Whether when Revenue has taken a view that surrendered income belongs to individual members and not to AOP, can a different view be taken in case of AOP by taking same amount again - NO: ITAT

THE issues before the Bench are - Whether when Department has taken a view that surrendered income belongs to the members individually and not to AOP, can a different view be taken in the case of AOP by taking the same amount again on the ground that the assessee himself had originally filed the return in the hands of AOP and Whether penalty u/s 271(1)(C) is warranted, when the assessee has disclosed on affidavit the undisclosed income and the manner it was earned during a search operation u/s 132. And the verdict goes in favour of the assessee.

Facts of the case

A search and seizure operation was carried out on the Group of Gupta & Company Pvt. Ltd. at the various residential and business premises on 10.02.2009. The statement was recorded u/s 132(4) of Shri Virendara Kumar Gupta, one of the Directors of Gupta & Company Pvt. Ltd. He has disclosed Rs.20 crores in the statemen, details of which have been given in answer to the

queries sought by the Department. The cheques were also issued by him for the tax liability which has also been recorded in answer to questions as a part of the statement. An affidavit was filed by one of the Group persons, Shri Sharad Jain, wherein the disclosure of Rs.20 crores was substantiated. Rs.7.5 crores was made towards the discrepancy in the inventory prepared on 10.02.2009 at the premises of Gupta & Company Pvt. Ltd. and Rs.12.50 crores was for a joint enterprise of Shri Virendara Kumar Gupta, Shri Sudhir Jain and Shri Sharad Jain compendiously as Sugandh Sansar. The AO did not accept the AOP concept and made the assessment of Rs.12.50 crores in the individual hand of these three members of AOP. There was no further addition to the income declared of Rs.12.5 crores. The declaration of Rs.12.5 crores in the name of Sugandh Sansar was trifurcated in three names. The Commissioner of Income-tax on the application made by AOP of Sugandh Sansar has directed to adjust the taxes paid in the hands of AOP in the hands of individuals also were Members of AOP. In this order, it has also been recorded that there are no words in the Income-tax Act, which empower the Income-tax Officer or give him an option to tax either AOP or its Members individually.

The AO also initiated penalty proceedings. On appeal, while the CIT(A) agreed that the income should be taxed only in the hands of the individuals, but sustained the penalty proceedings.

Aggrieved, the assessee filed this appeal before the Tribunal.

Having heard the parties, the Tribunal held that,

+ in the present case, the Department has taken a view that surrendered amount of Rs.12.50 crores belongs to the members individually and not to AOP, hence no different view can be taken in the case of AOP by taking the same amount again on the ground that the assessee himself had originally filed the return in the hands of AOP. The appeal of individual cases is pending before the CIT (A) and these assessees have given an undertaking that in case the relief is allowed to the AOP “Sugandh Sansar”, all the members will withdraw the appeals from CIT (A);

+ thus, the CIT has considered the issue and has finally agreed that the income should be taxed in the hands of the individuals. The taxes had been paid along with the interest in all these individual hands. Since a statement was given during the course of search u/s 132 of Income-tax Act, 1961 admitting the undisclosed income of Rs.20 crores of the Group, the quantum of disclosure of income was affirmed by an affidavit by other person of the Group. The manner was also stated in the statement by which such income was earned. In our considered view, the Group has also substantiated the manner in which this undisclosed income was derived. In the statement recorded u/s 132(4) of the Act and in an affidavit dated 15.05.2009, the disclosure was maintained. The assessees of the Group have also paid the taxes applicable along with interest. In such a situation, the CIT (A) was not justified in sustaining the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer. Considering all these facts and circumstances, we set aside the orders of the authorities below and direct to delete the penalty u/s 271AAA.