ACIT CEN CIR 7, MUMBAI V. WIZCRAFT INTERNATIONAL ENTERTAINMENT P.LTD, MUMBAI

ITA 6876/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2929 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 12-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAPRIYA RAGHAVAN
• Assessee Lawyers: SENEHAL SHAH
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6876/MUM/2014 ASSESSMENT YEAR: 2011-12 ACIT, CC-7, ROOM NO. 805, 8 TH FLOOR, OLD CGO ANNEX, , M. K. ROAD, MUMBAI-400020. VS. M/S WIZCRAFT INTERNATIONAL PVT. LTD., 5 TH FLOOR, SATYADEV PLAZA, VEERA DESAI ROAD, ANDHERI (WEST), MUMBAI-400053. PAN: AAACW1931D (APPELLANT) (RESPONDENT) REVENUE BY : MS. RAMAPRIYA RAGHAVAN (SR. DR) ASSESSEE BY : SHRI SENEHAL SHAH (AR) DATE OF HEARING : 07.06.2016 DATE OF ORDER : 24.06.2016 O R D E R PER PAWAN SINGH, JM: 1. THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E ORDER OF CIT(A)-26, MUMBAI DATED 04.08.2014 FOR ASSESSMENT YEAR (AY) 20 11-12. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) IS JUSTIFIED IN DELETING THE PENALTY U/S. 271AAA OF RS. 13,29,634/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE MANNER IN WHICH UNDISCLOSED INCOME IS DERIVED AS REQUIRED U/S. 271AAA(2)(II) OF THE I.T. ACT, 1961? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) IS JUSTIFIED HOLDING THA T PROVISION OF SECTION 271AAA(2)(II) CANNOT BE SATISFIED UNLESS PR OVISIONS OF SECTION 271AAA(2)(II) ARE FULFILLED WITHOUT APPRECIATING TH E FACT THAT BOTH THE CONDITIONS ARE DISTINCT AND INDEPENDENT OF EACH OTH ER?. 2 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. 2. BRIEF FACTS OF THE CASE ARE THAT THE SEARCH & SEIZU RE ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT ON 20.01.2011 ON THE PREMISES O F ASSESSEE. DURING THE SEARCH INCRIMINATING MATERIAL WAS SEIZED FROM THE P REMISES OF THE ASSESSEE. THE ASSESSEE MADE A STATEMENT U/S 132(4) OF THE ACT AND MADE A DISCLOSURE OF ADDITIONAL INCOME OF RS. 3,00,00,000/ -.. THEREAFTER, THE ASSESSEE FILED RETURN OF INCOME ON 30.09.2011, DECL ARING TOTAL INCOME OF RS.26,13,92,237/-. THE ASSESSMENT WAS COMPLETED U/S . 143(3) OF THE ACT ON 22.03.2013 COMPUTING TOTAL INCOME AT RS. 26,13,9 2,237/-. WHILE FRAMING ASSESSMENT NO FURTHER ADDITION WAS MADE BY AO. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY AO THAT THE ASSESSEE, OFFERED UNDISCLOSED INCOME OF RS. 3,0 0,00,000/-. OUT OF THE SAID UNDISCLOSED INCOME OF RS. 1,32,96,340/- WAS NO T SUBSTANTIATED WHEN CONFRONTED TO SUBHASH VINCENT JOSEPH . ON THE BASI S OF ABOVE CONCLUSION, THE AO ISSUED A SHOW CAUSE NOTICE TO ASSESSEE ON 08 .07.2013 FOR INITIATING PENALTY PROCEEDING U/S 271AAA OF THE ACT AND. THE A SSESSEE REPLIED THE SHOW CAUSE NOTICE, VIDE HIS REPLY DATED 26.07.2013. IN REPLY THE ASSESSEE CONTENDED THAT ASSESSEE-COMPANY MADE A DISCLOSURE O F RS. 3,00,00,000/- U/S 132(4) OF THE ACT DURING THE SEARCH & SEIZURE A CTION. THE UNDISCLOSED INCOME WAS OFFERED FOR TAXATION. THE ASSESSEE-COMPA NY OFFERED RS. 3,00,00,000/- FOR TAX OUT OF WHICH RS. 1.67 CRORE W AS SUBSTANTIATED WITH DOCUMENT, SEIZED DURING THE COURSE OF SEARCH & SEIZ URE. THE REMAINING AMOUNT OF RS. 1.33 CRORE (APPROX) WAS TO BE CONSIDE RED FOR ANY OTHER ISSUE WHICH MAY ARISE LATER AND JUST TO BUY PEACE WITH THE DEPARTMENT AND REQUESTED TO DROP THE ACTION INITIATED U/S 271AAA. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO. THE AO CONCLUDED T HAT ASSESSEE- COMPANY HAS NOT FURNISHED ANY CONFIRMATION FROM THI RD PARTY OF HAVING PAID SUCH AMOUNT AND PROOF ON RECEIPT OF THE SAID A MOUNT OF RS. 1.33 CRORE (APPROX). THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS OF SECTION 271AAA (2)(II) OF THE ACT. THE ASSESSEE FAILED TO D ISCLOSE HIS TAXABLE INCOME TRULY AND CORRECTLY. THE AO WORKED OUT THE P ENALTY OF RS. 13,29,634/- BEING 10% OF UNDISCLOSED INCOME RS. 1,3 2,96,340/-, WHICH 3 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. WAS NOT SUBSTANTIATED. AGGRIEVED BY THE ORDER OF AO , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), AND SUCCEEDED VIDE IMPUG NED ORDER DATED 04.08.2014. AGAINST THE ORDER OF CIT(A), THE REVENU E FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE DEPARTMENTAL REPRESENTATIVE (DR) OF THE REVENUE AND AUTHORISED REPRESENTATIVE (AR) FOR ASSESSEE AND PER USED THE MATERIAL AVAILABLE ON RECORD. DR FOR REVENUE ARGUED THAT DUR ING THE SEARCH & SEIZURE ACTION, THE STATEMENT OF SHRI SUBHASH VINCE NT JOSEPH WAS RECORDED U/S 132(4) OF THE ACT, WHEREIN RS. 3,00,00,000/- WA S OFFERED AS AN UNDISCLOSED INCOME. OUT OF RS. 3,00,00,000/-, RS. 1 .67 CRORE WAS DULY SUBSTANTIATED WITH THE DOCUMENTS SEIZED. RS. 1.33 C RORE (APPROX) WAS NOT SUBSTANTIATED BY ASSESSEE AND THUS ALL THREE CONDIT ION ATTACHED WITH SUB- SECTION (2) OF SECTION 271AAA WAS NOT COMPLIED. SIN CE THE ASSESSEE- COMPANY FAILED TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME OF RS. 1.33 CRORE (APPROX) WAS DERIVED, THE AO LEVIED THE PENALTY AS PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 271AAA. LD. DR FOR REVENUE VEHEMENTLY ARGUED THAT WHEN SHRI SUBHASH VINCENT JO SEPH WAS CONFRONTED WITH THE INCRIMINATING MATERIAL SEIZED D URING THE SEARCH AND WAS ASKED TO EXPLAIN THE NATURE OF RECEIPT IN THE B OOKS OF ACCOUNT, SHRI SUBHASH VINCENT JOSEPH ONLY COULD EXPLAIN ABOUT RS. 1.67 CRORE. IT WAS ARGUED THAT CIT(A) WRONGLY DELETED THE PENALTY LEVI ED BY AO. LD. DR ARGUED THAT ORDER OF CIT(A) BE REVERSED AND THE ORD ER OF AO MAY BE RESTORED. LD. DR RELIED UPON THE DECISION OF ITAT, MUMBAI IN ACIT VS. PRAKASH STEELAGE LTD. (2015 55 TAXMAN.COM 284(MUMBA I TRIB.). ON THE OTHER HAND LD. AR FOR ASSESSEE ARGUED THAT AO HAS G ROSSLY ERRED IN CONCLUDING THAT ASSESSEE HAS NOT SUBSTANTIATE THE M ANNER IN WHICH THE UNDISCLOSED INCOME OF RS. 1.33 CRORE. THE AR FURTHE R ARGUED THAT WHILE RECORDING THE STATEMENT OF SHRI SUBHASH VINCENT JOS EPH, NO SPECIFIC QUESTION IN RESPECT OF AMOUNT OF RS. 1.33 CRORE (AP PROX) WAS POSED. THE AMOUNT OF RS. 1.67 CRORE WAS DULY SUBSTANTIATED WIT H THE DOCUMENT SEIZED DURING THE COURSE OF SEARCH & SEIZURE. LD. AR OF TH E ASSESSEE FURTHER 4 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. ARGUED THAT THE ASSESSEE VOLUNTARILY DISCLOSED THE AMOUNT OF RS. 3,00,00,000/- WHICH INCLUDED RS.1.33 CRORE(APPROX). THE QUESTION OF SPECIFYING THE MANNER IN WHICH THE INCOME HAS BEEN DERIVED IS DULY ANSWERED AND SUBSTANTIATED WITH THE DOCUMENT IMPOUN DED/SEIZED DURING THE SEARCH & SEIZURE. HOWEVER, NO SPECIFIC QUESTION WITH REGARD TO THE AMOUNT OF RS. 1.33 CRORE (APPROX) WAS ASKED TO THE SHRI SUBHASH VINCENT JOSEPH. THUS, THE ASSESSEE HAS NO OPPORTUNITY TO SU BSTANTIATE THE SAID PART OF VOLUNTARY OFFERED UNDISCLOSED INCOME. LD. AR OF ASSESSEE FURTHER RELIED UPON THE DECISION(S) OF ITAT, CHENNAI IN ACIT VS. S HRI KISHORE KUMAR GOKUL DAS (ITA NO. 716 & 717/MDS/2013, ITAT, DELHI TRIBUNAL, IN SMT. RAJ RANI GUPTA VS. DCIT (ITA NO. 3371/DEL/2011, ACI T VS. RITU SINGHAL (ITA NO. 5257/DEL/2013) AND ITAT, KOLKATA IN SPS STEEL & POWER LTD. VS. ACIT (ITA NO. 1391/KOL/2011). 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE VARIOUS DECISIONS REFERRED BY LD. REPRESENTATIVE OF THE PARTIES. LD. DR RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN ACIT VS. PRAKASH STE ELAGE LTD. (SUPRA) WHEREIN THE CO-ORDINATE BENCH WHILE DEALING WITH TH E LEVY OF PENALTY U/S 271AAA HELD AS UNDER: THERE WAS A SEARCH AND SEIZURE ACTION UNDER SECTIO N 132 AT PREMISES OF ASSESSEE- SEVERAL INCRIMINATING MATERIA LS WERE FOUND LEADING TO DISCLOSURE OF UNDISCLOSED INCOME VIDE ST ATEMENT UNDER SECTION 132(4) ADDITION WAS MADE BY ASSESSING OFF ICER- THEREAFTER, PENALTY UNDER SECTION 271AAA HAD BEEN L EVIED BY ASSESSING OFFICER AS ASSESSEE COULD NOT SPECIFY MAN NER IN WHICH SUCH INCOME HAD BEEN DERIVED- COMMISSIONER (APPEALS) DEL ETED PENALTY ON BASIS OF A FINDING THAT THERE WAS SUBSTANTIAL CO MPLIANCE, NOT WARRANTING ANY FURTHER DENIAL OF BENEFIT OF EXPLANA TION 5A TO SECTION 271(1)(C) WHETHER COMMISSIONER (APPEALS) HAVING E XAMINED LEVY ON BASIS AND ANVIL OF A DIFFERENT PROVISION, MATTER WAS TO BE RESTORED BACK TO HIM FOR CONSIDERATION AFRESH. ON THE OTHER HAND LD. AR FOR ASSESSEE RELIED UPON T HE DECISION OF ACIT, CHENNAI VS. KISHORE KUMAR GOKUL DAS, ITAT, DELHI TR IBUNAL, IN SMT. RAJ RANI GUPTA VS. DCIT (ITA NO. 3371/DEL/2011, ACIT VS . RITU SINGHAL (ITA NO. 5257/DEL/2013) AND ITAT, KOLKATA IN SPS STEEL & POWER LTD. 5 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. (ITA NO. 5257/DEL/2013) AND ITAT, KOLKATA IN SPS ST EEL & POWER LTD. VS. ACIT (ITA NO. 1391/KOL/2011). IN ACIT, CHENNAI VS. KISHORE KUMAR GOKUL DAS (SUPRA ) IT WAS HELD AS UNDER: IN VIEW THEREOF AND AFTER GIVING OUR THOUGHTFUL CO NSIDERATION, WE ARE OF THE VIEW THAT ADMITTEDLY, WHILST INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE 'ACT' IN THE IMPUGNE D 'SEARCH' CONDUCTED ON 11.09.2008 I.E. ON OR AFTER 01.06.2007 , THE ASSESSING OFFICER HAD NOT TAKEN INTO CONSIDERATION THE SPECIF IC PROVISION I.E. SECTION 271AAA OF THE 'ACT'. APART FROM THAT, IT AL SO EMANATES FROM THE CASE FILE THAT IN THE COURSE OF 'SEARCH', THE A SSESSEE ADMITTED UNDISCLOSED INCOME OF RS.53.55 LAKHS. THE SAME WAS 'RETURNED' ON 13.09.2010 IN FURTHERANCE TO NOTICE UNDER SECTION 1 53A OF THE 5 I.T.A. NOS.716 & 717/M/ 717/M/13 /M/13 'ACT'. WE MA KE IT CLEAR THAT EARLIER, HE HAD DISCLOSED INCOME OF RS.2,30,90 0/-. POST SECTION 153A NOTICE, HE DECLARED INCOME OF RS. 55,85,900 /- I.E. RS. 2,30,900/- + ADDITIONAL AMOUNT OF RS.53,55,000/-. N EEDLESS TO STATE, HE ALSO PAID THE TAXES THERE UPON. IT IS NOT THE CA SE OF THE REVENUE THAT THE ASSESSMENT FINALIZED LEAD TO ANY ADDITION IN ASSESSEE'S CASE. SIMILARLY, THERE IS NO FINDING THAT THE ASSESSEE HA D ANY 'UNDISCLOSED' INCOME NOT RETURNED AFTER 153A NOTICE. WE REITERATE THAT NO COGENT MATERIAL HAS BEEN PRODUCED BY THE REVENUE TO REBUT THE FINDINGS OF THE CIT(APPEALS) REGARDING ADMISSION OF UNDISCLOSED INCOME BY WAY OF STATEMENT RECORDED UNDER SECTION 132(4), EXPLANA TION OF ITS SOURCE AND ALSO PAYMENT OF TAXES BY THE ASSESSEE. THEREFOR E, IN OUR VIEW, THE PRESENT CASE IS COVERED BY SECTION 271AAA(2) OF THE 'ACT' AND THE PENALTY HAS BEEN RIGHTLY DELETED BY THE CIT(APPEALS ). FURTHER, THE ITAT, DELHI IN RAJ RANI GUPTA VS. DCIT (SUPRA) IT WAS HELD AS UNDER: 5. THE APPELLANT TRUTHFULLY ANSWERED EVERY QUESTION BEING ASKED AND FULFILLED ITS OBLIGATION. THE STATEMENT MADE BY THE APPELLANT WAS BONA FIDE, GENUINE AND IN ACCORDANCE TO HER KNOWLED GE OF THE PROVISIONS OF LAW. NO OPPORTUNITY WAS PROVIDED TO S PECIFY AND SUBSTANTIATE THE MANNER IN WHICH SUCH INCOME WAS DE RIVED RATHER QUESTIONS WERE NOT RAISED AT ALL. 6. THE OATH ADMINISTRATOR SHOULD HAVE INFORMED THE APPELLANT THAT YOU HAVE NOT SPECIFIED AND SUBSTANTIATED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. THEREFORE, YOU COULD BE PE NALIZED. 7. THE APPELLANT IS LAYMAN WHEREAS OATH ADMINISTRAT OR WAS REPRESENTING INCOME TAX DEPARTMENT AND CONDUCTING S EARCH WITH MANY OFFICERS. IN A WAY HE MUST BE VERY WELL AWARE OF THE 5 ITA 6 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. NO3371/DEL/11 PROVISIONS OF THE LAW AND ESPECIALLY PROVISIONS RELATED TO SEARCH AND SEIZURE. 8. FRAMING OF THE QUESTIONS WERE NOT IN THE SCOPE OF THE APPELLANT. 9. THE APPELLANT RELY THE DECISION OF CIT V. RADHA KISHAN GOEL 278 ITR 454 WHERE THE HON'BLE ALLAHABAD HIGH COURT ACCE PTED THAT UNLESS THE AUTHORIZED OFFICER PUTS A SPECIFIC QUEST ION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED. IT IS NOT EXPECTED FROM THE PERSON TO MAKE A STATEMENT IN THIS REGARD. 10. THE APPELLANT FURTHER CLARIFIED THE NATURE AND SOURCE OF INCOME IN THE ASSESSMENT AND PENALTY PROCEEDINGS. THE APPE LLANT WAS NOT HAVING ANY DOCUMENTARY EVIDENCE OF THE ADDITIONAL I NCOME OTHERWISE IT WOULD HAVE BEEN DISCOVERED DURING THE SEARCH.' 6. THE LD AR RELIED UPON THE DECISION OF HON'BLE AP EX COURT IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA (1972) 83-ITR 26 (SC) HE PARTICULARLY MADE REFERENCE TO THE FOLLOWING OBS ERVATION OF HON'BLE SUPREME COURT:- 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI CRIMINAL PROCEE DINGS AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSC IOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENAL TY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATI ON IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDI CIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EV EN IF A MINIMUM PENALTY IS PRESCRIBES, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY 6 ITA NO3371/DEL/11 WHEN THERE IS A TECHNICAL OR VE NIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FL OWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' THE HON'BLE GUJARAT HIGH COURT ALSO IN THE CASE OF CIT V. MAHENDRA C. SHAH 299 ITR 305 HELD AS UNDER: . 'INSOFAR AS THE ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO SPECIFY IN THE STATEMENT UNDER S. 132(4) OF THE ACT REGARDING THE MANNER IN 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 ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUT HORIZED OFFICER CANNOT STOP SHORT AT A PARTICULAR STAGE SO AS TO PE RMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE STATEMENT. TH E REASON IS NOT FAR TO SEEK. IN THE FIRST INSTANCE, THE STATEMENT IS BE ING RECORDED IN THE 7 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. 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 SUCH STATEMENT IS BEING RECORDED, AS NOTED BY ALLAHABAD HIGH COURT IN CASE OF RADHA KISHAN GOEL (SUPRA). SECONDLY, CONSIDERING THE SOCI AL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LITERATE OR ILLITERATE, TO BE SPECIFIC AND TO THE POINT REGARDI NG THE CONDITIONS STIPULATED BY EXCEPTION NO. 2 WHILE MAKING STATEMEN T UNDER S. 132(4) OF THE ACT IN VIEW OF THE ABOVE, THE PENALTY IS DE LETED. FURTHER, IN ACIT, DELHI VS. RITU SINGHAL,(SUPRA) IT WAS HELD AS UNDER: (12) AN OVERVIEW OF THE PROVISIONS OF S 271AAA OF T HE ACT WILL MAKE IT CLEAR THAT NO PENALTY IS LEVIABLE IN CASE AN APP ELLANT DISCLOSES AND SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS EARNED AND PAYS THE TAXES DUE THEREON WITH INTEREST . IN THE INSTANT CASE THE APPELLANT HAD DISCLOSED THE MANNER IN WHIC H THE INCOME HAS BEEN EARNED AND THE SAME HAS ALSO GOT SUBSTANTIATED WITH REFERENCE TO THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH AND ACCORDINGLY THE QUESTION OF LEVY OF PENALTY U/S 271AAA OF THE I NCOME TAX ACT, 1961 GETS ANSWERED IN THE NEGATIVE. IN SPS STEEL & POWER LTD VERSUS ACIT(SUPRA) IT WAS HELD: PENALTY UNDER SECTION 271 AAA COULD NOT BE LEVIED NEARLY ON ADMISSION OF ASSESSEE DURING SEARCH PROCEEDINGS AND THERE MUST BE SOME CONCLUSIVE EVIDENCE BEFORE ASSESSING O FFICER THAT ANTRIM EIGHT IN SEIZED DOCUMENTS REPRESENTED UNDISC LOSED INCOME OF ASSESSEE FURTHER CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN ITA NO. 807/MUM/2012 TITLED AS SHRI PURNANDU JAIN VS. ACIT (AUTHORED BY LD. AM), HELD AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBU NAL AND THE JUDGMENTS OF THE HIGH COURTS. THE CORE ISSUE FOR ADJUDICATION RE LATES TO THE AVAILABILITY OF IMMUNITY UNDER THE PROVISIONS OF EXPLANATION 5(2 ) TO SECTION 271(1)(C) OF THE ACT IN RESPECT OF ADDITIONAL INCOME DISCLOSE D AND RELATABLE TO THE EARLIER ASSESSMENT YEARS. ADMITTEDLY, THIS IS THE C ASE WHERE NO INQUIRY WAS MADE INTO THE MANNER OF DERIVING OF THE INCOME WHIC H IS A SUBJECT MATTER OF PENALTY. THESE ASPECTS ARE ANALYZED BY THE TRIBU NAL IN THE ASSESSEE'S OWN CASE IN THE LATER ASSESSMENT YEARS AND THE ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS OF TH IS ORDER, WE REPRODUCE THE SAID PARAS 6.1 TO 6.3 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) DATED 23.9.2013, WHICH READ AS UNDER: '6.1. THE CONSTRUCTION OF THE PROVISIONS OF EXPLANA TION 5 PUT-FORTH BY LD DR ON THE BASIS OF AFOREMENTIONED INSTRUCTION NO .1882 ARE TOTALLY 8 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. CONTRARY TO THE AFOREMENTIONED DECISION OF HON'BLE MADRAS HIGH COURT AND THE AFOREMENTIONED DECISIONS OF OTHER BEN CHES OF ITAT. THESE INSTRUCTIONS ARE ISSUED BY CBDT ON 5.6.1991 W HEN THE DECISION RENDERED BY HON'BLE MADRAS HIGH COURT IS D ATED 9.12.2003. DURING THE COURSE OF HEARING LD CIT DR W AS REQUIRED TO PLACE ON RECORD ANY DECISION OF ANY COURT IN WHICH THE VIEW CONVEYED BY THE CBDT IN AFOREMENTIONED INSTRUCTION NO. 1882 IS ADOPTED, HE WAS UNABLE TO CITE ANY SUCH DECISION. I T WAS ONLY ARGUED THAT INSTRUCTIONS ISSUED BY CBDT ARE IN THE NATURE CONTEMPORANEA EXPOSITION AND FOR SUCH PURPOSE RELIANCE WAS MAINLY PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K. P. VARGHESE (SUPRA). WE HAVE CAREFULLY CONSIDERED SUCH SUBMISSI ONS OF LD CIT DR AND WE FOUND THAT SUCH CONTENTION OF LD DR HAS N O FORCE AS THE LAW REGARDING BINDINGNESS OF CIRCULARS ISSUED BY CB DT HAS BEEN LATER ON EXPLAINED BY LARGER BENCH OF HON'BLE SUPRE ME COURT IN THE CASE OF CCE VS. RATAN MELTING & WIRE INDUSTRIES (TH E DECISION RENDERED BY FIVE JUDGES OF HON'BLE SUPREME COURT) [ 2008] 17 STT 103 WHEREIN IT HAS BEEN HELD THAT IT IS FOR THE COU RT TO DECLARE WHAT THE PARTICULAR PROVISION OF STATUTE STATES AND IT I S NOT FOR EXECUTIVE; A CIRCULAR CANNOT BE GIVEN EFFECT TO IN PREFERENCE TO THE VIEW EXPRESSED IN A DECISION OF THE HON'BLE SUPREME COURT OR THE H IGH COURT; A CIRCULAR WHICH IS CONTRARY TO THE STATUTORY PROVISI ONS HAS REALLY NO EXISTENCE IN LAW. IT HAS BEEN CLARIFIED THAT THE CL ARIFICATIONS I CIRCULARS ISSUED BY THE CENTRAL GOVERNMENT AND OF T HE STATE GOVERNMENT REPRESENT MERELY UNDERSTANDING OF THE ST ATUTORY PROVISION. THEY ARE NOT BINDING UPON THE COURT. IT IS FOR THE COURT TO DECLARE WHAT THE PARTICULAR PROVISION OF THE STATUT E SAYS AND IT IS NOT FOR THE EXECUTIVE. THUS, THE LAW ON THIS ISSUE IS V ERY MUCH CLEAR THAT WHEREVER QUESTION REGARDING INTERPRETATION OF A PRO VISION IS APPLICABLE THE INTERPRETATION ADOPTED BY THE COURT WILL HAVE A PREFERENCE OVER THE INTERPRETATION GIVE BY THE CBDT . THEREFORE, THIS CONTENTION OF LD CIT DR HAS TO BE REJECTED PARTICUL ARLY IN THE VIEW OF THE FACT THAT LD CIT DR COULD NOT CITE ANY DECIS ION OF ANY COURT BY WHICH THE AFOREMENTIONED VIEW OF THE CBDT IS SUP PORTED. MOREOVER, WE ARE CONSIDERING THE PROVISION REGARDIN G LEVY OF PENALTY. WHERE TWO INTERPRETATIONS ARE POSSIBLE, LE VY OF CONCEALMENT PENALTY IS NOT JUSTIFIED. EVEN ACCORDING TO LAW OF PRECEDENCE, THE DECISION RENDERED BY MADRAS HIGH COURT, IN ABSENCE OF DECISION OF JURISDICTIONAL HIGH COURT ON THE ISSUE WILL HAVE PE RSUASIVE VALUE AND VIEW HAS BEEN TAKEN AFTER CONSIDERING THE RELEV ANT PROVISIONS. ACCORDINGLY, WE HOLD THAT LD CIT (A) DID NOT COMMIT ANY ERROR IN DELETING THE PENALTY BY FOLLOWING THE AFOREMENTIONE D DECISION OF HON 'BLE MADRAS HIGH COURT AND PENALTY CANNOT BE SUSTAI NED ON THE INTERPRETATION OF PROVISIONS ADOPTED BY THE CBDT. 6.2. BEFORE, PARTING WITH THE APPEALS OF THE REVENU E, FOR THE SAKE OF COMPLETENESS WE MAY MENTIONED HERE THAT EVEN THOUGH IT IS NOT THE CASE OF AO THAT ASSESSEE DID NOT SPECIFY IN THE STA TEMENT MADE U/S 132(4) THE MANNER IN WHICH THE ADDITIONAL INCOME WA S DERIVED, BUT DURING THE COURSE OF HEARING OF THE APPEAL IT WAS C LARIFIED BY LD AR THAT ASSESSEE WAS NEVER ASKED TO DESCRIBE THE MANNE R IN WHICH HE 9 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. HAS DERIVED SUCH ADDITIONAL INCOME AND IT WAS SUBMI TTED THAT DURING THE COURSE OF HEARING BEFORE LD CIT (A) ASSESSEE HA D PLACED RELIANCE ON VARIOUS DECISION IN WHICH IT WAS HELD T HAT WHERE ASSESSEE HAS NOT BEEN ASKED WITH SUCH QUESTION THAT IN WHAT MANNER SUCH INCOME HAS BEEN DERIVED AND THE INCOME HAS BEEN OFF ERED AND TAXES HAVE BEEN PAID THEN IT WILL BE SUFFICIENT COMPLIANC E OF EXPLANATION 5 TO SECTION 271(1)(C). HE IN THIS REGARD REFERRED TO THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M AHENDRA C SHAH [2008] 299 ITR 305/172 TAXMAN 58 AND THE DECISION O F ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RADHA. KISHAN GOE SL [2005] 278 ITR 454/ [2006] 152 TAXMAN 290. THUS, IMMUNITY PROV IDED BY EXPLANATION 5 IS AVAILABLE TO THE ASSESSEE EVEN THO UGH ASSESSEE HAS NOT SPECIFIED THE MANNER IN WHICH THE UNDISCLOSED I NCOME IS EARNED BY HIM. 6.3. IN VIEW OF THE ABOVE DISCUSSION, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY LD CIT (A) AND APPEALS FILED BY THE REVENUE ARE DISMISSED. 8. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSU E, THE PENALTY LEVIED BY THE AO IS DELETED. ACCORDINGLY, GROUNDS RAISED BY T HE ASSESSEE ARE ALLOWED. 6. NOW COMING TO THE FACTS OF THE PRESENT CASE, WE HAV E NOTICED THAT THE AO WHILE LEVYING THE PENALTY, OUT OF TOTAL UNDISCLOSE D DECLARED INCOME OF RS. 3,00,00,000/- , THE SUM OF RS. 1.67 CRORE WAS DULY SUBSTANTIATED AND SUPPORTED THE SAME WITH THE DOCUMENTARY EVIDENCE. THEREFORE AO DID NOT LEVIED PENALTY U/S 271AAA. HOWEVER THE REMAINING RS . 1.33 CRORE (APPROX) WAS FURTHER OFFERED FOR AN AMBIGUITY THAT MAY ARISE IN ANY PROCEEDING . THE CIT(A) WHILE CONSIDERING THIS GROU ND OBSERVED THAT AO HAS NOT ACCEPTED THE ASSESSEES CLAIM IN THE MANNER , IN WHICH THE SAID INCOME WAS SUBSTANTIATED. SINCE THE DISCLOSURE IS VOLUNTARY, IT IS DEEM TO BE INTERPRETED THAT ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH UNDISCLOSED INCOME AMOUNTING TO RS. 1.33 CRORE (APP ROX) HAS BEEN DERIVED. AND CONCLUDED, IF THE SAID AMOUNT IS NOT TREATED AS INCOME OFFERED IN LEGITIMATE MANNER, THE QUESTION OF PAYIN G TAX ON THE SAME DOES NOT ARISE. THE ASSESSEE-COMPANY HAS PAID TAX OF RS. 9.70 LACS FOR UNDISCLOSED INCOME DESPITE THE FACT THAT HUGE REFUN D WAS DUE TO THE ASSESSEE. THE CIT(A) WHILE RELYING UPON THE DECISIO N OF CO-ORDINATE BENCH REPORTED IN [2013] 59 SOT 36 MUM(TRIB.) TITLE D AS MARATHON NEXTGEN REALITY & TEXTILES LT. VS. DCIT WHEREIN IT WAS HELD THAT: 10 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. WHEN A STATEMENT IS RECORDED FROM THE ASSESSEE AND ADDITION IS MADE ON THE BASIS OF THE STATEMENT RECORDED THEN THE SAME S TATEMENT HAS TO BE ACCEPTED IN FULL OR REJECTED IN FULL . THE REVENUE CANNOT PICK-UP AND CHOOSES THE PORTION WHICH IS FAVOURABLE TO THE DEPARTMENT AND AGAINST THE ASSESSEE AND DELETED THE PENALTY AND LEVIED BY AO. 7. IN OUR CONSIDERED OPINION, THE ONLY ISSUE THAT ARIS ES FOR OUR CONSIDERATION IS, WHETHER THE MANNER IN WHICH THE, UNDISCLOSED IN COME HAS BEEN DERIVED IS SUBSTANTIATED OR NOT WHEN THE ASSESSEE WAS ASKED TO EXPLAINED IT. IF WE EXAMINE THE ANSWER OF THE QUESTIONS OF SPECIFYING T HE MANNER IN WHICH THE INCOME HAS BEEN DERIVED, THE ANSWER IS YES. NO Q UESTION WAS POSED BY AUTHORISED OFFICER WHILE RECORDING THE STATEMENT O F SUBASH VINCENT U/S132(4) IN RESPECT INCOME OF RS.1.33CRORE (APPRO X) . THUS THE ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO SPECIFY AND SUBSTANTIATE IN RESPECT OF UNDISCLOSED INCOME OF RS. 1.33 CRORE(APPROX) , WAS DUE TO THE REASON THAT NO SUCH QUESTION WAS POSED TO SUBASH VINCENT. SO I T WAS NOT EXPECTED FROM THE PERSON WHO HAS ONCE VOLUNTARILY OFFERED TH E INCOME AND SUBSTANTIATED PART OF IT, SO FAR AS CONFRONTED TO H IM AND REMAINING WAS NEITHER POSE TO HIM NOR HE VOLUNTARILY SUBSTANTIATE D. THE ARGUMENT OF AR OF ASSESSEE THAT THE AMOUNT SURRENDERED HAS BEEN ACCEPTED SUO-MOTO BY THE REVENUE ITSELF LEADS TO THE IRREFUTABLE CONC LUSION THAT THE QUESTION OF SPECIFYING AND SUBSTANTIATING THE MANNER IN WHIC H IT HAS EARNED HAS BEEN ANSWERED TO THE SATISFACTION OF THE AUTHORISED PERSON AS WELL AS ASSESSING OFFICER. MOREOVER IT NEEDS TO BE UNDERSTO OD THAT IN ABSENCE OF ANY SPECIFIC PROCEDURE PRESCRIBED IN THE ACT, FOR S PECIFYING AND SUBSTANTIATING THE UNDISCLOSED INCOME, THE FACT THA T THE SAME HAS BEEN ACCEPTED WITHOUT ANY VARIATION BY THE AO IS BY ITSE LF ENOUGH EVIDENCE OF THE SAID CRITERIA IS HAVING BEEN MET AND SATISFIED. AND THIS OF OUR VIEW IS DULY SUPPORTED WITH THE DECISION OF DELHI TRIBUNAL IN RITU SINGHAL CASE (SUPRA) AND SHRI PURNANDU JAIN VS. ACIT (SUPRA).THE DECISION OF MUMBAI TRIBUNAL IN ACIT VS PRAKASH STEELAGE LTD (SUPRA) RE FERRED BY LD DR IS DEFER ON THE FACT OF THE PRESENT CASE. IN PRAKASH S TEELAGE, THE RETURN 11 ITA NO. 6876/MUM/2014- M/S WIZCRAFT INTERNATIONAL PVT. LTD. INCOME WAS NOT ACCEPTED BY AO, THE AO MADE ADDITION WHILE FRAMING ASSESSMENT. AND THE STATEMENT RECORDED ON BEHALF OF ASSESSEE DOES NOT SPECIFY THE MANNER IN WHICH INCOME IS DERIVED. HOW EVER IN THE PRESENT CASE THE RETURN INCOME IS WAS ACCEPTED BY AO WITHOU T ANY VARIATION/ADDITION. AS THE RATIO OF DECISION CITED BY LD DR IS NOT APPLICABLE ON THE FACT OF THE PRESENT CASE. IN THE ABOVE DISCU SSION WE HOLD THAT THE ORDER PASSED BY COMMISSIONER OF APPEALS DOES NOT RE QUIRE ANY INTERFERENCE AT OUR END, AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COUR T ON THIS 24 TH JUNE, 2016. SD/- SD/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 24/06/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/