IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI SANDEEP GOSAIN (JM) ITA No. 6261/MUM/2014 Assessment Year: 2009-10 DCIT 22(3), Mumbai, Shri. Vijay Ravji Gajra, 3rd Floor, Tower No. 6, F.No. 801, Tower No. 6, Vashi Railway Station Complex. Sea Breeze Society, Vashi, Navi Mumbai. Vs. Palm Beach Raod, Nerul, Navi Mumbai- 400 706. PAN : AEDPG2541P (Appellant) (Respondent) Appellant by : Shri. Rajnesh K. Arvind Respondent by : Shri. Sunil Kumar Tiwari Date of Hearing: 22/09/2016 Date of Pronouncement: 05/10/2016 ORDER PER JASON P. BOAZ, AM This appeal by revenue is directed against order of CIT (Appeals)-33, Mumbai dt. 15/07/2014, deleting penalty of Rs. 35,58,183/-levied u/s 271AAA of Income Tax Act, 1961 (in short Act ) for Asst. Year 2009-10. 2. facts of case, briefly, are as under:- 2.1 assessee is individual engaged in business of real estate as builder and developer. search and seizure action u/s 132 of Act was conducted by I.T. Department in Gajra group on 19/02/2009, wherein assessee along with his partner Shri.Ramesh Gajra disclosed collectively additional income of Rs. 2 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 15 crores in their individual hands and firm in which he was partner. In assessee s case disclosure was as Rs. 4,24,31,099/-. For Asst. year 2009-10, assessee filed his return of income on 03/05/2010 declaring total income of Rs. 3,57,72,163/-. breakup of disclosure of income declared in course of search and was as under:- Sr. Description AY 2009-10 As per ROI Difference No. (as per 132(4) 1 Jewellery 3,00,000 3,00,000 NIL 2 Cash Seizure 10,00,000 10,00,000 NIL 3 Brokerage 7,50,000 7,50,000 NIL 4 Cash Credit by way of 3,78,81,099 3,35,31,393 43,49,166 loan 5 Miscellaneous 25,00,000 NIL 25,00,000 6 Total 4,24,31,099 3,55,81,933 68,49,166 2.2 In course of assessment proceedings, assessee explained difference of Rs. 43,49,166/- on account of reduced disclosure of cash credit which was accepted by Assessing Officer ( AO ). In respect of difference of Rs. 25,00,000/- on account of Miscellaneous income assessee submitted that this amount was declared by assessee during search to cover any shortfall in declaration made u/s 132(4) of Act and since later on, at time of filing of return of income, it was found that there was no shortfall in undisclosed income beyond Rs. 3,55,81,933/-, same was not offered in return of income filed for Asst. year 2009-10. assessee s explanation, however, did not find favour with A.O and said amount of Rs. 25,00,000/- was brought to tax in assessee s hands when A.O concluded assessment u/s 153A r. w. s 143(3) of Act vide order dt. 03/11/2010 wherein assessee s income was determined at Rs. 3,82,75,163/-. Penalty proceedings u/s 271AAA of Act were initiated simultaneously in this regard. authorities below have observed 3 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 that no appeal has been preferred by assessee against order of assessment for Asst. year 2009-10 dt. 03/11/2010 and therefore matter attained finality. 3.1 A.O initiated penalty proceedings u/s 271AAA of Act simultaneously in order of assessment for Asst. year 2009-10 dt. 03/11/2010, requiring assessee to show cause as to why penalty be not levied there under in case on hand. In reply dt. 23/05/2011, assessee objected to said proposal of A.O submitting, inter alia, that A.O had accepted disclosure of Rs. 3,55,81,933/- made by assessee and that only addition made to returned income was Rs. 25,00,000/-purely on estimate basis. explanation put forward by assessee were not accepted by A.O and proceeded to levy penalty of Rs.35,58,193/-; being 10% of returned income of Rs. 3,55,81,933/- vide order dt. 30/05/2011 due to non compliance with conditions specified u/s 271AAA of Act. 3.2 Aggrieved by order levying penalty of Rs. 35,58,193/- u/s 271AAA of Act for Asst. year 2009-10 vide order dt. 30/05/2011, assessee preferred appeal before Ld. CIT(Appeals)-33, Mumbai. After considering submissions put forth by assessee, AO s views in matter and material on record, Ld. CIT(A) in impugned order, dt. 15/07/2014, deleted penalty levied u/s 271AAA of Act, as he was of view that assessee in course of search proceedings had declared details of income and manner thereof, as evident from perusal of working on page 3 of order of assessment and also for reason that A.O had not identified which conditions has not been complied with by assessee as provided u/s 271AAA of Act. In coming to this finding, Ld. CIT(A) followed decision of Co-ordinate bench of this Tribunal in case of M/s Kanakia Spaces Pvt. Ltd. in ITA No. 6763/Mum/2011 dt. 10/07/2013. 4 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 4.1 Revenue, being aggrieved by impugned order of CIT(Appeals)-33, Mumbai dt. 15/07/2014 deleting penalty of Rs. 35,58,193/- levied u/s 271AAA of Act for Asst. year 2009-10, has preferred this appeal raising following grounds:- 1. On facts and in circumstances of case and in law, Ld. CIT(A) erred in deleting penalty of Rs. 35,58,193/- levied by Assessing Officer u/s 271AAA of Income Tax Act, 1961, without considering fact that assessee had failed to Specify and Substantiate manner in which undisclosed income has been derived despite fact that u/s 271AAA(2) onus lies on assessee to specify and substantiate manner in which undisclosed income was derived. 2. appellant prays that order of CIT(A) on above grounds be reversed and that of Assessing Officer be restored. 3. appellant craves leave to amend or alter any grounds or add new ground which may be necessary. 4.2 Ld. DR for Revenue was heard in support of grounds raised (supra), submitting that only issue challenged was order of Ld. CIT(A) deleting penalty of Rs. 35,58,193/- levied by A.O u/s 271AAA of Act for Asst. year 2009-10. According to Ld. DR, who placed strong reliance on order of A.O, Ld. CIT(A) ought not to have deleted said penalty as assessee had failed to discharge its onus to specify and substantiate manner in which undisclosed income had been derived. In view of above it was prayed that order of Ld. CIT(A) be reversed and that of A.O be restored. 5 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 4.3 Per contra, Ld. AR for assessee supported impugned order of Ld. CIT(A) deleting penalty of Rs. 35,58,193/-levied u/s 271AAA of Act, as being in order. Submissions put forward before authorities below were reiterated. According to Ld. AR, assessee had fulfilled conditions, as required by provisions of sec. 271AAA of Act, and both specified and substantiate d u/s 132(4) of Act, manner and source from which undisclosed income of Rs. 4,24,31,099/- had been earned before Addl. DIT (Inv.) Kalyan vide letter dt. 12/04/2009, which item wise break up finds mention at pages 1 and 2 of order of assessment of for Asst. year 2009-10. It was contended that in view of above, penalty u/s 271AAA of Act was not leviable or sustainable in case on hand and was correctly deleted by Ld. CIT(A). In this regard reliance was, inter alia, placed on decision of Co-ordinate bench of this Tribunal in case of Kanakia Spaces Pvt. Ltd. ( ITA No. 6763/Mum/2011 dt. 10/07/2013.) which Ld. AR contends covers issue in this appeal in favour of assessee. 4.4.1 We have heard rival contentions and perused and carefully considered material on record; including judicial pronouncement cited. facts of matter as emanate from record are that in course of search action in Gajra group, on 09/02/2009 and thereafter it was, inter alia admitted before Addl. DIT (Inv), Thane vide letter dt. 12/04/2009 and in assessee s statement u/s 132(4) of Act that declaration/admission of undisclosed income of assessee in case on hand for Asst. year 2009-10 was as under:- Sr. Description & Details Amount No. 1 Jewellery Rs. 3,00,000 2 Cash Seizure Rs. 10,00,000 3 Brokerage Rs. 7,50,000 4 Represents cash credit by way of loans in regular books Rs. 3,78,81,099 6 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 of account including interest(loan amount Rs. 3,38,22,409/-, interest Rs. 40,58,690/-) 5 Miscellaneous Rs. 25,00,000 Total Rs. 4,24,31,099 4.4.2 It is seen that in return of income filed thereafter for Asst. year 2009-10 on 03/05/2010, assessee declared undisclosed income as under:- Sr. No. Description Amount (Rs.) 1 Jewellery 3,00,000 2 Cash Seizure 10,00,000 3 Brokerage 7,50,000 4 Cash credit by way of loan 3,35,31,933 Total 3,55,81,933 difference between declaration u/s 132(4) of Act and that admitted in return of income filed was; (i) Rs. 43,49,100/- on accounts of cash credit by way of loan, assessee s explanation for which was accepted by A.O; and (ii) amount of Rs. 25,00,000/- on account of Miscellaneous which was added to assessee s income when order of assessment was finalized u/s 153A rws 143(3) vide order dt. 03/11/2010. 4.4.3 Penalty proceedings were initiated u/s 271AAA of Act simultaneously in order of assessment for Asst. year 2009-10. It is seen that A.O proceeded to levy penalty of Rs. 35,58,193/- @ 10% of returned undisclosed income of Rs. 3,55,81,933/- admitted by assessee u/s 132(4) of Act and declared in return of income for A.Y. 2009-10, on ground that assessee had not complied with provisions specified under Section 271AAA of Act for non-levy of penalty there under. On appeal by assessee, we find that Ld. CIT(A) after considering submissions of assessee, A.O s views and 7 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 material on record, has deleted penalty levied u/s 271AAA holdings under at paras 2.6 to 2.8 of impugned order :- 2.6 I have considered details on record filed by A.O as well as by appellant on various dates. I have also perused assessment order and impugned penalty order. first contention of appellant that income offered under 132(4) does not fall within definition of term "undisclosed income" is incorrect. appellant was found in possession of cash and jewellery which he could not explain. Similarly brokerage expense of Rs.7.50 lakh has been found to be false. However, amount of Rs.3.55 crore representing unexplained cash credit is squarely covered by Explanation (a)(ii) of section 271AAA. details of these cash credits are also provided to AO during assessment and find mention in assessment order date wise. Thereof, this contention of appellant is not frivolous and deserves to be held as such. 2.7 Coming to next contention of appellant it is undisputed fact that appellant has during course of search proceedings declared income and manner thereof. This is evident from perusal of Assessment Order wherein these facts are recorded. AO has on page 3 of assessment order recorded details of cash credits of Rs.3.55 crore and dates on which these are credited in books of appellant. cash and jewellery found do not require any further substantiation as they are tangible items. Even in penalty order, AO has clearly mentioned comparison between income offered u/s 132(4) and income as per return of income. On perusal of penalty order, no reason has been provided by AO for levy of penalty. He has not identified which condition has been violated by appellant as provided u/s 271AAA and why. He has 8 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 merely reproduced conditions u/s 271AAA and made bald statement that appellant has not satisfied conditions. penalty order seems to have been passed mechanically without dealing with each condition separately. appellant's case is squarely covered by decision of jurisdictional ITAT in case of M/s Kanakia Spaces Private Limited (supra) wherein Hon ble ITAT has held as under :- "The fact of matter is that requirement on part of assessee to substantiate source of income cannot be taken to mean that all evidences in respect has to be produced. very fact that disclosure is made in respect of undisclosed income, all that can be required of assessee is that proximate nature of acquisition can be mentioned by him. It cannot be case that very minute detail thereof would be preserve with evidence which is possible only for regular income being disclosed by him requirement as per' Section (2) of Section 271AAA is only that manner of earning income should be specified so that undue advantage of telescoping or some other income being brought within total ambit of undisclosed income surrendered does not happen. From order of Ld. A.0 also, it is apparent that penalty is not levied by him on account of some conviction but has been just levied to complete proceedings. In fact there are no material facts warranting levy of penalty and, accordingly, penalty of Rs.55,00,000/- - levied under section 271AAA is directed to be deleted." 2.8 It is also important to mention here that disclosure made by appellant has been duly accepted by AO and detailed in Assessment Order by AO. Therefore, there is no occasion to levy 9 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 penalty u/s 271AAA. I direct AO to delete impugned penalty. appellant succeeds in appeal and penalty stands deleted. 4.4.4 provisions of Section 271AAA of Act read as under:- 271AAA (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,- (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; (ii) Substantiates manner in which undisclosed income was derived; and (iii) pays tax, together with interest, if, any, in respect of undisclosed income. (3) No penalty under provisions of clause(c) of sub-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. 10 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 Explanation.- For purposes of this section,- (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; (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.) 11 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 4.4.5 From perusal of provisions of section 271AAA of Act(supra), finding of Ld. CIT(A)(supra) and material on record, we concur with Ld. CIT(A) s observation that undisclosed income of Rs. 3.55 crores representing various items as cited therein are liable to be considered in terms of provisions of Explanation (a)(ii) to Section 271AAA of Act. As per material on record and as observed by Ld. CIT(A), we find that it is undisputed fact that assessee has, during course of search proceedings, apart from declaring undisclosed income; has also given detailed break up of same, item wise and giving proximate manner in which and source same have been earned/derived from. This is therefore, in our view, substantiated. above facts find mention by A.O in order of assessment at 2 to 4 thereof, inter alia giving dates on which these cash credit are credited in books of accounts. It is not requirements on part of assessee that all evidences in respect of undisclosed income have to be produced to substantiate source of income; proximate nature of acquisition would be sufficient. We too, agree with finding of Ld. CIT(A) that A.O has not identified which of conditions have been violated by assessee, that invite levy of penalty u/s 271AAA of Act in case on hand; Nor has any reason has been rendered for levy thereof. On careful appreciation of factual and legal matrix of case on hand, we are of considered view that assessee s case is squarely covered by decision of co-ordinate bench of this Tribunal in case of Kanakia Spaces Pvt. Ltd.(supra) wherein Hon ble Tribunal at paras 3.1 to 4.1 has observed and held as under:- 3.1 It is seen that ld.AO has written two sentences at para- 8 to conclude that appellant has not been able to substantiate source of acquisition of movable assets. fact of matter is that requirement on part of assessee to substantiate source of income cannot be taken to mean that all evidences in 12 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 respect has to be produced. very fact that disclosure is made in respect of undisclosed income, all that can be required of assessee is that proximate nature of acquisition can be mentioned by him. It cannot be case that very minute detail thereof would be preserve with evidence which is possible only for regular income being disclosed by him. requirement as per Section (2) of Section 271AAA is only that manner of earning income should be specified so that undue advantage of telescoping or some other income being brought within total ambit of undisclosed income surrendered does not happen. From order of Ld. A.O also, it is apparent that penalty is not levied by him on account of some conviction but has been just levied to complete proceedings. In fact there are no material facts warranting levy of penalty and, accordingly, penalty of Rs.55,00,000/- levied under section 271AAA is directed to be deleted. 4. After considering rival submissions, we do not see any reason to interfere with order of CIT(A). order is in tune with principles laid down by various co-ordinate Benches and High Courts particularly with reference to disclosure made under section 132(4). In case of CIT vs. Mahendra C. Shah (299 ITR 305) Hon ble Gujarat High Court considered similar statement under section 132(4) to grant immunity under section 271(1)(c). Hon'ble High Court held as under:- When statement is being recorded by authorized officer it is 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 13 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 format stipulated by provisions considering setting in which such statement is being recorded. 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 in second exception while making statement under section 132(4). 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. 4.1 In this case, assessee was asked to explain entries in work-in-progress sheet and assessee in course of statement offered income with plea not to initiate penalty proceedings. assessee was not asked about manner in which such income was earned and also to substantiate manner in which undisclosed income was derived. provision of clause-2 of Explanation-V appended to section 271(1)(c) are similar to section 271AAA(2). scope and meaning has been lucidly explained by Hon'ble Allahabad High Court in case of CIT vs. Radha Kishan Goel (2005) 278 ITR 454 (All.), which was followed by Hon'ble Gujarat High Court in above referred case. In view of above principles laid down, we are of opinion that immunity provided under s/s.(2) of section 271AAA is applicable and accordingly, order of CIT(A) does not require any modification. Revenue s grounds are rejected. 4.4.6 In factual and legal matrix of case as discussed above, from para 4.1 to 4.4.5 of this order(supra), and following decision of co-ordinate bench of this Tribunal in case of Kanakia Spaces Pvt. Ltd. (ITA No. 6763/Mum/2011 dt. 10/07/2013), we are of opinion that impugned order of Ld. CIT(A) deleting penalty of Rs. 35,58,193/- u/s 271AAA of Act in case on hand 14 ITA No. 6261/MUM/2014 Assessment Year: 2009-10 for Asst. year 2009-10 does not call for any interference by us and therefore uphold same. Consequently, ground No. 1 to 3 of revenue s appeal is dismissed. 5. In result, revenues appeal for Asst Year. 2009-10 is dismissed. Order pronounced in open court on 5th October, 2016 Sd/- Sd/- (SANDEEP GOSAIN) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 05/10/2016 /Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Pramila DCIT-22(3), Mumbai v. Vijay Ravji Gajra