Referred Sections:
Section 271AAA of the Income-tax Act, 1961
Section 132(1) of the Act
Section 143(3) of the act
Section 271AAA of the Act
Referred Cases / Judgments
PCIT, Surat Vs. Shahlon Silk Mills Private Limited.
DCIT Vs. Pradeep Aggarwal in ITA No.1100/Del/2015 dated 15/10/2018.
PCIT Vs. Ritu Singhal in ITA 672 of 2016 (2018-TIOL-438-HC-DEL-IT)
Narsi Iron & Steel P Ltd. Vs. DCIT reported in (2019) 102
ACIT vs. M/s. SSA International Ltd.
Pr. CIT Vs. Mukesh Bhai Raman Lal Tax Appeal 434 of2017
PCIT Vs. Emirates Technologies Pvt. Ltd. [2017] 399 ITR 189(Delhi)
PCIT V s. Sandeep Gupta (DHC) ITA No. 967-68/2017 dated 13.11.2017
PCIT VS. Swapna Enterprise [2018] 401 ITR 488 (Gujrat HC)
Smt. Raj Rani Gupta VS. DCIT (Delhi I.T. Trib.) ITA No. 3371/De1/2011 dated 30.03.2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `G', NEW DELHI
BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER
AND
SHRI K.N. CHARY, JUDICIAL MEMBER
ITA No.4978/Del/2016
Assessment Year: 2010-11
Smt. Shobha Sardana, Vs. DCIT,
C/o-M/s. RRA TAXINDIA, D- Central Circle-I,
28, South Extension, Part-1, Faridabad
New Delhi.
PAN :ABAPS9735M
(Appellant) (Respondent)
Appellant by Dr. Rakesh Gupta &
Sh. Somil Aggarwal, Advocates
Respondent by Sh. S.S. Rana, CIT(DR)
Date of hearing 11.07.2019
Date of pronouncement 31.07.2019
ORDER
PER O.P. KANT, A.M.:
This appeal by the assessee is directed against order dated
08/08/2016 passed by the Ld. Commissioner of Income-tax
(Appeals), Gurgaon [in short `the Ld. CIT(A)'] for assessment year
2010-11 in relation to penalty under section 271AAA of the
Income-tax Act, 1961 (in short `the Act'). The grounds raised by
the assessee are reproduced as under:
1. That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in not deleting the penalty of
Rs. 4,46,055/- fully, which was levied by Ld. A.O. and that too
without assuming jurisdiction as per law and without appreciating
the facts and circumstances of the case.
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2. That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in confirming the levy of penalty
u/s 271 AAA, more so when penalty was initiated & levied by Ld.
A.O. only
3. In any view of the matter and in any case, imposition of penalty u/s
271 AAA and confirmed by Ld. CIT(A) is bad in law and against the
facts and circumstances of the case.
4. That the appellant craves the leave to add, alter or amend the
grounds of appeal at any stage and all the grounds are without
prejudice to each other.
2. Briefly stated facts of the case are that a search and seizure
operation under section 132(1) of the Act was carried out at the
business premises of "M/s Imperial Auto Industry Limited Group"
on 02/09/2009 along with the residential premises of the
assessee. It is the contention of the assessee is that during the
course of the search, Rs. 5 lakh on account of jewellery found and
Rs. 20 lacs on account of income relating to property
transaction/advance for properties given, was surrendered on
behalf of the assessee, before the Assistant Director of Income-tax
(Investigation). For the year under consideration i.e. assessment
year 2010-11, the assessee filed return of income on 20/12/2010
declaring total income of Rs.26,46,920/- which included
surrendered income of Rs. 25 lakhs. The Assessing Officer, in the
assessment completed under section 143(3) of the act on
28/12/2011 made addition for unexplained investment in
jewellery of Rs.34,00,546/- and initiated penalty proceedings
under section 271AAA of the Act for not disclosing the source for
the investment of amount surrendered. On further appeal by the
assessee against the addition of Rs.34,00,546/-, the addition was
restricted to Rs.19,60,546/- by the Ld. CIT(A). The order of the
Ld. CIT(A) was further challenged by the Department as well as
the assessee before the Tribunal, wherein the issue has been set
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aside and matter has been remitted to the Assessing Officer for
deciding in view of the CBDT instruction No. 1916 dated
11/05/1994.
2.1 In view of the position of the additions, the Ld. Assessing
Officer issued show cause notice to the assessee as why the
penalty in respect of amount of Rs. 25 lakh surrendered by the
assessee in the return of income and for the addition of
Rs.19,60,546/- sustained by the Ld. CIT(A), might not be levied.
The assessee filed detailed submissions contesting that complete
details of the various head relating to which declaration of
undisclosed income was made, was already submitted. Regarding
the addition of Rs.19,60,546/- on account of unexplained
jewellery, confirmed by the Ld. CIT(A), the assessee submitted
that in view of the circular (supra ) of the CBDT in various judicial
decisions, the addition itself is unwarranted and therefore no
penalty should be levied under section 271AAA of the Act. After
considering the submission of the assessee, the Assessing Officer
held that the assessee failed to specify the manner of deriving
said income declared against investment in jewellery and property
and substantiate it, and accordingly he imposed a penalty of
Rs.4,46,055/- under section 271AAA of the Act at the rate of 10
percentile of the addition of Rs.44,60,546/-.
