DCIT, Faridabad V. Sh. Pradeep Aggarwal, Gurgaon

ITA 1100/DEL/2015

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 2746 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 24-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHNATH
• Assessee Lawyers: VED JAIN CA SHRI ASHISH GOEL
• Keywords: Income from undisclosed sources; Search and seizure; Opportunity of being heard
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.1100/DEL/2015 ASSESSMENT YEAR : 2011-12 DCIT, CENTRAL CIRCLE- II, FARIDABAD. VS. PRADEEP AGGARWAL, 26- P, SECTOR- 33, GURGAON. PAN : AAGPA9350D (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI RAGHNATH, SR. DR ASSESSEE BY : SHRI VED JAIN, CA SHRI ASHISH GOEL, CA DATE OF HEARING : 20-09-2018 DATE OF PRONOUNCEMENT : 15-10-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 29.12.2014 OF THE CIT(A)- 3, GURGAON RELATING TO AS SESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : - (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE TOTAL PENALTY LEVIED U/S 271AAA EVE N WHEN THE ASSESSEE WAS GIVEN APPROPRIATE OPPORTUNITY OF BEING HEARD. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN GRANTING RELIEF TO THE ASSESSEE WHEN THE B ASIC REQUIREMENT OF THE SECTION 271AAA IS NOT FULFILLED I.E. THE ASSESSEE FAILED TO ELABORATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS. A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE I.T. 2 ITA NO.1100/DEL/2015 ACT, 1961 WAS CARRIED OUT AT THE RESIDENTIAL AS WEL L AS OFFICE PREMISES OF THE ASSESSEE ON 28.01.2011. IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR D ECLARING TOTAL INCOME OF RS.23,22,78,376/- ON 30.10.2012. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THAT DURING THE COURSE OF SEARCH CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE CERTAIN DOCUMENTS WERE FOUND AND SEIZED. ON THE BASIS OF THESE DOCUMENTS, THE ASSES SEE, IN HIS STATEMENT RECORDED U/S 132(4), HAD SURRENDERED A SUM OF RS.21,00,00,00 0/- OVER AND ABOVE HIS NORMAL INCOME. HE FURTHER NOTED THAT DURING THE CO URSE OF SEARCH ACTION A SUM OF RS.16,46,300/- IN CASH AS WELL AS JEWELLERY VALU ED AT RS.50,00,000/- WAS FOUND FROM THE RESIDENTIAL PREMISES WHICH HAS ALSO BEEN SURRENDERED BY THE ASSESSEE IN THE INSTANT ASSESSMENT YEAR. FURTHER, THE ASSESSEE HAD ALSO SURRENDERED AN AMOUNT OF RS.1,33,53,700/- ON ACCOUN T OF OTHER DISCREPANCIES EITHER IN PERSONAL INCOME OR IN GROUP COMPANIES. T HUS, THE TOTAL SURRENDER MADE BY THE ASSESSEE IS RS.23,00,00,000/- WHICH WAS INCLUDED BY THE ASSESSEE IN HIS RETURN OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS SPECIFICALLY ASKED TO GIVE EXPLANATION REGARDING TH E APPLICATION OF PROVISIONS OF SECTION 271AAA. THE REPLY SUBMITTED BY THE ASSESSE E WAS NOT ACCEPTED BY THE ASSESSING OFFICER SINCE THE ASSESSEE WAS NOT ABLE T O SUBSTANTIATE THE MANNER IN WHICH THE ABOVE UNDISCLOSED INCOME HAS BEEN EARNED. ACCORDING TO THE 3 ITA NO.1100/DEL/2015 ASSESSING OFFICER, HAD THE ASSESSEE GIVEN THE DETAI LS ABOUT THE NATURE AND THE PERSONS WHO HELPED HIM IN EARNING THE UNDISCLOSED I NCOME IT WOULD HAVE ENABLED THE DEPARTMENT TO TAKE ACTION AGAINST SUCH PERSONS. HE, THEREFORE, ISSUED A SHOW-CAUSE NOTICE ASKING THE ASSESSEE TO E XPLAIN AS TO WHY PENALTY U/S 271AAA SHOULD NOT BE LEVIED SINCE THE ASSESSEE HAS NOT EXPLAINED THE MANNER IN WHICH SUCH INCOME WAS EARNED. REJECTING THE VAR IOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND APPLYING THE PROVISIONS OF SECTION 271AAA, THE ASSESSING OFFICER LEVIED PENALTY OF RS.2,20,00,000/- BEING PE NALTY AT THE RATE OF 10% OF THE UNDISCLOSED INCOME OF RS.22,00,00,000/-. 5. BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENGED T HE LEVY OF PENALTY U/S 271AAA OF THE I.T. ACT. IT WAS ARGUED THAT THE SUR RENDERED AMOUNT WAS ADMITTED U/S 132(4) AND THE SAME WAS DISCLOSED IN T HE RETURN FILED AND DUE TAXES WERE PAID AND THE ASSESSING OFFICER HAS ACCEPTED TH E SAME. IT WAS FURTHER ARGUED THAT THE AMOUNT WAS SURRENDERED TO BUY PEACE AND AVOID LITIGATION. IT WAS ALSO SUBMITTED THAT NO SPECIFIC QUESTION ABOUT SUBSTANTIATION WAS ASKED BY THE SEARCH PARTY TO THE ASSESSEE DURING THE COURSE OF SEARCH. SINCE THE ASSESSEE HAD FULFILLED ALL THE THREE CONDITIONS I.E. SURREND ER OF INCOME, PAYMENT OF DUE TAXES THEREON AND MANNER OF SUBSTANTIATION OF SUCH INCOME, THEREFORE, NO PENALTY U/S 271AAA IS CALLED FOR. VARIOUS DECISION S WERE ALSO RELIED UPON TO THE ABOVE PROPOSITION. 4 ITA NO.1100/DEL/2015 6. BASED ON THE ARGUMENT ADVANCED BY THE LD. COUNSE L FOR THE ASSESSEE, THE LD. CIT(A) CANCELLED THE PENALTY LEVIED BY THE ASSE SSING OFFICER BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS AS WE LL AS THE IMPUGNED ORDER. IT IS NOT IN DISPUTE THAT A SUM OF RS.22,00,00,000/ - WAS SURRENDERED U/S 132(4) ON ACCOUNT OF THE FOLLOWING ISSUES: (I) RS.21.00 CRORES ON ACCOUNT OF VARIOUS PAYMENTS MADE AS ADVANCE TOWARDS PURCHASE OF AGRICULTURAL LAND. (II) RS.50,00,000/- ON ACCOUNT OF EXCESS JEWELLE RY FOUND. (III) RS.7,73,300/- ON ACCOUNT OF CASH FOUND. (IV) RS.42,26,700/- ON ACCOUNT OF OTHER DISCREPA NCIES. IT IS HOWEVER THE CASE OF THE AO THAT THE MANNER IN WHICH THE INCOME WAS DERIVED WAS NEITHER SPECIFIED NOR SUBSTANTIATED IN AS MUCH AS THE METHODOLOGY WITH DOCUMENTARY EVIDENCE WERE NOT FURNISHED BY THE ASSE SSEE. THIS PERSUADED THE AO HOLD THAT THE ASSESSEE DID NOT FULFILL ALL THE COND ITIONS AS LAID DOWN IN SECTION 271AAA AND PROCEEDED TO LEVY THE PENALTY OF RS.2,20,00,000 /-. BEFORE ME, THE ASSESSEE REITERATED THAT THE SURREND ERED AMOUNT WAS ADMITTED U/S 132(4) AND THAT THE SAME, AS DISCLOSED IN THE R ETURN FILED, WAS ALSO ACCEPTED BY THE AO. HE FURTHER STATED THAT THE DUE TAXES ALSO STOOD PAID. HE ALSO STRESSED THAT THE AFORESAID SURRENDER WAS TO BUY PEACE AND TO AVOID L ITIGATION, APART FROM ITERATING THAT NO SUCH SPECIFIC QUESTION ABOUT SUBSTANTIATION WAS ASKED OF HIM IN THE COURSE OF SEARCH. IN OTHER WORDS, IT IS ASSESSEE'S CONTENTION THAT HE FULFILLED ALL THREE CONDITIONS AS LAID DOWN IN SUB SECTION (2) OF SECTION 271AAA. HE HAS ALSO RELIED ON VARIOUS JUDGMENT INCLUDING THAT OF THE HON'BLE ITAT CHANDIG ARH AND DELHI; BESIDES THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CROSSIN GS INFRASTRUCTURE LTD. VS CIT(CENTRAL) REPORTED IN 22 TAXMANN 