Santosh Kumar Garg, New Delhi V. DCIT, New Delhi

ITA 267/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5558 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Search and seizure; Share purchase agreement; Documents seized
• Section: 2

Judgement Text

1 ITA NO. 26 7/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.267/DEL/2014 ( A.Y 2009-10) SANOTSH KUMAR GARG 141, 1 ST AND 2 ND FLOOR, SUNDER NAGAR NEW DELHI AANPG3624R (APPELLANT) VS DCIT CENTRAL CIRCLE-5 NEW DELHI (RESPONDENT) APPELLANT BY SH. RAJIV SAXENA, ADV RESPONDENT BY SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21/10/2013 PASSED BY CIT(A)-XXXI, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE PENALTY U/S 271AAA TO THE T UNE OF RS.25,00,000/-. 3. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 31/7/2008 ON THE ASSESSEE COMPANY. THE DOCUMENTS SEIZED CONTAINED T HE SHARE PURCHASE AGREEMENT WHICH WAS AT THE RESIDENCE OF THE BROTHER OF THE ASSESSEE SHRI RAKESH KUMAR GARG. DURING THE COURSE OF SEARCH ACT ION A SURRENDER OF DATE OF HEARING 07.03.2018 DATE OF PRONOUNCEMENT 13.04.2018 2 ITA NO. 26 7/DEL/2014 RS.2,50,00,000/- WAS MADE IN THE NAME OF THE ASSESS EE IN RESPECT OF CASH RECEIVABLES OF RS.2,25,00,000/- ON ACCOUNT OF HOUSE HOLD ITEMS AND EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS COMPLET E DETAILS REGARDING SOURCE OF EXPENSES AND SURRENDER AMOUNT WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD EXPLAINED AND SUBM ITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. AS THE ASSESSEE DID NOT SPECIFY THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED AND ALSO NOT S UBSTANTIATED THE SAME. THEREFORE, PENALTY PROCEEDINGS U/S 271 AAA OF THE I NCOME TAX ACT, 1961 WAS ACCORDINGLY INITIATED VIDE NOTICE DATED 30/12/2010. ANOTHER SHOW CAUSE NOTICE DATED 10/6/2011 WAS ISSUED IN RESPONSE TO WH ICH THE ASSESSEE FILED A REPLY. THE ASSESSING OFFICER HELD THAT THE ASSESSE E FAILED TO SPECIFY THE MANNER IN WHICH UNDISCLOSED INCOME HAD BEEN DERIVED AND NO T SUBSTANTIATED THE SAME. THE ASSESSING OFFICER FURTHER OBSERVED THAT AT THE TIME OF SEARCH AND SEIZURE OPERATION, THE ASSESSEE SURRENDERED INCOME OF RS.2,50,00,000/-. ACCORDINGLY, THE ASSESSING OFFICER IMPOSE PENALTY O F 10% I.E. RS. 25,00,000/-. 4. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE FIL ED BEFORE THE CIT(A). THE CIT(A) DISMISS THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS COMPLETE DETAILS REGARDING SOURCE OF THE CONSTRUCTI ON EXPENSES, STOCK AND SURRENDERED AMOUNT WERE EXPLAINED AND SUBMITTED BY THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT TO AVOID LITIGATION WITH THE DEPARTMENT, THE ASSESSEE VOLUNTARILY DECLARED AND SURRENDERED AMOUNT AS HIS INCOME FOR THE ASSESSMENT YEAR 2009-10 ON THE PRE-CONDITION THAT NO PENALTY P ROCEEDINGS MAY BE INITIATED EITHER IN HIS CASE OR IN THE CASE OF THE OTHER FAMILY MEMBERS. THE LD. AR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 271AAA ARE ATTRACTED ONLY WHEN ANY UNDISCLOSED INCOME IS FOUND DURING THE COU RSE OF SEARCH ACTION AND NO EXPLANATION IS OFFERED REGARDING SOURCE OF SUCH UNDISCLOSED INCOME BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ASSESSEE H AS FULLY EXPLAINED AT THE TIME OF SEARCH THE UNDISCLOSED INCOME AND ALSO DURI NG THE COURSE OF 3 ITA NO. 26 7/DEL/2014 ASSESSMENT PROCEEDINGS. THERE BEING NO MATERIAL AV AILABLE ON RECORD WITH THE DEPARTMENT INDICATING EARNING OF UNDISCLOSED INCOME BY THE ASSESSEE AS WELL AS HIS FAMILY MEMBERS, THE PENALTY PROCEEDINGS CANN OT BE INITIATED AT ALL. THE ASSESSEE DEPOSITED THE TAX ALONG WITH INTEREST ON T HE SURRENDERED AMOUNT IN ORDER TO BY PEACE ON THE UNDERSTANDING THAT NO PENA LTY WOULD BE IMPOSED. THE LD. AR DURING THE COURSE OF HEARING POINTED OUT THA T IN CASE OF BROTHER OF THE ASSESSEE I.E. RAJESH KUMAR GARG, THE TRIBUNAL DELET ED THE PENALTY U/S 271AAA OF THE ACT FOR ASSESSMENT YEAR 2009-10. THE LD. AR ALSO RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. EMIRATES TECHNOLOGIES PVT. LTD. (ITA NO. 400/2017 DATED 18.0 7.2017). 6. THE LD. DR SUBMITTED THAT PENALTY U/S 271AAA LE VIED IN THE PRESENT CASE IS JUST AND PROPER AS THE ASSESSEE FAILED TO S UBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. DR RELIED UPON THE DECISION O F THE ITAT NAGPUR BENCH IN CASE OF ANAND SANCHETI VS. DCIT ITA NO. 305/NAG/201 5 WHERE THE TRIBUNAL UPHELD LEVY OF PENALTY U/S 271 AAA ON THE GROUND TH AT THE ASSESSEE FAILED TO SPECIFY THE MANNER IN WHICH THE SAID INCOME HAD BEE N DERIVED AND ALSO NOT SUBSTANTIATED THE MANNER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE LD. AR DU RING THE COURSE OF HEARING POINTED OUT THAT IN CASE OF BROTHER OF THE ASSESSEE I.E. RAJESH KUMAR GARG, THE TRIBUNAL DELETED THE PENALTY U/S 271AAA OF THE ACT FOR ASSESSMENT YEAR 2009- 10 ITSELF. THE TRIBUNAL HELD AS UNDER:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. ACCORDING TO THE PROVISIONS OF SECTION 271AAA IMMUNITY FROM PENALTY IS AVAILABLE WITH RESPECT TO UNDISCLOSED INCOME OF PREVIOUS YEAR IF THE ASSES SEE MAKES DECLARATION OF THE UNDISCLOSED INCOME IN THE STATEMENT RECORDED U/ S 132(4) OF THE ACT ADMITTING THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FURTHER SUBSTANTIATE TH E MANNER IN WHICH IT WAS DERIVED. OF COURSE, THE TAXES HAVE BEEN PAID THEREO N. IT IS NOT IN DISPUTE HERE 4 ITA NO. 26 7/DEL/2014 THAT THE ASSESSEE HAS ADMITTED IN HIS STATEMENT U/S 132(4) OF THE ACT DURING THE COURSE OF SEARCH AND PAID DUE TAX THEREON. HOWE VER, THE DISPUTE IS THAT ASSESSEE HAS NOT SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN ARRIVED AS WELL AS NOT SUBSTANTIATED THE MANNER OF EARNING SUCH INCOME. IT IS ALSO AN UNCONTROVERTED FACTS THAT ASSESSEE HAS NEVE R BEEN ASKED TO SUBSTANTIATE THE UNDISCLOSED INCOME DECLARED. ASSES SEE HAS CATEGORICALLY DENIED AND THAT HE HAS BEEN ASKED TO SUBSTANTIATE T HE MANNER OF EARNING UNDISCLOSED INCOME AND UNLESS ASKED ASSESSEE DID NO T HAVE ANY OPPORTUNITY TO EXPLAIN IT. REVENUE ALSO COULD NOT EXPLAIN THAT SPECIFIC QUESTION WAS ASKED AND ASSESSEE DID NOT FURNISH THE ANSWER. THE CONDIT ION REGARDING SPECIFYING AND SUBSTANTIATING THE MANNER IN WHICH UNDISCLOSED INCOME HAS BEEN EARNED IS ALWAYS DIFFICULT FOR THE ASSESSEE FOR OBVIOUS RE ASON THAT NO RECORDS OF SUCH INCOME ARE KEPT IN A METICULOUS MANNER. GENERALLY, NO PERSON USUALLY KEEPS THE EVIDENCES OF UNDISCLOSED INCOME WHICH HAS NOT B EEN RECORDED IN THE REGULAR BOOKS OF ACCOUNT. THE HON'BLE GUJARAT HIGH COURT IN CIT VS. MAHENDRA C. SHAH 215 CTR 493 HAS HELD THAT ASSESSEE HAVING DECLARED THE VALUE OF DIAMONDS IN HIS STATEMENT U/S 132(4) AND P AID DUE TAX THEREON, HE WAS ENTITLED TO IMMUNITY FROM PENALTY ACCORDING TO EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. IT IS IMPORTANT TO NOTE THAT IN THAT PARTICULAR SECTION HAS THE REQUIREMENT OF SPECIFYING THE MANNER OF EARNING UNDISCLOSED INCOME. SUCH VIEW IS ALSO TAKEN BY COORDINATE BENCHES IN FOLLOWI NG CASES: A. PRAMOD KUMAR JAIN VS. DCIT 33 TAXMANN.COM 651 B. ASHOK KR. SHARMA VS. DCIT 33 TAXMANN.COM 652 C. RAJRANI GUPTA VS. DCIT ITA NO. 3371/DEL/2011 D. SUNIL KR. BANSAL VS. DCIT 37 ITR (TRIB) 576 E. CIT VS. RADHA KISHAN GOEL 278 ITR 454 F. CONCRETE DEVELOPERS VS. ACIT 34 TAXMANN.COM 62 G. ACIT VS. NANDINI REALTORS ITA NO. 415/NAGPUR/201 5 H. BRIJ BHUSAN SINGHAL VS. ITO 5261/DEL/2013 I. DCIT VS. SULACHANA DEVI AGARWAL 1052/AHD/2012 J. ACIT VS. KANAKIYA SPACES PVT. LTD. 6763/MUM/2011 5 ITA NO. 26 7/DEL/2014 K. NEERAJ SINGHAL VS. ACIT 146 ITD 152. L. ACIT V AJIT SINGH 76 TAXMMANN.COM 212 (JP) 8. COMING TO THE DECISION CITED BY THE LD DEPARTME NTAL REPRESENTATIVE OF ANAND SANCHETI VS. DCIT ITA NO. 305/NAGPUR/2015, WH EREIN IT HAS BEEN HELD THAT THE DECISION OF GUJARAT AND ALLAHABAD HIG H COURT WERE NOT IN REFERENCE PENALTY U/S 271AAA BUT U/S 271(1)(C) OF T HE ACT. WE DO NOT AGREE WITH THE ORDER OF THE SMC IN THE ABOVE CASE AS IN E XPLANATION 5 OF SECTION 271(1)(C) THERE WAS ALSO A REQUIREMENT OF SPECIFYIN G THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED TO OBTAIN THE IMMUNITY. FUR THER THE DECISION RELIED UP ON BY THE LD DR IS ALSO OF SMC WHERE IN THE VIEW S OF COORDINATE BENCHES ARE HEAVILY LOADED IN FAVOUR OF THE ASSESSEE. THERE FORE, ON THE FACTS AND CIRCUMSTANCES OF THE CASES AND RESPECTFULLY FOLLOWI NG VARIOUS DECISION OF COORDINATE BENCHES MENTIONED IN PARA NO 7 ABOVE WE REVERSE THE FINDING OF THE LD CIT (A) AND DIRECT THE LD AO TO DELETE THE P ENALTY U/S 271AAA OF THE ACT 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. THE LD. AR ALSO RELIED UPON THE DECISION OF THE HON BLE DELHI HIGH COURT IN CASE OF EMIRATES TECHNOLOGIES PVT. LTD. WHEREIN THE HONBLE HIGH COURT CONFIRMED THE VIEW OF THE TRIBUNAL (ACIT VS. EMIRAT ES TECHNOLOGIES PVT. LTD. ITA NO. 476/DEL/2014 ORDER DATED 28.10.2016). THE T RIBUNAL HELD AS UNDER: 5.1 IN VIEW OF THE FACTS OF THE PRESENT CASE AND T HE FINDINGS RECORDED BY THE LD. CIT(A) WHICH COULD NOT BE NEGATED BY THE LD . DR, IT IS EVIDENT THAT THE DEPARTMENT HAD NOT RAISED ANY SPECIFIC QUERY REGARD ING THE MANNER IN WHICH THE UNDISCLOSED INCOME HAD BEEN DERIVED. IN ABSENCE OF QUERY ABOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND ABOUT ITS SUBSTANTIATION, IT IS OUR CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 271AAA SPECIALLY, WHEN THE OFF ERED UNDISCLOSED INCOME WAS ACCEPTED BY THE AO AND THE TAX DUE THEREON HAD BEEN PAID BY THE ASSESSEE. WE DRAW OUR STRENGTH FROM THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF NEERAJ SINGAL VS. ACIT IN ITA NO. 337/D EL/2013 REPORTED IN 2015(3) TMI-680-ITAT DELHI, WHICH IS IDENTICAL TO T HE PRESENT CASE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A). 6. IN THE FINAL RESULT, THE APPEAL FILED BY THE DEP ARTMENT IS DISMISSED. THE HONBLE DELHI HIGH COURT WHILE CONFIRMING THE T RIBUNALS VIEW HELD AS 6 ITA NO. 26 7/DEL/2014 UNDER: 3. THE CIT(A) IN PARA 4.7 OF THE ORDER DATED 4 TH NOVEMBER, 2013 NOTED THAT NO SPECIFIC QUERY HAD BEEN PUT TO THE ASSESSEE BY DRAW ING HIS ATTENTION TO SECTION 271 AAA OF THE ACT ASKING HIM TO SPECIFY TH E MANNER IN WHICH THE UNDISCLOSED INCOME, SURRENDERED DURING THE COURSE O F SEARCH, HAD BEEN DERIVED. THE CIT(A), THEREFORE, RELYING ON THE DECI SIONS OF THIS COURT HELD THAT THE JURISDICTIONAL REQUIREMENT OF SECTION 271AAA WA S NOT MET. 4. THE ABOVE VIEW HAS BEEN CONCURRED WITH THE ITAT THE ISSUE CONTESTED IN THE PRESENT APPEAL IS IDENTI CAL WITH THE CASE OF THE BOTHER OF THE ASSESSEE AS WELL AS THE HONBLE HIGH COURT DECISION IN CASE EMIRATES TECHNOLOGIES PVT. LTD. WHEREIN THE PENALTY IMPOSED U/S 271AAA OF THE ACT IS DELETED. IT IS PERTINENT TO NOTE THAT TH E PENALTY PROVISION U/S 271AAA HAS PARTICULARLY GIVEN THE REQUIREMENT OF SPECIFYIN G THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED TO OBTAIN THE IMMUNITY. TH E MANNER IN WHICH SUCH INCOME WAS DERIVED WAS NOT CHALLENGED BY THE REVENU E AUTHORITIES. THUS, THE PENALTY IMPOSED U/S 271AAA OF THE ACT IS DELETED. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2018 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 13/04/2018 R. N* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 7 ITA NO. 26 7/DEL/2014 ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 12/04/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 12/04/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 16.04.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 16.04.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.