M/s Naval K Agarwal, Nagpur V. Asstt.Commissioner of Income-tax Central Circle-1(1), Nagpur

ITA 32/NAG/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7640 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Income from undisclosed sources; Search and seizure; Revised return
• Section: 143(3); 5(2); 32; 132; 139

Judgement Text

1 ITA NO. 32/NAG/2013. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 32/NAG/2013. ASSESSMENT YEAR : 2009 - 10. M/S NAVAL KISHORE AGARWAL, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CENTRAL CIRCLE - 1(1), NAGPUR. PAN AAKPA8834M. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 27 - 03 - 2017. DATE OF PRONOUNCEMENT : 29 TH MARCH, 2017. O R D E R. PER SHAMIM YAHYA, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 15 - 10 - 2012 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE ORDER IMPOSING PENALTY U/S 271AAA IS ILLEGAL, INVALID AND BAD IN LAW. 2. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 1 ERRED IN CONFIRMING PENALTY IMPOSED U/S 271AAA OF INCOME TAX ACT, 1961 BY ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), NAGPUR. 3. THE PENALTY IMPOSED U/S 271AAA IS UNJUSTIFIED, UNWARRANTED & EXCESSIVE. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE INCOME - TAX ACT, 1961 WAS CARRIED OUT ON 28 - 01 - 2009 AT THE BUSINESS PREM ISES OF THE ASSESSEE. ASSESSMENT U/S 143(3) HAS BEEN COMPLETED ON 24 - 12 - 2010 ON THE BASIS OF SEIZED 2 ITA NO. 32/NAG/2013. MATERIAL AND PENALTY INITIATED U/S 271AAA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO HAS OBSERVED THAT THE ASSESSEE HAD DISCLOSED TOTAL ADDITIONAL INC OME OF RS.2,21,00,000/ - ON VARIOUS ACCOUNTS. RS.1,21,00,000/ - WAS DISCLOSED ON ACCOUNT OF NON - VERIFIABLE SUNDRY CREDITORS, RS.50,00,000/ - ON ACCOUNT OF INTRODUCTION OF SHARE APPLICATION MONEY IN HIS COMPANY FUEICO COAL INDIA LTD., RS.30,00,000/ - ON ACCOUNT OF EXCESS CASH AND RS.20,00,000/ - ON ACCOUNT OF CASH SALES. NOTICE OF PENALTY REQUIRING ASSESSEE TO SHOW CAUSE WHY PENALTY U/S 271AAA SHOULD NOT BE LEVIED WAS ISSUED ON 28 - 12 - 2010. DURING THE PENALTY PROCEEDINGS AO HAS HELD THAT THE ASSESSEE COULD NOT S PECIFY THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED AND FURTHER COULD NOT SUBSTANTIATE THE MANNER IN WHICH SUCH INCOME WAS DERIVED. THEREFORE AO HAS LEVIED PENALTY U/S 271AAA OF RS.22,10,000/ - BEING 10% OF THE UNDISCLOSED INCOME OF RS.2,21,0 0,000/ - FOR ASSESSMENT YEAR 2009 - 10. 3. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) NOTED THAT IN A STATEMENT RECORDED U/S 132(4) DURING THE COURSE OF SEARCH ON 30 - 01 - 2004 FROM SHRI NAWAL KISHORE AGRAWAL SPECIFIC QUERIES WERE RAISED REGARDING CERTAIN TRANS ACTIONS. LEARNED CIT(APPEALS) NOTED THAT SHRI NAWAL KISHORE AGRAWAL H A S ST A TED THAT HE WOULD BE GIV ING ALL THESE DETAILS SUBSEQUENTLY. FURTHER LEARNED CIT(APPEALS) NOTED THAT VIDE LETTER DATED 27 - 02 - 2009 THE GROUP CONCERNS HAVE OFFERED ALL UNDISCLOSED INCO ME. LEARNED CIT(APPEALS) OBSERVED T HAT NO DISCLOSURE HAS BEEN MADE AT THE TIME OF STATEMENT RECORDED U/S 132(4). THAT THE LETTER SUBMITTED BY THE ASSESSEE ON 27 - 02 - 2009 BEFORE THE A.D.I. DOES NOT HAVE SAME LEGAL BASIS AS A STATEMENT RECORDED U/S 132(4). LE ARNED CIT(APPEALS) FUR T HER NOTED THAT IN THE SAID LETTER THE MODE OF EARNING SUCH UNACCOUNTED INCOME H A S NOT BEEN SPECIFIED. HENCE HE UPHELD THE PENALTY U/S 271AAA. 4. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNS EL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DULY ADMITTED IN THE COURSE OF 3 ITA NO. 32/NAG/2013. SEARCH THE UNDISCLOSED INCOME AND DULY SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED IN THE STATEMENT BEFORE THE A.D.I. ON 27 - 02 - 2009. THAT THE ASSESSEE HAS HONOURED THE DECLARATION AND PAID TAXES ALONG WITH INTEREST. LEARNED COUNSEL FURTHER REFERRED TO THE ASSESSMENT ORDER WHERE IT IS MENTIONED THAT THE SEARCH COMMENCED ON 28 - 01 - 2009 AND DATE OF CONCLUSION WAS MENTIONED ON 26 - 03 - 2009. HENCE LEARNED COUNSEL SUBMITTED THAT THE DISCLOSURE BY LETTER DATED 27 - 02 - 2009 IS VERY MUCH WITHIN THE PERIOD OF SEARCH. HENCE LEARNED COUNSEL SUBMITTED THAT ADVERSE INFERENCE CANNOT BE DRAWN AGAINST THE ASSESSEE FOR LEVYING PENALTY U/S 271AAA. FURTHER LEARNED COUNSEL PLACED RELIANCE UPON SEVERAL CASE LAWS IN THIS REGARD AS UNDER : 1 . (2008) 299 ITR 0305 (GUJ.) CIT VS . MAHENDRA C . SHAH 2 . ITAT ORDER IN ITA NO.5261/0E1/2013 IN THE CASE OF BRIJ BHUSHAN SINGAL VIDE ORDER DATED 09/03/2015 3 . ITAT ORDER IN ITA NO . 1835/0E1/2013 IN THE CASE OF SITA RAM GUPTA VIDE ORDER DATED 30/06/2014 4. ITAT ORDER IN ITA NO.3372/0E1/2011 IN THE CASE OF MOTHERS PRIDE EDUCATION PERSONNA P . LTD . VIDE ORDER DATED12/1 0/2012 5. ITAT ORDER IN ITA NO . 6763/MUM/2011 IN THE CASE OF M/S . KANAKIA SPACES PVT . LTD . VIDE ORDER DATED 10/07/2013 6. (2012) 149 TTJ 0033 (CTK.) ASHOK KUMAR SHARMA VS . OCIT 7 . (2015) 152 ITO 0453 (CHD . ) ACIT VS . MUNISH KUMAR GOYAL 8 . (2015) 37 ITR (TRIB . ) 0576 (CHD . ) SUNIL KUMAR BANSAL VS . OCIT 9 . ITATORDERIN ITA NO . 711 TO 715/MUM/2011 IN THE CASE OF SHRI UDAY C . TAMHANKAR V I DE ORDER DATED 11/09/2015 4 ITA NO. 32/NAG/2013. 10 . ITAT ORDER IN ITA NO.1433 AND 1432/PN/2013 IN THE CASE OF SHRI ARUN S. AGRAWAL VIDE ORDER DATED 26/06/2015 11 . HON ' BLE BOMBAY HIGH COURT ORDER IN ITA NO . 76 OF 2009 IN THE CASE OF MUKESH OEDUTTA GUPTA VIDE ORDER DATED 03/09/2010 1 6. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. UPON CAREFUL CONSIDERATION WE FIND THAT WE MAY GAINFULLY REFER TO THE PROVISIONS OF SECTION 271AAA : 2 71AAA. 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 TA X, 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, ( 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 - SECTI ON (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 TH E 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 A SEARCH UNDER SECTION 132, W HICH 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 O R COMMISSIONER BEFORE THE DATE OF THE SEARCH; OR 5 ITA NO. 32/NAG/2013. ( 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 ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL C OURSE 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 PREVIOUS YEAR BEFORE THE SAID DATE; OR ( II ) IN WHICH SEARCH WAS CONDUCTED.. A READING OF THE ABOVE MAKES IT CLEAR THAT PENALTY U/S 271AAA WOULD NOT BE ATTRACTED IF THE ASSESSEE IN THE COURSE OF SEARCH MAKES A STATEMENT REGARDING THE ADMISSION OF UNDISCLOSED INCOME, SPECIFIES AND SUB STANTIATE THE MANNER IN WHICH THE INCOME HAS BEEN EARNED AND HAS PAID TAX ALONG WITH THE INTEREST THEREON. IN THE PRESENT CASE WE FIND THAT THE SEARCH COMMENCED ON 28 - 01 - 2009 A ND THE DATE OF CONCLUSION OF THE SEARCH HAS BEEN MENTIONED AS 26 - 03 - 2009. THE AS SESSEE VIDE LETTER DATED 27 - 02 - 2009 HAS GIVEN THE ADMISSION AND GIVEN DETAILS OF UNDISCLOSED INCOME TO THE ADDL. DIRECTOR OF IN COME - TAX . IN OUR CONSIDERED OPINION THIS FACTUAL ASPECT CLEARLY BRINGS OUT THE FACT THAT DURING THE COURSE OF PERIOD OF SEARCH WH EN THE SEARCH WAS SUBSISTING , THE ASSESSEE VIDE LETTER TO THE ADDL. DIRECTOR OF INVESTIGATION HAS GIVEN THE DETAILS OF UNDISCLOSED INCOME. HENCE IN VIEW OF THE AFORESAID FACTS, INFERENCE BY THE AUTHORITIES BELOW THAT THE ASSESSEE HAS NOT DISCLOSED THE IMP UGNED INCOME AT THE TIME OF SEARCH IS NOT SUSTAINABLE. IT IS ALSO NOTED THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS DULY PAID THE TAXES THEREON. FURTHER THE LEARNED CIT(APPEALS) HAS DRAWN ADVERSE INFERENCE THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE MAN NER IN WHICH THE UNDISCLOSED INCOME WAS EARNED. IN THIS REGARD WE NOTE THAT THE ASSESSEE HAS DULY DISCLOSED IN THE LETTER REGARDING THE INCOME BEING OFFERED FOR TAXATION AS UNDISCLOSED INCOME WHICH IS AS UNDER : 6 ITA NO. 32/NAG/2013. I) SHARE APPLICATION IN FUELCO FOR FY 2008 - 09 RS. 74,50,000 II) CASH SALES NOT RECORDED IN NAWALKISHOR AGRAQWAL FY 2008 - 09 RS. 20,00,000 III) ASSETS MORE THAN LIABILITIES & CAPITAL OF SHRI NAWAL KISHOR AGRAWAL FY 2008 - 09 RS. 30,00,000 IV) SUNDRY CREDITORS NOT VERIFIABLE IN SHRI SHYAM COAL SER VICES RS.1,21,00,000 8. FROM THE ABOVE WE FIND THAT THE NATURE AND MANNER IN WHICH THE UNDISCLOSED INCOME IS EARNED IS AMPLY EXHIBITED. FURTHER WE NOTE THAT THERE IS NO QUERY WHATSOEVER HAVING BEEN ASKED BY THE REVENUE AUTHORITIES AT ANY STAGE OF THE SEARCH OR ASSESSMENT TO FURTHER SPECIFY THE MANNER OF EARNING THE UNDISCLOSED INCOME OR SUBSTANTIATION THEREOF. IN THIS REGARD WE NOTE THAT THE PROVISIONS OF SECTION 271AAA HAS ENORMOUS SIMILARITIES TO SECTION 271(1)(C) READ WITH EXPLANATION 5. IN THIS CONNECTION WE MAY GAINFULLY REFER TO DECISION OF ITAT DELHI E BENCH IN ITA NO. 337/DEL/20013 IN THE CASE OF NEERAT SINGAL VS. ACI T ORDER DATED 24 - 06 - 2013 WHEREIN IT WAS HELD AS UNDER : THE RELEVANT OPERATIVE PART OF THIS ORDER READS THUS: - '11. WHEN WE COMPARE EXPLANATION 5 TO SECTION _2 7 1 ( L) OF THE ACT WITH THE PROVISIONS LAID DOWN U/S 271AAA OF T H E ACT WE FIND A LOT OF SIMILARITY THEREIN UNDER WHICH PE NA LT Y IS NOT ATTRACTED IN A CASE OF SEARCH ON THE UNDISCLOSED I NC O ME. AS PER EXPLANATION 5 TO SECTION 271 (1) OF THE ACT IF HE A S SESSEE IN THE COURSE OF SEARCH MAKES A STATEMENT UNDER SUB SE CTION (4) O F SECTION 132 THAT ANY MONE Y, B ULLION , IEW E L L E RY OR OTHER VALUABLE ARTICLE OR THINGS FOUND IN HIS PO SS ES SION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INC O ME WHICH HAS NOT BEEN DIS C LOSED SO FAR IN HIS RETURN OF . IC O ME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB SEC TION (1) OF SECTION 139 AND ALSO 7 ITA NO. 32/NAG/2013. SPECIFIES IN THE S TA TE ME NT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAY S THE TAX, TOGETHER WITH INTEREST, IF ANY , IN RESPECT OF SUCH INC OME , THEN THE ASSESSEE FOR SUCH INCOME W ILL NOT BE DE E M ED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURN ISH E D INACCURATE PARTICULARS OF SUCH INCOME TO ATTRA C T THE PEN A LT Y THEREIN . SIMILARL Y UNDER THE PROVISIONS OF SECTION 271 AA A OF THE ACT PENALTY IS NOT LEVIABLE WHERE SEARCH HAS BEEN ITA N O - 3371DEL/2013 8 INITIATED U/S 132 ON OR AFTER 1 .6.2 007 BUT BEFORE 1.7.2012 , AND THE ASSESSEE IN THE COURSE OF S E ARC H , IN A STATEMENT UNDER THE SUB SE C TION 4 OF SECTION 1 32 , ( I ), ADMITS THE UNDIS C LOSED INCOME (II) SPECIFIES AND S U BS T A NTIAT E S THE MANNER IN WHICH SUCH INCOME HAS BEEN DE RI V E D , AND (IIII) PAYS THE TAX TOGETHER WITH INTEREST, I F AN Y , IN RE S PEC T OF THE UNDIS C LOSED INCOME . FROM THE READING OF BOTH T HES E PE NAL PROVI S IONS WE FIND THAT ONE REQUIREMENT IS COMMON O R N ON ATTRACTION OF THE PENAL PRO V ISIONS ' UNDER BOTH THE SEC TIO NS I. E . (F THE ASSESSEE IN HIS STATEMENTS RECORDED U/S 1 3 2 ( 4 ) OF THE ACT ADMITS THE UNDIS C LOSED INCOME AND SPECIFIES IN THE S TAT E MENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DE RI V E D AND PA Y S THE TAX TOGETHER WITH INTEREST , IF AN Y , IN RE PEC T OF S UCH INCOME. THE ONL Y ADDITIONAL REQUIREMENT IN THE EA E O F S E CTION 271AAA IN THIS REGARD IS THAT THE ASSESSEE WILL AL SO H AV E TO SUBSTANTIATE THE MANNER IN WHICH THE UNDIS C LO S ED INC OME W AS DERIVED BESIDES SPECIFICATION OF THE MANNER IN WH IC H S UC H INCOME WAS DERIVED . THE OTHER DIFFERENCE IS IN THE AP PLIC ATI ON OF THE PROVISIONS UNDER BOTH THE SECTIONS. THE PE NA L P RO V ISION U/S 271 (L) UNDER EXPLANATION 5 TH E RETO IS A P PLIC A BLE IN SUCH CASES WHERE SEARCH U/S 132 WAS INITIATED B EF O R E 1 . 6 . 2007 WHEREAS U/S 271AAA , THE PROVISIONS THEREIN AR E A P PLI C ABLE IN A CASE WHERE SEARCH U/S 132 OF THE A C T HAS B E E N INI TIATED ON OR AFTER 1.6.2007 BUT BEFORE 1.7.2012. THU S T HE IN T E N TION OF THE LEGISLATURE IS C LEAR TO THIS EXTENT THAT IN A CA SE W H E REIN SEARCH WAS INITIATED BEFORE 1.6.2007 , PROVISIONS U/ S 27 1 ( L) WILL BE APPLICABLE AND IN SEAR C H INITIATED AFTER 1 .6 .20 07 ( BUT BEFORE 1.7.2012) PROVISIONS U/S 271AAA OF THE ACT W I LL B E APPLICABLE . THESE PROVISIONS ARE THUS NOT AP PLIC A BL E S IMULTANEOUSL Y BUT THESE ARE PERIOD SPECIFI C. AS DI SC US S E D ABOVE , THE ONL Y ADDITIONAL REQUIREMENT FOR NON [ F RAC TIO N OF PENAL PROVISION U/S ' 271AAA OF THE ACT IN CO M PA R I S ON TO THIS U/S 271 (L) IS THAT BESIDES SPECIF Y ING THE M A NNE R IN W HICH THE ADMITTED AN UNDIS C LOSED INCOM E HAS BEEN D E RIV E D , TH E ASSESSEE WILL ALSO HAVE TO SUBSTANTIATE THIS M A N NE R . IN VIEW OF THIS RELATIVE STUD Y OF BOTH THE PROVISIONS HE N W E G O THROUGH THE DECISIONS RELIED UPON B Y THE LD. AR , E F IN D THAT IN THE C ASE OF ACIT VS . GE B ILAL KANHIALAL (HUF ) ( S UPRA) BEFORE THE HON ' BLE SUPREME COURT THE KARTA OF . THE A S SE SEEE HUF HAD 8 ITA NO. 32/NAG/2013. MADE A STATEMENT U/S 132 (4 )ADMITTING ITA NO. 337 /DEL/2013 9 CONCEALED INCOME IN THE C OURSE OF SE ARC H AN D SPE C IFIED THE MANNER IN WHICH SUCH IN C OME S TOOD DE RIV E D . IN THIS STATEMENT THE KARTA ALSO SURRENDERED AN AMO U NT O F R S . 42 , 32 , 000/ - . THE KARTA HOWEVER NEITHER FILED RETURN OF INCOME ULS 139 (1) ON DUE DATE NOR PAID DUE TAX ON THE SURRENDERED INCOME . LATER ON HE ALSO RETRACTED FROM HIS STATEMENT RECORDED ULS 132(4) ABOUT SURRENDER. THE HON' BLE SUPR E ME COURT AFTER DELIBERATING IN DETAIL ON DIFFER E NT E X PLANATIONS TO SECTION 271 ( 1) HAS BEEN PLEASED TO HOLD THAT THE ASSESSEE WAS ENTITLED TO IMMUNIT Y U NDER C LAUSE (2) OF E X PLANATION 5 TO SECTION 271 (1) OF THE ACT. IN THAT CASE FA ILURE TO FILE RETURN OF INCOME ON 31 ST JULY 1987 AND FAILURE TO PAY TAX THEREON WAS THE MERE REASON RELIED UPON B Y THE DE PARTMENT TO DENY TO THE ASSESSEE THE BENEFIT OF IMMUNI T Y U N D E R C LAUSE (2) OF E X PLANATION 5 TO SECTION 271 ( 1) OF THE A C T . A CC ORDING TO THE DEPARTMENT THE ASSESSEE HAD C OMPLIED W ITH ALL THE CONDITIONS OF C LAUSE 2 OF EXPLANATION 5 E X CEPT PA Y MENT OF TAX IN TIME. HON'BLE SUPREME COURT PLEASED TO H OL D THAT NO TIME LIMIT HAS BEEN PRESCRIBED FOR PA Y MENT OF TAX UN DE R C LAUSE 2 OF E XPLANATION 5 AND THE ASSESSEE HA V ING PAID T AX UPTO THE DATE OF PA Y MENT IN RESPECT OF THE UNDIS C LOSED I NC O M E SURRENDERED B Y IT IN THE COURSE OF SEARCH , ALL THE THREE C O ND ITIONS LAID DOWN I N CLAUSE 2 OF EXPLANATION 5 TO S EC TION 271 ( 1 ) STOOD FULFILLED AND THEREFORE THE ASSESSEE IS ENTITLED TO I M MU NIT Y UNDER CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1) OF THE ACT. IN THE CASE OF CIT VS. RADHA KISHAN GOEL (SUPRA) BEF O RE THE HON ' BL E ALLAHABAD HIGH COURT THE ISSUE RAISED W AS AS TO W H E THER MERE NON - STATEMENT OF MANNER IN W HI C H U N D ISC LOSED INCOME WAS DERI V ED WOULD MAKE EXPLANATION 5 (2) OF SE CT ION 271(1) INAPPLICABLE. THE FURTHER QUESTION RAISED A AS TO W HETHER IN A CASE MANNER IN W HICH INCOME HAS BEEN DERIV E D HAS NOT BEEN STATED IN THE STATEMENT U/S 132(4 ) BUT IS AC TED S UBSEQUENTLY, THAT AMOUNTS TO COMPLIANCE WITH E XP L ANA TION 5 (2) TO SE C TION 271 (1) AND NO PENALT Y WOULD B E LE VI AB LE UNDER SAID SECTION .. BOTH THESE QUESTIONS HA V E B EEN REPLIED IN A FFIRMATIVE IN THE DECISION OF THE H ON' BLE ALLAHABAD HIGH COU RT. AS PER THE DECISION MERE NON STATEMENT OF MANNER W H I C H UN DISCLOSED WAS DERIVED WOULD NOT MAKE EXPLANATION TO SEC TION 271(L) INAPPLI C ABLE. SIMILARL Y IN A CASE MANNER I N W HICH INCOME HAS BEEN ITA NO - 3371DEL/2013 10 DERIVED D HA S NOT BEEN STATED IN STATEMENT ULS 132(4) BUT IS STA T ED SU B S EQUENTL Y THAT AMOUNTS TO C OMPLIAN C E W ITH EXPLANATION 5 (2) TO SE C TION 271 ( 1 ) AND NO PENALT Y W O U LD B E LEVIABLE . SIMILARL Y IN THE CASE OF CIT V S . MAHENDRA G. SHAH BEFORE T HE HON' BLE GUJARAT HIGH COURT THE BASIC REQUIREMENT FOR IM M UNITY FORM THE LE VY OF PENALT Y UNDER EXPLANATION 5 TO SECTION 271 ( 1 ) OF THE ACT HAS BEEN DISCUSSED AS PER W HI C H T HE FIRST REQUIREMENT IS DISCLOSURE IN STATEMENT MADE U/S 132(4) AND PAYMENT OF 9 ITA NO. 32/NAG/2013. TAX BEFORE THE ASSESSMENT WAS C O MPLETED. FOLLOWING RATIO LAID DOWN IN THIS DECISION OF H O N 'BLE GUJARAT HIGH COURT, PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF DCFT VS. SHRI INDERCHAND SURAJMAL BOTHRA (SUPRA) W HE REIN PENALTY U/S 271(1) WAS LEVIED HELD THAT IT IS NOT RE QUIRED TO SPECIFY THE MANNER IN WHICH THE INCOME WAS E AR NED IN RESPECT OF THE AMOUNT OFFERED TO TAX IN THE RETURN OF I NC OME FILED TO SEARCH ACTION BY PAYING TA XES THEREON FOR A D OPTING IMMUNITY FROM PENALTY UNDER EXPLANATION 5 OF S EC T ION 271(A) (C) OF THE ACT. THE CUTTAK BENCH OF THE TRIBUNAL IN THE CASE OF SHRI ASHOK KUMAR SHARMA (HUF) AND OTHERS VS. DCIT (SUPRA) WHEREIN PENALTY U/S 271 AAA WAS LEVIED THE A S ES EE HAD DISCLOSED CONCEALED INCOME WHILE GIVING S T ATE MENT U/S 132 OF THE ACT DURING THE COURSE OF SEARCH AND HA D PAID THE TAX THEREON AND SHOWED THE SAID UNDIS C LOSED INC O ME FILED UNDER THE HEAD 'INCOME FROM BUSINESS' AND DE PA RTMENT HAD ACCEPTED THESE RETU RNS AND ACCORDINGLY PASSED THE ASSESSMENT ORDER. PENALTY U/S 271AAA WAS LEVIED. IT WAS HE LD THAT UNDISPUTEDLY THE ASSESSEE HAD SHOWN THE UNDISCLOSED INC O ME UNDER THE HEAD 'INCOME FROM BUSINESS' IN THE RETURNS F ILE D B Y THEM AND THAT WAS ACCEPTED BY THE DEPARTMENT B Y PAS S ING THE ASSESSMENT ORDERS ACCORDINGLY, THEREFORE THE CASE OF THE ASSESSEE FALLS EXACTLY WITHIN THE PURVIEW OF SUB SECTION 2 OF SE C TION 271AAA. THUS THE IMPUGNED PENALTY LEVIED CONTRARY TO TH E PROVISIONS CONTAINED IN SECTION 271AAA (2) IS NOT SUS TA INABLE. THE PENALTY WAS ACCORDINGLY DELETED. IN THE CASE OF SH RI PRAMOD KUMAR LAIN AND ANOTHER VS. LCFT (SUPRA) BEF O R E THE CUTTAK BENCH OF THE TRIBUNAL, THE ASSESEE HAD DISC LOS ED THE UNACCOUNTED INCOME BUT HAD FAILED TO SPECIF Y THE MAN NE R IN WHIC H SUCH INCOME HAD BEEN DERIVED. THE DEP AR TM E NT ACCORDINGL Y LEVIED PENALTY U/S 271AAA OF THE ACT. THE SA ME ITA NO - 337/DEL/2013 11 WAS UPHELD BY THE FIRST AP P E LLATE AUTHORITY. THE TRIBUNAL HAS HOWEVER DELETED THE PE NA LT Y ON THE BASIS THAT THERE IS NO PRESCRI BED METHOD TO IN ID I C ATE THE MANNER IN WHICH INCOME WAS GENERATED WHERE THE DE F IN I T I ON OF 'UNDISCLOSED INCOME' HAS BEEN DEFINED IN THE ACT I T ELF W H E N NO INCOME OF THE SPECIFIED PREVIOUS YEAR R EPR ES ENTED 'EITHER WHOLLY OR PARTLY ' WHICH ONUS LAY UPON THE ASS E SS EE STOOD DISCHARGED. THE DELHI BENCH OF THE TRIBUNAL IN R , RE CE NT DECISION IN THE CASE OF MOTHER PRIDE EDUCATION PERSO N NA PVT. LTD , .VS. DCIT (SUPRA) WHILE PLACING RELIANCE ON , EA RL I E R DECISION IN THE CASE OF SMT. RAJ RANI GUPTA (SUPRA) AND FOLLOWING T HE RATIO OF THE DECISION OF HON'BLE HIGH COURTS IN THE CASE OF CIT VS. RADHI KISHAN GOEL (SUPRA) (ALL) AND CIT V S. MAHENDRA C . SHAH (SUPRA) (GUJ) HAS DELETED THE PENALTY. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. 10 ITA NO. 32/NAG/2013. RADHA KISHAN GOEL (SUPRA) HAS BEEN PLEASED TO HOLD THAT U/S 132(4) OF THE I . T. ACT 1961 UNLESS THE AUTHORIZED OFFICER PUTS SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED, IT IS NOT EXPECTED FROM THE PERSON TO MAKE A S TATE MENT IN THIS REGARD AND IN CASE IN THE STATEMENT THE M ANNER IN WHICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATED BUT HAS BEEN STATED SUBSEQUENTLY, THAT AMOUNTS TO THE C OMPLIANCE WITH EXPLANATION 5 (2) TO SECTION 271 (1) (C) OF T HE ACT. IT WAS FURTHER H ELD THAT IN CASE THERE IS NOTHING TO THE C ONTRARY IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT IN THE A BSENCE OF ANY SPECIFIC STATEMENT ABOUT THE MANNER IN WHICH S U CH INCOME HAS BEEN DERIVED, IT CAN BE INFERRED THAT SUCH U NDISCLOSED INCOME WAS DERIV ED FROM THE BUSINESS WHICH HE W AS CARRYING ON OR FROM OTHER SOURCES. THE OBJECT OF THE P ROVISION IS ACHIEVED BY MAKING THE STATEMENT ADMITTING THE N O N - DISCLOSURE OF MONEY, BULLION, JEWELLERY ETC. IT WAS THUS HE LD THAT MUCH IMPORTANCE SHOULD NOT BE ATTA CHED TO THE S TA T E MENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN D E RIVED. IT CAN BE INFERRED ON THE FACTS AND CIRCUMSTANCES OF T HE CASE, IN ABSENCE OF ANYTHING TO THE CONTRARY. THEREFORE, M E R E NON STATEMENT OF THE MANNER IN WHICH SUCH INCOME WAS DE RI V ED WOULD NOT MAKE EXPLANATION 5 (2) INAPPLICABLE, HELD TH E HON' BLE HIGH COURT. 12 . THE HON 'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M A H E NDRA C . SHAH HAS BEEN PLEASED TO HELD AS UNDER : - I N SO FAR AS THE ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO S PEC IF Y IN THE STATEMENT U/S 132(4) OF THE INCOME TAX ACT 1961 RE GA RDING THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED , S U F FICE IT TO STATE THAT WHEN THE STATEMENT IS BEING RECORDED B Y THE A UTHORI Z ED OFFICER IT IS INCUMBENT UPON THE AUTHORIZED OFF I C E R TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ITS ENTIRETY OF THE ASSESSEE CONCERNED AND THE AUTHORI Z ED OFFICER C ANNOT STO P SHORT AT A PARTICULAR STAGE SO AS TO PERMIT THE REVENUE TO T AK E AD VANTAGE OF SUCH A LAPSE IN THE STATEMENT. THE REASON IS NO T F AR TO SEEK. IN THE FIRST INSTANCE, THE STATEMENT IS BEING REC O RDED IN THE QUESTION AND ANSWER FORM AND THERE WOULD BE NO OC C ASION OF AN ASSESSEE TO STAGE AND MAKE AVERMENTS IN THE E XAC T FORMAT STIPULATED B Y THE PROVISIONS CONSIDERING THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED, AS NOTED BY THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RADHA KISHAN GOEL (2005) 278 ITR 454. SECONDLY, CONSIDERING THE ILLITERATE, TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS 11 ITA NO. 32/NAG/2013. STIPULATED BY EXCEPTION NO.2 WHILE MAKING STATEMENT U/S 132(4) OF THE INCOME TAX ACT , 1961. THE VIEW TAKEN BY THE TRIBUNAL AS W ELL AS THE ALLAHABAD HIGH COURT TO THE EFFECT THAT EVEN I F THE S TATEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLARED AND TAX THEREON PAID, THERE W OULD BE SUBSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER D E NIAL OF THE BENEFIT UNDER EXCEPTION NO.2 IN EXPLANATION 5 IS C OMMENDABLE. ' 13 . IN THE PRESENT CASE BEFORE US DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 4.3.2010 CERTAIN DOC UMENTS RELATING TO THE TRANSACTIONS IN PROPERTIES U N DERTAKEN BY THE ASSESSEE WERE FOUND AND SEIZED AS PER PAGE N OS. 4 & 5 OF ANNEXU RE A3 IN SR4. AS PER SUCH PAPERS THE AS SE SSEE HAD AN OUTSTANDING SUM OF RS. 3 CRORE AND RS. 6 C RO R E FROM VARIOUS PERSON WHICH WAS DULY DISCLOSED AS A DD ITIONAL INCOME FOR ASSTT. YEAR 2010 - 11 WHILE MAKING STA TE MENT U/S 132(4) OF THE ACT. IN ADDITION, AS PER PAGE NO. 6 OF A NNEXURE A3 IN SR4 THE ASSESSEE HAD PAID IN CASH A SUM OF RS . 17,86,57,781/ - FOR PURCHASE OF LAND BY BHUSHAN STEEL LIM IT ED (HOWEVER AT THE TIME OF STATEMENT RECORDED IT WAS ITA NO - 3 37/DEL/2013 13 INADVERTENTLY MENTIONED AS BHUSHAN E NE RGY LTD.) WHICH WAS ALSO DECLARED AS ADDITIONAL INCOME FOR THE ASS TT. YEAR 2010 - 11 WHILE MAKING A STATEMENT U/S 132(4) OF THE AC T. AS PER THE SAID STATEMENT THE ASSESSEE HAD ADMITTED THAT HE HAD ENTERED INTO VARIOUS FORWARD/SPECULATIVE AND PR O PE RT Y TRANSACTIO N DURING THE PERIOD FROM 1 . 4.2009 TO 4.3.2010. 20 10. KEEPING IN VIEW THE SAME AN INCOME OF RS. 125 C RO RE S ARISING OUT OF THE SAID TRANSACTIONS WAS DECLARED IN THE STA TE ME NT RECORDED DURING THE COURSE OF SEARCH WHICH INCLUDED THE S AID AMOUNT AS UNDISCLOSED. SUBSEQUENTLY THE TAXES DUE THEREON WE RE ALSO PAID AND THE SAME INCOME DECLARED IN THE RETURN 1 O F INCOME FILED FOR THE A SSESSMENT YEAR 2010 - 11 WAS ALSO ACC E PTED BY THE DEPARTMENT. 14. ON H A V ING GONE THROUGH THE QUERY RAISED WHILE RE CORDING ST A TE MENT OF ASSESSEE U/S 132(4) OF THE ACT , WE FIND SUBS TA NC E IN THE CONTENTION OF THE LD. AR THAT NOWHERE THE AUTHORIZED ED OFFICER HAS ASKED A SPECIFIC QUESTION WITH REGARD TO THE M A N NER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED. THE RELEVANT QUESTIONS ARE QUESTION NOS. 4,5,6 AND 7. FOR A READ Y REFERENCE THESE QUESTIONS AND REPL Y BY THE ASSESEE THERETO ARE BEING REPRODUCED HEREUNDER: - 4 FOR FACILITY OF REFERENCE AND AS IN AID FOR FURTHER ANALYSIS AND DISCUSSION THE RELEVANT PART OF THE STATEMENT RECORDED DURING THE COURSE 12 ITA NO. 32/NAG/2013. OF SEARCH IS AS FOLLOWS: - Q 4 . I AM DRAWING YOUR ATTENTION TO ANNEXURE A - 3 AT PAGE NO - 6. PLEASE GO THROUGH THE SAME AND EXPLAIN THE CONTENT THEREOF? ANS. THIS PAPER DEPICTS DETAILS REGARDING PURCHASE OF VARIOUS LANDS ON VARIOUS DATES BY MLS BHUSHAN ENERGY LTD IN KOLKATA. AS MENTIONED IN THIS PAPER IN THE ENTIRE TRANSACTION AN AMOUNT OF RS. 1786577811 - WAS PAID IN CASH ON 0210512009. THIS CASH WAS PAID OUT OF MY OWN UNACCOUNTED ITA NO - 3371DE112013 14 FUNDS WHICH WAS NEVER I DISCLOSED FOR TAXATION PURPOSE. I HEREB Y ACCEPT THE ABOVE AMOUNT TO BE MY UNACCOUNTED INCOME IN THE SHAPE OF INVESTMENT IN THE CURRENT FINANCIAL YEAR AND THE SAME IS OFFERED FOR TAXATION. Q5. I AM DRAWING YOUR ATTENTION TOWARDS ANNEXURE A - 3 AT PAGE NO - 5 FOUND FROM YOUR RESIDENCE, PLEASE EXPLAIN TO WHOM THIS PAPER BELONGS AND UNDER WHOSE HAND WRITING THIS HAS BEE N WRITTEN. PLEASE GO THROUGH THE SAME AND EXPLAIN THE C ONTENT THEREOF? ANS. YES, I ACCEPT THAT THIS SHEET OF PAPER WAS FOUND FROM M Y BE D ROOM AT THIS PREMISE, I OWN THIS PAPER AND ALL THE CONTENTS OF THIS PAPER ARE WRITTEN BY ME ONLY. THE NOTINGS ON THIS PAPER DE PI C TS THE FACT THAT I HAVE ADVANCED CERTAIN AMOUNTS TO SOME PE RSON ON DIFFERENT DATES. THE DETAILS OF WHICH IS FURNISHED BE LOW: - LIS T OF ADVANCES OUTSTANDING ON 31.01.2010 A TM A RAM 11 . 0 CR SH H I V PRAKASH 15 . 0 CR D EV ENDER KUMAR 17.0 CR PRE M SINGH 6.0 CR KUN DAN SINGH NEGI 9.5 CR PRE MBIR SINGH 5.5 CR S U RE INDER SINGH 5 CR ------------ 69.0 CR THIS IS THE AMOUNT GIVEN BY ME TO THE ABOVE PERSONS DURING THE CURRENT FINANCIAL YEAR OUTSTANDING AS ON 31.01.2010. Q.6 WHAT IS THE SOURCE OF THIS AMOUNT OF R. 69 CRORES? ANS. THE ABOVE AMOUNT OF RS.69 CRORES IS MY UNACCOUNTED INCOME FOR THE CURRENT FINANCIAL YEAR GENERATED FROM UNDISCLOSED SOURCES. BY MEANS OF ITA NO.337/DEL/2013 15 T HIS STATEMENT I HEREBY ACCEPTED THE 13 ITA NO. 32/NAG/2013. ABOVE AMOUNT OF RS. 69 CR TO BE MY UNACCOUNTED INCOME FRO M THE CURRENT F Y AND OFFER IT FOR TAXATION. Q.7. I AM DRAWING YOUR ATTENTION TOWARDS ANNEXURE - A - 3 AT PAGE NO - 4 FOUND FROM YOUR RESIDENCE. PLEASE EXPLAIN TO WHOM THIS PAPER BELONGS AND UNDER WHOSE HAND WRITING THIS HAS BEEN WRITTEN. PLEASE GO THROUGH THE SAME AND EXPLAIN THE CONTENT THEREOF? ANS. YES, I ACCEPT THAT THIS SHEET OF PAPER BELONGS TO ME, I OWN THIS PAPER AND ALL THE CONTENTS OF THIS PAPER HAVE BEEN WRITTEN BY ME ONLY. THE NOTINGS ON THE PAPER DEPICTS THE FACT THAT I HAD ADVANCED AN AMOUNT OF RS .3.0 CR ON 9.6.2009 FOR THE PURPOSE OF PURCHASE OF PROPERTY AT Q1 - A, HAUZ KHIAS ENCLAVE, NEW DELHI. IN RESPECT OF THIS AMOUNT I HEREBY STATE THAT THIS AMOUNT IS MY UNACCOUNTED INCOME NOT OFFERED FOR TAXATION FOR THE CURRENT FINANCIAL YEAR. ON THE BASIS OF MY REPLY TO QUESTIONS 5,6 AND 7 I REITERATE TO HAVE ACCEPTED A TOTAL AMOUNT OF RS. 90CR (RUPEES NINETY CRORES ONLY TO BE MY UNACCOUNTED INCOME FOR THE CURRENT FINANCIAL YEAR, WHICH I HEREBY OFFER FOR TAXATION. 15. WE FIND FURTHER THAT VIDE ITS REPLY DATED 03.6.2010, ADDRESSED TO THE ASSTT. DIRECTOR OF INCOME TAX (INVESTIGATION) AND DATED 25/7/2011 AND 20/6/2012 TO THE ASSTT. COMMISSIONER OF INCOME TAX THE ASSESSEE HAS TRIED TO EXPLAIN THE UNDISCLOSED INCOME OF RS. 125 CRORES SURRENDERED BY THE ASSESSEE IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT. THE CONTENTS OF PARA NO.1 & 2 OF THE LETTER DATED 25.7.2011 ARE BEING REPRODUCED HEREUNDER : - (1) WITH REGARD TO YOUR HONOURS QUERY REGARDING INCOME OF RS.125 CRORES FOR F.Y. 2009 - 10 DISCLOSED DURING T COURSE OF SEARCH U/S 132, IT IS SUBMITTED THAT DURING THE COURSE OF THE SAID SEARCH AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 04 MARCH 2010 CERTAIN DOCUMENTS RELATING TO TRANSACTIONS IN P RO PE RTI E S UND E RTAK E N B Y HIM WE RE FOUND A S P E R PAG E NO S. 4 & - O F A NN EX UR E A - 3 IN SR - 4. A S P E R TH E SA ID P A P E R S TH E A LSSE SSEE HAD AN OUTSTANDIN G OF A S UM OF RS . 3, 00 , 00 , 000/ - A ND RS. 69, 00,000/ - FROM V ARIOU S P E RSONS W HI C H WE R E D EC LAR E D AS A D DITIO N A L IN C OM E O F AIY 2010 - 1 \ 2011 W HIL E MAKIN G A S TA T E ME NT U/S 132 ( 4) O F TH E IN C OME - TA X A C T , 1961 . IN ADDITI O N, A PER PA GE N O - 6 OF ANNE X URE A - 3 IN SR - 4 , TH E ASS ES S EE HAD P A ID IN C A S H A SUM OF R S . 17 , 86 , 5 7 ,7811 - FOR PUR C H ASE O F L A ND B Y M / S BHUSHAN ST E EL LIMIT E D HO WE V E R , AT TH E TIM E O F S TA T E ME N T R E CORD E D IT W A S INAD VE RT E NTL Y M E NTION E D AS M/ S BH USHAN ENER GY LTD , W HICH W A S AL S O D EC LAR E D AS A DDITIO N AL I NCO ME F O R A . Y 2 010 - 2011 W HIL E MAKIN G A S TAT E M E NT U/ S 13 2 ( 4) OF TH E IN C OM E - TA X - A C T , 1961. (2) AS P E R TH E STAT E M E NT RE C ORD E D DURIN G TH E C OUR SE O F SEA R C H T HE ASSESSEE HIM SE LF HAD ADMITTED TH A T H E H A D E N TE R E D I N T O V A RIOUS FOR W ARD/SPE C ULATIV E 14 ITA NO. 32/NAG/2013. TRANSACTIONS AND ALSO TRANS AC TI O N S RE LATE D T O PR O P E RTI ES DURIN G THE P E RIOD F R OM 1/4/2009 T O 4 / 3/2 010 I.E . FINAN C I A L Y EA R 2009 - 2010 R E L EVA NT TO A SSE S S M E NT YEA R 2 01 0 - 2 011. TH E SA ID TR A N SAC T IO N S WE R E CA RRI E D O U T IN AN U NO RGA NI ZE D M A N NER A ND N EI TH E R A N Y ACCO UNTIN G R ECO RD S NOR A NY D OC UM E NTAR Y EV ID E N CE /SUPPO R T IN R ES P EC T OF T RANS A C TIONS/A C TIVITI E S CARRI E D OUT WER E MAINTAINED. TH E O NL Y DOC UME NT A R Y E VID E N CE IN RESP E CT OF TH E S AID TRANS AC TION W A S A S PE R T H E PA GE NO S. 4 , 5 & 6 O F ANN EX U RE - A - 3 IN SR - 4 A ND N O O THE R DE T A IL E D R ECO RD OF TRAN S A C TIONS WE R E EI TH E R M A IN TA IN E D O R PRESE R VE D. K EE PIN G IN V I EW TH E S ITUATI O N M E NTI O N E D A B OVE, T HE I N CO M E O F ITA N O - 33 7/DEL/2013 1 7 R S. 125 , 00 , 000/ - AR ISI N G OUT OF TH E SAID TRANSACTIONS W AS DE C LAR E D IN THE ST AT E ME NT R EC ORD E D DURIN G TH E CO UR SE OF SE AR C H U/ S 132 W HI C H INC LU D E D TH E S AID AMOUNT A S PER PA GE NO S . 4 , 5 & 6 O F AN NEXU R E A - 3 IN SR - 4 . SUB SE QU E NTL Y, TH E TA XE S DU E TH E R EON W E R E A L S O PAID AND TH E SAID IN C OM E D EC LAR E D IN TH E R ET URN O F I NC O M E FIL E D FOR A . Y 2010 - 11. 1 6 . IN VIEW OF ABOVE FACTS OF THE PRESENT CASE WHEREFROM IT IS EV ID E NT THAT DURING THE COURSE OF SEARCH PROCEEDINGS THE A UT HORI ZE D OFFICER OF THE DEPARTMENT HAD NOT RAISED AN Y SP EC IFI C QU E RY REGARDING THE MANNER IN WHICH TH E UNDIS C LOSED I N C O M E HAS BE E N D E RI V ED AND ON TH E CONTRAR Y THE ASSESS E E HAS T RIE D TO E X PLAIN THE EARNING OF THE UNDIS C LOSED INCOME IN Q UE STION IN ITS R E PLY DURING TH E COURSE OF RECORDING OF HIS S TA T E MENT U/S 132(4) OF THE ACT AND THEREAFTER. WE THUS RE S P E CTFULL Y FOLLOWING THE RATIO OF ABOVE CITED DECISIONS OF HON ' BLE ALLAHABAD HIGH COURT AND HON ' BLE GUJARAT HIGH COURT HOLD THAT IN ABSENCE OF QUERY RAISED B Y THE AUTHORI Z ED OF FICER DURING THE COURSE OF RECORDING OF ST ATEMENT ULS 132 (4) A BOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DE RIVED AND ABOUT ITS SUBSTANTIATION, THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY ULS 271AAA OF THE ACT SPECIALLY WHEN THE OF FERED UNDISCLOSED INCOME HAS BEEN ACCEPTED AND DUE T AX T H E REON HAS BEEN PAID BY THE ASSESSEE. WE THUS WHILE SETTING AS IDE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD DIRECT THE A O TO DELETE THE PENALTY OF RS. 12,50,00 , 0001 - LEVIED ULS 2 71AAA OF THE ACT. THE GROUND IS ACCORDINGL Y ALLOWED. ' 9. FURTHER MORE WE MAY ALSO REFER TO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF RADHA KISHAN GOEL 278 ITR 454 A S UNDER : UNDER SECTION 132(4) OF THE INCOME TAX ACT, 1961, IT IS THE AUTHORIZED OFFICER, WHO EXAMINES ON OATH ANY PERSON, WHO IS FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUNTS, DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING, THEREFORE, I T IS FOR THE AUTHORIZED OFFICER TO RECORD THE STATEMENT IN HIS OWN WAY. THEREFORE , IT IS NOT EXPECTED FROM THE PERSON TO 15 ITA NO. 32/NAG/2013. STATE THOSE THINGS , WHICH ARE NOT ASKED BY THE AUTHORIZED OFFICER . IT IS A MATTER OF COMMON KNOWLEDGE , WHICH CANNOT BE IGNORED THAT THE SEARCH IS BEING CONDUCTED WITH THE COMPLETE TEAM OF THE OFFICERS CONSISTING OF SEVERAL OFFICERS WITH THE POLICE FORCE . USUALLY TELEPHONE AND ALL OTHER CONNECTIONS ARE DISCONNECTED AND ALL INGRESS AND EGRESS ARE BLOCKED. DURING THE COURSE OF SEA RCH PERSON IS SO TORTURED HARASSED AND PUT TO A MENTAL AGONY THAT HE LOSES HIS NORMAL MENTAL STATE OF MIND AND AT THAT STAGE IT CANNOT BE EXPECTED FROM A PERSON TO PRE - EMPT THE STATEMENT REQUIRED TO BE GIVEN IN LAW AS A PART OF HIS DEFENCE . IN THESE CIRCUMSTANCES , WE ARE OF THE VIEW THAT UNDER SECTION 132(4) OF THE INCOME TAX ACT, 1961 UNLESS THE AUTHORIZED OFFICER PUTS A SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED , IT IS NOT EXPECTED FROM THE PERSON TO MAKE A STATEME NT IN THIS REGARD AND IN CASE IN THE STATEMENT THE MANNER IN WHICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATED BUT HAS BEEN S TATED SUBSEQUENTLY , THAT AMOUNTS TO THE COMPLIANC E WITH EXPLANATION 5(2) OF THE INCOME TAX ACT, 1961. WE ARE ALSO OF THE OPINION T HAT IN CASE E THERE IS NOTHING TO THE CONTRARY IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE INCOME TAX ACT , 1961 , IN THE ABSENCE OF ANY SPECIFIC STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED , IT CAN BE INF E RRED THAT SUCH UNDISCL OSED INCOME WAS DERIVED FROM THE BUSINESS WHICH HE WAS CARRYING ON OR FROM OTHER SOURCES. THE OBJECT OF THE PROVISION IS ACHIEVED BY MAKING THE STATEMENT ADMITTING THE NON DISCLOSURE OF MONEY , BULLION, JEWELLERY ETC . THUS , WE ARE OF THE OPINION THAT MUCH IMPORTANCE SHOULD 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. THEREF ORE, MERE NON STATEMENT OF THE MANNER IN WHICH SUCH INCOME WAS DERIVED WOULD NOT MAKE EXPLANATION 5(2) INAPPLICABLE. 10. AGAIN HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH 298 ITR 305 HAS HELD AS UNDER : , 'IN SO FAR AS THE ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO SPECIFY IN THE STATEMENT UNDER SECTION 132(4) OF THE INCOME TAX ACT, 1 961 REGARDING THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, SUFFICE IT TO STATE THAT WHEN THE STATEMENT IS BEING RECORD ED BY THE AUTHORIZED OFFICER IT IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ITS ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTHORIZED OFFICER 16 ITA NO. 32/NAG/2013. CANNOT STOP SHORT AT A PARTICULAR STAGE SO AS TO PERMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE STATEMENT. THE REASON 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 OCCASION FOR AN ASSESSEE TO STAGE AND MAKE AVERMENTS IN THE EXACT FORMAT STIPULATED BY THE PROVISIONS CONSIDERING THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED , AS NOTED BY THE ALLAHABAD HIGH COURT IN THE CASE OF CFT VS. RADHA KISHAN GOEL (2005) 278 ITR 454. SECONDLY , CONSIDERING THE ILLITERATE, TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATED BY EXCEPTION NO. 2 WHILE MAKING STATEMENT UNDER SECTION 132(4) OF THE INCOME TAX ACT, 1 961. THE VIEW TAKEN BY THE TRIBUNAL AS WELL AS THE ALLAHABAD HIGH COURT TO THE EFFECT THAT EVEN IF THE STATEMENT DO E S 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 COMMENDAB LE. 11. WE MAY ALSO REFER TO THE DECISION OF ITAT, NAGPUR BENCH IN THE CASE OF M/S NANDINI REALITORS PVT. LTD. IN ITA NO. 415/NAG/2014 WHEREIN VIDE ORDER DATED 05 - 052016 IT WAS HELD AS UNDER : ' WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH THE FACTS NARRATED HEREIN ABOVE ARE NOT IN DISPUTE THAT A SEARCH ULS 132 WAS CONDUCTED AND THEREUPON IT WAS FOUND THAT THE ASSESSEE HAS PURCHASED A LAND AS PER THE REGISTERED DEED WHEREIN THE CONSIDERATION M ONEY WAS RS.2,75,65,0001 - . A STATEMENT ULS 132(4) WAS RECORDED AND AFTER CONFRONTING WITH THE EVIDENCES AN AMOUNT OF RS . 2 CRORES WAS OFFERED BEING CASH CONSIDERATION OVER AND ABOVE THE SALE CONSIDERATION MENTIONED IN THE REGISTERED DEED. AS A CONSEQUEN CE A REVISED RETURN WAS FILED. THE ASSESSMENT WAS COMPLETED U / S 143(3) AND THE INCOME WAS ASSESSED AT RS.2,15,60,6201 - . WE HAVE BEEN INFORMED THAT THE SURRENDERED AMOUNT U/S 132(4) WAS ACCEPTED AS SUCH BY THE AO. THERE IS NO DISPUTE THAT THE TAX ON THE AMOUNT OFFERED HAD ALSO BEEN PAID BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE MENTIONED ADMITTED FACTS WE HAVE PERUSED THE PROVISIONS OF SECTION 271AAA WHICH HAS PROVIDED THAT A PENALTY AT THE RATE OF 10% IS TO BE LEVIED ON THE AMOUNT OF UNDISCLOSED INC OME FOUND AS A CONSEQUENCE OF SEARCH ULS 132 OF LT. ACT . HOWEVER, VIDE SUB - SECTION (2) AN EXCEPTION IS ALSO PROVIDED THAT IN A SITUATION WHEN THE OFFER IS MADE OF THE UNDISCLOSED INCOME ULS 132(4) OF LT. ACT AND IT IS SPECIFIED THE MANNER 17 ITA NO. 32/NAG/2013. IN WHICH THE INCOME WAS EARNED AND DULY SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND THAT THE TAX WITH INTEREST WAS PAID THEN OUT OF THE AMBITS OF PENALTY PROVISIONS. FURTHER IT HAS ALSO - BEEN BROUGHT ON RECORD THAT THE INCOME OFFERED WAS DULY DISCLOSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE MANNER IN WHICH THE INVESTMENT WAS MADE HAS ALSO BEEN DULY INCORPORATED IN THE ACCOUNTS, MOREOVER THE TAX WAS PAID HENCE WE HEREBY HOLD THAT THE LEARNED CIT(APPEALS) HAS RIGHTLY HELD THAT THE ' QUESTION OF LEVY OF PENALTY U / S 271AAA WAS OUT OF THE SCOPE OF SUB - SECTION (1) BUT WITHIN THE AMBITS OF ' THE EXCEPTION PRESCRIBED UNDER SUB - SECTION (2) OF THE SAI D SECTION. RESULTANTLY THE VIEW TAKEN BY THE LEARNED CIT(APPEALS) IS HEREBY CONFIRMED. 12. NOW WE EXAMINE THE PRESENT CASE ON THE TOUCH STONE OF ABOVE SAID CASE LAWS. WE FIND THAT DURING THE COURSE OF SEARCH THE ASSESSEE HAS DULY DISCLOSED THE UNDISCLOSED INCOME. THE NATURE THEREOF HAS BEEN DULY EXHIBITED AS MENTIONED ABOVE. NO FURTHER QUERY WHA TSOEVER HAS BEEN ASKED BY THE REVENUE REGARDING FURTHER CLARIFYING THE MANNER OF EARNING OF INCOME OR SUBSTANTIATING THE SOURCE THEREOF. IN THESE CIRCUMSTANCES, THE RATIO FROM THE ABOVE CASE LAWS IS CLEARLY APPL IED . IN THE ABOVE CASES THE RATIO CLEARLY EMA NATES THAT WHERE THE ASSESSEE WAS NOT ASKED ABOUT THE MANNER IN WHICH THE INCOME WAS EARNED AND WHEN HE WAS NOT ASKED TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME WAS ARRIVED, PENAL PROVISIONS OF SECTION 271AAA ARE NOT ATTRACTED. WE FIND THAT THE CASE OF PRESENT ASSESSEE IS EVEN ON A BETTER FOOTING AS THE DETAIL OF UNDISCLOSED INCOME HAS BEEN DULY SPECIFIED WITH THE NATURE AND AMOUNT THEREOF. NO FURTHER QUESTION REGARDING THE MANNER IN WHICH INCOME WAS EARNED AND NO QUESTION WAS ASKED TO FURTHER S UBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME W A S ARRIVED AT. HENCE FOLLOWING THE ABOVE CASE LAW S WE HOLD THAT T H E ASSESSEE IN THIS CASE CANNOT BE HELD LIABLE FOR PENALTY U/S 271AAA. ACCORDINGLY WE SET SIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY. 18 ITA NO. 32/NAG/2013. 13. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MARCH, 2017. SD/ - SD/ - (RAM LAL NEGI) ( SHAMI M YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 29 TH MARCH, 2017. COPY FORWARDED TO : 1. M/S NAVAL KISHORE AGARWAL, C/O M/S DEWANI BROS., ADVOCATES, 1 - AJANTA, CHHINDWARA ROAD, NAGPUR - 440 013, 2. AC.I.T., CENTRAL CIRCLE - 1(1), NAGPUR. 3. CIT(APPEALS) - (C), NAGPUR. 4. C.I.T. - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTR AR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.