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Income Tax Appellate Tribunal - Ahmedabad

Sulochanadevi A.Agarwal, Surat vs Department Of Income Tax on 17 July, 2012

              IN THE INCOME TAX APPELLATE TRIBUNAL
                       'A' BENCH - AHMEDABAD

       (BEFORE SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMONY, AM)

                           ITA No.1052/Ahd/2012
                                A. Y.: 2009-10

     The D. C. I. T., Cent. Cir-3,    Vs   Smt. Sulochanadevi A. Agarwal,
     Aayakar Bhavan, Room No.507,          Patel Building, 2nd Floor, 20,
     Majura Gate,                          Dadyseth Agiary Lane, Mumbai
     Surat                                 P. A. No. AABPA 9575 D

             (Appellant)                            (Respondent)

             Appellant by        Shri Rahul Kumar, Sr. DR
             Respondent by       None

                       Date of hearing: 17-07-2012
                    Date of pronouncement: 20-07-2012

                                     ORDER

PER A. MOHAN ALANKAMONY: This appeal is filed by the revenue aggrieved by the order of the learned CIT(A)-II, Surat in appeal No. CIT(A)-II/CC.3/139/2011-12 dated 16-03-2012 passed u/s 271AAA r.w.s 250 of the IT Act for assessment year 2009-10.

2. The revenue has raised three grounds in its appeal wherein grounds No.2 and 3 are general in nature. Ground No.1 of the appeal is reproduced herein below for our consideration:

"1. The Ld. CIT(A) has erred in law and on facts in directing the AO to delete the penalty of Rs.5,00,000/- levied by the Assessing Officer u/s. 271AAA of the Act."

DCIT, Cent Cir-3, Surat Vs Smt. Sulochanadevi A. Agarwal

3. Brief facts: - A search action u/s 132 of the Act was carried on in the residential and business premises of the assessee on 24-09- 2008 and assessment order u/s 143(3) read with section 153A of the Act was passed on 27-12-2012 wherein the assessee had admitted undisclosed income of Rs.50,00,000/- as her additional income under the head income from other sources. The learned AO initiated penalty proceedings us/ 271 AAA of the Act and levied penalty of Rs.5,00,000/- with the following observations:

"However, it is seen that in the return of income filed by the assessee for AY 2009-10 on 29-03-2010, the assessee has offered to tax only after being detected by the Department during the course of search proceedings. Had the search not taken place, the assessee would not have come forward voluntarily to disclose the aforesaid income in her return of income. The treatment given to the undisclosed income in the computation of income reads as under:

       Particulars                                            Amount
       On account of unexplained cash in hand                  Rs.24,07,200/-

To cover unidentified discrepancies/receivables that RS.24,92,800/- may be found based on any entry, note, scribbling etc. in the books of accounts, other documents, loose paper, hard disk, or in any assets etc. either in her hands or in the hands of her family members or relatives or employees of partnership firm or sister concerns or any of the company or its directors of the entire ground Total RS.50,00,000/-

The assessee's case is therefore not covered under section 271AAA(2), the exemption provision of section 271AAA. The conditions and their status in assessee's case are as under:-

DCIT, Cent Cir-3, Surat Vs Smt. Sulochanadevi A. Agarwal Condition Fulfilled 1 In the course of the search, in a statement under No sub-section (4) of section 132, admits the undisclosed income and specified the manner in which such income has been derived 2 Substantiates the manner in which undisclosed No income has been derived 3 Pays the tax together with interest, if any in respect Yes of undisclosed income From the above chat it is very much clear that out of three conditions, the assessee failed to fulfill first two conditions.

Therefore, the assessee's case is not covered in section 271AAA (2) of t he Act.

As per the section 271AAA

(a) 'Undisclosed income' means -

(i) Any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable articles or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has -

(A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) Otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search; or In the instant case, the income declared by the assessee was not found recorded in the regular books of account of the assessee on the date of search. It means the assessee has herself accepted that this income is not recorded in her books of a/c. Further, the income was not previously disclosed to CCIT or CIT before the date of search. Therefore, the income declared by the assessee squarely falls under the definition of 'undisclosed income'. It is pertinent to mention here that had the search action not taken place, the assessee would not have come forward voluntarily to disclose the aforesaid income in her return of income.

DCIT, Cent Cir-3, Surat Vs Smt. Sulochanadevi A. Agarwal Therefore, I am of the considered opinion that the assessee has disclosed Rs.50,00,000/- during the course of search for which the assessee failed to specify the manner in which such income has been derived and also substantiate the manner in which the undisclosed income was derived. Therefore, section 271AAA (1) is clearly applicable in assessee's case. Hence, penalty of Rs.5,00,000/- @10% of disclosed income of Rs.50,00,000/- as specified in the section is imposed. Accordingly, the assessee is directed to pay, by way of penalty, a sum of Rs.5,00,000/- within the stipulated date and time mentioned on the demand notice and challan issued with this order."

4. The assessee carried the matter before the learned CIT(A). The learned CIT(A) deleted the penalty levied by the learned AO with the following reasoning:

"6. I have considered the facts of the case, order of the A. O., the submissions of the appellant as also the statement of the appellant's son viz. Shri Mitesh Agarwal recorded u/s 132 (4) during the course of search.

It is seen that during the course of search, pending verification of the seized material, the appellant's son viz. Shri Mitesh Agarwal in his statement recorded u/s 132(4) of the Act, had voluntarily disclosed a total amount of Rs.17 Crores for the entire group, with a request that no penalty should be levied in respect of the said disclosure. It is further seen that after obtaining the said disclosure with a request of not levying penalty, the statement u/s. 132(4) has been concluded by the Authorized Officer and no specific question as regards manner of earning the undisclosed income or substantiation thereof was put forth by the Authorized Officer.

Even during the post search proceedings or assessment proceedings, when the assessee-wise break-up of the aforesaid total disclosure of Rs.17 Crores was submitted to the A. D. I. T. allocating an amount of Rs.50 lacs in the hands of the appellant, no specific questions as regards manner of ITA No.1052/Ahd/2012 (AY: 2009-10) 5 DCIT, Cent Cir-3, Surat Vs Smt. Sulochanadevi A. Agarwal earning the undisclosed income or substantiation thereof was put forth by the Departmental Officer. It is further seen that in pursuance of the statement u/s. 132(4), the appellant has offered the income of Rs.50 lacs in the return of income of the current year and has even paid the tax thereon. Thus, the appellant's case is squarely covered by the decision of the jurisdictional High Court of Gujarat in the case of CIT v. Mahendra C. Shah (2008) 299 ITR 305 (Guj) wherein it has been held that when the undisclosed income admitted by the assessee has been offered for tax in the return of income and the tax thereon is duly paid, penalty could not be levied on the ground that manner of earning the undisclosed income has not been specified, in absence of any question in this respect by the Authorized Officer.

I also do not agree with the reasoning of the A. O. that there is no admission by the appellant instatement u/s. 132(4) of the Act since, the disclosure of Rs.50 lacs offered for tax by the appellant dully forms part of the total disclosure of Rs.17 crores made by her son in the statement recorded u/s. 132(4), which has been accepted by the A. O. during the course of assessment.

Further, the reasoning of the A. O. that the appellant has not specified the manner of earning the undisclosed income and has failed to substantiate the same, it also not in view of the decision of the jurisdictional High Court of Gujarat in the case of CIT v. Mahendra C. Shah (supra), since, no question as regards specification of manner of earning the undisclosed income and substantiation thereof was put forth by the Authorized Officer while recording the statement u/s. 132(4) during the course of search.

Thus, considering the facts of the case that the undisclosed income has been admitted in the statement recorded u/s. 132(4), the same has been offered in the return in the current year, the tax along with interest thereon has been duly paid and there being no further question by the Departmental Officials while recording the statement u/s. 132(4) or during the assessment proceedings as regards manner of earning such ITA No.1052/Ahd/2012 (AY: 2009-10) 6 DCIT, Cent Cir-3, Surat Vs Smt. Sulochanadevi A. Agarwal undisclosed income and substantiation thereof, in spite of request, by the assessee during statements u/s 132(4), not to levy penalty, I hereby delete the penalty u/s. 271AAA amounting to Rs.5,00,000/- levied @10% on the disclosure of Rs.50,00,000/- made during the course of search."

5. Now, the revenue is in appeal before us aggrieved by the order of the learned CIT(A) deleting the penalty levied by the learned AO.

6. The learned DR supported the order of the learned AO and prayed that the same may be sustained while none appeared on behalf of the assessee.

7. We have heard the submissions of the revenue and carefully perused the materials on record. The learned CIT(A) had deleted the penalty due to the following reasons:

(1) The assessee had voluntarily disclosed the sum of Rs.50,00,000/- during the search proceedings with request that no penalty should be levied in respect of such disclosure.

(2) During the post search proceedings no specific question as regards manner of earning of undisclosed income or substantiation thereof was put forth by the revenue.

(3) The assessee had also paid due tax for the undisclosed income of Rs.50,00,000/- declared voluntarily.

(4) In the decision rendered by the jurisdictional High Court of Gujarat in the case of CIT Vs Mahendra C. Shah (2008) 299 ITR 305 (Guj) it was held that when undisclosed income admitted by the assessee has been offered for tax in the return of income and the tax thereof duly paid, penalty cannot be levied, specifically, in the absence of any question in this respect by the AO.

DCIT, Cent Cir-3, Surat Vs Smt. Sulochanadevi A. Agarwal At this juncture, we must admit that the reasons pointed out by the learned CIT(A) are justifiable for deleting the penalty levied by the learned AO u/s 271 AAA of the Act. Therefore, we do not find any hesitation to confirm the order of the learned CIT(A)

8. In the result, the appeal of the revenue is dismissed.

Order pronounced in the open Court on 20-07-2012 Sd/- Sd/-

                (D. K. TYAGI)                          (A. MOHAN ALANKAMONY)
             JUDICIAL MEMBER                            ACCOUNTANT MEMBER

Lakshmikant Deka/
Copy of the order forwarded to:
1.  The Appellant
2.  The Respondent
3.  The CIT concerned
4.  The CIT(A) concerned
5.  The DR, ITAT, Ahmedabad
6.  Guard File
                                                                BY ORDER


                                           Dy. Registrar, ITAT, Ahmedabad

1.     Date of Dictation: 17-07-2012

2. Date on which the typed draft is placed before the Dictating Member: 18-07-2012 other Member:

3. Date on which approved draft comes to the Sr.P.S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement:

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk:

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: