SH. PAWAN SAHNI,SOLAN vs. DCIT, CC-II, CHANDIGARH

आदेश/ORDER PER BENCH : All the above appeals relate to different assessees belonging to the same group, i.e. Sahni Group, where search action was carried out u/s 132(1) of the Income Tax Act, 1961 (in short referred to as ‘Act’).While the appeals in ITA No.1372 & 1373/Chd/2017 are assessees appeal against separate orders of the Commissioner of Income Tax (Appeals)-3, Gurgaon dated 15.6.2017, confirming penalty levied u/s 271AAA of the Act, the rest are appeals filed by the Revenue against orders passed by the CIT(A) Since the appeals arise from the common action of search carried out on a group to which all the above assessees relate, they were taken up together for hearing.

involved in all the appeals filed by the Revenue i.e. in

ITA No.194/Chd/2014, ITA No.37/Chd/2017, ITA No.

143/Chd/2015 and ITA No.201/Chd/2014 is less than Rs.

20 lacs. The Ld. DR has also fairly admitted that CBDT

circular No. 3/2018 is applicable to this appeal, hence, this

appeal of the Revenue is liable to be dismissed.

dated 11.07.2018 has revised the monetary limit upto Rs.20

lacs for filing appeals by the Department before the Tribunal

and further vide para 13 of the said Circular it has been

clarified that said circular is applicable retrospectively to

the pending appeals also. The Hon’ble Punjab & Haryana

High Court in the case of “Principal CIT of Income Tax Vs.

Surinder Kumar Singhal” ITA No 406-2016 (O&M) vide order

dated 30.1.2017 while further relying upon the decision of

the Hon'ble Supreme Court in the case of “CIT Vs.

Dhanalekshmi Bank Ltd.” (2015) 373 ITR 526 (SC), has

dismissed the appeal of the Revenue without going into the

merits due to low tax effect leaving the question of law open.

In view of the CBDT Circular No. 03/2018 (supra) and in the

light of the above referred to decision of the Hon'ble

Jurisdictional Punjab & Haryana High Court (supra), the

present appeal of the Revenue is dismissed due to low tax

effect.

appeal shall not be taken to be affirmation of the order of

the CIT(A) on merits. The legal issue raised by the Revenue

is being left open to be adjudicated in an appropriate case.

ITA No No.37/Chd/2017, ITA No.143/Chd/2015 and in ITA

No.201/Chd/2014 are, therefore, dismissed.

Nos.1372 & 1373/Chd/2017. It was common ground

between both the parties that the penalty was levied u/s

271AAA of the Act on identical set of facts i.e. of cash

surrendered. Since the facts and issue involved in both the

appeals are common, they are being decided together. For

convenience, we shall be dealing with the facts in the case

of Shri Pawan Sahni in ITA No.1373/Chd/2017 and the

decision rendered therein will apply mutatis mutandis in

the case of Shri Manoj Sahni in ITA No.1372/Chd/2017.

ITA No.1373/Chd/2017:

action of the Ld.CIT(A) in upholding the levy of penalty u/s

271AAA on cash surrendered during search operation

carried out on the assessee.

operations u/s 132(1) of the Act were carried out at the

residential and business premises of Sahni Group of Cases

including the assessees on 11.9.2009, during the course of

which cash of Rs.32,65,270/- was found from the

residential premises of the assessee out of which Rs.30,

00,000/- was seized from the group.. The assessee when

asked to explain the source of the cash found, in his

statement recorded u/s 132(4) of the Act stated that the

cash amounting to Rs.9,65,270/- was the cash in hand of

all persons and concerns of the group, detail of which was

also filed. The balance unexplained cash of Rs.23,00,000/-

(32,65,270 - 9,65,270) was surrendered by the assessee as

under:

Shri Pawan Sahni (assessee) Rs.15,00,000/- Shri Girish Sahni Rs. 2,50,000/- Shri Manoj Sahni Rs. 5,50,000/-

return filed u/s 153A of the Act which was accepted also by

the Revenue. However,, penalty proceedings were initiated

u/s 271AAA of the Act stating that since the assessee could

not specify the manner of earning the undisclosed cash

surrendered by him during search. Thereafter the order was

passed levying penalty @ 10% of the cash surrendered as

per the provisions of section 271AAA of the Act for the said

reason. The Ld.CIT(A) upheld the order of the A.O. The

relevant findings of the Ld.CIT(A) upholding the levy of

penalty at paras 3.4 to 3.6 of the order is as under:

“3.4 During the search proceedings, the appellant had voluntarily surrendered Rs.23,00,000/- as additional income, which was included in the total surrender of Rs.3,00,00,000/- made by the group. 3.5 Further, the appellant had offered additional income of Rs.15,00,000/- made in the return u/s 153A. The AO has imposed penalty of Rs.1,50,000/- u/s 271AAA of the Act on the ground that the appellant had failed to specify the manner of earning the undisclosed income.

3.6 It is apparent from the case, that the appellant had not disclosed income of Rs.15,00,000/- which relates to the 'Specified Previous Year' in the course of Certified True Copy the search in a statement u/s 132(4) of the Act had not admitted this undisclosed income nor specified the manner in which such income has been derived as mandated in sec 271AAA(2)(i) of the Act to get immunity from Penalty u/s 271AAA. In view of the above discussion, penalty u/s 271AM of the Act amounting Rs.1,50,000/- is sustained.” 11. Aggrieved by the same, the assessee has come up in

appeal before us. During the course of hearing before us

the Ld. counsel for assessee made his submissions dated

4.9.2018 in writing and relying upon the same argued

before us that the order of the CIT(A) confirming levy of

penalty was bad on various counts as under:

1) since the assessee had complied with all the

conditions specified u/s 271AAA sub-section (2) for

grant of immunity from levy of penalty under the

section by making the surrender during the search

specifying the amendment of earning the said cash as

being on account of advances received against sale of

certain properties which did not mature, which was

declared in the return of income filed post search,

taxes and interest paid thereon and which surrender

was accepted by the A.O. also. Our attention was

drawn to the surrender letter specifying the manner of

earning the income placed at Paper Book page No.23 as

under:

“That our of total cash of Rs.30 lacs seized during the search/survey, Rs.23 lacs was on account of advance received against certain properties and the same not getting matured and hence being

surrendered in the absence of proper details. Balance cash of Rs.7 lacs is duly accounted for in the books of account and hence the same is not being surrendered.” 2) That the A.O. was factually wrong in mentioning

that the assessee had not specified the manner in

which this income was earned which is evident from

the surrender letter as pointed out above and which

stood accepted by the Department also.

that the surrender of cash was not disclosed in the

course of search when the fact was that it was

surrendered only during search and had also wrongly

held that the manner of earning had not been specified

by the assessee.

4) That on identical set of facts on the basis of same

surrender letter, the assessee’s brother, Shri Girish

Sahni had surrendered Rs.2,50,000/- explaining the

same source and same manner and similar penalty had

been levied on him also which was subsequently

deleted in appeal by the CIT(A) on the basis of exactly

same explanation of same source, manner and

specification. Our attention was drawn to the order of

the CIT(A) in the case of Shri Girish Sahni placed at

Paper Book page No.39 dated 9.6.2017 deleting the

penalty levied on cash surrendered of Rs.2,50,000/- at

paras 3.4 to 3.6 as under:

“3.4 During the search proceedings, the appellant had voluntarily surrendered Rs.2,50,000/- as additional

income, which was included in the total surrender of Rs.3,00,00,000/- made by the group. 3.5 Further, the appellant had offered additional income of Rs.2,50,000/- made in the return u/s 153A. The AO has imposed penalty of Rs.25,000/- u/s 271AAA of the Act on the ground that the appellant had failed to specify the manner of earning the undisclosed income. 3.6 It has been submitted by the appellant that it is a settled law that where surrender amount stands offered in the return and taxes and interest stand paid, then no penalty should be levied for technical reasons. It has further been submitted that if the assessee answers the questions raised by the search party regarding surrender amount, it should be deemed that he has completed all his obligations relating to surrender amount and if there is any deficiency, including which may be specifically for not addressing the specific issue by the search party, the assessee cannot be faulted. Reliance placed on following judicial pronouncements. a) CIT vs. Sudhir Jain 41 Taxrnann.com 234 (Delhi HC) b) Sunil Kumar Bansal vs. DCIT 70 SOT 137 (Chd Trib) c) ACIT vs. Munish Kr, Goyal 152 ITD 458 (Chd Trib)” I agree with the appellant's contention in view of the judicial pronouncements relied upon which are applicable to the case of the appellant and hence penalty on Rs. 2,50.000 amounting Rs. 25,000 is also deleted. In view of the same, Penalty of Rs. 69,557 imposed by the AO is deleted. As a result, appeal of the appellant is allowed.” 5) That in the case of M/s Dev Bhoomi Apartments

(AOP) (Group concern) surrender of Rs.25,00,000/- for

work in progress made vide the same surrender letter

on which penalty u/s 271AAA had been levied was aso

deleted by the CIT(A) vide his order dated 9.6.2017.

Our attention was drawn to the findings of the CIT(A)

in the said case at para 4.3(b) as under:

4.3 (b) With regard to penalty on Rs. 25,00,000/- surrendered u/s 132(4) as WIP, it has been stated by the appellant that it is a case where the assessee surrendered the amount, included the same in the return, also explained the manner of deriving such undisclosed income and also paid taxes thereon. Thus, the appellant satisfied all the conditions of sec 271AAA(2) of the Act and hence penalty should not be levied. It has further been submitted that during search as well as during post search period, whatever and whenever any questions were asked including in statement u/s 132(4) of the Act, the appellant always replied fully and completely & relied on judicial pronouncements including CIT. vs. Sudhir Jain 41 Taxrnann. Com 234 (Delhi HC) and Sudhir Kumar Bansal vs. DCIT 70 SOT 137 (Chd. Tribunal) I agree with the contentions of the appellant There is no reason to levy penalty on this surrendered amount in view of the provisions of the Act and the judicial pronouncements on this issue. In view of the same, penalty on surrendered value amounting to Rs. 25,00,OOO/- is also deleted.” 6) Without prejudice to the above contention where

surrendered amount stood offered in the return, taxes

and interest stood paid and the manner of earning

stood explained, no penalty was leviable u/s 271AAA of

the Act. Reliance was placed on various decisions of

the Hon'ble High Court and the Tribunal in this

regard. The submissions filed by the assessee are

being produced hereunder:

PENALTY U/S 271AAA Rs.1,50,000/- @10% ON CASH SURRENDERED Rs. 1,50,000/-

ONE - Search on the group u/s.132 on l 1.09.09 (A.Y. 2010-1 1) - Cash of Rs. 30,00,000/- was seized from the group - Out of this cash of Rs.23,00,000/- was surrendered u/s.132 (4) as under:- • Pawan Sahni (Assessee) Rs. 15,00,000/- • Girish Sahni Rs.2,50,000/- • Manoj Sahni Rs. 5,50,000/- - The assessee also explained the source as "business income" and also the manner as "on account of advance received against certain properties and the same not getting matured and hence being surrendered in the absence of proper details"

- Thus, the surrender was made during search, the manner was also suo moto furnished and it was substantiated also and the A.O. duly accepted the same as and in the manner as surrendered by the assessee - Thus he substantiated the manner of earning the said income also - Rs.15,00,000/- were declared in the return filed post search and the surrender was also accepted - The assessee also paid taxes and interest thereon as per law - Hence, all conditions vide sec.271AAA (2) stood satisfied for not levying penalty u/s. 271AAA. TWO - The A.O. has been factually wrong in mentioning that the assessee had not specified the manner in which this income was earned - The manner was duly specified in the surrendered letter as detailed above - The surrender stands accepted THREE - CIT (A) wrongly held that Rs. 15,00,000/- was not disclosed in the course of search while it was surrendered only during search - CIT (A) also wrongly held that manner has not been specified while it was duly specified as given in Pg.23 of the paper book FOUR - Exactly on similar facts, on the basis of same surrender letters, Sh. Girish Sahni (brother) also surrendered cash of Rs.,2.5 lacs explaining the same source and same manner and similar penalty has been levied on him also - However, same CIT (A), vide same dated order i.e. 15.06.17. deleted the penalty of Rs, 25, 000/- on surrender of Rs.2,50,000/- on the basis of exactly same/common explanation of source, manner and its substantiation FIVE - M/s Dev Bhoomi Apptt. AOP (group concerned) also surrendered Rs.25,00,000/- for WIP vide same surrender letter - Same Ld. CIT (A) vide order dtd.09.06.17 deleted the penalty on said amt. - SIX - Without Prejudice - Where surrender amt. stands offered in the return, taxes and interest stands paid and the manner stands explained, no penalty U/S.271AAA can be levied CASE LAWS CIT VS. SUDHIR JAIN 41 TAXMANN.COM 234 (DELHI HC) Section 271AAA, read with section 69, of the Income-tax Act, 1961 - Penalty - Where search has been initiated [Conditions precedent] - A certain sum was surrendered as undisclosed income by an AOP at time of search

- Taxes and applicable interest were paid on undisclosed income and manner of earning was recorded in statement of one of members of AOP that income was derived from trading transactions not recorded in books - Whether penalty under section 271AAA could not be imposed - Held, yes [Para 7] [In favour of assessee] SUNIL KUMAR BANSAL VS..DCIT 70_SQT 137 (CHD. TRIE) IT : Where no question was asked during statement recorded under section 132(4), in Respect of manner of earning income surrendered, assessee could not be expected to substantiate same later on; penalty could not be levied under section 271AAA. 1`432ACIT VS. MUNISH KUMAR GOYAL 152 ITD 453 (CHD. TRIE) Section 271 AAA of the Income-tax Act, 1961 - Penalty - Where search has been initiated (Applicability of) - Assessment year 2010- 11 - Where assessee having surrendered certain income in course of search, filed return wherein said amount was duly disclosed and taxes were paid accordingly, there was sufficient compliance of provisions of section 271 AAA (2) and, thus, impugned penalty order deserved to be set aside - Held, yes [Para 10] [In favour of assessee] NEERAT SINGAL VS. ACIT 161 TTJ (DEL.) (TRIE.) 483 Penalty u/s. 271 AAA - Conditions precedent - Surrender of income vis- a-vis matter of earning - In the absence of query raised by the AO during the course of recording of statement u/s. 132 (4) about the manner in which the undisclosed income has been derived about its substantiation, the AO was not justified in imposing penalty u/s. 271 AAA specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. PRAMOD KR. JAIN VS. DCIT (2012) 77 DTR (CTK.) (TRIE.) 244 Assessee having surrendered certain income for the relevant Asstt. Years in the statements during the course of search and filed returns declaring the same pursuant to notice U/s. 153 A which has been accepted by the AO, levy of penalty U/s. 271 AAA was not justified on the ground that the assessee has made disclosure but failed to specify the manner in which such income has been derived. ASHQK KR. SHARMA VS. DCIT (2012) 77 DTR (CTK.) (TRIE.) 241 Assessee having disclosed concealed income while giving statement U/s. 132 (4) during the course of search and paid tax thereon and showed the said undisclosed income in the return under the head "income from business" which has been accepted by the Deptt., penalty U/s. 271 AAA is not leviable.” 12. The Ld. counsel for assessee, therefore, contended that

the assessee having complied with all the conditions

specified for grant of immunity u/s 271AAA sub-section (2)

of the Act and the CIT(A) having himself deleted the penalty

levied in identical circumstances in the case of other

assessees of the same group and in relation to the same

surrender made, there was no case of levy of penalty u/s

271AAA of the Act.

of the A.O. and the CIT(A) emphasizing that the assessee

had failed to specify the manner of earning the cash

surrendered.

orders of the authorities below. We are convinced with the

arguments of the Ld. counsel for assessee that the present

is not the fit case for levy of penalty u/s 271AAA of the Act.

Undisputedly the penalty has been levied on the cash

surrendered by the assessee of Rs.15 lacs. Admittedly the

assessee in its surrender letter as reproduced above, had

explained the source of earning the said cash as being on

account of business receipt against certain properties and

the same not getting matured. The aforesaid surrender

undisputedly was accepted by the A.O. and was reflected in

the return of income filed by the assessee and taxes paid

thereon. The Revenue authorities have levied penalty for the

reason that the assessee failed to specify the manner of

earning the surrendered income/cash. This finding as is

evident from the facts stated above is an incorrect finding.

Since the surrender letter duly specified the manner of

earning the surrendered cash . Also as rightly pointed out

by the Ld. counsel for assessee the other conditions

specified for grant of immunity from the levy of penalty u/s

271AAA stood fulfilled by the assessee by way of making the

impugned surrender in the statement made during the

course of search, returning the same as income and paying

taxes thereon. Moreover as rightly pointed out by the Ld.

counsel for assessee in identical set facts and

circumstances the Ld.CIT(A) had deleted the levy of penalty

in the case of Shri Girish Sahni, the brother of the assessee

who had made surrender of Rs.2,50,000/- cash explaining

the source to be the same as in the case of the assessee and

all other conditions also being identical to that in the case

of the assessee. Similarly, in the case of M/s Dev Bhoomi

Apartments(AOP) the penalty levied on the surrender made

on account of WIP which was also duly explained in the

surrender letter filed and included in the return of income

and taxes paid thereon were also deleted by the CIT(A). The

facts and circumstances involved in these cases are

identical to that in the case of the assessee. The Ld. DR has

been unable to point out any differentiating facts. There is

no reason why the CIT(A) took a totally divergent view in

the present case and confirmed the levy of penalty.

In view of the above facts and circumstances of the

case, we hold that the assessee having demonstrated to

have fulfilled all the conditions for grant of immunity from

levy of penalty u/s 271AAA as specified in sub-section (2) of

the section including specifying the manner of earning the

surrendered income, and having deleted penalty levied in

identical set of facts in case of other assessees of the same

group, the CIT(A) was wrong in confirming the levy of

penalty in the present case. The penalty so levied is,

therefore, directed to be deleted.

The appeal of the assessee is, therefore, allowed.

ITA No.1372/Chd/2017:

cash surrendered by Shri Manoj Sahni amounting to

Rs.5,50,000/-. Since it was common ground that the facts and circumstances leading to the levy of penalty and

confirmation of the same by the CIT(A) were identical to

that in the case of Shri Pawan Sahni dealt with by us above

in ITA No.1373/Chd/2017, the decision rendered therein will squarely apply to the present case also, following which

we delete the levy of penalty.

The appeal of the assessee is allowed. 16. In effect;

1) The appeal of the assessee in ITA Nos.1272/Chd/2017 & ITA No.1273/Chd/2017 are allowed.

2) The appeals of the Revenue in ITA No.194/Chd/2014, ITA No.37/Chd/2017, ITA No.143/Chd/2015 & ITA No.201/Chd/2014 are dismissed.

Order pronounced in the Open Court.

�दवा �संह अ�नपणा� ग�ता (ANNAPURNA GUPTA) (DIVA SINGH) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated: 30th November, 2018

*रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar