Income Tax Appellate Tribunal - Ahmedabad
Jaiprkash K.Aswani, Surat vs Department Of Income Tax on 26 June, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND
SHRI S.S. GODARA JUDICIAL MEMBER
ITA No.2090 & 2091/Ahd/2011
A.Y.2008-09
1. DCIT, Central Circle-1, Vs Shri Jaiprakash K.
Surat. Aswani,
J-18 Basement, J.J.
Market, Ring Road,
Surat.
PAN: AASPA 3016C
2. DCIT, Central Circle-1, M/s. Surya Prakash
Surat. Organizers,
2nd Floor, Ascon City,
Light Road, Surat.
PAN: ABCFS 5993F
(Appellant) (Respondent)
Revenue by : Shri V.K. Singh, Sr.D.R.,
Assessee(s) by : Shri Rajesh Shah, A.R.
सन
ु वाई क तार ख/Date of Hearing : 23/06/2015
घोषणा क तार ख /Date of Pronouncement : 26/06/2015
आदे श/O R D E R
PER S.S. GODARA, JUDICIAL MEMBER
These Revenue's appeals for A.Y.2008-09, arise from separate orders of the CIT(A)-II, Ahmedabad, dated 13.06.2011 and 15.06.2011, passed in case nos.CIT(A)-II/CC.1/73/2010-11 and CIT(A)-II/CC.1/76/2010-11, deleting penalties of Rs.30 lacs and ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -2- Rs.70 lacs; respectively, in proceedings under section 271AAA of the Income Tax Act, 1961, in short 'the Act'.
2. Both parties inform us at the outset that facts involved in the two cases are identical. We find that these two appeals seek restoration of the impugned section 271AAA penalties arising from the same search conducted on 14.2.2008 and the former assessee's statement record on behalf of himself as well as at the latter assessee's behest. Thus, we treat ITA 2090 as the lead case.
3. The assessee is an individual. The department conducted a search on 14.2.2008 in his group of cases. He admitted unaccounted on-money income of Rs.3 crores in his statement recorded in course of the search. And included the very sum in his return filed on 12.1.2009. The Assessing Officer completed a regular assessment on 24.12.2009 making unexplained investment addition of Rs.6,79,10,000/-. And initiated penalty proceedings u/s.271(1)(c) of the Act alleging concealment and furnishing of inaccurate particulars of income at the assessee's behest. The assessee does not seem to have filed any appeal. Quantum proceedings attained finality accordingly.
4. The Assessing Officer took up the penalty proceedings. The assessee inter alia quoted section 271AAA(2)(i)-(iii) and claimed to have admitted the aforesaid undisclosed income of Rs.3 crores, specified as well as substantiated manner of deriving the same along with payment of taxes and interest. The Assessing Officer held in penalty order dated 29.06.2010 that although the assessee had declared the abovestated undisclosed income of Rs. 3 crores, he had ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -3- not disclosed particulars of his accounts and details with source thereof. He recited assessment proceedings and observed that the very factual position had continued therein. He concluded that conditions enumerated in section 271AAA(2)(i) and (ii) had not been fulfilled. This resulted in the impugned penalty of Rs.30 lacs @ 10% of the undisclosed income amounting to Rs.3 crores being levied in the assessee's case.
5. The assessee preferred appeal. The CIT(A) has accepted his contention on merits as under:
"5. I have considered the facts of the case mentioned by the AO, 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 Expl.(a) to section 271 AAA 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, jewellery and receivables and undisclosed income was not recorded in the books of accounts. The disclosure made by the assessee for undisclosed income of Rs.3,00,00,000/-, is clearly covered under the definition of 'undisclosed income' as per Expl.(a) to section 271AAA of the I.T. Act.
5.2 On perusal of assessment order it is found that in para 6 of the order the assessing officer issued notice for initiating penalty under section 274 r.w.s. 271 (1)(c) of the income tax act and not under section 271 AAA. 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:
ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -4-
(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
(iii) 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. Shri Jaiprakash K. Aswani in his statement recorded u/s 132(4) before Deputy DIT in course of search on 19 & 20.2.2008, stated in reply to question no.11, and disclosed total income of Rs.20.23 crores out of which undisclosed income of Rs.3.00 crores belonged to the assessee. 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.3.00 crores on account of net income from on-money receipts 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. 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.3.00 crores in the hands of the assessee. In the same question the Authorized Officer mentioned that it was established that the assessee earned income from on money 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 C1T v. Mahendra C. Shah [2008] 299 1TR 305 (Guj.) and second C1T v. Radha Krishna Goel [2005] 278 1TR 454/[200G] 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 ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -5- 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(1j(c), now by a deeming provision attract penalty provisions. But an exception is provided in clause (2) of Explanation 5where the deeming provision will not apply if during the course of search the assesses 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, 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 ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -6- 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 not 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 against any money, bullion, jewellery or other valuable articles or things found during the course of search nor made 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 Shri Jaiprakash K. Aswani recorded u/s. 132(4) on ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -7- the ground of 'on money' collected on booking of residential properties in their projects.
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 ma.de 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 returned income declared by the assessee. The returned income included disclosure amount of Rs.3,00,00,000/- 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 income offered in return of income, therefore, he did not initiate penalty 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."
This leaves the Revenue aggrieved.
6. We have heard both sides and perused the case file. The Revenue reiterates the Assessing Officer's findings in penalty order regarding non fulfilment of conditions u/s. 271AAA(2)(i) and (ii) i.e. manner of deriving of the impugned undisclosed income was neither specified nor substantiated in this case. The assessee supports the CIT(A) order. It is evident that the assessee has attributed this undisclosed income to be on-money on sale of residential properties throughout. The CIT(A) holds that the Assessing Officer accepted the abovestated source and undisclosed income in assessment framed ITA No.2090 & 2091/Ahd/2011 Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -8- without making any comment or observation. This case file comprises of the assessment order as well. The Revenue fails to refer to any such query being put up to the assessee doubting the source and manner of deriving of the impugned undisclosed income. We find that a co- ordinate bench in ITA 1052/Ahd/2012 decided on 20.7.2012 has quoted the hon'ble jurisdictional high court decision in case of CIT vs. Mahindra C. Shah (2008) 299 ITR 305 (Guj.) in holding that when an assessee admits undisclosed income in course of search, offers it to be taxed in the return, pays tax thereupon, no penalty can be levied particularly in the absence of any question being raised in respect thereof by the Assessing Officer. The Revenue fails to point out any exception to the same. It also does not rebut the CIT(A) crucial findings that the assessee had not been put to specific question specifying and substantiating the manner of having derived the impugned undisclosed income. We draw support therefrom and affirm the CIT(A) findings under challenge. The Revenue's sole substantive ground fails accordingly.
ITA 2090/Ahd/2011 is dismissed.
7. Same order to follow in ITA 2091/Ahd/2011.
8. These Revenue's appeals bearing nos. 2090 and 2091/Ahd/2011 are dismissed.
Order pronounced in the Court on this day, the 26 June, 2015 at Ahmedabad.
Sd/- Sd/-
(G.D. AGRAWAL) (S.S. GODARA)
VICE PRESIDENT JUDICIAL MEMBER
Ahmedabad; Dated /06/2015
ITA No.2090 & 2091/Ahd/2011
Shri Jaiprakash K. Aswani & M/s. Surya Prakash Organizers.
For A.Y. 2008-09 -9- Prabhat Kr. Kesarwani, Sr. P.S. 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)-III, 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-23.06.2015 Direct on Computer
2. Date on which the typed draft is placed before the Dictating Member - 23.06.2015 Other Member ...................
3. Date on which the approved draft comes to the Sr.P.S./P.S. 26-6-2015
4. Date on which the fair order is placed before the Dictating Member for Pronouncement 26-6-201.
Date on which the fair order comes to the Sr.P.S. 26-6-2015.
5. Date on which the file goes to the Bench Clerk- 30-6-2015
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..................