B. Janardhan Reddy, Hyderabad, Hyderabad V. Dy. Commissioner of Income Tax, Circle-6(1), Hyderabad

ITA 1465/Hyd/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4805 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 14-05-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH PODUCHURI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Unexplained expenditure; Opportunity of being heard; Initiation of penalty proceedings; Revised return; Set aside
• Section: 273B; 143(3); 27; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMEBR ITA NO. 1465 / HYD/201 7 ASSESSMENT YEAR: 20 0 8 - 0 9 JANARDHAN REDDY BEKKERY, HYDERABAD. PAN A DYPB3929N VS. ACIT, CENTRAL CIRCLE - 3 PRESENTLY DCIT, CIRCLE 6(1) HYDERABAD. (APPLICANT) (RESPONDENT) ASSESSEE BY : S HRI A.V. RAGHURAM REVENUE BY : SHRI DINESH PODUCHURI DATE OF HEARING : 14 - 0 5 - 201 9 DATE OF PRONOUNCEMENT : 09 - 0 8 - 201 9 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE A.Y 2008 - 09 AGAINST THE LEVY OF PENALTY U/S 271AAA OF THE ACT AND WHICH HAS BEEN CONFIRMED BY THE CIT(A) - 6, HYDERABAD, VIDE ORDERS DATED 17.05.2017. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , AN INDIVIDUAL , HAD FILED H IS RETURN OF INCOME FOR THE A.Y 2008 - 0 9 ON 18.07.2008 , ADMITTING A TOTAL INCOME OF RS. 8,62,290/ - AND AGRICULTURAL INCOME OF RS. 49,100/ - . THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 15,87,290/ - . THE A.O HAD MADE ADDITIONS OF (I) RS. 1,15,000/ - TOWARDS UNEXPLAINED INVESTMENT IN SERILINGAMPALLI PROPERTY ; (II) RS.5 LAKHS TOWARDS 2 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . UNEXPLAINED MONEY U/S 69A OF THE ACT ; (III) RS.60,000/ - TOWARDS LOW WITHDRAWALS ; AND (IV) RS.50,000/ - AS UNEXPLAINED EXPENDITURE FOR LAWYER FEES AND COURT EXPE NSES. THE MATTER TRAVELLED UP TO ITAT AND THE ITAT DELETED THE ADDITIONS OF LAWYERS FEE AND COURT EXPENSES CLAIMED OF RS. 50,000/ - AND LOW WITHDRAWALS OF RS.60,000/ - . H OWEVER, WITH REGARD TO THE ISSUE OF UNEXPLAINED MONEY OF RS.5,00,000/ - U/S 69A OF THE ACT, LOW WITHDRAWALS OF RS. 60,000/ - AND UNEXPLAINED INVESTMENT IN SERILINGAMPALLI PROPERTY AT RS. 1,15,000/ - , THE ITAT SET ASIDE THE SAME TO THE FILE OF THE A.O WITH A DIRECTION TO FRAME THE ASSESSMENT AFRESH AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE. THE A.O THEREFORE , REQUIRED THE ASSESSEE TO EXPLAIN WITH PROPER EVIDENCE AS T O HOW THE NOTES OF DENOMINATION OF RS. 1,000 (CONTAINING SERIAL NUMBERS) WERE FOUND AT THE TIME OF SEARCH I F IT WERE THE OLD CASH BALANCES AVAILABLE WITH TH E ASSESSEE. THE ASSESSEE SUBMITTED THAT HE HAS NO EVIDENCE TO PROVE THAT THE CAS H AVAILABLE WA S FROM EXPLAINABLE SOURCES. THEREFORE, THE A.O CONFIRMED THE ADDITION OF RS. 5 LAKHS U/S 69A OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ADDITIONS MADE BY THE A.O AND THE ASSESSEE FILED SECOND APPEAL BEFORE THE ITAT AND THE ITAT ALSO CONFIRMED THE ADDITIONS OF RS. 5 LAKHS AND RS. 1,15,000/ - . MEANWHILE THE A.O INITIATED THE PENALTY PROCEEDINGS U/S 271AAA OF THE ACT AND LEVIED THE PENALTY OF RS. 61,500/ - @ 10% OF THE UNDISCLOSED INCOME ASSESSED. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE A.O AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . 3. THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE DISALLOWANCE S MADE BY THE A.O WERE CONFIRMED BY THE ITAT ONLY BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE INVESTMENTS TO THE EXTENT OF RS. 1,15,000/ - IN THE SERILINGAMPALLI PROPERTY AND ALSO UNEXPLAINED CASH FOUND AT THE TIME OF SEARCH OF RS. 5 LAKHS. HE SUBMITTED THAT THESE MAY BE G R O UN DS FOR MAKING AND CONFIRMING THE ADDITIONS BUT THEY CANNOT BE CONSIDERED FOR LEVY OF THE PENALTY U/S 271AAA OF THE ACT. HE SUBMITTED THAT ASSESSEES EXPLANATION HAS NOT BEEN FOUND TO BE F ALS E AND THEREFORE THE PENALTY IS NOT SUSTAINABLE . 4. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPL AIN THE SOURCES OF CASH FOUND DURING THE COURSE OF SEARCH AND THE SOURCES FOR INVESTMENT OF RS. 1,15,000/ - AND THEREFORE, THE ADDITIONS HAVE BEEN RIGHTLY MADE TO THE RETURNED INCOME OF THE ASSESSEE AND THE SAID ADDITIONS HAVE ALSO BEEN CONFIRMED BY THE ITAT . THIS APPEAL IS AGAINST THE LEVY OF PENALTY U/S 271 AAA OF THE ACT. FOR THE SAKE OF READY REFERENCE, THE RELEVANT PROVISION IS REPRODUCED HEREUNDER. SECTION 271AAA OF INCOME - TAX ACT, 1961 DEALS WITH PENALTY WHERE SEARCH HAS BEEN INITIATED (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, 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, 4 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . (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. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SUB - SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB - SECTION (1). (4 ) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, SO FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, (A) UNDISCLOSED INCOME MEANS (I) ANY INCOME OF THE SPE CIFIED 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 CHIEF 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 A CCOUNT 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; (B) SPECIFIED PREVIOUS YEAR MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FILING THE RETURN OF INCOME UNDER SUB - SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIO US YEAR BEFORE THE SAID DATE; OR (II) IN WHICH SEARCH WAS CONDUCTED.] 5.1 . FROM A DETAILED READING OF THE ABOVE PROVISION, WE FIND THAT LEVY OF PENALTY U/S 27 1 AAA OF THE ACT IS NOT AUTOMATIC BUT IS SUBJECT TO THE PROVISIONS OF SECTIONS 274 AND 275 . WE FIND THAT T HE ADDITIONS MADE BY THE A.O. AND CONFIRMED BY ITAT HAVE TRIGGERED THE INITIATION OF PENALTY PROCEEDINGS U/S 271AAA OF THE ACT, AND THE SAME IS NOT COVERED BY THE PROVISIONS OF SEC. 273B OF THE ACT , BUT IS COVERED BY THE PROVISION OF SEC.274 O F THE ACT WHICH PROVIDES AS UNDER. 5 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . SEC. 274. PROCEDURE (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE MADE UNL ESS THE ASSESSEE HAS BEEN HEARD, OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. (2) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE MADE - (A) BY THE INCOME - TAX OFFICER, WHERE THE PENALTY EXCEEDS TEN THOUSAND RUPEES; (B) BY THE ASSISTANT COMMISSIONER, WHERE THE PENALTY EXCEEDS TWENTY THOUSAND RUPEES, EXCEPT WITH THE PRIOR APPROVAL OF THE DEPUTY COMMISSIONER.] (3) AN INCOME - TAX AUTHORITY ON MAKING AN ORDER UNDER THIS CHAPTER IMPOSING A PENALTY, UNLESS HE IS HIMSELF THE ASSESSING OFFICER, SHALL FORTHWITH SEND A COPY OF SUCH ORDER TO THE ASSESSING OFFICER' 5.2. THUS, AN OPPORTUNITY OF HEARING HAS TO BE PROVIDED T O THE ASSESSEE AND IF THE AO IS NOT SATISFIED WITH THE ASSESSEES EXPLANATION, THEN THE PENALTY U/S 271AAA OF THE ACT CAN BE LEVIED. THUS, IT IS SEEN THAT IF THE ASSESSEE GIVES AN EXPLANATION, THE AO HAS TO CONSIDER THE EXPLANATION OF THE ASSESSEE BEFORE IMPOSING THE PENALTY U/S 271AAA OF THE ACT. 5.3 . FROM THE PENALTY ORDER, WE FIND THAT THE ASSESSEE HAS NOT FILED ANY EXPLANATION BEFORE THE A.O. EXCEPT REQUESTING THE A.O. TO KEEP THE PROCEEDINGS IN ABEYANCE TILL THE ASSESSEES APPEAL BEFORE THE ITAT IS DISPOSED OF. THE A O, HOWEVER, CONCLUDED THE PROCEEDINGS BY OBSERVING THAT THE ASSESSEE HAS NOT SUBMITTE D ANY EXPLANATION TO THE SHOW CAUSE NOTICE DATED 14.3.2012 ISSUED U/S 271AAA R.W.S. 274 OF THE ACT. THE ASSESSEE HAS NOT FILED ANY EXPLANATION EVEN BEFORE THE CIT(A), EXCEPT FOR THE CASH BOOK FOR THE PERIOD 1/4/2007 TO 31/3/2008 SUBMITTING THAT THE OPENI NG BALANCE OF RS.13,37,026.75 AS THE SOURCE 6 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . FOR THE CASH FOUND. WE FIND THAT THE CIT(A) HAS CLEARLY BROUGHT OUT THAT THE SOURCES FOR CASH FOUND AND THE INVESTMENT ARE NOT EXPLAINED BY THE ASSESSEE. THEREFORE, ASSESSEES ARGUMENT THAT THE ASSESSEES EXPLA NATION HAS NOT BEEN FOUND TO BE FALSE AND, THEREFORE, PENALTY IS NOT SUSTAINABLE IS NOT ACCEPTABLE. FURTHER, WE ALSO FIND THAT THE ASSESSEE HAS NOT FULFILL ED THE CONDITIONS UNDER SUB - SECTION (2) OF SEC.271AAA OF THE ACT TO BE OUT OF THE AMBIT OF SUB - S ECTION(1) OF SEC.271AAA OF THE ACT . THEREFORE , PENALTY U/S 271AAA OF THE ACT CAN BE LEVIED AS THE UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH HAS NOT BEEN SUBSTANTIATED BY THE ASSESSEE AND IT IS ALSO NOT PROVED THAT TAXES HAVE BEEN PAID THEREON. THE ADDITION HAS ALSO BEEN CONFIRMED BY ITAT. THE REFORE, WE CANNOT AGREE WITH THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PENALTY U/S 271AAA OF THE ACT IS NOT ATTRACTED BECAUSE THE EXPLANATION OF THE ASSESSEE HA S NOT BEEN PROVED TO BE W RONG. SIMILAR DECISION WAS TAKEN BY THE CO - ORDINATE BENCH OF THE TRIBUNAL AT PUNE IN THE CASE OF ACIT VS. SHRI SHAILESH GOPAL MHASKE, IN ITA NO.2242/PUN/2014 DATED 27.9.2017. FOR READY REFERENCE, THE RELEVANT PARAS ARE AS UNDER: 13. IN ORDER TO ADJUDICA TE THE ISSUE, FIRST WE SHALL REFER TO EXPLANATION UNDER SECTION 271AAA OF THE ACT, WHICH DEFINES 'UNDISCLOSED INCOME'. UNDISCLOSED INCOME MEANS ANY INCOME OF 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 SEARCH UNDER SECTION 132 OF THE ACT. THE CIT(A) WHILE DECIDING THE ISSUE HAS REFERRED TO PART OF DEFINITION OF 'UNDISCLOSED INCOME' THOUGH IN THE F IRST PART OF PARA 6.4 OF THE APPELLATE ORDER, HE REFERS THAT IN THE ASSESSMENT ORDER AS WELL AS PENALTY ORDER, THERE IS NO WHISPER EITHER OF ABOUT ANY MONEY, BULLION, JEWELRY OR OTHER VALUE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOC UMENTS OR TRANSACTIONS FOUND IN THE COURSE OF SEARCH OR BOOKS OF ACCOUNT MAINTAINED IN THE 7 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . NORMAL COURSE BUT IN THE LATER PART OF PARA 6.4, HE RESTRICTS THE DEFINITION OF 'UNDISCLOSED MONEY' TO INCOME REPRESENTED BY ANY ASSET FOUND OR ANY ENTRY IN EITHER S EIZED BOOKS OR REGULAR BOOKS. HE HAS LOST SIGHT OF THE TRANSACTIONS FOUND AS ONE OF THE CONDITIONS I.E. ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND ALSO TRANSACTIONS FOUND IN THE COURSE OF SEARCH. AS POINTED OUT BY US IN THE PARAS HEREINABOVE, DU RING THE COURSE OF SEARCH, DIARY WAS FOUND IN WHICH THERE WAS MENTION OF TRANSACTIONS IN WHITE AND BLACK, OTHER DOCUMENTS OF EXPENDITURE WERE FOUND AND ALSO THE LIST OF INVESTMENTS AND INVESTMENTS IN VARIOUS ASSETS BOTH MOVABLE AND IMMOVABLE WERE DECLARED BY THE ASSESSEE DURING SEARCH AND IN VIEW OF THE SAID POSITION, THE ASSESSEE MADE A DECLARATION OF INCOME WHICH ADMITTEDLY, FALLS WITHIN THE DEFINITION OF 'UNDISCLOSED INCOME' AND HENCE, WE FIND NO MERIT IN THE OBSERVATIONS OF CIT(A) IN THIS REGARD AND THE SAME ARE REVERSED. 14. NOW, COMING TO THE MAIN PROVISIONS OF SECTION 271AAA OF THE ACT. THE FIRST GRIEVANCE OF ASSESSEE IS THAT PENALTY PROCEEDINGS HAVE BEEN INITIATED FOR FURNISHING OF INACCURATE PARTI CULARS OF INCOME AND CONCEALMENT OF INCOME AND HENCE, THE SATISFACTION IS INCORRECT. IN CASE THE ASSESSMENT ORDER AND OBSERVATIONS OF THE ASSESSING OFFICER ARE READ, THEN HE IS ONLY TALKING ABOUT ADDITIONAL INCOME OFFERED BY THE ASSESSEE. HE ALSO WHILE CON CLUDING STATES THAT THE ADDITIONAL / TOTAL INCOME WAS OFFERED FOR TAXATION ONLY AS A RESULT OF SEARCH ACTION AND SINCE IT WAS SO OFFERED, PENALTY PROCEEDINGS UNDER SECTION 271AAA OF THE ACT WERE INITIATE D. THOUGH, HE MENTIONS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME BUT THAT LIMB DOES NOT DECIDE THE ACTION UNDERTAKEN BY THE ASSESSING OFFICER UNDER SECTION 271AAA OF THE AC T AND AT BEST IT IS SUPERFLUOUS. 15. COMING TO THE ORDER LEVYING PENALTY UNDER SECTION 271AAA OF THE ACT. VIDE PARA 8, IT IS CLEARLY MENTIONED THAT WHERE THE ASSESSEE HAD DISCLOSED THE INCOME IN THE STAT EMENT RECORDED UNDER SECTION 132(4) OF THE ACT BUT TAXES ON THE UNDISCLOSED INCOME WERE NOT PAID, THAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS OF CLAUSE (III) OF SUB - SECTION (2) OF SECTION 271AAA OF THE ACT. HENCE, THE ASSESSING OFFICER TALKS ABOUT THE 'UNDISCLOSED INCOME' WHICH WAS BASIS FOR LEVYING PENALTY UNDER SECTION 271AAA OF THE ACT. HE NCE, THE ORDER LEVYING PENALTY MERITS TO BE UPHELD IN CASE THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN IN SUB - SECTION (2) OF SAID SECTION. IN THIS REGARD, RELIANCE WAS PLACED UPON BY THE ASSESSEE ON THE PUNE BENCH OF TRIBUNAL IN ACIT VS. SHRI V IKAS BAPURAO TAKAWANE (SUPRA) IS MISPLACED, WHERE SATISFACTION WAS FOR INITIATING PENALTY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THE ORDER LEVYING PENALTY WAS ALSO FOR CONCEALMENT OF INCOME. THE TRIBUNAL NOTES THAT THERE WAS NO REFERENCE OF UNDISCLOSED INCOME EITHER IN THE ASSESSMENT ORDER OR THE ORDER LEVYING PENALTY UNDER SECTION 271AAA OF THE ACT AND WHERE THE ASSESSING OFFICER HAD FAILED TO SPECIFY UNDISCLOSED INCOME UNEARTHED DURING THE COURSE OF SEARCH AS ENVISAGED UNDER THE PROVISIONS OF SECTION 271AAA OF THE ACT, PENALTY LEVIED UNDER THE SAID SECTION WAS DELETED. WE HAVE ALREADY REFERRED TO THE FACTS OF TH E PRESENT CASE AND ORDER OF ASSESSING OFFICER WHILE RECORDING SATISFACTION, WHEREIN HE TALKS ABOUT THE INCOME UNEARTHED DURING THE COURSE OF SEARCH AND ORDER LEVYING PENALTY UNDER SECTION 271AAA OF THE A CT, WHICH SPECIFICALLY TALKS ABOUT UNDISCLOSED INCOME AND CONSEQUENTLY, WE FIND NO MERIT IN THE RELIANCE PLACED UPON BY THE LEARNED 8 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN ACIT VS. SHRI VIKAS BAPURAO TAKAWANE (SUPRA). 16. NOW, COMING TO THE CONDITION S TO BE FULFILLED. IN CASES WHERE THE ASSESSEE CLAIMS THE IMMUNITY FROM LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT, SUB - SECTION (2) PROVIDES THAT THREE CONDITIONS TO BE FULFILLED BUT IN ACTUAL FACT THERE ARE FOUR STEPS ARE TO BE UNDERTAKEN BEFORE GRANT OF ANY IMMUNITY UNDER SECTION 271AAA OF THE ACT, WHICH ARE AS UNDER: - A) ASSESSEE IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT ADMITS THE UNDISCLOSED INCOME; B) ASSESSEE SATISFIES THE MANNER IN WHICH THE INCOME HAS BEEN DERIVED; C) ASSESSEE SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED; AND D) PAYS THE TAXES TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF UNDISCLOSED INCOME. 17. THE ASSESSEE CLAIMS THAT IT HAS FULFILLED ALL THE CONDITIONS OF SAID SUB - SECTION ( 2) OF SECTION 271AAA OF THE ACT AND HENCE, THERE IS NO MERIT IN THE LEVY OF PENALTY. ADMITTEDLY, YES, THE ASSESSEE IN THE COURSE OF SEARCH WHILE STATEMENT UNDER SECTION 132(4) OF THE ACT WAS RECORDED, HAD ADMITTED THE UNDISCLOSED INCOME. HOWEVER, HE FAILED TO SPECIFY THE MANNER IN WHICH THE INCOME WAS DERIVED. VIDE QUESTION NO.25, HE WAS SPECIFICALLY ASKED TO EXPLAIN THE INVESTMENTS MADE IN LAND / PLOT S AND MOVABLE & IMMOVABLE ASSETS, CONSIDERING THE NON FILING THE INCOME TAX RETURNS. IN REPLY, HE DOES NOT GIVE ANY EXPLANATION ABOUT THE SAID INVESTMENTS AND THE SOURCES FROM WHERE HE HAS MADE THE SAID INVESTMENTS BUT HE VOLUNTARILY DECLARED SUM OF RS.2.3 0 CRORES TOWARDS HIS CAPITAL IN HOME CORPORATION, INVESTMENT IN MOVABLE AND IMMOVABLE ASSETS, UNEXPLAINED EXPENDITURE, DRAWINGS, ETC. HE ALSO ADMITTED THAT HE WOULD FILE YEARWISE BREAKUP IN DUE COURSE, WHICH HE CONSEQUENTLY, FILED AND THE SAID BREAKUP IS T ABULATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE IN ASSESSMENT YEARS 2005 - 06 TO 2011 - 12 IN ALL, DECLARED SUM OF RS.2.39 CRORES AS HIS ADDITIONAL INCOME OUT OF WHICH SUM OF RS.1.02 CRORES RELATED TO ASSESSMENT YEAR 2011 - 12. IN THE ABSENCE OF ASSESSE E HAVING SATISFIED THE MANNER IN WHICH THE INCOME WAS DERIVED AND ALSO SPECIFYING THE MANNER, CLAUSE (I)(PART) AND CLAUSE (II) UNDER SUB - SECTION (2) OF SECTION 271AAA OF THE ACT ARE NOT FULFILLED. 