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Income Tax Appellate Tribunal, “B”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM Shri Narpat Mehta,
आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A) for the assessment year 2011-12, in the matter of penalty of Rs.1.00 lakh imposed u/s.271AAA of the IT Act. 2. Following grounds have been taken by the assessee.
1. The Learned Commissioner of Income Tax, Appeal - 40 erred in law & on facts confirming penalty u/s. 271AAA of the Income Tax Act @ 10 % on cash amounting to Rs. 10,00,000/-
2. The Learned Commissioner of Income Tax, Appeal - 40 erred in law & on facts in stating that the appellant's AR reliance on the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah ( 299 ITR 305 ) & Allahabad High Court in the case of CIT vs. Radha Kishan Goel (278 ITR 454) & Also Hon'ble ITAT decision in the case of Mls Kanakia Spaces Pvt. Ltd. ( ) is distinguishable from our case.
2 Shri Narpat Mehta 3. Rival contentions have been heard and record perused.
In this case, assessee is aggrieved for levy of penalty of Rs.1.00 lakh u/s.271AAA in respect of cash amount surrendered during course of search for which due taxes were deposited with interest.
The facts in brief are that during course of search on the Kanakia Group on 29/03/2011 at assessee’s premises, assessee was found to be owing jewellery and cash. The assessee, in his statement dated 12.05.2011, declared and offered Rs.10,00,000/- cash and valuables worth Rs.75,110/- to tax under section 132(4). The same was filed in his return for the “specified previous year”. During the assessment proceedings, the disclosure made by the assessee was admitted. However, A.O. also initiated penalty u/s. 271AAA in respect of the jewellery and cash surrendered.
By the impugned order, CIT(A) deleted the penalty in respect of jewellery, however, he confirmed the penalty in respect of cash found and surrendered during course of search which was duly explained and accepted by the AO during assessment proceedings.
At the outset, learned AR placed on record the order of the Tribunal in the Group case i.e., Kanakia Spaces Pvt. Ltd., wherein during the same search, the amount was surrendered as per the statement recorded u/s. 132(4). AO levied penalty with respect to the surrendered amount u/s.271AAA. The Tribunal in its order dated 10/07/2013 in ITA No.6763/Mum/2011 has confirmed the deletion of penalty after observing as under:-
3 Shri Narpat Mehta 4. After considering the rival submissions, we do not see any reason to interfere with the order of CIT(A). The order is in tune with the principles laid down by various co-ordinate Benches and High Courts particularly with reference to disclosure made under section 132(4). In the case of CIT vs. Mahendra C. Shah (299 ITR 305) the Hon'ble Gujarat High Court considered similar statement under section 132(4) to grant immunity under section 271(1)(c). The Hon'ble High Court held as under:- "When the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated in the second exception while making statement under section 132(4). Even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit." 4.1 In this case, the assessee was asked to explain the entries in the 'work-in-progress sheet' and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived. The provision of clause-2 of Explanation-V appended to section 271(1)(c) are similar to section 271AAA(2). The scope and meaning has been lucidly explained by the Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel (2005) 278 ITR 454 (All.), which was followed by the Hon'ble Gujarat High Court in the above referred case. In view of the above principles laid down, we are of the opinion that immunity provided under s/s.(2) of section 271AAA is applicable and accordingly, the order of CIT(A) does not require any modification. Revenue's grounds are rejected.
Learned AR also placed on record the order of ITAT-Delhi Bench in case of Sudha Gupta in ITA No.5445/Del/2012 dated 22/08/2014, wherein similar penalty imposed for the amount surrendered during course of search was deleted by Tribunal.
4 Shri Narpat Mehta 9. Reliance was also placed on the decision of ITAT Mumbai in the case of Gulabrai V Gandhi vs. ACIT, reported as 84 ITD 370 (ITAT Mumbai), wherein it was held that when the statement u/s 132(4) was recorded in question and answer form, the benefit of immunity from penalty cannot be denied to the assessee on the ground of not specifying the manner in which income was derived by her.
On similar facts ITAT, Delhi in the case of Mrs. Raj Rani Gupta in ITA 11 No. 3371/Del/2011 dated 30/03/2012, wherein penalty imposed u/s 271AAA of the Act was deleted by following decision of Hon’ble Gujarat High Court in the case of CIT vs. Mahendra C Shah, 299 ITR 305 (Guj.), wherein it was held that if the statement of the assessee recorded u/s 132(4) of the Act does not specify the manner in which the income is derived, if the income is declared and tax thereon has been paid, there would be substantial compliance not warranting any further denial of the benefit under exception no. 2 in Explanation 5 attached to section 271(1) of the Act.
We have considered rival contentions and carefully gone through the orders of the authorities below as well as decision cited by us. In this case of Mrs. Rajrani Gupta vs. DCIT the penalty imposed u/s 271AAA has been deleted with following conclusion and findings:
“10. From the above statement it appears that whatever question was put to assessee, she replied, she was not asked about the manner in which such income was earned and she was never asked to substantiate the manner in which the undisclosed income was derived. During assessment 5 Shri Narpat Mehta proceedings u/s 271AAA the question about manner in which income was derived were asked to assessee and she had replied to that. From here it implies that had this question been posed before her during recording of statement u/s 132(4) she might have replied that. The question of penalty as contained in section 271(1)(c) prior to 1.6.2007 has been decided by various High Courts. Before 1.6.2007, the penalty provisions on search and seizure were contained in section 271(1)(c) and immunity was granted to the assessee vide clause (2) of explanation 5 appended to section 271(1)(c). Provisions of clause (2) of explanation 5 appended to section 271(1)(c) are similar to immunity granted to assessee under clause (2) of section 271AAA.”
Similarly, ITAT Cuttack Bench in case of Ashok Kumar Sharma vs. DCIT – 149 TTJ 33 deleted similar penalty by observing as under:- The assessees have disclosed concealed income while giving statements u/s.132 during the course of search and paid the tax thereon and showed the said undisclosed income in the return filed under the head "income from business" and Department has accepted these returns and accordingly passed the assessment orders. , it is not the case of the Departmental Authorities that the assessee has not satisfied the manner in which the income is derived and the assessee has not paid the tax with interest on the undisclosed income. Undisputedly the assessees have shown the undisclosed income under the head "income from business" in the returns filed by them and that was accepted by the Department by passing the assessment orders accordingly. Therefore, the cases of the assessees fall exactly within the purview of sub‐section (2) of Section 271AAA. Therefore, the provisions contained in sub‐section (1) of Section 271AAA are not applicable. The Departmental Authorities have not considered this aspects of the issue and passed the impugned orders. The impugned orders having been made contrary to the provisions contained in Section 271AAA(2), they are not sustainable for legal scrutiny. Hence, we hereby set aside the impugned orders of the authorities below are set aside and the penalty levied u/s 271AAA in the cases of the assessee is cancelled.
Similar penalty was deleted by ITAT-Cuttack Bench in case of Pramod Kumar Jain vs DCIT – 149 TTJ 36 after observing as under:- “No definition could be given to the "specified manner" insofar as the very statement on oath u/s.132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance to notice u/s.153A accounting the assets. Therefore, the case laws cited at the Bar clearly indicate that the penalty is not automatic if one of the purported condition is not fulfilled although all the conditions 6 Shri Narpat Mehta have been agreed to of having fulfilled by the Assessing Officer insofar as the tax and interest has been recovered.”
ITAT-Chandigarh Bench in case of Munish Kumar Goyal, 45 taxmann.com 563 upheld the deletion of penalty u/s.271AAA after observing as under:- “A plain reading of section 271AAA would show that if the assessee during the course of search admits certain undisclosed income and pays taxes on the same then penalty cannot be levied in terms of sub-section (1) of his section. In the instant case, the amount of Rs.4 crore which was surrendered during search has been declared by the assessee in the return and taxes have been paid accordingly. Therefore the assessee is normally entitled for the immunity provided in section 271AAA itself. However, the revenue has raised further dispute that whether the assessee has disclosed the manner in which income has been earned. Once the income is surrendered during the course of search under section 132(4) it can be safely assumed that during discussion the assessee must have disclosed the manner.
Applying proposition of law laid down in above judicial pronouncements and respectfully following the order of Co-ordinate Bench in group concern as discussed above, we do not find any merit for the penalty of Rs.1.00 lakh imposed by AO u/s. 271AAA. We direct the AO to delete the same.
In the result, appeal of the assessee is allowed.