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TMI Blog2015 (5) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... for levying the penalty in search cases the Finance Act, 2007 inserted section 271AAA of the Act w.e.f 01.04.2007 which clearly states that no penalty under the provisions of clause (c) of Sub-section (1) of section 271 t shall be imposed upon the assessee in respect of the undisclosed income referred to in Sub-section (1) i.e. the undisclosed income found after the search, the word “shall” used in Sub-section (3) to section 271AAA makes it mandatory, therefore, the penalty u/s 271(1)(c) of the Act was not leviable in the present case. Therefore, it can be said that the AO wrongly invoked the provisions of section 271(1)(c) of the Act and levied the penalty under said section. In the present case, since the search took place on 04.09.2008 i.e. after first day of June 2007, therefore, penalty if any was leviable that was to be levied u/s 271AAA of the Act but not u/s 271(1)(c) of the Act. Thus penalty levied by the AO u/s 271(1)(c) of the Act was not justified and the ld. CIT(A) wrongly upheld the penalty levied by the AO - Decided in favour of assesse. - ITA No. 1324/Del/2013, ITA No. 1325/Del/2013, ITA No. 1326/Del/2013 , ITA No. 1327/Del/2013 , ITA No. 1328/Del/2013 - - - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduced during the year represented the assessee s income and there was conscious concealment on the part of the assessee. The AO also noted that as the assessee had not preferred appeal against the addition and having paid all due taxes, it was evident that the onus cast upon the assessee remained un-discharged. Accordingly, penalty u/s 271(1)(c) of the act was levied for a sum of ₹ 22,96,875/-. 4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that it had voluntarily surrendered ₹ 62,50,000/- on account of share capital which was accepted by the AO while passing the order u/s 153A(1)(b) of the Act and that during the assessment as well as the penalty proceedings all relevant evidences/explanation were submitted including the identity proof, PAN, copy of income tax return, MOA, COI form no. 18 32 etc. It was further submitted that to prove the creditworthiness, the assessee submitted duly sworn and notarized affidavit from the creditor deposing on oath all those facts as stated in the confirmation. It was further stated that neither the transactions were in cash nor did the assessee deposited cash in its bank account for the equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opies of bank accounts were furnished. These affidavits were notarized. There was no ground for disbelieving the contents of the affidavits. v) Subscribers were companies incorporated with the Registrar of Companies. Proper inquiries would have revealed the true facts of the case. The appellant cannot be faulted if there was no limit to rebut. vi) The shares have been allotted to the shareholders and return of allotment has been submitted to the Registrar of Companies. vii) The existence of these companies i.e. deposits of shares application money has also been verified from the website of department of companies affairs. The existence of the shareholders therefore cannot be doubted. In the assessment order, AO has quoted assessee also failed to produce affidavit from the directors proving the source of capital introduced and also failed to produce the directors of such companies. Whereas we have submitted affidavits from the directors of all companies in which they have confirmed that they have invested in shares of our companies Not only affidavits but confirmations from all the share applicants are also submitted. Further the transactions are related to 6-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove that all the share applicants exist, we submit following: All the companies are incorporated in ROC. All the applicants have PAN No. and also filling income tax return. We has furnished permanent account number and copy of Income tax returns of all the share applicants and the same has not been found to be false or untrue by the AO. All the applicants are assessed by Income tax department for which assessment orders are issued by income tax authorities. Whether this is not the sufficient evidence of existence of these applicants. The AO did not make any verification in this regard either form the internal record of the department or from the concerned bank. If he so wanted, he could have called for the IT returns of the share applicants to ascertain whether the investment made in our company was reflected in their balance sheets or not. In case of corporate applicants balance sheets are audited by chartered accountants. Also holding bank account which is quite impossible in absence of existence. The share application money was received by our company by way of bank drafts, through normal banking channels. Nothing prevented the AO from summoning the record of the banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del) 157- Ed.] similar view has been taken by the Hon'ble Delhi High Court that once the details of IT returns, bank statements etc. with regard to the various share applicants have been provided, the mere fact that parties were not produced before the AO was not good enough for making the addition. The Hon'ble Court has held that since the AO had not made any efforts to find out the latest address of the directors and details of these companies, the identity of the share applicants and the genuineness of the transactions were held to be genuine on the basis of records and details submitted by the assessee. The issue was decided in favour of the assessee and against the Revenue. In the present set of facts also the AO has been provided various opportunities through remand proceedings to carry out any inquires or make verifications with regard to PAN and other details of the share applicants. Through letter dated 22nd Feb., 2010 the AO was specifically asked to make any inquires required and issue any summons to different parties for controverting the documents submitted by the Authorised Representative of the appellant regarding the identity and genuineness of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ophia Finance Co., case Supra. Therefore no addition is called for in the hands of the assessee. On being perusal of assessment order, we found that AO has drawn adverse inference from offer of surrender. We have surrendered this amount only for peace of mind with the condition of no penalty therefore such addition cannot be a basis to treat us having concealed particulars of income or having furnished inaccurate particulars of income. It is quite wrong that there was wrong intention because the entire share capital stood disclosed to the department as having been entered in the. regular account books maintained by our company prior to the date of search on 04.09.2008, under section 132 against Marvel Tea Estate (I) Ltd., as per details given by the AO himself in assessment order u/s 153A(1)(b) of IT Act, 1961. The details of shareholders were filed before the ROC, New Delhi and therefore, the AO has no reason to treat the share capital as undisclosed income of assessee. Therefore, there was no concealment on our part. The levy of penalty without any material against assessee is unwarranted and inconsistent with the provision of law. In this regard, in order to substantiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espite of the fact that we have all documentary evidences of share capital just to purchase peace with a condition that no penalty proceedings will be initiated. Interest and tax on this surrendered amount itself was so heavy that it was like penalty and further imposition of penalty has ruined the humble petitioner because practically there was no concealment except a compromise to avoid litigation. Further it is important to mention here that our books of accounts have been scrutinized u/s 143 (3) for the assessment year 2003-04 by the Addl. Commissioner of Income Tax, Hisar and he has properly verified each and every detail of share applicants and made no any doubt regarding existence of share applicants. Further it is no worthwhile to mention that our books of accounts are also scrutinized u/s 143(3) for the AY 2004-05 and 2005-06. All the details regarding share capital of the company are duly verified by Ld. Income Tax Authorities in each year. Therefore there is no question arises regarding concealment of income. 5. The assessee also contended that the surrender was on agreed basis and was conditional and also submitted as under: Thus in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent on the consent or otherwise of the assessee on the basis of an agreed surrender, what was germane was the facts of the case leading to the conclusion that the assessee had consciously acted to conceal and file inaccurate particulars of its income. The ld. CIT(A) observed that the assessee was confronted with the findings of the Investigation Wing during the assessment proceedings and requiring him to file full evidence of the additions to its share capital and to produce the directors of the investor company with affidavits for verification but the same was not complied with, which persuaded the assessee to voluntarily surrender the amount of ₹ 65,00,000/-, ₹ 40,00,000/- and ₹ 15,00,000 for the assessment years 2003-04, 2004-05 and 2005-06 respectively vide letter dated 10.05.2010. The ld. CIT(A) further observed that it was by virtue of investigation carried out by the department regarding various companies used to make accommodation entries and assessee s inability to produce the directors of the companies who had invested in its shares, during the subsequent proceedings that led to the assessee coming forward to accept the introduction of its unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sufficient to levy the penalty u/s 271(1)(c) of the Act. It was submitted that section 271AAA of the Act has been inserted w.e.f 01.04.2007 and Sub-section (3) of the said section provides that no penalty under the provisions of clause (c) of Sub-section (1) of section 271 of the Act shall be imposed upon the assessee in respect of undisclosed income where search has been initiated u/s 132 of the Act on or after the 1st day of June, 2007. It was further submitted that the penalty was not leviable u/s 271(1)(c) of the Act because the search took place on 04.09.2008 and that the penalty, if any was to be levied, it was leviable u/s 271AAA of the Act. It was contended that in the instant case no penalty was leviable as per the provisions of Sub-section (2) of section 271AAA of the Act because the assessee substantiated the manner in which the amount on account of share capital was received and gave all the information during the course of assessment proceedings, therefore, the penalty u/s 271(1)(c) of the Act levied by the AO and sustained by the ld. CIT(A) was not justified. 8. In his rival submissions that the ld. DR strongly supported the impugned order passed by the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceeding and assessment proceedings are two different and distinct proceedings. In such type of cases, there can be many reasons for making the surrender but the surrender itself is not a conclusive proof of concealment of income or furnishing of inaccurate particulars of income. In the present case, it is also noticed that the AO levied the penalty u/s 271(1)(c) of the Act. However, for levying the penalty in search cases the Finance Act, 2007 inserted section 271AAA of the Act w.e.f 01.04.2007. The said section read as under: 271AAA (1) The Assessing Officer 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 1st 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 subsection (4) of section 132, admits the undisclosed income and spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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