2023 (2) TMI 1023 - HC - Income Tax

Penalty u/s 271 AAB or u/s 271 (1)(c) - concealment of the particulars of income and/or inaccurate particulars of income - Assessee revised its return of income from loss to income after issuance of notice u/s 143 (2) - search and seizure action u/s132 (1) was carried out at the business and residential premises of Jagdamba Group of cases - The appellant is one of the members of the said group - HELD THAT - From the plain reading of Section 271AAB, it is clear that where a search u/s.132(1) was initiated on or after the 1st day of July, 2012, penalty is leviable on the undisclosed income at the rate and conditions specified under section 271AAB(1) for the specified previous year. Further, the section also defines the term undisclosed income and specified previous year . Moreover, the section starts with non abstante clause and excludes the applicability of section 271(1)(c), if the undisclosed income pertains to the specified previous year. Viewed from the above, the facts of the case of the Assessee is squarely covered by section 271AAB as the search was conducted on 03.09.2014 i.e., after 01/07/2012. On the date of search the due date to furnish the return for A.Y.2014-15 has not expired and the respondent has furnished the return on 30.11.2014 - respondent has not admitted any income in a statement recorded under section 132(4) nor paid any taxes on the admitted income - case of the respondent is not governed by Section 271AAB (1)(a) and Section 271AAB(1)(b). The respondent s case clearly falls under section 271AAB(1)(c) where the minimum penalty prescribed is 30% and maximum penalty is 90% of undisclosed income. Thus, as per clause (2) of section 271AAB, no penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) of Sub Section (1A) of section 271AAB. Accordingly, the AO should have initiated and levied penalty under section 271AAB(1)(c) instead of section 271(1)(c). We do not find any infirmity in the order as stated hereinabove. At the cost of repetition, a case where a search has been initiated under section 132 (1) of the Act on or after 1st day of July, 2012, the penalty, if any, should be levied under section 271 AAB and not under section 271 (1)(c) of the Act as the case falls under specified previous year. The argument of learned counsel for the revenue does not stand in the eye of law because the penalty proceeding was initiated pursuant to a search conducted on 03.09.2014 i.e., after the amendment made in the Act; as such whether incriminating document was found or not is immaterial because the law mandates that the penalty if any should have been taken under section 271 AAB of the Act where search has been initiated on or after first day of July 2012. Decided against revenue.

Summary

Issues Involved:
1. Applicability of Section 271(1)(c) versus Section 271AAB for penalty imposition.
2. Whether the ITAT's order is perverse and deserves to be set aside.

Issue-wise Detailed Analysis:

1. Applicability of Section 271(1)(c) versus Section 271AAB:

The case revolves around the imposition of penalty following a search and seizure operation under Section 132 of the Income Tax Act, 1961. The search was conducted on 03.09.2014 at the premises of a business group, and the respondent is a member of this group. No incriminating material was found during the search. The respondent filed multiple returns of income, initially showing a loss and later revising it to show an income after being confronted with audited financial statements. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for concealing particulars of income and furnishing inaccurate particulars, eventually imposing a penalty of Rs. 1,69,01,620/-.

The respondent appealed, and the Commissioner of Income Tax (Appeals) [CIT(A)] allowed the appeal, stating that the penalty should have been imposed under Section 271AAB, which specifically deals with cases where searches are initiated post 01.07.2012. The Income Tax Appellate Tribunal (ITAT) upheld this decision, leading to the current appeal.

The Court noted that Section 271AAB, introduced w.e.f. 01.07.2012, prescribes penalties for 'undisclosed income' found during searches. The section defines 'undisclosed income' and 'specified previous year' and starts with a non-obstante clause, excluding the applicability of Section 271(1)(c) if the undisclosed income pertains to the specified previous year. Since the search in this case was conducted on 03.09.2014, the penalty should be levied under Section 271AAB, not Section 271(1)(c). The Court emphasized that whether incriminating documents were found is immaterial because the law mandates penalty under Section 271AAB for searches initiated post 01.07.2012.

2. Whether the ITAT's order is perverse and deserves to be set aside:

The Court examined the orders passed by the CIT(A) and ITAT and found no infirmity in them. The CIT(A) had deliberated the issue of penalty initiation under Section 271AAB in detail, which was in accordance with the law. The ITAT had sustained the CIT(A)'s order after due examination. The Court concluded that the penalty should be levied under Section 271AAB, not Section 271(1)(c), as the case falls under the specified previous year.

Conclusion:

The Court decided both questions of law against the revenue, dismissing the appeal as devoid of merit. The penalty, if any, should be levied under Section 271AAB for searches initiated on or after 01.07.2012, irrespective of whether incriminating documents were found. The orders of the CIT(A) and ITAT were upheld as being in accordance with the law.