ITA No. 305/Nag/2015. IN INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. No.305/Nag/2015. Assessment Year : 2008-09. Shri Anand Sancheti, Dy. Commissioner of Income-tax, Nagpur. Vs. Central Circle-2(3), Nagpur. PAN ABJPS0675H. Appellant. Respondent. Appellant by : Shri Mukesh Agrawal.. Respondent by : Smt. Agnes P. Thomas. Date of Hearing : 19-09-2016 Date of Pronouncement : 22nd Sept., 2016 ORDER This appeal by assessee is directed against order of learned CIT(Appeals)-III, Nagpur dated 13-10-2015 and pertains to assessment year 2008-09. ground of appeal reads as under : That on facts and in circumstances of case learned CIT Appeals erred in confirming penalty of R.2,66,700/- levied by AO u/s 271AAA of I.T. Act. levy of penalty is unjustified, arbitrary and deserves to be deleted. 2. assessee in this case is individual earning salary. During course of search operations at residential premises, cash and jewellery were found and seized. For levy of penalty u/s 271AAA AO observed as under : returned income of assessee of Rs.43,36,490/- includes income of Rs.26,67,000/- under head other income . This other income is on account of excess gold and diamond jewellery found during course of search and seizure operations as discussed above. During 2 ITA No. 305/Nag/2015. course of statement u/s 132(4) assessee had admitted excess jewellery in his possession subject to certain reconciliation. amount of excess jewellery offered after such reconciliation is Rs.26,67,000/-. assessee would not have offered excess jewellery in his return of income but for search and seizure operations. As such penalty proceedings u/s 271AAA are separately initiated against this amount of Rs.26,67,000/-. 3. Upon assessee s appeal learned CIT(Appeals) upheld AO s action holding as under : On perusal of cases relied upon by assessee, it is seen that present case is distinguishable on facts from cases relied upon by appellant. One of exceptional conditions for waiver of penalty u/s 271AAA is disclosure by assessee of manner in which undisclosed income was earned. Further, assessee is also mandated to substantiate manner in which such undisclosed income was earned. In case of appellant, after considering assessment order and assessee s submission, it is seen that assessee has neither disclosed manner in which undisclosed income of Rs.26,67,000/- was earned nor substantiate such manner. assessee is individual and and manner of earning undisclosed income can not be ascertained unless assessee specifically reveals that before AO. In return filed by assessee, undisclosed income of Rs.26,67,000/- has simply been shown as other sources . Therefore, there was no way AO could have deciphered manner of earning undisclosed income of assessee. Accordingly, penalty levied of Rs.2,66,700/- by AO is held to be in order. order of AO is confirmed. In result, appeal filed by assessee is dismissed. 4. Against above order, assessee is in appeal before ITAT. 5. I have heard both counsel and perused records. Learned counsel of assessee submitted that penalty u/s 271AAA should not be levied in this 3 ITA No. 305/Nag/2015. case. For this proposition, he made reference to following case laws as under : 1. CIT vs. Mahendra C. Shah 299 ITR 305 (Guj.). 2. CIT vs. Radhakisan Goel 278 ITR 454 (All.). 3. Concrete Developers vs. ACIT 34 Taxmann.com 62 (Nagpur Trib.) 4. ACIT vs. V. Nandini Realtors Pvt. Ltd. (ITA No. 415/Nag/2015) Nagpur Trib.). 5. above judgments of Hon ble Gujarat and Allahabad High Courts have been followed by various Tribunals and held that if assessee has declared income in 132(4) statement, showed in return of income and paid taxes on it, then it is sufficient compliance not to levy penalty u/s 271AAA. Assessee need not explain manner in which such income was earned. 32 CCH 260 DCIT v. Rajendra Prasad Dhoknla. (Ahd. Trib.) 77 DTR 244 Pramod Kumar Jain v. DCIT (Ctk. Trib.). 146 ITD 152 (Del.) Neerat Singh v/s ACIT. ITA No.3371/Del/2011 Smt. Raj Rani Gupta v. DCIT. (Del.ITAT) ITA No.5261/Del/2013 Brij Bhushan Singal v. Dept.of I.T.(Del.ITAT). ITA No.1052/Ahd/2012 DCIT v. Sulochanadevi Agrawal (Ahd. Trib.). ITA No.6763/Mum/2011 ACIT v. Kanakia Spaces Pvt.Ltd. (Mum. Trib.). Learned counsel further placed reliance upon decision of this Tribunal in case of M/s Nandini Realtors Pvt. Ltd. in ITA No. 415/Nag/2015 vide order dated 6th May, 2916 where similar penalty u/s 271AAA was deleted by Tribunal. 6. I have carefully considered submissions and perused records. I may gainfully refer to provisions of section 271AAA as under : 4 ITA No. 305/Nag/2015. Section 271AAA of Income-Tax Act, 1961 deals with Penalty where search has been initiated (1) Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in case where search has been initiated under section 132 on or after 1st day of June, 2007, assessee shall pay by way of penalty, in addition to tax, if any, payable by him, sum computed at rate of ten per cent of undisclosed income of specified previous year. (2) Nothing contained in sub-section (1) shall apply if assessee, o (i) in course of search, in statement under sub-section (4) of section 132, admits undisclosed income and specifies manner in which such income has been derived; o (ii) substantiates manner in which undisclosed income was derived; and o (iii) pays tax, together with interest, if any, in respect of undisclosed income. (3) No penalty under provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon assessee in respect of undisclosed income referred to in sub-section (1). (4) provisions of sections 274 and 275 shall, so far as may be, apply in relation to penalty referred to in this section. Explanation. For purposes of this section, o (a) undisclosed income means (i) any income of specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in books of account or other documents or transactions found in course of search under section 132, which has (A) not been recorded on or before date of search in books of account or other documents maintained in normal course relating to such previous year; or (B) otherwise not been disclosed to Chief Commissioner or Commissioner before date of search; or (ii) any income of specified previous year represented, either wholly or partly, by any entry in respect of expense recorded in books of account or other documents maintained in normal course relating to specified previous year which is found to be false and would not have been found to be so had search not been conducted; o (b) specified previous year means previous year (i) which has ended before date of search, but date of filing return of income under sub-section (1) of section 139 for such year has not expired before date of search and assessee has not furnished return of income for previous year before said date; or (ii) in which search was conducted.] 5 ITA No. 305/Nag/2015. 7. I may also refer to provisions of section 273B which provides that penalty need not be imposed in certain cases as under : 273B. Notwithstanding anything contained in provisions of 32[clause (b) of sub- section (1) of] 33[section 271, section 271A, 34[section 271AA,] section 271B 34[, section 271BA], 35[section 271BB,] section 271C, 36[section 271CA,] section 271D, section 271E, 37[section 271F, 38[section 271FA,] 39[section 271FB,] 40[section 271G,]] 41[section 271H,] clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA] or 42[section 272B or] 43[sub- section (1) 44[or sub-section (1A)] of section 272BB or] 45[sub-section (1) of section 272BBB or] clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on person or assessee, as case may be, for any failure referred to in said provisions if he proves that there was reasonable cause46 for said failure.] reading of above makes it clear that provisions of Act make it clear that assessee shall be exonerated from penalty in this regard, if inter alia, in course of survey in statement under sub-section (4) of section 32 admits undisclosed income and specifies manner in which such income has been derived and substantiates manner in which undisclosed income was derived. 8. In present appeal before ITAT it is clear that assessee has not specified manner in which such income has been derived and further there is no substantiation of manner in which undisclosed income was derived. 9. case laws from Hon ble Gujarat and Allahabad High Court were not in context of section 271AAA penalty. Hence they do not support case of assessee. other case laws referred from Tribunal are on different set of facts. 10. In case law of Concrete Developers vs. ACIT of Nagpur Bench cited above, search and seizure operations were carried out at business premises of assessee who was engaged in business. In present appeal before 6 ITA No. 305/Nag/2015. ITAT assessee is individual and earning only salary income. Further more in said decision Tribunal has noted assessee s statement and found that same clearly showed that assessee has requested to cover his case under exception clause of sub-section (ii) of section 271AAA of Act. Tribunal opined that this part of statement should be read as harmoniously and should be taken as assessee satisfied condition for not levying penalty u/s 271AAA. In present appeal I do not find that there could be any harmonious reading of assessee s statement vis-a-vis levy of penalty u/s 271AAA. In case law from Ahmadabad Tribunal in case of Rajendra Prasad Dhoknia (supra) assessee has stated that assessee was disclosing Rs.50 lakhs representing net on-money receipt on land dealings as income. Tribunal found that assessee has clearly specified that income is earned by way of getting on money in land dealings. case law from Cuttack Tribunal in case of Pramod Kumar Jain (supra) is also with reference to section 271(1)(c) of I.T. Act and not with reference to section 271AAA. In case of Smt. Raj Rani Gupta from Delhi Tribunal (supra) in assessment u/s 132(4) assessee had stated that said income was derived from forward/speculation and property transaction carried out by him. Thus assessee in that case has given necessary explanation. So this case law is also not helping case of assessee. In case of Kanakia Spaces Pvt. Ltd. of ITAT, Mumbai (supra) assessee was engaged in business and amount surrendered was on basis of entries contained in work in progress sheet seized during course of search. So admittedly income in this case was related to business while in present case assessee is having only salary income and no source 7 ITA No. 305/Nag/2015. whatsoever has been stated leave alone manner and substantiating of same. In case of Nandini Realtors Pvt. Ltd. of Nagpur ITAT (supra), Tribunal has noted that income offered was duly disclosed in books of accounts of assessee and manner in which investment was made has also been duly incorporated. Hence this case is different from that of present assessee. 11. Accordingly in my considered opinion case laws referred by learned counsel of assessee do not support case of assessee. assessee derived only income from salary and has admitted undisclosed income without specifying manner in which said income has been derived and has also not substantiated manner. Hence assessee clearly falls under ambit of aforesaid provision of Act. In fact section 273B does not include section 271AAA from cases where penalty can be waived on attribution of reasonable cause. Accordingly I do not find any infirmity in orders of authorities below and confirm levy of penalty. 12. In result, appeal filed by assessee stands dismissed. Order pronounced in Open Court on this 22nd day of Sept., 2016. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER. Nagpur, Dated: 22nd Sept., 2016. 8 ITA No. 305/Nag/2015. Copy forwarded to : 1. Shri Anand Sancheti, C/o R.S. Bhattad & Co., 33, Central Bazar Road, Ramdaspeth, Nagpur. 2. D.C.I.T., Central Circle-2(3), Nagpur. 3. C.I.T.- I, Nagpur. 4. CIT(Appeals), -III, Nagpur. 5. D.R., ITAT, Nagpur. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Nagpur Bench, Nagpur. Wakode. Anand Sancheti v. Dy. Commissioner of Income-tax, Central Circle-2(3), Nagpur