Sunil N Goyal, Aurangabad vs Department Of Income Tax

Dy. Commissioner of Income Tax, Shri Banarasidas R. Jindal, Central Circle, Aurangabad Jindal House, Sambhaji Nagar, Vs. Jalna-431203 (Appellant) (Respondent) PAN No. AAQPJ5272C

ITA No. 1438/PN/2013 Assessment Year : 2010-11

Dy. Commissioner of Income Tax, Shri Sunil N. Goyal, Central Circle, Aurangabad Plot No. 18-19, Priti Sudha Vs. Nagar, Mantha Road, Jalna-431203 (Appellant) (Respondent) PAN No. AAWPG1295K

ITA No. 1440/PN/2013 Assessment Year : 2010-11

Dy. Commissioner of Income Tax, Shri Jaibhagwan B. Jindal, Central Circle, Aurangabad Jindal House Sambhaji Vs. Nagar, Jalna-431203 (Appellant) (Respondent) PAN No. AAQPJ5374E

Revenue By: Shri Y.K. Bhaskar Assessee By: Shri J.P. Bairagra

Date of hearing : 11-06-2015 Date of pronouncement : 26-06-2015

ORDER

PER VIKAS AWASTHY, JM:-

These appeals have been filed by the Revenue against the orders of

Commissioner of Income Tax (Appeals), Aurangabad dated 01-04-2013

for assessment year 2010-11 cancelling penalty levied u/s. 271AAA of 2 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

the Income Tax Act, 1961 (hereinafter referred to as "the Act") in the case

of all the three assessees. Since, the facts and issues involved in the

appeals are identical the appeals are taken up together for adjudication.

2. The brief facts of the case as emanating from records are: The

assessees belong to 'Kalika Group", Jalna. A search u/s. 132 was

conducted on the group concerns on 16-06-2009. In response to notice

u/s. 153A, the assessees filed return of income in their respective cases.

On the basis of disclosure statement recorded u/s. 132(4), addition was

made in the hands of the assessees. The details of income returned by

the assessees, income assessed, income disclosed and penalty levied

u/s. 271AAA are as under:

ITA No. Income Return Income Income Penalty u/s.

Disclosed u/s. Assessed 271AAA 132(4) 1436/PN/2013 Rs.68,05,574/- Rs.50,00,000/- Rs.68,95,959/- Rs.5,00,000/- 1438/PN/2013 Rs.1,46,85,821/- Rs.1,40,10,384/- Rs.1,46,89,938/- Rs.13,48,625/- 1440/PN/2013 Rs.1,56,64,772/- Rs.1,38,85,272/- Rs.1,57,89,770/- Rs.13,48,625/-

3. The Assessing Officer held that the assessees have not

substantiated the income declared at the time of search. Therefore, they

are liable for penalty u/s. 271AAA. Accordingly, penalty was levied vide

separate orders dated 28-06-2012 in the case of each assessee.

Aggrieved by the penalty order u/s. 271AAA, the assessees

preferred appeals before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) vide impugned order cancelled

the levy of penalty u/s. 271AAA in the case of respective assessees.

Now, the Revenue has come in appeal before the Tribunal assailing

the findings of the First Appellate Authority in deleting penalty in respect

of all the three assessees.

3

ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

4. Shri Y. K. Bhaskar representing the Department, vehemently

defending the order levying penalty submitted that the assessees have

satisfied only two conditions i.e. No. (i) and (iii) as set out in section

271AAA(2) of the Act. The assessees have not been able to substantiate

the manner in which the undisclosed income has been derived. For

seeking immunity u/s. 271AAA(2), all the three conditions have to be

satisfied. The ld. DR prayed for setting aside the impugned orders and

restoring the order of penalty in all the three appeals.

5. On the other hand, Shri J.P. Bairagra appearing on behalf of the

assessees submitted that the statement of Shri Ghanshyam Chunnilal

Goyal was recorded u/s. 132(4) of the Act during the course of search

action. Subsequently, statement u/s. 131 of the Act was also recorded

wherein Shri Ghanshyam Chunnilal Goyal gave the details of amount

disclosed in the hands of various members of the group. During the

course of recording statement u/s. 132(4), a specific question (Q. No. 50)

was asked, whether for availing the benefit of section 271AAA the

assessee (Shri Ghanshyam Chunnilal Goyal) wants to say anything? In

reply to the question, it was admitted that income of Rs.14 Crores was

earned by the members of the group, by unaccounted transaction in

their business like steel, cotton, trading in land and plots, cloth trading,

scrap trading etc. The same is declared as additional income over and

above the regular income. The statement recorded by Shri Ghanshyam

Chunnilal Goyal was admitted and accepted by other members of the

group. Accordingly, addition was made in the hands of the group

members. The substantial part of additional income declared is with

respect to amounts receivable on account of hundi/petty

loans/unaccounted sales and unaccounted purchases total to the tune

of Rs.6,54,35,000/- and unaccounted income from badla transaction of

land Rs.85,10,000/-. The ld. AR also referred to Q. No. 10 and Q. No. 13 4 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

of the statement recorded u/s. 131 to show that the additional income

offered was substantiated during the course of search. The ld. AR

submitted that all the conditions as laid down u/s. 271AAA(2) have been

satisfied. Therefore, no penalty is leviable in the case of assessees. In

support of his submissions ld. AR placed reliance on the following

decisions:

i. Neerat Singal Vs. ACIT; 146 ITD 152 (Delhi Trib.).

ii. ACIT Vs. Munish Kumar Goyal; 45 taxmann.com 563 (Chandigarh

Trib.).

iii. DCIT Vs. Rajendra Prasad Dokania in ITA No. 525/Ahd/2012

decided on 04-05-2012.

6. We have heard the submissions made by the representatives of

both the sides and have perused the orders of the authorities below. We

have also examined the decisions on which the ld. AR of the assessee

has placed reliance. The penalty u/s. 271AAA has been levied on the

ground that the assessees have not been able to substantiate the

manner in which the undisclosed income is derived. Before we proceed

with the issue, it would be appropriate to first examine the relevant

provisions of section 271AAA of the Act. The same are reproduced as

under:

"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 5 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

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."

7. A perusal of sub-section (2) of section 271AAA shows that for

seeking immunity from levy of penalty u/s. 271AAA, three conditions

have to be satisfied:

i. The assessee should be able to specify the manner in which

income disclosed in statement recorded u/s. 132(4) has been

derived.

ii. Substantiate/corroborate the manner in which the undisclosed

income is derived.

iii. Pays tax along with interest, if any in respect of undisclosed

income.

8. In the present case, the Revenue has accepted that the conditions

no. (i) and (iii) have been satisfied. Thus, the only condition which has

not been fulfilled according to the Revenue is that the assessee has not

been able to substantiate the manner in which undisclosed income is

derived. The ld. AR of the assessee has drawn our attention towards the

statement recorded u/s. 132(4) on 08-07-2009 and u/s. 131 on 17-08-

2009. During the recording of statement u/s. 132(4), we find a specific

question was put to the assessee with respect to availing of benefit u/s.

271AAA. The same reads as under:

"Q. 50. Do you want to say anything else for availing the benefit of section 271AAA?

Ans. I want to state that I have answered the all questions to the best of my knowledge. For the explanation regarding the issue of the shares allotted on premium, I want to state that though I has (sic) a honest belief 6 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

that the said transactions are genuine, but the possibility of some technical errors like confirmation of the investing companies, mode of allotment, rationale of allotment, identification of the consultant and details of the investing companies etc. may has some technical errors. On account of the same and to buy the peace of mind I want to offer Rs.14 Crores as an additional income over and above the regular income of the Group concerns for the assessment year 2010-11 in the hands of the following directors :-

1. Shri Ghanshyam Chunnilal Goyal 3.50 Crores

2. Shri Arun Shrikishan Agrawal 3.50 Crores

3. Shri Anil Nandkishor Goyal 3.50 Crores

4. Shri Naresh Banarasidas Jindal 3.50 Crores

-----------------

Total 14 Crores

The said income of Rs.14 Crs. Was earned by the members of the group, by unaccounted transactions in their businesses like steel, cotton, trading in land and plot, cloth trading, scrap trading etc. which may be used or the purpose of investing in the businesses.

The said disclosure is to cover up the all discrepancies, difference in the books of A/c, difference in the stock, and difference of opinion in regards to the issues raised by as above and also in relation to personal balance sheet discrepancies of partners, directors or any other assessee of this group."

9. To show that the undisclosed income was substantiated, the ld.

AR referred to Q. No. 10 and Q. No. 13 of the statement recorded u/s.

131 of the Act. The same reads as under:

"Q. No. 10. I am showing you the chit seized from your residential premises, during the course of search action and inventoried as Annexure

- A/4, page No. 6 (back page). Please go through the contents of this page and explain the entries there in.

Ans. I have gone through the said page. I want to state that, we are dealing in the sale of land and plots. Some of the land and plots were sold by us in the FY 09-10 by badla system. We had made agreements with the owners of the land to purchase some land/plots at a fixed rate within the fixed time frame. Consequent upon the said agreements, we had sold these lands/plots to the different parties at a higher rates and this amount i.e. 85,10,000/- was the income earned by four of us i.e. 7 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

Myself, Shri Arun Agrawal, Anil Goyal and Naresh B. Jindal. The said amount was shared by us equally. I accept the fact that this amount is not recorded in the regular books of A/c of the assessees, hence I am offering this amount as an additional income in the hands of the Myself, Shri Arun Agrawal, Anil Goyal and Naresh B Jindal for the AY 10-11 @ 21,27,500/- each.

Q. No. 11. Xxxxxxxxxx.

Q. No. 12. Xxxxxxxxxx.

Q. No. 13. I am showing you the chit seized from your residential premises, during the course of search action and inventoried as Annexure A-3 page 11 (back page). Please go through the contents of this page and explain the entries there in.

Ans. The said details are the details of the persons to whom the directors had given the hundi/petty loans/unaccounted sale and made unaccounted purchases. The amount of Rs.6,54,35,000/- is amount is receivable by the members of the group on 10-05-2009. These amount belongs to Shri Anil N. Goyal, Shri Arun S. Agrawal, (mentioned as Arun Ag), Shri Naresh B. Jindal (mentioned Naresh Jin) and my self (mentioned as Ghanshyam). As per the said entries the peak amount is Rs.6,54,35,000/-. I accept the fact that this amount is not recorded in the regular books of A/c of the assessees; hence I am offering this amount as an additional income in the hands of the Myself, Shri Arun Agrawal, Anil Goyal and Naresh B Jindal for the AY 10-11 @ 1,63,58,750/- each."

10. A perusal of aforesaid questions and answers, show that the

undisclosed income and the source of income both were substantiated

by the assessee during the course of search. Since, no further query was

put to the assessee with respect to undisclosed income the assessee did

not elaborate the same. We observe from the impugned orders that the

assessees in their submissions before the Commissioner of Income Tax

(Appeals) have given the bifurcation and source of income, declared in

the hands of various members of the group. The same is reproduced as

under:

8

ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

Name of the appellant Hundi, petty loans, Badla income Rs. Total Rs.

sales receivable Rs.

1) Sunil Goyal 1,13,58,750 21,27,500 1,34,86,250

2) Nandkishor Goyal 50,00,000 - 50,00,000

3) Narendra Agrawal 1,63,88,125 21,27,500 1,85,15,625

4) Jaibhagwan Jindal 1,13,58,750 21,27,500 1,34,86,250

5) Banarasidas Jindal 50,00,000 - 50,00,000

6) Gopal Agrawal 1,63,58,750 - 1,63,58,750

7) Ghandshyamdas Goayl - 21,27,500 21,27,500 Total 6,54,64,375 85,10,000 7,39,74,375

In the statement u/s. 131, the assessee Shri Ghanshyam

Chunnilal Goyal has given the details of the income declared, which is as

follows:

Sr. No. Particulars Amount 1 On account of unaccounted sale as per details 2,80,79,844 mentioned in [Question no. 2 & 3] 2 Investment in stock [Question no. 14] 2,55,52,503 3 Unaccounted sale/petty loans in case of Shri Anil 10,00,000 R. Goyal [Question no. 6] 4 Investment in construction [Question no. 5] 86,48,831 5 Investment in stock of Sagar Paridhan Pvt. Ltd. 24,35,417 [Question no. 7] 6 Investment in furniture in Sagar Paridhan Pvt. 5,00,000 Ltd. [Question no. 7] 7 Unaccounted income from badla transaction 85,10,000 [Question no. 10] 8 Unaccounted transactions explained [Question 6,54,35,000 no. 13] TOTAL 14,01,61,595

It is evident that the total undisclosed income under badla

transaction and unaccounted transactions have been offered to tax in

the hands of group members.

9 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

11. Thus, in our considered view the assessees have been able to

substantiate the manner in which undisclosed income has been derived.

Since, all the three conditions as laid down in sub-section (2) of section

271AAA are satisfied. The levy of penalty u/s. 271AAA is not warranted.

12. The ld. AR in support of his contentions have placed reliance on

the decision of the Chandigarh Bench of the Tribunal in the case of ACIT

Vs. Munish Kumar Goyal (supra) wherein under similar circumstances

the penalty u/s. 271AAA was deleted. The Tribunal held that were the

assessee surrendered certain income in the course of search, filed the

return disclosing the said amount and paid taxes thereon, there was

sufficient compliance of provisions of section 271AAA(2). The relevant

extract of the order of the Tribunal is as under:

"10. Plain reading of sub-section would show that if the assessee during the course of search in a statement admits to some undisclosed income and pay taxes on the same then penalty cannot be levied in terms of sub- sec (1) of this Section. In the case before us, the amount of Rs.4 crores which was surrendered during search, has been declared by the assessee in the return and taxes have been paid accordingly. Therefore the assessee is normally entitled for the immunity provided in Sec 271AAA itself. However, the Revenue has raised further dispute that whether the assessee has disclosed the manner in which income has been earned. In the penalty order passed by the Assessing Officer following questions and answers have been extracted:

Q. Do you want to say anything more?

Ans. I voluntarily surrender a sum of Rs.4.00 crore (Rs. Four crore) for current financial year i.e. 2009-10 relevant to A.Y. 2010- 11 in any (should be 'my') individual capacity. They cover all the discrepancies in the seized papers during the course of search proceedings."

11. Therefore clearly the Revenue has not asked the assessee to disclose the manner in which such income was earned. In any case once the income is surrendered during the course of search u/s. 132(4) it can be safely assumed that during discussion the assessee must have disclosed the manner. In any case we find force in the submissions of the Ld. 10 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

Counsel for the assessee that if the explanation of the assessee has been accepted for a sum of Rs.1987500 out of total surrender of Rs.4 crores then same manner should have been accepted for the whole of the amount. It is not clear f rom the penalty order how explanation for Rs.1987500 was accepted. In any case the Ld. CIT(A) has considered all these issues in detail and the D.R. for the Revenue has not referred to any material or decision which can controvert the findings of the CIT(A). In the following cases which have been relied on by the Ld. Counsel for the assessee which was clearly held that penalty is not leviable.

12. Further the assessee has relied on the following decisions:

Kanakia Spaces (P.) Ltd. (supra) A.N. Annamalaisamy (HUF) (supra) Pramod Kumar Jain (supra) Smt. Raj Rani Gupta (supra)

13. The Ld. D.R. for the Revenue was not able to place before us any decision which supports his case, therefore we find nothing wrong with the order of the Ld. CIT(A) and confirm the same.

14. In the result, appeal of the Revenue in ITA No. 1003/Chd/2013 is dismissed."

13. The co-ordinate Pune Bench of the Tribunal in the case of The

Income Tax Officer Vs. Shri Satishchandra G. Mittal in ITA No.

970/PN/2011 for the assessment year 2008-09 decided on 11-05-2015

by placing reliance of the decision of Chandigarh Bench of the Tribunal

deleted the levy of penalty u/s. 271AAA in respect of income offered to

tax during such proceedings.

14. The Delhi Bench of the Tribunal in the case of Neerat Singhal

(Supra) has held that levy of penalty u/s.271AAA is not justified in

absence of any query raised by the authorised officer during the course

of recording of statement u/s.132(4) about the manner in which

undisclosed income has been derived and about its substantiation.

15. The Mumbai Bench of the Tribunal in the case of Kanakia Spaces

Pvt. Ltd. in ITA No. 6763/Mum/2011 decided on 10-07-2013 while 11 ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

dismissing the appeal of the Revenue wherein, the order of

Commissioner of Income Tax (Appeals) deleting penalty levied u/s.

271AAA was challenged, observed as under :

"4. After considering the rival submissions, we do not see any reason to interfere with the order of CIT(A). The order is in tune with the principles laid down by various co-ordinate Benches and High Courts particularly with reference to disclosure made under section 132(4). In the case of CIT vs. Mahendra C. Shah (299 ITR 305) the Hon'ble Gujarat High Court considered similar statement under section 132(4) to grant immunity under section 271(1)(c). The Hon'ble High Court held as under:-

"When the statement is being recorded by the authorized officer it is 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 reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated in the second exception while making statement under section 132(4). 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."

4.1 In this case, the assessee was asked to explain the entries in the 'work-in-progress sheet' and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived. The provision of clause-2 of Explanation-V appended to section 271(1)(c) are similar to section 271AAA(2). The scope and meaning has been lucidly explained by the Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel (2005) 278 ITR 454 (All.), which was followed by the Hon'ble Gujarat High Court in the above referred case. In view of the above principles laid down, we are of the opinion that immunity provided under s/s.(2) of section 271AAA is applicable and accordingly, the order of CIT(A) does not require any modification. Revenue's grounds are rejected." 12

ITA Nos. 1436, 1438 & 1440/PN/2013, A.Y. 2010-11

16. Thus, in view of the facts of the case and decisions discussed

above, we find no infirmity in the impugned orders cancelling levy of

penalty u/s. 271AAA of the act. The appeals of the Revenue are

dismissed being devoid of merit.

Order pronounced on Friday, the 26th day of June, 2015

at Pune

Sd/- Sd/-

(R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated: 26th June, 2015 RK/PS

Copy to

1 Assessee 2 Department 3 The CIT(A), Aurangabad 4 The CIT, Central, Nagpur 5 The DR, ITAT, "A" Bench, Pune. 6 Guard file.

//True Copy//

By Order

Private Secretary, Income Tax Appellate Tribunal, Pune