$~1.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL No. 973/2018
Date of decision: 13th September, 2018
THE PR. COMMISSIONER OF INCOME TAX -CENTRAL-3
..... Appellant
Through Mr. Ruchir Bhatia, Advocate.
versus
BHAVI CHAND JINDAL ..... Respondent
Through Mr. Rohit Jain & Mr. Aniket D. Agrawal,
Advocates.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J. (ORAL):
This appeal by the Revenue under Section 260A of the Income Tax
Act, 1961 (Act, for short) impugns the order dated 17 th April, 2018 passed
by the Income Tax Appellate Tribunal (Tribunal, for short) in the case of
Bhavi Chand Jindal (respondent-assessee, for short). The impugned order
affirms the order passed by the Commissioner of Income Tax (Appeals)
deleting penalty of Rs.3 crores imposed by the Assessing Officer under
Section 271AAA of the Act. The appeal relates to Assessment Year 2012-
13.
ITA No. 973/2018 Page 1 of 12
2. Having heard learned counsel for the appellant-Revenue, we are not
inclined to interfere with the impugned order for several reasons.
3. The assessment order records that the respondent-assessee is an
individual, who was subjected to search and seizure operations at his
premises at Kolkata on 14th November, 2011. Later on, this case was
centralised with Central Circle-14, New Delhi alongwith Jindal Group of
cases, which were also covered by the said search. The relevant portion of
the assessment order reads as under:-
" The assessee was confronted on the documents
found and seized from his residence premises 20C,
Belvedre Alipore, Kolkata, from factory premises of
M/s Jindal India Ltd, Jindal Photo Ltd at 2/1, Ahmed
Mamuj Street Liluah, Howrah, and Annexure JJ/1 &
JJ/7 impounded from factory premises of Jindal India
Ltd Anjul, Howrah. These documents contains details
of cash payments made to various parties for
acquisition of land. These document when confronted,
the assessee has offered has the amount for which the
source could not be explained for taxation and filed the
return disclosing Rs.30,00,00,000/- on account of these
discrepancies.
The case is assessed u/s 143(3) of the Income Tax
Act, 1961 at returned income of Rs.30,28,31,563/-.
Penalty proceedings u/s 271AAA is being initiated
separately as although the assessee has admitted the
undisclosed income however he has not substantiated
the manner in which the income has been derived."
ITA No. 973/2018 Page 2 of 12
A reading of the aforesaid order would indicate that the penalty
proceedings under Section 271AAA had been initiated on the limited ground
that the respondent-assessee had not substantiated the manner in which the
undisclosed income of Rs.30 crores had been derived. The respondent-
assessee in the return of income had included this amount of Rs.30 crores.
No addition to the returned income was made by the Assessing Officer.
4. The penalty order passed under Section 271AAA of the Act is equally
brief. It refers to assessment order, reproduces submission made by the
respondent-assessee, quotes Sub-sections (i) and (ii) to Section 271AAA(2)
and thereafter the following findings are recorded:-
" However, in order to escape from the penalty under
Section 271AAA the assessee is required to fulfill all
these conditions laid down under the Act and as
reproduced above. In the present case, the assessee has
not been able to substantiate the manner in which the
undisclosed income was derived hence conditions laid
down in the Act have not been fulfilled. Although the
tax has been paid yet the assessee has not been able to
present the manner to derive this income. The penalty
proceedings are getting barred by limitation on
30.09.2014, hence the penalty is decided on the basis
of material on record.
Considering the facts and circumstances of the case,
I am of the opinion that it is fit case for imposition of
penalty under Section 271AAA. The quantum of
penalty is computed @ 10% of the amount of
ITA No. 973/2018 Page 3 of 12
disclosure at Rs. 30,00,00,000. Hence penalty is levied
at Rs.3 Crore.
Penalty imposed u/s 271AAA: Rs.3,00,00,000/-"
5. It is clear that there is hardly any discussion in the penalty order. It is
a brief and cryptic order.
6. We are concerned for we notice that surrender of Rs.30 crores was
made by Mr. Punit Jatia, one of the directors of M/s Jindal (India) Limited in
his statement recorded on oath under Section 132(4) of the Act on 15 th
November, 2011 on the basis of seized documents. The surrender was made
by the respondent-assessee by way of letter dated 25th March, 2014. This
has been treated as valid surrender and statement under Section 132(4) of
the Act. Nature and manner of surrender and whether it would satisfy
requirement of sub-section (2) to Section 271AAA is not examined either in
the assessment order or in the penalty order under Section 271AAA. It is
also apparent that this contention was not raised by the Revenue in the
appeal preferred by them before the Tribunal against the order passed by the
Commissioner of Income Tax (Appeals) deleting the penalty under the said
Section. Even in the grounds of appeal raised before us, this contention is
not raised.
ITA No. 973/2018 Page 4 of 12
7. A perusal of the order passed by the Commissioner of Income Tax
(Appeals) deleting penalty would indicate that the respondent-assessee
during the course of the assessment proceedings had submitted several
letters to substantiate the manner in which the undisclosed income of Rs.30
crores was derived. Reference in this regard can be made to the following
submissions made before and relied by the Commissioner of Income Tax
(Appeals):-
"1.1 A search and seizure operation under
section 132 of the Income Tax Act, 1961was carried
out in the case of Jindal Group on 14/11/2011 and
during the course of search and seizure operation
certain documents were found and seized from the
premises of M/s Jindal (India) Limited at 2/1,
Ahmed Mamuji Street, Liluah, Howrah -- 711204
and from residential premises of the appellant at
20C, Belvedre Alipore, Kolkata and from premises
Anjul Howrah.
1.2 During the course of search and seizure
operation Mr. Punit Jatia one of the directors of M/s
Jindal (India) Limited has made to offer additional
income of Rs 30,00,00,000/- in his statement
recorded on oath under section 132(4) of the
Income Tax Act, 1961 on 15/11/2011 on the basis
of some seized documents. Later on, it is clarified
that the said offer of income of Rs 30,00,00,000/-
relatable to the appellant.
(Pages. 30 to 31 of the Paper book)
1.3 During the course of assessment proceedings,
the learned assessing officer vide notice dated
ITA No. 973/2018 Page 5 of 12
05/03/2014 asked the appellant to specify the nature of
undisclosed income, its bifurcation along with
supporting evidences.
(Page 7 of the Paper book)
1.4 In response, the appellant vide replies dated
19/03/2014, 25/03/2014 and 26/03/2014 filed the
nature of undisclosed income, bifurcation of
undisclosed income of Rs 30,00,00,000/- along
with relevant documentary evidence as required
by the learned assessing officer. The appellant
further submitted that the said undisclosed income
has primarily been earned from transactions in
land / properties and from other speculative
activities.
(Pages 9 to 18 of the Paper book)
1.5 The learned assessing officer issued notices
under section 271AAA of the Income tax Act, 1961
dated 31/03/2014 and 03/09/2014, to show cause
as to why an order imposing a penalty should not
be made under section 271AAA of the Income tax
Act, 1961 as the appellant has not substantiated
the manner in which undisclosed income admitted
during search was derived.
(Pages 8 to 8A of the Paper book)
In response, the appellant vide replies dated
28/04/2014 and 08/09/2014 submitted that no
specific query was raised by the authorized
officer during the course of recording statement
under section 132(4) of the Income tax Act, 1961 in
relation to the manner in which the undisclosed income
was derived by the appellant. The appellant further
submitted that since during the course of search
undisclosed income is admitted and the same was
offered for tax, together with interest has been paid,
ITA No. 973/2018 Page 6 of 12
return showing said income has been filed and the
same is also been accepted as it is in the assessment,
merely because the appellant had not specified the
manner in which the said undisclosed income was
derived, could not be the basis for denying the benefit
of immunity from penalty under sub section (2) of
section 271AAA of the Income tax Act, 1961.
(Pages 19 to 28 of the Paper book)
1.7 The appellant also submitted that the said offer
of additional income of Rs30,00,00,000/- was made
merely to buy peace and to avoid litigation and was
subject to there being no penalty and prosecution under
the provisions of the Act.
(Pages 19 to 28 of the Paper book)
1.8 However, the learned assessing officer imposed
penalty under section 271AAA of the Income tax Act,
1961 only on the basis that the appellant failed to
substantiate the manner in which the undisclosed
income was derived without appreciating the fact that
no specific question was asked by the authorized
officer during the course of recording statement under
section 132(4) about the manner of deriving
undisclosed income and also without appreciating the
fact that the appellant has substantiated the manner in
which undisclosed income was derived before the
learned assessing officer during the course of
assessment proceedings. The learned assessing officer
alleged in the impugned order that:
"However, in order to escape from the penalty under
section 271AAA the assessee is required to fulfill all
these conditions laid down under the Act and as
reproduced above. In the present case, the assessee
has not been able to substantiate the manner in
which the undisclosed income was derived; hence
conditions laid down in the Act have not been
ITA No. 973/2018 Page 7 of 12
fulfilled. Although the tax has been paid yet the
assessee has not been able to present the manner to
derive this income. The Penalty proceedings are
getting barred by limitation on 30.09.2014, hence
the penalty is decided on the basis of material on
record.
(Pages 1 to 2 of the Paper book)
1.9 On perusal of the impugned order, it is quite
evident that the learned assessing officer has imposed
penalty under section 271AAA of the Income tax Act,
1961 only on the basis that the appellant has not been
able to substantiate the manner in which the
undisclosed income was derived.
1.10 It is pertinent to note that a search and seizure
operation under section 132 of the Income tax Act,
1961 was carried out in the case of Jindal Group on
14/11/2011. It is pertinent to note that during the
course of search and seizure operation Mr. Punit Jatia,
one of the directors of M/s Jindal (India) Limited has
made to offer of income of Rs30,00,00,000/- in his
statement recorded on oath under section 132(4) of the
Income tax Act, 1961 on 15/11/2011 on the basis of
certain seized documents. It is also pertinent to note
that the appellant filed his return of income for the said
assessment year on 31/08/2012 declaring income of Rs
30,28,31,563/-, which inter alia includes income of Rs
30,00,00,000/-, which was surrendered by Mr. Punit
Jatia one of the directors of M/s Jindal (India) Limited
in his statement recorded on oath under section 132(4)
of the Income tax Act, 1961 on 15/11/2011, which was
relatable to the appellant. It is also pertinent to note
that the said disclosure was made to buy peace of
mind, avoid litigation with the department and penal
provisions under the Income tax Act, 1961.
(Pages 5 to 6 and Pages 29 to 31 of the Paper book)
ITA No. 973/2018 Page 8 of 12
1.11 It is pertinent to note that the learned
assessing officer vide notice dated 05/03/2014 asked
the appellant to specify the nature of income,
bifurcation with the supporting evidences.
(Page 7 of the Paper book)
1.12 It is also pertinent to note that in response the
appellant. vide reply dated 19/03/2014 submitted that
the income of Rs 30,00,00,000/- declared under the
under the head of Income from other sources has been
earned during the year relevant to the assessment year
2012-13, from transactions in land / properties and also
from other speculation activities. It is also pertinent to
note that the appellant vide reply dated 25/03/2014 and
26/03/2014 also furnished the break--up of Rs
30,00,00,000/- along with documentary evidence
earned from transactions in land / properties /
speculation activities. Thus, the appellant during the
course of assessment proceedings has filed detail of
nature and bifurcation of the undisclosed income of Rs
30,00,00,000/- as asked by the learned assessing
officer.
(Pages 9 to 18 of the Paper book)
1.13 It is pertinent to note that the learned assessing
officer alleged in the impugned order that the appellant
has not fulfilled one of the condition of 271AAA (2) of
the Income tax Act, 1961 i.e. "substantiate the manner
in which the undisclosed income was derived", which
is essential to be complied in order to get immunity
from the imposition of penalty under section 271AAA
of the Income tax Act, 1961.
(Pages 1 to 2 of the Paper book)
1.14 It is pertinent to note that the appellant has
disclosed the manner by which the undisclosed
income was earned vide his replies dated
19/03/2014, 25/03/2014 and 26/03/2014 submitted
ITA No. 973/2018 Page 9 of 12
before the learned assessing officer during the
course of assessment proceedings in which he has
stated that the income of Rs 30 Crores declared under
the head of Income from other sources has been
earned during the year relevant to the A. Y. 2012-
13, from transactions in land/ properties and also
from other speculation activities. The appellant
has also furnished the documentary evidences in
respect of transaction in properties.
(Pages 9 to 18 of the Paper book)
1.15 It is also pertinent to note that the appellant
has voluntarily offered the amount of Rs
30,00,00,000/- for taxation with the understanding
with the income tax department that no
penalty/prosecution proceedings will be initiated.
It is also pertinent to note that the learned
assessing officer accepted the amount offered by
the appellant for taxation in toto, without any
variation in the amount offered by the appellant
for taxation on this account, this fact substantiated
that the appellant has passed the test of Section
271 AAA(2) of the Income tax Act, 1961.
Therefore, penalty of Rs 3,00,00,000/- imposed
under section 271AAA of the Income tax Act,
1961 is liable to be deleted.
1.16 It is also pertinent to note that the
authorized officer during the course of recording
statement under section 132(4) of the Income tax
Act, 1961 has not asked the appellant / directors
of M/s Jindal (India) Limited to specify or to
substantiate the manner in which the undisclosed
income of Rs 30,00,00,000/- was derived and
thus the . appellant / directors of M/s Jindal
(India) Limited has not specified the manner in
which the said undisclosed income of Rs
30,00,00,000/- was earned at the time of
ITA No. 973/2018 Page 10 of 12
recording statement under section 132(4) of the
Income tax Act, 1961. However, duing the course
of assessment proceedings the appellant has
specified and substantiated the manner in which
the said undisclosed income of Rs 30,00,00,000/-
was derived as required by the learned assessing
officer.
(Pages 9 to 18 and Pages 29 to 31 of the Paper
book) "
8. The aforesaid communications written by the respondent-assessee to
the Assessing Officer during the course of the assessment proceedings have
not been placed on record in the present appeal. The penalty order also does
not mention and refer to the said communications and the documents
enclosed. Communications written and documents furnished are not denied.
9. Plea and contention of the Revenue in the present appeal is to the
effect that the statement made under Section 132(4) did not indicate and
state the manner in which the undisclosed income was derived. This is
different from the ground and reason given by the Assessing Officer to
impose penalty of Rs.3 crores under Section 271AAA of the Act, which was
that the respondent-assessee had not been able to substantiate the manner in
which the undisclosed income of Rs.30 crores had been derived. The two
aspects are different as is clear from clauses (i) and (ii) to sub-section (2) to
Section 271AAA of the Act. The Assessing Officer had not relied upon or
ITA No. 973/2018 Page 11 of 12
claimed that there was violation of clause (i) to sub-section (2) to Section
271AAA, but had imposed penalty on account of the fact that there was
violation and non-compliance of clause (ii) to sub-section (2) to Section
271AAA of the Act, i.e., assessee was not able to substantiate the manner in
which the undisclosed income was derived.
10. In view of the aforesaid position, there is no merit in the present
appeal and the same is dismissed, without any order as to costs.
SANJIV KHANNA, J.
CHANDER SHEKHAR, J.
SEPTEMBER 13, 2018
VKR
ITA No. 973/2018 Page 12 of 12
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