The Jt.Commissioner of Income Tax, (OSD) Circle-1(3), Vadodara V. Shri Jayendra N. Shah, Vadodara

ITA 1552/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5852 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Keywords: Income from undisclosed sources; Search and seizure; Assessment record
• Section: 5(2); 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1552/AHD/2016 (ASSESSMENT YEAR : 2010-11) THE JT. COMMISSIONER OF INCOME-TAX(OSD), CIRCLE-1(3), 3 RD FLOOR, ROOM NO.302, AAYKAR BHAVAN, RACE COURSE CIRCLE, VADODARA 390 007 APPEL LANT VS. SHRI JAYENDRA N. SHAH JANOD 4, AMRAKUNJ SOCIETY, ELLOR PARK, VADODARA (390007) RESPONDE NT PAN: AJKPS6643Q / BY REVENUE : SHRI PRASOON KABRA, SR. D.R. / BY ASSESSEE : SHRI M. J. SHAH, A.R. /DATE OF HEARING : 15.03.2018 /DATE OF PRONOUNCEMENT : 16.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 A RISES FROM THE CIT(A)- 5, VADODARAS ORDER DATED 09.03.2016 IN CASE NO. CA B/5-192/2014-15, REVERSING ASSESSING OFFICERS ACTION LEVYING PENALTY OF RS.19 ,83,000/- @ 10% OF ASSESSEES UNDISCLOSED INCOME OF RS.1,98,30,000/-, IN PROCEEDI NGS U/S.271AAA OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 2 - 2. WE NOTICE AT THE OUTSET THAT THE CIT(A)S ELABOR ATE DISCUSSION ON THE ABOVE SOLE PENALTY ISSUE READS AS UNDER: 5.3 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OBSERVATIONS OF THE ASSESSING OFFICER, THE SUBMISSIONS OF THE ASSES SEE, MATERIAL AVAILABLE ON RECORD AND THE JUDICIAL PRONOUNCEMENTS ON THE SUBJE CT. IN THIS CASE, ACTION U/S 132(1) WAS TAKEN ON 11.02.2010 AND THE SAME IS COVE RED U/S 271AAA(1) OF THE ACT. THERE IS NO DISPUTE REGARDING THE NATURE AND Q UANTUM OF THE 'UNDISCLOSED INCOME' DECLARED BY THE ASSESSEE IN HIS RETURN OF I NCOME FOR THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT IN DISPUTE THAT THE U NDISCLOSED INCOME OF RS.1,98,30,000/- WAS DECLARED BY THE ASSESSEE IN HI S STATEMENT U/S 132(4), AT THE TIME OF THE SEARCH. IT IS ALSO NOT IN DI SPUTE THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS PART OF THE 'SPECIFIED PREVI OUS YEAR', AS DEFINED IN EXPLANATION (B) TO SECTION 271 AAA. IT IS MATTER OF RECORD THAT THE ASSESSEE HAS PAID NECESSARY TAXES ON THE UNDISCLOSED INCOME DECL ARED BY HIM IN HIS STATEMENT U/S 132(4) AND OFFERED THE UNDISCLOSED IN COME TO TAX IN HIS RETURN OF INCOME FOR THE RELEVANT YEAR. THE ONLY GROUND ON WH ICH THE ASSESSING OFFICER HAS IMPOSED PENALTY U/S 271 AAA IN THIS CASE IS ON THAT THE ASSESSEE HAS FAILED TO COMPLY WITH THE PROVISIONS OF SUB CLAUSES (J) AN D (II) OF SECTION 271(2) OF THE ACT, VIZ. HE HAS FAILED TO SPECIFY THE MANNER IN WH ICH SUCH INCOME WAS DERIVED AND HAD ALSO FAILED TO SUBSTANTIATE THE SAME. 5.4 THE ASSESSEE HAS OBJECTED TO LEVY OF PENALTY U/S 271 AAA IN THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2010-11, ON THE GROUND THAT THE ASSESSEE WAS NEVER SPECIFICALLY ASKED TO SPECIFY THE MANNER IN WHICH T HE DECLARED UNACCOUNTED INCOME WAS DERIVED OR TO SUBSTANTIATE THE SAME IN H IS STATEMENT U/S 132(4) OF THE ACT. THE ASSESSEE HAS ARGUED THAT IN THE ABSENC E OF SPECIFIC OPPORTUNITY/QUESTIONS BY THE AUTHORIZED OFFICER DUR ING RECORDING OF HIS STATEMENT U/S 132(4) OF THE ACT, EITHER TO SPECIFY THE MANNER IN WHICH THE DECLARED UNACCOUNTED INCOME WAS DERIVED OR TO SUBST ANTIATE THE SAME, THE ASSESSEE CANNOT BE PENALIZED, HOLDING THAT HE HAD F AILED TO COMPLY WITH THE PROVISIONS OF SECTION 271AAA(2)(I) AND 271AAA(2)(II ) OF THE ACT. I HAVE PERUSED ASSESSEE'S STATEMENT U/S 132(4) AND HAVE AL SO PERUSED THE ASSESSMENT RECORDS OF THE ASSESSEE FOR THE RELEVANT A.Y. AND H AVE NOTED THAT NO SPECIFIC QUESTIONS WERE EVER ASKED BY THE AUTHORISED OFFICER DURING THE RECORDING OF ASSESSEE'S STATEMENT U/S 132(4) OF THE ACT, REQUIRI NG THE ASSESSEE TO SPECIFY THE MANNER IN WHICH THE DECLARED UNACCOUNTED INCOME WAS DERIVED OR TO SUBSTANTIATE THE SAME. EVEN THE ASSESSING OFFICER H AS FAILED TO PROVIDE ANY SPECIFIC OPPORTUNITY TO THE ASSESSEE REQUIRING HIM TO COMPLY WITH THE PROVISIONS OF SUB CLAUSES (I) AND (II) OF SECTION 271AAA(2) OF THE ACT. 5.5 THE PROVISIONS OF SECTION 271 AAA READ AS UN DER- [PENALTY WHERE SEARCH HAS BEEN INITIATED. 271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAND ING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, I N A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1S T DAY OF JUNE, 2007 [BUT BEFORE THE 1ST DAY OF JULY, 2012], THE ASSESSEE SHA LL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM COMP UTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PRE VIOUS YEAR. ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 3 - (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISC LOSED 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 R ESPECT 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 SECT ION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'UNDISCLOSED INCOME ' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REP RESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHE R 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 SEA RCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NOR MAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE 7[PRINCIPA L CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SE ARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECOR DED IN THE BOOKS OF ACCOUNT 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 YE AR (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 PREVIOUS YEAR BEFORE THE SAID DATE; OR (II) IN WHICH SEARCH WAS CONDUCTED.] 5.6 HON'BLE ITAT, AHMEDABAD HAS, IN THE CASE OF DCIT VS RAJENDRA PRASAD DOKANIA (2012) 32 CCH 0260 AHDTRIB , HELD THAT IN A CASE WHERE THE ASSESSEE WAS NEITHER ASKED BY THE AUTHORISED OFFICER NOR BY THE ASSESSING OFFICER AT THE STAGE OF EITHER RECORDING OF STATEMENT U/S 132(4) OR AT THE TIME OF ASSESSMENT PROCEEDINGS, TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED IN COME WAS DERIVED, THE ASSESSEE WILL BE DEEMED TO HAVE DISCHARGED HIS ONUS OF SUBSTANTIA TING THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND IT CANNOT BE SAI D DURING PENALTY PROCEEDINGS THAT THE ASSESSEE HAD NOT FULFILLED THIS CONDITION. ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 4 - 5.7 HON'BLE ITAT, CHANDIGARH HAS, IN THE CASE OF SUNIL KUMAR BANSAL VS DCIT [2015] 62 TAXMANN.COM 78 (CHANDIGARH-TRIB), HELD THAT WHERE NO QUESTION WAS ASKED DURING STATEMENT RECORDED U/S 132(4), IN RESPECT OF MANNER OF EARNING INCOME SURRENDERED, ASSESSEE COULD NOT BE EXPECTED TO SUBS TANTIATE THE SAME LATER ON AND PENALTY COULD NOT BE LEVIED U/S 271AAA. SIMILARLY, HON'BLE DELHI ITAT HAS, IN THE CASE OF NEERAT SINGHAL VS ACIT [2013] 37 TAXMANN.COM 189 (D ELHI-TRIB), HELD THAT PENALTY LEVIED UNDER SECTION 271 AAA WAS NOT JUSTIF IED IN ABSENCE OF QUERY RAISED BY AUTHORIZED OFFICER DURING COURSE OF RECORDING OF ST ATEMENT UNDER SECTION 132(4), ABOUT MANNER IN WHICH UNDISCLOSED INCOME HAS BEEN DERIVED AND ABOUT ITS SUBSTANTIATION. SIMILAR VIEWS HAVE ALSO BEEN EXPRESSED BY HON'BLE C HANDIGARH ITAT IN ACIT VS MUNISH KUMAR GOYAL [2015] 152 ITD (CHANDIGARH). 5.8 HON'BLE GUJARAT HIGH COURT HAS, IN THE CASE OF CIT VS MAHENDRA C.SHAH (2008) 299 ITR 0305 (GUJ) , HELD THAT EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLA RED AND TAX THEREON IS PAID, THERE WOULD BE SUBSTANTIAL COMPLIANCE NOT WARRANTING DENI AL OF BENEFIT UNDER EXCEPTION 2 IN EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. APPL YING THE ANALOGY TO PENALTY U/S 271 AAA IN THE PRESENT CASE WHERE INCOME HAS BEEN DECLA RED IN STATEMENT U/S 132(4) AND TAXES HAVE BEEN PAID ON THE SAME, EVEN THOUGH THE S TATEMENT U/S 134(4) DOES NOT SPECIFY THE MANNER IN WHICH INCOME IS DERIVED, THER E IS SUBSTANTIAL COMPLIANCE WITH SUB CLAUSES (I) AND (II) OF SECTION 271 AAA(2) OF T HE ACT. 5.9 IN VIEW OF THE ABOVE DISCUSSION AND KEEPING IN VIEW THE DECISION OF HON'BLE ITAT IN RAJENDRA PRASAD, DOKANIA (SUPRA) AND ALSO OTHER CITED JUDICIAL PRECEDENTS, PENALTY OF RS,19,83,000/- LEVIED U/S 271AAA FOR THE YEAR UN DER CONSIDERATION IS DIRECTED TO BE DELETED. THE ASSESSEE SUCCEEDS ON THIS GROUND OF AP PEAL. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE IMPUG NED PENALTY AS IMPOSED BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSEES FAILURE IN SPECIFYING THE MANNER OF HAVING DERIVED THE ABOVE UNDISCLOSED INCOME AS WELL AS SUBSTANTIATION THEREOF DURING THE COURSE OF SEARCH AS WELL AS ASSESSMENT P ROCEEDINGS. HE HOWEVER FAILS TO REBUT THE CIT(A)S CLINCHING FINDING THAT NO SUCH Q UERY OF MANNER OF DERIVING THE IMPUGNED UNDISCLOSED INCOME HAD BEEN PUT TO THE ASS ESSEE BY THE AUTHORIZED OFFICER WHILST RECORDING THE SEARCH STATEMENT IN QUESTION. WE NOTICE IN THIS BACKDROP THAT HONBLE JURISDICTIONAL HIGH COURTS RECENT JUDGMENT IN PCIT VS. MUKESHBHAI RAMANLAL PRAJAPATI TAX APPEAL NO. 434 OF 2017 DECID ED ON 24.07.2017 HOLDS THAT IT IS INCUMBENT FOR THE AUTHORIZED OFFICER TO QUESTION THE ASSESSEE ABOUT THE RELEVANT MANNER OF HAVING DERIVED THE UNDISCLOSED INCOME IN QUESTION AND THEN ONLY THE ONUS SHIFTS ON THE TAX PAYER TO SUBSTANTIATE THE SA ME. THEIR LORDSHIPS OPERATIVE PORTION READS AS UNDER: ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 5 - 5. FROM THE PERUSAL OF THE ORDERS ON RECORD, IT BE COMES CLEAR THAT THE ASSESSEE HAD ADMITTED THE UNDISCLOSED INCOME IN HIS STATEMENT RE CORDED UNDER SECTION132(4) OF THE ACT DURING THE SURVEY. THE ASSESSEE HAD OWNED UP TO SUCH INCOME IN THE RETURN FILED AND HAD ALSO PAID TAX AND INTEREST ON SUCH SUM. THE ASSESSING OFFICER IMPOSED A PENALTY ON THE GROUND THAT THE ASSESSEE FAILED TO S UBSTANTIATE THE MANNER OF EARNING THE INCOME. HOWEVER, CIT (APPEALS), AS NOTED, CONCLUDED THAT NO QUESTION WAS ASKED BY THE DEPARTMENTAL REPRESENTATIVES (IN THE COURSE OF RECORDING THE STATEMENT UNDER SECTION 132(4) OF THE ACT) REGARDING THE MANNER OF EARNING SUCH INCOME. IT WAS, ON THIS BASIS, THAT THE CIT (APPEALS) AS WELL AS THE TRIBUN AL FOUND THAT THE ASSESSING OFFICER COMMITTED AN ERROR IN IMPOSING PENALTY. 6. AS IS WELL KNOWN, SECTION 271, PROVIDING FOR PEN ALTY FOR CONCEALMENT OF INCOME ETC., CONTAINED AN EXPLANATION 5 INSERTED W.E.F. 01.10.19 84 AND HELD THE FIELD TILL INTRODUCTION OF EXPLANATION 5A W.E.F 01.06.2007. UN DER THIS EXPLANATION 5, PREVAILING AT THE RELEVANT TIME, AN ASSESSEE COULD AVOID PAYME NT OF PENALTY ON THE ASSESSEE BEING FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELL ERY OR OTHER VALUABLE ARTICLE OR THING ACQUIRED BY UNDISCLOSED INCOME, IF IN THE COU RSE OF SEARCH, THE ASSESSEE MADE A STATEMENT UNDER SUB SECTION (4) OF SECTION 132 ADMI TTING ACQUISITION OF SUCH ASSET OUT OF HIS INCOME NOT DISCLOSED IN THE RETURN AND ALSO SPECIFIES IN THE STATEMENT THE MANNER, IN WHICH, SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IN RESPECT OF SUCH INCOME. 7. TO AVOID PENALTY, WITH THE AID OF EXPLANATION 5 THEREFORE, THE ASSESSEE HAD TO MAKE A STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 ADMI TTING SUCH UNDISCLOSED INCOME AND SPECIFY IN SUCH STATEMENT THE MANNER, IN WHICH, SUC H INCOME WAS DERIVED AND TO PAY TAX TAX, IF ANY, ON SUCH INCOME. 8. THIS PROVISION CAME-UP FOR CONSIDERATION BEFORE ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. RADHA KISHAN GOEL RE PORTED IN 278 ITR 454. THE REVENUE WAS IN APPEAL BEFORE THE HIGH COURT CHALLEN GING JUDGEMENT OF THE INCOME TAX APPELLATE TRIBUNAL. GRIEVANCE OF THE REVENUE WA S THAT THE ASSESSEE HAD NOT DISCLOSED THE MANNER OF DERIVING SUCH INCOME. DESPI TE WHICH, THE TRIBUNAL HAD DELETED THE PENALTY. THE HIGH COURT REJECTED THE REVENUE'S APPEAL PRIMARILY ON THE GROUND THAT A STATEMENT UNDER SECTION 132(4) OF THE ACT IS RECORDED BY THE DEPARTMENTAL AUTHORITIES AND IF IN SUCH STATEMENT NO QUESTION IS ASKED ABOUT THE DISCLOSURE OF MANNER IN WHICH THE INCOME IS DERIVED, THE REVENUE CANNOT IMPOSE PENALTY ON THE PREMISE THAT THE ASSESSEE DID NOT MAKE NAY SUCH DIS CLOSURE. IT WAS HELD AND OBSERVED AS UNDER: '10. UNDER SECTION 132(4) OF THE ACT, IT IS THE AUT HORISED OFFICER, WHO EXAMINE ON OATH ANY PERSON, WHO IS FOUND TO BE IN POSSESSION OR CON TROL OF ANY BOOKS OF ACCOUNT, DOCUMENT, MONEY, BULLION, JEWELLERY OR OTHER VALUAB LE ARTICLE OR THING, THEREFORE, IT IS ON THE AUTHORISED OFFICER TO RECORD THE STATEMENT I N HIS OWN WAY. THEREFORE, IT IS NOT EXPECTED FROM THE PERSON TO STATE THOSE THINGS, WHI CH ARE NOT ASKED BY THE AUTHORISED OFFICER. 11. IT IS A MATTER OF COMMON KNOWLEDGE, WHICH CAN N OT BE IGNORED THAT THE SEARCH IS BEING CONDUCTED WITH THE COMPLETE TEAM OF THE OFFIC ERS CONSISTING OF SEVERAL OFFICERS WITH THE POLICE FORCE. USUALLY TELEPHONE AND ALL OT HER CONNECTION ARE DISCONNECTED AND ALL INGRACE AND OUTGRACE ARE BLOCKED. DURING THE CO URSE OF SEARCH PERSON IS SO TORTURED, HARASSED AND PUT TO A MENTAL AGONY THAT H E LOOSES ITS NORMAL MENTAL STATE OF ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 6 - MIND AND AT THAT STAGE IT CAN NOT BE EXPECTED FROM A PERSON PRE-EMPT THE STATEMENT REQUIRED TO BE GIVEN IN LAW AS A PART OF HIS DEFENC E. 12. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT UNDER SECTION 132(4) OF THE ACT UNLESS AUTHORISED OFFICER PUTS A SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED, IT IS NOT EXPECTED FROM TH E PERSON TO MAKE A STATEMENT IN THIS REGARD AND IN CASE IF IN THE STATEMENT THE MANNER I N WHICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATED BUT HAS BEEN STATED SUBSEQUENTL Y, AMOUNTS TO THE COMPLIANCE OF EXPLANATION 5(2) OF THE ACT. WE ARE ALSO OF THE OPI NION THAT IN CASE IF THERE IS NOTHING TO THE CONTRARY IN THE STATEMENT RECORDED UNDER SEC TION 132(4) OF THE ACT, IN THE ABSENCE OF ANY SPECIFIC STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, IT CAN BE INFERRED THAT SUCH UNDISCLOSED I NCOME WAS DERIVED FROM THE BUSINESS, WHICH HE WAS CARRYING ON OR FROM OTHER SOURCE. THE OBJECT OF THE PROVISION IS ACHIEVED BY MAKING THE STATEMENT ADMITTING THE NON-DISCLOSUR E OF MONEY BULLION, JEWELLERY ETC. THUS, WE ARE OF THE OPINION THAT MUCH IMPORTANCE SH OULD NOT BE ATTACHED TO THE STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. IT CAN BE INFERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE ABSENCE OF ANYTHING TO THE CONTRARY. THEREFORE, MERE NON- STATEMENT OF MANNER IN WHICH S UCH INCOME WAS DERIVED WOULD NOT MAKE THE EXPLANATION 5 (2) INAPPLICABLE.' 9. SIMILAR SITUATION AROSE BEFORE THIS COURT. DIVIS ION BENCH IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C SHAH REPORTED IN 299 ITR 305 ADOPTED THE SAME LOGIC AS THAT OF THE ALLAHABAD HIGH COURT AND OBSERVED AS UN DER: '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 REGARDING THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, SUFFICE IT TO STATE THAT WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHORIZED OFFICER IT IS INCUMBENT UPON THE AUTHORI ZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCER NED AND THE AUTHORIZED OFFICER CANNOT STOP SHORT AT A PARTICULAR STAGE SO AS TO PE RMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE STATEMENT. THE REASON IS NOT FA R TO SEEK. IN THE FIRST