By K. B. Bhujle
Advocate
Penalty – Presumption of
concealment in case of search – Condition precedent – Finding that statement
specified manner in which such income earned – No evidence to show that such
income earned from any other source – Payment of tax with interest before
assessment made – Conditions satisfied – Deletion of penalty justified
The
assessee-firm was in the business of development of housing projects. Search
and seizure operations were conducted, u/s. 132 of the Income-tax Act, 1961, at
the business and residential premises of the assessee. In the course of search,
a statement of one of the partners of the firm, AGK, was recorded u/s. 132(4)
wherein he had admitted Rs. 15 crore as undisclosed income. The said income was
offered in the return filed pursuant to search. The Assessing
Officer levied penalty,
u/s. 271AAA of Rs. 15
lakh at the rate of 10% of the admitted undisclosed income on the ground that
the assessee failed to substantiate the source of such undisclosed income.
The
Commissioner (Appeals) found that AGK, during the course of recording his
statement, had explained that the unaccounted income represented net taxable
income of the project undertaken by the assessee and that the details mentioned
in the seized diary represented the net taxable income for the projects and
during the course of assessment proceedings, the assessee had filed relevant
details in that regard. He also found that no evidence was found to show that
the assessee had earned the undisclosed income from any other source instead of
the project income. On the basis of such finding, he held that the first
condition as prescribed under clause (2)(i) of section 271AAA was fulfilled in
the case of the assessee. As regards second condition u/s. 271AAA(2)(ii), the
Commissioner (Appeals) found that the undisclosed income of Rs. 8.10 crore was
admitted by AGK in his statement u/s. 132(4), the basis of which was a diary
found and seized during the course of search. The diary contained the entries
of the unaccounted/undisclosed income of Rs. 8.10 crore belonging to the
assessee firm, which had been explained by AGK, while recording his statement.
Therefore, he held that the second condition also was satisfied since such
undisclosed income had been accepted by the Assessing Officer in the assessment
proceedings. As regards the third condition u/s. 271AAA(2)(iii) the
Commissioner (Appeals) noted that the tax together with interest, if any, in
respect of undisclosed income should have been paid by the assessee for getting
immunity from the penalty and the Assessing Officer had stated in the penalty
order itself that full tax including interest on the undisclosed income had
been paid by way of adjustment out of the seized cash or otherwise in response
to the notice of demand but before conclusion of the penalty proceedings. In
the light of the fact that the assessee had satisfied all the three conditions
set out in sub-section (2) of section 271AAA, the Commissioner (Appeals)
deleted the penalty. The Tribunal upheld the decision of the Commissioner
(Appeals).
On appeal
by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and
held as under:
“i) Both the Commissioner (Appeals) as well as
the Tribunal had recorded concurrent findings of fact that the partner of the
firm, AGK, during the course of recording of his statement at the time of the
search, had stated that the income was earned by accepting on-money in its
building project. Therefore, the manner in which income has been derived has
been clearly specified in his statement.
ii) It was not the case of the Department that
during the course of recording of the statement of AGK any specific questions
had been asked to substantiate the manner in which the income was derived. Thus
the findings recorded by the Commissioner (Appeals) and the Tribunal regarding
the satisfaction of clause (i) and (ii) of sub-section (2) of section 271AAA
did not suffer from any legal infirmity.
iii) In so far as the satisfaction of clause (iii)
of sub-section (2) of section 271AAA was concerned, the penalty order revealed
that the entire amount of tax and interest had been paid, prior to making the
assessment order.
iv) In the light of the above discussion, there
being no infirmity in the impugned order passed by the Tribunal, no question of
law, as proposed or otherwise, can be said to arise. The appeal, therefore,
fails and is, accordingly, summarily dismissed.”
