Income Tax Appellate Tribunal - Ahmedabad
Geeta Prints Pvt. Ltd., Surat vs Department Of Income Tax on 26 February, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH
Before: Shri Shailendra Kr. Yadav, Judicial Member
and Shri Anil Chaturvedi, Accountant Member
ITA No. 2093/Ahd/2011
Assessment Year 2008-09
The Deputy Commissioner M/s. Geeta Prints Pvt.
of Income Tax, Central Ltd, Plot No. 150 GIDC,
Circle-1, Surat Vs Pandesara, Surat
(Appellant) PAN: AAACG8818R
(Respondent)
Revenue by: Shri M.K. Singh, Sr. D.R.
Assessee by: None
Date of hearing : 23-02-2015
Date of pronouncement : 26-02-2015
आदे श/ORDER
PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:-
This is the assessee's appeal against the order of Ld. CIT(A)-II, Ahmedabad dated 04-07-2011 for A.Y. 2008-09.
I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 2 DCIT vs. M/s. Geeta Prints Pvt. Ltd
2. None appeared on behalf of the assessee though notice of hearing was served on the assessee. We therefore proceed to dispose of the appeal ex-parte qua the assessee on the basis of material on record.
3. The facts as culled out from the material on record are as under.
4. Assessee is a company stated to be engaged in the business of jobber of dying and printing of cloth. A search u/s. 132 of the Act was carried at the assessee's business premises. During the course of search, Assessee had disclosed Rs. 2 crores on account of unaccounted income for financial year 2007-08 i.e. assessment year 2008-09 and which was included in the total income of Rs. 2,25,57,824/- in the return of income that was filed by the assessee on 26-09-2008. The assessment was thereafter framed u/s. 143(3) vide order dated 24-04-2009 and the income returned by the assessee was accepted without any addition. On the amount of Rs. 2 crores that was disclosed in the return of income, penalty of Rs. 20,00,000/- was levied u/s. 271AAA by the AO vide order dated 29- 06-2010. Aggrieved by the penalty levied by the AO, Assessee carried the matter before CIT(A), who vide order dated 04-07-2011 deleted the penalty by holding 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 honourable High Court's 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 key person of the group himself made disclosure of unaccounted income while recording the statement u/s.132(4) of the IT 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 I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 3 DCIT vs. M/s. Geeta Prints Pvt. Ltd 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 IT Act.
5.2 On perusal of assessment order it is found that the Assessing Officer issued notice for initiating penalty under section 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(2) 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 penalty u/s 271 AAA 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) 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. The key person of the group, Shri Jaiprakash K. Aswani in his statement recorded u/s 132(4) before the of the group, before Deputy DIT in course of search on 19, & 20-02-2008, stated in reply to question no11, and disclosed total income of Rs.20.23 crores out of which undisclosed income of Rs 2.00 crores belonged to the asaessee company. 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 and from textile business," clearly specifies that the income is earned from textile business. The key person of the group, in his statement recorded u/s 132(4) disclosed Rs.2.00 crores on account of net income from textile business. Further, Shri Ashok K Aswani in a statement on 6.5.2008 in reply to question number 3 stated that entries made in pocket diary were related to FY 2007 -
08. The entries related to Geeta Prints pvt ltd in which he himself and his son were directors. He further explained that the figures might not have been reflected in the regular books of the Geeta prints Pvt Ltd and considering that his brother Shri Jayprakash K Aswani made disclosure of Rs. 2 crores as unaccounted income of the company. He also had confirmed the the disclosure made by the I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 4 DCIT vs. M/s. Geeta Prints Pvt. Ltd key person of the group Shri Jayprakash K Aswani. So assessee specified the manner in which undisclosed income was earned as the assessee company was having business of dyeing and printing of textile.
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 totaI 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 hands of the assessee company. 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 textile business and substantiated the manner in which unaccounted income was earned. The director of the company Shri Ashok K Aswani also confirmed the disclosure made by Shri Jaiprakash K Aswani.
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 29O (AIL), 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 assesaee 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 aasessee 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.
I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 5 DCIT vs. M/s. Geeta Prints Pvt. Ltd 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 incomes 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 132 (4) of the IT Act and the principles laid down by the Honourable Gujrat 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 and these were not applicable. 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 I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 6 DCIT vs. M/s. Geeta Prints Pvt. Ltd 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 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 this case the disclosure made by Shri Jayprakash K Aswani was also confirmed by Shri Ashok K Aswani the director of the company. The taxes are paid with interest.
'In view of the above circumstances and on the basis of principle laid down by the honourable jurisdictional High Court and by the Allahabad High Court in the above cited decisions 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 in the returned income including 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. The assessing officer has not made any addition of undisclosed income in addition to the disclosure made by the assessee and the income offered in I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 7 DCIT vs. M/s. Geeta Prints Pvt. Ltd the return filed. He has also not recorded any satisfaction or any addition of undisclosed income in addition to the disclosure made by the assessee and the income offered in the return filed. He has also not recorded any satisfaction or any reason for initiating the penalty under section 271AAA of the act. This shows that the A.O. himself was satisfied about the disclosed income offered in the return of income as undisclosed income and the manner in which the income was derived.
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 of the Act and hence the same is deleted."
5. Aggrieved by the aforesaid order of CIT(A), Revenue is now in appeal and has raised the following grounds:-
"1 The Ld. CIT(A) has erred in law and on facts in deleting the penalty levied u/s. 271AAA of Rs. 20,00,000/- even though the assessee failed to fulfill the conditions prescribed u/s. 271AAA(2) of the Act."
6. Before us, Ld DR pointed to the various observations made by the AO in the penalty order and supported the order of AO.
7. We have heard the Ld. DR and perused the material available on record. We find that CIT(A) while deleting the penalty has noted that the conditions provided u/s. 271AAA(2) are required to be fulfilled so as to grant immunity to the asssessee from penalty. He has further noted that all the three conditions have been fulfilled by the assessee and further relying on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C Shah (2000) 299 ITR 305 (Gujarat) and CIT vs. Radha Krishna Goel (2005) 278 ITR 454 had held that assessee had made disclosure of unaccounted income while recording statements u/s. 132(4) of the Act and had also paid the tax with interest. He has further given a I.T.A No. 2093/Ahd/2011 A.Y. 2008-09 Page No 8 DCIT vs. M/s. Geeta Prints Pvt. Ltd finding that the AO in the assessment order passed u/s. 143(3) of the Act had accepted the disclosed income declared by the assessee and no addition on account of undisclosed income has been made by the AO. He has further given a finding that AO was satisfied about the disclosed income offered in the return of income and the manner in which the income was derived. We thus find that Ld. CIT(A) by a detailed and reasoned order deleted the penalty. Before us, Revenue has not brought any material on record to controvert the findings of the CIT(A) or how the ratio of decisions relied by ld. CIT(A) not applicable to the present facts. In view of the aforesaid facts, we find no reason to interfere with the order of Ld. CIT(A) and thus this ground of Revenue is dismissed.
8. In the result, the appeal of the Revenue is dismissed.
Order pronounced in open court on the date mentioned hereinabove at caption page Sd/- Sd/-
(SHAILENDRA KR. YADAV) (ANIL CHATURVEDI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 26/02/2015
ak
आदे श क ूितिल प अमे षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद