9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (4) TMI 163 - AT - Income TaxPenalty u/s 271AAB - additional income duly offered by the appellant on the basis of seized papers found during search while filing the return of income - whether penalty is discretionary and not mandatory? - HELD THAT - From perusal of the record, we noticed that a search was carried out on 04.09.2013 on the assessee and others being members of the Okay Plus- JKD group. During the course of search various books of accounts, files, loose papers and documents of the group were found and seized. One document / diary reflecting advances given totaling to ₹ 12.50 crores was found containing various entries of bank deposits and also advances given by assessee to certain individuals towards the purchases of land. These amounts of advances were explained in the statements u/s 132(4) of the Act as earned out of land deal and this income was over and above the regular salary income and was included in the total income shown by assessee in the return of income filed. The assessee is having regular sources of income from salary and during the year assessee did some stray activity of sale of land. Since it was not a regular course of the business of the assessee, he was not required to maintain books of accounts. The profit earned out of sale of land was given as advances to various persons which were recorded in the diary which has been placed as found during the course of search. On being asked during the course of search about this diary, the assessee stated the fact that it contains advances given to various persons totaling to ₹ 12.50 crore. This diary also contained certain other notings of money which was duly found recorded in the books of accounts of group companies and since the assessee was not having any business income and does not require to maintain regular books of account thus, the entry of advances were recorded in this diary maintained by assessee. As decided in MANISH AGARWALA 2018 (2) TMI 972 - ITAT KOLKATA penalty u/s 271AAB is not mandatory but discretionary and therefore, the entire set of facts and circumstances of the case have to be examined carefully and penalty can be levied by the AO only after satisfying itself about the existence of circumstances warranting levy of penalty. The penalty cannot be imposed as a matter of routine and should be levied only if the circumstances of a particular case so required. In the instant case also, income under question was entered in the other document maintained in normal course and therefore, such income will not fall within the meaning of undisclosed income as defined in section 271AAB . With regard to the observation of the Ld. CIT(A) that the penalty u/s 271AAB is mandatory, we observe that the word used in the section 271AAB is may and not shall . The word 'May' indicates discretion of the authority either to levy or not to levy a penalty. In other words the imposition of penalty is not mandatory. Ld. CIT(A) referred to the explanatory notes clause 96 which explains the intention for introduction of particular amendment however the same cannot replace the provision of Act where the word may is used and not shall . Hence, the observation of the Ld. CIT(A) that the penalty u/s 271AAB is mandatory is patently wrong and deserves to be ignored and excluded being made without properly appreciating the provision and language of the Act which is very much clear and inserted in the statute after long discussions before both the houses of parliament. The language of section 271AAB is similar to that of section 158BFA(2). Section 158BFA(2) of the Act provides that the assessing officer May direct that a person shall pay by way of penalty . With reference to this section various courts including the Hon ble Rajasthan High Court have held that penalty under this section is discretionary and not mandatory. The assessee was required to show his true and correct income which was stated by him in his statements recorded u/s 132(4) of the Act, therefore, it was necessary for him to refer to his own statements. However, according to the assessee, when the copies of such statements were not provided for a long period and considering that the heavy interest u/s 234 was running and being mandatory could not be escaped, therefore the assessee was left with no option but to file the return of income for the year under appeal without referring to the statements. In these circumstances, the assessee did not have any option to keep the return pending anymore and wait for the department to provide copy of statements. Had the assessee not done so, the time limit prescribed u/s 139(4) would also have expired. The assessee in all fairness, only wanted to make sure that each and every income admitted by him in the statements gets included in the return of income and therefore, a reference to the statements was necessary. Thus not filing of return within stipulated time was beyond the control of assessee, for which assessee could not be penalized as same constituted reasonable cause within the meaning of section 273B of the Act. Since due taxes have already been paid by assessee within the stipulated time thus delay in filing the return for the reasons beyond the control of the assessee constitute reasonable cause as has been held in the case of DCIT Patiala Vs. Hari Singh 2017 (9) TMI 1827 - ITAT CHANDIGARH . AO while levying the penalty u/s 271AAB had not doubted the mode and manner of earning such income which was duly explained stand substantiated by the assessee in the return itself where it was stated that advances of ₹ 12.50 crores were made out of the income from land dealing. All these facts are undisputed and nowhere controverted by the department. However, the only dispute raised by the department is with respect to the filing of return of income after the expiry of specified time u/s 139(1) of the Act. In this regard we are of the opinion that the assessee was prevented by sufficient causes , beyond the control of assessee, due to which he could not file the return within the stipulated time period and this constituted a reasonable cause within the meaning of section 273B - thus we direct to delete the penalty levied u/s 271AAB.
Issues Involved:
1. Legality of the penalty imposed under Section 271AAB. 2. Whether the additional income declared by the assessee qualifies as "undisclosed income" under Section 271AAB. 3. Whether the penalty under Section 271AAB is mandatory or discretionary. 4. The impact of procedural lapses, such as non-provision of statements recorded under Section 132(4), on the penalty proceedings. Issue-wise Detailed Analysis: 1. Legality of the Penalty Imposed under Section 271AAB: The assessee challenged the penalty of ?3,75,00,000/- imposed under Section 271AAB, arguing that it was arbitrarily confirmed by the CIT(A). The assessee contended that the penalty was wrongly imposed as the additional income was disclosed in the statements under Section 132(4) and the due tax was paid. The Tribunal found that the penalty notice did not specify under which limb of Section 271AAB the penalty was levied, making the notice void ab initio. This procedural lapse was acknowledged, but the assessee later chose not to press this additional ground, leading to its dismissal. 2. Whether the Additional Income Declared by the Assessee Qualifies as "Undisclosed Income" under Section 271AAB: The Tribunal examined whether the additional income of ?12,50,00,000/- declared by the assessee qualifies as "undisclosed income." The assessee argued that the income was recorded in a diary found during the search, which was maintained in the regular course of business. The Tribunal noted that the income was not recorded in the regular books of accounts but was documented in the diary, which also contained other entries recorded in the group companies' books. Since the assessee was not required to maintain books of accounts for the stray land sale activity, the Tribunal concluded that the income recorded in the diary did not qualify as "undisclosed income" under Section 271AAB. 3. Whether the Penalty under Section 271AAB is Mandatory or Discretionary: The Tribunal deliberated on whether the penalty under Section 271AAB is mandatory or discretionary. It was observed that the word "may" in Section 271AAB indicates that the imposition of penalty is discretionary and not mandatory. The Tribunal cited various judicial precedents, including decisions from the ITAT Kolkata Bench and the Hon'ble Rajasthan High Court, which supported the view that the penalty under Section 271AAB is discretionary. The Tribunal emphasized that the assessing officer must exercise discretion judiciously, considering the nature and extent of the breach and other relevant circumstances. 4. The Impact of Procedural Lapses on the Penalty Proceedings: The assessee argued that the delay in filing the return of income was due to the non-provision of statements recorded under Section 132(4) during the search. The Tribunal acknowledged that the assessee made repeated requests for the statements, which were not provided, leading to the delayed filing of the return. The Tribunal found that the delay was beyond the control of the assessee and constituted a "reasonable cause" under Section 273B. Consequently, the Tribunal held that penalizing the assessee for the delay was unjust and unwarranted. Conclusion: The Tribunal concluded that the penalty imposed under Section 271AAB was not justified as the additional income declared did not qualify as "undisclosed income," and the imposition of the penalty was discretionary, not mandatory. Furthermore, the procedural lapses and the reasonable cause for the delay in filing the return warranted the deletion of the penalty. The appeal was partly allowed, and the penalty under Section 271AAB was directed to be deleted.
|
