M/s. Spaze Tower Pvt. Ltd., Gurgaon V. DCIT, Faridabad

ITA 2296/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69191 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Keywords: Unexplained expenditure; Business income; Income from undisclosed sources; Search and seizure; Loose papers
• Section: 143(3); 5(2); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 2296/DEL/2012 ASSESSMENT YEAR: 2008- 2009 M/S. SPAZE TOWER PVT. LTD. VS. DCIT, CENTR AL CIRCLE-II, SPAZEDGE, SECTOR-47, FARIDAB AD. SOHNA ROAD, GURGAON (AACCK8088R) (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI C.S. AGGA RWAL, SR. ADVOCATE, SHRI GAU TAM JAIN, ADVOCATE RESPONDENT BY : SMT. RENUKA JAIN GUPTA, SR. DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESSEE HAS IMPUGNED FIRST APPELLATE OR DER ON THE FOLLOWING GROUNDS :- 1. THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS IN LAW IN CONFIRMING THE ORDER IMPOSING A PENALTY ON T HE ASSESSEE BY THE LEARNED DCIT, CENTRAL CIRCLE-II, FARIDABAD, OF RS. 80,00,000/- BY INVOKING THE PROVISIONS OF SECTION 271AAA OF THE ACT, DESPITE TH E FACT, ASSESSEE HAD SATISFIED THE REQUIREMENTS OF SUB-SECT ION (2) OF SECTION 271AAA OF THE INCOME TAX ACT. 2. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE ALSO DULY SATISFIED THE PROVISIONS OF SUB- CLAUSE (II) OF SUB-SECTION (2) AND THE FINDING THAT THE ASSESSEE HAD FAILED TO SATISFY THE MANNER IN WHICH THE AFORESAID INCOME HAS BEEN EARNED IS LEGALLY AND FACTUALLY MISCONCEIVED DESPITE THE SAME HAVING BEEN ITA NO. 2296/DEL/2012 2 REPLIED IN ANSWER TO QUESTION NO. 18, OF THE STATEM ENT RECORDED U/S 132(4) OF THE ACT AT THE TIME OF SEARC H. 3. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT, ONCE THE ASSESSEE HAD MADE A STATEMENT THAT THE AFORESAID INCOME HAS BEEN EARNED FROM THE 'BUSINESS OPERATIONS' AND HAS NOT BEEN EARNED FROM ANY OTHER SOURCE OTHER THAN BUSINESS OPERATIONS, IT COULD BE HELD THAT IT HAD SATISFIED THE REQUIREMENTS OF THE AFORE SAID SECTION. 4. THAT THE LEARNED CIT(A) HAS ALSO OVERLOOKED THAT , THE AFORESAID INCOME AS WAS DECLARED AND WAS ASSESSED UNDER THE HEAD BUSINESS INCOME AND NOT UNDER ANY OTHER HEAD OF INCOME AND THUS THE FINDINGS THAT ASSESSEE HAD NOT SATISFIED THE REQUIREMENT OF SUB- SECTION (2) OF SECTION 271AAA OF THE ACT ARE MISCONCEIVED AND AS SUCH THE. PENALTY IMPOSED AND LEVIED WAS ENTIRELY UNSUSTAINABLE. 5. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIAT E THAT, THE ASSESSEE, IN THE COURSE OF SEARCH HAD DULY OFFE RED RS. 8 CRORES REPRESENTING THE AMOUNT PAID IN CASH TOWARDS THE AGREEMENT ENTERED BY IT WITH M/S KAY KA Y DESIGNERS TOWERS PVT. LTD. AND SUCH AN INCOME AS WA S DISCLOSED BY IT, WAS FROM THE BUSINESS OPERATIONS CARRIED ON BY IT AND WAS SO ACCEPTED AS HAVING BEEN EARNED FROM BUSINESS. THUS, IT IS WELL ESTABLISHED THAT ONCE INCOME HAS BEEN SHOWN AS INCOME FROM THE BUSINESS AND WAS ASSESSED UNDER THE HEAD BUSINESS, AND NOT IN ANY OTHER HEAD INCLUDING INCOME FROM OTH ER SOURCES, IT HAD TO BE HELD THAT THE ASSESSEE HAD DU LY SATISFIED THE REQUIREMENTS OF SUB-SECTION (2) OF SE CTION 271AAA OF THE ACT. 6. THAT THE LEARNED CIT(A) HAS FAILED TO COMPREH END THAT UNDER THE STATUTORY PROVISIONS OF SECTION 271A AA OF THE INCOME TAX ACT WHERE ANY INCOME HAS BEEN OFFERE D FROM A PARTICULAR SOURCE AND THE SAME IS ACCEPTED A S AN INCOME FROM THAT SOURCE OR HEAD OF INCOME, NO PENAL TY COULD BE LEVIED. ITA NO. 2296/DEL/2012 3 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS A DVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE FACTS IN BRIEF ARE THAT ASSESSEE IS ENGA GED IN THE BUSINESS OF REAL ESTATE. SEARCH AND SEIZURE OPERATIONS U/S 132(1) OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND RESID ENTIAL PREMISES OF SHRI VIPIN SHARMA & SHRI AMAN SHARMA ON 29.4.2008. AT TH E TIME OF FRAMING OF THE ASSESSMENT U/S 153A READ WITH SECTION 143(3) PE NALTY PROCEEDINGS WERE INITIATED U/S 271AAA OF THE ACT WHICH RESULTED INTO LEVY OF PENALTY OF RS. 80 LACS. THE ASSESSEE QUESTIONED THE IMPOSITION OF THE PENALTY BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. HENCE THE PRE SENT APPEAL. WE FIND THAT THE ISSUE INVOLVED IN THE GROUNDS IS AS TO WHE THER THE ASSESSEE WAS ABLE TO SPECIFY THE MANNER IN WHICH UNDISCLOSED INC OME WAS DERIVED AND ABLE TO SUBSTANTIATE THE SAID MANNER TO GET IMMUNIT Y FROM LEVY OF PENALTY U/S 271AAA OF THE INCOME TAX ACT. 4. LD. AR SUBMITTED THAT SHRI J.S. CHAWLA DIRECTO R OF THE APPELLANT COMPANY IN HIS STATEMENT HAD STATED THAT AN AGREEME NT TO SELL FOR PURCHASE OF AGRICULTURAL LAND WAS ENTERED BY THE ASSESSEE CO MPANY FOR WHICH INITIAL PAYMENT OF RS. 15 CRORES WAS MADE PRIOR TO 31.3.200 8. IT WAS FURTHER STATED THAT OUT OF AFORESAID SUM OF RS. 15 CRORS, S UM OF RS. 8 CRORES IN CASH WAS GIVEN AS IMPREST AMOUNT FOR CUSTODY TO THE SEL LER TO EXCHANGE AGAINST CHEQUES ISSUED AGAINST REFUND OF THE SAME. HOWEVER THE SAID SUM OF RS. 8 ITA NO. 2296/DEL/2012 4 CRORES PAID IN CASH WAS OFFERED AS UNDISCLOSED INCO ME FROM BUSINESS OPERATION OF THE APPELLANT COMPANY. HE SUBMITTED TH AT IN RESPONSE TO NOTICE U/S 153A ISSUED TO THE APPELLANT COMPANY IT FILED THE RETURN OF INCOME DECLARING AN INCOME OF RS. 24,79,04,507/- FO R THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH ALSO INCLUDED INCOME SURR ENDERED DURING THE COURSE OF SEARCH OF RS. 26,71,70,000/-. HE REFERRED PAGE 137 OF THE PAPER BOOK WHEREIN BREAK UP OF RS. 26.71 CRORES HAS BEEN GIVEN WITH THIS FURTHER SUBMISSION THAT IT INCLUDES A SUM OF RS. 8 CORES RE PRESENTING INVESTMENT IN CASH FOR THE PURCHASE OF AGRICULTURAL LAND IN THE A GREEMENT TO SAY DATED 27.3.2008. LD. AR POINTED OUT THAT AGREEMENT TO SEL L DATED 27.3.2008 WAS SEIZED DURING THE COURSE OF SEARCH OPERATIONS, COP IES THEREOF HAS BEEN MADE AVAILABLE AT PAGE NOS. 39 TO 49 OF THE PAPER B OOK. AS A RESULT OF THE SEARCH STATEMENT OF SHRI J.S. CHAWLA WAS RECORDED U /S 132 (4) OF THE ACT A COPY THEREOF HAS BEEN MADE AVAILABLE AT PAGE 52 TO 57 OF THE PAPER BOOK WITH TYPED COPY THEREOF AT PAGE NOS. 68 TO 71 OF TH E PAPER BOOK. IN HIS STATEMENT IN ANSWER TO QUESTION NO. 18 HE SUBMITTED THAT THE SAID PAPERS ARE AGREEMENT FOR PURCHASE OF AGRICULTURAL LAND FOR WHICH INITIAL PAYMENT AGGREGATING TO RS. 15 CRORES WAS MADE PRIOR TO 31.3 .2008. DUE TO PAUCITY OF FUNDS IN BANKS/BOOKS OF ACCOUNTS A SUM OF RS. 8 CRORES WAS GIVEN AS IMPREST FOR CUSTODY TO THE SELLER TO EXCHANGE AGAIN ST CHEQUES ISSUED AGAINST REFUND OF THE SAME, THE SAID CASH MAY BE TR EATED AS THEIR UNDISCLOSED INCOME FROM THE BUSINESS OPERATIONS, TH E EXACT SOURCE AND ITA NO. 2296/DEL/2012 5 MANNER SHALL BE INTIMATED SHORTLY. THE CHEQUES OF R S. 8 CRORES SHALL BE ISSUED SHORTLY WHEN FUNDS ARE AVAILABLE IN THE BOOK S OF ACCOUNTS. NOTICE U/S 271AAA WAS ISSUED TO THE APPELLANT COMPANY BY ALLEG ING THAT ASSESSEE HAS FAILED TO SPECIFY AND SUBSTANTIATE THE MANNER IN WH ICH THE UNDISCLOSED INCOME OF RS. 24,79,04,507/- HAS BEEN DERIVED AND IT HAS FURTHER FAILED TO PAY THE TAX TOGETHER WITH INTEREST IN RESPECT OF TH E ABOVE UNDISCLOSED INCOME. IN RESPONSE TO THE NOTICE THE ASSESSEE STAT ED THAT PROVISIONS CONTAINED IN SECTION 271 AAA OF THE ACT ARE INAPP LICABLE TO THE FACTS OF THE APPELLANT COMPANY AND COMPLETE TAXES HAD BEEN PAID BY THE APPELLANT COMPANY. THE AO HAS LEVIED PENALTY OF RS. 80 LACS W ITH THIS FINDING THAT ASSESSEE HAS FAILED TO SUBSTANTIATE THE SOURCE OF P AYMENT OF RS. 8 CRORES IN CASH BY WAY OF DOCUMENTARY EVIDENCE. LD. CIT(A) WHI LE UPHOLDING THE ACTION OF THE AO HAS NOTED IN PARA NO. 10 THAT MER ELY STATING IN ITS WRITTEN SUBMISSION THAT A SUM OF RS. 8 CRORES HAS BEEN DER IVED FROM THE BUSINESS CARRIED ON BY THE ASSESSEE AND WAS THUS A BUSINESS INCOME IS TOO GENERAL AN EXPLANATION TOBE ACCEPTED TO AVAIL OF THE IMMUNI TY UNDER THE ACT. HE NOTED FURTHER THAT IT MAY NOT BE NECESSARY FOR HIM TO FURNISH DOCUMENTARY EVIDENCES, YET THE SAME SHOULD AND OUGHT TO HAVE BE EN DIVULGED IN THE STATEMENT U/S 132(4) OR SUBSEQUENTLY. 5. THE LD. AR SUBMITTED THAT LEVY OF PENALTY OF RS. 80 LAC U/S 271AAA IN THE CASE OF THE PRESENT ASSESEE IS BASED ON COMPLET E MISCONCEPTION OF FACTS, CIRCUMSTANCES OF THE CASE AND STATUTORY PROV ISION OF LAW. PENALTY U/S ITA NO. 2296/DEL/2012 6 271AAA OF THE ACT IS TO BE INITIATED ONLY IN RESPEC T OF UNDISCLOSED INCOME, WHICH HAS BEEN DEFINED IN CLAUSE (A) OF EXPLANATION TO SECTION 271AAA(4) OF THE ACT. AS PER WHICH THERE MUST BE AN INCOME FOUND IN THE COURSE OF SEARCH U/S 132 ON THE APPELLANT COMPANY. IN THE PRE SENT CASE PENALTY 271AAA OF THE ACT HAS BEEN LEVIED IN RESPECT OF INC OME OF RS. 8 CRORES OFFERED BY THE APPELLANT IN STATEMENT RECORDED U/S 132(4) OF THE ACT ON THE BASIS OF AN AGREEMENT TO SELL FOUND FROM THE PREMIS ES OF SHRI VIPIN SHARMA AND SHRI AMAN SHARMA AT C-25, GREATER KAILASH-1, NE W DELHI. LD. AR SUBMITTED THAT INCOME OF RS. 8 CORRES DOES NOT CONS TITUTE UNDISCLOSED INCOME IN TERMS OF CLAUSE (A) OF EXPLANATION TO SECT ION 271AAA OF THE ACT SINCE THE SAME IS NOT BASED ON ANY MONEY, BULLION, JEWELLARY OR OTHER DOCUMENT OR MATERIAL FOUND IN THE COURSE OF SEARCH ON THE APPELLANT COMPANY. THUS LEVY OF PENALTY U/S 271AAA OF THE ACT PER SE ON A SUM OF RS. 8 CRORES IS MISCONCEIVED AND HENCE UNTENABLE. 6. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, T HE LD. AR CONTENDED THAT EVEN ASSUMING THAT A SUM OF RS. 8 CRORES IS UNDISC LOSED INCOME THOUGH THE SAME IS DISPUTED, PENALTY LEVIED IS NOT IN ACCORDAN CE WITH SECTION 271AAA(2) OF THE ACT. THERE IS NO DISPUTE THAT ASSE SEE HAD ADMITTED THE ALLEGED UNDISCLOSED INCOME IN A STATEMENT U/S 132(4 ) OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT ASSESEE HAD PAID THE TAX ON THE SAID UNDISCLOSED INCOME. IT IS ALSO NOT DISPUTED THAT ASSESEE HAD AL SO SPECIFIED THE MANNER OF UNDISCLOSED INCOME AS BUSINESS INCOME IN THE STA TEMENT RECORDED ON THE ITA NO. 2296/DEL/2012 7 DATE OF SEARCH. HOWEVER WHAT IS BEING DISPUTED IS T HAT ASSESEE HAS NOT SUBSTANTIATED THE MANNER OF UNDISCLOSED INCOME I.E BUSINESS INCOME, DESPITE THE FACT THAT THE AO IN ITS ORDER OF ASSESS MENT HAS ACCEPTED THE SAME BY OBSERVING AT PAGE NO. 10 OF THE ASSESSMENT ORDER , A COPY THEREOF HAS BEEN MADE AVAILABLE AT PAGE NO. 144 OF THE PAPE R BOOK. THE LD. AR SUBMITTED THAT THE AO HAVING ACCEPTED THE MANNER OF UNDISCLOSED INCOME AND THE UNDISCLOSED INCOME DECLARED WAS NOT JUSTIFI ED IN IMPOSING THE PENALTY ON THE BASIS THAT THE ASSESSEE HAS FAILED T O SUBSTANTIATE THE MANNER IN WHICH WAS DERIVED, DESPITE THIS FACT THAT NO SPE CIFIC QUESTION IN THIS REGARD WAS RAISED TO THE ASSESSEE DURING THE RECORD ING OF THE STATEMENTS. IN SUPPORT HE REFERRED THE DECISION OF AHMEDABAD BE NCH OF THE TRIBUNAL IN THE CASE OF SULOCHANADEVI A AGARWAL IN ITA NO. 1052 /AHD/2012 FOR ASSTT. YEAR 2009-10 DATED 20.7.2012 A COPY THEREOF HAS BEE N MADE AVAILABLE AT PAGE 210 TO 214 OF PAPER BOOK (CITATION). LD. AR AL SO CITED THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M AHENDRA FC. SHAH 299 ITR 305 (GUJ.). HE ALSO PLACED RELIANCE ON THE FOLL OWING DECISIONS:- 1. PRAMOD KUMAR JAIN ITA NO. 131 TO 133/CTK/201 2 (ASSTT. YEARS 2007 -08 AND 2008-09) 2. DCIT VS. PIONEER MARBLES & INTERIORS (P) LTD. 14 ITR (TRIB) 608 7. LD. AR SUBMITTED FURTHER THAT IN THE CONTEXT OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT WHEN THE UNDISCLOSED INCOME AD MITTED BY THE ASSESSEE AND HAS BEEN OFFERED FOR TAX IN THE RETURN OF INCO ME AND THE TAX THEREON IS ITA NO. 2296/DEL/2012 8 DULY PAID, PENALTY COULD NOT BE LEVIED ON THE GROUN D THAT MANNER OF EARNING THE UNDISCLOSED INCOME HAS NOT BEEN SPECIFIED, IN A BSENCE OF ANY QUESTION RAISED IN THIS RESPECT BY THE AUTHORIZED OFFICER. I N SUPPORT HE HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- I) 299 ITR 305 (GUJ) CIT VS. MAHENDRA C. SHA H (PAGES 224-225 OF JPB) II) 270 ITR 523 (RAJ) GEBITLAL KANHAIALAL (H UF) VS. ACIT III) 299 ITR 19 (RAJ.) CIT VS. KANHAIYALAL IV) 286 ITR 626 (MAD) CIT VS. E.V. BALASHANMU GHAM V) 264 ITR 249 (DEL) CIT VS. CHHABRA EMPORI UM VI) 247 ITR 742 (KER) CIT VS. SANTHOSH FINAN CIERS VII) 278 ITR 454 (ALL) CIT VS. RADHA KISHAN G OEL 8. LD. AR SUBMITTED THAT SEARCH WAS CONDUCTED O N 28.4.2008 WHEN BOOKS OF ACCOUNTS OF THE APPELLANT WERE NOT CLOSED. THE DOCUMENTS WAS FOUND FROM THE PREMISES OF SHRI VIPIN SHARMA AND SH RI AMAN SHARMA WHO ARE ASSESSED INDEPENDENTLY. THEY HAVE NOT BEEN SEAR CHED AS DIRECTORS OF THE ASSESSSEES COMPANY. HE SUBMITTED THAT SHRI J.S . CHAWLA IS A DIRECTOR OF THE ASSESSEE COMPANY WHOSE STATEMENT U/S 132 (4) WAS RECORDED. ACCORDING TO HIM PENALTY PROVISIONS MUST STRICTLY B E APPLIED AND NOT AS PER THE LOGIC TO JUSTIFY THE ACTION. IN SUPPORT HE PLAC ED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF INCOME TAX OFFICER. V. CH. ATCHAIAH. 218 ITR 239 (SC). AO HAS ACCEPTED RS. 8 C RORES AS BUSINESS INCOME WITHOUT ANY ADVERSE FINDING. IN THIS REGARD HE REFERRED PAGE NO. 13 ITA NO. 2296/DEL/2012 9 OF THE ASSESSMENT ORDER. HE REITERATED THAT THE PEN ALTY IN QUESTION LEVIED ON THE BASIS THAT THE MANNER OF EARNING OF UNDISCLO SED INCOME HAS NOT BEEN SUBSTANTIATED BUT NO QUESTION WAS ASKED ABOUT IT DU RING THE COURSE OF RECORDING OF STATEMENT. HOWEVER THE AO HAS ACCEPTED RS. 8 CRORES AS BUSINESS INCOME IN THE ASSESSMENT. 9. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW ON THE QUESTION OF LEVY OF PENALTY U/S 271AAA OF THE ACT. HE DREW OUR ATTENTION TO THE CONTENTS OF THE PENALTY ORDER ESPECIALLY PAGE NO. 7 PARA C WITH THIS SUBMISSION THAT THERE IS NO DISPUT E ON UNDISCLOSED INCOME OF RS. 8 CRORES SURRENDERED BY THE ASSESSEE. HAD TH ESE NOT BEEN A SEARCH, THE ASSESSEE WOULD NOT HAVE DISCLOSED THE INCOME OF RS. 8 CRORES FOR TAXATION. HE SUBMITTED FURTHER THAT THE DECISIONS R ELIED UPON BY THE LD. AR HAVING DISTINGUISHABLE FACTS ARE NOT HELPFUL TO THE ASSESSEE. 10. WE AGREE WITH THIS CONTENTION OF THE LD. A R THAT PENAL PROVISION SHOULD BE APPLIED IN ITS STRICT SENSE BUT WE DO NOT FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR THAT SINCE IN THE PRESENT CASE THE DOCUMENT IN QUESTION WAS NOT FOUND FROM THE PREMISES OF SHRI J. S. CHAWLA, DIRECTOR OF THE APPELLANT COMPANY, PENALTY U/S 271AAA OF THE AC T SHOULD NOT BE LEVIED AGAINST THE APPELLANT ON THE BASIS OF STATEMENT OF SHIR J.S. CHAWLA. HIS FURTHER CONTENTION REMAINED THAT THE DOCUMENT IN QU ESTION I.E. AGREEMENT TO SELL WAS FOUND DURING THE COURSE OF SEARCH AT TH E PREMISES OF SHRI VIPIN SHARMA AND SHRI AMAN SHARMA WHO ARE ASSESSED INDEPE NDENTLY. WE DO NOT ITA NO. 2296/DEL/2012 10 AGREE WITH THIS CONTENTION OF THE LD. AR AS ADMITTE DLY SHRI VIPIN SHARMA AND SHRI AMAN SHARMA ARE ALSO DIRECTORS OF THE APPE LLANT COMPANY AND THERE IS NO DENIAL ON THE PART OF THE APPELLANT COM PANY THAT THE DOCUMENT IN QUESTION BELONGS TO THEM. THEY HAVE RATHER SURRE NDERED THE UNDISCLOSED INCOME OF RS. 8 CRORE ON THE ACCOUNT OF THAT DOCUM ENT ONLY. NOW WE HAVE TO EXAMINE AS TO WHETHER THE ASSESSEE HAS BEEN ABLE TO FULFILL THE REQUIREMENT OF SECTION 271AAA FOR CLAIMING EXEMPTIO N FROM LEVY OF THE PENALTY THEREUNDER. HAVING GONE THROUGH THE PROVISI ONS LAID DOWN U/S 271AAA OF THE I.T. ACT 1961 WE FIND THAT IN RESPECT OF UNACCOUNTED INCOME IN THE CASES WHERE SEARCH IS INITIATED AFTER 1.6.20 07 AND BEFORE 1.7.2012, THE ASSESSEE IS TO PAY A PENALTY @ 10% OF UNACCOUNT ED INCOME. SUB SECTION (2) OF SECTION 271AAA HOWEVER PROVIDES EXEM PTION FROM THIS PENALTY PROVISIONS IN A SITUATION IN WHICH (I) DURI NG THE COURSE OF SEARCH IN A STATEMENT UNDER SECTION 132(4) THE ASSESSEE ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED AND (III) PAYS THE TAX TOGETHER WITH THE INTEREST, IF A NY, IN RESPECT OF THE UNDISCLOSED INCOME. THE AO IN THE IMPUGNED PENALTY ORDER HAS HELD THAT THE ASSESSEE HAS NOT FULFILLED CONDITIONS AS LAID D OWN IN CLAUSE (II) TO SUB SECTION (2) OF SECTION 271 AAA . IT HAS BEEN ALLEGE D THAT THE AMOUNT OF RS. 8 CRORES PAID TO M/S. KAY KAY DESIGNERS TOWERS PVT. LTD. OUT OF THE AGREED CONSIDERATION OF RS. 15 CRORES (THE BREAK-UP OF WHI CH WAS RS. 7 CRORES PAID ITA NO. 2296/DEL/2012 11 BY CHEQUE ACCOUNTED IN THE BOOKS OF ACCOUNTS WHILE THE BALANCE RS. 8 CRORES PAID BY CASH) WAS NOT RECORDED. ON THE DAT E OF SEARCH OPERATION SHRI T.S. CHAWLA DIRECTOR OF THE APPELLANT COMPANY DISCLOSED THE AMOUNT OF RS. 8 CRORES WHICH HAS BEEN ACCEPTED BY THE DEPARTM ENT IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT. BEING NOT SATISFIED WIT H EXPLANATION OF THE ASSESSEE THE AO HOWEVER HAS LEVIED PENALTY U/S 271 AAA AT RS. 80 LACS I.E. @ 10% OF THE UNACCOUNTED INCOME. UNDISPUTED FACTS W HICH ARE MATERIAL FOR ADJUDICATING THE ISSUE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF REAL ESTATE, IN HIS STATEMENT U/S 132(4) RS. 8 CROR ES HAS BEEN ADMITTED AS AN UNDISCLOSED INCOME, ON WHICH TAX TOGETHER WITH I NTEREST HAS BEEN PAID. NOW THE QUESTION IS AS TO WHETHER THE ASSESSEE HAS BEEN ABLE TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AN D HAS BEEN ABLE TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED IN COME WAS DERIVED. THE AO IN HIS PENALTY ORDER HAS ALLEGED THAT ASSESSEE H AS FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERI VED. LD. CIT(A) HAS ALLEGED THAT THE ASSESSEE HAS NOT SAID HOW THE UNDI SCLOSED INCOME WAS DERIVED AND IT HAS NOT SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. HE HAS GONE FURTHER IN SAYING A S MERELY STATING IN ITS WRITTEN SUBMISSION THAT THE SUM OF RS. 8 CRORES HA D BEEN DERIVED FROM THE BUSINESS CARRIED ON BY THE ASSESSEE AND WAS THUS A BUSINESS INCOME IS TOO GENERAL AN EXPLANATION TO BE ACCEPTED IT MAY NOT B E NECESSARY FOR HIM TO FURNISH DOCUMENTARY EVIDENCES, YET THE SAME SHOULD AND OUGHT TO HAVE ITA NO. 2296/DEL/2012 12 BEEN DIVULGED IN THE STATEMENT U/S 132(4) OR SUBSEQ UENTLY. NOW WE HAVE TO EXAMINE THE ABOVE ALLEGATIONS OF THE AUTHORITIES BELOW IN VIEW OF THE STATEMENTS OF SHRI J.S. CHAWLA ON THE BASIS OF WHIC H PENALTY HAS BEEN LEVIED. THESE RELEVANT STATEMENTS IN THE FORM OF QU ESTION AND ANSWER REFERRED BY BOTH THE AUTHORITIES ARE AS UNDER :- QUES25:- DO YOU WANT TO SAY ANYTHING ELSE TO THE AB OVE STATEMENT AND THE DOCUMENTS/ ASSETS SEIZED/ FOUND FROM VARIOUS BUSINESS PREMISES. ANS. IT IS TO CLARIFY THAT WE HAVE MADE CONS OLIDATED AN ADEQUATE DISCLOSURES OF RS. 27 CRORES REPRESENTING ADDITIONAL UNACCOUNTED I NCOME EARNED BY VARIOUS ASSESSEE OF THE GROUP. THIS DISCLOSURE OF UNACCOUNTED INCOME IS BEING MADE U1S 132(4) OF L TAX ACT READ WITH EXPLAN ATION 5 TO SECTION 271(II) (C) COUPLED WITH SECTION 27/AAA. I MAY BE A LLOWED THE BENEFITS OF DISCLOSURE MADE ABOVE AS PROVIDED UNDER THE PROVISI ONS OF THE IT ACT AND ANY OTHER PROVISION OF RELEVANT ACT0'HIS DISCLOSURE IS MADE VOLUNTARILY AND IN GOOD FAITH WITH AN UNDERSTANDING THAT NO PENALTY OR PROSECUTION SHALL BE INITIATED! LAUNCHED AGAINST VARIOUS ASSESSEE OF THE GROUP. THE BREAKUP OF THIS DISCLOSURE OF 27CRORES AS DISCUSSED IN THIS ST ATEMENT IS AS UNDER SUBJECT TO ADJUSTMENTS ON THE BASIS OF SEIZED MATERIAL. (I) CASH ANDJEWELLERY 5 CRORES (QNO.-19) (II)) INVESTMENTS 8 CRORES (Q NO.-18) (III) UNEXPLAINED EXPENDITURE/ 4 CROR ES (Q NO.-23 AND 20) INVESTMENTS AS PER LOOSE PAPERS (III) ADJUSTMENT IN SALES VALUE 10 CRORES (Q NO. - 24) TOTAL DISCLOSURES 27 CRORES THE AFORESAID FIGURE OF RS. 5 CRORES AS MENTIONED AT 1 ABOVE INCLUDES UNDISCLOSED INVESTMENT IN JEWELLERY FOUND AND SEIZED FROM THE RESIDENCE OF DEEPAK KUMAR C-275 DEFENCE COLONY NEW DELHI AMOUNTING TO RS. 26 LACS APPROX .. QUES 26 :- DO YOU WANT TO SAY ANYTHING ELSE. ANS. NO SIR, THANKS. ITA NO. 2296/DEL/2012 13 QUES 18 - PAGES 1-11 1 FOUND FROM THE RESIDENCE OF AMAN SHARMA R/O C-, G.K -1, N DELHI (SEIZED AS PER AN NEXURE A IS SHOWN TO YOU WHICH IS AN AGREEMENT OF SALE OF LAND. PLE ASE EXPLAIN THE CONTENTS OF THE SAME. ANS. THE SAID PAPERS ARE AGREEMENT FOR PURCHASES OF AGRICULTURE LAND FOR WHICH INITIAL PAYMENT AGGREGAT ING TO RS. 15 CRORES WAS MADE PRIOR TO 31.03.2008 AS APPARENT FROM TH E SAID AGREEMENT. DUE TO PAUCITY OF FUNDS IN BANKS/BOOKS OF ACCOU NTS A SUM OF RS. 8 CRORE WAS GIVEN AS IMPREST FOR CUSTODY TO THE SEL LER TO EXCHANGE AGAINST CHEQUES ISSUED AGAINST REFUND OF THE SAME. THE SAID CASH MAY BE TREATED AS OUR UNDISCLOSED INCOME FROM THE BUSINESS OPERATIONS, THE EXACT SOURCE AND MANNER SHALL BE INTIMATED SHORT LY. THE CHEQUES TO RS. 8 CRORES SHALL BE ISSUED SHORTLY WHEN FUN DS ARE AVAILABLE IN THE BOOKS OF ACCOUNTS. 11. WE FIND THAT THOUGH NO SPECIFIC QUESTION H AS BEEN RAISED TO SHRI J. S. CHAWLA ABOUT SPECIFICATION OF THE MANNER IN WHIC H SUCH INCOME HAS BEEN DERIVED AND SUBSTANTIATION OF THE MANNER IN WH ICH THE UNDISCLOSED INCOME WAS DERIVED, BUT THE ASSESSEE IN ANSWER TO Q UESTION NO. 18 HAS SPECIFIED THE MANNER THAT THE UNDISCLOSED INCOME WA S FROM THE BUSINESS OPERATIONS. IT IS ALSO AN ADMITTED FACT THAT THE UN DISCLOSED INCOME OF RS. 8 CRORE HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE AS SESSMENT U/S 153A OF THE ACT. WE HAVE GONE THROUGH CERTAIN FOLLOWING DE CISIONS ON AN IDENTICAL ISSUE WHILE DECIDING THE QUESTION IN THE CASE OF NE ERAJ SINGHAL VS. ACIT , ITA NO. 337/D/2013 (ASSTT. 2010-11) ORDER DATED 24 .6.2013. THESE DECISIONS ARE OF HONBLE ALLAHABAD HIGH COURT IN TH E CASE OF CIT VS. RADHA KISHAN GOEL (2005) 278 ITR 454 (ALL) AND HONBLE GU JRAT HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH (2008) 298 ITR 305 (GUJ.). THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RADHA K ISHAN GOEL (SUPRA) HAS BEEN PLEASED TO HOLD THAT U/S 132(4) UNLESS THE A UTHORIZED OFFICER PUTS A ITA NO. 2296/DEL/2012 14 SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WHIC H INCOME HAS BEEN DERIVED, IT IS NOT EXPECTED FROM THE PERSON TO MAKE A STATEMENT IN THIS REGARD AND IN CASE IN THE STATEMENT THE MANNER IN W HICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATED BUT HAS BEEN STATED SUB SEQUENTLY, THAT AMOUNTS TO THE COMPLIANCE WITH EXPLANATION 5(2) TO S ECTION 271(1)(C) OF THE ACT. IT HAS BEEN FURTHER HELD BY THE HONBLE H IGH COURT THAT IN CASE THERE IS NOTHING TO THE CONTRARY IN THE STATEMENT R ECORDED UNDER SECTION 132(4) OF THE ACT, IN THE ABSENCE OF ANY SPECIFIC S TATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, IT CA N BE INFERRED THAT SUCH UNDISCLOSED INCOME WAS DERIVED FROM THE BUSINESS WH ICH HE WAS CARRYING ON AND NOT FROM OTHER SOURCES. THE OBJECT OF THE PR OVISION IS ACHIEVED BY MAKING THE STATEMENT ADMITTING THE NON-DISCLOSURE O F MONEY, BULLION, JEWELLERY, ETC. IT WAS HELD 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 T HE CASE, IN THE ABSENCE OF ANYTHING TO THE CONTRARY. THEREFORE, MERE NON-ST ATEMENT OF THE MANNER IN WHICH SUCH INCOME WAS DERIVED WOULD NOT MAKE EXPL ANATION 5(2) INAPPLICABLE HELD HONBLE HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS . MAHENDRA C. SHAH (SUPRA) FOR A READY REFERENCE RELEVANT EXTRACT OF THE SAID DECISION OF HONBLE GUJARAT HIGH COURT IS REPRODUCED HEREUNDER :- IN SO FAR AS THE ALLEGED FAILURE ON THE PART OF TH E ASSESSEE TO SPECIFY IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT REGAR DING THE MANNER IN ITA NO. 2296/DEL/2012 15 WHICH SUCH INCOME HAS BEEN DERIVED, SUFFICE IT TO S TATE THAT WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHORIZED OFFIC ER IT IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIO NS OF EXPLANATION 5 IN ITS ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTH ORIZED OFFICER CANNOT STOP SHORT AT A PARTICULAR STAGE SO AS TO PERMIT TH E REVENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE STATEMENT. THE REA SON IS NOT FAR TO SEEK. IN THE FIRST INSTANCE, THE STATEMENT IS BEING RECORDED IN THE QUESTION AND ANSWER FORM AND THERE WOULD BE NO OCCA SION FOR AN ASSESSEE TO STATE AND MAKE AVERMENTS IN THE EXACT F ORMAT STIPULATED BY THE PROVISIONS CONSIDERING THE SETTING IN WHICH SUC H STATEMENT IS BEING RECORDED, AS NOTED BY THE ALLAHABAD HIGH COURT IN T HE CASE OF CIT V. RADHA KISHAN GOEL [2005] 278 ITR 454. SECONDLY, CON SIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN AS SESSEE, WHETHER LITERATE OR ILLITERATE, TO BE SPECIFIC AND TO THE P OINT REGARDING THE CONDITIONS STIPULATED BY EXCEPTION NO. 2 WHILE MAKI NG STATEMENT UNDER SECTION 132(4) OF THE ACT. THE VIEW TAKEN BY THE TR IBUNAL AS WELL AS THE 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 SUBST ANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT UN DER EXCEPTION NO. 2 IN EXPLANATION 5 IS COMMENDABLE. THE CUTTAK BENCH OF THE TRIBUNAL IN THE CASE OF ASH OK SHARMA AND OTHERS VS. DCIT (ITA NO. 476 TO 480/CTK/2011 REFERRED IN T HE CASE OF NEERAJ SINGHAL VS. ACIT(SUPRA), HAS OBSERVED THAT PENALT Y U/S 271AAA WAS LEVIED, THE ASSESSEE HAD DISCLOSED HUGE INCOME WHIL E GIVING STATEMENT U/S 132 OF THE ACT DURING THE COURSE OF SEARCH AND HAD PAID TAX THEREON AND THE INCOME SHOWN FROM BUSINESS, DEPARTMENT HAD ACCE PTED THESE RETURNS AND ACCORDINGLY PASSED THE ASSESSMENT ORDER. IT WAS HELD THAT UNDISPUTEDLY THE ASSESSEE HAS SHOWN UNDISCLOSED INCOME UNDER THE HEAD INCOME FROM BUSINESS IN THE RETURNS FILED BY THEM AND THAT WAS ACCEPTED BY THE DEPARTMENT BY PASSING THE ASSESSMENT ACCORDINGLY, T HE CASE OF THE ASSESEE FALLS EXACTLY WITHIN THE PURVIEW OF SUB SECTION 2 O F SECTION 271AAA. THUS THE IMPUGNED PENALTY LEVIED CONTRARY TO THE PROVISIONS CONTAINED IN SECTION ITA NO. 2296/DEL/2012 16 271AAA (2) IS NOT SUSTAINABLE. IT WAS DELETED ACCOR DINGLY. IN THE CASE OF SHRI PRAMOD KUMAR JAIN VS. JCIT (SUPRA) BEFORE TH E CUTTAK BENCH OF THE TRIBUNAL, THE ASSESEE HAD DISCLOSED THE UNACCOUNTED INCOME BUT HAD FAILED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. THE DEPARTMENT LEVIED PENALTY U/S 271AAA AND THE SAME WAS UPHELD BY THE FIRST APPELLATE AUTHORITY. THE TRIBUNAL HAD HOWEVER DELETED THE PENALTY ON THE BASIS THAT THERE IS NO PRESCRIBED METHOD TO IND ICATE THE MANNER IN WHICH INCOME WAS GENERATED WHEN THE DEFINITION OF UNDISCLOSED INCOME HAS BEEN DEFINED IN THE ACT ITSELF WHEN NO INCOME O F THE SPECIFIED PREVIOUS YEAR REPRESENTED EITHER WHOLLY OR PARTLY WHICH O NUS LAY UPON THE ASSESSEE STOOD DISCHARGED. 12. WHEN WE EXAMINE THE FACTS OF THE PRESENT C ASE IN VIEW OF THE ABOVE DECISIONS, WE FIND THAT NO SPECIFIC QUESTION WAS RA ISED BY THE DEPARTMENT DURING THE COURSE OF RECORDING OF STATEMENT U/S 132 (4) OF THE ACT TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AN D TO SUBSTANTIATE IT, INSTEAD THE ASSESSEE IN REPLY TO QUESTION NO. 18 HA S STATED THAT UNDISCLOSED INCOME WAS FROM THE BUSINESS. RESPECTFULLY FOLLOWIN G THE ABOVE DECISION WE HOLD THAT IN ABSENCE OF SPECIFIC QUERY RAISED IN TH IS REGARD, THE ASSESSEE WOULD NOT BE EXPECTED TO SPECIFY THE MANNER IN WHI CH THE SAID UNDISCLOSED INCOME WAS DERIVED AND SUBSTANTIATE IT, STILL THE A SSESSEE HAS SPECIFY THE MANNER SUBSTANTIATION OF WHICH CANNOT BE DISPUTED I N ABSENCE OF ANY ADVERSE FINDING ON THE MANNER EXPLAINED BY THE ASSE SSEE AND ACCEPTED AS ITA NO. 2296/DEL/2012 17 SUCH IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT. WE ARE THUS OF THE VIEW THAT THE AUTHORITY BELOW WERE NOT JUSTIFY IN IMPOSI NG AND SUSTAINING THE PENALTY OF RS. 80 LACS U/S 271 AAA OF THE ACT KEEPI NG IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISCUSSED ABOV E. THE SAME IS DIRECTED TO BE DELETED. THE ISSUE RAISED IN THE GROUNDS IS D ECIDED IN FAVOUR OF THE ASSESSEE IN RESULT RELATED GROUNDS ARE ALLOWED. 13. CONSEQUENTLY APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2013 . SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 8 TH AUGUST, 2013 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT