ACIT, Central Circle-1, Baroda v. Dwarkadas P. Patel (HUF)
[Citation -2016-LL-1005-25]

Citation 2016-LL-1005-25
Appellant Name ACIT, Central Circle-1, Baroda
Respondent Name Dwarkadas P. Patel (HUF)
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 05/10/2016
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags immunity from penalty • unaccounted income • undisclosed income • documents seized
Bot Summary: Such income with reference to the undisclosed assets found during the course of search as well as undisclosed transactions found as per the incriminating documents seized during the course of search is undoubtedly the undisclosed income of the assessee, since such undisclosed asset / income found during the course of search is covered as per the definition of 'undisclosed income'. 6.4 So far as the manner of earning of the said undisclosed income and substantiating the same is concerned, I agree with the AO that the appellant in the statement recorded u/s 132(4) of the Act has not specified the manner of earning such income and has not substantiated the same as well. So far as specifying and substantiating the manner in which income has been earned is concerned, there is nothing on record to suggest that any such question was asked to the appellant either in the statement recorded u/s 132(4) of the Act or even during the course of assessment proceedings. Unless specific question is asked to the appellant either in the statement recorded u/s 132(4) or even during the course of assessment proceedings, it may not be proper to attribute the failure, if any, for not specifying and substantiating the manner in which income was earned, to the appellant. Insofar as the alleged failure on the part of the assessee to specify in the statement under section 132(4) of the Act regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is SMC-ITA No. 2059/Ahd/2013 ACIT vs. Dwarkadas P Patel-HUF AY : 2010-11 3 incumbent upon the authorized officer to explain the provisions of Explanation 5 in entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the revenue to take advantage of such a lapse in the statement. The view taken by the Tribunal as well as Allahabad High Court to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under Exception No.2 in Explanation 5 is commendable. 6.6 In view of the above, I am of the considered opinion that so far as the manner of earning the income and substantiating the same is concerned, the appellant has, in my view, not specified the manner of earning the undisclosed income as well as substantiated the same since no question as regards specification of manner of earning the undisclosed income and substantiation thereof was put forth in the statement recorded u/s 132(4) of the Act.


IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ITA No. 2059/Ahd/2013 Assessment Year : 2010-11 ACIT, Dwarkadas P. Patel (HUF), Central Circle-1, Vs 1, Dayalbaug Society, Baroda Manjalpur Naka, Baroda PAN : AACHP 3814 K (Appellant) (Respondent) Revenue by : Smt. Sonia Kumar, Sr DR Assessee by : Shri P M Mehta with Shri G M Thakor, ARs Date of Hearing : 03/10/2016 Date of Pronouncement: 05/10/2016 ORDER This appeal by Revenue is directed against order of Learned Commissioner of Income Tax (Appeals)-IV, Ahmedabad dated 20.05.2013 for Assessment Year 2010-11. 2. solitary ground raised is as under:- On facts and in circumstances of case, Ld. CIT(A) has erred in law and on facts in deleting penalty of Rs.10,27,890/- for AY 2010-11 levied u/s 271AAA of IT Act, despite assessee having not satisfied conditions mentioned in clause (i) & (ii) of Section 271AAA(2) of Act. 3. ld. DR relied on order of Assessing Officer. 4. ld. Counsel for assessee, on other hand, vehemently contends that assessee s case is fully covered under exemptions provided by Section 271AAA which has been clearly observed by ld. CIT(A), by following observations:- 6.2 From perusal of statement recorded u/s 132(4) of Act during course of search as well as post-search submission made before Dy. Director of Income-tax (Inv.), Baroda, it is quite evident that appellant SMC-ITA No. 2059/Ahd/2013 ACIT vs. Dwarkadas P Patel-HUF AY : 2010-11 2 has admitted fact of undisclosed assets found during course of search as well as earning of undisclosed income on basis of entries made in seized papers. It is also clearly admitted by appellant that such undisclosed assets / income of Rs. 1,02,78,900/- is not recorded in regular books of accounts. Therefore, such income with reference to undisclosed assets found during course of search as well as undisclosed transactions found as per incriminating documents seized during course of search is undoubtedly undisclosed income of assessee, since such undisclosed asset / income found during course of search is covered as per definition of 'undisclosed income'. 6.3 So far as submission made subsequent to search proceedings which included headwise, yearwise and assetwise details of disclosure of unaccounted income based on scrutiny of seized incriminating documents, before Dy. Director of Income-tax (Inv.), Baroda is concerned, same may be treated as disclosure made as per statement u/s 132(4) of Act only, mainly in view of fact that proper scrutiny of seized material is always not possible for making disclosure during course of search. Even otherwise, disclosure of undisclosed income of Rs.1,02,78,900/- during course of search in case of appellant is duly accepted by AO as noted in assessment order. 6.4 So far as manner of earning of said undisclosed income and substantiating same is concerned, I agree with AO that appellant in statement recorded u/s 132(4) of Act has not specified manner of earning such income and has not substantiated same as well. 6.5 However, so far as specifying and substantiating manner in which income has been earned is concerned, there is nothing on record to suggest that any such question was asked to appellant either in statement recorded u/s 132(4) of Act or even during course of assessment proceedings. It is noted that appellant has responded to all questions asked u/s 132(4) of IT Act relating to his financial affairs. Unless specific question is asked to appellant either in statement recorded u/s 132(4) or even during course of assessment proceedings, it may not be proper to attribute failure, if any, for not specifying and substantiating manner in which income was earned, to appellant. In this regard decision of Hon'ble High Court of Gujarat in case of Mahendra C. Shah [2008] 299 ITR 305 (GUJ) which is in context of immunity from penalty u/s 271 (1)(c) read with Explanation 5 is reproduced as under: "15. Insofar as alleged failure on part of assessee to specify in statement under section 132(4) of Act regarding manner in which such income has been derived, suffice it to state that when statement is being recorded by authorized officer it is SMC-ITA No. 2059/Ahd/2013 ACIT vs. Dwarkadas P Patel-HUF AY : 2010-11 3 incumbent upon authorized officer to explain provisions of Explanation 5 in entirety to assessee concerned and authorized officer cannot stop short at particular stage so as to permit revenue to take advantage of such lapse in statement. reason is not far to seek. In first instance, statement is being recorded in question and answer form and there would be no occasion for assessee to state and make averments in exact format stipulated by provisions considering setting in which such statement is being recorded, as noted by Allahabad High Court in case of Radha Kishan Goel (SUpra) Secondly, considering social environment it is not possible to expect from assessee, whether literate or illiterate, to be specific and to point regarding conditions stipulated by Exception No. 2 while making statement under section 132(4) of Act. view taken by Tribunal as well as Allahabad High Court to effect that even if statement does not specify manner in which income is derived, if income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of benefit under Exception No.2 in Explanation 5 is commendable." 6.6 In view of above, I am of considered opinion that so far as manner of earning income and substantiating same is concerned, appellant has, in my view, not specified manner of earning undisclosed income as well as substantiated same since no question as regards specification of manner of earning undisclosed income and substantiation thereof was put forth in statement recorded u/s 132(4) of Act. There is nothing on record to suggest that appellant has failed to respond to any of questions relating to manner of earning undisclosed income as well as substantiating same even during course of assessment proceedings. In view of this, appellant is deemed to have fulfilled first two conditions for availing of immunity from penalty proceedings u/s 271AAA of Act. There is no dispute about third condition as appellant has paid tax with interest on undisclosed income. Thus, appellant has fulfilled all conditions required for immunity from levy of penalty u/s 271AAA of Act. 4.1 Since ld. CIT(A) has referred to entire material on record, including statement of assessee and relief has been granted by relying on Hon ble Gujarat High Court judgment in case of Mahendra C. Shah (supra), there is no infirmity in order of ld. CIT(A). 5. I have heard rival contentions, perused material available on record and gone through orders of authorities below. ld. CIT(A) SMC-ITA No. 2059/Ahd/2013 ACIT vs. Dwarkadas P Patel-HUF AY : 2010-11 4 has recorded clear finding of facts that during course of search itself assessee had accepted above undisclosed income and explained source thereof to be business operations of assessee. No further questions were asked from assessee and it is clear from question and answer No.10 of his statement at paper-book page No.44. In view thereof, I see no infirmity in order of ld. CIT(A) in deleting penalty relying on Hon ble Gujarat High Court judgment in case of Mahendra C. Shah (supra) and order of ld. CIT(A) is accordingly upheld. 6. In result, appeal of Revenue is dismissed. Order pronounced in Court on 5th October, 2016 at Ahmedabad. Sd/- R.P. TOLANI (JUDICIAL MEMBER) Ahmedabad; Dated 05/10/2016 Biju T. Copy of Order forwarded to : 1. / Appellant 2. Respondent. 3. Concerned CIT 4. CIT(A) 5. DR, ITAT, Ahmedabad 6. Guard file. BY ORDER, TRUE COPY /(Dy./Asstt.Registrar) , ITAT, Ahmedabad ACIT, Central Circle-1, Baroda v. Dwarkadas P. Patel (HUF)
Report Error