HEMANT KUMAR,MUMBAI vs. ACIT CEN CIR 18 & 19, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 17/12/2014,of the CIT(A)-51,Mumbai,the assessee has filed the present appeal.An action u/s. 132 (1) of the Act was carried out in the case of ISPAT Industries and group companies,promoters and executives in 30/11/2010. The assessee,working as President (Legal) of the group companies, was also covered by the search and seizure action. During the course of search cash of Rs.54.97 lakhs,kept into bank lockers standing in the name of the assessee,was seized.In the assessment completed,u/s. 143(3) of the Act,the AO brought to tax the seized cash as income from undisclosed sources holding that the assessee had failed to explain the sources of income of seized cash. He also initiated penalty proceedings u/s. 271AAA of the Act. 2.In the course of penalty proceedings,before the AO, the assessee argued that cash seized represented his professional income for the year under consideration, that same had been kept in the locker for safety purposes. However the AO did not consider the said explanation is tenable. He held that neither during the assessment nor during the penalty proceedings the assessee would explain the sources of seized cash,that he had failed to substantiate the same, that had there been no search income shown by the assessee would have escaped taxation. The AO further held that assessee was liable to penalty u/s. 271 AAA of the Act. Finally, he imposed penalty of Rs.5.49 lakhs (10% of Rs. 54.97 lakhs).

745/M/15-Hemant Kumar 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was contended that in the statement recorded u/s. 132(4),on 20/12/2010,the assessee had stated that the cash found in the lockers represented his income,that in response to question 4 of the statement,he had stated that income/cash was from his professional knowledge and it had no connection with any of the fund of Ispat group,that at the time of the search proceedings the assessee was not working with the group as he had left the job and had started his legal activity.Referring to the provisions of section 271 AAA(ii) of the Act,the assessee argued that penalty levied by the AO should be cancelled.

3.1After considering the submission of the assessee,the FAA held that the assessee was required to fulfill all the conditions of the section 271AAA,that he had stated that seized cash represented his professional income,that he had failed to substantiate the manner in which the income was derived,that during the appellate proceedings the assessee was specifically asked to give details such as to whom consultancy/ advocacy services were provided and the details of remuneration received, that the assessee showed his inability to give the required details, that all the conditions were clearly for escaping the rigours of penalty which had been cumulatively satisfied, that the assessee had not complied with all the conditions as stipulated in subsection (2)of section 271 AAA. Finally,he upheld the order of the AO.

4.Before us,the Authorised Representative(AR)argued that the assessee had fulfilled all the conditions stipulated in the section,that cash represented his professional income, that he had left the employment of Ispat four months before the seizure took place, that the assessee had paid taxes,that word ‘substantiate’ was not defined in the Act,that the assessee had explained the manner in which income was earned.He relied upon the cases of Sita Ram Gupta(ITA/1835/ Del/2013-AY.2009-10,dtd.30.06.2014),Nirat Singal(37taxmann.com189) and Concrete Developers (34taxmann.com62).Departmental Representative(DR) supported the order of the FAA.

5.We have heard the rival submissions and perused the material before us.We find that cash of Rs.54. lakhs was seized from the assessee,that he admitted that it represented his unaccounted professional receipts,that he had paid due taxes on the undisclosed income,that the FAA had confirmed the penalty as he was of the opinion that the assessee had not substantiated the disclosure.We find that in the case of Sita Ram Gupta(supra),the Tribunal has held as under : 2

745/M/15-Hemant Kumar

“... There is no specific format/procedure prescribed in the Act for specifying and substantiating and undisclosed income. The statement of the assessee, specifying the manner in which the undisclosed income was derived and substantiated, did not face any rebuttal of rejection at the hands of the AO. As per the statement recorded ……. It had been admitted that the assessee had entered into various transactions of sale and purchase of land during the concerned period. The income arising out of the said transactions was declared. This included the undisclosed amount. Later, due taxes thereon were also paid. XXXXXXXX 22. For the above discussion, we hold that the assessee had substantiated the manner in which the undisclosed income was derived and that being so, the condition laid down by section 271 AAA (2) (ii) has been duly met.” In the case of Concrete Developers (supra) the Tribunal has held that where the assessee had disclosed certain amount during the course of search and had paid taxes thereon, filed return showing said income as business income and same had been accepted by the AO under the head ‘business income’, penalty u/s. 271 AAA was not leviable. In the case of Pramod Kumar Jain(33 taxmann.com651), it has been held by the Tribunal that there was no prescribed method to indicate the manner in which income was generated.Considering the facts that the assessee had paid taxes on the undisclosed income and had stated the seized cash represented his professional income,we are of the opinion that no penalty is leviable u/s.271AAA of the Act.In our opinion,the judgment delivered by the Hon’ble Gujarat High Court in the case of Mahendra C. Shah(299ITR305) support the view taken by the Tribunal in the above mentioned cases.So, reversing the order of the FAA,we decide effective ground of appeal in favour of the assessee . As a result,appeal filed by the assessee stands allowed. फलतः िनधा�रती �ारा दािखल क� गई अपील मंजूर क� जाती है. Order pronounced in the open court on 19th July,2016. आदेश क� घोषणा खुले �यायालय म� �दनांक 19 जुलाई, 2016 को क� गई ।