ITO, Central-2, Nashik V. Shri Satishchandra G. Mittal, Jalgaon

ITA 970/PUN/2011

• Counselvise Citation: 97024514 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Unexplained expenditure; Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.970/PN/2011 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, CENTRAL- 2, NASHIK. . APPELLANT VS. SHRI SATISHCHANDRA G. MITTAL, GURUKRIPA NEAR OMKARESHWAR MANDIR, JALGAON. PAN : ACZPZ8796J . RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI B. C. MALAKAR DATE OF HEARING : 12-03-2015 DATE OF PRONOUNCEMENT : 11-05-2015 ORDER PER SUSHMA CHOWLA, JM : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-I, NASHIK DATED 10.05.2011 RELATING TO ASSESSMENT YEAR 2008-0 9 AGAINST ORDER PASSED UNDER SECTION 271AAA OF THE INCOME TAX ACT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A), NASHIK HAS ERRED IN HOLDING THAT THE ASSESSEE HAS F ULFILLED ALL THE CONDITIONS LAID DOWN FOR IMMUNITY FROM PENALTY U/S. 271AAA OF THE A CT. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE EARNED CIT(A), NASHIK HAS ERRED IN NOT NOTICING THAT, THOUGH THE I NCOME ON ACCOUNT OF GOLD AND SILVER JEWELLERY OF RS.3,75,257/- AND CASH OF RS.89 ,65,875/- FOUND AT THE RESIDENCE DURING SEARCH, HAS BEEN OFFERED TO TAX BU T THE ASSESSEE AT NOT STAGE SUBSTANTIATED THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A), NASHIK HAS ERRED IN HOLDING THAT INTEREST RECEIVABL E OF RS.3,61,500/- FROM M/S NIKKI AGRO IS COVERED BY STATEMENT U/S 132(4) OF TH E ACT, WHEREAS THE ASSESSEE HAS NOT OFFERED THIS INCOME FOR TAXATION. (IV) APPELLANT CRAVES, LEAVE OF THE HON'BLE TRIBU NAL TO ADD, AMEND / ALTER OR DELETE ANY OF THE AFORESAID GROUND HEREIN IF DIRECT ED SO. (V) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. ITA NO.970/PN/2011 2 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE DELETION OF PENALTY LEVIED UNDER SECTION 271AAA OF THE ACT. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE WAS ENGAGED IN THE ACTIVITY OF COMMODITY TRADING AND WAS ALSO PARTNER IN VARIOUS FIRMS. A SEARCH AND SEIZURE ACTION WAS CARRIED OUT AT THE PREMISES OF T HE ASSESSEE ALONG WITH SAHAYOG GROUP OF JALGAON ON 22.11.2007. DURING THE COURSE OF SEARCH, THE STATEMENT OF THE ASSESSEE WAS RECORDED UNDER SECTIO N 132 OF THE ACT ON 22.11.2007 AND THE ASSESSEE MADE DISCLOSURE OF UNDI SCLOSED INCOME OF RS.1,69,75,257/-. IN THE RETURN OF INCOME FILED, T HE ASSESSEE DECLARED TOTAL UNDISCLOSED INCOME OF RS.1,00,08,887/-. THE ASSESS ING OFFICER NOTED THAT THE ASSESSEE HAD FAILED TO COMPLETELY OFFER THE DECLARA TION MADE DURING THE COURSE OF SEARCH AND IN VIEW THEREOF ADDITIONS WERE MADE I N THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED THE PENALTY PR OCEEDINGS UNDER SECTION 271AAA OF THE ACT. IN RESPONSE, THE ASSESSEE EXPLA INED THAT IT HAD DECLARED ADDITIONAL INCOME IN HIS HANDS IN THE REVISED RETUR N FILED AND SINCE IT HAD NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE P ARTICULARS OF INCOME AND HAD OFFERED AND DECLARED THE ADDITIONAL INCOME DURI NG THE COURSE OF SEARCH ACTION, NO PENALTY UNDER SECTION 271AAA OF THE ACT WAS LEVIABLE. IT WAS ALSO CLAIMED BY THE ASSESSEE THAT DURING THE COURSE OF S EARCH ACTION ITSELF, THE ASSESSEE HAD STATED THE SOURCES FROM WHICH IT HAD D ERIVED ITS ADDITIONAL INCOME I.E. INCOME FROM SPECULATION ACTIVITIES AND SINCE T AXES WERE PAID ON THE SAID ADDITIONAL INCOME, NO PENALTY WAS LEVIABLE UNDER SE CTION 271AAA OF THE ACT. THE ASSESSING OFFICER REJECTING THE PLEA OF THE ASSESSE E HAD LEVIED PENALTY UNDER SECTION 271AAA OF THE ACT AT 10% OF THE UNDISCLOSED INCOME AT RS.1,00,08,887/-. 5. THE CIT(A) DELETED THE PENALTY ON THE GROUND THA T THE ASSESSEE HAD OFFERED TO TAX A SUM OF RS.1,00,08,887/- IN ITS RET URN OF INCOME FILED FOR ASSESSMENT YEAR 2008-09. FURTHER, THE ASSESSEE HAD ALSO CLAIMED THAT THE ITA NO.970/PN/2011 3 SOURCE OF THE SAID INCOME WAS OUT OF SPECULATION BU SINESS INCOME OF COMMODITY TRADING MAINLY OUT OF STATE. THE CIT(A) NOTED THAT CASH AMOUNTING TO RS.1 CRORE WAS SEIZED FROM THE ASSESSEE DURING THE SEARCH ACTI ON AND SINCE THE ASSESSEE HAD ALREADY MADE AN APPLICATION FOR ADJUSTMENT OF T HE SEIZED CASH AGAINST THE TAX LIABILITY IN RESPECT OF THE SAID ADDITIONAL INC OME OFFERED TO TAX, THE TAXES WERE PAID AND THERE WAS NO MERIT IN LEVYING PENALTY UNDE R SECTION 271AAA OF THE ACT. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT(A). 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE POINTED OUT THAT THE SECOND CONDITION PRESCRIBED IN SECTION 271AAA OF TH E ACT HAS NOT BEEN FULFILLED BY THE ASSESSEE WHERE THE ASSESSEE WAS REQUIRED TO SUBSTANTIATE THE CHARACTER OF THE ADDITIONAL INCOME AND THE MANNER OF EARNING THE INCOME AND SOURCES THEREOF. THE LD. DEPARTMENTAL REPRESENTATIVE FOR T HE REVENUE POINTED OUT THAT IN THE BODY OF THE APPELLATE ORDER, THE CIT(A) HAS NOT TAKEN NOTE OF ANY EXPLANATION OF THE ASSESSEE VIS--VIS INCOME OF RS. 3,04,845/-. 8. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT DURING THE COURSE OF RECORDING OF STATEMENT UNDER S ECTION 132(4) OF THE ACT, ADDITIONAL INCOME WAS OFFERED ON ACCOUNT OF DIFFERE NT ITEMS, WHEREAS THE DECLARATION MADE IN THE RETURN OF INCOME WAS ON CER TAIN DIFFERENT ITEMS. IT WAS FURTHER POINTED OUT BY THE LD. AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE THAT ON ACCOUNT OF THE FIRST THREE ITEMS WHICH WERE OFFERED AS ADDITIONAL INCOME UNDER SECTION 132(4) OF THE ACT, THE ASSESSEE DECLARED AD DITIONAL INCOME OF RS.97 LAKHS AND IN RESPECT OF THE BALANCE ITEMS, NO PENAL TY UNDER SECTION 271AAA OF THE ACT WAS LEVIED. OUR ATTENTION WAS DRAWN TO THE STATEMENT OF THE ASSESSEE RECORDED IN THIS REGARD AND IT WAS POINTED OUT BY T HE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSING OFFICER NEVER QUESTIONED THE ITA NO.970/PN/2011 4 MANNER OF EARNING SUCH INCOME. RELIANCE IN THIS RE GARD WAS PLACED UPON THE RATIO LAID DOWN BY THE TRIBUNAL IN FOLLOWING DECISI ONS :- (I) ACIT VS. MUNISH KUMAR GOYAL, (2014) 45 TAXMANN. COM 563 (CHANDIGARH TRIB.); (II) NEERAJ SINGAL VS. ACIT, (2014) 40 CCH 387 (DEL HI TRIB.); AND, (III) SUDHA GUPTA VS. DCIT IN ITA NO.5445/DEL/2012, ORDER DATED 22.08.2014. 9. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE FURTHER POINTED OUT THAT THE THIRD CONDITION WITH REGARD TO THE PAYMENT OF TAXES WAS ALSO FULFILLED BY THE ASSESSEE AND IT HAD MADE REQUEST FOR THE ADJUST MENT OF THE CASH SEIZED FROM THE ASSESSEE AGAINST HIS LIABILITY, WHICH HAD BEEN ADJUSTED BY THE BANK. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE IS NO TIME-LIMIT PRESCRIBED FOR THE PAYMENT OF DUE TAXES AS HELD BY THE TRIBUNAL IN DCIT VS. SHRI RAVINDRA CHAMPALAL KHINVASARA IN ITA NO.1427/PN/201 3 RELATING TO ASSESSMENT YEAR 2010-11, ORDER DATED 28.11.2014. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO LEV Y OF PENALTY AS PROVIDED UNDER SECTION 271AAA OF THE ACT WHICH PRESCRIBES THAT IN CASE WHERE THE SEARCH UNDER SECTION 132 OF THE ACT HAS BEEN INITIATED ON OR AFT ER THE 1ST DAY OF JUNE, 2007 BUT BEFORE THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHAL L PAY BY WAY OF PENALTY, A SUM EQUIVALENT TO 10% OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. THE IMMUNITY FROM THE LEVY OF PENALTY UNDER SECTION 271 AAA IS PROVIDED IN SUB- SECTION (2) TO THE SAID SECTION, WHICH READS AS UND ER :- (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APP LY IF THE ASSESSEE,- (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND S PECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; ITA NO.970/PN/2011 5 (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLO SED INCOME WAS DERIVED; AND (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. 11. SECTION 271AAA(2) OF THE ACT PROVIDES THAT WHER E THE ASSESSEE DURING THE COURSE OF SEARCH UNDER SECTION 132 OF THE ACT, ADMI TS TO SOME UNDISCLOSED INCOME IN THE STATEMENT RECORDED UNDER SECTION 132( 4) OF THE ACT AND ALSO SUBSTANTIATES THE MANNER IN WHICH UNDISCLOSED INCOM E WAS DERIVED AND PAYS THE TAXES, TOGETHER WITH INTEREST, IF ANY, ON SUCH UNDI SCLOSED INCOME THEN NO PENALTY UNDER SUB-SECTION (1) OF SECTION 271AAA OF THE ACT CAN BE LEVIED TO THE ASSESSEE. THE ASSESSEE HAS, IN OTHER WORDS, TO FUL FILL THE THREE CONDITIONS LAID DOWN IN SUB-SECTION (2) OF SECTION 271AAA OF THE AC T. FIRSTLY, IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, ASSESSEE ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOM E HAS BEEN DERIVED; SECONDLY, IF THE ASSESSEE SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED; AND, THIRDLY, PAYS THE TAXES, A LONG WITH INTEREST, IF ANY, ON SUCH UNDISCLOSED INCOME, THEN ON FULFILLMENT OF THE ABOVE THREE CONDITIONS, NO PENALTY IS LEVIABLE UNDER SECTION 271AAA OF THE ACT . 12. COMING TO THE FACTS OF THE PRESENT APPEAL, SEAR CH UNDER SECTION 132 OF THE ACT WAS CARRIED ON AT THE PREMISES OF THE ASSESSEE ON 22.11.2007. DURING THE COURSE OF SEARCH, THE ASSESSEE HAD MADE THE UNDER-M ENTIONED DECLARATION OF ADDITIONAL INCOME, AS UNDER :- 1. UNRECORDED CASH : RS.1,00,00,000/- 2. CASH PAYMENT TO M/S NIKI AGRO : RS. 50,00,00 0/- 3. ON ACCOUNT OF SILVER ARTICLES : RS. 3,75, 257/- 4. ON ACCOUNT OF ERRORS & OMISSIONS : RS. 16,00 ,000/- TOTAL : RS.1,69,75,257/- ITA NO.970/PN/2011 6 13. HOWEVER, THE ASSESSEE IN THE RETURN OF INCOME O FFERED THE FOLLOWING ADDITIONAL INCOME :- 1. GOLD DIAMOND JEWELLERY & SILVER : RS. 3,75,257 /- 2. CASH FOUND AT RESIDENCE AFTER SUBMITTING : RS.8 9,65,875/- EXPLANATION 3. INTEREST RECEIVABLE FROM M/S NIKKY AGRO : RS. 3,61,500/- 4. COMMODITIES TRADING INCOME AT RAJASTHAN : RS. 57,244/- 5. COMMODITIES TRADING INCOME AT : RS. 25,0 51/- AHMADABAD 6. UNRECORDED EXPENDITURE : RS. 85,000/- 7. UNRECORDED INVESTMENT IN DIAMOND & : RS. 1, 10,550/- JEWELLERY TOTAL : RS.1,00,08,887/- 14. THE ASSESSING OFFICER HAS ACCEPTED THE ADDITION AL INCOME OFFERED BY THE ASSESSEE AT RS.1,00,08,887/- AND HAS FURTHER MADE A DDITION ON ACCOUNT OF HOUSEHOLD EXPENSES, UNEXPLAINED EXPENDITURE AND ERR ORS AND OMISSIONS TOTALING TO RS.47 LAKHS AGAINST WHICH HE HAS INITIATED THE P ENALTY UNDER SECTION 271(1)(C) OF THE ACT. HOWEVER, IN RESPECT OF ADDITIONAL INCO ME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME AFTER THE SEARCH AMOUNTING TO RS.1,00,08,887/-, THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271AAA OF THE ACT. 15. AS REFERRED BY US IN THE PARAS HEREINABOVE, CON DITIONS REGARDING IMMUNITY FROM LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT IS PROVIDED UNDER SUB-SECTION (2) TO THE SAID SECTION ITSELF. THE FI RST CONDITION FOR SUCH IMMUNITY IS THAT THE ASSESSEE IN THE COURSE OF SEARCH ITSELF AD MITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED. SECOND ASPECT IS THAT THE ASSESSEE IS TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED AND THIRDLY, THE ASSESSEE IS TO PAY TAXES TOGETHER WITH INTEREST, IF ANY, ON SUCH UNDISCLOSED INCOME. AS P ER THE ASSESSING OFFICER, THE ASSESSEE HAD NOT FULFILLED THE SAID CONDITIONS. ON THE OTHER HAND, THE LD. CIT(A) ITA NO.970/PN/2011 7 HAS DELETED THE ADDITIONS BY HOLDING THAT THE FIRST CONDITION STANDS FULFILLED AS THE ASSESSEE ADMITTED THE UNDISCLOSED INCOME IN THE STA TEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE CIT(A) IN PARA 8.2 ADMITS THAT INCOME ON ACCOUNT OF GOLD, DIAMOND AND SILVERY JEWELLERY RS.3,75,257/ -, CASH FOUND AT THE RESIDENCE RS.89,65,875/- AND INTEREST RECEIVABLE FR OM M/S NIKKY AGRO RS.3,61,500/- IS SPECIFICALLY COVERED BY THE ITEMS OFFERED TO TAX IN STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE CIT( A) FURTHER OBSERVED THAT REMAINING INCOME OF RS.3,04,845/- ON ACCOUNT OF COM MODITIES TRADING, UNRECORDED EXPENDITURE AND UNRECORDED INVESTMENT IN DIAMOND ARE NOT COVERED BY THE ITEMS OF INCOME STATED IN STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE CONCLUSION OF THE CIT(A) WAS THAT THE FIR ST CONDITION LAID DOWN IN SUB- SECTION (2) OF SECTION 271AAA OF THE ACT IS FULFILL ED IN RESPECT OF INCOME OFFERED TO TAX TO THE EXTENT OF RS.97,02,632/-. 16. THE CIT(A) FURTHER NOTES THAT THE SEARCH PARTY HAD NOT ASKED THE ASSESSEE TO SPECIFY AND SUBSTANTIATE THE SOURCE OF INCOME DI SCLOSED. HOWEVER, THE ASSESSEE IN HIS STATEMENT, IN REPLY TO QUERY NO.2 R ECORDED DATED 24.11.2007 QUERY NO.11 DATED 13.12.2007 HAD OFFERED THE ADDITI ONAL INCOME AND ADMITTED THAT THE SAID UNDISCLOSED WAS EARNED OUT OF UNDISCL OSED SPECULATION INCOME OF COMMODITIES/DERIVATIVES AND IS NOT SUPPORTED BY DOC UMENTARY PROOF. THE CIT(A) FURTHER NOTES THAT WHERE THE ASSESSEE HAD MOVED AN APPLICATION FOR ADJUSTMENT OF THE CASH SEIZED OF 1 CRORE AGAINST THE TAXES AND INTEREST LIABILITY, THE THIRD CONDITION MENTIONED IN SUB-SECTION (2) TO SECTION 2 71AAA OF THE ACT WAS FULFILLED AND AS SUCH THERE WAS NO MERIT IN THE LEVY OF PENAL TY UNDER SECTION 271AAA OF THE ACT TO THE EXTENT OF RS.97,02,632/-. THE BALAN CE PENALTY LEVIED IN THE HANDS OF THE ASSESSEE WAS CONFIRMED TO THE EXTENT OF RS.3 0,625/-. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT POINTED ANY APPEAL HAVING BEEN FILED AGAINST THE SAID CONFIRMATION OF PARTIAL PENALTY UN DER SECTION 271AAA OF THE ACT. ITA NO.970/PN/2011 8 THOUGH, THE REVENUE IS IN APPEAL AGAINST THE DELETI ON OF PENALTY TO THE EXTENT OF RS.9,72,632/- ON UNDISCLOSED INCOME OF RS.97,02,632 /-. 17. IN ORDER TO AVAIL THE IMMUNITY TO LEVY OF PENAL TY UNDER SECTION 271AAA OF THE ACT, THE FIRST CONDITION TO BE FULFILLED BY THE ASSESSEE IS THE DECLARATION OF THE ADDITIONAL INCOME DURING THE COURSE OF STATEMENT RE CORDED UNDER SECTION 132(4) OF THE ACT, STANDS FULFILLED IN THE CASE OF THE ASS ESSEE WHERE ORIGINALLY THE ASSESSEE HAD OFFERED ADDITIONAL INCOME TO THE EXTEN T OF RS.1.69 CRORES BUT ON ACCOUNT OF FOUR ITEMS HAD RESTRICTED THE DECLARATIO N IN THE RETURN OF INCOME TO THREE OF THE SAID ITEMS. EVEN THOUGH, THERE WAS DI FFERENCE IN THE QUANTUM ORIGINALLY DECLARED DURING THE COURSE OF SEARCH AND THOSE OFFERED IN THE RETURN OF INCOME, BUT THE FIRST CONDITION OF SUB-SECTION (2) TO SECTION 271AAA OF THE ACT STANDS FULFILLED. THE PERUSAL OF THE STATEMENT ITS ELF REFLECTS THAT THE ASSESSEE ADMITTED TO HAVE ENGAGED IN COMMODITY TRADING IN CA SH AND EVEN THE GROUP WHICH WAS SIMULTANEOUSLY SEARCHED BY THE INCOME TAX DEPARTMENT, WAS ALSO ENGAGED IN SIMILAR TRADING. WE FIND NO MERIT IN TH E ORDER OF THE ASSESSING OFFICER IN THIS REGARD AS THE ASSESSEE HAVING SUBSTANTIATED ABOVE ADDITIONAL INCOME OF BEING DERIVED FROM ITS BUSINESS OF COMMODITY TRADIN G, OUTSIDE THE BOOKS OF ACCOUNT, THE CONDITION NO.1 AND 2 PROVIDED IN SUB-S ECTION (2) OF SECTION 271AAA OF THE ACT ARE APPLICABLE. 18. FOR THE SAID PROPOSITION, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN ACIT VS. MUNISH KUMAR GOYAL (SUPRA), WHEREIN IT WAS HELD AS UNDER :- 10. PLAIN READING OF SUB-SECTION WOULD SHOW THAT I F THE ASSESSEE DURING THE COURSE OF SEARCH IN A STATEMENT ADMITS TO SOME UNDI SCLOSED INCOME AND PAY TAXES ON THE SAME THEN PENALTY CANNOT BE LEVIED IN TERMS OF SUB-SEC (1) OF THIS SECTION. IN THE CASE BEFORE US, THE AMOUNT OF RS. 4 CRORE WHICH WAS SURRENDERED DURING SEARCH, HAS BEEN DECLARED BY THE ASSESSEE IN THE RETURN AND TAXES HAVE BEEN PAID ACCORDINGLY. THEREFORE THE, ASSESSEE IS N ORMALLY ENTITLED FOR THE IMMUNITY PROVIDED IN SEC 271AAA ITSELF. HOWEVER, TH E REVENUE HAS RAISED FURTHER DISPUTE THAT WHETHER THE ASSESSEE HAS DISCL OSED THE MANNER IN WHICH ITA NO.970/PN/2011 9 INCOME HAS BEEN EARNED. IN THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER FOLLOWING QUESTIONS AND ANSWERS HAVE BEEN EXTRACTED : 'Q. DO YOU WANT TO SAY ANYTHING MORE? ANS. I VOLUNTARILY SURRENDER A SUM OF RS.4.00 CRORE (RS. FOUR CRORE) FOR CURRENT FINANCIAL YEAR I.E. 2009-10 RELEVANT TO A. Y. 2010-11 IN ANY (SHOULD BE 'MY') INDIVIDUAL CAPACITY. THEY COVER AL L THE DISCREPANCIES IN THE SEIZED PAPERS DURING THE COURSE OF SEARCH PROCE EDINGS.' 11. THEREFORE CLEARLY THE REVENUE HAS NOT ASKED THE ASS ESSEE TO DISCLOSE THE MANNER IN WHICH SUCH INCOME WAS EARNED. IN ANY CASE ONCE THE INCOME IS SURRENDERED DURING THE COURSE OF SEARCH U/S 132(4) IT CAN BE SAFELY ASSUMED THAT DURING DISCUSSION THE ASSESSEE MUST HAVE DISCLOSED THE MANNER. IN ANY CASE WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FO R THE ASSESSEE THAT IF THE EXPLANATION OF THE ASSESSEE HAS BEEN ACCEPTED FOR A SUM OF RS.1987500 OUT OF TOTAL SURRENDER OF RS.4 CRORE THEN SAME MANNER SHOU LD HAVE BEEN ACCEPTED FOR THE WHOLE OF THE AMOUNT. IT IS NOT CLEAR FROM THE P ENALTY ORDER HOW EXPLANATION FOR RS.1987500 WAS ACCEPTED. IN ANY CASE THE LD. CIT(A) HAS CONSIDERED ALL THESE ISSUES IN DETAIL AND THE D.R. FOR THE REVENUE HAS N OT REFERRED TO ANY MATERIAL OR DECISION WHICH CAN CONTROVERT THE FINDINGS OF THE C IT(A). IN THE FOLLOWING CASES WHICH HAVE BEEN RELIED ON BY THE LD. COUNSEL FOR TH E ASSESSEE WHICH WAS CLEARLY HELD THAT PENALTY IS NOT LEVIABLE. 12. FURTHER THE ASSESSEE HAS RELIED ON THE FOLLOWIN G DECISIONS: KANAKIA SPACES (P.) LTD. (SUPRA) A.N. ANNAMALAISAMY (HUF) (SUPRA) PRARNOD KUMAR JAIN (SUPRA) SRNT. RAJ RANI GUPTA (SUPRA) 13. THE LD. D.R. FOR THE REVENUE WAS NOT ABLE TO PL ACE BEFORE US ANY DECISION WHICH SUPPORTS HIS CASE, THEREFORE WE FIND NOTHING WRONG WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 14. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 1003/CHD/2013 IS DISMISSED. 19. FURTHER, THE DELHI BENCH OF THE TRIBUNAL IN SUD HA GUPTA VS. DCIT (SUPRA) HAD LAID DOWN SIMILAR PROPOSITION THAT WHERE DURING THE COURSE OF SEARCH PROCEEDINGS, THE AUTHORIZED OFFICER OF DEPARTMENT H AD NOT RAISED ANY SPECIFIC QUERY REGARDING THE MANNER IN WHICH THE UNDISCLOSED INCOME HAVE BEEN DERIVED AND WHERE THE ASSESSEE HAD TRIED TO EXPLAIN THE EAR NING OF THE UNDISCLOSED INCOME IN QUESTION, IN ITS REPLY, DURING THE RECORD ING OF THE STATEMENT UNDER SECTION 132(4) AND IN THE ABSENCE OF ANY QUERY RAIS ED BY THE AUTHORIZED OFFICER ABOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME HA VE BEEN DERIVED AND ABOUT ITS SUBSTANTIATION, THE ASSESSING OFFICER WAS NOT J USTIFIED IN IMPOSING THE PENALTY UNDER SECTION 271AAA OF THE ACT. ITA NO.970/PN/2011 10 20. THE THIRD CONDITION OF PAYMENT OF TAXES TOGETHE R WITH INTEREST, IF ANY, IS ALSO FULFILLED IN THE CASE OF THE ASSESSEE WHERE TH E ASSESSEE HAD MADE A REQUEST FOR ADJUSTMENT OF THE CASH SEIZED OF RS. 1 CRORE AG AINST HIS TAX AND INTEREST LIABILITY, BOTH DURING THE COURSE OF SEARCH AND AFT ER THE COMPLETION OF THE ASSESSMENT. MERELY BECAUSE THE ADJUSTMENT WAS MADE AFTER THE COMPLETION OF ASSESSMENT IN THE HANDS OF THE ASSESSEE HAS NO MERI T TO LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT IN VIEW OF NON FULFILLMEN T OF THIRD CONDITION PROVIDED UNDER SUB-SECTION (2) OF THE SAID SECTION. IN THIS REGARD, WE FIND MERIT IN THE RELIANCE PLACED UPON BY THE LD. AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUN AL IN DCIT VS. SHRI RAVINDRA CHAMPALAL KHINVASARA (SUPRA) WHEREIN IT WAS HELD AS UNDER :- 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IN OUR OPINION, THE CIT(A) MADE NO MISTAKE IN APPLYING THE RATIO OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GEBILAL KANHAIALAL HUF (SUPRA) WHILE EXAMINING THE CONDITION PRESCRIBED IN CLAUSE (III) OF SUB-SEC TION (2) OF SECTION 271AAA OF THE ACT IN THE PRESENT CASE. IN THE CASE BEFORE THE HO NBLE SUPREME COURT, ISSUE RELATED TO A PENALTY IMPOSED U/S 271(1)(C) OF THE A CT ON AN AMOUNT OF INCOME SURRENDERED BY THE ASSESSEE IN A STATEMENT RECORDED U/S 132(4) OF THE ACT. CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT PRESCRIBED IMMUNITY FROM LEVY OF PENALTY U/S 271(1)(C) OF THE ACT WITH RESPECT TO AN INCOME SURRENDERED IN A STATEMENT U/S 132(4) OF THE ACT. ONE OF THE CONDITIONS PRESCRIBED THEREIN IS TO THE EFFECT THAT ASSESSEE PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. THE REVENUE HAD CONTENDED BEFORE THE HONBLE SUPREME COURT THAT ASSESSEE THEREIN HAD FAILED TO MAKE PAYMENT OF TAX IN TIME. IN THIS CONTEXT, THE HONBLE SUPREME COURT NOTED THAT THE CONDITION DID NOT PRESCRIBE ANY TIME LIMIT FOR PAYMENT OF SUC H TAX AND THAT THE ONLY REQUIREMENT STIPULATED IN THE THIRD CONDITION WAS F OR THE ASSESSEE TO PAY TAX TOGETHER WITH INTEREST. FACTUALLY, IT WAS CLEAR T HAT THE SAID CONDITION STOOD FULFILLED AS ASSESSEE HAD PAID TAX WITH INTEREST UP TO THE DATE OF PAYMENT. THEREFORE, THE HONBLE SUPREME COURT HELD THE ASSES SEE WAS ENTITLED TO THE IMMUNITY FROM PAYMENT OF PENALTY IN TERMS OF CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. IN THE PRESENT CASE TOO WHEREIN THE ISSUE RELATES TO LEVY OF PENALTY U/S 271AAA OF THE ACT, THE CONDITIO N PRESCRIBED IN CLAUSE (III) OF SUB-SECTION (2) OF SECTION 271AAA OF THE ACT IS PAR I-MATERIA TO THE THIRD CONDITION PRESCRIBED IN CLAUSE (2) OF EXPLANATION 5 TO SECTIO N 271(1)(C) OF THE ACT. THEREFORE, IN OUR CONSIDERED OPINION THE RATIO OF T HE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GEBILAL KANHAIALAL HUF (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE ALSO. 11. IN THIS BACKGROUND, EVEN IF WE WERE TO GO ALONG WITH THE STAND OF THE ASSESSING OFFICER THAT THE CREDIT FOR THE SEIZED CA SH COULD BE GIVEN FOR TAX LIABILITY ONLY AFTER COMPLETION OF ASSESSMENT YET IT FOLLOWS THAT THE ASSESSEE HAS PAID TAX WITH INTEREST AS REQUIRED BY CLAUSE (III) OF SUB-SE CTION (2) OF SECTION 271AAA OF THE ACT. THE PHRASEOLOGY OF CLAUSE (III) OF SUB-SE CTION (2) OF SECTION 271AAA OF ITA NO.970/PN/2011 11 THE ACT IS PARI-MATERIA WITH THE THIRD CONDITION IN CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT; AND, THEREFORE FOLLOW ING THE RATIO OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GEBILAL KA NHAIALAL HUF (SUPRA), THE CIT(A) MADE NO MISTAKE IN HOLDING THAT ASSESSEE HAS FULFILLED THE CONDITION OF CLAUSE (III) OF SUB-SECTION (2) OF SECTION 271AAA O F THE ACT AND ACCORDINGLY THE PENALTY OF RS.45,00,000/- LEVIED BY THE ASSESSING O FFICER HAS BEEN JUSTIFIABLY CANCELLED. THE ORDER OF THE CIT(A) IS HEREBY AFFIR MED. 21. IN VIEW OF THE CONDITIONS LAID DOWN FOR CLAIMIN G IMMUNITY FROM LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT AS PRESCRIB ED IN SUB-SECTION (2) TO THE SAID SECTION, HAVING BEEN FULFILLED, WE FIND NO MER IT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THIS REGARD. WE UPHOLD TH E ORDER OF THE CIT(A) IN DELETING THE PENALTY LEVIED UNDER SECTION 271AAA OF THE ACT IN RESPECT OF INCOME OFFERED TO TAX TO THE EXTENT OF RS.97,02,632/- AND CANCELLING THE PENALTY TO THE EXTENT OF RS.9,70,263/-. THE GROUNDS OF APPEAL RAI SED BY THE REVENUE ARE THUS, DISMISSED. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 11 TH DAY OF MAY, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 11 TH MAY, 2015 SUJEET COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE