Creative Processing Ltd., Surat V. The Dy.CIT.,Cent,Circile-1, Surat

ITA 992/AHD/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8649 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAJANA PARAMITA
• Assessee Lawyers: J P SHAH
• Keywords: Income from undisclosed sources; Search and seizure
• Section: 5(2); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBE R AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 992/AHD/2012 (ASSESSMENT YEAR: 2009-10) CREATIVE PROCESSING LIMITED, GARDEN MILLS COMPLEX, SAHARA GATE, SURAT APPELLANT VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, SURAT RESPONDENT PAN: AABCP4345H /BY ASSESSEE : SHRI J. P. SHAH, A.R. /BY REVENUE : PRAJANA PARAMITA, SR. D.R. /DATE OF HEARING : 11.08.2017 /DATE OF PRONOUNCEMENT : 31.08.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 ARISES AGAINST THE CIT(A)-II, AHMEDABADS ORDER DATED 20.03.2012, IN C ASE NO. CIT(A)- II/CC.1/117/2011-12, UPHOLDING ASSESSING OFFICERS ACTION IMPOSING PENALTY ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 2 - OF RS.7LACS IN HIS ORDER DATED 21.06.2011, IN PROCE EDINGS U/S. 271AAA OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILE PERUSED. 2. IT EMERGES THAT THE SOLE DISPUTE BETWEEN THE PAR TIES IS THAT OF CORRECTNESS OF THE ABOVESTATED SECTION 271AAA PENAL TY @ 10% OF THE UNDISCLOSED INCOME AMOUNTING TO RS.70LACS SHOWN AT ASSESSEES BEHEST IN ITS RETURN OF INCOME. BOTH PARTIES AGREE IN THE COURSE OF HEARING THAT THE CIT(A)S ORDER UNDER CHALLENGE ELABORATELY DISCUSSE S THE RELEVANT FACTS, ASSESSSEES EXPLANATION AS WELL AS ASSESSING OFFICE RS FINDING AS UNDER: 5 I HAVE CONSIDERED THE FACTS. OF THE CASE MENTION ED BY THE ASSESSING OFFICER, THE BASIS OF LEVY OF PENALTY, THE SUBMISSIONS MADE BY L D ARS ON BEHALF OF THE APPELLANT AND THE CASE LAWS RELIED UPON. THE BRIEF FACTS OF A PPELLANT'S CASE ARE THAT DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE YUSUF AKIKWALA, KEY OF LOCKER IN THE NAME OF APPELLANT COMPANY WAS FOUND A ND DIRECTOR OF APPELLANT COMPANY BEING MR. SUNIL KANSARRA IN HIS STATEMENT U /S 132(4) OF THE ACT RECORDED ON 27/06/2008 ADMITTED CASH FOUND FROM LOCKER FOR R 'S 70 LACS AS UNDISCLOSED INCOME OF COMPANY. THEREAFTER, APPELLANT COMPANY HA S FILED ITS RETURN OF INCOME FOR CURRENT ASSESSMENT YEAR DECLARING TOTAL INCOME AT RS. 4,57,05,874 ON 29TH SEPTEMBER, 2009 AFTER CONSIDERING THE DISCLOSURE MA DE BY DIRECTOR IN HIS STATEMENT. THE ASSESSING OFFICER HAS LEVIED PENALTY U/S 271 AAA OF THE ACT BECAUSE* THE FIRST TWO CONDITIONS OF SECTION 271AAA (2) ARE NOT FULFILLED BY THE APPELLANT. THE THREE CONDITIONS PROVIDED IN SUB SEC TION (2) OF SECTION 271AAA ARE REPRODUCED AS UNDER : '(2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APP LY IF THE ASSESSEE,-- (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UBSECTION (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 UNDISCLO SED INCOME WAS DERIVED; AND (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME.' IN THE PRESENT CASE, APPELLANT COMPANY HAS PAID TAX TOGETHER WITH INTEREST IN RESPECT OF UNDISCLOSED INCOME ADMITTED BY DIRECTOR IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT HENCE THIRD CONDITION MENTIONED I N SECTION 271AAA(2) IS FULFILLED BY APPELLANT WHICH IS ALSO NOT DISPUTED BY ASSESSIN G OFFICER. FURTHER, CLAUSE (I) LAYS DOWN THE FIRST CONDITION T HAT UNDISCLOSED INCOME SHOULD HAVE BEEN ADMITTED BY THE ASSESSEE IN THE STATEMENT U/S 132(4) AND ASSESSEE SHOULD ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 3 - SPECIFY THE MANNER IN WHICH IT HAS BEEN DERIVED. SH RI SUNIL KANSARA, DIRECTOR OF APPELLANT, IN HIS STATEMENT RECORDED ON 27/06/2008 HAS STATED AS UNDER: QUESTION - 7: DURING THE COURSE OF SEARCH PROCEED INGS AT THE RESIDENCE C YUSUF AKIKWALA ON 12/6/08 SOME LOCKER K EYS WERE FOUND. ON OPERATION LOCKER NO. 742 WITH HDFC BANK, CASH OF RS. 70 LACS WAS FOUND. HAVE YOUR RELATION WITH THE CA SH FOUND IN THE LOCKER? ANS 7: THE LOCKER NO. 742 MAINTAINED WITH HDFC BANK PERTAINS TO THE COMPANY CREATIVE PROCESSING LIMITED. THE C ASH FOUND IN THE SAID LOCKER BELONGS COMPANY AND THE SAID CASH R ELATED TO THE INCOME EARNED OUTSIDE THE BOOK ACCOUNT OF THE COMPA NY, DURING THE FY 2008-09. QUESTION - 14: GIVE THE DETAILS OF BUSINESS ACTIVIT IES CARRIED OUT BY THE COMPANY DURING THE CURRENT YEAR I.E. FY 2008-09 . ANS 14 DURING THE FY 2008-09, NO BUSINESS ACTIVITI ES RELATING TO YAR PAINTINGS WAS CARRIED OUT. ONLY GREY TRADING BU SINESS WAS CARRIED OUT DURING YEAR BY THE COMPANY, FOR WHICH N O ENTRY IS MADE IN THE BOOKS AS STATED EARLIER. THE DIRECTOR IN HIS STATEMENT REFERRED HEREIN ABOVE HAS ADMITTED RS 70 LACS FOUND FROM LOCKER AS APPELLANT'S COMPANY UNDISCLOSED INCO ME AND FURTHER STATED THAT SUCH INCOME HAS BEEN EARNED FROM GREY TRADING BUSIN ESS BUT NO EVIDENCE OF ANY KIND OF GREY TRADING BUSINESS WAS FOUND DURING THE SEARCH AND THE DIRECTOR COULD NOT FURNISH ANY DETAILS OR EVIDENCE OF GREY TRADING BUSINESS. THE DIRECTOR HIMSELF ADMITTED THAT NO BUSINESS ACTIVITIES RELATING TO YA RN AND PAINTING WAS CARRIED OUT. THIS ALSO CONFIRM THAT DIRECTOR DID NOT TELL CORREC T SOURCE OF UNACCOUNTED CASH FOUND AND SEIZED FROM LOCKER. HENCE CONDITIONS PRES CRIBED IN CLAUSE (I) REFERRED HEREIN ABOVE IS NOT FULFILLED. FURTHER, IN CASE OF APPELLANT COMPANY, CLAUSE (II) REFERRED HEREIN ABOVE WHICH LAYS DOWN THAT ASSESSEE SHOULD SUBSTANTIATE THE MANNER I N WHICH UNDISCLOSED INCOME HAS BEEN DERIVED HAS NOT BEEN FULFILLED. DURING THE COURSE OF SEARCH, DIRECTOR OF APPELLANT COMPANY IN QUESTION NO 17 WAS ASKED TO SU BMIT SOURCE OF UNDISCLOSED INCOME EARNED BY APPELLANT WHICH IS FOUND FROM BANK LOCKER. THE RELEVANT PORTION OF STATEMENT IS REPRODUCED HEREIN UNDER: QUESTION - 17: FROM WHICH PARTY(IES), THE SAID CASH OF RS. 70.00 LAC BEEN RECEIVED BY YOU? GIVE THE DETAILS? ANSWER -17: I DON'T KNOW, AS NO SUCH DETAILS AR E MAINTAINED. IT IS EXPLICITLY CLEAR FROM THE STATEMENT OF DIRECT OR RECORDED U/S 132(4) OF THE ACT WHEREIN AUTHORIZED OFFICER HAS ASKED HIM TO GIVE DE TAILS OF PARTIES FROM WHOM SUCH ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 4 - INCOME WAS RECEIVED AND IN RESPONSE TO SUCH QUESTIO N, NO SUCH DETAILS WERE SUBMITTED BY DIRECTOR. THE APPELLANT COMPANY IN ITS WRITTEN SUBMISSION HAS MAINLY ARGUED THAT IT IS NOT MANDATORY ON PART OF IT TO MA INTAIN DETAILS OF EARNING SUCH UNACCOUNTED INCOME, DURING THE COURSE OF SEARCH NO OTHER DETAILS REGARDING EARNING SUCH INCOME IS FOUND AND EVEN ASSESSING OFF ICER HAS NOT BROUGHT OUT ANY EVIDENCE WHICH CAN ESTABLISH THAT INCOME OF RS 70 L ACS IS NOT EARNED FROM GREY TRADING ACTIVITY OR MANNER OF EARNING SUGGESTED BY APPELLANT IS FOUND FALSE/INCORRECT HENCE APPELLANT CANNOT BE SUBJECT T O LEVY OF PENALTY U/S 271AAA ON THE GROUND THAT IT HAS FAILED TO SUBSTANTIATING THE MANNER OF EARNING SUCH INCOME CANNOT BE ACCEPTED AS DIRECTOR OF APPELLANT WAS SPE CIFICALLY ASKED TO SUBMIT DETAILS REGARDING PARTIES FROM WHOM IT HAS EARNED INCOME AN D DETAILS SUBSTANTIATING MANNER OF EARNING UNDISCLOSED INCOME ARE NOT SUBMIT TED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO. THE APPELLANT COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOT SUBMITTED ANY DETAIL S REGARDING SOURCE OF EARNING UNDISCLOSED INCOME OR SUBMITTED DETAILS WHICH CAN P ROVE THAT INCOME IS EARNED FROM GREY TRADING BUSINESS OR EVEN NO EVIDENCES OF GREY TRADING WAS FOUND DURING THE COURSE OF SEARCH HENCE STATEMENT OF DIRECTOR RE GARDING EARNING UNDISCLOSED INCOME FROM GREY TRADING BUSINESS IS INCORRECT. THE DIRECTOR HIMSELF ADMITTED THAT NO BUSINESS ACTIVITIES RELATING TO YARN AND PAINTIN G WAS CARRIED OUT DURING THE YEAR. THUS IT IS PROVED THAT EVEN AFTER SPECIFIC RE QUIREMENT AND QUESTIONS, APPELLANT HAS FAILED TO SPECIFY THE MANNER AND SUBS TANTIATING THE MANNER OF DERIVING UNDISCLOSED INCOME SO CONDITIONS OF EXCEPT IONS IN CLAUSE (I) AND (II) OF SECTION 271 AAA(2) ARE NOT FULFILLED. THE DECISION OF ALLHABAD HIGH COURT IN CASE OF CIT VS RADHA KISHAN GOEL 152 TAXMAN 290 AND GUJARAT HIGH COURT IN CASE OF GIT VS MAHENDRA C SHAH 172 TAXMAN 58 THOUGH PERTAINING TO EXPLANATION 5 TO SE CTION 271(1)(C) CANNOT APPLIED AS IN THOSE DECISIONS, NO SPECIFIC QUESTION WAS ASKED BY AUTHORIZED OFFICER REGARDING SUBSTANTIATING MANNER OF EARNING UNDISCLO SED INCOME HENCE THE HON'BLE HIGH COURTS HELD THAT MUCH IMPORTANCE SHOULD NOT BE GIVEN IN MANNER OF EARNING INCOME WHICH IS NOT THE CASE OF APPELLANT AS SPECIF IC DETAILS WERE ASKED .AT THE TIME OF RECORDING STATEMENT U/S 132(4) OF THE ACT. THE E XCEPTION PROVIDED U/S 271AAA(2) CAN BE APPLIED ONLY WHEN APPELLANT FULFIL LED ALL THE THREE CONDITIONS INDIVIDUALLY AND IN PRESENT CASE, APPELLANT HAS NOT SPECIFIED AND SUBSTANTIATED THE MANNER OF EARNING UNDISCLOSED INCOME EITHER DURING THE COURSE OF SEARCH PROCEEDINGS OR ASSESSMENT PROCEEDINGS OR IN PENALTY PROCEEDINGS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASES, IT IS HELD TH AT THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING PENALTY OF RS.7,00,000 U/S 271 AAA OF THE ACT AND HENCE, THE SAME IS CONFIRMED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. THERE IS NO HARDLY ANY QUARREL BETWEEN THE PARTIES THAT THE IMPUGNED PENALTY EMANATES FROM A SEARCH ACTION FOLLOWED BY ASSESSEE S DIRECTORS STATEMENT RECORDED THEREIN ON 27.06.2008. THE REVENUES ONLY CASE IS THAT THE ASSESSEE HAS NEITHER SPECIFIED THE MANNER NOR SUBSTANTIATED THE SAME REGARDING ITS ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 5 - UNDISCLOSED INCOME IN QUESTION. LEARNED CIT(A) HEA VILY RELIES UPON QUESTION NO.17WHILST UPHOLDING THE ASSESSING OFFICE RS ACTION UNDER CHALLENGE. HE IS OF THE VIEW THAT THE ASSESSEE DOE S NOT FULFILL SECTION 271AAA(2)(I) REGARDING MANNER OF DERIVING ITS UNDIS CLOSED INCOME. WE FIND THE SAME TO BE WHOLLY UNSUSTAINABLE. WE OBSERVE IN ABOVE BACKDROP OF FACTS THAT IT IS VERY MUCH IMPERATIVE FOR THE AUTHORIZED OFFICER IN THE COURSE OF SEARCH TO PUT UP THE SPECIFIC QUERY THAN VAGUE ONE IN SEEKING THE RELEVANT MANNER OF EARNING OF AN UNDISCLOSED INCOME IN SEARC H STATEMENT. WE FIND HEREIN THAT THE ABOVE REFERRED QUESTION NO.17 IS IN DEED A VAGUE QUERY INSTEAD OF THE ONE PUT UP TO THE ASSESSEE AFTER EXPLAINING THE RELEVANT PROVISION AND IMPACT THEREOF ON ACCOUNT OF ITS FAILURE IN NOT SPE CIFYING THE RELEVANT PARTICULARS. HONBLE JURISDICTIONAL HIGH COURTS L ATEST DECISION IN TAX APPEAL NO. 434/2017 DECIDED ON 24.07.2017 PCIT VS. MUKESHB HAI RAMANLAL PRAJAPATI DISCUSSES THE RELEVANT LAW ON THE INSTANT SUBJECT AS UNDER: 5. FROM THE PERUSAL OF THE ORDERS ON RECORD, IT BE COMES CLEAR THAT THE ASSESSEE HAD ADMITTED THE UNDISCLOSED INCOME IN HIS STATEMENT RECORDED UNDER SECTION132(4) OF THE ACT DURING THE SURVEY. T HE ASSESSEE HAD OWNED UP TO SUCH INCOME IN THE RETURN FILED AND HAD ALSO PAID TAX AND INTEREST ON SUCH SUM. THE ASSESSING OFFICER IMPOSED A PENALTY O N THE GROUND THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE MANNER OF EARNI NG THE INCOME. HOWEVER, CIT (APPEALS), AS NOTED, CONCLUDED THAT NO QUESTION WAS ASKED BY THE DEPARTMENTAL REPRESENTATIVES (IN THE COURSE OF RECO RDING THE STATEMENT UNDER SECTION 132(4) OF THE ACT) REGARDING THE MANN ER OF EARNING SUCH INCOME. IT WAS, ON THIS BASIS, THAT THE CIT (APPEAL S) AS WELL AS THE TRIBUNAL FOUND THAT THE ASSESSING OFFICER COMMITTED AN ERROR IN IMPOSING PENALTY. 