ld CITA. Aggrieved, the assessee is in appeal before us on the following grounds:- “1) That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in holding that judicial decisions relied by the appellant are not relevant to the facts of the case and thereby confirming the penalty order. 2.) That on the facts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in dismissing the assessee's appeal and confirming the action of Assessing Officer who imposed penalty of Rs. 24,11,050/- u/s 271AAA of Income Tax Act, 1961. 3.) That the appellant craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal.”

4 Sri Mayank Daga A.Yr.2011-12 5. None appeared on behalf of the revenue when the case was called for hearing. The revenue had not even sought an adjournment before us on the date of hearing. Hence we proceed to dispose off this appeal after hearing the ld AR.

We find that though the assessee had not properly made full disclosure of undisclosed income u/s 132(4) of the Act pursuant to the search, he had duly offered the entire cash found at the time of search (Rs 2,41,10,500/-) in the return filed by him. Hence the ultimate purpose of offering the said undisclosed income had been complied with by the assessee. Hence it could be concluded that for the purpose of claiming immunity from 6.1. Pursuant to the questions posed by the investigation wing after the search and during assessment proceedings, the assessee had duly explained the manner in which the undisclosed income had been earned by the family including the assessee in the following manner:-

“As mentioned before the search party, the assessee reiterate that apart from his regular business he was also engaged in providing accommodation entries to persons who desired so. He used to take cash / cheque from various beneficiaries, deposit them in those bank account controlled by him and issue them cheques in the name of the concerns as stated by the beneficiaries. In doing this, he used to get meager commission. Since all these bank accounts were opened for a very small period of time and were primarily used for accommodation entry business hence the assessee never maintained the details of beneficiaries who gave cash / cheques and took cheques in turn.”

Apart from this, the assessee had duly explained the entire cash found in the time of search together with the manner of earning the same by engaging in business of providing accommodation entries in lieu of commission income @ 0.2% of transactions and also explained the contents of the seized documents marked MD /1 (pages 1 to 26) and MD/2 (pages 1 to 11). Hence we are convinced that the assessee had duly substantiated the manner of deriving the undisclosed income and accordingly the second condition prescribed u/s 271AAA(2) of the Act has been complied with by the assessee.

6.2. With regard to payment of tax due on the undisclosed income, the assessee duly stated that the cash seized in the sum of Rs 2,40,00,000/- at the time of search may kindly be adjusted towards the undisclosed income of Rs 2,41,10,500/-. Hence the assessee had duly made satisfactory arrangements for payment of taxes thereon on the 6 Sri Mayank Daga A.Yr.2011-12 undisclosed income. Accordingly, it could be safely concluded that the assessee had duly complied with the third condition prescribed u/s 271AAA(2) of the Act. 6.3. Hence the assessee had duly complied with the three cumulative conditions prescribed u/s 271AAA(2) of the Act and hence is entitled for immunity from levy of penalty for the undisclosed income of Rs 2,41,10,500/- representing the cash found in the search.

6.4. In view of the aforesaid findings, we deem it fit and appropriate to cancel the penalty levied on the assessee u/s 271AAA(2) of the Act in the sum of Rs 24,11,050/- and accordingly the grounds raised by the assessee are allowed.

7. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 07.07.2017