Income Tax Appellate Tribunal - Chandigarh
Sh. Ashok Jindal, Chandigarh vs Dcit, Cc-1, Chandigarh on 15 October, 2018
sआयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए", च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH 'A' , CHANDIGARH ी संजय गग , याय क सद य एवं ीमती अ नपणा ू ग#ता ु , लेखा सद य BEFORE: SH.SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, AM आयकर अपील सं./ ITA No.1556/Chd/2017 नधा रण वष / Assessment Year : 2009-10 Shri.Ashok Jindal, बनाम The D.C.I.T., House No.22, NAC, Central Circle-1, Manimajra, Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO: AAMPJ1996Q
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.1557/Chd/2017
नधा रण वष / Assessment Year : 2009-10
Shri.Amit Jindal, बनाम The D.C.I.T.,
House No.21, NAC, Central Circle-1,
Manimajra, Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO: ACGPJ8215N
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Adv.
राज व क ओर से/ Revenue by : Smt.Chanderkanta,
Sr.DR
सनवाई
ु क तार#ख/Date of Hearing : 16.07.2018
उदघोषणा क तार#ख/Date of Pronouncement : 15.10.2018
आदे श/Order
PER ANNA PURNA GUPTA, A. M. :
Both the above appeal s have been fi l ed by di fferent
assessees agai nst separate orde rs of the Commi ssi oner of
I ncome Ta x ( Appeal s) -3, Gurgaon ( i n short CI T( A) both dated 29.8.2017, uphol di ng the penal t y l evi ed u/s 271AAA of the I ncome Ta x Act, 1961 ( i n short 'Act') .
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2. The facts and th e i ssue i nvol ved i n both the appe al s, i t was common ground, were i denti cal , bei ng the l ev y of penal t y u/s 271 AAA of the Act o n cash surrende red d uri ng search conducted on the assesse es u/s 132 of th e Ac t. The y were therefore heard together an d are bei ng di sp osed off by thi s common order for the sake of conveni ence.
We shal l be dea l i ng wi th the ass essee's appeal i n I TA No.1556/Chd/2017 and our deci si on rendered therei n wi l l appl y mutati s mutandi s to the appeal of the other assessee i n I TA No.1557/Chd/2017.
3. Bri efl y stated, a search and sei zure operati on was carri ed out at the resi denti al and busi ness p remi ses of Ji ndal Group of cases of Panch kul a on 15.7.20 08 and the assessee was one of the persons covered under the search acti on. The assessee had surrendered an addi ti onal i ncome of Rs.54,87,500/ - rel ati ng to the i mpugned year o n account of the fol l o wi ng assets/documents:-
1) Cash found from the resi denti al premi ses of the assessee group amounti ng to Rs.11 l acs.
2. Pages 54 to 59, of Anne xure A-10 of Del ta-I , amounti ng to Rs.60,000/-.
3. Anne xure A-8 of Del ta-3 amounti ng to Rs.38,50,000/-.
4. Capi tal i ntroduced in fi rms amounti ng to Rs.4,77,500/-.
4. The above surre nder was di scl osed i n the return of i ncome fi l ed by the assessee and was accepted by the Revenue al so. Ho wever, penal t y u/s 271AAA was i ni tiated 3 and thereafter levi ed for the reason that the assessee had fai l ed to substanti ate the manner i n whi ch the undi scl osed i ncome had been earned by hi m.
5. The matter was carri ed i n appeal before the Ld.C I T( A) , who fol l o wed the deci si on of I TAT Chandi garh Be nch i n the case of DCI T Vs. Shri Sanjeev Go yal in I TA No.109/Chd/2015 for assessment year 2011-12,as per whi ch i f the assessee had di scl osed i ncome whi l e gi vi ng statement u/s 132( 4) duri ng the course of s earch and pai d t a x thereon and sho wed the sai d undi scl osed i ncome i n the return under the head "I ncome from Busi ness" no penal t y u/s 2 71AAA was l evi abl e . I n vi ew of the aforesai d deci si on, the Ld.CI T( A) hel d that the assessee had speci fi ed and substantiated the manner of earni ng the i ncome wi th regard to surrender made of capi tal i ntroduced i n the fi rms and the documents rel ati ng to Ann e xure A-10 And A-8, and co nsequentl y del eted the penal t y l evi ed on the same. Ho wever, vis-à-vi s surrender of cash of Rs.11 l acs, the Ld.CI T( A) hel d that as per the deci si on of the Hon'bl e Juri sdi cti onal Hi gh Court in the case of Ki m Pharma Pvt. Ltd. Vs. CI T ( P&H) ( 2003) 258 C TR 458, the same was assessabl e as deemed i ncome of the assessee u/s 69A of the Act and not busi ness income and si nce no e xpl anati on wi th regard to the same has been furni shed, penal t y u/s 271AAA on the same was uphel d. The rel evant fi ndi ngs of the Ld.CI T( A) at para 5- 5.4 o f hi s order are as under:
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5. Decision:-
I have considered the basis of penalty imposed by the AO and the submissions made by the AR of the appellant. The perusal of the provisions of the section 271AAA make it clear that the penalty can be levied on undisclosed income of the specified year if the conditions specified in the sub-section (2) of section 271AAA are not satisfied. It, therefore, follows that first thing to determine is what is the amount of undisclosed income under the given circumstances. The concept of undisclosed income has been clearly defined by Explanation to section 271AAA. However, the AO has imposed the penalty on the ground that the appellant had not substantiated the manner in which the income was earned.
5.1 The AO has made following observations in this case:
(i) The assessee made a surrender of Rs. 54,87,5007- for the year under consideration.
(ii) This disclosure was declared in the return of income.
(iii) The assessee failed to substantiate the manner in which the income has been earned,
(iv) In view of the same, penalty u/s 271AAA was imposed.
5.2 The appellant during the appellate proceedings has submitted as follows:-
(i) The appellant admitted the undisclosed income of Rs. 54,87,500/-
during the year under consideration and disclosed the same in return filed.'
(ii) The income tax alongwith interest was paid on this surrendered amount.
(iii) The appellant has substantiated the manner of earning undisclosed income.
5.3 I have gone through the order of Hon'ble ITAT, Chandigarh Bench in case of DCIT vs Shri Sanjeev Goyal ITA No. 109/Chd/ 2015 for AY 2011-12 referred to by the appellant and the relevant part of the judgment is as follows:-
"9. The undisputed facts in the present case are that during the course of search and seizure operations u/s 132, the assessee had surrendered an amount of Rs. 1,50,00,OOO/-. It is also not in dispute that assessee had attributed this income as being derived from speculative dealings in commodities outside the books of accounts. It is I further not in dispute'that the assessee had disclosed the surrendered income in its return of income and paid the taxes thereon.
In the above factual background, it is to seen whether penalty u/s 271AAA is leviable.
It is the contention of the Revenue that though admittedly, the assessee has surrendered an income of Rs. 1,50,00,000/- during the course of search and seizure 5 operation, disclosed the manner of earning the same being from speculative dealings in commodities and also disclosed the income in its return of income, the assessee had not substantiated the manner of earning the undisclosed income and hence not fulfilled all the conditions specified u/s 2 71AAA for grant of immunity from penalty.
The issue therefore is whether admission of undisclosed income and a description of the nature of the same could be treated as compliance with the condition of specifying and substantiating the manner in which the undisclosed income is earned as required by the section 271AAA(2)(i)and
(ii).
10. We find that a similar requirement of disclosing the manner in which undisclosed income is earned is also there in Explanation-5 to section 271(l)(c). interpreting which the Allahabad High Court in the case ofCITvs RadhaKrishanGoel ( 2005) 278 ITR 454 observed fhat non disclosure of manner of earning the undisclosed income is not relevant for the purpose of availing benefit under Explanation 5 below section 271(l)(c). In CIT vs Mahendra C. Shah [2008] 215 CTR 493 (Guj). It was held the assessee having declared the value of diamonds in his statement under section 132(4) and paid taxes thereon before assessment was entitle to immunity from penalty under section 271(l)(c) under Explanation 5 thereof even though the statement did not specify the manner in which the income representing value of diamonds in his statement under section 132(4) and paid taxes thereon before assessment was entitled to immunity from penalty under section 271(l)(c) under Explanation 5 thereof even though the statement did not specify the manner in which the income representing value of diamonds was derived. With respect to such requirement in relation to section 271AAA, it has been held in the case ofPramod Kumar Jain v. Dy. CIT (2013) 33 Taxmann.com 651 (Ctk) that the disclosure of income under section 132(4) during the course of search having been made and the assessee having surrendered certain income for the relevant assessment years in the statements during the course of search and filed returns declaring the same pursuant to notice under section 153A and which returns have been accepted by the AO, levy of penalty under section 271AAA was not justified on the ground that the assessee has though made disclosure but failed to specify the manner in which such income had been derived. Hon'ble Tribunal further held that no definition could be given to the 'specified manner' and there is no prescribed method given in the statute to indicate the manner in which income was generated.
It has been held in the case of Ashok Kumar Sharma v Dy. CIT [2013] 33 taxmann.com 652 (Ctk) that when assessee disclosed concealed income while giving statement under section 132(4) during the course of search and paid tax thereon and showed the said undisclosed income in the return under the head "Income from business" and which undisclosed income has been accepted by the Department, penalty under section 271AAA is not leviable.
11. In view of the above judicial precedents we find that the assessee has specified and substantiated the manner of earning the income and has not violated any of the conditions specified u/s 271AAA(2), for granting immunity from penalty.
12. We therefore hold that no penalty u/s 271AAA could be levied in the present case. 6
Accordingly we uphold the order of the Id. CIT(A) deleting the penalty. 5.4 In view of the facts of the case, submissions made by the appellant and judicial pronouncement of the Hon'ble ITAT Chandigarh on this issue discussed above, it is held that the appellant has specified and substantiated the manner of earning the income with regard to following income disclosed:-
(0 Capital introduced in firms -Rs. 4,77,500/-.
(if) Documents page54-59 ofannexure A-10 of delta 1 amounting Rs. 60,000/-
(iii) Documents Annexure A-8 of Delta 3 amounting Rs. 38,50,OOO/-
However with regard to disclosure on account of cash found from residential premises of the assessee group amounting Rs. 11,00,000/-, it is held that manner of earning this income-has not been specified and substantiated because:-
(i) cash of Rs. 11 lakh surrendered by the appellant was part of Rs. 44 lakh cash surrendered by the assessee group vide letter dated 22.07.2008 and it was in the surrender letter itself stated as unexplained cash found in residential premises during search operations.
It has been held by the Hon'ble Jurisdictional High Court in the case of Kim Pharma (P) Ltd vs CIT (P&H) [2013) 258 CTR 458 that where amount surrendered during survey was not reflected in books of accounts and no source from where it was derived was declared by the assessee, it was assessable as deemed income of assessee u/s 69A and not business income.
In view of the above referred judgement, cash found is held as unexplained as no from which it is derived. Thus, with regard to the same, it is held that the appellant has not specified and substantiated the manner of earning income during the course of search and hence Penalty u/s 271AAA of the Act is leviable on this amount.
In view of the above discussion, penalty u/s 271AAA amounting Rs. 1,10,000/-related to surrender related to cash amounting Rs. 11,00,000/- is confirmed and the appellant gets relief on the balance amount,
6. As a result, appeal of the appellant is partly allowed.
6. Aggri eved by the same, the assessee has come up i n appeal before us, rai si ng the fol l o wi ng grounds:
"1 That the Worthy Commissioner of Income Tax (Appeals)-3, Gurgaon has erred in upholding penalty amounting to Rs.1,10,000/- relating to surrender of cash of Rs.11 lacs found during the course of search from the residential premises of the assessee group.
2. That the Worthy CIT (A)-3, has erred in holding that with regard to cash found during search, the appellant has not specified and substantiated the manner of earning the income during the course of search and hence penalty u/s 271 AAA of the Act is leviable on this amount.7
3. That the Worthy CIT (A) while confirming the penalty u/s 271AAAwithregard to cash found during the search, has erred in assessing the income of assessee as deemed income u/s 69A and not business income by following the judgment of Jurisdictional High Court in the case of M/s Kim Pharma (P) Ltd. vs CIT (P&H) (2013) 258 CTR 458.
4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off."
7. Duri ng the course of heari ng before us, the Ld. co unsel for assessee stat ed that the CI T( A) had uphel d t he l ev y of penal t y on cash f or the reason th at the same was assessabl e as deemed i ncome u/s 69A of the Act and not busi ness i ncome as per the deci si on of the Hon'bl e Juri sdi cti onal Hi gh Court i n the cas e of Ki m Pharm a Pvt. Ltd.( supra) . The Ld. counsel for asses see stated that t hi s fi ndi ng of the Ld.CI T( A) was contrar y to the facts of the case si nce the surrender made on account of cash had not been assessed a s de emed i ncome u/s 69A of the Act but had been accepted al ong wi th the other i ncome surrendered by the assessee,penal t y on whi ch had been del eted by the CI T( A) .
8. The Ld. DR fai rl y conceded to thi s fact, but at the same ti me rel i ed on the fi ndi n gs of the CI T( A ) that the assessee had no t been abl e to s peci f y and subst antiate the manner of earni ng the cash surrendered and therefore penal t y u/s 271AAA had been ri ghtl y uphel d by the C I T( A) .
9. We have consi dered the ri val contenti ons and have al so gone through the order of the CI T( A) .Undi sputedl y the enti re surrender made by the assessee on account of capi tal i ntroduced i n fi rms,documents found and cash , amounti ng i n al l to Rs.54,8 7,500/- was accepted and assesse d to ta x by 8 the Revenue. Al l ta xes thereon had been pai d.Admi ttedl y ,no porti on of the surrender had been assessed separatel y under any other head. Therefore the deci si on of the I TA T i n the case of Sanjeev Go yal ( supra) ap pl i ed to the enti r e surrender made,and the CI T( A) , we hol d h ad wrongl y segragated the surrender made on account of cash by stati ng that the same was assessabl e u/s 69A of the Ac t, when the fact was that i t had not been so assessed.I n fact on goi ng through the order of the I TA T i n th e case of Sanjeev Go yal ( supra) w e fi nd that i t has been held i n the sai d case that the discl osure of i ncome u/s 132( 4) duri ng search havi ng been made and the assessee havi ng surrendered th e same and i nc l uded t he same i n the returns fi l ed whi ch have been accepted by the Revenue,no penal t y u/s 271AAA is l evi abl e for not speci f yi ng the manner of earni ng the i ncome surrendered.Al l the aforesai d condi ti ons admi ttedl y stood ful fi l l ed i n the case of surrender made on account of documents found and ca pi tal i ntroduced i n the fi rm ,as per the CI T( A) . The cas h was al so part of the same surrender and no di sti ncti on has been brought out of the same wi th the rest of the surrender made.We therefore hol d that there was no basi s for uphol di ng the l e v y of penal t y on the cash surren dered and the same i s therefore di rected to be del eted. The appeal fi l ed by the assessee i s, therefore, al l o wed. ITA No.1557/Chd/2017:
10. I n the i mpugned case , i t was common ground that the facts were i denti cal , wi th the penal t y havi ng been l evi ed u/s 9 271AAA of the Act, on surrender made of i dentical amount of Rs.54,87,500/- on i denti c al counts of c ash Rs.11 l acs,Anne xure A 10 of Del ta 1 R s.60,000/-,Anne xure A-8 of Del ta 3 Rs.38,50,000/- & capi tal i ntroduced in firm Rs.4,77,500/-, out of whi ch the CI T( A) uphel d penal t y l evi ed, on the cash surrendered of Rs.11 l acs, for the i denti cal reason that the same was not assessabl e as busi ness i ncome but as deemed i ncome of the a ssessee as per the deci si on of the Hon'bl e Juri sdi cti onal Hi gh Court in the case of Ki m Pharma Pvt. Ltd. ( supra) .It was poi nted out by the Ld. counsel for assessee was that the i mpugned surrender of cash had been accepted and assessed al ong wi th the t otal surrender made and had not been assessed as deemed i ncome.
I n vi e w of the same, si nce the the facts are i dentical to that i n I TA No.1556/Chd/2017,our deci si on rendered therei n wi l l appl y squar el y to the presen t case al so fol l o wi ng whi ch we del ete the penal t y uphel d on the cash surrendered. The appeal of the assessee i s al l o wed.
11. I n effect, both the appeal s of the assessees are al l o wed.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
संजय गग अ नपणा
ू ग#ता
ु
(SANJAY GARG ) (ANNAPURNA GUPTA)
याय क सद य/ Judicial Member लेखा सद य/ Accountant Member
)दनांक /Dated: 15th October, 2018
*रती*
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आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय-त
ु / CIT
4. आयकर आय-त
ु (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील#य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File
आदे शानसार
ु / By order,
सहायक पंजीकार/ Assistant Registrar