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2019 (12) TMI 38 - AT - Income TaxLevy of penalty under section 271AAB - no search conducted on the assessee u/s 132 - HELD THAT - There is no need for levy of penalty u/s 271AAB of the Act that search warrant should be in the name of the assessee. CIT(A) admitted that there is no search warrant in the name of the assessee or no search is conducted in the case of assessee but the requirement for levy of penalty under section 271AAB of the Act is fulfilled for the reason that a statement under section 132(4) of the Act was recorded admitting undisclosed income. We noted that in all the case laws relied, the co-ordinate Benches have taken a consistent view holding that the penalty under section 271AAB of the Act cannot be levied where search is not conducted under section 132 of the Act on the assessee. Hence, respectfully following the same we delete the penalty and allow the appeal of the assessee on this jurisdictional issue.
Issues Involved:
1. Applicability of Section 271AAB of the Income-tax Act, 1961. 2. Validity of penalty levied under Section 271AAB without a search warrant under Section 132. 3. Mechanical issuance of notice under Section 274 without specifying the charge. 4. Requirement of recording satisfaction by the Assessing Officer (AO) for initiating penalty under Section 271AAB. 5. Consideration of the bonafide explanation and debate on the circumstances for levying penalty under Section 271AAB. Detailed Analysis: 1. Applicability of Section 271AAB of the Income-tax Act, 1961: The primary issue in this appeal was whether the provisions of Section 271AAB were applicable to the assessee. The learned Counsel for the assessee argued that Section 271AAB was not applicable as no search under Section 132 was initiated against the assessee. The search was conducted on Shri Chandrakant Gavade, and not on the assessee. The Tribunal noted that the penalty under Section 271AAB can only be levied if a search is initiated under Section 132, which was not the case here. Consequently, the penalty levied was deemed "bad and illegal." 2. Validity of Penalty Levied under Section 271AAB without a Search Warrant under Section 132: The Tribunal emphasized that for penalty under Section 271AAB to be valid, a search must be initiated under Section 132 against the assessee. In this case, the search was conducted on a third party (Shri Chandrakant Gavade), and no search warrant was issued against the assessee. The Tribunal referenced several cases, including "DCIT vs. Cargo Solutions Pvt. Ltd." and "DCIT vs. Volga Dresses," where it was held that penalty under Section 271AAB cannot be levied if no search under Section 132 was conducted on the assessee. 3. Mechanical Issuance of Notice under Section 274 without Specifying the Charge: The assessee contended that the notice under Section 274 was issued in a mechanical manner without framing a specific charge of the undisclosed income. The Tribunal did not delve deeply into this issue as the primary jurisdictional issue was decided in favor of the assessee, rendering other grounds moot. 4. Requirement of Recording Satisfaction by the AO for Initiating Penalty under Section 271AAB: The assessee argued that the AO did not record satisfaction while initiating the penalty under Section 271AAB. The Tribunal noted that since the primary condition for levying penalty under Section 271AAB was not met (i.e., no search under Section 132), the question of recording satisfaction did not arise. 5. Consideration of the Bonafide Explanation and Debate on the Circumstances for Levying Penalty under Section 271AAB: The CIT(A) had dismissed the assessee's explanation, stating that there was no need for a search warrant in the name of the assessee for levying penalty under Section 271AAB. However, the Tribunal disagreed, stating that the penalty provisions under Section 271AAB explicitly require a search under Section 132. Since this condition was not fulfilled, the penalty could not be sustained. Conclusion: The Tribunal allowed the appeal, deleting the penalty levied under Section 271AAB on the grounds that no search under Section 132 was conducted against the assessee. The judgment emphasized that the primary condition for levying penalty under Section 271AAB is a search under Section 132, which was not met in this case. Therefore, the penalty was deemed invalid. Other grounds on merits were not adjudicated as the jurisdictional issue was decided in favor of the assessee.
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