Income Tax Appellate Tribunal - Ahmedabad
Kanchan L.Shah, Surat vs Department Of Income Tax on 6 November, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'डी'
BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER,
AND SHRI S. S. GODARA, JUDICIAL MEMBER.
ITA. No. 1141/Ahd/2012
(Assessment Year:2009-10)
The Deputy Commissioner of Income Tax,
Central Circle-4, Surat Appellant
Vs.
M/s. Vishal Fashion Pvt. Ltd.
102, Vishal House, World Trade
Centre, Ring Road, Surat - 395002 Respondent
PAN: AAACV8087F
&
ITA. No. 1146/Ahd/2012
(Assessment Year:2009-10)
The Deputy Commissioner of Income Tax,
Central Circle-4, Surat Appellant
Vs.
Kanchanben L. Shah
102, Vishal House, World Trade
Centre, Surat - 395002 Respondent
PAN: ADRPS1651D
&
ITA Nos. 1141, 1146 & 1147/Ahd/2012 (ACIT vs. M/s. Vishal Fashion P. Ltd. & Ors.)
A.Y. 2009-10 -2-
ITA. No. 1147/Ahd/2012
(Assessment Year:2009-10)
The Deputy Commissioner of Income Tax,
Central Circle-4, Surat Appellant
Vs.
Shri Dipesh L Shah
102, Vishal House, World Trade
Centre, Surat - 395002 Respondent
PAN: AFSRS3839J
राज व क ओर से / By Revenue : Shri Samir Vakil, Sr. D.R.
आ वेदक क ओर से / By Assessee : None (Written Submission)
सन
ु वाई क तार ख/Date of Hearing : 03.11.2015
घोषणा क तार ख/Date of
Pronouncement : 06.11.2015
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
These three Revenue's appeals for assessment year 2009-10 in case of different assessees arise from separate orders of the CIT(A) - II, Ahmedabad, dated 19.03.2012 passed in proceedings u/s.271AAA of the Income Tax Act, 1961, hereinafter 'the Act'.
2. The Revenue's solitary substantive grievance identical in all three cases challenges the CIT(A)'s action in deleting Section 271AAA penalties of Rs.41,10,205/- in first case and Rs.10lacs each in the remaining two cases.
3. Case called twice. None appears at assessees' behest despite service of notice. The case files reveal that these assessees have chosen to place on record ITA Nos. 1141, 1146 & 1147/Ahd/2012 (ACIT vs. M/s. Vishal Fashion P. Ltd. & Ors.) A.Y. 2009-10 -3- written submissions. We accordingly take note of contents therein. All there appeals are taken up for disposal accordingly.
4. It transpires from the case file that the department conducted a search action in case of M/s. Visahl Fashion Pvt. Ltd. on 20.01.2009. Shri Dipesh Shah, One of its Director got recorded its statement on the same day making total disclosure of Rs.7.5 crores including a sum of Rs.4,11,02,053/- in the first appeal and Rs.1 crore each in latter two cases. The Assessing Officer thereafter framed regular assessments in the three cases on 31.12.2010 in first two appeals and 28.12.2010 in the last one inter alia assessing income of Rs.6,38,84,520/-, Rs.95,02,860/- & Rs.2,14,21,580/- including the above stated undisclosed income. He initiated Section 271AAA proceedings against all these assessees and levied impugned penalties vide its different order holding therein that their action in declaring above state undisclosed incomes did not describe manner of deriving the same or they had not provided for specific details. He accordingly held that first and second conditions in the exemption provision u/s.271AAA(2) had not been fulfilled in these three cases. This resulted in imposition of impugned penalties amounting to Rs.41,10,205/- in the first case and Rs.10lacs each in the latter two i.e. @ 10% of the undisclosed incomes hereinabove.
5. These assessees preferred appeal. We find that the CIT(A) deletes the impugned penalties. We treat ITA No.1141/Ahd/2012 as the lead case comprising the lower appellate order 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 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 represented by unaccounted grey stocks, receivables and other discrepancies and undisclosed income was not recorded in the books of account. The disclosure made by the assessee for undisclosed income of ITA Nos. 1141, 1146 & 1147/Ahd/2012 (ACIT vs. M/s. Vishal Fashion P. Ltd. & Ors.) A.Y. 2009-10 -4- Rs.4,11,02,053/-, is clearly covered under the definition of "undisclosed income"
represented by unaccounted assets as per Expl.(a) to section 271AAA of the I.T.Act.
The Ld. AR further argued that the assessee case falls in exception of sub-section (2) of Section 271 AAA as alt the three conditions are laid down in three clauses of this sub-section are satisfied.
5.2 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 271AAA 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. Shri Dipesh L Shah, in the statement recorded on 20.01.2009, in the course of search stated in reply to questions no.34 that he was disclosing Rs.4,11,02,053/- for financial year 2008-09 representing current year income. He clearly mentioned that undisclosed income was declared on account of current year business income. This clearly implies that the income is earned in current year from business. The assessee in his statement recorded u/s 132(4) disclosed Rs.4,11,02,053/- as current year's income and to cover any discrepancies and to buy peace of mind 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 authorised officer did not ask any specific question on substantiating the manner in which income was derived, however the assessee clearly mentioned in a statement recorded in sector 132(4) that undisclosed income was current year business income. It is further argued that 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 entirety 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 ITA Nos. 1141, 1146 & 1147/Ahd/2012 (ACIT vs. M/s. Vishal Fashion P. Ltd. & Ors.) A.Y. 2009-10 -5- 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.
5.3 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, 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 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 1 32 (4) of the IT Act and the principles laid down by the Honorable Gujarat High Court and Allahabad High Court, it is held that the AO has wrongly rejected the assessee's arguments. The Honorable 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 20.01. 2009, the authorized Officer has not asked any further question but was satisfied with the manner the income was earned by the assessee. Unaccounted stock found during search clearly substantiates that undisclosed income was earned from business run by the assessee company only and not from any other activity which was not disclosed by the assessee during search. The learned DCIT has never given the appellant any show cause notice or an ITA Nos. 1141, 1146 & 1147/Ahd/2012 (ACIT vs. M/s. Vishal Fashion P. Ltd. & Ors.) A.Y. 2009-10 -6- opportunity during the course of ^assessment proceedings with regard to his reservation and contrary opinion about the explanations, information and specific manner in which the unaccounted income has been derived by the appellant. Therefore, in absence thereof, it is a constructive and undisputed acceptance of the said disclosure, the specific manner thereof and the substantiation thereof by the appellant. The assessing officer has not found any other source of undisclosed income offered by the assessee in the return of income. 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.
On the basis of principles laid down by the Honorable jurisdictional High Court and by the Allahabad High Court in the above cited cases the assessee has made disclosure of unaccounted income while recording a statement under section 132(4) of the Income tax Act and paid the taxes with interest. The returned income included disclosure amount of Rs. 4,11,02,053/- made during search while recording statement u/s. 132(4) of the Act which represented by unaccounted stock and receivables. 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.
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."
The very reasoning stands adopted in the other two cases.
6. This leaves the Revenue aggrieved.
7. We have heard the Revenue and gone through assessees' written submissions. Relevant facts narrated hereinabove are not repeated for the sake of brevity. These three assessees declared their undisclosed incomes in the search statement. The same stand assessed. The Revenues' case is that none of these three assessees satisfy first two conditions envisaged u/s.271AAA(2) of the Act i.e. admission of undisclosed income as well as specifying the manner of deriving the same followed by its substantiation. The CIT(A) refers to case law of Mahindra C. Shah (supra) and holds that the assessees in search statement had already claimed the impugned undisclosed income to have been ITA Nos. 1141, 1146 & 1147/Ahd/2012 (ACIT vs. M/s. Vishal Fashion P. Ltd. & Ors.) A.Y. 2009-10 -7- earned from their business activities. He concludes that the same was never rebutted at any stage right from search till assessment. We find that a co- ordinate bench in ITA No.1145/Ahd/2012 DCIT vs. Bharat L. Shah decided on 13.08.2015 arising from the very search dated 20.01.2009 upholds similar order of CIT(A) deleting identical Section 271AAA penalties on the very aspect of non satisfaction of first two conditions under sub-section 2 thereof. The Revenue neither point out any distinction on facts nor does it file any evidence disputing the lower appellate findings on factual aspects that the assessees had declared their undisclosed income under the head 'business'. We affirm the CIT(A)'s order deleting the impugned penalties accordingly.
8. These three Revenue's appeals ITA Nos. 1141, 1146 & 1147/Ahd/2012 are dismissed.
Pronounced in the open Court on this the 06the day of November, 2015.
Sd/- Sd/-
(PRAMOD KUMAR) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 06/11/2015
True Copy
S.K.SINHA
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आ वेदक / Assessee
3. संबं धत आ यकर आ यु!त / Concerned CIT
4. आ यकर आ य!
ु त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आ यकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आ दे श से,
उप/सहायक पंजीकार
आ यकर अपील य अ धकरण, अहमदाबाद ।