26. SPECIFIC RE LIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUDHIR JAIN IN ITA NO.575 OF 2013. IT IS EVIDENT FROM THE IMPUGNED ORDER THAT THE ADDI TIONAL INCOME OF RS.23 CRORE SURRENDERED BY THE ASSESSEE U/S 132(4) AND TA XES PAID THEREON WAS DISCLOSED IN THE RETURN WHICH WAS ACCEPTED BY THE AO AS NO ADVER SE INFERENCE WAS DRAWN EXCEPT FOR HOLDING THAT THE SAME WAS NOT SUBSTANTIATED BY THE ASSESSEE. I FIND THAT THE FACTS OF THE CASE AT HAND ARE COVERED BY THE VARIOUS DECISIO NS. THE HON'BLE ITAT, DELHI DECIDE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN S ITA RAM GUPTA VS. ACIT IN ITA NO.1835 & 1836 OF 2103; NEERAJ SINGHAL VS ACIT IN 1 46 ITD 152; M/S SPAZE TOWER PVT LTD. VS DCIT IN ITA NO.2296/DEL/2012. THE CHAND IGARH BENCH OF THE TRIBUNAL HAS ALSO ACCEPTED ASSESSEE'S CONTENTION IN THE CASE S VIZ ACIT VS. MUNISH KUMAR GOYAL REPORTED IN 4 TAXMANN.COM 563; ACIT. CC. PATI ALA VS. GIAN CHAND GUPTA/ MOHINDER GUPTA/ SANJAY KUMAR GUPTA IN ITA NOS. 1005 /1006/1007/CHD/2013; DCIT CENTRAL CIRCLE-2 CHANDIGARH VS. AMARJIT GOYAL, ADIT YA GOYAL, KRISHAN KUMAR GOYAL (ITA NO.1080,1081,1082/2013). THE HON'BLE HIGH COUR TS OF ALLAHABAD AND DELHI HAS ALSO DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSE E. THUS WITHOUT MUCH ELABORATION RESPECTFULLY FOLLOWING THE CASES CITED, THE PENALTY LEVIED OF RS. 2,20,00,000/- IS DIRECTED TO BE DELETED. 5 ITA NO.1100/DEL/2015 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. 7. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT P ROCEEDINGS HAS NOT SUBSTANTIATED THE MANNER OF EARNING OF THE UNDISCLO SED INCOME. ALTHOUGH, THE ASSESSEE HAD DECLARED SUCH INCOME AND PAID THE DUE TAXES THEREON, HOWEVER, THE ASSESSEE HAS NOT FULFILLED ONE OF THE THREE CONDITI ONS PRESCRIBED U/S 271AAA OF THE I.T. ACT. THEREFORE, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN LEVYING PENALTY U/S 271AAA AND THE LD. CIT(A) WAS NOT JUSTI FIED IN DELETING SUCH PENALTY. HE ALSO RELIED ON THE RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. SMT. RITU SINGAL WHERE PENA LTY U/S 271AAA WAS UPHELD ALTHOUGH THE ASSESSEE HAS DECLARED THE INCOME IN TH E RETURN FILED AS PER DUE TAXES THEREON. 9. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). REFERRING TO THE STATEMEN T RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, HE SUBMITTED THAT VIDE QUESTI ON NO.5, THE ASSESSEE WAS ASKED TO EXPLAIN THE ENTRIES MADE ON PAGE NO.4 AGAI NST DATED 13.12.2010 OF ANNEXURE-A-1 FOUND AND SEIZED AT THE RESIDENTIAL PR EMISES OF THE ASSESSEE. THE ASSESSEE IN HIS REPLY HAD SUBMITTED THAT THESE PAGE S WERE A SUMMARY OF VARIOUS 6 ITA NO.1100/DEL/2015 PAYMENTS AS ADVANCE TOWARDS PURCHASE OF AGRICULTURA L LAND AS ADVANCE FOR THE LAND LOCATED IN DISTRICT INDORE (MP) FOR 48 ACRES A GAINST 50% OF HIS SHARE. DUE TO SOME UNAVOIDABLE REASONS THE SAID DEAL WAS CANCE LLED AND THE MONEY SHALL BE RECEIVED BACK IN THE COMING SIX MONTHS TIME. THE I NVESTMENT OF RS.21 CRORES WAS MADE OUT OF CURRENT YEAR INCOME AND THE SAME IN COME IS NOW OFFERED TO TAX AS CURRENT YEAR ADDITIONAL INCOME. 