6. AS IS WELL KNOWN, SECTION 271, PROVIDING FOR PEN ALTY FOR CONCEALMENT OF INCOME ETC., CONTAINED AN EXPLANATION 5 INSERTED W. E.F. 01.10.1984 AND HELD THE FIELD TILL INTRODUCTION OF EXPLANATION 5A W.E.F 01.06.2007. UNDER THIS EXPLANATION 5, PREVAILING AT THE RELEVANT TIME , AN ASSESSEE COULD AVOID PAYMENT OF PENALTY ON THE ASSESSEE BEING FOUND TO B E THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ACQUIRED BY UNDISCLOSED INCOME, IF IN THE COURSE OF SEARCH, THE ASSESSEE MADE A STATEMENT UNDER SUB SECTION (4) OF SECTION 132 ADMI TTING ACQUISITION OF SUCH ASSET OUT OF HIS INCOME NOT DISCLOSED IN THE RETURN AND ALSO SPECIFIES IN THE STATEMENT THE MANNER, IN WHICH, SUCH INCOME HAS BEE N DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IN RESPECT OF SUCH INCOM E. ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 6 - 7. TO AVOID PENALTY, WITH THE AID OF EXPLANATION 5 THEREFORE, THE ASSESSEE HAD TO MAKE A STATEMENT UNDER SUB-SECTION (4) OF SECTIO N 132 ADMITTING SUCH UNDISCLOSED INCOME AND SPECIFY IN SUCH STATEMENT TH E MANNER, IN WHICH, SUCH INCOME WAS DERIVED AND TO PAY TAX TAX, IF ANY, ON SUCH INCOME. 8. THIS PROVISION CAME-UP FOR CONSIDERATION BEFORE ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. RADHA KISHAN GOEL REPORTED IN 278 ITR 454 . THE REVENUE WAS IN APPEAL BEFORE THE HIGH COURT CHALLENGING JUDGEMENT OF THE INCOME TAX APPELLATE T RIBUNAL. GRIEVANCE OF THE REVENUE WAS THAT THE ASSESSEE HAD NOT DISCLOSED THE MANNER OF DERIVING SUCH INCOME. DESPITE WHICH, THE TRIBUNAL HAD DELETE D THE PENALTY. THE HIGH COURT REJECTED THE REVENUE'S APPEAL PRIMARILY ON THE GROUND THAT A STATEMENT UNDER SECTION 132(4) OF THE ACT IS RECORD ED BY THE DEPARTMENTAL AUTHORITIES AND IF IN SUCH STATEMENT NO QUESTION IS ASKED ABOUT THE DISCLOSURE OF MANNER IN WHICH THE INCOME IS DERIVED , THE REVENUE CANNOT IMPOSE PENALTY ON THE PREMISE THAT THE ASSESSEE DID NOT MAKE NAY SUCH DISCLOSURE. IT WAS HELD AND OBSERVED AS UNDER: 10. UNDER SECTION 132(4) OF THE ACT, IT IS THE AUT HORISED OFFICER, WHO EXAMINE ON OATH ANY PERSON, WHO IS FOUND TO BE IN POSSESSION O R CONTROL OF ANY BOOKS OF ACCOUNT, DOCUMENT, MONEY, BULLION, JEWELLERY OR OTH ER VALUABLE ARTICLE OR THING, THEREFORE, IT IS ON THE AUTHORISED OFFICER TO RECOR D THE STATEMENT IN HIS OWN WAY. THEREFORE, IT IS NOT EXPECTED FROM THE PERSON TO ST ATE THOSE THINGS, WHICH ARE NOT ASKED BY THE AUTHORISED OFFICER. 11. IT IS A MATTER OF COMMON KNOWLEDGE, WHICH CAN N OT BE IGNORED THAT THE SEARCH IS BEING CONDUCTED WITH THE COMPLETE TEAM OF THE OF FICERS CONSISTING OF SEVERAL OFFICERS WITH THE POLICE FORCE. USUALLY TELEPHONE A ND ALL OTHER CONNECTION ARE DISCONNECTED AND ALL INGRACE AND OUTGRACE ARE BLOCK ED. DURING THE COURSE OF SEARCH PERSON IS SO TORTURED, HARASSED AND PUT TO A MENTAL AGONY THAT HE LOOSES ITS NORMAL MENTAL STATE OF MIND AND AT THAT STAGE IT CA N NOT BE EXPECTED FROM A PERSON PRE-EMPT THE STATEMENT REQUIRED TO BE GIVEN IN LAW AS A PART OF HIS DEFENCE. 12. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT UNDER SECTION 132(4) OF THE ACT UNLESS AUTHORISED OFFICER PUTS A SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED, IT IS NOT EXPECTED F ROM THE PERSON TO MAKE A STATEMENT IN THIS REGARD AND IN CASE IF IN THE STAT EMENT THE MANNER IN WHICH INCOME HAS BEEN DERIVED HAS NOT BEEN STATED BUT HAS BEEN S TATED SUBSEQUENTLY, AMOUNTS TO THE COMPLIANCE OF EXPLANATION 5(2) OF THE ACT. WE A RE ALSO OF THE OPINION THAT IN CASE IF THERE IS NOTHING TO THE CONTRARY IN THE STA TEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, IN THE ABSENCE OF ANY SPECIFIC S TATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, IT CAN BE INFER RED THAT SUCH UNDISCLOSED INCOME WAS DERIVED FROM THE BUSINESS, WHICH HE WAS CARRYING ON OR FROM OTHER SOURCE. 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 STATE MENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. IT CAN BE INFER RED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE ABSENCE OF ANYTHI NG TO THE CONTRARY. THEREFORE, MERE NON-STATEMENT OF MANNER IN WHICH SUCH INCOME W AS DERIVED WOULD NOT MAKE THE EXPLANATION 5 (2) INAPPLICABLE. ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 7 - 9. SIMILAR SITUATION AROSE BEFORE THIS COURT. DIVIS ION BENCH IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C SHAH REPORTED IN 299 ITR 305 ADOPTED THE SAME LOGIC AS THAT OF THE ALLAHABAD HI GH COURT AND OBSERVED AS UNDER: 15. IN SO FAR AS THE ALLEGED FAILURE ON THE PART O F THE ASSESSEE TO SPECIFY IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT REGARDING THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, SUFFICE IT TO STATE THAT W HEN THE STATEMENT IS BEING RECORDED BY THE AUTHORIZED OFFICER IT IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTHORIZED OFFICER CANNOT STOP SHORT AT A PARTI CULAR STAGE SO AS TO PERMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE ST ATEMENT. THE REASON IS NOT FAR TO SEEK. IN THE FIRST INSTANCE, THE STATEMENT IS BE ING RECORDED IN THE QUESTION AND ANSWER FORM AND THERE WOULD BE NO OCCASION FOR AN A SSESSEE TO STATE AND MAKE AVERMENTS IN THE EXACT FORMAT STIPULATED BY THE PRO VISIONS CONSIDERING THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED, AS NOTED BY ALLAHABAD HIGH COURT IN CASE OF CIT VS. RADHA KISHAN GOEL (SUPRA). SECONDLY , CONSIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN AS SESSEE, WHETHER LITERATE OR ILLITERATE, TO BE SPECIFIC AND TO THE POINT REGARDI NG THE CONDITIONS STIPULATED BY EXCEPTION NO.2 WHILE MAKING STATEMENT UNDER SECTION 132(4) OF THE ACT. THE VIEW TAKEN BY THE TRIBUNAL AS WELL AS ALLAHABAD HIGH COU RT TO THE EFFECT THAT EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLARED AND TAX THEREON PAID, THERE WOULD BE SU BSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT UNDER EXCEPTION NO.2 IN EXPLANATION 5 IS COMMENDABLE. 10. IT CAN THUS BE SEEN THAT THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH AND ALLAHABAD HIGH COURT IN CAS E OF COMMISSIONER OF INCOME TAX VS. RADHA KISHAN GOEL (SUPRA) HAVE PU T CONSIDERABLE STRESS ON THE RECORDING OF THE STATEMENT UNDER SECTION 132 (4) OF THE ACT IN THE CONTEXT OF THE REQUIREMENT OF THE ASSESSEE TO DISCL OSE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED IN ORDER TO AVOI D PENALTY. THE HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAH ENDRA C.SHAH, IN PARTICULAR, OBSERVED THAT CONSIDERING THE SOCIAL EN VIRONMENT, IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATED BY EXCEPTION NO .2 WHILE MAKING STATEMENT UNDER SECTION 132(4) OF THE ACT. THE COUR T WENT ON TO OBSERVE THAT IF THE INCOME IS DECLARED AND TAX IS PAID THER EON, THERE WOULD BE SUBSTANTIAL COMPLIANCE. 11. IT IS THIS PRINCIPLE WHICH THE CIT (APPEALS) AN D THE TRIBUNAL HAVE APPLIED IN THE PRESENT CASE. AS NOTED, CIT (APPEALS) WAS SP ECIFIC THAT NO QUESTION WAS PUT TO THE ASSESSEE WHILE RECORDING STATEMENT U NDER SECTION 132 REGARDING THE MANNER OF DERIVING THE UNDISCLOSED IN COME. COUNSEL FOR THE REVENUE, HOWEVER, VEHEMENTLY CONTENDED THAT IN THE PRESENT CASE, THE PENALTY WAS BEING IMPOSED UNDER SECTION 271AAA OF T HE ACT AND THE STATUTORY PROVISIONS ENABLING THE ASSESSEE TO AVOID SUCH A PENALTY ARE ENTIRELY DIFFERENT AS COMPARED TO EXPLANATION 5 TO SECTION 271. ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 8 - 12. SUB SECTION (1) OF SECTION 271AAA PROVIDES FOR A PENALTY IN ADDITION TO TAX AT THE RATE OF TEN PERCENT OF THE UNDISCLOSED INCOM E IN CASE WHERE THE SEARCH HAS BEEN INITIATED UNDER SECTION 132 OF THE ACT ON OR AFTER 1ST DAY OF JUNE 2007 BUT BEFORE 1ST DAY OF JULY 2012. SUCH PEN ALTY MAY, HOWEVER, BE AVOIDED IF THE CONDITIONS SPECIFIED UNDER SUB SECTI ON (2) ARE SATISFIED WHICH ARE AS UNDER: (2) NOTHING CONTAINED IN SUB SECTION (1) SHALL APPL Y 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 SPECI FIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (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. 13. SUB SECTION (2) OF SECTION 271AAA THUS WHILE RE TAINING THE OTHER REQUIREMENTS OF AVOIDING PENALTY AS PROVIDED IN CLA USE (II) OF EXPLANATION 5 HAS NOW INTRODUCED AN ADDITIONAL REQUIREMENT OF T HE ASSESSEE HAVING TO SUBSTANTIATE THE MANNER IN WHICH, THE UNDISCLOSED I NCOME WAS DERIVED. IT IS THIS REQUIREMENT WHICH THE COUNSEL FOR THE REVENUE WOULD PLACE GREAT EMPHASIS ON. ACCORDING TO HER, ONUS IS NOW ENTIRELY SHIFTED ON THE ASSESSEE NOT ONLY TO MAKE A DISCLOSURE OF THE UNDISCLOSED IN COME BUT ALSO TO SPECIFY THE MANNER, IN WHICH, THE INCOME HAS BEEN DERIVED A ND TO SUBSTANTIATE THE SAME. IT WAS THEREFORE, CONTENDED THAT THE EARLIER DECISIONS OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.S HAH AND THE DECISION OF ALLAHABAD HIGH COURT IN CASE OF COMMISS IONER OF INCOME TAX VS. RADHA KISHAN GOEL RENDERED IN BACKDROP OF DIFFE RENT STATUTORY PROVISIONS WOULD NOT AUTOMATICALLY APPLY. 14. WE DO NOT REJECT THIS CONTENTION TOTALLY. HOWEV ER, INSOFAR AS THE FACTS OF THE PRESENT CASE ARE CONCERNED, THE FIELD WOULD STILL B E HELD BY THE DECISION OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS . MAHENDRA C.SHAH (SUPRA). SUB-SECTION (2) OF SECTION 271AAA IMPOSES AN ADDITIONAL CONDITION OF THE ASSESSEE HAVING TO SUBSTANTIATE THE MANNER I N WHICH, THE UNDISCLOSED INCOME WAS DERIVED. THIS REQUIREMENT, HOWEVER, MUST BE SEEN AS CONSEQUENTIAL TO OR COROLLARY TO THE BASE REQUIREME NT OF SPECIFYING THE MANNER, IN WHICH, THE UNDISCLOSED INCOME WAS DERIVE D. IT IS ONLY WHEN SUCH DECLARATION IS MADE, THE QUESTION OF SUBSTANTIATING SUCH DISCLOSURE OR CLAIM WOULD ARISE. IF, AS IN THE PRESENT CASE, THE REVENU E FAILED TO QUESTION THE ASSESSEE WHILE RECORDING HIS STATEMENT UNDER SECTIO N 132 (4) OF THE ACT AS REGARDS THE MANNER OF DERIVING SUCH INCOME, THE REV ENUE CANNOT JUMP TO THE CONSEQUENTIAL OR LATER REQUIREMENT OF SUBSTANTI ATING THE MANNER OF DERIVING THE INCOME. IN THE CONTEXT OF THE REQUIREM ENT OF THE ASSESSEE SPECIFYING THE MANNER OF DERIVING THE INCOME THE DE CISION OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.S HAH (SUPRA) WOULD HOLD THE FIELD EVEN IN THE CONTEXT OF SUB-SECTION ( 2) OF SECTION 271AAA OF ITA NO. 992/AHD/12 (CREATIVE PROCESSING LTD. VS. DC IT) A.Y. 2009-10 - 9 - THE ACT. IT IS ONLY WHEN THE OFFICER OF THE RAIDING PARTY RECORDING THE STATEMENT OF THE ASSESSEE UNDER SECTION 132(4) OF T HE ACT ELICITS A RESPONSE FROM THE ASSESSE'S THIS REQUIREMENT, THE ASSESSEE'S RESPONSIBILITY TO SUBSTANTIATE THE MANNER OF DERIVING SUCH INCOME WOU LD COMMENCE. WHEN THE BASE REQUIREMENT ITSELF FAILS, THE QUESTION OF DENYING THE BENEFIT OF NO PENALTY WOULD NOT ARISE. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO INDIC ATE ANY DISTINCTION ON FACTS OR LAW VIS--VIS THE INSTANT CASE INVOLVIN G THE IMPUGNED SECTION 271AAA PENALTY. WE THEREFORE DELETE THE SAME. THE ASSESSEE SUCCEEDS IN ITS SOLE SUBSTANTIVE GROUND. 6. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF AUGUST, 2017.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 31/08/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0