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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’, NEW DELHI
Before: SHRI O.P. KANT & SHRI K.N. CHARY
Date of hearing 11.07.2019 Date of pronouncement 31.07.2019 ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 08/08/2016 passed by the Ld. Commissioner of Income-tax (Appeals), Gurgaon [in short ‘the Ld. CIT(A)’] for assessment year 2010-11 in relation to penalty under section 271AAA of the Income-tax Act, 1961 (in short ‘the Act’). The grounds raised by the assessee are reproduced as under:
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the penalty of Rs. 4,46,055/- fully, which was levied by Ld. A.O. and that too without assuming jurisdiction as per law and without appreciating the facts and circumstances of the case.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the levy of penalty u/s 271 AAA, more so when penalty was initiated & levied by Ld. A.O. only 3. In any view of the matter and in any case, imposition of penalty u/s 271 AAA and confirmed by Ld. CIT(A) is bad in law and against the facts and circumstances of the case. 4. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.
2. Briefly stated facts of the case are that a search and seizure operation under section 132(1) of the Act was carried out at the business premises of “M/s Imperial Auto Industry Limited Group” on 02/09/2009 along with the residential premises of the assessee. It is the contention of the assessee is that during the course of the search, Rs. 5 lakh on account of jewellery found and Rs. 20 lacs on account of income relating to property transaction/advance for properties given, was surrendered on behalf of the assessee, before the Assistant Director of Income-tax (Investigation). For the year under consideration i.e. assessment year 2010-11, the assessee filed return of income on 20/12/2010 declaring total income of Rs.26,46,920/- which included surrendered income of Rs. 25 lakhs. The Assessing Officer, in the assessment completed under section 143(3) of the act on 28/12/2011 made addition for unexplained investment in jewellery of Rs.34,00,546/- and initiated penalty proceedings under section 271AAA of the Act for not disclosing the source for the investment of amount surrendered. On further appeal by the assessee against the addition of Rs.34,00,546/-, the addition was restricted to Rs.19,60,546/- by the Ld. CIT(A). The order of the Ld. CIT(A) was further challenged by the Department as well as the assessee before the Tribunal, wherein the issue has been set Assessing Officer for deciding in view of the CBDT instruction No. 1916 dated 11/05/1994. 2.1 In view of the position of the additions, the Ld. Assessing Officer issued show cause notice to the assessee as why the penalty in respect of amount of Rs. 25 lakh surrendered by the assessee in the return of income and for the addition of Rs.19,60,546/- sustained by the Ld. CIT(A), might not be levied. The assessee filed detailed submissions contesting that complete details of the various head relating to which declaration of undisclosed income was made, was already submitted. Regarding the addition of Rs.19,60,546/- on account of unexplained jewellery, confirmed by the Ld. CIT(A), the assessee submitted that in view of the circular (supra ) of the CBDT in various judicial decisions, the addition itself is unwarranted and therefore no penalty should be levied under section 271AAA of the Act. After considering the submission of the assessee, the Assessing Officer held that the assessee failed to specify the manner of deriving said income declared against investment in jewellery and property and substantiate it, and accordingly he imposed a penalty of Rs.4,46,055/- under section 271AAA of the Act at the rate of 10 percentile of the addition of Rs.44,60,546/-. 2.2 Aggrieved, the assessee filed appeal before the Ld. CIT(A) who cancelled the penalty in respect of the addition of Rs. 19, 60, 546/-pertaining to unaccounted jewellery, however, penalty in respect of amount of Rs. 20 Lacs and Rs. 5 lakhs, was upheld mainly on the ground that the assessee failed to specify and substantiate the manner of deriving the undisclosed income. According to Ld. CIT(A) the assessee has merely explained the Rs. 25 lakh and not the manner in which the undisclosed income was derived. The Ld. CIT(A) has observed that no reference or details of any property transaction or the evidence regarding the ownership of any such property had been furnished by the assessee either before the Assessing Officer or during the appellate proceedings. Aggrieved with the finding of the Ld. CIT(A), the assessee is before the Tribunal raising the grounds as reproduced above.
3. Before us, the Ld. counsel of the assessee filed a paper book containing pages 1-72 and submitted that identical penalty for identical surrendered amount was levied in the case of daughter- in-law of the assessee i.e. Mrs Preeti Sardana, which has been deleted by the Tribunal on the ground that when such amount has been disclosed in the return of income and taxes paid and no question was asked, there is no ground for levy of penalty under section 271AAA of the Act.
4. In this reference, the Ld. counsel referred to page 15-18, 18A-18B of the paper book, which is a copy of the surrender letter dated 09/07/2009 indicating incomes surrendered in the case of Mrs. Preeti Sadhana as well as the assessee. The Ld. counsel also invited our attention to the copy of the order of the Tribunal in the case of Mrs. Preeti Sardana in for AY 2010-11 available on page 1-13 of the compendium of case laws filed.
5. The Ld. counsel of the assessee further argued that the surrendered amount of Rs. 20 lakh was declared without reference of any money, bullion, jewellery and other valuable, article or things or any entry in books of account, and thus, it would not even constitute “undisclosed income” as defined under 271AAA of the Act and no penalty could be levied in respect of said amount.
6. The next argument which was taken by the Ld. counsel of the assessee that the assessee had included Rs.25 lakh surrendered amount in her return of income and has paid taxes and no question was asked during search, regarding the manner of earning of this income and thus, the penalty in terms of section 271AAA could not be levied. The Ld. counsel referred to pages 15- 18, 18A-18B of the paper book and shown copy of surrender letter. The Ld. Counsel also filed a copy of the statement of the assessee dated 08/09/2009 recorded under section 132(4) of the Act. The Ld counsel relied on following decision in support of the proposition that when amount has been surrendered and taxes have been paid and no specific questions have been asked, then there is no question of Levy of penalty under section 271AAA of the Act:
1. 1. Decision of the Tribunal in in the case of Sh. Vikas Aggarwal for assessment year 2011-12.
2. Decision dated 5/02/2018 of the Hon’ble Gujarat High Court in ITA 823 along with 824 of 2017 in the case of PCIT, Surat Vs. Shahlon Silk Mills Private Limited.
7. The next argument which was taken by the Ld counsel of the assessee is that the assessee falls within the jurisdiction of Hon’ble Punjab and Haryana High Court and the decision of the Hon’ble Gujarat High Court in the case of Shahlon Silk Mills Private Limited (supra) favours the assessee and therefore even if there is any other decision of the Hon’ble Delhi High Court Tribunal in following decisions:
1. 1. DCIT Vs. Pradeep Aggarwal in dated 15/10/2018.
2. DOT versus Vikas Aggarwal in ITA No. 1099/Del/2015 dated 6 to 2019.
8. On the contrary, the Ld. DR submitted that the assessee has not fulfilled the conditions required to save itself from penalty under section 271AAA of the Act. The Ld. DR submitted that the income surrendered by the assessee was not under section 132(4) of the Act and thus, it does not fulfill the first condition of section 271AAA(2) of the Act. He further submitted that either during the search proceeding or assessment proceeding, the assessee has also neither specified nor substantiated the manner in which the undisclosed income was derived by the assessee. The Ld. DR referred to the decision of the Hon’ble Delhi High Court in the case of the PCIT Vs. Ritu Singhal in ITA 672 of 2016 (2018-TIOL- 438-HC-DEL-IT) wherein it is held that mere statement that sum surrendered during the search was undisclosed income but not disclosing the source of such income, it cannot be construed as a satisfaction of the conditions under section 271AAA of the Act. The Ld counsel submitted that in the case of Mrs. Preeti Sardana (supra) , the decision of the Hon’ble Delhi High Court in the case of Smt. Ritu Singhal (supra) was not placed before the Tribunal and thus it has not been considered by the Tribunal. He accordingly, submitted that decision of the higher judicial form should be followed.
9. Further, he submitted that the contention of the Ld. counsel that the income declared was not falling under definition of the ‘undisclosed income’ was not correct, because the assessee surrendered the said income after five days from beginning of the search. According to him such surrender was not voluntarily and it was based on the various documents seized from the premises of the assessee and other sister concerns. He further submitted that contention of the assessee that said surrender was made only in order to buy peace of mind and to avoid litigation is not sufficient to save herself from the penalty under section 271AAA of the Act as held in the decision of the Tribunal in the case of Narsi Iron & Steel P Ltd. Vs. DCIT reported in (2019) 102 taxmann.com 333 (Delhi-Trib).
The Ld. DR emphasized that the assessee has not fulfilled first two conditions of section 271AAA(2) of the Act and thus the Ld. CIT(A) is justified in upholding the penalty on the amount of Rs. 25 lakh, surrendered on behalf of the assessee. 11. We have heard the rival submissions and perused the relevant material on record. In view of the provisions of section 271AAA(1) of the Act, it is evident that the Assessing Officer may levy penalty under the said section in case of ‘undisclosed income’ declared during search for specified previous year. But, if the assessee satisfy the three conditions of section 271AAA(2), the assessee can save itself from the from rigours of section 271AAA(1) and save itself from the penalty. The three conditions specified in section 271AAA(2) are as under:
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.
11.1 The term ‘undisclosed income’ and ‘specified years’ have been defined in explanation to section 271AAA of the Act. Whether the year under consideration is a specified year or not, is not in dispute between the parties and the present assessment year is accepted as one of the specified year. The dispute has been raised whether the amount of Rs. 20 lakh surrendered on account of income relating to property transaction/advance for properties given is undisclosed income or not. The term ‘undisclosed income’ has been defined in Explanation as under: “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;” 11.2 Thus, for any item of income to be undisclosed income for the purpose of section 271AAA of the Act it must be represented Bullion, jewellery or other valuable article or thing or any entry in the books of accounts or other documents or transaction found in the course of the search, which is either not been recorded in the books of accounts or not disclosed to the Income Tax Department, before the date of the search. Similarly any item of expense recorded in books of account or other documents if found to be false, same would also be the undisclosed income. 11.3 In the instant case, in search proceedings, Sh. Jagjit Singh S/o late Sh Avtar Singh, Director of M/s Imperial Auto industry limited made declaration of around Rs.15 crores during the course of the statement recorded under section 132(4) of the Act on 05/09/2009. The said disclosure was also signed Sh. SB Sardana, Sh. Manav Sardana and Sh. Tarun Lamba. But it was not signed by the assessee. A copy of the said statement is placed on page 18A-18B of the paper book. Further, by way of letter dated 07/09/2009, a breakup of said disclosure of Rs. 15 crore was provided by Sh. Jagjit Singh to the Assistant Director of Income tax (investigation) for surrender of income against various persons of the group. The said letter is available on page 15-18 of the paper book. The declaration/surrender in relation to the assessee made was as under: “ In the case of Mrs. Sibha Sardana Income relating to property Rs.20,00,000/- transaction/advance for properties given Jewellery found in seized from residence Rs.5,00,000/- and locker ” 11.4 Now, contention of the Ld counsel before us, is that this income of Rs.20 lakh, which was declared on behalf of the 271AAA of the Act because it is neither any money, bullion, jewellery or other valuable article or things nor based on any entry in the books of accounts or other documents or transactions found in the course of the search. However , in our opinion , this contention of the L.d counsel is not found to be true. On perusal of the statement dated 05/09/2009 of Sh. Jagjeet Singh under section 132(4) of the Act, available on page 18A-18B, we find that Sh Jagjit Singh was shown all the documents seized/impounded from different residential and business premises during the course of the search action and then he was asked to explain the content of those documents. Sh Jagjit Singh gone through all the documents found during the course of the search and stated that against certain documents which were not recorded in the books of accounts, he surrendered Rs. 15 crores. The relevant answer to the questions raised by Authorised Officer is reproduced as under: “Que. 2 - I am sharing you all the documents seized/impounded from different residential and business premises during the course of search operation on 02.09.2009 and 03.09.2009. Your are requested to explain the contents and nature of these documents. Ans.