10. REFERRING TO QUESTION NO.7 OF THE SAID STATEMEN T, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IN HIS REPLY T O QUESTION NO.7 OFFERED FOR TAXATION THE UNDISCLOSED INCOME OF RS.22 CRORES AS ADDITIONAL INCOME OVER AND ABOVE THE INCOME FROM ANY REGULAR SOURCE OF INCOME. HE SUBMITTED THAT AFTER THIS QUESTION, THERE WAS NO QUESTION RAISED BY THE SEARCH PARTY TO SUBSTANTIATE THE MANNER OF EARNING OF THE UNDISCLOSED INCOME. HE SU BMITTED THAT THE ASSESSEE HAD DULY SUBMITTED THAT THE SAID UNDISCLOSED INCOME WAS EARNED FROM SOURCES OTHER THAN REGULAR SOURCE OF INCOME. RELYING ON VA RIOUS DECISIONS, HE SUBMITTED THAT THE REQUIREMENT OF DISCLOSING THE MANNER OF EA RNING THE INCOME ARISES ONLY IF QUESTION IN THIS REGARD HAS BEEN PUT TO THE PERS ONS WHOSE STATEMENT WAS RECORDED. SINCE NO QUESTION WAS PUT TO THE ASSESSE E ON THIS ISSUE DURING THE COURSE OF SEARCH, THEREFORE, THE MANNER OF SUBSTANT IATING SUCH INCOME DOES NOT ARISE. FOR THIS PROPOSITION, HE RELIED ON THE DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS. SHAHLON SILK M ILLS PVT. LTD. VIDE ITA NO.823 OF 2017 DATED 05.02.2018 AND THE DECISION IN THE CASE OF CIT VS. 7 ITA NO.1100/DEL/2015 MAHENDRA C. SHAH REPORTED IN 299 ITR 305. FURTHER, THE ASSESSING OFFICER HAS ACCEPTED THE VOLUNTARY OFFER MADE BY THE ASSESSEE I N TOTO AND, THEREFORE, NO PENALTY CAN BE LEVIED U/S 271AAA OF THE I.T. ACT. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. SUDHIR JAIN VIDE ITA NO.575/2013 ORDER DATED 26.11. 2013. 11. SO FAR AS RELIANCE OF THE DECISION IN THE CASE OF PR. CIT VS. SMT. RITU SINGAL IS CONCERNED, HE SUBMITTED THAT THE IN THE S AID CASE THE ASSESSEE NEVER TOOK A STAND THAT THERE WAS NO SPECIFIC QUERY RAISE D FROM THE REVENUE AUTHORITIES. HOWEVER, IN THE CASE OF THE ASSESSEE, IT WAS SUBMIT TED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT(A) THAT NO SP ECIFIC QUERY WAS RAISED BY THE SEARCH PARTY TO THE ASSESSEE TO SUBSTANTIATE THE MA NNER OF EARNING OF SUCH INCOME. 12. HE FURTHER SUBMITTED THAT THE CASE OF THE ASSES SEE DOES NOT FALL UNDER THE JURISDICTION OF THE HONBLE DELHI HIGH COURT AND FA LLS UNDER THE JURISDICTION OF HONBLE PUNJAB & HARYANA HIGH COURT. HE SUBMITTED THAT WHEN TWO VIEWS ARE POSSIBLE ON THE SAME ISSUE, THE VIEW WHICH IS FAVOU RABLE TO THE ASSESSEE HAS TO BE ADOPTED. FOR THE ABOVE PROPOSITION, HE RELIED O N THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD. REPORTED IN 88 ITR 192. 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSESSING OFFICER IN THE 8 ITA NO.1100/DEL/2015 INSTANT CASE LEVIED PENALTY OF RS.2,20,00,000/- BEI NG 10% OF THE UNDISCLOSED INCOME SURRENDERED DURING THE COURSE OF SEARCH ON T HE GROUND THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE MANNER OF EARNING OF SUCH UNDISCLOSED INCOME. WE FIND THE LD. CIT(A) CANCELLED SUCH PENALTY ON THE G ROUND THAT THE ASSESSEE HAD DECLARED THE INCOME DURING THE COURSE OF SEARCH AND PAID THE TAXES THEREON AND NO SPECIFIC QUERY WAS RAISED BY THE SEARCH PARTY DU RING THE COURSE OF RECORDING STATEMENT U/S 132(4) TO SUBSTANTIATE THE MANNER OF EARNING OF SUCH INCOME. FURTHER, ACCORDING TO THE LD. CIT(A), THE INCOME RE TURNED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER AND NO ADVERSE IN FERENCE WAS DRAWN EXCEPT FOR HOLDING THAT THE SAME WAS NOT SUBSTANTIATED BY THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETIN G THE PENALTY OF RS.2,20,00,000/- LEVIED BY THE ASSESSING OFFICER. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD DECLARED SUCH INCOME IN THE RETURN OF INCOME WHICH WAS SURRENDERED DURING THE SEARCH ACTION AND PAID THE D UE TAXES THEREON. THE ASSESSEE, DURING THE COURSE OF SEARCH, IN HIS STATE MENT U/S 132(4) HAS EXPLAINED SUCH INCOME IN REPLY TO QUESTION NO.5 WHICH READS A S UNDER :- Q. 5. YOU ARE REQUESTED TO EXPLAIN THE ENTRIES MAD E ON PAGE NO.4 AGAINST DATED 13.12.2010 OF ANNEXURE-A-1 FOUND AND SEIZED AT YOUR RESIDENCE. ANS. THIS PAGE IS SUMMARY OF VARIOUS PAYMENTS MADE DATEWISE TOWARDS PURCHASES OF AGG. LAND AS ADVANCE FOR THE LAND LOCATED IN DIS TRICT INDORE (MP) FOR 48 ACRES AGAINST MY 50% SHARE (THE TOTAL LAND UNDER THE DEAL WAS 96 ACRES). DUE TO SOME UNAVOIDABLE REASONS THE SAID DEAL WAS CANCELLED AND THE MONEY SHALL BE RECEIVED BACK IN THE COMING SIX MONTHS TIME. THE INVESTMENT OF RS.21 CRORES WAS MADE OUT OF CURRENT YEAR UNACCOUNTED INCOME AND THE SAME INCOME IS NOW OFFERED TO TAX AS MY CURRENT YEAR ADDITIONAL INCOME. 9 ITA NO.1100/DEL/2015 14. A PERUSAL OF THE STATEMENT RECORDED U/S 132(4) BY THE SEARCH PARTY SHOWS THAT NO SPECIFIC QUERY WAS PUT TO THE ASSESSEE REGA RDING THE MANNER OF EARNING OF SUCH ADDITIONAL INCOME. WE FIND THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF SHAHLON SILK MILLS PVT. LTD. (SUPRA) HAS HELD TH AT IF WHILE RECORDING THE STATEMENT OF THE ASSESSEE DURING THE COURSE OF SEAR CH NO QUESTION REGARDING THE DISCLOSURE OF MANNER IN WHICH THE INCOME WAS EARNED WAS PUT BY THE REVENUE OFFICER, THEN IN THAT CASE NO PENALTY U/S 271AAA CA NNOT BE LEVIED. THE RELEVANT OBSERVATION OF THE HON'BLE HIGH COURT FROM PARA 2 O NWARDS READS AS UNDER :- 2. ISSUE ARISES IN CONNECTION WITH THE ASSESSMENT YEAR 2010-11 AND PERTAINS TO PENALTY UNDER SECTION 271AAA OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT). THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF GREY FABRICS AND PROCESSING OF YARN. SEARCH AND SEIZURE OPERATION WAS CARRIED O UT AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE ON 28.01.2010. DURING SUCH SEARCH, THE ASSESSEE DISCLOSED INCOME OF RS.2,09,67,770/- PREVIOUSLY UNDISCLOSED. ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 153A OF THE ACT WAS FINALIZED ON 29.12.2011. THE INCOME TAX OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271AAA OF THE ACT AND PASSED THE ORDER OF PENALTY OF RS.20.96 LAKHS ON THE GROUND TH AT THE ASSESSEE THOUGH HAD DISCLOSED THE INCOME, FAILED TO DISCLOSE THE MANNER OF EARNING SUCH INCOME AND SUBSTANTIATE SUCH MANNER OF EARNING THE INCOME OFFE RED TO TAX. 3. COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE TRIBUNAL BOTH CONCURRENTLY FOUND THAT ALL THE REQUIREMENTS OF EXP LANATION 5 BELOW SUBSECTION (4) OF SECTION 132 OF THE ACT WERE SATISFIED. WITH RESPECT TO DISCLOSURE OF THE MANNER IN WHICH THE INCOME WAS EARNED, THE SAID AUTHORITIES W ERE OF THE OPINION THAT WHILE RECORDING THE STATEMENT OF THE ASSESSEE DURING SEAR CH, NO QUESTION REGARDING THIS ISSUE WAS PUT BY THE REVENUE OFFICER. RELIANCE WAS PLACED ON THE DECISION OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX V. MAHE NDRA C. SHAH REPORTED IN [2008] 299 ITR 305 (GUJ). 4. HAVING NOTED THE FACTS, WE FIND THAT THE ISSUE IS COVERED AGAINST THE REVENUE BY VIRTUE OF THE JUDGMENT OF THIS COURT IN CASE OF MAHENDRA C. SHAH (SUPRA) IN WHICH, FOLLOWING OBSERVATIONS WERE MADE: '15. IN SO FAR AS THE ALLEGED FAILURE ON THE PART O F THE ASSESSEE TO SPECIFY IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT REGAR DING THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, SUFFICE IT TO STATE T HAT WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHORIZED OFFICER IT IS INCU MBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTHORIZED OFFICER CANNOT STOP SH ORT AT A PARTICULAR STAGE SO AS TO PERMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE STATEMENT. 10 ITA NO.1100/DEL/2015 THE REASON IS NOT FAR TO SEEK. IN THE FIRST INSTANC E, 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 EXAC T FORMAT STIPULATED BY THE PROVISIONS CONSIDERING THE SETTING IN WHICH SUCH ST ATEMENT IS BEING RECORDED, AS NOTED BY ALLAHABAD HIGH COURT IN CASE OF CIT V. RADHA KISHAN GOEL (SUPRA). SECONDLY, CONSIDERING THE SOCIAL ENVIRONME NT IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LITERATE OR ILLITE RATE, TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATED BY EXCEPT ION NO. 2 WHILE MAKING STATEMENT UNDER SECTION 132(4) OF THE ACT. THE VIEW TAKEN BY THE TRIBUNAL AS WELL AS ALLAHABAD HIGH COURT TO THE EFFECT THAT EVE N 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 CO MPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT UNDER EXCEPTION N O.2 IN EXPLANATION 5 IS COMMENDABLE. 5. IN THE RESULT, TAX APPEALS ARE DISMISSED. 15. ALTHOUGH A CONTRARY VIEW HAS BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF SMT. RITU SINGAL (SUPRA), HOWE VER, IT IS TO BE NOTED THAT THE ASSESSEE FALLS UNDER THE JURISDICTION OF HONBLE PU NJAB & HARYANA HIGH COURT AND, THEREFORE, THE DECISION OF THE HONBLE DELHI H IGH COURT IS NOT BINDING ON THE ASSESSEE. IT IS THE SETTLED POSITION OF LAW TH AT WHEN TWO VIEWS ARE POSSIBLE ON AN ISSUE THE VIEW WHICH IS FAVOURABLE TO THE ASS ESSEE HAS TO BE ACCEPTED IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF VEGETABLE PRODUCTS LTD. (SUPRA). SINCE THE ASSESSEE IN THE I NSTANT CASE HAS SURRENDERED ADDITIONAL INCOME AND PAID THE TAXES DUE THEREON AN D 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 DECIS ION OF THE HONBLE GUJARAT HIGH COURT CITED (SUPRA) AND VARIOUS OTHER DECISION S RELIED ON BY THE LD. CIT(A), WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY U /S 271AAA IS NOT LEVIABLE IN 11 ITA NO.1100/DEL/2015 THE INSTANT CASE. THE ORDER OF THE LD. CIT(A) IS A CCORDINGLY UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF OCTOBER, 2018. SD/- SD/- (SUDHANSHU SRIVASTAVA) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15-10-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI