ACIT, Chandigarh V. Sh. Om Parkash Sahni, Solan

ITA 178/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9932 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 178/CHD/2016 ASSESSMENT YEAR: 2010-11 THE ACIT, VS SHRI OM PARKASH SAHNI, CENTRAL CIRCLE-II, UPPER BAZAR, CHANDIGARH. SOLAN (H.P.). PAN NO. APYPS9025G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : NONE DATE OF HEARING : 25.05.2016 DATE OF PRONOUNCEMENT : 13.06.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-III GURGAON DATED 31.12.2015 FOR ASSESSMENT YEAR 2010-11, CHALLENGING THE CANCELLATION OF PENALTY UNDER SECTION 271AAA OF THE INCOME TAX ACT. 2. WE HAVE HEARD LD. DR AND PERUSED THE MATERIAL ON RECORD. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTIFYING THE DATE O F HEARING TO THE ASSESSEE. THE ASSESSEE IS, THEREFOR E, PROCEEDED EX-PARTE. 2 3. THE FACTS AS NOTED IN THE IMPUGNED ORDER ARE THAT THE ASSESSING OFFICER IN THE PENALTY ORDER HAS DISCUSSED THE LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT BY MENTIONING THAT ASSESSEE DURING THE COURSE OF SEARCH, SURRENDERED ADDITIONAL INCOME OF RS. 3 CR. RELEVANT STATEMENT OF THE ASSESSEE IS REPRODUCED THROUGH WHICH SURRENDER OF RS. 3 CR WAS MADE. IN ASSESSMENT YEAR UNDER APPEAL, ASSESSEE MADE TOTAL SURRENDER OF RS. 1,55,25,970/- ON ACCOUNT OF CASH AND STOCK SURRENDERED. THE ASSESSING OFFICER CONSIDERED THE PROVISIONS OF SECTION 270AAA OF THE INCOME TAX ACT AND FACTS OF THE CASE AND NOTED THAT ASSESSEE HAS NOT BROUGHT ON RECORD ANY DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE MANNER OF DERIVING UNDISCLOSED INCOME. THE PENALTY WAS, THEREFORE, LEVIED AGAINST THE ASSESSEE . 4. THE PENALTY ORDER WAS CHALLENGED BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT SURRENDER WAS MADE IN RESPECT OF BOOKINGS WHICH WERE INADVERTENTLY NOT RECORDED. THE ASSESSEE, WHILE FILING RETURN OF INCO ME HAS BIFURCATED THE SURRENDERED AMOUNT IN ASSESSMENT YEAR 2004-05 TO ASSESSMENT YEAR 2010- 11 AND ALL PARTICULARS OF THE SAME HAVE BEEN GIVEN. THE ASSESSEE MADE VOLUNTARY DISCLOSURE UNDER SECTION 132(4) OF THE ACT AND PAID THE TAXES THEREO N. 3 THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION THAT WHEN THE REVENUE DID NOT ASK ANY QUESTION TO THE ASSESSEE AT THE TIME OF RECORDING THE STATEMENT, THEN REVENUE CANNOT TAKE ADVANTAGE OF SUCH LAPSE IN THE STATEMENT OF THE ASSESSEE. THE AUTHORIZED OFFICER SHALL HAVE TO EXPLAIN PROVISION OF LAW. WHEN NO QUESTIONS HAVE BEEN ASKED TO THE ASSESSEE, THERE WAS NO OCCASION FOR THE ASSESSEE TO EXPLAIN THE MANNER OF EARNING UNDISCLOSED INCOME. THE LD. CIT(APPEALS), CONSIDERING EXPLANATION OF THE ASSESSEE AND MATERIAL ON RECORD, CANCELLED THE PENALTY AND ALLOWED APPEAL OF THE ASSESSEE. FINDINGS OF LD. CIT(APPEALS) IN PARA 5 AND 6 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : I HAVE CONSIDERED THE BASIS OF PENALTY IMPO SED BY THE AO AND THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT. TH E PERUSAL OF THE PROVISIONS OF THE SECTION 271AAA MAKE IT CLEAR THAT THE PENALTY CAN BE LEVIED ON UNDISCLOSED INCOME OF THE SPECIFIED YE AR IF THE CONDITIONS SPECIFIED IN THE SUB-SECTION (2) OF SECT ION 271AAA ARE NOT SATISFIED. IT, THEREFORE, FOLLOWS THAT FIRST THING TO DETERMINE IS WHAT IS THE AMOUNT OF UNDISCLOSED INCOME UNDER THE GIVEN CIRCUMSTANCES. THE CONCEPT OF UNDISCLOSED INCOME HA S BEEN CLEARLY DEFINED BY EXPLANATION TO SECTION 271AAA. HOWEVER, THE AO HAS IMPOSED THE PENALTY ON THE GROUND THAT THE APPELLAN T HAD NOT SUBSTANTIATED THE MANNER IN WHICH THE INCOME WAS EA RNED. 6.1 THE AO HAS MADE FOLLOWING OBSERVATIONS IN THIS CASE: (I) THE ASSESSEE MADE A SURRENDER OF RS. 1,55 ,25,970 FOR THE YEAR UNDER CONSIDERATION. (II) THIS DISCLOSURE WAS DECLARED IN THE RETU RN OF INCOME. (III) THE ASSESSEE FAILED TO SUBSTANTIATE THE MANNER IN W HICH THE INCOME HAS BEEN EARNED, 4 (IV) IN VIEW OF THE SAME, PENALTY U/S 271AAA WAS IMPOSED 6.2 THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS SUBMITTED AS FOLLOWS:- (I) THE APPELLANT ADMITTED THE UNDISCLOSED INCOME O F RS. 1,55,25,970/-DURING THE YEAR UNDER CONSIDERATION AN D DISCLOSED THE SAME IN RETURN FILED.' (II) THE APPELLANT HAS SURRENDERED THE AMOUNT OF RS . 59,25,970/- ON ACCOUNT OF STOCK SURRENDERED AND RS. 96,00,000/- ON ACCOUNT OF CASH FOUND DURING THE TIME OF SEARCH. (III) THE INCOME TAX ALONGWITH INTEREST WAS PAID ON THIS SURRENDERED AMOUNT. 6.3 SIMILAR ISSUE RECENTLY CAME UP BEFORE THE HON' BLE ITAT CHANDIGARH BENCH IN ITA NO. 188/CHD/2015 IN THE CASE OF DCIT CENTRAL CIRCLE-II VS SHRI HARMOHINDER SINGH CHADHA AND THE ISSUE WAS DISCUSSED AS REPRODUCED BELOW:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAR EFULLY AND FIND THAT HON'BLE GUJRAT HIGH COURT IN CASE OF CIT V. MA HENDRA C. SHAH (SUPRA) HAS MADE FOLLOWING OBSERVATIONS IN THI S REGARD. 'WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHOR IZED OFFICER IT IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCER NED AND THE AUTHORIZED OFFICER CANNOT STOP SHORT OF A PARTICULA R STAGE SO AS TO PERMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPS E IN THE STATEMENT. THE REASON IS NOT FOR TO SEEK. IN THE FI RST INSTANCE, THE STATEMENT IS BEING RECORDED IN THE QUESTION AN ANSW ER FROM AND THERE WOULD BE NO OCCASION FOR AN ASSESSEE TO STATE AND M AKE AVERMENTS IN THE EXACT FORMAT STIPULATED BY THE PROVISIONS CONSI DERING THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED. SECONDLY CO NSIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FRO M AN ASSESSEE, WHETHER LITERATE OR ILLITERATE TO BE SPECIFIC AND T O THE POINT REGARDING THE CONDITIONS STIPULATED BY THE SECOND EXCEPTION W HILE MAKING STATEMENT U/S 132(4). EVEN IF THE STATEMENT DOES NO T SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED IF THE INCOME IS DEC LARED AND TAX THEREON PAID, THERE WOULD BE SUBSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT.' 8. FURTHER THIS ISSUE CAME UP FOR CONSIDERATION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V AMARJIT GOYAL AND OTHERS, ITA'S NO. 1080, 1081 & 1082/CHD/2013 AND THE HON 'BLE ITATHAS DISCUSSED THE ISSUE AS HEREUNDER: 9. WE FURTHER FIND THAT SECTION 271AAA READS AS U NDER:- 5 271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDIN G ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTIO N 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007 BUT BEFORE THE 1 ST DAY OF JULY 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM COMPUTED AT THE RATE OFTEN PERCENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR . (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APP LY IF THE ASSESSEE,____ (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 132 ADMITS THE UNDISCLOSED INCOME AND SPECI FIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UND ISCLOSED INCOME WAS DERIVED; AND . (II) PAYS THE TAX, TOGETHER WITH INTEREST, IF A NY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SU B-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 SECTION 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 SECT ION- (A) UNDISCLOSED INCOME' MEANS I (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOU NT OR OTHER DOCUMENT OR TRANSACTION FOUND IN THE COURSE OF A SEARCH UNDE R SECTION 132 WHICH HAS_ (A)NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARC H IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RETAINING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMMI SSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RE CORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FA LSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED; 6 (B) NOT RELEVANT----------- 10. PLAIN READING OF SUB-SECTION WOULD SHOW THAT IF THE ASSESSEE DURING THE COURSE OF SEARCH IN A STATEMENT ADMITS TO SOME UNDISCLOSED INCOME AND PAY TAXES ON THE SAME THEN PENALTY CANNOT BE LE VIED IN TERMS OF SUB-SECTION (1} OF THIS SECTION. IN THE CASE BEFORE US, THE AMOUNT OF RS. 4 CRORES WHICH WAS SURRENDERED DURING SEARCH, HAS B EEN DECLARED BY THE ASSESSEE IN THE RETURN AND TAXES HAVE BEEN PAID ACCORDINGLY. THEREFORE THE ASSESSEE IS NORMALLY ENTITLED FOR THE IMMUNITY PROVIDED IN SECTION 271AAA ITSELF. HOWEVER, THE REVENUE HAS RAISED FURTHER DISPUTE THAT WHETHER THE ASSESSEE HAS DISCLOSED THE MANNER IN WHICH THE INCOME HAS BEEN EARNED. IN THE PENALTY ORDER PA SSED BY THE ASSESSING OFFICER FOLLOWING QUESTIONS AND ANSWERS H AVE BEEN EXTRACTED: Q. DO YOU WANT TO SAY ANYTHING MORE ? ANS I VOLUNTARILY SURRENDER A SUM OFRS. 4.00 CRORE [ RS. FOUR CRORES) FOR CURRENT FINANCIAL YEAR I.E. 2009-10 RELEVANT TO AY 2010-11 IN ANY (SHOULD BE 'MY) INDIVIDUAL CAPACITY. THEY COVER ALL THE DIS CREPANCIES IN THE SEIZED PAPERS DURING THE COURSE OF SEARCH PROCEEDINGS.' 11 THEREFORE CLEARLY THE REVENUE HAS NOT ASKED THE ASSESSEE TO DISCLOSED THE MANNER IN WHICH SUCH INCOME WAS EARNE D. IN ANY CASE ONCE THE INCOME IS SURRENDERED DURING THE COURSE OF SEAR CH U/S 132(4) IT CAN BE SAFELY ASSUMED THAT DURING DISCUSSION THE ASSESS EE MUST HAVE DISCLOSED THE MANNER. IN ANY CASE WE FIND FORCE IN THE SUBMISSIONS OF THE ID. COUNSEL FOR THE ASSESSEE THAT IN THE EXPLANATIO N OF THE ASSESSEE HAS BEEN ACCEPTED FOR A SURA OFRS. 1987500 OUT OF TOTAL SURR ENDER OF RS. 4 CRORES THEN SAME MANNER SHOULD HAVE BEEN ACCEPTED FOR THE WHOLE AMOUNT. IT IS NOT CLEAR FROM THE PENALTY ORDER HOW EXPLANATION FO R RS. 1987500 WAS ACCEPTED. IN ANY CASE THE LD. C!T(AJ HAS CONSIDERED ALL THESE MATERIAL OR DECISION WHICH CAN CONTROVERT THE FINDINGS OF THE C IT(A). IN THE FOLLOWING CASES WHICH HAVE BEEN RELIED ON BY THE ID. COUNSEL FOR THE ASSESSEE WHICH WAS CLEARLY HELD THAT PENALTY IS NOT LEVIABL E. FOLLOWING THE ABOVE ORDER WE DECIDE THE ISSUE AGAINST THE REVENUE.' FROM ABOVE IT AS WELL AS THE OBSERVATION OF HON'BLE GUJRAT HIGH COURT IN CASE OF CIT V. MAHENDRA C. SHAH (SUPRA) IT BECOM ES CLEAR THAT IF NO QUESTION IS ASKED DURING THE STATEMENT RECORDED U/S 132(4) THEN THE ASSESSEE CANNOT BE EXPECTED TO FURTHER SUBSTANTIATE THE MANNER OF EARNING OF INCOME. SINCE TAXES HAVE ALREADY BEEN PA ID, THEREFORE IN OUR OPINION, PENALTY COULD NOT HAVE BEEN LEVIED. AC CORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE PE NALTY. 7 IN THE PRESENT CASE ALSO REVENUE NEVER ASKED ANY QU ESTION REGARDING MANNER OF EARNING THE INCOME THEREFORE FOLLOWING AB OVE ORDER WE DECIDE THIS ISSUE AGAINST THE REVENUE. IN VIEW OF THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE APPELLANT AND FOLLOWING THE JUDICIAL PRONOUNCEMENTS ON THIS ISSUE INCLUDING THE ABOVE DECISION OF HON'BLE ITAT CHANDIGARH BENCH, PENALTY U/S 271AAA AMOUNTING RS. 15,52,597/- IN THIS CASE IS DIRECTED TO BE DELETED. 6. AS A RESULT, THE APPEAL OF THE APPELLANT IS ALLOWED. 5. AFTER HEARING SUBMISSIONS OF THE LD. DR, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. T HE LD. CIT(APPEALS) HAS REFERRED TO SEVERAL DECISIONS OF THE TRIBUNAL AND GUJRAT HIGH COURT IN HIS FINDINGS IN ORDER TO ARRIVE AT THE CONCLUSION THAT PENALTY IS N OT LEVIABLE. THE LD. CIT(APPEALS) SPECIFICALLY NOTED IN HIS FINDING THAT REVENUE HAS NOT ASKED THE ASSESSEE TO DISCLOSE THE MANNER IN WHICH SUCH INCOME WAS EARNED. THEREFORE, ISSUE WAS FOUND COVERED BY JUDGEMENT OF GUJRAT HIGH COURT IN THE CASE OF CIT V S MAHENDRA C. SHAH. SINCE NO QUESTION IS ASKED DURING THE STATEMENT RECORDED UNDER SECTION 132(2) OF THE ACT, THEN THE ASSESSEE CANNOT BE EXPECTED TO FURTHER SUBSTANTIATE THE MANNER OF EARNING UNDISCLOSED INCOME. THE LD. CIT(APPEALS), THEREFOR E, CORRECTLY FOUND THAT WHEN REVENUE NEVER ASKED ANY QUESTION REGARDING MANNER OF EARNING THE INCOME, THEREFORE, NO PENALTY SHOULD BE LEVIED AGAINST THE ASSESSEE. IT, THEREFORE, APPEARS THAT ISSUE IS COV ERED BY THE DECISIONS OF THE TRIBUNAL AND GUJRAT HIGH COURT AS HAVE BEEN REFERRED IN THE FINDINGS OF LD. 8 CIT(APPEALS). NO INFIRMITY HAVE BEEN POINTED OUT I N THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY. WE, THEREFORE, DO NOT FIND ANY MERIT IN T HE APPEAL OF THE REVENUE, SAME IS, ACCORDINGLY, DISMISSED. 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH JUNE,2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD