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TMI Blog2018 (3) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of the employees of the assessee. - Decided in favour of assessee Unexplained source of acquisition of gold and jewellery - Held that:- On the day of the search and subsequently, the assessee has categorically explained the source of acquisition of gold and jewellery stating that the said gold and jewellery was said to be belonging to his brother’s daughter Miss S. Chandrika and also to his brother’s wife. Though he has admitted the income, the above gold and jewellery required to be examined in the hands of Miss S. Chandrika and Mrs. Sita wife of his brother and his wife for levy of penalty u/s 271AAB. The A.O. stopped his enquiries once the disclosure has been made by the assessee and did not make any further enquiry, therefore, the A.O. has not established that gold and jewellery was acquired from the sources of undisclosed income. As per the provisions of section 271AAB of the Act, the penalty is leviable only on undisclosed income. Thus no case for imposing penalty u/s 271AAB - Decided in favour of assessee - I.T.A.No.126/Vizag/2017 And I.T.A.No.132/Vizag/2017 - - - Dated:- 16-3-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted towards any other discrepancies 1,79,502.00 Total 1,63,73,191.00 The AO has imposed the penalty of ₹ 49,11,957/-@ 30% on the above income under section 271AAB of IT act. 3. (i) With regard to item No.5 and 6 i.e. income from business of construction of apartment complex in the name of Sanjeevini Mansion and the income admitted by the assessee towards discrepancies amounting to ₹ 30,01,421/- and ₹ 1,79,502/-, the Ld. CIT(A) deleted the penalty imposed by the A.O., holding that the financial year was not yet complete and the A.O. has not made out a case that the assessee would not have disclosed the profit from sale of apartments and the revenue has not preferred any appeal. 3 (ii) With regard to the gold jewellery weighing around 1530.40 gms. of the value of ₹ 55,94,482/-, diamonds of ₹ 11,79,350/- and silver articles 13.28 kgs. Valued at ₹ 7,43,568/-, the A.O. levied penalty @ 30% and the CIT(A) allowed partial relief and the assessee is in appeal. 3.(iii). The addition made with regard to the cheques deposited into the bank account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested to drop penalty proceedings. The A.O. not being convinced with the explanation of the assessee imposed the penalty @ 30% of the undisclosed income. The A.O. was of the view that once the search is conducted u/s 132 of the Act, as per the provisions of section 271AAB of the Act, levy of penalty is mandatory. 5. Aggrieved by the order of the A.O., the assessee went on appeal before CIT(A) and the Ld. CIT(A) held that the imposition of penalty is not mandatory. Mere admission of income u/s 132(4) of the Act cannot automatically lead to penalty u/s 271AAB of the Act. The Ld. CIT(A) relied on the decision of ITAT Kolkata Bench in the case of SSP Steel and Power Limited Vs. CCIT 171 TTJ 749 (2015), which reads as under: 13. In view of the above facts and circumstances, and legal position discussed above, the penalty to be levied for undisclosed income as per the provision of Sec. 271AAA of the Act, we have to understand the meaning of undisclosed income and the relevant provision define undisclosed income as under:- ( a) undisclosed income means- ( i) Any income of the specified previous year represented, either wholly or partly, by any money, bullion, jew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee during the course of survey would not empower the Assessing Officer to levy the penalty under section 271(1)(c) of the Income-tax Act, 1961 -.. The fact that the assessee had agreed to additions to income was not proof of concealment. Even Hon ble Kerala High Court in the case of CIT vs. M. George Brothers 59 CTP. 298 (Kel) held that: where the assessee for one reason or the other agrees or surrenders certain amounts for assessment, the imposition of penalty solely on the basis of the assessees surrender will not be well-founded. Depending upon the facts and circumstances of each case the Court has to decide whether penalty is justified. It is always for the Revenue to bring the case under the ambit of Sec. 271(1)(c) by establishing there is concealment on the part of the assessee. The Explanation to sec. 271(1)(c) inserted w.e.f. 1st day of April, 1964 merely raises a rebuttable presumption but the basic principle that there should be have been concealment still remains. Further Honble Punjab Haryana High Court in case of Commissioner of Income-tax Vs. Rajiv Garg 313 ITR 256 (P H) upheld the order of the Tribunal where it was observed that - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appeal hearing, the Ld. A.R. vehemently argued that penalty u/s 271AAB of the Act is not mandatory but discretionary. The provisions of section 271AAB of the Act is parimateria with that of section 158BFA(2) of the Act relating to block assessment and accordingly argued that the levy of penalty under section 271AAB is not mandatory but directory. When there is reasonable cause, the penalty is not exigible. The Ld. A.R. has taken us to the section 271AAB of the Act and also section 158BFA(2) of the Act and argued that the words used in section 271AAB of the Act and the words used in section 158BFA(2) of the Act and sub section (1) of section 271AAB of the Act are identical. Hon ble courts in respect of penalty u/s 158BFA held the penalty is not mandatory but discretionary. Hence, argued that the penalty under section 271AAB of the Act penalty is also not automatic and it is on the basis of merits of the case. For ready reference, we extract hereunder section 158BFA (2) of the Act and section 271AAB of the Act which reads as under; 271AAB [Penalty where search has been initiated]: ( 1) The Assessing Officer may, notwithstanding anything contained in any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished a return under clause (a) of section 158BC; ( ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable. ( iii) Evidence of tax paid is furnished along with the return; and ( iv) An appeal is not filed against the assessment of that part of income which is shown in the return: Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return. 8. Careful reading of section 271AAB of the Act, the words used are AO may direct and the assessee shall pay by way of penalty . Similar words were used section 158BFA(2) of the Act. The word may direct indicates the discretion to the AO. Further, sub section (3) of section 271AAB of the Act, fortifies this interpretation and the same reads as under; Sub section (3) of section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or af ter the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- ( a) a sum computed at the rate of ten per cent of the undis closed Income of the spec i f ied prev ious year, i f such as sessee- ( 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 ) substant iates the manner in which the undis closed income was der ived; and ( iii ) on or before the specified date- ( A) pays the tax, together with interest, if any, In respect of the undisclosed income; and ( B) furnishes the return of income for the spec i f ied previous year dec lar ing such undis closed income therein; ( b) a sum computed at the rate of twenty per cent of the undisclosed income of the specif ied previous year, if such assessee- ( i) in the course of the search, In a statement under sub-section (4) of section 132. does not admit the undisclosed income; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which is found to be false and would not have been found to be so had the search not been conducted. From plain reading of section 271AAb penalty is leviable on undisclosed income. Income admitted u/s 132(4) of the Act need not be undisclosed income and every undisclosed income need not necessarily be admitted by the assessee u/s 132(4) of the Act. 11. In the assessee s case, the assessee had admitted the undisclosed income in respect of the deposits of the employees, exemployees in their bank accounts. The assessee admitted the peak deposit in the accounts of employees as his undisclosed income amounting to ₹ 56,74,868/-. At the time of search, the assessee has submitted before the A.O. that the bank accounts are not belonged to the assessee and they were belonged to the employees who opened the accounts and operating the same. However, the assessee had admitted peak deposits u/s 132(4) of the Act. The A.O. did not make any further enquiries and accepted the admission given by the assessee. Though peak deposits were admitted by the assessee as additional income u/s 132(4) of the Act, the A.O. has not established that the impugned bank accounts were belonged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to ₹ 12,63,650/- were said to be belonged to his wife, though assessee had admitted the same as income in his hands. The Ld. CIT(A) has allowed the relief to the extent of permissible deduction as per board s circular and sustained the penalty to the extent of ₹ 27,41,676/- as under: I have considered the submissions of the appellant, perused the facts of thecase and gone through the proceedings of search and seizure operations. Though the appellant claimed that except 10.400 grams of jewellery belongs to him, the rest of the jewellery belonged to his wife, his sister-in-law and his brother's daughter, he could not furnish any specific evidence in this regard. At the same time, a part of the jewellery can certainly be held to be belonging to them. In the absence of specific evidence in this regard, I would consider 500 gms as belonging to the wife of the appellant and 250 gms as belonging to Ms.Sarat Chandrika who was staying with the appellant even at the time of search and seizure operations. Jewellery of brother's wife cannot be given credit in the hands of the appellant. Therefore, to the extent of 750 gms, though the appellant admitted income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms.Sarat Chandrika and 500 gra-ms belonged to Smt. Sita, wife of his brother. Out of the balance, 250 gms belonged to wife of the appellant and only 10.400 gms belonged to the appellant. The gold jewellery and diamonds of the value of ₹ 12,63,650/- belonged to wife of the appellant. It was further explained that marriage of Ms.Sarat Chandrika was scheduled for 1 11h May, 2013 and she stays in their house only as she was brought up by him and his wife right since her childhood. The jewellery of 770 grains was kept ready for her marriage and the said jewellery does not belong to the appellant. Likewise, the appellant submitted that the remaining jewellery also did not belong to him. Further, the appellant submitted that the admission was given in anticipation that the jewellery will be released once the same is admitted as income and the taxes are paid. 6.9) I have considered the submissions of the appellant, perused the facts of the case and gone through the proceedings of search and seizure operations. Though the appellant claimed that except 10.400 grams of jewellery belongs to him, the rest of the jewellery belonged to his wife, his sister-in-law and his brother s da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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