18. TH E ASSESSEE IN THIS REGARD HAS PLACED RELIANCE ON THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN ACIT VS. MUNISH KUMAR GOYAL (SUPRA) AND POINTED OUT THAT WHERE THE ASSESSEE HAD FURNISHED INCOME IN THE COURSE OF SEARCH AND FILED THE RETURN OF INCOME AND TA XES WERE PAID, THERE WAS SUFFICIENT COMPLIANCE OF PROVISIONS OF SECTION 271AAA(2) OF THE ACT AND IT WAS HELD THAT THE IMPUGNED PENALTY ORDER DESERVES TO BE SET ASIDE. REFERENCE IS MADE TO PARA 10 OF THE SAID ORDER, WHEREIN QUESTIONS ASKED TO THE ASSESSEE DURING THE COURSE OF SEARCH PROCEEDINGS HAVE BEEN EXTRACTED. THE QUESTION WHICH WAS PUT TO THE ASSESSEE WAS DO YOU WANT TO SAY ANYTHING MORE. HE REPLIED THAT HE VOLUNTARILY SURRENDERS SUM OF RS.4 CRORES F OR ASSESSMENT YEAR 2010 - 11 TO COVER ALL THE DISCREPANCIES IN THE SEIZED PAPERS. THE 9 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . TRIBUNAL THUS, IN VIEW THEREOF, OBSERVED THAT WHERE THE REVENUE HAS NOT ASKED THE ASSESSEE TO DISCLOSE THE MANNER IN WHICH SAID INCOME WAS EARNED, THEN DURING SEARCH, THE A SSESSEE MUST HAVE DISCLOSED THE MANNER. HOWEVER, IN THE FACTS OF PRESENT CASE, THERE IS VARIANCE THAT VIDE QUESTION NO.25, THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE INVESTMENTS IN LAND AND PLOTS, MOVABLE AND IMMOVABLE ASSETS AND NON FILING OF RETU RN OF INCOME. IN REPLY, HE DID NOT GIVE AN EXPLANATION AS TO MANNER IN WHICH THE INCOME WAS EARNED AND HE ONLY SURRENDERED ADDITIONAL INCOME IN HIS HANDS FOR THE YEAR UNDER CONSIDERATION. THE YEAR BEFORE US IS THE YEAR OF SEARCH AND IN VIEW OF DECLARATION MADE BY THE ASSESSEE ON ACCOUNT OF UNDISCLOSED INCOME, THEN IN VIEW OF SUB - SECTION (1) TO SECTION 271AAA OF THE ACT, THE ASSESSEE IS TO PAY PENALTY IN ADDITION TO TAXES, IF ANY, PAYABLE BY HIM ON SUCH UN DISCLOSED INCOME. ACCORDINGLY, WE HOLD SO. 19. NOW, COMING TO THE LAST CLAUSE OF IMMUNITY UNDER SUB - SECTION (2) OF SAID SECTION, WHEREIN IT IS PROVIDED THAT THE ASSESSEE IS TO PAY TAXES TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF UNDISCLOSED INCOME IMMED IATELY PRECEDING THE ASSESSMENT YEAR RELATING TO PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR ANY REQUISITION IS MADE. IN THE FACTS OF PRESENT CASE, SEARCH ACTION UNDER SECTION 132 OF THE ACT ON 10.02. 2011 I.E. IN THE FINANCIAL YEAR UNDER CONSIDERATION. THE ASSESSEE FURNISHED THE RETURN OF INCOME ON 05.03.2012 DISCLOSING TOTAL INCOME OF RS.1.01 CRORES. SUBSEQUENTLY, HE FILED THE REVISED RETURN ON 14.03.2013 DECLARING INCOME OF RS.1.25 CRORES. THE ASSES SMENT IN THE CASE WAS COMPLETED ON 28.03.2013 AND THE ORDER LEVYING PENALTY UNDER SECTION 271AAA OF THE ACT WAS PASSED ON 20.09.2013. THE ASSESSEE TILL THE DATE OF PASSING OF PENALTY ORDER UNDER SECTION 271AAA OF THE ACT HAD NOT DEPOSITED THE TAXES DUE ON THE RETURN OF INCOME. EVEN IN THE WRITTEN SUBMISSIONS FILED BEFORE THE ASSESSING OFFICER IN PENALTY PROCEEDINGS UNDER SECTION 271AAA OF THE ACT, THE ASSESSEE HAS POINTED OUT THAT HE HAD ONLY MADE PART PAYMENT OF TAXES DUE. THE ASSESSEE HAVING DEFAULTED TO MAKE THE PAYMENT OF TAXES WHICH WERE DUE, CANNOT BE SAID TO HAVE FULFILLED THE CONDITIONS LAID DO WN IN CLAUSE (III) OF SUB - SECTION (2) OF SECTION 271AAA OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN ACIT VS. GEBILAL KANHAIALAL HUF (SUPRA), WHEREIN IT HAS BEEN HELD THAT WHILE LEVYING PENALTY UNDER SECTION 271(1)(C ) OF THE ACT, EXPLANATION 5 IS ATTRACTED IN CASES OF SEARCH PROCEEDINGS. THE HON'BLE SUPREME COURT HELD THAT TO GRANT IMMUNITY FROM PAYMENT OF PENALTY, NO TIME LIMIT FOR PAYMENT OF TAXES IS PRESCRIBED UNDER CLAUSE (II) OF EXPLANATION 5 TO SECTION 271(1)(C ) OF THE ACT. IN THE FACTS OF SAID CASE, THE APEX COURT NOTED THAT THE ASSESSEE HAD PAID TAXES WITH INTEREST UPTO THE DATE OF PAYMENT AND HENCE, THREE CONDITIONS STOOD FULFILLED. THE ISSUE BEFORE THE HON'BLE SUPREME COURT WAS WITH REGARD TO RETURN FILED IN R ESPONSE TO NOTICE UNDER SECTION 158BC OF THE ACT, WHICH WAS IN ADDITION TO THE REGULAR RETURNS OF INCOME FOR RESPECTIVE YEARS OF SEARCH PERIOD. ON THE OTHER HAND, PENALTY UNDER SECTION 271AAA OF THE ACT IS LEVIABLE IN RESPECT OF REGULAR RETURN OF INCOME OF SEARCH YEAR. IN THE FACTS OF PRESENT CASE BEFORE US, THE ASSESSEE HAS NOT PAID THE TAXES DUE ON RETURNED INCOME (NOT ADDITIONAL INCOME UNDER SECTION 158BC OF THE ACT) TILL THE DATE OF PASSING THE ASSESSMENT ORDER AND EVEN TILL DATE OF PASSING THE ORDER LEVYING PENALTY. THE ASSESSEE CLAIMS TO HAVE PAID THE TAXES THEREAFTER, BUT SUCH PAYMENT OF TAXES WHICH DOES NOT ACCOMPANY THE RETURN OF INCOME, CANNOT BE 10 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . HELD TO BE COMPLIANCE TO THE CONDITIONS LAID DOWN IN SUB - SECTION (2) TO SECTION 271AAA OF THE ACT. IT MAY BE POINTED OUT THAT MAJOR PORTION OF T AXES HAVE BEEN PAID AFTER SEPTEMBER, 2013 AND CONSEQUENTLY, WE FIND NO MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD AND THE SAME IS REJECTED. ACCORDINGLY, WE REVERSE THE FINDINGS OF CIT(A) AND UPHOLD THE LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT. THE APPLICATION MOVED UNDER RULE 27 OF THE RULES IS THUS, DISMISSED AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED. 20. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED. 5.4 . ACCORDINGLY, BY RESP ECTFULLY FOLLOWING THE ABOVE DECISION, WE REJECT THE ASSESSEE S GROUNDS AN D THE PENALTY U/S 271AAA IS UPHELD . 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 09 TH AUGUST , 2019 . SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 09 TH AUGUST , 201 9 K RK *GMV 11 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . 1) SHRI B. JANARDHAN REDDY, 8 - 2 - 686/L/A, ROAD NO. 12, BANJARA HILLS, HYDERABAD. 2) DCIT, CIRCLE 6(1), HYDERABAD. . 3) CIT (A) - 6 , HYDERABAD. 4) PR .CIT - 6 , HYDERABAD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE . 12 ITA.NO . 1 4 6 5 /HYD/201 7 JANARDHAN REDDY BEKKERY ., HYDERABAD . DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 14.05.19 2. DRAFT PLACED BEFORE AUTHOR 14.05.19 07.08.19 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.P.S./PS 6. KEPT FOR PRONOUNCEMENT ON 09.08. 19 7. FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER