Income Tax Appellate Tribunal - Ahmedabad
Surya Enclave Developers, Surat vs Department Of Income Tax on 25 June, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL " A " BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND S.S. GODARA JUDICIAL MEMBER I.T.A. No. 2092/Ahd/2011 (Asstt. Year 2008-09) The Deputy Commissioner of Vs M/s. Surya Enclave Income Tax, Developers, Central Circle-1, 2nd Floor, Ascon City, Room No.505, City Light Road, Aayakar Bhavan, Surat.
Majura Gate, Surat
PAN ABBFS 3082 Q
(Appellant) (Respondent)
By Revenue Shri V.K. Singh, Sr. D.R.
By Assessee. Shri Rajesh Shah, A.R.
सन
ु वाई क तार ख/Date of Hearing : 22-06-2015
घोषणा क तार ख /Date of Pronouncement: 25/06/2015
आदे श/O R D E R
PER ANIL CHATURVEDI ACCOUNTANT MEMBER:
This appeal is filed by the Revenue against the order of CIT (A)-II, Ahmedabad dated 14-6-2011 for Assessment Year 2008-09.
2. The relevant facts as culled out from the material on record are as under.
ITA No. 2092/ Ahd/2011Assessment Year 2008-09.
23. The assessee is a partnership firm stated to be engaged in the business of construction activity. In this case, a search and seizure operation under section 132 of the Act was carried out on the assessee's business premises and at that time Managing Director of the Company, Shri Jaiprakash Aswani, made a total disclosure of Rs.2 crore in the Surya Enclave Project. Thereafter, the assessee filed its return of income on 12-1-2009 declaring total income of Rs.2,40,48,820/- which included the disclosure of Rs.2 crore made at the time of search and seizure operation. Thereafter, assessment was framed under Sec. 143(3) of the Act vide order dated 31-12-2009 and total income was determined at Rs.2,89,46,800/-. On the undisclosed income of Rs.2 crore, A.O. vide order dated 29-6-2010, levied penalty of Rs.20 lac under Section 271AAA of the Act for the reason that the assessee during the course of search had failed to specify the manner in which such income was derived by it. Aggrieved by the order of A.O. assessee carried the matter before the CIT (A)., who vide order dated 14-6-2011 deleted the penalty by holding as under:-
"5. I have considered the facts of the case mentioned by the A.O., the basis of levy of penalty, submissions made by Ld. AR on behalf of the assessee and the case laws relied upon.
5.1. The Ld. AR's argument that the income disclosed by the assessee could not be covered under the definition of 'undisclosed income' as defined in Explanation (a) to section 271AAA of the Act, cannot be accepted because the assessee himself made disclosure of unaccounted income while recording the statement u/s.132(4) of the I.T. Act. He has also admitted that undisclosed income was invested in land, unaccounted cash, jeweler and receivables and undisclosed income was not recorded n the books of accounts. The disclosure made by the assessee for undisclosed income of Rs.2,00,00,000/-, is clearly covered under the definition of 'undisclosed income' as per Expl. (a) to section 271AAA of the Income Tax Act.
5.2 On perusal of assessment order it is found that the Assessing Officer issued notice for initiating penalty under section ITA No. 2092/ Ahd/2011 Assessment Year 2008-09.3
274 r.w.s. 271AAA of the income tax act without recording his satisfaction that income offered by the assessee firm was not covered under section 271 AAA of the act and I also perused the statement of the assessee recorded under section 132 (4) of income tax act. The AO has levied the penalty u/s 271AAA of the Act because the first two conditions of section 271AAA(2) are not fulfilled by the appellant. The three conditions provided in sub section (2) of section 271 AAA are reproduced as under:
(i) In the course of 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 derived; and
(ii) Pays the tax together with interest, if any, in respect of the undisclosed income.
. .
Clause (i) lays down the first condition that undisclosed income should have been admitted by the assessee in the statement u/s 132(4) and assessee should specify the manner in which it has been derived. The key person of the group, Shri Jaiprakash K. Aswani in his statement recorded u/s 132(4) before the Deputy DIT in course of search on 19 & 2.0.2.2008, stated in reply to question no. 11, and disclosed total income of Rs.20.23 Crores out of which undisclosed income of Rs.2.00 crores belonged to the assessee firm. In the same question the authorized Officer himself stated "in these transactions it mainly appears that receipts of on-
money from various residential projects by your group companies," clearly implies that the income is earned from on- money. The assessee in his statement recorded u/s 132(4) disclosed Rs.2.00 crores on account of net income from on-money receipts from booking of residential properties in the project developed and constructed by the assessee firm itself. So assessee specified the manner in which undisclosed income was earned.
Clause (ii) lays down the second condition that assessee should substantiate the manner in which undisclosed income has been derived. The key person of the group Shri Jaiprakash K. Aswani, in his statement recorded u/s 132(4) on 19 & 20.2.2008, in reply to question no. 11, made disclosure of total income of Rs.20.23 Crores and has provided bifurcation of undisclosed income in different hands and made disclosure of Rs.2.00 crores in the ITA No. 2092/ Ahd/2011 Assessment Year 2008-09.
4hands of the assessee firm. In the same question the Authorized Officer mentioned that it was established that the assessee earned income from on money received from booking of residential properties and substantiated the manner in which unaccounted income was earned.
5.3 The principles laid down by the Hon'ble High Courts in the cases of CIT v. Mahendra C. Shah [2008] 299 ITR 305; (Guj.) and second CIT v. Radha Krishna Goel [2005] 278 ITR 454/[2006] 152 Taxman 290 (All.), are also squarely applicable to the facts and circumstances of the appellant's case. In the case of CIT v. Mahendra C. Shah, Hon'ble jurisdictional High Court has observed that When the statement is being recorded by the authorized Officer, it is incumbent upon the authorized officer to explain the provision of explanation 5 in entirely to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the revenue to take advantage of such lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by the second exception while making statement under section 132(4). 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 substantial compliance not warranting any further denial of the benefit.
In the case of CIT v. Radha Krishna Goel [2005] 278 ITR 454, the Hon'ble Allahabad High Court gave similar findings and laid down similar principles as under:-
"...From a perusal Explanation 5, it is evident that the circumstances which otherwise did not attract the penalty provisions of section 271(1)(c), now by a deeming provision attract penalty provisions. But an exception is provided in clause (2) of Explanation 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-section (4) of section 132 that the money, bullion, jewellery etc. found in his possession has been acquired out of his income which has not been disclosed so far in his return of income and also specifies in the statement the manner in which such income has been derived and pays the tax together with interest, ITA No. 2092/ Ahd/2011 Assessment Year 2008-09.5
if any, in respect of such income....under section 132(4) of the Act, unless the authorized officer puts a specific question 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 and in case in the statement the manner in which income has been derived, has not been stated but has been stated subsequently, it amounts to compliance with Explanation 5(2). If there is nothing to the contrary in the statement- recorded under section 132(4) of the Act, in the absence of any specific statement about the manner in which such income, has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on. The object of the provision is achieved by making the statement admitting the non-disclosure of money, bullion, jewellery, etc. thus, much importance should hot be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was '.derived Would not make explanation 5(2) inapplicable. "(P. 454)." .
5.4 After going through the statement recorded under section 132 (4) of the IT Act and the principles laid down by the Honourable Gujarat High Court and Allahabad High Court, it is held that the AO has wrongly rejected the assessee's arguments on the ground that the decision was rendered in reference to explanation 5 of section 271(1)(c) and not with regard to the section 271AAA. The Honourable courts have laid down the principle that the authorized Officer is to explain the provision to the assessee and ask the relevant questions on the manner in which the undisclosed income was earned and in the present case it is applicable for section 271AAA instead of explanation 5 of Section 271(1). In the whole, statement recorded under section 132(4) on 19 & 20.2.2008, the authorized Officer has not asked any further question but was satisfied with the manner the income was earned by the assessee.
Clause (iii) lays down the third condition regarding the payment of tax along with interest on undisclosed income admitted in the course of search. It is undisputed fact that the tax and interest had been paid by the assessee. The Assessing Officer himself stated the same in the penalty order.
The assessee has made disclosure of unaccounted income while recording statement under section 132(4) of the Income tax Act and paid the taxes with interest. The disclosure was neither made ITA No. 2092/ Ahd/2011 Assessment Year 2008-09.
6against any money, bullion, jewellery or other valuable articles or things found during the course of search nor rria.de against any entry in the books of accounts or other documents or transactions found in the course of search because no such assets or transactions were found during the course of search. The disclosure of unaccounted income in the entire group was made in the statement of key person of the group, Shri Jaiprakash K.Aswani recorded u/s.132(4) on the ground of 'on money' collected on booking of residential properties in their projects and from the textile business.
In view of the above circumstances and on the basis of principles laid down by the Honourable jurisdictional High Court and by the Allahabad High Court in the above cited cases the assessee can be said to have substantially discharged the onus of explaining and substantiating the manner of earning undisclosed income because the Assessing Officer made assessment of disclosure made by assessee on the basis of actual income and not on the basis of the investment/expenditure under the various deeming provisions. Moreover, the Assessing Officer, in the assessment order passed u/s.143(3) of the Act, accepted the disclosed income declared by the assessee. The returned income included disclosure amount of Rs.2,00,00,000/- made during search while recording statement u/s.132(4) of the Act. The A.O. has not made any comment or observation about the source and nature of income, manner in which income was derived or substantiating the manner. This shows that the A.O. himself was satisfied about the disclosed income offered in return of income.
In view of these facts and circumstances of the case and the principles laid down in the decisions by the Hon'ble High Courts narrated above in paras 4.1 and 5.3 of this order, it is held that the Assessing Officer was not justified in levying the penalty u/s 271AAA of the Act and hence the same is deleted.
5. Aggrieved by the aforesaid order of the CIT (A), the Revenue is now in appeal before us.
6. Before us the Ld. D.R. supported the order of A.O. On the other hand, Ld. A.R. reiterated the submissions made before the A.O. and the CIT (A). and also placed reliance on the decision of Ahmedabad Tribunal ITA No. 2092/ Ahd/2011 Assessment Year 2008-09.
7in the case of DCIT vs. Smt. Sulochanadevi D. Agarwal in ITA No.1052/Ahd/2012 order dated 20-7-2012 and Delhi Bench Tribunal in the case of Smt. Raj Rani Gupta vs. DCIT order dated 30-3-2012. He thus supported the order of CIT (A).
7. We have heard the rival submissions and perused the material available on record. We find that CIT (A) while deleting the penalty has noted that the disclosure made by the assessee of undisclosed income of Rs.2 crore was covered under the definition of "undisclosed income"
as per the Explanation (a) to Section 271AAA r.ws. 271(1)(c) of the Act, the assessee had specified the manner in which the undisclosed income was earned and had substantiated the manner in which unaccounted income was earned. The CIT (A) while relying on the decision of High Court in the case of CIT vs. Mahendra C. Shah [2008] 299 ITR 305 (Guj.) and CIT vs. Radha Kishan Goel [2005] 278 ITR 454 has held that the principles laid down by the aforesaid decision squarely applies to the facts and circumstances of the present case. Before us the Revenue as not brought any contrary binding decision in its support nor could demonstrate as to how the principles laid down by the decisions relied upon the CIT (A) are not applicable to the facts of the aforesaid case. In view of the aforesaid we find no reason to interfere with the order of the CIT (A) and thus this ground of the Revenue is dismissed.
8. In the result, appeal of the Revenue is dismissed.
Order pronounced in the Court on Thursday, the 25th/06/2015 at Ahmedabad.
Sd/- Sd/-
(S.S. GODARA) ( ANIL CHATURVEDI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
ITA No. 2092/ Ahd/2011
Assessment Year 2008-09.
8
Ahmedabad. Dated 25/ 6 /2015
Patki
आदे श क
त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आय!
ु त(अपील) / The CIT(A) II, Ahmedabad
5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड- फाईल / Guard file.
ु ार/ BY ORDER, आदे शानस उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील!य अ"धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation- 22-6-2015
2. Date on which the typed draft is placed before the Dictating Member :23-6-2015
3. Date on which the approved draft comes to the Sr.P.S./P.S. 23-6-2015
4. Date on which the fair order is placed before the Dictating Member for Pronouncement: 25-6-2015
5. Date on which the file goes to the Bench Clerk : 25-6-2015
6. Date on which the file goes to the Head Clerk..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order..........................
8. Date of Despatch of the Order..................