INSTANCE, THE STATEMENT IS BEING RECORDED IN THE QUESTION AND ANS WER FORM AND THERE WOULD BE NO OCCASION FOR AN ASSESSEE TO STATE AND MAKE AVERMENT S IN THE EXACT FORMAT STIPULATED BY THE PROVISIONS CONSIDERING THE SETTING IN WHICH SUC H STATEMENT IS BEING RECORDED, AS NOTED BY ALLAHABAD HIGH COURT IN CASE OF CIT VS. RA DHA KISHAN GOEL (SUPRA). SECONDLY, CONSIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LITERATE OR ILLITERATE, TO BE SPE CIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATED BY EXCEPTION NO.2 WHILE MAKIN G STATEMENT UNDER SECTION 132(4) OF THE ACT. THE VIEW TAKEN BY THE TRIBUNAL AS WELL AS ALLAHABAD HIGH COURT TO THE EFFECT THAT 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 UNDER EXCEPTION NO.2 IN EXPLANATION 5 IS COMMENDABLE.' 10. IT CAN THUS BE SEEN THAT THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH AND ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. RADHA KISHAN GOEL (SUPRA) HAVE PUT CONSIDERABLE STRESS ON THE RECORDING OF THE STATEMENT UNDER SECTION 132(4) OF THE ACT IN THE CO NTEXT OF THE REQUIREMENT OF THE ASSESSEE TO DISCLOSE THE MANNER IN WHICH THE UNDISC LOSED INCOME WAS DERIVED IN ORDER TO AVOID PENALTY. THE HIGH COURT IN CASE OF COMMISS IONER OF INCOME TAX VS. MAHENDRA C.SHAH , IN PARTICULAR, OBSERVED THAT CONS IDERING THE SOCIAL ENVIRONMENT, IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE TO BE SP ECIFIC AND TO THE POINT REGARDING THE ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 7 - CONDITIONS STIPULATED BY EXCEPTION NO.2 WHILE MAKIN G STATEMENT UNDER SECTION 132(4) OF THE ACT. THE COURT WENT ON TO OBSERVE THAT IF TH E INCOME IS DECLARED AND TAX IS PAID THEREON, THERE WOULD BE SUBSTANTIAL COMPLIANCE. 11. IT IS THIS PRINCIPLE WHICH THE CIT (APPEALS) AN D THE TRIBUNAL HAVE APPLIED IN THE PRESENT CASE. AS NOTED, CIT (APPEALS) WAS SPECIFIC THAT NO QUESTION WAS PUT TO THE ASSESSEE WHILE RECORDING STATEMENT UNDER SECTION 13 2 REGARDING THE MANNER OF DERIVING THE UNDISCLOSED INCOME. COUNSEL FOR THE RE VENUE, HOWEVER, VEHEMENTLY CONTENDED THAT IN THE PRESENT CASE, THE PENALTY WAS BEING IMPOSED UNDER SECTION 271AAA OF THE ACT AND THE STATUTORY PROVISIONS ENAB LING THE ASSESSEE TO AVOID SUCH A PENALTY ARE ENTIRELY DIFFERENT AS COMPARED TO EXPLA NATION 5 TO SECTION 271. 12. SUB SECTION (1) OF SECTION 271AAA PROVIDES FOR A PENALTY IN ADDITION TO TAX AT THE RATE OF TEN PERCENT OF THE UNDISCLOSED INCOME IN CA SE WHERE THE SEARCH HAS BEEN INITIATED UNDER SECTION 132 OF THE ACT ON OR AFTER 1ST DAY OF JUNE 2007 BUT BEFORE 1ST DAY OF JULY 2012. SUCH PENALTY MAY, HOWEVER, BE AVO IDED IF THE CONDITIONS SPECIFIED UNDER SUB SECTION (2) ARE SATISFIED WHICH ARE AS UN DER: (2) NOTHING CONTAINED IN SUB SECTION (1) SHALL APPL Y IF THE ASSESSEE- (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB SECTION (4) OF SECTION 132 ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MAN NER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLO SED INCOME WAS DERIVED; AND (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME.' 13. SUB SECTION (2) OF SECTION 271AAA THUS WHILE RE TAINING THE OTHER REQUIREMENTS OF AVOIDING PENALTY AS PROVIDED IN CLAUSE (II) OF EXPL ANATION 5 HAS NOW INTRODUCED AN ADDITIONAL REQUIREMENT OF THE ASSESSEE HAVING TO SU BSTANTIATE THE MANNER IN WHICH, THE UNDISCLOSED INCOME WAS DERIVED. IT IS THIS REQUIREM ENT WHICH THE COUNSEL FOR THE REVENUE WOULD PLACE GREAT EMPHASIS ON. ACCORDING TO HER, ONUS IS NOW ENTIRELY SHIFTED ON THE ASSESSEE NOT ONLY TO MAKE A DISCLOSURE OF TH E UNDISCLOSED INCOME BUT ALSO TO SPECIFY THE MANNER, IN WHICH, THE INCOME HAS BEEN D ERIVED AND TO SUBSTANTIATE THE SAME. IT WAS THEREFORE, CONTENDED THAT THE EARLIER DECISIONS OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH AND THE DECISION OF ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS . RADHA KISHAN GOEL RENDERED IN BACKDROP OF DIFFERENT STATUTORY PROVISIONS WOULD NO T AUTOMATICALLY APPLY. 14. WE DO NOT REJECT THIS CONTENTION TOTALLY. HOWEV ER, INSOFAR AS THE FACTS OF THE PRESENT CASE ARE CONCERNED, THE FIELD WOULD STILL BE HELD B Y THE DECISION OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH (SUP RA). SUB-SECTION (2) OF SECTION 271AAA IMPOSES AN ADDITIONAL CONDITION OF THE ASSES SEE HAVING TO SUBSTANTIATE THE MANNER IN WHICH, THE UNDISCLOSED INCOME WAS DERIVED . THIS REQUIREMENT, HOWEVER, MUST BE SEEN AS CONSEQUENTIAL TO OR COROLLARY TO TH E BASE REQUIREMENT OF SPECIFYING THE MANNER, IN WHICH, THE UNDISCLOSED INCOME WAS DERIVE D. IT IS ONLY WHEN SUCH DECLARATION IS MADE, THE QUESTION OF SUBSTANTIATING SUCH DISCLOSURE OR CLAIM WOULD ARISE. IF, AS IN THE PRESENT CASE, THE REVENUE FAIL ED TO QUESTION THE ASSESSEE WHILE RECORDING HIS STATEMENT UNDER SECTION 132 (4) OF TH E ACT AS REGARDS THE MANNER OF DERIVING SUCH INCOME, THE REVENUE CANNOT JUMP TO TH E CONSEQUENTIAL OR LATER REQUIREMENT OF SUBSTANTIATING THE MANNER OF DERIVIN G THE INCOME. IN THE CONTEXT OF THE ITA NO. 1552/AHD/16 [JCIT (OSD) VS. SHRI JAYENDRA N . SHAH] A.Y. 2010-11 - 8 - REQUIREMENT OF THE ASSESSEE SPECIFYING THE MANNER O F DERIVING THE INCOME THE DECISION OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C. SHAH (SUPRA) WOULD HOLD THE FIELD EVEN IN THE CONTEXT OF SUB-SEC TION (2) OF SECTION 271AAA OF THE ACT. IT IS ONLY WHEN THE OFFICER OF THE RAIDING PARTY RE CORDING THE STATEMENT OF THE ASSESSEE UNDER SECTION 132(4) OF THE ACT ELICITS A RESPONSE FROM THE ASSESSE'S THIS REQUIREMENT, THE ASSESSEE'S RESPONSIBILITY TO SUBSTANTIATE THE M ANNER OF DERIVING SUCH INCOME WOULD COMMENCE. WHEN THE BASE REQUIREMENT ITSELF FAILS, T HE QUESTION OF DENYING THE BENEFIT OF NO PENALTY WOULD NOT ARISE. WE THEREFORE CONCLUDE THAT CIT(A) HAS RIGHTLY DELET ED THE IMPUGNED PENALTY. REVENUES SOLE SUBSTANTIVE GROUND AS WELL AS ITS MA IN APPEALS FAILS. 4. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 16 TH DAY OF MARCH, 2018.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 16/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0