M/s Vee Gee Industrial Enterprises, Faridabad v. ACIT, Faridabad, Income Tax Appellate Tribunal, Judgment, Law, casemine.com

Precedent	Rule or Principle Cited For	Application by the Court (as reflected in the provided opinion)
Shourya Towers Pvt. Ltd. vs. DCIT (255 CTR 225)	The provided opinion notes that the CIT(A) relied on this decision. The specific rule/principle from the case is not detailed in the text.	The CIT(A) relied on this decision in upholding the penalty; the Tribunal recorded that CIT(A) had relied on it, although the Tribunal ultimately set aside the CIT(A) order on other authorities and reasoning.
CIT vs. Bhandari Silk Store (337 ITR 153)	The opinion mentions this decision as relied on by the assessee; the specific rule/principle from this decision is not detailed in the text.	Cited by the assessee to support its contention that acceptance of a return filed after search leads to no concealment and penalty cannot be imposed. The Tribunal noted the citation among the assessee's authorities.
DCIT vs. Purti Sakhar Karkhana Ltd. (153 TTJ 12)	The opinion records that this Tribunal decision was cited; the exact principle cited in that decision is not detailed in the provided text.	Cited by assessee's counsel; the Tribunal recorded the reliance but did not specify further application beyond noting it among cited authorities.
Kirit Dahyabhai Patel vs. ACIT (280 CTR 216)	Mentioned by counsel; the specific rule/principle from the decision is not detailed in the text.	Cited by the assessee to argue immunity should be granted where conditions are met; recorded as part of the assessee's authorities.
CIT vs. Sid Nath Goel (359 ITR 481)	Cited by the assessee concerning manner of disclosure; the opinion states the decision holds that no presumption of concealment arises where statement under s.132(4) sets out manner and tax is paid. The provided text does not fully reproduce the decision's rule beyond this description.	Relied on by the assessee to argue immunity; noted by the Tribunal among the authorities considered.
Jt.CIT vs. Bhagwan Dass Garg (95 DTR 45)	The opinion mentions this Tribunal decision for the proposition that mere incorrect claim does not necessarily amount to concealment; the text does not set out the full principle.	Used by the assessee to support that incorrect claim or nondetailed statement need not attract penalty; Tribunal recorded the citation.
ACIT vs. M/s Gebilal Kanhaialal HUF (348 ITR 561)	The opinion indicates the Supreme Court decision held that paying tax and interest on income disclosed after search satisfied immunity requirements; the text gives a brief description.	Cited by the assessee to support that payment of tax/interest on disclosed income satisfies immunity; Tribunal noted the citation among authorities.
CIT vs. Radha Kishan Goel (278 ITR 454)	The text reproduces the key principle from this decision: much importance should not be attached to the exact wording of the manner in which income was derived in a s.132(4) statement; if not specifically asked, the manner can be inferred from facts and circumstances and subsequent statements.	The Tribunal relied on this decision substantively, quoting its reasoning and using it to support the conclusion that non-specification of the manner in the s.132(4) statement does not automatically displace immunity under Explanation 5(2).
CIT vs. Mahendra C. Shah (299 ITR 305)	The opinion reproduces the decision's reasoning that authorized officer recording the statement must explain Explanation 5 fully and that practical difficulties of search environment mean exact formal wording is not to be expected; hence failure to state manner in the precise terms should not defeat immunity.	The Tribunal relied on this decision to support the view that substantial compliance (declaration + tax payment) can afford immunity where the manner was not expressed in exact terms during the search statement.
ITO vs. Shri Sheetal P. Banthia (ITA No.156/PN/2014, order dated 29.04.2015)	The Tribunal decision is described in the opinion as holding that where income declared during search was accepted in assessment and tax paid, penalty was cancelled despite lack of specific statement on manner; the text summarizes the reasoning.	The assessee relied on this decision as an identical factual precedent; the Tribunal considered it in its reasoning and treated it as supportive of cancelling penalty where surrendered income was accepted and tax paid.
New Sorathia Engineering Co. vs. CIT (282 ITR 642)	Listed among authorities relied upon by the assessee; the specific rule from the decision is not detailed in the text.	Cited by the assessee and recorded by the Tribunal among the authorities considered.
Shri Pannalal K. Banthia (ITA No.6145/Mum/2010)	The Tribunal decision (Mumbai Bench) appears in the opinion and is summarized as cancelling penalty where declaration was made, tax paid and the AO had denied immunity only on the ground that manner was not stated; the Mumbai Bench followed Gujarat and Allahabad High Court authorities in cancelling penalty.	The Tribunal expressly followed this Mumbai Bench decision as identical in facts and outcome and relied on it in setting aside the CIT(A) order in the present appeal.

PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order of CIT(A) (Central), Gurgaon, dated 23.07.2013 relating to assessment year 2007-08.

2. The only issue arising from the assessees appeal for our consideration is regarding levy of penalty of Rs.1,43,31,316/- made by the Assessing Officer u/s 271(1)(c) of the I.T. Act which has been upheld by the CIT(A).

3. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of manufacturing of Automobile Parts. A search and seizure operation was conducted at the business premises of M/s Vee Gee ITA No.5050/Del/2013 Industrial Enterprises as well as residential premises of partners on 16.01.2007 during which certain documents were impounded and seized. The assessee firm filed its return of income on 31.10.2007 declaring total income of Rs.6,64,45,650/- which included an amount of Rs.2,47,50,000/- surrendered in statement recorded u/s 132(4) during the search. The Assessing Officer completed the assessment u/s 143(3) on 22.12.2008 determining the total income of Rs.6,46,11,762/- which is less than the returned income.

4. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the I.T. Act on the various additions made which were part of the surrendered amount. Rejecting the various explanations given by the assessee, the Assessing Officer levied penalty of Rs.1,43,31,316/- being 200% of the tax sought to be evaded.

5. Before ld. CIT(A), it was argued that the penalty imposed by the Assessing Officer is not sustainable since the surrendered amount of Rs.2,47,50,000/-, which was made u/s 132(4) and which covers the additions made by the Assessing Officer with reference to which penalty has been imposed cannot be the subject-matter of penalty as it was clearly agreed at the time of surrender u/s 132(4) that no penalty shall be levied. Further, the penalty has been levied on the amount which has been shown in the return of income furnished u/s 139(1) and, therefore, there is no question of any concealment. It was further argued that the Assessing Officer has imposed the penalty by ITA No.5050/Del/2013 relying on Explanation 5A to section 271(1)(c) of the I.T. Act, which in-fact is not applicable as the said Explanation is applicable in respect of search initiated on or after 01.06.2007 whereas the search has taken place in the case of the assessee on 16.01.2007. It was submitted that the case of the assessee is covered under the immunity provided under Explanation 5 to section 271(1)(c) of the I.T. Act. Since the assessee has made the statement during the course of search u/s 132(4) and has declared the said income in the return filed and taxes and interest due have been paid on such income, therefore, the case of the assessee is covered under such immunity. For the above proposition, various decisions were brought to the notice of ld. CIT(A). It was finally argued that levy of penalty at the rate of 200% is on higher side and it should have been at 100% of the tax sought to be evaded. However, it was argued that levy of penalty u/s 271(1)(c) in the instant case is not at all justified.

6. However, ld. CIT(A) was also not satisfied with the explanation given by the assessee. So far as reliance of the Assessing Officer on Explanation 5A to section 271(1)(c) is concerned, the ld. CIT(A) held that it was an inadvertent error on the part of the Assessing Officer. Therefore, the argument of the assessee that Assessing Officer is not justified in invoking the provisions of Explanation 5A to section 271(1)(c) is incorrect. He further held that for getting immunity from Explanation 5 to section 271(1)(c) of the I.T. Act, the assessee has to fulfill all the three conditions, which are as under :- ITA No.5050/Del/2013

(i) the assessee must make a statement under Section 132(4) in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which have not been disclosed in the return of income to be furnished before expiry of time specified in Section 139(1).

(ii) the assessee should specify, in his statement under Section 132(4), the manner in which such income was earned.

(iii) the assessee should pay the tax together with interest, if any, in respect of such undisclosed income.

7. He observed that the assessee has fulfilled the condition no.1 and 3 but has not fulfilled the second condition of the said Explanation, since the assessee has not specified in his statement regarding the manner in which such income was earned, therefore, the assessee has not come out in clean hands by specifying the manner of deriving such income in his statement recorded u/s 132(4) so as to avail of the immunity under the Act. Rejecting the various decisions cited before him and relying on the decision of the Honble Delhi High Court in the case of Shourya Towers Pvt. Ltd. vs. DCIT reported in 255 CTR 225, the ld. CIT(A) upheld the penalty levied by the Assessing Officer u/s 271(1)(c).

8. Aggrieved with such order of ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal :-

1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty of Rs.1,43,31,316/- that too @200% without assuming jurisdiction as per law and the impugned penalty order being illegal and void ab-initio, more so when assessee's case is covered by clause (2) of explanation 5 to section 271(1)(c) of Income Tax Act, 1961.

2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned ITA No.5050/Del/2013 penalty order being contrary to law as the assessment order framed under section 143(3) dated 22-12-2008 was also illegal, beyond jurisdiction and void ab-initio.

3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty u/s 271(1)(c) on the disallowance made in the assessment order u/s 143(3) dated 22-12- 2008 as the same disallowance is also contrary to law and facts.

4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty u/s

271 (1)( c) which is bad in law being beyond jurisdiction and barred by limitation and contrary to the principles of natural justice and has been passed by recording incorrect facts and findings and without giving adequate opportunity to the assessee and the same is not sustainable on various legal and factual grounds.

5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in imposing a penalty of Rs.1,43,31 ,316/- that too without recording mandatory "satisfaction" as per law.

6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in imposing a penalty of Rs.1,43,31,316/- that too placing reliance on explanation 5A to section 271(1)(c), which in fact is not applicable as the said explanation is applicable in respect of search initiated on or after 01-06-2007 whereas in the present case the search has taken place on 16-01-2007.

7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in observing that penalty levied by Ld. AO @200% is fair and as per the average rate.

8. That the assessee craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.

9. Ld. counsel for the assessee referring to page 26 of Paper Book drew the attention of the Bench to the computation of total income which included the amount to Rs.2,47,50,000/- surrendered during the course of search in the statement recorded u/s 132(4).

10. Referring to page 63 of Paper Book, ld. counsel for the assessee drew the attention of the Bench to the details of income declared during the course of search and shown under the head income from other sources in the return of income filed, the details of which are as under :- ITA No.5050/Del/2013

1 Surrender on Sale of Scrap Rs.53,10,000/- + 31,10,000/-

2 Cash Payment to Mr. Pardeep Virmani against purchase of Plot (Unexplained Investment) Rs.20,00,000/-

3 Unexplained Cash Deposit Rs.2,52,648/-

4 Income Surrendered Rs.69,00,000/-

5 Cash seized from Residence of Sh. R.K. Gupta and Sh. Rajesh Gupta Rs.32,50,000/-

6 Cash payment to Bio Made agency Rs.99,000/-

7 Other surrender Rs.38,28,352/- Total 2,47,50,000/-

11. Referring to the copy of acknowledgement of the income-tax return, copy of which is placed at page 25 of the Paper Book, ld. counsel for the assessee drew the attention of the Bench to the taxes paid on the total income of Rs.6,64,45,650/-.

12. Referring to the decision of Honble Gujarat High Court in the case of CIT vs. Bhandari Silk Store reported in 337 ITR 153, he submitted that the Honble High Court in said decision has held that where the return of income filed u/s 153A is accepted by the Assessing Officer, there will be no concealment of income and consequently penalty u/s 271(1)(c) cannot be imposed.

13. Referring to the decision of the Nagpur Bench of the Tribunal in the case of DCIT vs. Purti Sakhar Karkhana Ltd. reported in 153 TTJ 12, he submitted that the Tribunal in the said decision has held that regarding of satisfaction by the Assessing Officer in the assessment order is sine-qua-none for initiating the ITA No.5050/Del/2013 penalty proceedings u/s 271(1)(c). Mere observations that penalty proceedings being initiated separately is not enough.

14. Referring to the decision of the Honble Gujarat High Court in the case of Kirit Dahyabhai Patel vs. ACIT reported in 280 CTR 216, he submitted that the Honble Gujarat High Court in the said decision held that where the assessee had satisfied all the conditions which are required for claiming immunity from payment of penalty u/s 271(1)(c), the Assessing Officer ought to have granted him immunity available u/s 271(1)(c) of the I.T. Act.

15. So far as the manner of disclosure of additional income is concerned, the ld. counsel for the assessee referring to the decision of the Honble Allahabad High Court in the case of CIT vs. Sid Nath Goel reported in 359 ITR 481, he submitted that the Honble High Court in the said decision has held that no presumption of concealment has to be drawn, where in course of search assessee makes statement u/s 132(4) that he acquired any of assets out of his undisclosed income and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income.

16. Referring to the decision of Chandigarh Bench of the Tribunal in the case of Jt.CIT vs. Bhagwan Dass Garg reported in 95 DTR 45, he submitted that the Tribunal in the said decision held that mere making of incorrect claim does not amount to concealment of particulars and does not attract penalty u/s 271(1)(c) of the I.T. Act. He further submitted that the Tribunal in the said decision has ITA No.5050/Del/2013 held that where assessee had surrendered amount during the course of search u/s 132(4) read with clause (2) of Explanation 5 to section 271(1)(c) which was accepted, therefore, penalty was not leviable where all facts and surrender of amount was already within the knowledge of revenue and part of record and it was also specifically disclosed in cash flow and balance sheet filed at assessment stage then it was a case of bona-fide error and not a case of concealment of income.

17. Referring to the decision of Honble Supreme Court in the case of ACIT vs. M/s Gebilal Kanhaialal HUF reported in 348 ITR 561, he submitted that the Honble Supreme Court in the said decision has held that the only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income upto the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under section 132(4). The assessee was entitled to immunity under clause (2) to Explanation 5 to section 271(1)(c) of the I.T. Act.

18. Referring to the decision of the Honble Allahabad High Court in the case of CIT vs. Radha Kishan Goel reported in 278 ITR 454, he submitted that the Honble High Court in the said decision has held that much importance should not be attached to the statement about the manner in which income has been ITA No.5050/Del/2013 derived which can be inferred on the facts and circumstances of the case. In the absence of anything to the contrary; all the conditions of Explanation 5(2) of section 271(1)(c) having been fulfilled by assessee, no penalty u/s 271(1)(c) could be imposed.

19. Referring to the decision of Honble Gujarat High Court in the case of CIT vs. Mahendra C. Shah reported in 299 ITR 305, he submitted that the Honble High Court in the said decision has held that the assessee having declared the value of diamonds in his statement u/s 132(4) and paid taxes thereon before assessment, was entitled to immunity from penalty u/s 271(1)(c) under Explanation 5 thereof even though the statement did not specify the manner in which the income representing value of diamonds was derived. He submitted that the decisions relied on by the ld. CIT(A) are not applicable to the facts of the present case.

20. Referring to the decision of Pune Bench of the Tribunal in the case of ITO vs. Shri Sheetal P. Banthia in ITA No.156/PN/2014 relating to assessment year 2007-08, order dated 29.04.2015, he submitted that on identical facts and circumstances, the Tribunal dismissed the appeal filed by the Revenue wherein the ld. CIT(A) had cancelled the penalty levied by the Assessing Officer. In the said order, the Assessing Officer had levied penalty u/s 271(1)(c) on the ground that assessee had not specified the manner in which such additional income was derived, which was declared in the statement recorded u/s 132(4) of the I.T. Act. ITA No.5050/Del/2013

21. He also relied on the decision of the Honble Gujarat High Court in the case of New Sorathia Engineering Co. vs. CIT reported in 282 ITR 642 and the decision of the Honble Allahabad High Court in the case of CIT vs. Sid Nath Goel reported in 359 ITR 481. So far as the decision relied upon by the ld. CIT(A) is concerned, he submitted that the said decision is not applicable to the facts of the present case and is distinguishable.

22. Ld. DR, on the other hand, heavily relied on the order of the CIT(A). He submitted that since the assessee has not specified the manner in which the income was earned in the statement recorded u/s 132(4), therefore, the assessee is not entitled to immunity as per provisions of Explanation 5 to section 271(1)(c) of the I.T. Act. Accordingly, the order of the ld. CIT(A) be upheld and the ground raised by the assessee should be dismissed.

23. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer as well as ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find that the assessee, in the instant case, is a partnership firm engaged in the business of manufacturing of Automobile Parts. A search took place in the business premises of the assessee firm as well as the residential premises of the partners on 16.01.2007. The due date for filing of return of income for the impugned assessment year not has expired. The assessee filed the return of income on 31.10.2007 declaring total income of Rs.6,64,45,650/- ITA No.5050/Del/2013 which included the amount of Rs.2,47,50,000/- surrendered during the course of search in the statement recorded u/s 132(4) of the I.T. Act. We find the Assessing Officer determined the taxable income at Rs.6,46,11,762/- which is less than the returned income. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the I.T. Act. Rejecting the various explanations given by the assessee the Assessing Officer levied penalty of Rs.1,43,31,316/- being 200% of the tax sought to be evaded which has been upheld by the ld. CIT(A). While confirming the penalty so levied, the ld. CIT(A) observed that the assessee is not entitled to immunity as provided in Explanation 5 of section 271(1)(c) since the assessee had not specified in his statement recorded u/s 132(4) regarding the manner in which such income was earned. He, however, held that the other two conditions of Explanation 5 of section 271(1)(c) are fulfilled by the assessee i.e. the assessee had made the statement u/s 132(4) and surrendered the income and has paid the tax together with interest thereon. It is the submission of the ld. counsel for the assessee that much importance should not be attached to the statement about the manner in which such income has been derived which can be inferred in the facts and circumstances of the case. It is also the submission of ld. counsel for the assessee that once the assessee has surrendered the income in the statement recorded u/s 132(4) under various heads and has paid the due taxes and interest thereon before the assessment, the assessee is entitled to immunity from penalty ITA No.5050/Del/2013 under Explanation 5 of section 271(1)(c) of the I.T. Act even though the statement did not specify the manner in which such income has been earned.

24. We find merit in the above arguments of the ld. counsel of the assessee. We find the Honble Allahabad High Court in the case of Radha Kishan Goel (supra) has observed as under :-

9. Under section 132(4) of the Act, it is the authorised officer, who examines on oath any person, who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing, therefore, it is for the authorised officer to record the statement in his own way. Therefore, it is not expected from the person to state those things, which are not asked by the authorised officer.

10. It is a matter of common knowledge, which cannot be ignored that the search is being conducted with the complete team of the officers consisting of several officers with the police force. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured harassed and put to a mental agony that he loses his normal mental state of mind and at that stage it cannot be expected from a person to pre-empt the statement required to be given in law as a part of his defence.

11. In these circumstances, we are of the view that under section 132(4) of the Act unless the authorised officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5(2) of the Act. We are also of the opinion that in case there is nothing to the contrary in the statement recorded under section 132(4) of the Act, in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources. The object of the provision is achieved by making the statement admitting the non-disclosure of money, bullion, jewellery, etc. Thus, we are of the opinion that much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable.

12. For the reasons stated above, we are of the considered view that there is no error in the order of the Tribunal and the same is upheld. ITA No.5050/Del/2013

25. We find that the Honble Gujarat High Court in the case of Mahendra C. Shah (supra) has observed as under :-

15. In so far 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 incumbent upon the authorized officer to explain the provisions of Explanation 5 in its 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, as noted by the Allahabad High Court in the case of CIT v. Radha Kishan Goel [2005] 278 ITR 454. 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 by exception No. 2 while making statement under section 132(4) of the Act. The view taken by the Tribunal as well as the 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.

16. Hence, the Tribunal was justified in coming to the conclusion that in so far as the value of diamonds was concerned, the assessee having made a declaration under section 132(4) of the Act and paid taxes thereon, had fulfilled all the conditions for availing of the benefit of immunity from levy of penalty as provided under Explanation 5 to section 271(1)(c) of the Act. In the absence of any infirmity in the order of the Tribunal on this count the question referred is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

26. We find that the Pune Bench of the Tribunal in the case of Shri Sheetal P. Banthia (supra) while adjudicating an identical issue has observed as under :-

11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. In this case a search and seizure action u/s.132 of the I.T. Act was conducted at the residential-cum-business premises of the assessee on 04-10-2006. During the course of search the statement of the assessee was recorded u/s.132(4) wherein he has offered an amount of Rs.13,37,100/- being excess stock of silver articles found during the course of search and seizure action and further admitted undisclosed additional income of Rs.5 lakhs on account of construction of a house. The assessee filed his return of income on 31-08-2007 declaring total income of Rs.21,2,670/- which ITA No.5050/Del/2013 included the income declared during the search and which was accepted by the Assessing Officer in the order passed u/s.143(3) r.w.s. 153B(b) of the I.T. Act accepting the returned income. The Assessing Officer levied penalty u/s.271(1)(c) of the I.T. Act on the ground that although the time for filing of the return u/s.139(1) was available but apparently the intention of the assessee was not to disclose unaccounted income voluntarily. Had there been no search, the assessee would not have disclosed such additional income and assessee has not explained the manner in which such income was derived in the statement recorded u/s.132(4). The Assessing Officer accordingly levied penalty of Rs.6,12,700/- u/s.271(1)(c) of the I.T. Act. In appeal the Ld.CIT(A) cancelled such penalty on the ground that assessee is eligible for immunity contained in provisions of Explanation 5 to section 271(1)(c) of the I.T. Act. While doing so, he also relied on the decisions of the Coordinate Benches of the Tribunal in other related cases of the same group.

12. We find an identical issue had come up before the Mumbai Bench of the Tribunal in the case of Shri Pannalal K. Banthia, father of the assessee wherein penalty levied by the Assessing Officer u/s.271(1)(c) was cancelled by the CIT(A). On further appeal by the Revenue the Tribunal vide ITA No.6145/Mum/2010 order dated 25-07-2012 for A.Y. 2009-10 upheld the order of the CIT(A) and dismiss the appeal filed by the Revenue by observing as under :

7. We have considered the rival submissions and also perused the relevant material on record. It is observed that in his statement recorded during the course of search u/s.132(4), the undisclosed income found as a result of search was surrendered by the assessee and after payment of tax in respect of such income, the same was duly declared by the assessee in the return of income for the year under consideration. In the assessment completed u/s.143(3) r.w.s. 153B(b) of the Act, the income so declared in the return of income by the assessee was accepted by the AO. Subsequently, the AO however initiated penalty proceedings u/s.271(1)(c) and also imposed penalty under the said provision denying the immunity claimed by the assessee as per the relevant provisions contained in Explanation 5 on the ground that in his statement recorded u/s.132(4), the manner in which undisclosed income had been earned was not specified by the assessee as required by the provisions of Explanation 5. It is observed that a similar issue had come up for consideration before the Hon'ble Gujarat High Court in the case of CIT vs. Mahendra C. Shah (supra) wherein penalty u/s.271(1)(c) was levied by the AO by denying the benefit of Explanation 5 for the reason that the assessee had not explained in the statement recorded u/s.132(4), the manner in which undisclosed income was derived and the penalty imposed by the AO was held to be unsustainable by the Hon'ble Gujarat High court allowing the benefit of immunity to the assessee as provided under Explanation 5 to sec.271(1)(c) by observing as under: "Insofar as the alleged failure on the part of the assessee to specify in the in the statement u/s 132(4) 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 5 ITA 6145/Mum/2010 Shri Pannalal K. Banthia is incumbent upon the authorized officer to explain the provisions of Expl. 5 in entirety to the assessee concerned ITA No.5050/Del/2013 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 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 by Exception No. 2 while making statement under s. 132(4). The view taken by the Tribunal to the effect that even if the statement does no specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would substantial compliance not warranting any further denial of the benefit under Exception No. 2 in Expl. 5 is commendable. Hence, the Tribunal was justified in coming to the conclusion that insofar as the value of diamonds was concerned, the assessee having made a declaration under s. 132(4) and paid taxes thereon, had fulfilled all the conditions for availing the benefit of immunity from levy of penalty as provided under ExpI. 5 to s. 271(1)(c)."

8. To the similar effect is the decision of Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel (supra) wherein it was held that much importance should not be attached to the statement about the manner in which undisclosed income has been derived and mere non-statement of the manner in which such income was derived would not make explanation 5(2) to sec.271(1)(c) of the Act inapplicable. Keeping in view the decision of Hon'ble Gujarat High Court in the case of Mahendra C. Shah (supra) as well as that of Allahabad High Court in the case of Radha Kishan Goel (supra) and 6 ITA 6145/Mum/2010 Shri Pannalal K. Banthia having regard to the facts of the case, we are of the view that the penalty imposed by the AO u/s.271(1)(c) was rightly cancelled by the Ld. CIT (A) allowing the benefit of immunity contained in the provisions of Explanation 5 to sec.271(1)(c). In that view of the matter, we uphold the impugned order of the Ld. CIT (A) cancelling the penalty levied by the AO and dismiss this appeal filed by the revenue.

9. In the result, appeal of the revenue is dismissed.

13. Since the facts of the instant case are identical to the facts of the case decided by the Mumbai Bench of the Tribunal, therefore, respectfully following the decision of the Mumbai Bench of the Tribunal and in view of the detailed discussion by the Ld.CIT(A) we find no infirmity in the order of the CIT(A) cancelling the penalty levied u/s.271(1)(c) of the I.T. Act. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. ITA No.5050/Del/2013

27. Since in the instant case, the assessee had paid the tax and interest on the income surrendered during the course of search in the statement recorded u/s 132(4) and since no specific question was asked by the search party regarding the manner in which such income has been derived, therefore, following the decisions cited (supra) we are of the considered opinion that this is not a fit case for levy of penalty u/s 271(1)(c) as the assessee is entitled to immunity as per provision of Explanation 5 to section 271(1)(c) of the I.T. Act. We, therefore, set-aside the order of the ld. CIT(A) and direct the Assessing Officer to cancel the penalty. The grounds raised by the assessee are accordingly allowed.

28. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 26th day of May, 2017. Sd/- Sd/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26-05-2017. Sujeet Copy of order to: -

1) The Appellant

2) The Respondent

3) The CIT

4) The CIT(A)

5) The DR, I.T.A.T., New Delhi By Order //True Copy// Assistant Registrar ITAT, New Delhi

ITA 5050/DEL/2013

M/s Vee Gee Industrial Enterprises, Faridabad v. ACIT, Faridabad

Summary — ITAT Decision (Assessee Appeal) — Penalty u/s 271(1)(c) (Assessment Year 2007-08)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's (Assessee's) Arguments

Respondent's (Revenue / Ld. DR) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Disposition and Administrative Details

M/s Vee Gee Industrial Enterprises, Faridabad v. ACIT, Faridabad

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