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TMI Blog2013 (8) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer that in a situation in which due tax and interest has not been paid in full before filing of the relevant income tax return, the assessee will not be eligible for immunity under section 271 AAA(2). Relying on the judgment in the case of CIT Vs Mahendra C Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT], wherein it was held that Penalty provisions under section 271(1)(c) wherein Assessing Officer has to record the satisfaction in the course of assessment proceedings itself – something which is not a condition precedent for imposition of penalty under section 271 AAA - Outer limit has to be the point of time when the assessment proceedings are undertaken by the Assessing Officer because the opening portion of section 271(1) of the Act requires the Assessing Officer to record satisfaction in the course of such proceedings - Section 271 AAA, as the statute unambiguously provides, does not require any subjective satisfaction of the Asessing Officer to be arrived at during the assessment roceedings, and, therefore, the outer limit of payment before the conclusion of assessment proceedings will not come into play - On the facts of the present case wherein entire tax and inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.10 crores during the course of search u/s 132(4) and the said amount had been disclosed in the return of income filed on 29.02.2009 u/s 139(1), however, the assessee had not paid the due tax on the undisclosed income. The assessee submitted before the A.O. that the alleged default in payment of due taxes on the amount disclosed u/s 132(4) had occurred because of non acceptance of request of the assessee made before the AO to adjust the cash seized to the tune of Rs.89,30,000/- against the advance tax liability. It was submitted by the assessee that because of non adjustment of seized cash, interest u/s 234B/234C was levied on the assessee which led to short payment of due taxes and in turn to the alleged non compliance with the stipulated requirements as contained in section 132(4) to avail of immunity from penalty proceedings. The Assessing Officer however referred to the provisions of section 132B of the Act to hold that seized cash could not be adjusted against advance tax liability as the same was not in the nature of existing liability . The A.O. therefore proceeded to impose penalty u/s 271AAA on the ground that section 271AAA(2)(iii) reads as under: Nothing contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said amount was lying in the P.D. account of the CIT(Central), Ludhiana and this amount lying in P.D. Account can not be treated as a payment against either self assessment tax advance tax.. viii) While making assessment u/s 143(3), the A.O. observed Tax due on returned income has not been considered as credited into Govt. account, though it was lying in the P.D. account. In this way tax has not been paid/credited on the returned income disclosed u/s 132(4) of the Act are initiated. Copy of the assessment order is enclosed. ix) The detailed reply to penalty proceedings was filed by letter dated 19.01.2011. However, the A.O. imposed penalty of Rs.1,00,000 @ 10% of the undisclosed income of Rs.10,00,00,000/- surrendered by the assessee u/s 132(4) holding that the stand of the assessee is not acceptable as the case of the assessee is weak on merits as interest u/s 234B has been charged. x) The seized amount was liable to be adjusted against the advance tax payable by the assessee. The case is squarely covered up by the order of the Jurisdictional High Court in the case of CIT vs. Ashok Kumar reported at 334 ITR 355 (P H). Even the facts are identical. xi) Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 [but before the Ist day of July, 2012] the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. 5. A specific reference was made to section 271AAA(2)(iii) where the assessee for getting immunity from levy of penalty has to pay the tax together with interest, if any, in respect of undisclosed income. He argued that paying of the tax together with interest is with reference to filing of return of income i.e. the same has to be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance tax under the provision of section 210 from the Ist April next following such financial year to the date of determination of total income is payable. The AO observed in the penalty order that as a matter of fact interest under section 234B has been charged because tax paid is less than 90% of the tax on assessed income and accordingly referring to the provisions of section 271AAA(2)(iii), the A.O. levied the penalty. On filing letter dated 03.03.2009 for requesting to adjust seized amount of Rs.89,30,000/- against total demand of Rs.3,45,69,000/-, the same was not adjusted as mentioned hereinabove. However, the Ld. CIT(A) with regard to application u/s 154 for adjustment of Rs.89,30,000/- after considering the remand report and counter comments of the ld. counsel for the assessee vide para 5 of his order held that the A.O s action in rejecting application u/s 154 was erroneous and therefore, interest so charged under section 234B was directed to be deleted. The matter traveled before the ITAT, Amritsar Bench and the ITAT vide order dated 6.10.2012 in ITA No.197(Asr)/2012 for the assessment year 2009-10 vide para 7 of his order dismissed the appeal of the Revenue. 8. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re matter of present dispute. Therefore, on this account as well, intention of the law was clear that there was no time limit prescribed in section 271AAA of the Act for the payment of interest together with interest. 10. Lastly, the ld. counsel for the assessee referred to the decision in the case of CIT vs. Mridula, Prop. Dhruv Fabrics reported in 335 ITR 266 (P H) which is in different context and not on section 271AAA, cannot be made applicable in the present facts and circumstances of the case. The Ld. counsel accordingly prayed to confirm the order of the ld. CIT(A) and dismiss the appeal of the Revenue. 11. We have heard the rival contentions and perused the facts of the case. At the outset, we are convinced with the arguments made by the ld. counsel for the assessee, Mr. Salil Kapoor, Advocate that the AO has levied penalty u/s 271AAA of the Act keeping in view the provision of section 234B. Section 234C was never the basis of the A.O. while levying penalty and it is for the first time that the Ld. DR has referred to section 234C of the Act. The seized amount of Rs.89,30,000/- was not adjusted as an advance tax by the A.O. which matter was taken to the A.O. for rectific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) on or before the specified date- A) pays the tax, together with interest, if any, in respect of the undisclosed income; and B) furnishes such undisclosed income therein. b) a sum computed at the rate of twenty percent of the undisclosed income of the specified previous year, if such assessee- i) in the course of the search, in a statement under subsection (4) of section 132, does not admit the undisclosed income and ii) on or before the specified date- A) declares such income in the return of income furnished for the specified previous year; and B) pays the tax, together with interest, if any, in respect of the undisclosed income; c) a sum which shall not be less than thirty percent but which shall not exceed ninety percent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clause (a) and (b). 13. Therefore, we are convinced with the arguments made by the Ld. counsel that the law had no intention in section 271AAA for payment of tax together with interest to pay the same within some time limit in particular before due date of filing of return. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B and 234C. There was also a demand for 234B and 234C liabilities and there is no dispute that the assessee later on paid over the shortfall, within permissible time, upon receiving the notice of demand under section 156. It was thus argued that the tax, together with applicable interest, was duly paid by the assessee, and, accordingly, the condition regard payment of tax and interest was duly complied with. The Assessing Officer was, therefore, urged to drop the penalty proceedings. However, the Assessing Officer was not impressed with this submission.By way of two separate, but materially similar orders, the Assessing Officer rejected the submissions of the assessee and proceeded to impose the penalty by observing as follows: The above submission has been considered and the assessment record has been perused. Since the search was conducted on 30/8/2007 and the disclosure was made in the statement recorded u/s 132(4) of the Act for the specified previous year, the penalty provisions of Section 271AAA was squarely applicable in this case. The sub section (2) of Section 271AAA provides that: (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been initiated under section 132 on or after the 1st day of June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) 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). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation : For the purposes of this section,- (a) undisclosed income means- (i) any income of the specified previous year represented, either whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedent for availing the immunity under section 271AAA(2), there is no time limit set out for such payments by the assessee. Once a time limit for payment of tax and interest has not been set out by the statute, it cannot indeed be open to the Assessing Officer to read such a time limit into the scheme of the Section or to infer one. There is thus no legally sustainable basis for the stand of the Assessing Officer that in a situation in which due tax and interest has not been paid in full before filing of the relevant income tax return, the assessee will not be eligible for immunity under section 271 AAA(2). 8. While dealing with Explanation 5 to Section 271(1)(c), which is broadly on the same lines, Hon ble Gujarat High Court, in the case of CIT Vs Mahendra C Shah (299 ITR 305) has observed that, there is no prescription about the point of time when the tax had to be paid qua the amount of income declared in the statement under section 132(4) of the Act . We must, however, point out that even after making these specific observations Their Lordships had to treat the conclusion of assessment proceedings as outer limit for making payment of tax and interest but that was becau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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