2.2 Aggrieved, the assessee filed appeal before the Ld. CIT(A)
who cancelled the penalty in respect of the addition of Rs. 19, 60,
546/-pertaining to unaccounted jewellery, however, penalty in
respect of amount of Rs. 20 Lacs and Rs. 5 lakhs, was upheld
mainly on the ground that the assessee failed to specify and
substantiate the manner of deriving the undisclosed income.
According to Ld. CIT(A) the assessee has merely explained the
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application of the undisclosed income of Rs. 25 lakh and not the
manner in which the undisclosed income was derived. The Ld.
CIT(A) has observed that no reference or details of any property
transaction or the evidence regarding the ownership of any such
property had been furnished by the assessee either before the
Assessing Officer or during the appellate proceedings. Aggrieved
with the finding of the Ld. CIT(A), the assessee is before the
Tribunal raising the grounds as reproduced above.
3. Before us, the Ld. counsel of the assessee filed a paper book
containing pages 1-72 and submitted that identical penalty for
identical surrendered amount was levied in the case of daughter-
in-law of the assessee i.e. Mrs Preeti Sardana, which has been
deleted by the Tribunal on the ground that when such amount
has been disclosed in the return of income and taxes paid and no
question was asked, there is no ground for levy of penalty under
section 271AAA of the Act.
4. In this reference, the Ld. counsel referred to page 15-18,
18A-18B of the paper book, which is a copy of the surrender
letter dated 09/07/2009 indicating incomes surrendered in the
case of Mrs. Preeti Sadhana as well as the assessee. The Ld.
counsel also invited our attention to the copy of the order of the
Tribunal in the case of Mrs. Preeti Sardana in ITA No.
4979/Del/2016, for AY 2010-11 available on page 1-13 of the
compendium of case laws filed.
5. The Ld. counsel of the assessee further argued that the
surrendered amount of Rs. 20 lakh was declared without
reference of any money, bullion, jewellery and other valuable,
article or things or any entry in books of account, and thus, it
would not even constitute "undisclosed income" as defined under
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explanation to section 271AAA of the Act and no penalty could be
levied in respect of said amount.
6. The next argument which was taken by the Ld. counsel of
the assessee that the assessee had included Rs.25 lakh
surrendered amount in her return of income and has paid taxes
and no question was asked during search, regarding the manner
of earning of this income and thus, the penalty in terms of section
271AAA could not be levied. The Ld. counsel referred to pages 15-
18, 18A-18B of the paper book and shown copy of surrender
letter. The Ld. Counsel also filed a copy of the statement of the
assessee dated 08/09/2009 recorded under section 132(4) of the
Act. The Ld counsel relied on following decision in support of the
proposition that when amount has been surrendered and taxes
have been paid and no specific questions have been asked, then
there is no question of Levy of penalty under section 271AAA of
the Act:
1. Decision of the Tribunal in ITA No.1099/Del/2015 in
the case of Sh. Vikas Aggarwal for assessment year
2011-12.
2. Decision dated 5/02/2018 of the Hon'ble Gujarat High
Court in ITA 823 along with 824 of 2017 in the case of
PCIT, Surat Vs. Shahlon Silk Mills Private Limited.
7. The next argument which was taken by the Ld counsel of
the assessee is that the assessee falls within the jurisdiction of
Hon'ble Punjab and Haryana High Court and the decision of the
Hon'ble Gujarat High Court in the case of Shahlon Silk Mills
Private Limited (supra) favours the assessee and therefore even if
there is any other decision of the Hon'ble Delhi High Court
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against the assessee, the view favourable to the assessee should
be followed, as held by the Tribunal in following decisions:
1. DCIT Vs. Pradeep Aggarwal in ITA No.1100/Del/2015
dated 15/10/2018.
2. DOT versus Vikas Aggarwal in ITA No. 1099/Del/2015
dated 6 to 2019.
8. On the contrary, the Ld. DR submitted that the assessee has
not fulfilled the conditions required to save itself from penalty
under section 271AAA of the Act. The Ld. DR submitted that the
income surrendered by the assessee was not under section 132(4)
of the Act and thus, it does not fulfill the first condition of section
271AAA(2) of the Act. He further submitted that either during the
search proceeding or assessment proceeding, the assessee has
also neither specified nor substantiated the manner in which the
undisclosed income was derived by the assessee. The Ld. DR
referred to the decision of the Hon'ble Delhi High Court in the
case of the PCIT Vs. Ritu Singhal in ITA 672 of 2016 (2018-TIOL-
438-HC-DEL-IT) wherein it is held that mere statement that sum
surrendered during the search was undisclosed income but not
disclosing the source of such income, it cannot be construed as a
satisfaction of the conditions under section 271AAA of the Act.
The Ld counsel submitted that in the case of Mrs. Preeti Sardana
(supra) , the decision of the Hon'ble Delhi High Court in the case
of Smt. Ritu Singhal (supra) was not placed before the Tribunal
and thus it has not been considered by the Tribunal. He
accordingly, submitted that decision of the higher judicial form
should be followed.
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9. Further, he submitted that the contention of the Ld. counsel
that the income declared was not falling under definition of the
`undisclosed income' was not correct, because the assessee
surrendered the said income after five days from beginning of the
search. According to him such surrender was not voluntarily and
it was based on the various documents seized from the premises
of the assessee and other sister concerns. He further submitted
that contention of the assessee that said surrender was made
only in order to buy peace of mind and to avoid litigation is not
sufficient to save herself from the penalty under section 271AAA
of the Act as held in the decision of the Tribunal in the case of
Narsi Iron & Steel P Ltd. Vs. DCIT reported in (2019) 102
taxmann.com 333 (Delhi-Trib).
10. The Ld. DR emphasized that the assessee has not fulfilled
first two conditions of section 271AAA(2) of the Act and thus the
Ld. CIT(A) is justified in upholding the penalty on the amount of
Rs. 25 lakh, surrendered on behalf of the assessee.
11. We have heard the rival submissions and perused the
relevant material on record. In view of the provisions of section
271AAA(1) of the Act, it is evident that the Assessing Officer may
levy penalty under the said section in case of `undisclosed income'
declared during search for specified previous year. But, if the
assessee satisfy the three conditions of section 271AAA(2), the
assessee can save itself from the from rigours of section
271AAA(1) and save itself from the penalty. The three conditions
specified in section 271AAA(2) are as under:
"Penalty where search has been initiated.
271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other
provisions of this Act, direct that, in a case where search has been initiated under section
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132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee
shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the
rate of ten per cent of the undisclosed income of the specified previous year.
(2) Nothing contained in sub-section (1) shall apply if the assessee,--
(i) in the course of the 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."
11.1 The term `undisclosed income' and `specified years' have
been defined in explanation to section 271AAA of the Act.
Whether the year under consideration is a specified year or not, is
not in dispute between the parties and the present assessment
year is accepted as one of the specified year. The dispute has
been raised whether the amount of Rs. 20 lakh surrendered on
account of income relating to property transaction/advance for
properties given is undisclosed income or not. The term
`undisclosed income' has been defined in Explanation as under:
"Explanation.--For the purposes of this section,--
(a) "undisclosed income" means--
(i) any income of the specified previous year represented, either wholly or partly,
by any money, bullion, jewellery or other valuable article or thing or any entry
in the books of account or other documents or transactions found in the course
of a search under section 132, which has--
(A) not been recorded on or before the date of search in the books of account
or other documents maintained in the normal course relating to such
previous year; or
(B) otherwise not been disclosed to the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner before the
date of search; or
(ii) any income of the specified previous year represented, either wholly or partly,
by any entry in respect of an expense recorded in the books of account or other
documents maintained in the normal course relating to the specified previous
year which is found to be false and would not have been found to be so had the
search not been conducted;"
11.2 Thus, for any item of income to be undisclosed income for
the purpose of section 271AAA of the Act it must be represented
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by any money, Bullion, jewellery or other valuable article or thing
or any entry in the books of accounts or other documents or
transaction found in the course of the search, which is either not
been recorded in the books of accounts or not disclosed to the
Income Tax Department, before the date of the search. Similarly
any item of expense recorded in books of account or other
documents if found to be false, same would also be the
undisclosed income.
11.3 In the instant case, in search proceedings, Sh. Jagjit Singh
S/o late Sh Avtar Singh, Director of M/s Imperial Auto industry
limited made declaration of around Rs.15 crores during the
course of the statement recorded under section 132(4) of the Act
on 05/09/2009. The said disclosure was also signed Sh. SB
Sardana, Sh. Manav Sardana and Sh. Tarun Lamba. But it was
not signed by the assessee. A copy of the said statement is placed
on page 18A-18B of the paper book. Further, by way of letter
dated 07/09/2009, a breakup of said disclosure of Rs. 15 crore
was provided by Sh. Jagjit Singh to the Assistant Director of
Income tax (investigation) for surrender of income against various
persons of the group. The said letter is available on page 15-18 of
the paper book. The declaration/surrender in relation to the
assessee made was as under:
" In the case of Mrs. Sibha Sardana
Income relating to property Rs.20,00,000/-
transaction/advance for properties
given
Jewellery found in seized from residence Rs.5,00,000/-
and locker
"
11.4 Now, contention of the Ld counsel before us, is that this
income of Rs.20 lakh, which was declared on behalf of the
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assessee during the course of the search, is not undisclosed
income as defined under explanation to section 271AAA of the Act
because it is neither any money, bullion, jewellery or other
valuable article or things nor based on any entry in the books of
accounts or other documents or transactions found in the course
of the search. However , in our opinion , this contention of the L.d
counsel is not found to be true. On perusal of the statement
dated 05/09/2009 of Sh. Jagjeet Singh under section 132(4) of
the Act, available on page 18A-18B, we find that Sh Jagjit Singh
was shown all the documents seized/impounded from different
residential and business premises during the course of the search
action and then he was asked to explain the content of those
documents. Sh Jagjit Singh gone through all the documents
found during the course of the search and stated that against
certain documents which were not recorded in the books of
accounts, he surrendered Rs. 15 crores. The relevant answer to
the questions raised by Authorised Officer is reproduced as
under:
"Que. 2 - I am sharing you all the documents
seized/impounded from different residential and
business premises during the course of search
operation on 02.09.2009 and 03.09.2009. Your are
requested to explain the contents and nature of these
documents.
Ans.- I have seen all the documents and most of these are
recorded in the books of account. However, there are
certain documents, cash and jewellery found which
are not recorded in the books of account and therefore
I am surrendering an amount of Rs.15.01 crores (Rs.
Fifteen crores & one lakh) as undisclosed income. This
disclosure is on behalf of all group companies and all
individuals where search operation have been
undertaken of our group except Sh. Darsh Mehtani &
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Sh. Aman Mehtani relating to the property transaction
and other personal matters which are not part of any
business person-wise or year-wise details of the above
surrender shall be submitted later on. I am making
this disclosure in the presence and with the consent of
sh. S.B. Sardana, Sh. Manav Sardana and Sh. Tarun
Lamba and who are also signing the statement.
Further, it is submitted that the above disclosure is
being made u/s 132 of the I.T. Act, 1961 and no
penalty proceeding of any nature are attached on the
same. The amount of tax and interest if any due on
the above disclosure shall be paid in due course of
time."
11.5 This statement has never been retracted by Sh. Jagjit Singh
and thus, in view of the clear admission under section 132(4) of
the Act by Sh Jagjit Singh, the income of Rs. 20 lakh surrendered
by the assessee was based on documents seized/impounded
during the course of the search action at different residential and
business premises of the group.
11.6 Regarding the other surrender of Rs. 5 lakh against
jewellery is concerned, there is no dispute that it is undisclosed
income as defined under explanation below section 271AAA of the
Act.
11.7 Now once, the income surrendered is in the nature of
`undisclosed income' in the specified year, the onus shift to the
assessee, to demonstrate whether she satisfies the three
conditions of section 271AAA(2) of the Act.
11.8 The first condition of section 271AAA(2) has two limbs,
which have to be satisfied cumulatively. The first limb is
admission of undisclosed income in a statement u/s 132(4) of the
Act and second limb is specifying the manner of deriving said
undisclosed income in the statement. As far as far admission of
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undisclosed income in a statement under section 132(4) of the
Act is concerned, the assessee has placed reliance on the letter
dated 07/09/2009, which was furnished before the Assistant
Director of Income-tax(Investigation) and submitted that said
disclosure of Rs.20 lakh and Rs. 5 lakh against property
transaction and jewellery found, satisfies the requirement of first
limb of the condition. However, according to the Ld. DR, the
assessee has never surrendered the said income of Rs. 25 lakh in
a statement recorded under section 132(4) of the Act. We have
perused the statement of sh Jagjeet Singh dated 05/09/2009,
along with his letter dated 07/09/2009 giving breakup of the
surrendered income of Rs. 15 crore and we find that neither the
statement dated 05/09/2009 nor the letter dated 07/09/2009 is
signed by the assessee, though the statement dated 05/09/2009
has been signed by other three persons of the group, i.e., Sh. S.B.
Sardana, Sh. Manav Sardana and Sh. Tarun Lamba, have
declared / surrendered the sum mentioned in the detailed letter
dated 07/09/2009. We have also seen the statement of the
assessee recorded under section 132(4) of the Act filed separately
before us. From these statements and the letter filed before the
Assistant Director of the Income-tax (investigation), it cannot be
inferred that the assessee has admitted the undisclosed income of
Rs. 25 lakh in a statement under section 132(4) of the Act. The
requirement of law as mentioned section 271AAA of the Act is
that the assessee should admit the undisclosed income, in a
statement u/s 132(4) of the Act. The statement made by another
person can't substitute the statement by the assessee.
11.9 We also note that Shri Jagjeet Singh in his letter dated
07/09/2009, in relation to the assessee has only explained the
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application of the income in property or advanced for the property
and in the jewellery, but not explained the manner of deriving the
said income. The Tribunal in the case of Narsi Iron & Steel P. Ltd.
Vs. DCIT (supra) has relied on the decision of the Hon'ble High
Court in the case of Smt. Ritu Singhal (supra) wherein it is
observed that disclosure to buy peace only is not sufficient to
explain the manner of deriving the undisclosed income. The
relevant finding of the Hon'ble High Court is reproduced as
under:
"15. While dealing with a case of similar surrender- but made in the
course of survey proceedings, by an assessee (which led to
imposition of penalty), the Supreme Court, in Mak Data (P) Ltd. v CIT
[2013] 38 taxmann.com 448/358 ITR 539 held as follows:
'7. The AO, in our view, shall not be carried away by the plea of the
assessee like "voluntary disclosure", "buy peace", "avoid litigation",
"amicable settlement", etc. to explain away its conduct. The question
is whether the assessee has offered any explanation for
concealment of particulars of income or furnishing inaccurate
particulars of income. Explanation to 271 raises a presumption of
concealment, when a difference is noticed by the AO, between
reported and assessed income. The burden is then on the assessee
to show otherwise, by cogent and reliable evidence. When the initial
onus placed by the explanation, has been discharged by him, the
onus shifts on the Revenue to show that the amount in question
constituted the income and not otherwise.
8. Assessee has only stated that he had surrendered the additional
sum of Rs.40,74,000/- with a view to avoid litigation, buy peace and
to channelize the energy and resources towards productive work
and to make amicable settlement with the income tax department.
Statute does not recognize those types of defences under the
explanation 1 to 271 (1) (c) of the Act. It is trite law that the voluntary
disclosure does not release the Appellant-assessee from the mischief
of penal proceedings. The law does not provide that when an
assessee makes a voluntary disclosure of his concealed income, he
had to be absolved from penalty.
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9. We are of the view that the surrender of income in this case is not
voluntary in the sense that the offer of surrender was made in view
of detection made by the AO in the search conducted in the sister
concern of the assessee. In that situation, it cannot be said that the
surrender of income was voluntary. AO during the course of
assessment proceedings has noticed that certain documents
comprising of share application forms, bank statements,
memorandum of association of companies, affidavits, copies of
Income Tax Returns and assessment orders and blank share
transfer deeds duly signed, have been impounded in the course of
survey proceedings under Section 133A conducted on 16-12-2003, in
the case of a sister concern of the assessee.'
16. That the income which was ultimately brought to tax pursuant to
the disclosure made, which was voluntary on the part of the
assessee is stating the obvious. The assessee merely stated that the
sums advanced were undisclosed income. However, she did not
specify how she derived that income and what head it fell in (rent,
capital gain, professional or business income out of money lending,
source of the money etc). Unless such facts are mentioned with some
specificity, it cannot be said that the assessee has fulfilled the
requirement that she, in her statement (under Section 132 (4))
"substantiates the manner in which the undisclosed income was
derived". Such being the case, this court is of opinion that the lower
appellate authorities misdirected themselves in holding that the
conditions in Section 271AAA (2) were satisfied by the assessee.
17. For the above reasons, it is held that the impugned order is in
error; the substantial question of law is answered in favour of the
revenue and against the assessee. The appeal is consequently
allowed. No costs."
11.10 Further, the Tribunal in the case of Narsi Iron & Steel
(supra) observed as under:
"6. The Co-ordinate Bench of Tribunal in the case of ACIT vs. M/s.
SSA International Ltd. vide order dated 30.05.2018 (ITA No.
5051/Del/2013 - A.Y. 2010-11), after considering various decisions
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ITA No.4978/Del/2016
on the issue, has also relied on the decision of Hon'ble jurisdictional
High Court in aforesaid case, observing as under :
"4. We have heard the ld. Authorized Representatives of the parties
to the appeal, gone through the documents relied upon and orders
passed by the revenue authorities below in the light of the facts and
circumstances of the case.
5. Undisputedly, during the search and seizure operation conducted
at the business and residential premises of the assessee u/s 132(1)
on 11.12.2009, assessee surrendered additional income of Rs.21
crores. It is also not in dispute that in the return filed by the
assessee for AY 2010-11, assessee declared undisclosed income of
Rs.21 crores which includes Rs.9.25 crores on account of excess
stock and Rs.11.75 crores as income from other sources in the
computation of income annexed with the tax return. It is also not in
dispute that the assessee has expressed his inability to explain
certain seized documents rather stated that those may be included
to form part of the amounts surrendered during search and seizure
operation. It is also not in dispute that assessee has already paid
tax together with interest on the surrendered income of Rs.21 crores.
6. In the backdrop of the aforesaid facts and circumstances of the
case, order passed by ld. Revenue authorities below, arguments
advanced by ld. AR for the parties, the sole question arises for
determination in this case is :-
"as to whether assessee has failed to substantiate the manner in
which the undisclosed income of Rs.21 crores was derived and is
liable to be penalized u/s 271AAA of the Act."
7. To proceed further, provisions contained under section 271AAA (2)
are reproduced as under for ready perusal :-
"271AAA. (1) The Assessing Officer may, notwithstanding anything
contained in any other provisions of this Act, direct that, in a case
where search has been initiated under section 132 on or after the
1st day of June, 2007 but before the 1st day of July, 2012, the
assessee shall pay by way of penalty, in addition to tax, if any,
payable by him, a sum computed at the rate of ten per cent of the
undisclosed income of the specified previous year.
(2) Nothing contained in sub-section (1) shall apply if the assessee,--
(i) in the course of the 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"
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8. Under section 271AAA(2)(i) of the Act, penalty @ 10% of the
undisclosed income shall not be imposed if the assessee, "in the
course of the 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" substantiates the manner in
which the undisclosed income was derived and pays the tax
together with interest if any on the undisclosed income.
9. During the course of search, a specific question was put to Shri
Anil Mittal, MD of the assessee company to explain certain seized
documents and discrepancies in the stock who has answered as
under :-
"I have seen question no.43 and the reply of Shri A.K. Nijhawan to it
and acknowledge the same to be true. Regarding the discrepancy to
stock found by your search team, during the course of search, I am
unable to reconcile the same. However, in order to buy a peace of
mind and avoid the litigation with department, I will accept the
inventory of stock taken by your team during the course of search on
11.12.2009. This will form the part of surrender which I had already
made at the time of search. This voluntary disclosure is made in
order to buy peace of mind and avoid any litigation made by the
department. It is stated that this disclosure is made to avoid any
panel-action including penalties and prosecution".
10. The ld. CIT (A) deleted the penalty on the premise that if no
specific question was put to assessee u/s 132(4), it cannot be
concluded that the assessee has failed to reply or specify/
substantiate the manner of concealment. It is settled principle of law
that assessee has to specify the manner in which income has been
derived and substantiated the manner in which the undisclosed
income was derived at the time of search in its statement recorded
u/s 132(4) and not thereafter.
11. However, answer to the question no.43 reproduced above
categorically goes to prove that the assessee has shown his inability
to reconcile the discrepancy in the stock found and failed to
substantiate the manner in which income has been derived by the
search team during the course of search, however has made the
disclosure only in order to buy peace of mind and to avoid litigation.
So, we are of the considered view that the assessee has failed to
satisfy the conditions laid down in section 271AAA (2) so as to get
the general amnesty u/s 271AAA(2) because the assessee has
neither specify the manner nor substantiate the manner in which the
undisclosed income was derived.
11. The ld. AR for the assessee relied upon plethora of case laws
cited as under :-
1. Pr. CIT Vs. Mukesh Bhai Raman Lal Tax Appeal 434 of2017
17
ITA No.4978/Del/2016
2. PCIT Vs. Emirates Technologies Pvt. Ltd. [2017] 399 ITR 189
(Delhi)
3. PCIT V s. Sandeep Gupta (DHC) ITA No. 967-68/2017 dated
13.11.2017
4. PCIT VS. Swapna Enterprise [2018] 401 ITR 488 (Gujrat HC)
5. Smt. Raj Rani Gupta VS. DCIT (Delhi I.T. Trib.) ITA No.
3371/De1/2011 dated 30.03.2012
6. ACIT V s. Shreenarayan Sitaram Mundra [2017] 83 taxmann.com
231 (Ahmedabad- Trib)
7. Neerat Singal Vs. ACIT [2013] 37 Taxmann.Com 189 (Delhi- Trib.)
8. ACIT Vs. Bhavi Chand Jindal (Delhi I.T. Trib.) ITA No.
6810/De1/2015 dated 17.04.2018
9. DCIT Vs. Ashok Nagrath [2015] 57 taxmann.com 15 (Delhi-Trib.)
10. Ashwani Kumar Arora Vs. ACIT [2017] 81 taxmann.com 440
(Delhi-Trib.)
11. Concrete Developers Vs. ACIT [2013] 34 taxmann.com 62
(Nagpur- Trib.)
12. Sita Ram Gupta Vs. ACIT [2014] 48 taxmann.com 327 (Delhi-
Trib.)
13. CIT Vs. Radha Kishan Goel [2005] 278 ITR 454 (Allahabad-
Trib.)
14. CIT Vs. Mahendra C. Shah [2008] 299 ITR 305 (Gujrat-H.C.)
15. Mothers Pride Education Pertsonna P. Ltd. (Delhi I.T. Trib.) ITA
No. 3372/De1/2011 dated 12.10.2012
16. JCIT Vs. Shri Jayendra N. Shah (Ahmedabad I.T. Trib.) ITA No
1552/Ahd/2016 dated 16.03.2018
17. Santosh Kumar Vs. DCIT (Delhi I.T. Trib.) ITA No. 267/Del/2014
dated 13.04.2018
12. More particularly, the decision of Hon'ble High Court of Gujarat
cited as Pr. CIT-2 vs. MukeshBhai Ramanlal Prajapati - Tax Appeal
No.434 of 2017 order dated 24.07.2017 wherein decision rendered
in CIT vs. Mahendra C Shah - 299 ITR 307 and CIT vs. Radha
Kishan Goel - 278 ITR 454 (All.) have been discussed and in the
case cited as PCIT vs. Emirates Technologies Pvt. Ltd. - (2017) 399
ITR 189 (Delhi) relied upon by the Ld. AR also wherein Hon'ble Delhi
High Court held that when no query raised by the AO regarding
manner of derivation of such income and its substantiation, penalty
u/s 271AAA is not sustainable.
13. However, Hon'ble High Court of Delhi in a case relied upon by
the ld. CIT DR cited as Pr.CIT vs. Smt. Ritu Singal - (2018) 92
taxmann.com 224 (Delhi) after discussing the decisions relied upon
by the ld. AR rendered by Hon'ble Apex Court in ACIT vs. Gebilal
Kanhaialal 348 ITR 561 (SC) and Mak Data (P.) Ltd. vs. CIT 358 ITR
539 (SC), Hon'ble High Court of Gujarat in CIT vs. Mahendra C.
Shah - 299 ITR 305 (Guj.), Hon'ble Allahabad High Court in CIT vs.
Radha Kishan Goel - 278 ITR 454 (All.), Hon'ble Delhi High Court in
Mothers Pride Education Personnel (P.) Ltd. vs. DCIT ITA No.3372
(Delhi of 2011 dated 12.10.2012, reversed the decision rendered by
the Tribunal setting aside the penalty on the ground that in the
18
ITA No.4978/Del/2016
absence of the query raised by the authorized officer during the
course of recording of statement u/s 132 (4) to specify and
substantiate the manner in which the undisclosed income was
derived by returning the following findings :-
"16. That the income which was ultimately brought to tax pursuant
to the disclosure made, which was voluntary on the part of the
assessee is stating the obvious. The assessee merely stated that the
sums advanced were undisclosed income. However, she did not
specify how she derived that income and what head it fell in (rent,
capital gain, professional or business income out of money lending,
source of the money etc). Unless such facts are mentioned with some
specificity, it cannot be said that the assessee has fulfilled the
requirement that she, in her statement (under Section 132 (4))
"substantiates the manner in which the undisclosed income was
derived". Such being the case, this court is of opinion that the lower
appellate authorities misdirected themselves in holding that the
conditions in Section 271 AAA (2) were satisfied by the assessee."
14. However, the instant case is on better footing than Smt. Ritu
Singhal (supra) case because in reply to the specific query raised by
the AO during search proceedings, assessee has expressed his
inability to explain the discrepancy in the stock in order to
substantiate the manner in which income in question has been
derived rather categorically stated that he has made voluntary 9 ITA
No.5051/Del./2013 surrender of Rs.21 crores in order to buy peace
of mind and avoid litigation. So, when the assessee has failed to
specify the manner and substantiate the manner in which the
undisclosed income was derived rather embark upon the mercy plea
that he is making surrender to buy peace of mind and avoid
litigation, he is not entitled for benefit of section 271AAA(2) of the
Act. Case laws relied upon by the assessee is not applicable to the
facts and circumstances of the case. Following the decision rendered
by Hon'ble Delhi High Court in case cited as Pr.CIT vs. Smt. Ritu
Singal (supra), we are of the considered view that ld. CIT (A) has
erred in deleting the penalty of Rs.2,10,00,000/- u/s 271AAA, hence
appeal filed by the Revenue is hereby allowed and penalty order
passed by the AO is restored."
7. Thus, laying our hand on and respectfully following the aforesaid
latest decision of Hon'ble Jurisdictional High Court, and also the
decision of Co- ordinate Bench of ITAT Delhi Bench, we find no
justification to interfere with the orders of the authorities below.
Accordingly, the appeal of the assessee is found devoid of merits
and deserves to fail."
19
ITA No.4978/Del/2016
11.11 Thus, in our opinion, the assessee does not satisfy the one
limb of first condition of section 271AAA(2) of the Act, i.e.,
admission of undisclosed in a statement u/s 132(4) of the Act.
11.12 As far as second limb of first condition that to specify
manner of deriving the undisclosed income and second condition
of substantiating the manner in which undisclosed income was
derived is concerned, the Assessing Officer during assessment
proceeding asked the assessee to specify and substantiate the
manner of deriving the undisclosed income, however, details were
not provided except the claim that the surrender/declaration was
to buy peace. The relevant part of the order of the Assessing
Officer is reproduced as under:
"Unexplained investment made in property:
During the course of search and seizure action on
02.09.2009 the assessee has made a voluntary disclosure of
Rs.20,00,000/- on account of income relating to property
transaction/advance for property given. This surrendered amount of
undisclosed income has been declared by the assessee in her return
of income filed for the Asstt. Year 2010-11. Assessee during the
course of assessment proceedings was asked to give the detail of
property in respect of which she has made a disclosure of
Rs.20,00,000/- and also source of investment made by her.
In response to above, assessee in her reply letter dated
01.11.2011 submitted that,
"The declaration of undisclosed income at the time of search made
by the assessee to get peace and to avoid litigation. All the income
declared by the assessee has been duly reflected in the return of
income filed at application tax with interest had been fully paid by
the assessee
Your goodself may kindly appreciate that in spite of the no
evidence for undisclosed income/investment relating to assessee
found during the search, declaration of undisclosed income was
made by the assessee to buy peace. Such income was earned by the
assessee from the property / real estate transactions which remain
unrecorded and the total income surrendered / declared was
appropriated in the case of company Imperial Auto Industries Ltd. .
Mr. Jagjit Singh, Mr. S.B. Sardana and other family members.
20
ITA No.4978/Del/2016
In view of the above submission, evidence found during
search and declaration made by the assessee and other family
members. No penalty provision u/s 271 AAA of the I.T. Act, 1961 are
attracted in case of the assessee. Your goodself is requested that
under such circumstances no penalty u/s 271 AAA may kindly be
initiated"
I have gone through the submission offered by the assessee
and found that the assessee has made a declaration of Rs.
20,00,000/- on account of undisclosed investment made in property
but failed to prove any such source of investment and other
document which can prove that the assessee's declaration made
during search operation u/s 132(4) was a proper declaration. Since
the assessee failed to substantiate the manner in which the
undisclosed income was earned by her during the previous year
which was invested by her in property. Assessee has also failed to
prove that she has made investment in a particular property for
which she has made a disclosure. I, therefore, initiated penalty u/s
271 AAA of the I.T. Act, 1961.
With the above remarks total income of the assessee is computed as
under: -
Income as per return Rs.26,46,921/-
Add: As per para `6'above Rs.34,00,546/-
Total Rs. Rs. 60,47,467/-
R/o Rs.60,47,470/-"
11.13 The contention of the learned counsel before us is that as
far as condition of specifying the manner of deriving the
undisclosed income and its substantiation is concerned, the
Tribunal in the case of Mrs. Preeti Saradana (supra) has held that
if such amount has been disclosed in the return of income and
taxes paid and no question was asked, therefore, there is no
ground for levying the penalty in the section 271AAA of the Act.
The Tribunal in the said case has relied on the decision of the
Hon'ble Gujarat High Court in the case of CIT Vs Mahendra C
Shah(2008) 299 ITR 305 (Gujarat). The relevant paragraph of the
order of the Tribunal is reproduced as under:
21
ITA No.4978/Del/2016
"2.5 In the light of the aforesaid provision of the Act, if the facts
before us, are analyzed, we find that the Tribunal in the case of
ACIT vs. Emirates Technology P. Ltd (ITA No. 476/Del/2014) the
Tribunal vide order dated 28.10.2016 considered the facts, wherein
the assessment was also completed u/s 143(3) of the Act The
penalty proceedings u/s 271AAA were initiated against surrender of
unexplained/undisclosed income found during search. In that case
also it was noted that the assessee admitted undisclosed income in
his statement recording during search and paid tax alongwith
interest on the undisclosed income. The Tribunal considered various
decisions and ultimately considering the decision in the case of
Neeraj Singhal vs ACIT (ITA No 337/Del/2013) and dismissed the
appeal of the Revenue. This matter was carried in appeal before the
Hon'ble High Court, wherein vide order dated 18.07.2017 (ITA No.
400/2017) the Hon'ble High Court concurred with the order of the
Tribunal identical are the facts before us. Respectfully following the
order from Hon'ble Delhi High Court we delete the penalty so
imposed u/s 271AAA of the Act. The appeal of the assessee is
allowed."
11.14 But the Ld. DR has relied on the decision of the Hon'ble
Delhi High Court in the case of Ritu Singhal (supra). In the said
case, Hon'ble Delhi High Court has referred to the decision of the
Hon'ble Gujarat High Court in the case of Mahendra C Shah
(supra), however, held that by mere statement that sum
surrendered during the search was undisclosed income without
disclosing the source of such income, same cannot be construed
as satisfaction of condition of section 271AAA(2) of the Act. The
relevant finding of the Hon'ble High Court is reproduced as
under:
"16. That the income which was ultimately brought to tax
pursuant to the disclosure made, which was voluntary on the part of
the assessee is stating the obvious. The assessee merely stated that
the sums advanced were undisclosed income. However, she did not
specify how she derived that income and what head it fell in (rent,
capital gain, professional or business income out of money lending,
source of money etc. ) Unless such facts are mentioned with some
specificity, it cannot be said that the assessee has fulfilled the
requirement that she, in her statement (under Section 132(4)
"substantiate the manner in which the undisclosed income was
derived". Such being the case, this court is of opinion that the lower
22
ITA No.4978/Del/2016
appellate authorities misdirected themselves in holding that the
conditions in Section 271AAA(2) were satisfied by the assessee."
11.15 Before us, the Ld. counsel submitted that the assessee
before us, falls in jurisdiction of Hon'ble Punjab and Haryana
High Court and therefore the decision of the Hon'ble Delhi High
Court is not binding on the assessee. The Ld. DR on the other
hand submitted that the Benches of the Delhi Tribunal are
situated in the jurisdiction of the Hon'ble Delhi High Court and
therefore decision of the Hon'ble Delhi High Court is binding on
the Tribunal Delhi benches. Thus, dispute between the parties is
whether the bindingness of the decision of the Hon'ble High Court
should be seen vis-à-vis, Situs of the Tribunal or Situs of the
assessee.
11.16 We find that Tribunal in the case of Pradeep Aggarwal
(supra) , held that in case of assessees falling in the jurisdiction of
the Punjab and Haryana High Court, the decision of the Hon'ble
Delhi High Court is not binding. The relevant finding of the
Tribunal is reproduced as under:
"15. Although a contrary view has been taken by the Hon'ble Delhi
High Court in the case of Smt. Ritu Singal (supra), however, it is to
be noted that the assessee falls under the jurisdiction of Hon'ble
Punjab & Haryana High Court and, therefore, the decision of the
Hon'ble Delhi High Court is not binding on the assessee. It is the
settled position of law that when two views are possible on an issue
the view which is favourable to the assessee has to be accepted in
view of the decision of Hon'ble Supreme Court in the case of
Vegetable Products Ltd. (supra). Since the assessee in the instant
case has surrendered additional income and paid the taxes due
thereon and no specific query was raised by the search party at the
time of search to substantiate the manner of earning such income,
therefore, following the decision of the Hon'ble Gujarat High Court
cited (supra) and various other decisions relied on by the Id. CIT(A),
we are of the considered opinion that the penalty u/s 271 AAA is not
leviable in the instant case."
23
ITA No.4978/Del/2016
11.17 Respectfully following the above decision of the Tribunal
and the decision of the Hon'ble Gujarat High court in the case of
Sh. Mahendra Shah (supra), we are the view that the assessee
cannot be said to have not satisfied the condition of specifying the
manner of deriving undisclosed income as per section 271AAA of
the Act in respect of surrender of amount of Rs. 20 lakh and Rs. 5
lakh against investment in property and jewellery respectively.
11.18 But, if the assessee fails to satisfy any one of the
conditions of section 271AAA(2) of the Act, the assessee cannot
escape the penalty under section 271AAA(1) of the Act. Since we
have already answered that the assessee failed to satisfy the one
limb of first condition of section 271AAA(2) of the Act, i.e.,
admission of undisclosed income in a statement u/s 132(4) of the
Act, the assessee is liable for penalty under section 271AAA of the
Act. The grounds of the appeal are accordingly dismissed.
12. In the result, the appeal of the assessee is dismissed.
Order is pronounced in the open court on 31st July, 2019.
Sd/- Sd/-
[K.N. CHARY] [O.P. KANT]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 31st July, 2019.
RK/-[d.t.d.s]
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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