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TMI Blog2016 (12) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271AAA - Held that:- As search action u/s 132 of the Act was initiated after 1.6.2007,penalty u/s 271(1) (c) of the Act could not be imposed by virtue of insertion of new provisions on the statute book for levy of penalty in the case of search under section 271AAA of the Act w.e.f. AY 2007-08 and therefore the penalty as imposed by the AO and confirmed by the ld.CIT(A) has to be deleted. - I.T.A. No.5771 and 5772/Mum/2014 - - - Dated:- 26-10-2016 - SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM For The Assessee : Shri Rajesh P Shah For The Revenue : Shri Kailash Gaikwad ORDER PER RAJESH KUMAR, AM : These are the two appeals filed by the assessee against the two separate orders dated 16.6.2014 passed by the ld. CIT(A)-36, Mumbai for the assessment years 2007-08 and 2008-09. The issues involved in these appeals are in respect of confirmation of penalty levied u/s 271(1)( c) of the Income Tax Act, 1961 by the ld.CIT(A) as imposed by the AO. Since these appeals pertain to the same assessee these were clubbed and heard together and are being decided by this common order for the sake of convenience. 2. The only issue raised in all the grounds of appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of the group M/s Su-Raj Diamond and Jewellery Ltd disclosed a sum of ₹ 10 Cr as additional income of the assessee company for the assessment year 2007-08 and 2008-09 comprising ₹ 7.88 Cr on account of withdrawal of exemption u/s 10AA of the Income Tax Act, 1961 in respect of SEZ., Chennai and a sum of ₹ 2.12 Cr on account of variation in valuation of stock and any such discrepency. The assessee in question was covered by the provisions of section 153C of the Act and filed return of income on 3.5.2010 declaring a total income of ₹ 1,08,80,835/- which included additional income of ₹ 1.25 crores in the search operation in response to notice issued u/s 153C of the Act. The assessment were framed and completed by an assessment order dated 24.12.2010 passed under section 143(3) read with section 153C assessing the total income at ₹ 1,76,38,130/-. A penalty proceedings under section 271(1)(c) of the Act was initiated by issuing notice dated 24.12.2010 u/s 274 r.w.s 271(1)( c ) of the Act was duly served. Since assessee failed to reply the said notice , another fresh show cause notice dated 26.11.2012 was issued which was replied by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction by observing that the assessee had furnished inaccurate particulars of income filed under section 139(1) of the Act and also not furnished any satisfactory explanation to the income disclosed in the search proceedings. 5. The ld. AR vehemently submitted before us that the AO has wrongly imposed the penalty and the ld. CIT(A) wrongly confirmed the same specifically when no incriminating material was found during the search proceedings against the assessee. The ld. AR further submitted that the disclosure was made only to buy peace of mind without being any corroborating materials found by the search team during the search proceedings. The ld. AR drew our attention to question no. 28 and answer thereto by referring to the statement recorded on oath of Shri Jatin R Mehta on 22.8.2008, the relevant extract of which have been placed at pages 37 to 41 of the assessee s paper book. The ld. AR argued that total of ₹ 22 crores was disclosed during the course of search operation in the entire group, the details thereof were given to Investigation Wing on 23.10.2008 which is placed at pages 45 to 47 of the paper book. The ld. AR also submitted that the assessee has duly disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made during the search action in order to buy piece of mind. In para 2.4 of the penalty order, the AO himself admitted that there is no specific discrepancy pointed out in the assessment order, but he proceeded to levy penalty on the basis of mere admission made during the search action at the time of recording the statement on oath under section 132(4) of the Act. Finally, the ld. AR submitted that since there was no incriminating material found by the search and seizure team and the group disclosure of ₹ 22 crores was voluntary in order to buy peace of mind which was supported by the observations of the AO in the penalty order stating that no specific discrepancy was pointed out in the assessment order. Therefore, the imposition the penalty by the AO was wrong and the ld. CIT(A) has also wrongly confirmed the same by upholding the application of Explanation 1 to section 271(1)(c) of the Act. Finally the ld AR prayed that the penalty be deleted with costs. 6. The ld.DR relied heavily relied on the orders passed by the authorities below by submitting that the assessee disclosed ₹ 1.25 crores in the return of income filed in response to notice issued u/s 153C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or no specific defects were pointed out by the AO while framing the assessment order. We are not in agreement with the AO and the ld. CIT(A) that the admission made by the assessee during the course of search operation was sufficient to invoke the provisions of section 271(1)( c ) of the Act and the fact that the assessee has not disclosed the income in the return filed u/s 139(1) of the Act but the additional income was shown in the return of income filed in response to notice u/s 153C of the Act after search operation was conducted on the assessee. In our opinion, the act of the ld.CIT(A) in upholding the order of AO is not justified, particularly when the disclosure was made during the recording of statement u/s 132(4) of the Act qua exemption u/s 10AA in respect of SEZ Chennai and variation in valuation of stocks and others as stated in the letter dater 23.10.2008 to the Investigation Wing and thereafter the assessment was framed under section 143(3) read with section 153C of the Act vide order dated 24.10.2010 allowing exemption u/s 10AA at ₹ 1,02,10,433/- as claimed by the assessee. It cannot be a case of imposition of penalty when the assessee offered a disclosure tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere admission of assessee during the course of search action and also that the addtiuonal income was disclosed in the return filed in response to notice u/s 153C of gthe Act. In view of the facts we are of the considered opinion that the order of the ld.CIT(A) sustaining and upholding the penalty is wrong. We accordingly set aside the order of CIT(A) by allowing the appeal of the assessee and the AO is directed to delete the penalty. I.T.A. No.5772/Mum/2014 9. Grounds of appeal taken by the assessee in this appeal are as under : 1. On the facts and under the circumstances of the case and in law, the Learned AO erred in levying penalty u/s 271(1)(c) of ₹ 2,97,41,250/- instead of section 271AAA. 2. On the facts and under the circumstances of the case and in law, the notice issued and the penalty order passed u/s 271(1)(c) is illegal, bad in law and without jurisdiction as search had taken place after 0.1.6.2007 and no penalty u/s 271(1)(c) can be imposed in respect of the alleged income offered by the appellant 10. The common issue raised in the grounds of appeal by the appellant is that the AO imposed the penalty u/s 271(1)( c ) of ₹ 2,97,41, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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