IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH Before: Shri S. S. Godara, Judicial Member and Shri Amarjit Singh, Accountant Member IT(SS)A No. 148/Ahd/2012 & ITA 688 to 690 & 998/Ahd/2013 Assessment Year 2003-04, 04-05, 06-07 & 2008-09 ACIT, Shri Rakesh Ramniklal Central Circle 1(1), Sheth, 16, Ashwameg Room No. 305, 3 r d Vs Bunglows-2, 132 Ring Floor, Aaykar Bhavan, Road, Ahmedabad- Ashram Road, 382715 Ahmedabad PAN: AFGPS4063Q (Appellant) (Respondent) Revenue by: Mrs. Vibha Bhalla, Sr. D.R. Assessee by: Shri M.K. Patel, A.R. Date of hearing : 01-08-2016 Date of pronouncement : 16-09-2016 ORDER PER BENCH:- This is set of five appeals filed by Revenue. IT(SSA)A No. 148/Ahd/2012 and ITA 688Ahd/2013 for Y 2003-04 arise from I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 2 ACIT vs. Shri Rakesh Ramniklal Sheth order of CIT(A)-I, Ahmedabad dated 06-01-2012 in appeal No. CIT(A)-I/CC-1(1)/90/2010-11, in proceedings u/s 143(3) r.w.s. 153A of Income Tax Act, 1961 in short Act . ITA Nos. 688 to 690/Ahd/2012 for A.Ys. 2003-04, 04-05 and 2006-07 are filed against order of CIT(A)-I, Ahmedabad dated 06-12-2013, in appeal nos. CIT(A)-I/CC-1(1)/40, 41 & 42 /2010-11 in proceedings u/s. 271(1)(c) and ITA No. 998/Ahd/2013 for A.Y. 2008-09 is against order of CIT(A)-I, Ahmedabad dated 06-12-2012 in appeal no. CIT(A)- I/CC-1(1)/50/2010-11, in proceedings u/s. 271AAA of Act. We proceed assessment year-wise for sake of convenience and brevity with consent of both parties. Assessment Year 2003-04 Revenue s appeal IT(SS)A 148/Ahd/2012 and 688/Ahd/2013 2. We notice at outset that Revenue s former appeal pertains to quantum and latter one arises from consequential penalty proceedings. Its sole substantive ground in former quantum appeal IT(SS)A 148/Ahd/2012 is that CIT(A) has erred in deleting unexplained cash credit addition of Rs. 34,11,155/- after admitting additional evidence in violation of rule 46A of income tax rules. Latter appeal ITA 688/Ahd/2013 seeks to revive section 271(1)(c) penalty of Rs. 33,73,346/- qua quantum addition hereinabove. I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 3 ACIT vs. Shri Rakesh Ramniklal Sheth 3. assessee is share trader as well as developer. department conducted search in his case and that of other persons in group on 22-04-2011. assessee disclosed income of Rs. 75 lacs in course thereof. Assessing Officer issued section u/s. 153A notice on 04-03-2009. assessee filed return on 09-10- 2009 stating income of Rs. 2,28,210/-. Assessing Officer took up scrutiny. He came across assessee s cash balances deposited in bank account. assessee appears to have declared cash deposits; including all those in names of his family members, to be his income. This included impugned cash balance of Rs. 34,11,155/- pertaining to relevant previous year. Assessing Officer asked for source thereof along with relevant details such as bank accounts, withdrawals etc. He quoted assessee s failure in explaining same to make impugned addition of Rs. 34,11,155/-. 4. CIT(A) deletes impugned addition as follows:- 5. I have carefully considered observations and findings of AO in support of .the impugned addition as well as submissions and arguments of appellant. On perusal of same, I find that appellant has shown opening cash on hand balance aggregating to Rs.34,11.555/- claimed to have been available with him as on 01/04/2002 in name of 4 persons as mentioned in written submissions. It is seen that total opening capital shown by appellant is Rs.9.41 crores, which is net position of various assets and liabilities as on 31/03/2002 and is inclusive of-cash on hand balance of Rs.34,11.555/- which is in dispute. It is matter of fact that except said-cash on-hand balance, entire opening capital of Rs.9.41 crores has been-accepted verbatim by AO without any adverse finding. In as much as cash on hand balance is I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 4 ACIT vs. Shri Rakesh Ramniklal Sheth concerned, AO has not accepted explanation of appellant about source of same stated to have been generated from business activities carried out in earlier years as well as cash withdrawals made in earlier years from bank accounts operated for his business and which have been disclosed for year in question while filing return u/s. 153A of Act. argument of Id. AR that said fact being on record and verifiable too and that in absence of any contrary material brought on record by AO, source of opening cash on hand balance out of such withdrawals could not have been doubted by Assessing Officer has sufficient force. I also find that appellant has offered cash deposited in various bank accounts aggregating to Rs.11.59 Crores in 6 years as his income. argument of Id. AR that keeping in view said fact there was no reason on part of appellant not to offer said-cash on hand balance as income instead of showing same as opening balance and that since appellant was well aware of his financial affairs and requirement of huge cash on hand balance in normal course of his business showed same as opening cash on hand balance after due verification of records also appears to be plausible. It is also matter of fact that no attempt has been made to verify contentions and explanation furnished by appellant in support of source of opening cash on hand balance as being out of withdrawals from ban accounts. On perusal of evidences in form of bank statements and cash flow it is seen that appellant was having cash on hand of Rs.50,86,000/- as on 31/03/2002 against which he has claimed Rs.34,11,155/- as opening cash on hand balance. In my opinion, fact that appellant has shown opening cash on hand balance of Rs.34,11,555/- as against available amount of Rs.50,86,000/- lends some credence to genuineness of same. That apart, argument of Id. AR that degree of evidence for entire opening capital of Rs.9.41 Crores inclusive of opening cash on hand balance of Rs.34,11,155/- is same and A.O. having accepted facts/explanation in respect of entire capital except opening cash on hand balance, he was not justified in rejecting explanation only in respect of opening cash on hand balance without any ostensible reason also has sufficient force. On perusal of records and submissions of appellant, it also appears that maintaining huge cash on hand balance on year to year basis is also in normal course of business of appellant and does not appear to be afterthought keeping in view fact I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 5 ACIT vs. Shri Rakesh Ramniklal Sheth that cash of Rs.34,15,100/- was found during search from possession of appellant, out of which cash of Rs.33,50,000/- was seized. Further, Balance Sheet of appellant and other persons attached with returns of income filed in pursuance to notices issued u/s 153A of Act also shows average cash on hand balance more than Rs. 33.00 Lakh on year to year basis. Thus, in my considered opinion there is no reason to doubt availability of opening cash on hand of Rs.34,11,555/- since it is also established from cash flow statement by way of withdrawal from bank accounts and circumstantial evidences that keeping huge cash on hand balance is in normal course of business of appellant. Keeping in view above facts and findings, addition of Rs.34,11,555/- is hereby deleted. 5. Revenue s only argument before us that CIT(A) has deleted impugned addition after admitting additional evidence by violating rule 46A of income tax rules. We put up specific question about this additional evidence admitted in course of lower appellate proceedings. Ld. Departmental Representative submitted that same is in nature of assessee s bank statement demonstrating impugned opening balance to be less than cash in hand of Rs. 50.86 lacs. We find that these bank statements already form part of assessment duly reflected in assessment order. Revenue fails to rebut this factual position. We accordingly find no irregularity or infirmity in lower appellate finding extracted hereinabove deleting impugned addition of Rs. 34,11,155/- in question. Revenue s appeal IT(SS)A 148/Ahd/2012 is declined. 6. We come to Revenue s latter appeal ITA 688/Ahd/2013 seeking to revive section 271(1)(c) penalty of Rs. 52,73,346/-. We I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 6 ACIT vs. Shri Rakesh Ramniklal Sheth deem it to refer back to Revenue s quantum appeal hereinabove. assessee had declared sum of Rs. 75 lacs during search. He filed return on 09-10-2009 stating income of Rs. 2,28,210/-. Assessing Officer framed assessment u/s. 143(3) r.w.s. 153A of Act adding unexplained cash sum of Rs. 34,11,155/- (supra). He initiated impugned penalty proceedings alleging concealment and furnishing of inaccurate particulars of income qua above gross income of Rs. 1,09,11,155/- i.e. Rs. 75 lacs and Rs. 34, 11,155/-. He thereafter levied impugned penalty of Rs. 32,73,346/- vide order dated 30-03-2011 after invoking section 271(1)(c) explanation 5A of Act. 7. CIT(A) reverses Assessing Officer s action by observing that impugned penalty is leviable qua difference in returned and assessed income only which in instant case is already deleted in quantum proceedings. He further observes that there is no finding in impugned penalty order as to how assessee has concealed or furnished inaccurate particulars of income. 8. Revenue strongly argues in support of impugned penalty by stating that section 271(1)(c) explanation 5A is very much applicable since search in question is after 01-06-2007 i.e. 22- 04-2008. We find no reason to accept same. It has come on record that assessee s return filed in section 153A(1)(a) is to be treated as one u/s. 139 of Act. Assessing Officer himself accepted assessee s stand in assessment order except to tune I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 7 ACIT vs. Shri Rakesh Ramniklal Sheth of Rs. 34,11,155/- added as unexplained cash. This addition stands deleted hereinabove in quantum proceedings. net effect is that there is no difference now between returned and assessed income. We quote hon ble jurisdictional high court s decision Kirit Dayabhai Patel vs. ACIT Tax Appeal Nos. 1181, 1182 and 1185/Ahd/2010 decided on 03-12-2014 to conclude that impugned penalty is not leviable in absence of any difference between returned and assessed income. Revenue fails to point out any exception therein. Its latter appeal ITA 688/Ahd/2013 also meets same fate. ASSESSMENT YEAR 2004-05 Revenue s Appeal 689/Ahd/2013 9. Revenue s sole substantive ground in instant appeal challenges CIT(A) s order deleting section 271(1)(c) penalty of Rs. 21,07,919/- as imposed by Assessing Officer by quoting explanation 5A thereto qua assessee s disclosure of Rs. 70,26,398/- during search. There is no dispute that assessee s returned income of Rs. 1,31,030/- stood accepted in consequential assessment. We accordingly follow our reasoning hereinabove in preceding assessment year to reject this sole substantive ground in absence of any distinction on facts or law being pointed out. ITA 689/Ahd/2013 is rejected. ASSESSMENT YEAR 2006-07 Revenue s Appeal ITA 690/Ahd/2013 I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 8 ACIT vs. Shri Rakesh Ramniklal Sheth 10. Revenue s sole substantive ground pleads that CIT(A) has erred in deleting section 271(1)(c) of Rs. 3,00,46,530/- as imposed by Assessing Officer by invoking explanation 5A in respect of search disclosure of Rs. 10,01,55,110/-. We find herein as well that assessee filed returned on 08-12-2006 i.e. before impugned search stating income of Rs. 3,08,530/-. His post search return u/s. 153A proceeding came on 09-10-2009 declaring income of Rs. 36,55,450/-. Learned Departmental Representative before us seeks to apply above stated explanation stipulating deeming fiction of concealment. We find that hon ble jurisdictional high court in Kirit Dayabhai Patel s case (supra) has already reversed this tribunal s order thereby restoring that of CIT(A) holding that return filed prior to search is irrelevant one since section 153A(1)(a) itself considers post search return to be filed u/s. 139 of act. There is no dispute that assessee s post search return stands accepted in post search assessment. We accordingly find no reason to interfere with CIT(A) s well reasoned order. Revenue s appeal ITA 690/Ahd/2013 is accordingly declined. ASSESSMENT YEAR 2008-09 Revenue s Appeal ITA 998/Ahd/2013 11. This Revenue s appeal seeks to revive section 271AAA penalty of Rs. 50,78,988/-. We find that CIT(A) discusses all relevant facts right from assessment up to impugned penalty proceedings as under:- I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 9 ACIT vs. Shri Rakesh Ramniklal Sheth 6. I have gone through penalty order, it is seen that Assessing Officer has levied penalty u/s.271AAA of I.T. Act, based on cash deposits made in accounts of various persons consisting of family members and employees and on account of share trading done in name of family members 7 employees amounting to Rs.5,07,89,889/--. He has levied penalty @10% amounting to Rs.50,78,988/-. It is seen in assessment order dated 30.09.2010, Assessing Officer had computed total income of appellant at ,Rs,80,96,430/-. returned income in this case was also Rs. 80,96,430/- only. assessing officer has observed that items of income which were not disclosed in books of accounts emerged from documents found and seized during course of search and seizure operations. AO hence held that income of Rs. 5,07,89,889/- fell within meaning of "undisclosed income" as per provisions of section 271 AAA of Act. AO has also observed that assessee had not admitted undisclosed income in his statement u/s 132(4) nor did appellant specify manner in which this income was derived. This fact is mentioned by AO in assessment order where AO has observed as under: "In this case income of Rs.5,07,89,889/- was disclosed by assessee in return of income on account of cash deposited in bank accounts and share trading done in names of family members/employees. These items of income were emerged from documents found during course of search. Therefore, disclosure of Rs. 5,07,89,889/-falls within meaning of 'undisclosed income' as per provisions of section 271 AAA. Further, assessee did not admit this undisclosed income in any statements u/s 132(4) nor did he specify-the manner in which this income was derived. Therefore, case of assessee is not covered by exception provided in sub-section 2 of section 271 AAA. Accordingly, penalty u/s 271AAA(1) is leviable. " 6.1 Penalty u/s.271 AAA of LT. Act is leviable only on undisclosed income which is not recorded in books of accounts of assessee and which has not been admitted in statement u/s 134(4) and manner in which undisclosed income was earned is not specified and return filed subsequently does not include said income and taxes on this income has not been paid. In this case it is seen that appellant had made disclosure I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 10 ACIT vs. Shri Rakesh Ramniklal Sheth of income not accounted in books of accounts during course of search operations in statement u/s 132(4) on 22/04/2004. This fact was reiterated by appellant in statement recorded u/s 131(1A) of IT Act on 1/5/2008 by ADIT(Inv) Unit 1(2) Ahmedabad. In fact ADlT(Inv) has asked following Question to appellant: "Q3 It is known to you that search and survey u/s 132 & 133A of IT Act was carried out in your residential as well as business premises. During course of search proceedings you 've admitted unaccounted income of Rs. 5.20cr. Do you know this & please confirm. " In answer to above question, appellant replied as under : "As I confirm disclosure made on day of search proceedings, i.e. 22.04.2008" above question and reply clearly shows that appellant had made disclosure of income in statement recorded u/s 132(4) of IT Act 1961. contention of AO to contrary is not correct. Further in statement recorded u/s 131(1 A) of IT Act on 1/5/2008 by ADIT(Inv) Unit 1(2) Ahmedabad following Questions were also put to appellant: "Q. 4 You have submitted letter dated 30.04.2008 wherein you have agreed to pay taxes on profit earned by three of your employees i.e. Ashwin Sheth, Rajesh Vasani and Upendrasinh Chavdafrom Shares Trading activity. Please confirm. A.4 Yes, I have submitted above mentioned letter. All three are my employees. Entire transactions in shares earned by them are managed and funded by me only. They have no source of income except salary. Q.5 You have admitted on money received of Rs. 1.52 Crores (One crore fifty two lakhs) on unaccounted income. Please confirm. A. 5 Yes, I confirm on money received from land development activity to tune of Rs. 1,52 crores as my unaccounted income. I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 11 ACIT vs. Shri Rakesh Ramniklal Sheth Q.6 You have disclosed unaccounted income of Rs. 1.68 crores which is deposited in bank account of Shri Ashwin Sheth, Shri Rajesh Vasani and Shri Upendra Chavda in 'cash'. Please confirm disclosure made by you and also ownership of cash deposited. A.6 Yes, I confirm its disclosure of unaccounted income of Rs. 1,68 crore deposited in cash by above named three persons in their bank accounts. I am owner of cash deposited in bank account. Q. 7 You have admitted unaccounted income of Rs.2 crore which is shown on unsecured loans in names of three persons as listed in Q. 6. Please confirm. A. 7 Yes, I have shown unsecured loans from above three persons in my books of account of my brother Mr. Kalpesh R. Sheth. I confirm unsecured loan is nothing but my own unaccounted income brought into my books and my brother's book. " In view of above questions it becomes abundantly clear that appellant had very clearly stated manner in which such unaccounted income was earned. It is also clear that entire share trading done in names of family members and employees as well as cash deposited in accounts in names of family members and employees were also owned up by appellant. It is also seen that appellant had filed return of income incorporating above disclosures because AO has not made any addition whatsoever to returned income of appellant. This fact is obvious because Assessing Officer had computed total income of appellant at Rs.80,96,430/- and returned income in this case was also Rs. 80,96,430/- only. 5.2 Thus, it is not clear how or why AO has treated amount of Rs.5,07,89,889/- as concealed income of appellant. No mention about how concealment has occurred is mentioned in penalty order. In fact AO has mentioned facts regarding appellant not making disclosure of unaccounted income in statement u/s 132(4) and appellant did not specify manner in I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 12 ACIT vs. Shri Rakesh Ramniklal Sheth which this income was' derived is not correct. As narrated in para above, not only appellant had made disclosure of income but had also specified manner in which same was earned. appellant had also filed return of income incorporating above disclosure because AO has not made any addition on account of undisclosed income. appellant had also paid self assessment tax on returned income. Thus appellant had paid taxes on amounts disclosed. 6. Penalty u/s. 271AAA of I.T. Act is leviable only if it is not covered by exception provided in sub-section 2 of section 271AAA. In this case it is seen that appellant had fulfilled all conditions required as per exception provided in subsection 2 of section 271AAA. In view of above, no penalty u/s.271AAA of I.T. Act is leviable in this case. Penalty levied at Rs.50,78,988/- is hence cancelled. 12. Revenue strongly argues in support of impugned penalty. Ld. Departmental Representative however fails to rebut CIT(A) s findings elaborately discussing entire evidence on record in concluding that assessee satisfies all three necessary conditions of section 271AAA(2)(i to iii) immunity of admission of undisclosed income followed by specifying manner of deriving same along with substantiation and payment of taxes together with interest thereupon. We have already extracted lower appellate findings in preceding para quoting relevant evidence to this effect. same go un-rebutted during course of hearing. We accordingly conclude that CIT(A) has rightly deleted impugned section 271AAA penalty under challenge. Revenue s appeal ITA 998/Ahd/2013 fails. I.T(SS)A No. 148/Ahd/2012 & ITA 688 to690 & 998/Ahd/2013 Page No 13 ACIT vs. Shri Rakesh Ramniklal Sheth 13. These five Revenue s appeals are accordingly dismissed. Order pronounced in open court on 16-09-2016 Sd/- Sd/- (AMARJIT SINGH) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16/09/2016 ak Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order ACIT, Central Circle 1(1) v. Rakesh Ramniklal Sheth