Shri Chandrakant B. Sompura, Ahmedabad V. The Dy.CIT, Central Circle-2(2), Ahmedabad

ITSSA 407/AHD/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3434 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD , ACCOUNTANT MEMBER SHRI CHANDRAKANT B. SOMPURA, AHMEDABAD - 380013 PAN: ACBPS8922J (APPELLANT) VS THE DY. CIT, CENTRAL CIRCLE 2(2), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 25 - 10 - 2 017 DATE OF PRONOUNCEMENT : 30 - 10 - 2 017 / ORDER P ER : S.S. GODARA, JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , AR ISES FROM ORDER O F THE CIT(A) - III, AHMEDABAD DATED 19 - 09 - 2014 IN APPEAL NO. CIT(A) - III/536 & 537/DCIT.CC.2(2)/13 - 14 , UPHOLDING ASSESSING OFFICER S ACTION IMPOSING PENALTY OF RS. 13,23,200/ - IN HIS ORDER DATED 25 - 09 - 2013, IN PROCEEDINGS UNDER SECTION 271AAA OF THE INCOME T AX ACT, 1961; IN SHORT THE ACT . I T (SS). A NO . 407 / A HD/20 1 4 A S SESSMEN T YEAR 2010 - 11 I.T(SS). A NO. 407 /AHD/20 14 A.Y. 2010 - 11 PAGE NO SHRI CHANDRAKANT B. SOMPURA VS. DY. CIT 2 2. WE COME TO THE RELEVANT FACTS FIRST. THE INSTANT LIS EMANATES FROM A SEARCH ACTION IN M/S. TRIVEDI - SOMPURA GROUP DATED 21 - 04 - 2010. THE ASSESSEE APPEARS TO HAVE DISCLOSED VARIOUS AMOUNTS I.E. RS. 60 LACS CASH, RS. 70 LACS PERTAINING TO UNACCOUNTED JEWELRY , RS. 2 LACS RELATING TO UNDISCLOSED INVESTMENT AND RS. 32,000/ - AS MISCELLANEOUS INCOME; RESPECTIVELY DURING SEARCH. HE HAD FILED ORIGINAL RETURN ON 14 - 09 - 2011 STATING INCOME OF RS. 18292150/ - . HE THEREAFTER REV ISED THE SAME ON 20 - 12 - 2012 ENHANCING THE ABOVE INCOME TO RS. 18425540/ - . THE ASSESSING OFFICER COMPLETED ASSESSMENT ON 22 - 03 - 2013 ACCEPTING THE SAME. HE HOWEVER INITIATED THE IMPUGNED PENALTY PROCEEDINGS UNDER SECTION 271AAA OF THE ACT. 3. WE NOW ADVERT TO THE IMPUGNED PENALTY PROCEEDINGS. THE ASSESSING OFFICER PASSED HIS PENALTY ORDER ON 25 - 09 - 2013 HOLDING THEREIN THAT THE ASSESSEE S ACT AND CONDUCT IN DISCLOSING THE ABOVE INCOME DURING SEARCH DID NOT SPECIFY THE MANNER OF HAVING DERIVED THE ABOV E UNDISCLOSED INCOME FOLLOWED BY SUBSTANTIATION THEREOF. THERE IS NO DISPUTE THAT THE ASSESSEE HAS PAID ALL TAXES PERTAINING TO THE SAID UNDISCLOSED INCOME. THE CIT(A) UPHOLDS THE ASSESSING OFFICER S ACTION THAT THE ASSESSEE S INSTANT FACTS DO NOT SATISF Y THE FORMER TWO LIMBS OF IMMUNITY. 4. WE HAVE EXAMINED THE RELEVANT FACTS. WE NOTICE FIRST OF ALL THAT HON BLE JURISDICTIONAL RECENT JUDGMENT IN TAX APPEAL NO. 434/AHD/2017 DECIDED ON 24 - 07 - 2017 PCIT VS. MUKESHBHAI RAMANLAL PRAJAPATI I.T(SS). A NO. 407 /AHD/20 14 A.Y. 2010 - 11 PAGE NO SHRI CHANDRAKANT B. SOMPURA VS. DY. CIT 3 INTERPRETS T HE SAID TWO LIMBS OF MANNER OF DERIVING THE UNDISCLOSED INCOM E IN QUESTION VIS - - VIS SUBSTANTIATION THEREOF IN SECTION 271AAA PROCEEDINGS AS UNDER: - 10. IT CAN THUS BE SEEN THAT THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH AND HC - NIC PAGE 6 OF 10 CREATED ON MON AUG 21 02:26:34 IST 2017 O/TAXAP/434/2017 ORDER ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. RADHA KISHAN GOEL (SUPRA) HAVE PUT 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 DISCLOSE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED IN ORDER TO AVOID PENALTY. THE HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH , IN PARTICULAR, OBSERVED THAT CONSIDERING THE SOCIAL ENVIRONMENT, IT I S 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 COURT WENT ON TO OBSERVE THAT IF THE INCOME IS DECLARED AND TAX IS PAID THEREON, THERE WOULD BE SUBSTANTIAL COMPLIANCE. 11. IT IS THIS PRINCIPLE WHICH THE CIT (APPEALS) AND THE TRIBUNAL HAVE APPLIED IN THE PRESENT CASE. AS NOTED, CIT (APPEALS) WAS SPECIFIC THAT NO QUES TION WAS PUT TO THE ASSESSEE WHILE RECORDING STATEMENT UNDER SECTION 132 REGARDING THE MANNER OF DERIVING THE UNDISCLOSED INCOME. COUNSEL FOR THE REVENUE, HOWEVER, VEHEMENTLY CONTENDED THAT IN THE PRESE NT CASE, THE PENALTY WAS BEING IMPOSED UNDER SECTION 271AAA OF THE ACT AND THE STATUTORY PROVISIONS ENABLING THE ASSESSEE TO AVOID SUCH A PENALTY ARE ENTIRELY DIFFERENT AS COMPARED TO EXPLANATION 5 TO SECTION 271 . 12. SUB SECTION (1) OF SECTION 271AAA PROVIDES FOR A PENALTY IN ADDITION TO TAX AT THE RATE OF TEN PERCENT OF THE UNDISCLOSED INCOME 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 PENALTY MAY, HOWEVER, BE AVOIDED IF THE CONDITIONS SPECIFIED UNDER SUB SECTION (2) ARE SATISFIED WHICH ARE AS UNDER: (2) NOTHING CONTAINED IN SUB SECTION (1) SHALL APPLY IF THE ASSESSEE - (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER SUB SECTION (4) OF SECTION 132 ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DER IVED; 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 RETAINING THE OTHER REQUIREMENTS OF AVOIDING PENALT Y AS PROVIDED IN CLAUSE I.T(SS). A NO. 407 /AHD/20 14 A.Y. 2010 - 11 PAGE NO SHRI CHANDRAKANT B. SOMPURA VS. DY. CIT 4 (II) OF EXPLANATION 5 HAS NOW INTRODUCED AN ADDITIONAL REQUIREMENT OF THE ASSESSEE HAVING TO SUBSTANTIATE THE MANNER IN WHICH, THE UNDISCLOSED INCOME 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 INCOME BUT ALSO TO SPECIFY THE MANNER, IN WHICH, THE INCOME HAS BEEN DERIVED AND 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.SHAH AND THE DE CISION OF ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. RADHA KISHAN GOEL RENDERED IN BACKDROP OF DIFFERENT STATUTORY PROVISIONS WOULD NOT AUTOMATICALLY APPLY. 14. WE DO NOT REJECT THI S CONTENTION TOTALLY. HOWEVER, INSOFAR AS THE FACTS OF THE PRESENT CASE ARE CONCERNED, THE FIELD WOULD STILL BE 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 IN WHICH, THE UNDISCLOSED INCOME WAS DERIVED. THIS REQUIREMENT, HOWEVER, MUS T BE SEEN AS CONSEQUENTIAL TO OR COROLLARY TO THE BASE REQUIREMENT OF SPECIFYING THE MANNER, IN WHICH, THE UNDISCLOSED INCOME WAS DERIVED. 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 REVENUE FAILED TO QUESTION THE ASSESSEE WHILE RECORDING HIS STATEMENT UNDER SECTION 132 (4) OF THE ACT AS REGARDS THE MANNER OF DERIVING SUCH INCOME, THE REVENUE CANNOT JUMP TO THE CONSEQUENTIAL OR LATER REQUIREMENT OF SUBSTANTIATING THE MANNER OF DERIVING THE INCOME. IN THE CONTEXT OF THE REQUIREMENT OF THE ASSESSEE SPECIFYING THE MANNER OF DERIVING THE INCOME THE DECISION OF THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHENDRA C.SHAH (SUPRA) WOULD HOLD THE FIELD EVEN IN THE CONTEXT OF SUB - SECTION (2) OF SECTION 271AAA OF THE ACT. IT IS ONLY WHEN THE OFFICER OF THE RAIDING PARTY RECORDING THE STATEMENT OF THE ASSESSEE UNDER SECTION 132(4) OF THE ACT ELICITS A RESPONSE FROM THE ASSES SE'S THIS REQUIREMENT, THE ASSESSEE'S RESPONSIBILITY TO SUBSTANTIATE THE MANNER OF DERIVING SUCH INCOME WOULD COMMENCE. WHEN THE BASE REQUIREMENT ITSELF FAILS, THE QUESTION OF DENYING THE BENEFIT OF NO PENALTY WOULD NOT ARISE. 5. IT IS THEREFORE CLE AR THAT THEIR LORDSHIPS HOLD THAT AN ASSESSEE HAS TO BE SPECIFICALLY ASKED THE RELEVANT QUERY TO STATE THE MANNER OF HAVING DERIVED THE UNDISCLOSED INCOME IN QUESTION FOLLOWED BY SUBSTANTIATION THEREOF. WE FIND THAT THE CASE FILE CONTAINS ASSESSEE S SEARCH S TATEMENT IN PAGES 7 TO 10. THERE IS NO SPECIFIC QUESTION FROM THE DEPARTMENT SIDE BEING PUT TO HIM TO SPECIFY THE MANNER OF HAVING DERIVED THE UNDISCLOSED INCOME IN QUESTION. LD. DEPARTMENTAL I.T(SS). A NO. 407 /AHD/20 14 A.Y. 2010 - 11 PAGE NO SHRI CHANDRAKANT B. SOMPURA VS. DY. CIT 5 REPRESENTATIVE STRONGLY ARGUED IN SUPPORT OF BOTH THE LOWER AUTHO RITIES FINDINGS THAT THE ASSESSEE DID NOT SPECIFY SUCH MANNER. WE FIND NO MERIT IN REVENUE S INSTANT ARGUMENTS IN ABSENCE OF SUCH SPECIFIC QUERY IN ASSESSEE S SEARCH STATEMENT. WE THEREFORE FOLLOW HON BLE JURISDICTIONAL HIGH COURT S ABOVE EXTRACTED DECISIO N TO DELETE THE IMPUGNED PENALTY IMPOSED BY BOTH THE LOWER AUTHORITIES U/S. 271AAA OF THE ACT. 6. THIS ASSESSEE S APPEAL IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 30 - 10 - 201 7 SD/ - SD/ - ( MANISH BORAD ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30 /10 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,