ACIT CEN CIR 11, MUMBAI V. PRAKASH STEELAGE LTD, MUMBAI

ITA 5221/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88202 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 5221/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) ASST. CIT, CENTRAL CIRCLE-13, ROOM NO.1006, 10 TH FLOOR, OLD CGO ANNEXE BLDG., MUMBAI-400 020 / VS. PRAKASH STEELAGE LTD. 101, 1 ST FLOOR, SHANTRUNJAY APTS., 28, SINDHI LANE, N. D. ROAD, MUMBAI-400 004 ! ./' ./PAN/GIR NO. AAACP 6673 K ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI PREMANAND J. $%!# & ' / RESPONDENT BY : DR. K. SHIVRAM & MS. NEELAM C. JADHAV () * & + / DATE OF HEARING : 12.11.2014 ,-. & + / DATE OF PRONOUNCEMENT : 28.01.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-37, MUMBAI (CIT(A) FOR SH ORT) DATED 31.05.2012, ALLOWING THE ASSESSEES APPEAL CONTESTING THE LEVY OF PENALT Y U/S.271AAA OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEA R (A.Y.) 2009-10 VIDE ORDER DATED 29.06.2011. 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE MAINTAINABILITY OR OTHERWISE IN LAW, AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE , OF THE DELETION OF THE PENALTY LEVIED 2 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. U/S.271AAA OF THE ACT BY THE LD. CIT(A) VIDE HIS IM PUGNED ORDER, WHICH IS IN FACT A COMBINED ORDER FOR A.YS. 2004-05, 2008-09 AND 2009- 10. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THERE WA S A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT IN THE CASE OF PRAKASH STEELAGE GROUP OF COMPANIES, OF WHICH THE ASSESSEE- COMPANY FORMS A PART, ON 09.02.2009 . SEVERAL INCRIMINATING MATERIALS WERE FOUND, LEADING TO A DISCLOSURE OF UNDISCLOSED INCOME OF RS .15,00,21,000/- FOR THE ENTIRE GROUP VIDE STATEMENT U/S.132(4) DATED 06/3/2009 , TO BE APPROPRIATED BY THE ASSESSEE AMONGST THE VARIOUS GROUP CONCERNS. THE DISCLOSURE IN THE C ASE OF THE ASSESSEE WAS FOR A.YS. 2008-09 AND 2009-10, AT RS.49,21,666/- AND RS.99,13 ,210/- RESPECTIVELY. THE ASSESSEE SUBSEQUENTLY FILED ITS RETURN OF INCOME FOR THE REL EVANT YEAR ON 29.11.2009, DECLARING A TOTAL INCOME OF RS.7,52,43,818/-. ITS ASSESSMENT WA S COMPLETED U/S.143(3) ON 31.12.2010, DETERMINING THE TOTAL INCOME AT RS.7,55,90,450/-, I .E., AT AN INCREASE OF RS. 3,46,632/- OVER THAT RETURNED, ALSO INITIATING PENALTY PROCEED INGS U/S.271AAA VIDE NOTICE U/S.274 OF EVEN DATE. THE SAME WAS SUBSEQUENTLY LEVIED AT RS.6 6,52,232/-, BEING 10% OF THE UNDISCLOSED INCOME OF RS.6,65,22,317/-, DETAILED AS UNDER, INCLUDED IN THE ASSESSED INCOME OF RS.755.90 LACS: A) UNDISCLOSED INTEREST INCOME DECLARED BY THE ASSESSEE RS.99,13,210/- B) UNDISCLOSED INCOME RELATING TO STOCK RS.5,62,62 ,475/- C) UNDISCLOSED INCOME RELATING TO STOCK RS.3,46,632 /- DISCREPANCY IN APPEAL, THE LD. CIT(A) DELETED THE PENALTY ON T HE BASIS OF A FINDING AS TO SUBSTANTIAL COMPLIANCE (OF THE PROVISION), NOT WARR ANTING ANY FURTHER DENIAL OF BENEFIT OF EXPLANATION 5A TO SECTION 271(1)(C), WHICH IS WORDED SIMILAR TO EXPLANATION 5, AFTER NOTING THE DECISION IN THE CASE OF CIT VS. MAHENDRA C. SHAH [2008] 299 ITR 305 (GUJ). AGGRIEVED, THE REVENUE IS IN APPEAL, RAISING THE FO LLOWING TWO GROUNDS, WHICH WE MAY NUMBER AS 1 & 2: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY ORDER U/S.271A AA RELYING ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT V S. MAHENDRA SHAH 299 3 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. ITR 205 (GUJ) WITHOUT APPRECIATING THE FACT THAT TH E DECISION RELIED UPON WAS NOT SQUARELY APPLICABLE IN THE INSTANT CASE AS IT RELATED TO EXPLANATION 5A OF SECTION 271(1)(C) AND NOT U/S.271AAA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO FULFILL THE PR ECONDITIONS STIPULATED IN SECTION 271AAA PARTICULARLY THE CONDITION U/S.271AA A(2)(II) OF THE I.T. ACT. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 AT THE OUTSET, WE OBSERVE, EVEN AS WOULD BE APP ARENT FROM THE FOREGOING NARRATION OF EVENTS, AND AS ALSO SOUGHT TO BE BROUGHT FORTH B Y THE REVENUE PER ITS FIRST GROUND OF APPEAL, THAT THE LD. CIT(A) HAS GROSSLY MISAPPLIED HIMSELF IN THE MATTER; EXAMINING THE LEVY OF PENALTY UNDER A PROVISION (SECTION 271(1)(C )) WHICH WAS NEITHER INVOKED BY THE ASSESSING OFFICER (A.O.) NOR COULD IN FACT BE IN TH E FACTS AND CIRCUMSTANCES OF THE CASE. PENALTY IN THE INSTANT CASE STANDS LEVIED U/S.271AA A, WHICH READS AS UNDER: PENALTY WHERE SEARCH HAS BEEN INITIATED. 271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANY THING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR A FTER THE 1ST DAY OF JUNE, 2007 BUT BEFORE THE 1ST DAY OF JULY, 2012, THE ASSE SSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM , A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF T HE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y 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 SPEC IFIES 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) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN R ESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). (4) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, S O FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION . 4 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, ( A ) UNDISCLOSED INCOME MEANS ( I ) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESE NTED, 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, WHICH HAS ( A ) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NOR MAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR ( B ) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHI EF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEA RCH; OR ( II ) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESE NTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAIN ED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YE AR 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 TH E DATE OF FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) O F SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SE ARCH 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. 4.2 THE MATTER STANDS DEALT WITH BY THE LD. CIT(A) VIDE SUB-PARA 6 OF HIS ORDER, WHICH STANDS PERUSED BY US. PARA 6.1.1 RECORDS THE ASSESS EES GROUNDS BEFORE HIM. SUB-PARA 6.2 NOTES BRIEFLY THE FACTS OF THE CASE AND THE BASIS O F THE LEVY OF PENALTY AS RECORDED BY THE A.O. SUB-PARA 6.3 REPRODUCES THE ASSESSEES SUBMISS IONS BEFORE THE LD. CIT(A). VIDE SUB-PARA 6.4.1, THE LD. CIT(A) RECORDS HAVING CONSI DERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. SUB-PARA 6.5 DETAI LS HIS DECISION, WHICH WE MAY REPRODUCE AS UNDER: 6.5.1 PENALTY U/S.271AAA HAS BEEN LEVIED BY THE L D. A.O. ON THE FOLLOWING UNDISCLOSED INCOME /ADDITIONS:- 5 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. A. UNDISCLOSED INTEREST INCOME DECLARED BY THE ASS ESSEE OF RS.99,13,210/- B. UNDISCLOSED INCOME RELATING TO STOCK OF RS.5,62, 62,475/- DECLARED BY THE ASSESSEE AND ADDITION DUE TO DISCRE PANCY IN STOCK OF RS.3,46,632/-. 6.5.2 LD. A.O. HAS INITIATED PENALTY U/S.271AAA ON LY BECAUSE THE APPELLANT COULD NOT SPECIFY THE MANNER IN WHICH SUC H INCOME HAD BEEN DERIVED AND FAILED TO SUBSTANTIATE THE SAME. IN THI S REGARD, IT IS PERTINENT TO LOOK INTO THE PROVISIONS OF SEC.271AAA, RELEVANT PA RT OF WHICH ARE AS UNDER:- (I) IN THE COURSE OF THE SEARCH IN A STATEMENT UNDE R SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED INCOME WAS DERIVED; AND . 6.5.3 IT MAY ALSO BE PROFITABLE TO REFER TO EXPLAN ATION 5A SUBSTITUTED BY THE FINANCE ACT, 2009 W.R.E.F. 01.06.2007 WHICH IS AS UNDER:- WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SE CTION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF- (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABL E ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM B Y UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PREVIOUS YEA R; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRE SENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND (A) WHETHER THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FO R SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETU RN, 6 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB- SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 6.5.4 ON PERUSAL OF THE SAME IT IS TO BE SEEN THAT AN EXPLANATION HAS BEEN PROVIDED IN THE AFORESAID PROVISIONS ON FULFILLMENT OF WHICH PENALTY IS NOT TO BE LEVIED. THE SAME BEING: 1. A STATEMENT IS MADE U/S. 132(4) ADMITTING THE U NDISCLOSED INCOME, 2. SPECIFYING THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND 3. THE ASSESSEE PAYS THE TAX TOGETHER WITH INTERES T, IF ANY, ON THE SAME. 6.5.5 I FIND THAT THE APPELLANT HAS ALREADY MADE A STATEMENT ADMITTING THE UNDISCLOSED INCOME AND ALSO STATED THAT IT HAS PAID ALL THE TAXES TOGETHER WITH INTEREST ON THE SUM OFFERED FOR TAXATION IN TH E STATEMENT U/S.132(4) AS REFLECTED IN THE RETURN OF INCOME FILED FOR THE YEA R. THE APPELLANT GROUP HAS ALSO STATED DURING AND IMMEDIATELY AFTER THE SEARCH THAT THE INCOME OF THE GROUP WAS EARNED FROM UNDISCLOSED BUSINESS BASED ON THE ENTRIES FOUND IN THE SEIZED DOCUMENTS. WHILE DEALING WITH SIMILAR CI RCUMSTANCES, IN RESPECT OF EXPLANATION-5 TO SEC. 271(1)(C) WHICH ALSO CONTA INED SIMILAR REQUIREMENTS OF DISCLOSING THE MANNER IN WHICH THE INCOME WAS EARNED AND SUBSTANTIATING THE SAME HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAHENDRA SHAH 299 ITR 305 (GUJ.) HAS HELD AS UNDER: (PARAS 7 TO 15 OF THE DECISION STAND REPRODUCED) 6.5.6 IN VIEW OF THE ABOVE, IT IS CLEAR THAT EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER IN WHICH INCOME IS DERIVED BUT T HE INCOME IS DECLARED AND TAX THEREON IS PAID, THERE WOULD BE SUBSTANTIAL COMPLIANCE NOT WARRANTING ON FURTHER DENIAL OF THE BENEFIT UNDER E XPLANATION 5A TO SEC. 271(1)(C) WHICH IS SIMILARLY WORDED AS EXPL. 5. IN VIEW OF THE SAME, I AM OF THE CONSIDERED OPINION THAT PENALTY IMPOSED U/S.271 AAA IS NOT WARRANTED IN THE FACTS OF THE CASE. ACCORDINGLY, THE SAME IS DIRECTED TO BE CANCELLED. 4.3 THE INGREDIENTS OF SECTION 271AAA, FOR WHICH RE FERENCE MAY BE MADE TO SUB- SECTIONS (1) AND (2) THEREOF, AND WHICH PROVISION O NLY IS APPLICABLE FOR THE CURRENT YEAR 7 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. THE YEAR OF SEARCH (S. 271AAA(1) R/W EXPLANATION THERETO), AND IN FACT APPLIED BY THE A.O., VARY SUBSTANTIALLY FROM THAT OF SECTION 271(1 )(C) ( EXPLANATION 5), NOTED AT PARA 6.5.4 OF THE IMPUGNED ORDER, INASMUCH AS THE FORMER PROVIDES FOR SUBSTANTIATION OF THE MANNER IN WHICH THE UNDISCLOSED INCOME, AS DISCLOSE D PER S. 132(4), IS DERIVED BY THE ASSESSEE. IN FACT, THE LD. CIT(A) RECORDS THE INGRE DIENTS OF EXPLANATION 5 TO SECTION 271(1)(C) AT PARA 6.5.4 OF HIS ORDER, WHILE EXPLANATION 5A TO S. 271(1)(C) ALONE IS RELEVANT FOR A SEARCH INITIATED U/S.132 ON AND AFTER 01.06.2 007, AS IN THE INSTANT CASE; THE FORMER APPLYING ONLY IN CASE OF A SEARCH INITIATED BEFORE 01.06.2007. EVEN THE DECISION RELIED UPON BY HIM (AT PARA 6.5.5), I.E., MAHENDRA C. SHAH (SUPRA), IS ONLY IN THE CONTEXT OF SECTION 271(1)(C). THE TWO SECTIONS, I.E., S. 271(1 )( C) AND S. 271AAA, ARE NOT ONLY WORDED DIFFERENTLY, WITH THUS DIFFERENT CONCOMITANT SCOPES, ARE RATHER MANDATED TO OPERATE EXCLUSIVELY (REFER SECTION 271AAA(3)). THE FOREGOING, WE BELIEVE, WOULD BRING FORTH THE BASIS AS WELL AS THE VALIDITY OF OUR INIT IAL OBSERVATION AT PARA 4.1 OF THIS ORDER, I.E., OF THE LD. CIT(A) HAVING GROSSLY MISAPPLIED H IMSELF IN THE MATTER. WE, THEREFORE, ACCEPTING THE REVENUES GROUND # 1, VACATE THE FIND INGS BY THE LD. CIT(A) AS WELL AS HIS CONSEQUENT DECISION AS RECORDED IN THE CONCLUDING S UB-PARA (# 6.5.6) OF HIS ORDER. THE SAME, HOWEVER, WOULD NOT BY ITSELF IMPLY A POSI TIVE SATISFACTION OF THE CONDITIONS OF SECTION 271AAA, ONLY ON THE BASIS OF WHICH THE PENALTY AS LEVIED COULD BE SUSTAINED. THE MATTER WOULD THEREFORE; THE LD. CIT( A) HAVING EXAMINED THE LEVY ON THE BASIS AND ANVIL OF A DIFFERENT PROVISION, REQUIRE B EING RESTORED BACK TO HIM FOR A CONSIDERATION AFRESH, I.E., THE ISSUE ON MERITS, AN D TOWARD WHICH THE REVENUE HAS RAISED ITS GROUND NO. 2 BEFORE US. WE, ACCORDINGLY, RESTOR E THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO ADJUDICATE THE ISSUE ARISING, I.E., THE A PPLICABILITY OF S. 271AAA IN THE FACTS OF THE CASE, AND AFTER ALLOWING THE ASSSESSEE AN OPPOR TUNITY TO STATE ITS CASE BEFORE HIM. 4.4 IN THIS REGARD, WE ALSO CONSIDER IT RELEVANT TO STATE OUR PRIMA FACIE OBSERVATIONS, SO THAT THE SAME ARE KEPT IN VIEW BY THE LD. CIT(A) WH ILE DECIDING THE ASSESSEES CASE BEFORE HIM. FIRSTLY, ANY INCOME TO BE SUBJECT TO PENALTY U /S.271AAA SHOULD BE AN UNDISCLOSED INCOME, AS DEFINED VIDE EXPLANATION BELOW SUB-SUBSECTION (4) THE SAID SECTION. THE 8 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. PENALTY IN THE INSTANT CASE, HOWEVER, HAS BEEN LEVI ED ON THE INCOME OF RS.3,46,632/-, WHICH, AS IT WOULD APPEAR TO US ON A READING OF THE ASSESSMENT AND PENALTY ORDER, IS ONLY ON ACCOUNT OF A DIFFERENCE IN THE VALUATION OF STOC K. THUS A FINDING AS TO THE IMPUGNED INCOMES BEING UNDISCLOSED INCOMES IS A PRE-REQUISIT E FOR THE APPLICATION OF THE PROVISION. FURTHER, EACH OF THE THREE INGREDIENTS AS SPECIFIED U/S. 271AAA(2) WOULD NEED TO BE SEPARATELY EXAMINED FOR THEIR SATISFACTION BY TH E ASSESSEE IF THE PENALTY THERE-UNDER IS NOT TO BE LEVIED AND, THUS, SUSTAINED. WHILE THIS M AY SEEM AXIOMATIC AND, THEREFORE, SUPERFLUOUS FOR US TO BE STATING SO, LIABLE TO BE C ONSTRUED AS AN EXPRESSION OF OVER ANXIETY, WE DO SO AS WE OBSERVE A GROSS OVERLOOKING OF THIS VITAL ASPECT OF THE MATTER. AS WE OBSERVE, THE UNDISCLOSED INCOME OF RS.562.62 LACS R ELATING TO STOCK WAS DECLARED BY THE ASSESSEE, I.E., FOR THE FIRST TIME, ONLY PER ITS RE TURN OF INCOME FILED ON 29.11.2009, AND NOT PER THE DECLARATION VIDE A STATEMENT/DEPOSITION U/S .132(4) OF THE ACT; THE DISCLOSURE FOLLOWING SEARCH EXTENDING ONLY TO AN INCOME OF RS. 99.13 LACS, I.E., BY WAY OF INTEREST. THE ONLY FINDING BY THE LD. CIT(A) IN THE MATTER IS THAT VIDE PARA 6.5.5 OF HIS ORDER, WHICH STATES OF TAX AND INTEREST HAVING BEEN PAID ON THE INCOMES OFFERED U/S. 132(4), AND WHICH FIND DUE REFLECTION IN THE RETURN OF INCOME. THE ON LY INCOME, OF THE THREE INCOMES UNDER REFERENCE, WHICH SATISFIES THIS REQUIREMENT, IS THE INTEREST INCOME, I.E., PRESUMING THAT THE MANNER OF ITS DERIVATION STANDS ALSO SPECIFIED. THE ADMISSION U/S.132(4) IS TO SPECIFY THE UNDISCLOSED INCOME, OR AT LEAST THE MANNER IN WHICH IT IS TO BE ARRIVED AT; THE WHOLE PREMISE FOR EXTENDING IMMUNITY FROM THE PENALTY, ST ATUTORILY MANDATED, BEING THAT THE ASSESSEE COMMITS HIMSELF, PROVIDING THE NECESSARY D ETAILS UNDER A CONDITION OF OATH. FURTHER, SURPRISINGLY AGAIN, WE OBSERVE NO FINDING BY THE LD. CIT(A) IN RESPECT OF SUBSTANTIATION OF THE MANNER OF DERIVING THE UNDISC LOSED INCOME, WHICH STIPULATION, WHILE MISSING IN SECTION 271(1)(C), STANDS INCORPORATED I N SECTION 271AAA. THE A.O. CLEARLY RECORDS A FINDING, BOTH IN RESPECT OF THE ASSESSEE HAVING FAILED TO SPECIFY THE MANNER IN WHICH THE UNDISCLOSED INCOME IS DERIVED AS WELL AS OF THE ASSESSEE HAVING FAILED TO SUBSTANTIATE THE SAME, AND WHICH IN FACT THE LD. CI T(A) NOTES VIDE PARA 6.5.2 OF HIS ORDER. CLEARLY, THESE FINDINGS OF FACT WOULD NEED TO BE AD DRESSED BY THE LD. CIT(A), EITHER ENDORSING OR REVERSING OR OTHERWISE MODIFYING THE S AME, I.E., BASED ON HIS REAPPRAISAL OF 9 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. THE MATERIALS FOUND FROM THE POSSESSION OF, OR OTHE RWISE FURNISHED BY, THE ASSESSEE, OR EVEN THE EVIDENCES LED BY IT BEFORE HIM FOR THE FIR ST TIME, OF-COURSE BY AND UPON OBSERVING THE DUE PROCESS OF LAW (REFER R. 46A). TH E ONUS TO SATISFY THE CONDITIONS OF THE PROVISION THOUGH, WOULD ONLY BE ON THE ASSESSEE. IN FACT, ALL THIS WOULD PRECISELY BE THE PURVIEW OF THE FIRST APPELLATE AUTHORITY IN THE SET ASIDE PROCEEDINGS. COMING TO THE DECISION IN THE CASE OF MAHENDRA C. SHAH (SUPRA), RELIED UPON BY THE LD. CIT(A), THE SAME, AS AFORE-STATED, IS FIRST LY IN RESPECT OF SECTION 271(1)(C), THE PARAMETERS AS WELL AS INGREDIENTS OF WHICH ARE DIFF ERENT FROM THAT OF SECTION 271AAA. WHILE THE FORMER PROVISION IS APPLICABLE IN THE CAS E OF CONCEALMENT OF OR FURNISHING INACCURATE, PARTICULARS OF INCOME, CONSIDERING THE DEEMING PROVISIONS IN ITS RESPECT UNDER THE SECTION, S. 271AAA PROVIDES FOR A MANDATORY LEV Y OF PENALTY EXCEPT WHERE THE ASSESSEE SATISFIES THE CONDITIONS OF SECTION 271AAA (2). EVEN THE SAVING UPON PROVING A REASONABLE CLAUSE, AS PROVIDED UNDER SECTION 273B, IS NOT APPLICABLE FOR A PENALTY IMPOSABLE U/S.271AAA, WHICH IS ONLY IN RESPECT OF U NDISCLOSED INCOME, SO THAT WHAT ALONE IS RELEVANT IS THE APPLICABILITY OF THE PROVI SION IN THE FACTS OF THE CASE. IT IS APPARENT FROM THE READING OF THE SAID DECISION THAT THE ENVI RONMENTAL CONDITIONS EXISTING AT THE TIME OF THE SEARCH, INCLUDING THE MANNER IN WHICH T HE STATEMENT U/S.132(4) IS GENERALLY RECORDED, PREVAILED WITH THE HONBLE COURT IN HOLDI NG OF A SUBSTANTIAL COMPLIANCE IN THE FACTS OF THE CASE, I.E., QUA THE CONDITION OF ADMISSION OF UNDISCLOSED INCOME A ND THE STATEMENT OF THE MANNER IN WHICH IT IS DERIVED, ALS O PROVIDED U/ EXPL. 5 TO S. 271(1)(C), SAVING PENALTY. AS EXPLAINED BY IT, THIS IS AS THE ASSESSEE HAD NO OCCASION TO STATE OR MAKE AVERMENTS IN THE MANNER AS REQUIRED BY OR UNDER THE LAW. ITS PRESCRIPTION IS THEREFORE TO BE READ CONTEXTUALLY. THE LEGAL PROPOSITION THAT TH US ARISES FROM THE SAID JUDGMENT IS THAT THE SATISFACTION OF THE CONDITIONS MUST BE CONSIDER ED IN THE BACKGROUND AND THE CONTEXT OF THE OBTAINING FACTS AND CIRCUMSTANCES OF THE CASE. IN THE INSTANT CASE, THE STATEMENT U/S.132(4), WHICH IS BY SHRI PRAKASH C. KANUGO, A D IRECTOR OF THE ASSESSEE-COMPANY, WAS RECORDED ONLY ON 06.03.2009 (COPY ON RECORD), I.E., NEARLY A MONTH AFTER THE SEARCH . THE ASSESSEE CANNOT BE SAID TO BE CONSTRAINED FOR WANT OF TIME - WHICH WAS AMPLE, TO DELIBERATE IN THE MATTER, AS WELL AS SEEK LEGAL ADV ICE. IN FACT, THE STATEMENT WAS MADE ONLY 10 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. IN THE PRESENCE OF ITS COUNSEL, SHRI VINAY DOSHI, C A, AND ITSELF MAKES A PLEA FOR GRANT OF CONDONATION FROM THE LEVY OF PENALTY (IN ANSWER TO Q.11). COULD IT BE THEREFORE BE SAID THAT THE ASSESSEE HAD NO OCCASION TO AVER WITH REGA RD TO THE MANNER OF DERIVING THE INCOME BEING DISCLOSED? A COMPANY ACTS THROUGH THE HUMAN AGENCY OF ITS MANAGEMENT, WHICH ALONE COULD DEPOSE QUA THE MANNER IN WHICH ITS UNDISCLOSED INCOME STOOD E ARNED/ DERIVED, BEING RATHER IN ITS EXCLUSIVE KNOWLEDGE? ALL THAT THE LAW POSTULATES IS A HONEST DISCLOSURE QUA THE SAID INCOME. A FINDING AS TO THE SATISFACTION OR OTHERWISE OF TH E SAID CONDITION, OR FOR THAT MATTER ITS SUBSTANTIATION, I.E., OF THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED, IT NEEDS TO BE APPR ECIATED, ARE PURE FINDINGS OF FACT. THE HONBLE HIGH COURTS CAN INTERFERE WITH SUCH A FINDI NG/S ONLY WHERE IT IS IN ITS VIEW EITHER PERVERSE OR WITHOUT EVIDENCE OR BASED ON IRRELEVANT MATERIAL, OR WHICH IS PARTLY RELEVANT AND PARTLY IRRELEVANT (REFER, INTER ALIA, CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 (SC)). FURTHER, EVEN WHERE SO, THE PROVINCE OF THE HONBLE COURT IS TO RESTORE THE MATTER BACK TO THE TRIBUNAL, STATING ITS REASONS, AS CLARI FIED BY THE HONBLE COURT IN JANATHA CONTRACT CO. V. CIT [1976] 105 ITR 627 (KER), FOLLOWING THE BINDING DE CISIONS BY THE APEX COURT IN CIT V. GREAVES COTTON & CO. LTD . [1968] 68 ITR 200 (SC) AND CIT V. INDIAN MOLLASSES & CO. (P.) LTD . [1970] 78 ITR 474 (SC). THE AUTHORITIES ON THE LA W IN THE MATTER COULD IN FACT BE MULTIPLIED. THEN, AGAIN , WE WONDER, RATHER THAN READING DOWN THE PROVISION, SO AS TO OPERATE TO NEGATE THE MANDA TORY REQUIREMENT OF THE SECTION, DEFEATING THE LEGISLATIVE INTENT, WHICH, AS EXPLAIN ED BY THE HONBLE COURTS AS WELL AS THE OFFICIAL PRONOUNCEMENTS EXPLAINING THE PROVISION, I S OF PLUGGING THE GENERATION OF UNDISCLOSED INCOME AND THE CONSEQUENT LEAKAGE OF RE VENUE FOR FUTURE, WHY COULD THE SAME BE NOT READ SO AS TO ALLOW THE ASSESSEE THE LA TITUDE FOR PROVIDING THE NECESSARY DETAILS SUBSEQUENTLY, I.E., WHERE THE DISCLOSURE U/ S.132(4) IS MADE UNDER EXCRUCIATING OR DIFFICULT CIRCUMSTANCES. THE SAME OF COURSE WOULD B E UNDER OATH, MAKING IT A PART OF AND REFER TO THE EARLIER STATEMENT U/S. 132(4), COMPLYI NG THUS SUBSTANTIALLY AND EFFECTIVELY, WITH THE SUBSTANTIVE PROVISION OF LAW. FURTHER, THE FURTHER CONDITION OF SUBSTANTIATION, AS PROVIDED U/S. 271AAA(2)(II), WHICH WAS NOT THERE IN THE CASE, BEING U/S. 271(1)(C), BEFORE THE HONBLE COURT IN MAHENDRA C. SHAH (SUPRA), COULD ONLY BE INTERPRETED TO MEAN OF THE 11 ITA NO. 5221/MUM/2012 (A.Y.) 2009-10 ASST. CIT VS. PRAKASH STEELAGE LTD. LAW CASTING A FURTHER OBLIGATION ON THE ASSESSEE TO DEMONSTRATE THE MANNER OF DERIVING THE UNDISCLOSED INCOME, AS SPECIFIED PER THE STATEMENT U/S.132(4), AS VALID AND TRUE, I.E., STANDS VALIDATED AND IS ON A FIRM BASIS; THE PRESUM PTION AS TO THE TRUTH OF THE MATERIALS FOUND BEING ALREADY PROVIDED FOR U/S. 292C. THE SAI D DECISION WOULD THUS BE OF LITTLE ASSISTANCE TO THE ASSESSEE. 5. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES /. 0 ) & 1& 23 4 5 ) 6 & 78 ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 28, 2 015 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 9* MUMBAI; :( DATED : 28.01.2015 ).(../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. =)> ? $(@A , + @A. , 9* / DR, ITAT, MUMBAI 6. ? CD E * / GUARD FILE !' / BY ORDER, )/* + (DY./ASSTT. REGISTRAR) , 9* / ITAT, MUMBAI