- I have seen all the documents and most of these are recorded in the books of account. However, there are certain documents, cash and jewellery found which are not recorded in the books of account and therefore I am surrendering an amount of Rs.15.01 crores (Rs. Fifteen crores & one lakh) as undisclosed income. This disclosure is on behalf of all group companies and all individuals where search operation have been undertaken of our group except Sh. Darsh Mehtani & Sh. Aman Mehtani relating to the property transaction and other personal matters which are not part of any business person-wise or year-wise details of the above surrender shall be submitted later on. I am making this disclosure in the presence and with the consent of sh. S.B. Sardana, Sh. Manav Sardana and Sh. Tarun Lamba and who are also signing the statement. Further, it is submitted that the above disclosure is being made u/s 132 of the I.T. Act, 1961 and no penalty proceeding of any nature are attached on the same. The amount of tax and interest if any due on the above disclosure shall be paid in due course of time.” 11.5 This statement has never been retracted by Sh. Jagjit Singh and thus, in view of the clear admission under section 132(4) of the Act by Sh Jagjit Singh, the income of Rs. 20 lakh surrendered by the assessee was based on documents seized/impounded during the course of the search action at different residential and business premises of the group. 11.6 Regarding the other surrender of Rs. 5 lakh against jewellery is concerned, there is no dispute that it is undisclosed income as defined under explanation below section 271AAA of the Act. 11.7 Now once, the income surrendered is in the nature of ‘undisclosed income’ in the specified year, the onus shift to the assessee, to demonstrate whether she satisfies the three conditions of section 271AAA(2) of the Act. 11.8 The first condition of section 271AAA(2) has two limbs, which have to be satisfied cumulatively. The first limb is admission of undisclosed income in a statement u/s 132(4) of the Act and second limb is specifying the manner of deriving said undisclosed income in the statement. As far as far admission of 132(4) of the Act is concerned, the assessee has placed reliance on the letter dated 07/09/2009, which was furnished before the Assistant Director of Income-tax(Investigation) and submitted that said disclosure of Rs.20 lakh and Rs. 5 lakh against property transaction and jewellery found, satisfies the requirement of first limb of the condition. However, according to the Ld. DR, the assessee has never surrendered the said income of Rs. 25 lakh in a statement recorded under section 132(4) of the Act. We have perused the statement of sh Jagjeet Singh dated 05/09/2009, along with his letter dated 07/09/2009 giving breakup of the surrendered income of Rs. 15 crore and we find that neither the statement dated 05/09/2009 nor the letter dated 07/09/2009 is signed by the assessee, though the statement dated 05/09/2009 has been signed by other three persons of the group, i.e., Sh. S.B. Sardana, Sh. Manav Sardana and Sh. Tarun Lamba, have declared / surrendered the sum mentioned in the detailed letter dated 07/09/2009. We have also seen the statement of the assessee recorded under section 132(4) of the Act filed separately before us. From these statements and the letter filed before the Assistant Director of the Income-tax (investigation), it cannot be inferred that the assessee has admitted the undisclosed income of Rs. 25 lakh in a statement under section 132(4) of the Act. The requirement of law as mentioned section 271AAA of the Act is that the assessee should admit the undisclosed income, in a statement u/s 132(4) of the Act. The statement made by another person can’t substitute the statement by the assessee. 11.9 We also note that Shri Jagjeet Singh in his letter dated 07/09/2009, in relation to the assessee has only explained the application of the income in property or advanced for the property and in the jewellery, but not explained the manner of deriving the said income. The Tribunal in the case of Narsi Iron & Steel P. Ltd. Vs. DCIT (supra) has relied on the decision of the Hon’ble High Court in the case of Smt. Ritu Singhal (supra) wherein it is observed that disclosure to buy peace only is not sufficient to explain the manner of deriving the undisclosed income. The relevant finding of the Hon’ble High Court is reproduced as under:
“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.
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.'
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.
For the above reasons, it is held that the impugned order is in error; the substantial question of law is answered in favour of the revenue and against the assessee. The appeal is consequently allowed. No costs.”
11.10 Further, the Tribunal in the case of Narsi Iron & Steel (supra) observed as under:
6. The Co-ordinate Bench of Tribunal in the case of ACIT vs. M/s. SSA International Ltd. vide order dated 30.05.2018 (ITA No. 5051/Del/2013 - A.Y. 2010-11), after considering various decisions Hon'ble jurisdictional High Court in aforesaid case, observing as under :
4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, during the search and seizure operation conducted at the business and residential premises of the assessee u/s 132(1) on 11.12.2009, assessee surrendered additional income of Rs.21 crores. It is also not in dispute that in the return filed by the assessee for AY 2010-11, assessee declared undisclosed income of Rs.21 crores which includes Rs.9.25 crores on account of excess stock and Rs.11.75 crores as income from other sources in the computation of income annexed with the tax return. It is also not in dispute that the assessee has expressed his inability to explain certain seized documents rather stated that those may be included to form part of the amounts surrendered during search and seizure operation. It is also not in dispute that assessee has already paid tax together with interest on the surrendered income of Rs.21 crores.
In the backdrop of the aforesaid facts and circumstances of the case, order passed by ld. Revenue authorities below, arguments advanced by ld. AR for the parties, the sole question arises for determination in this case is :- "as to whether assessee has failed to substantiate the manner in which the undisclosed income of Rs.21 crores was derived and is liable to be penalized u/s 271AAA of the Act."
7. To proceed further, provisions contained under section 271AAA (2) are reproduced as under for ready perusal :- "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"
Under section 271AAA(2)(i) of the Act, penalty @ 10% of the undisclosed income shall not be imposed if the assessee, "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" substantiates the manner in which the undisclosed income was derived and pays the tax together with interest if any on the undisclosed income.
9. During the course of search, a specific question was put to Shri Anil Mittal, MD of the assessee company to explain certain seized documents and discrepancies in the stock who has answered as under :- "I have seen question no.43 and the reply of Shri A.K. Nijhawan to it and acknowledge the same to be true. Regarding the discrepancy to stock found by your search team, during the course of search, I am unable to reconcile the same. However, in order to buy a peace of mind and avoid the litigation with department, I will accept the inventory of stock taken by your team during the course of search on 11.12.2009. This will form the part of surrender which I had already made at the time of search. This voluntary disclosure is made in order to buy peace of mind and avoid any litigation made by the department. It is stated that this disclosure is made to avoid any panel-action including penalties and prosecution". 10. The ld. CIT (A) deleted the penalty on the premise that if no specific question was put to assessee u/s 132(4), it cannot be concluded that the assessee has failed to reply or specify/ substantiate the manner of concealment. It is settled principle of law that assessee has to specify the manner in which income has been derived and substantiated the manner in which the undisclosed income was derived at the time of search in its statement recorded u/s 132(4) and not thereafter. 11. However, answer to the question no.43 reproduced above categorically goes to prove that the assessee has shown his inability to reconcile the discrepancy in the stock found and failed to substantiate the manner in which income has been derived by the search team during the course of search, however has made the disclosure only in order to buy peace of mind and to avoid litigation. So, we are of the considered view that the assessee has failed to satisfy the conditions laid down in section 271AAA (2) so as to get the general amnesty u/s 271AAA(2) because the assessee has neither specify the manner nor substantiate the manner in which the undisclosed income was derived. 11. The ld. AR for the assessee relied upon plethora of case laws cited as under :- 1. Pr. CIT Vs. Mukesh Bhai Raman Lal Tax Appeal 434 of2017
PCIT Vs. Emirates Technologies Pvt. Ltd. [2017] 399 ITR 189 (Delhi) 3. PCIT V s. Sandeep Gupta (DHC) dated 13.11.2017 4. PCIT VS. Swapna Enterprise [2018] 401 ITR 488 (Gujrat HC) 5. Smt. Raj Rani Gupta VS. DCIT (Delhi I.T. Trib.) ITA No. 3371/De1/2011 dated 30.03.2012 6. ACIT V s. Shreenarayan Sitaram Mundra [2017] 83 taxmann.com 231 (Ahmedabad- Trib) 7. Neerat Singal Vs. ACIT [2013] 37 Taxmann.Com 189 (Delhi- Trib.) 8. ACIT Vs. Bhavi Chand Jindal (Delhi I.T. Trib.) ITA No. 6810/De1/2015 dated 17.04.2018 9. DCIT Vs. Ashok Nagrath [2015] 57 taxmann.com 15 (Delhi-Trib.) 10. Ashwani Kumar Arora Vs. ACIT [2017] 81 taxmann.com 440 (Delhi-Trib.) 11. Concrete Developers Vs. ACIT [2013] 34 taxmann.com 62 (Nagpur- Trib.) 12. Sita Ram Gupta Vs. ACIT [2014] 48 taxmann.com 327 (Delhi- Trib.) 13. CIT Vs. Radha Kishan Goel [2005] 278 ITR 454 (Allahabad- Trib.) 14. CIT Vs. Mahendra C. Shah [2008] 299 ITR 305 (Gujrat-H.C.) 15. Mothers Pride Education Pertsonna P. Ltd. (Delhi I.T. Trib.) ITA No. 3372/De1/2011 dated 12.10.2012 16. JCIT Vs. Shri Jayendra N. Shah (Ahmedabad I.T. Trib.) ITA No 1552/Ahd/2016 dated 16.03.2018 17. Santosh Kumar Vs. DCIT (Delhi I.T. Trib.) ITA No. 267/Del/2014 dated 13.04.2018 12. More particularly, the decision of Hon'ble High Court of Gujarat cited as Pr. CIT-2 vs. MukeshBhai Ramanlal Prajapati - Tax Appeal No.434 of 2017 order dated 24.07.2017 wherein decision rendered in CIT vs. Mahendra C Shah - 299 ITR 307 and CIT vs. Radha Kishan Goel - 278 ITR 454 (All.) have been discussed and in the case cited as PCIT vs. Emirates Technologies Pvt. Ltd. - (2017) 399 ITR 189 (Delhi) relied upon by the Ld. AR also wherein Hon'ble Delhi High Court held that when no query raised by the AO regarding manner of derivation of such income and its substantiation, penalty u/s 271AAA is not sustainable. 13. However, Hon'ble High Court of Delhi in a case relied upon by the ld. CIT DR cited as Pr.CIT vs. Smt. Ritu Singal - (2018) 92 taxmann.com 224 (Delhi) after discussing the decisions relied upon by the ld. AR rendered by Hon'ble Apex Court in ACIT vs. Gebilal Kanhaialal 348 ITR 561 (SC) and Mak Data (P.) Ltd. vs. CIT 358 ITR 539 (SC), Hon'ble High Court of Gujarat in CIT vs. Mahendra C. Shah - 299 ITR 305 (Guj.), Hon'ble Allahabad High Court in CIT vs. Radha Kishan Goel - 278 ITR 454 (All.), Hon'ble Delhi High Court in Mothers Pride Education Personnel (P.) Ltd. vs. DCIT ITA No.3372 (Delhi of 2011 dated 12.10.2012, reversed the decision rendered by the Tribunal setting aside the penalty on the ground that in the 132 (4) to specify and substantiate the manner in which the undisclosed income was derived by returning the following findings :- "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 271 AAA (2) were satisfied by the assessee."
However, the instant case is on better footing than Smt. Ritu Singhal (supra) case because in reply to the specific query raised by the AO during search proceedings, assessee has expressed his inability to explain the discrepancy in the stock in order to substantiate the manner in which income in question has been derived rather categorically stated that he has made voluntary 9 ITA No.5051/Del./2013 surrender of Rs.21 crores in order to buy peace of mind and avoid litigation. So, when the assessee has failed to specify the manner and substantiate the manner in which the undisclosed income was derived rather embark upon the mercy plea that he is making surrender to buy peace of mind and avoid litigation, he is not entitled for benefit of section 271AAA(2) of the Act. Case laws relied upon by the assessee is not applicable to the facts and circumstances of the case. Following the decision rendered by Hon'ble Delhi High Court in case cited as Pr.CIT vs. Smt. Ritu Singal (supra), we are of the considered view that ld. CIT (A) has erred in deleting the penalty of Rs.2,10,00,000/- u/s 271AAA, hence appeal filed by the Revenue is hereby allowed and penalty order passed by the AO is restored."
Thus, laying our hand on and respectfully following the aforesaid latest decision of Hon'ble Jurisdictional High Court, and also the decision of Co- ordinate Bench of ITAT Delhi Bench, we find no justification to interfere with the orders of the authorities below. Accordingly, the appeal of the assessee is found devoid of merits and deserves to fail.”
11.11 Thus, in our opinion, the assessee does not satisfy the one limb of first condition of section 271AAA(2) of the Act, i.e., admission of undisclosed in a statement u/s 132(4) of the Act. 11.12 As far as second limb of first condition that to specify manner of deriving the undisclosed income and second condition of substantiating the manner in which undisclosed income was derived is concerned, the Assessing Officer during assessment proceeding asked the assessee to specify and substantiate the manner of deriving the undisclosed income, however, details were not provided except the claim that the surrender/declaration was to buy peace. The relevant part of the order of the Assessing Officer is reproduced as under:
“Unexplained investment made in property: During the course of search and seizure action on 02.09.2009 the assessee has made a voluntary disclosure of Rs.20,00,000/- on account of income relating to property transaction/advance for property given. This surrendered amount of undisclosed income has been declared by the assessee in her return of income filed for the Asstt. Year 2010-11. Assessee during the course of assessment proceedings was asked to give the detail of property in respect of which she has made a disclosure of Rs.20,00,000/- and also source of investment made by her. In response to above, assessee in her reply letter dated 01.11.2011 submitted that, “The declaration of undisclosed income at the time of search made by the assessee to get peace and to avoid litigation. All the income declared by the assessee has been duly reflected in the return of income filed at application tax with interest had been fully paid by the assessee Your goodself may kindly appreciate that in spite of the no evidence for undisclosed income/investment relating to assessee found during the search, declaration of undisclosed income was made by the assessee to buy peace. Such income was earned by the assessee from the property / real estate transactions which remain unrecorded and the total income surrendered / declared was appropriated in the case of company Imperial Auto Industries Ltd. . Mr. Jagjit Singh, Mr. S.B. Sardana and other family members.
In view of the above submission, evidence found during search and declaration made by the assessee and other family members. No penalty provision u/s 271 AAA of the I.T. Act, 1961 are attracted in case of the assessee. Your goodself is requested that under such circumstances no penalty u/s 271 AAA may kindly be initiated” I have gone through the submission offered by the assessee and found that the assessee has made a declaration of Rs. 20,00,000/- on account of undisclosed investment made in property but failed to prove any such source of investment and other document which can prove that the assessee’s declaration made during search operation u/s 132(4) was a proper declaration. Since the assessee failed to substantiate the manner in which the undisclosed income was earned by her during the previous year which was invested by her in property. Assessee has also failed to prove that she has made investment in a particular property for which she has made a disclosure. I, therefore, initiated penalty u/s 271 AAA of the I.T. Act, 1961.
With the above remarks total income of the assessee is computed as under: - Income as per return Rs.26,46,921/- Add: As per para ‘6’above Rs.34,00,546/- Total Rs. Rs. 60,47,467/- R/o Rs.60,47,470/-“ 11.13 The contention of the learned counsel before us is that as far as condition of specifying the manner of deriving the undisclosed income and its substantiation is concerned, the Tribunal in the case of Mrs. Preeti Saradana (supra) has held that if such amount has been disclosed in the return of income and taxes paid and no question was asked, therefore, there is no ground for levying the penalty in the section 271AAA of the Act. The Tribunal in the said case has relied on the decision of the Hon’ble Gujarat High Court in the case of CIT Vs Mahendra C Shah(2008) 299 ITR 305 (Gujarat). The relevant paragraph of the order of the Tribunal is reproduced as under:
2.5 In the light of the aforesaid provision of the Act, if the facts before us, are analyzed, we find that the Tribunal in the case of ACIT vs. Emirates Technology P. Ltd (ITA No. 476/Del/2014) the Tribunal vide order dated 28.10.2016 considered the facts, wherein the assessment was also completed u/s 143(3) of the Act The penalty proceedings u/s 271AAA were initiated against surrender of unexplained/undisclosed income found during search. In that case also it was noted that the assessee admitted undisclosed income in his statement recording during search and paid tax alongwith interest on the undisclosed income. The Tribunal considered various decisions and ultimately considering the decision in the case of Neeraj Singhal vs ACIT (ITA No 337/Del/2013) and dismissed the appeal of the Revenue. This matter was carried in appeal before the Hon’ble High Court, wherein vide order dated 18.07.2017 (ITA No. 400/2017) the Hon’ble High Court concurred with the order of the Tribunal identical are the facts before us. Respectfully following the order from Hon’ble Delhi High Court we delete the penalty so imposed u/s 271AAA of the Act. The appeal of the assessee is allowed.
11.14 But the Ld. DR has relied on the decision of the Hon’ble Delhi High Court in the case of Ritu Singhal (supra). In the said case, Hon’ble Delhi High Court has referred to the decision of the Hon’ble Gujarat High Court in the case of Mahendra C Shah (supra), however, held that by mere statement that sum surrendered during the search was undisclosed income without disclosing the source of such income, same cannot be construed as satisfaction of condition of section 271AAA(2) of the Act. The relevant finding of the Hon’ble High Court is reproduced as under: “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 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) “substantiate the manner in which the undisclosed income was derived”. Such being the case, this court is of opinion that the lower Section 271AAA(2) were satisfied by the assessee.” 11.15 Before us, the Ld. counsel submitted that the assessee before us, falls in jurisdiction of Hon’ble Punjab and Haryana High Court and therefore the decision of the Hon’ble Delhi High Court is not binding on the assessee. The Ld. DR on the other hand submitted that the Benches of the Delhi Tribunal are situated in the jurisdiction of the Hon’ble Delhi High Court and therefore decision of the Hon’ble Delhi High Court is binding on the Tribunal Delhi benches. Thus, dispute between the parties is whether the bindingness of the decision of the Hon’ble High Court should be seen vis-à-vis, Situs of the Tribunal or Situs of the assessee. 11.16 We find that Tribunal in the case of Pradeep Aggarwal (supra) , held that in case of assessees falling in the jurisdiction of the Punjab and Haryana High Court, the decision of the Hon’ble Delhi High Court is not binding. The relevant finding of the Tribunal is reproduced as under:
15. Although a contrary view has been taken by the Hon’ble Delhi High Court in the case of Smt. Ritu Singal (supra), however, it is to be noted that the assessee falls under the jurisdiction of Hon’ble Punjab & Haryana High Court and, therefore, the decision of the Hon’ble Delhi High Court is not binding on the assessee. It is the settled position of law that when two views are possible on an issue the view which is favourable to the assessee has to be accepted in view of the decision of Hon'ble Supreme Court in the case of Vegetable Products Ltd. (supra). Since the assessee in the instant case has surrendered additional income and paid the taxes due thereon and no specific query was raised by the search party at the time of search to substantiate the manner of earning such income, therefore, following the decision of the Hon’ble Gujarat High Court cited (supra) and various other decisions relied on by the Id. CIT(A), we are of the considered opinion that the penalty u/s 271 AAA is not leviable in the instant case.
11.17 Respectfully following the above decision of the Tribunal and the decision of the Hon’ble Gujarat High court in the case of Sh. Mahendra Shah (supra), we are the view that the assessee cannot be said to have not satisfied the condition of specifying the manner of deriving undisclosed income as per section 271AAA of the Act in respect of surrender of amount of Rs. 20 lakh and Rs. 5 lakh against investment in property and jewellery respectively. 11.18 But, if the assessee fails to satisfy any one of the conditions of section 271AAA(2) of the Act, the assessee cannot escape the penalty under section 271AAA(1) of the Act. Since we have already answered that the assessee failed to satisfy the one limb of first condition of section 271AAA(2) of the Act, i.e., admission of undisclosed income in a statement u/s 132(4) of the Act, the assessee is liable for penalty under section 271AAA of the Act. The grounds of the appeal are accordingly dismissed.
In the result, the appeal of the assessee is dismissed.
Order is pronounced in the open court on 31st July, 2019.