SH. ASHOK JINDAL,CHANDIGARH vs. DCIT, CC-1, CHANDIGARH

आदेश/Order PER ANNAPURNA GUPTA, A.M. : Both the above appeals have been filed by different assessees against separate orders of the Commissioner of Income Tax (Appeals)-3, Gurgaon (in short CIT(A) both dated 29.8.2017, upholding the penalty levied u/s 271AAA of the Income Tax Act, 1961 (in short ‘Act’).

was common ground, were identical, being the levy of

penalty u/s 271AAA of the Act on cash surrendered during

search conducted on the assessees u/s 132 of the Act. They

were therefore heard together and are being disposed off by

this common order for the sake of convenience.

We shall be dealing with the assessee’s appeal in ITA

No.1556/Chd/2017 and our decision rendered therein will

apply mutatis mutandis to the appeal of the other assessee

in ITA No.1557/Chd/2017.

carried out at the residential and business premises of

Jindal Group of cases of Panchkula on 15.7.2008 and the

assessee was one of the persons covered under the search

action. The assessee had surrendered an additional income

of Rs.54,87,500/- relating to the impugned year on account

of the following assets/documents:-

1) Cash found from the residential premises of the assessee group amounting to Rs.11 lacs. 2. Pages 54 to 59, of Annexure A-10 of Delta-I, amounting to Rs.60,000/-. 3. Annexure A-8 of Delta-3 amounting to Rs.38,50,000/-. 4. Capital introduced in firms amounting to Rs.4,77,500/-.

income filed by the assessee and was accepted by the

Revenue also. However, penalty u/s 271AAA was initiated

and thereafter levied for the reason that the assessee had

failed to substantiate the manner in which the undisclosed

income had been earned by him.

who followed the decision of ITAT Chandigarh Bench in the

case of DCIT Vs. Shri Sanjeev Goyal in ITA

No.109/Chd/2015 for assessment year 2011-12,as per which

if the assessee had disclosed 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” no penalty u/s 271AAA was

leviable . In view of the aforesaid decision, the Ld.CIT(A)

held that the assessee had specified and substantiated the

manner of earning the income with regard to surrender

made of capital introduced in the firms and the documents

relating to Annexure A-10 And A-8, and consequently

deleted the penalty levied on the same. However, vis-à-vis

surrender of cash of Rs.11 lacs, the Ld.CIT(A) held that as

per the decision of the Hon'ble Jurisdictional High Court in

the case of Kim Pharma Pvt. Ltd. Vs. CIT (P&H) (2003) 258

CTR 458, the same was assessable as deemed income of the

assessee u/s 69A of the Act and not business income and

since no explanation with regard to the same has been

furnished, penalty u/s 271AAA on the same was upheld. The

relevant findings of the Ld.CIT(A) at para 5- 5.4 of his order

are as under:

In the above factual background, it is to seen whether penalty u/s 271AAA is leviable. It is the contention of the Revenue that though admittedly, the assessee has surrendered an income of Rs. 1,50,00,000/- during the course of search and seizure

operation, disclosed the manner of earning the same being from speculative dealings in commodities and also disclosed the income in its return of income, the assessee had not substantiated the manner of earning the undisclosed income and hence not fulfilled all the conditions specified u/s 2 71AAA for grant of immunity from penalty. The issue therefore is whether admission of undisclosed income and a description of the nature of the same could be treated as compliance with the condition of specifying and substantiating the manner in which the undisclosed income is earned as required by the section 271AAA(2)(i)and (ii). 10. We find that a similar requirement of disclosing the manner in which undisclosed income is earned is also there in Explanation-5 to section 271(l)(c). interpreting which the Allahabad High Court in the case ofCITvs RadhaKrishanGoel ( 2005) 278 ITR 454 observed fhat non disclosure of manner of earning the undisclosed income is not relevant for the purpose of availing benefit under Explanation 5 below section 271(l)(c). In CIT vs Mahendra C. Shah [2008] 215 CTR 493 (Guj). It was held the assessee having declared the value of diamonds in his statement under section 132(4) and paid taxes thereon before assessment was entitle to immunity from penalty under section 271(l)(c) under Explanation 5 thereof even though the statement did not specify the manner in which the income representing value of diamonds in his statement under section 132(4) and paid taxes thereon before assessment was entitled to immunity from penalty under section 271(l)(c) under Explanation 5 thereof even though the statement did not specify the manner in which the income representing value of diamonds was derived. With respect to such requirement in relation to section 271AAA, it has been held in the case ofPramod Kumar Jain v. Dy. CIT (2013) 33 Taxmann.com 651 (Ctk) that the disclosure of income under section 132(4) during the course of search having been made and the assessee having surrendered certain income for the relevant assessment years in the statements during the course of search and filed returns declaring the same pursuant to notice under section 153A and which returns have been accepted by the AO, levy of penalty under section 271AAA was not justified on the ground that the assessee has though made disclosure but failed to specify the manner in which such income had been derived. Hon'ble Tribunal further held that no definition could be given to the 'specified manner' and there is no prescribed method given in the statute to indicate the manner in which income was generated. It has been held in the case of Ashok Kumar Sharma v Dy. CIT [2013] 33 taxmann.com 652 (Ctk) that when assessee disclosed concealed income while giving statement under section 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" and which undisclosed income has been accepted by the Department, penalty under section 271AAA is not leviable. 11. In view of the above judicial precedents we find that the assessee has specified and substantiated the manner of earning the income and has not violated any of the conditions specified u/s 271AAA(2), for granting immunity from penalty. 12. We therefore hold that no penalty u/s 271AAA could be levied in the present case.

Accordingly we uphold the order of the Id. CIT(A) deleting the penalty. 5.4 In view of the facts of the case, submissions made by the appellant and judicial pronouncement of the Hon'ble ITAT Chandigarh on this issue discussed above, it is held that the appellant has specified and substantiated the manner of earning the income with regard to following income disclosed:- (0 Capital introduced in firms -Rs. 4,77,500/-. (if) Documents page54-59 ofannexure A-10 of delta 1 amounting Rs. 60,000/- (iii) Documents Annexure A-8 of Delta 3 amounting Rs. 38,50,OOO/- However with regard to disclosure on account of cash found from residential premises of the assessee group amounting Rs. 11,00,000/-, it is held that manner of earning this income-has not been specified and substantiated because:- (i) cash of Rs. 11 lakh surrendered by the appellant was part of Rs. 44 lakh cash surrendered by the assessee group vide letter dated 22.07.2008 and it was in the surrender letter itself stated as unexplained cash found in residential premises during search operations. It has been held by the Hon'ble Jurisdictional High Court in the case of Kim Pharma (P) Ltd vs CIT (P&H) [2013) 258 CTR 458 that where amount surrendered during survey was not reflected in books of accounts and no source from where it was derived was declared by the assessee, it was assessable as deemed income of assessee u/s 69A and not business income. In view of the above referred judgement, cash found is held as unexplained as no from which it is derived. Thus, with regard to the same, it is held that the appellant has not specified and substantiated the manner of earning income during the course of search and hence Penalty u/s 271AAA of the Act is leviable on this amount. In view of the above discussion, penalty u/s 271AAA amounting Rs. 1,10,000/-related to surrender related to cash amounting Rs. 11,00,000/- is confirmed and the appellant gets relief on the balance amount, 6. As a result, appeal of the appellant is partly allowed. 6. Aggrieved by the same, the assessee has come up in

appeal before us, raising the following grounds:

“1 That the Worthy Commissioner of Income Tax (Appeals)-3, Gurgaon has erred in upholding penalty amounting to Rs.1,10,000/- relating to surrender of cash of Rs.11 lacs found during the course of search from the residential premises of the assessee group. 2. That the Worthy CIT (A)-3, has erred in holding that with regard to cash found during search, the appellant has not specified and substantiated the manner of earning the income during the course of search and hence penalty u/s 271 AAA of the Act is leviable on this amount.

for assessee stated that the CIT(A) had upheld the levy of

penalty on cash for the reason that the same was assessable

as deemed income u/s 69A of the Act and not business

income as per the decision of the Hon'ble Jurisdictional High

Court in the case of Kim Pharma Pvt. Ltd.(supra). The Ld.

counsel for assessee stated that this finding of the Ld.CIT(A)

was contrary to the facts of the case since the surrender

made on account of cash had not been assessed as deemed

income u/s 69A of the Act but had been accepted alongwith

the other income surrendered by the assessee,penalty on

which had been deleted by the CIT(A).

same time relied on the findings of the CIT(A) that the

assessee had not been able to specify and substantiate the

manner of earning the cash surrendered and therefore

penalty u/s 271AAA had been rightly upheld by the CIT(A).

gone through the order of the CIT(A).Undisputedly the entire

surrender made by the assessee on account of capital

introduced in firms,documents found and cash , amounting

in all to Rs.54,87,500/- was accepted and assessed to tax by

the Revenue. All taxes thereon had been paid.Admittedly ,no

portion of the surrender had been assessed separately under

any other head. Therefore the decision of the ITAT in the

case of Sanjeev Goyal (supra) applied to the entire surrender

made,and the CIT(A) ,we hold had wrongly segragated the

surrender made on account of cash by stating that the same

was assessable u/s 69A of the Act,when the fact was that it

had not been so assessed.In fact on going through the order

of the ITAT in the case of Sanjeev Goyal (supra) we find that

it has been held in the said case that the disclosure of

income u/s 132(4) during search having been made and the

assessee having surrendered the same and included the

same in the returns filed which have been accepted by the

Revenue,no penalty u/s 271AAA is leviable for not specifying

the manner of earning the income surrendered.All the

aforesaid conditions admittedly stood fulfilled in the case of

surrender made on account of documents found and capital

introduced in the firm ,as per the CIT(A). The cash was also

part of the same surrender and no distinction has been

brought out of the same with the rest of the surrender

made.We therefore hold that there was no basis for

upholding the levy of penalty on the cash surrendered and

the same is therefore directed to be deleted. The appeal

filed by the assessee is, therefore, allowed.

ITA No.1557/Chd/2017:

facts were identical, with the penalty having been levied u/s

271AAA of the Act, on surrender made of identical amount of Rs.54,87,500/- on identical counts of cash Rs.11 lacs,Annexure A 10 of Delta 1 Rs.60,000/-,Annexure A-8 of Delta 3 Rs.38,50,000/- & capital introduced in firm Rs.4,77,500/-, out of which the CIT(A) upheld penalty levied, on the cash surrendered of Rs.11 lacs, for the identical reason that the same was not assessable as business income but as deemed income of the assessee as per the decision of the Hon'ble Jurisdictional High Court in the case of Kim Pharma Pvt. Ltd. (supra).It was pointed out by the Ld. counsel for assessee was that the impugned surrender of cash had been accepted and assessed alongwith the total surrender made and had not been assessed as deemed income.

In view of the same, since the the facts are identical to that in ITA No.1556/Chd/2017,our decision rendered therein will apply squarely to the present case also following which we delete the penalty upheld on the cash surrendered. The appeal of the assessee is allowed.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपणा� ग�ता (ANNAPURNA GUPTA) (SANJAY GARG ) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated: 15th October, 2018 *रती*

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

आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar