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TMI Blog2019 (1) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in the return of income and levied the income tax on it accordingly. In the present case, even the penalty order is silent on subject of undisclosed income. Therefore, provisions u/s 271AAA will not come under the purview as it is specifically a penalty relating to undisclosed income. - Appeal of the assessee is allowed. - I.T.A. No. 2702/DEL/2015 - - - Dated:- 22-1-2019 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh. V. K. Bindal, CA For The Respondent : Ms. Ashima Neb, Sr. DR ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the order dated 18/3/2015 passed by CIT(A)-XXIV, New Delhi for Assessment Year 2009-10. 2. The grounds of appeal are as under:- 1. The CIT(A) erred in law and on facts in confirming the penalty of ₹ 5,16,410/-, @ 10% of the amount offered as undisclosed income at the time of search, u/s 271 AAA of the Act ignoring the fact that the appellant filed complete details regarding source of shares, cash and jewellery found and surrendered during the course of the assessment proceedings though the appellant also deposited the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A). The CIT(A)dismissed the appeal of the assessee. 5. The Ld. AR submitted that in this case, a search was conducted on 31/07/2008 in the residential premises of the assessee. The return of income for the AY 2009-10 was filed on 30/07/2009 (wrongly mentioned as on 27/08/2010 in the assessment order) and notice u/s 143(2) was issued on 27/08/2010. Assessment order was passed on 30/12/2010.On perusal of the panchnama dated 01/08/2008 in respect of the search conducted in the premises of the assessee, it is clear that the search commenced on 31/07/2008 and was concluded on 01/08/2008. Similarly, in respect of the bank locker no. 12 with Axis Bank, Shakti Nagar, Delhi of the assessee which was the only bank locker, the assessee had, as per the panchnama dated 01/08/2008, it would be seen that the locker was opened in August 2008 and the search thereon was also concluded on the very same day. Thus, the income-tax search proceedings u/s 132 of the Act stood completed before 31/08/2008. 6. The Ld. AR pointed out that the assessee had no business / professional income and he was receiving salary, rent, interest on FDR and other bank accounts. (Please refer answer to the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this offer was for buying peace of mind and to avoid litigation and to cooperate on the specific condition that no penalty proceedings and prosecution proceedings would be initiated. The assessee indicated that ₹ 45 lakhs was paid for purchasing shares and further, lump sum ₹ 6.641 lakhs on account of cash in hand, jewellery and any other items, without any specific break up / details. 7. The Ld. AR submitted that the Hon ble jurisdictional Delhi High Court in case of Bhagirath Aggarwal vs CIT 2013-TIOL-82-HC-DEL-IT held that where the assessee make a voluntary surrender, income-tax officials are bound to record a statement u/s 132(4) of the Act to make it reliable and to be used as evidence. Further, it has been held that a letter written after one and a half month after the search cannot be treated as a statement u/s 132(4) of the Act. In fact, this view has also been held by the CIT(A) in the concluding para of his appellate order. The AO completed the assessment by accepting the return of income filed by the assessee which included this surrender of ₹ 51,64,100/- without any reference to above mentioned letter or any independent investigation to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions found in the course of a search under section 132, which has - ( A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or ( B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or ( ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; 8. Thus, the Ld. AR submitted that a plain reading clearly shows that the said penalty is leviable in respect of undisclosed income of the previous year as defined in the Explanation and not for substantiating the manner of the earning undisclosed income The issue regarding substantiation is relevant only for exemption from the said penalty. But, the question of exemption comes only when there is undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the said order and if it is a case of relying on deeming provision contained in Explanation- 1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. The above has been duly affirmed by the Apex Court in SSA s Emerald Meadows (2016) 73 taxmann.com 248 (SC). The Ld. AR further submitted that in case of CIT Vs ECS LTD 2010-TIOL-287-HC-DEL-IT it was held that The ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpared to the secret internal files off the income-tax department. Therefore, any penalty imposed in consequence to the said illegal order itself is bad in law. 10. On merit, the Ld. AR submitted that the assessee was not conducting any business or profession and as such, was not required and was factually not maintaining any books of account. Therefore, this case does not fall under non-entering of income or expenses in the books of account maintained in the normal course. The assessment order does not at all spell as to what undisclosed assets were found by way of money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents. It also does not specify what transactions found were not recorded in the books of account or other documents in the normal course. It is pertinent to note that the assessee had no business / professional income and he was just receiving salary, rent, interest on FDR and other saving bank accounts. (Kindly refer the question no. 4 of the statement dated 31/07/2008 in this regard) and therefore, there could not be any undisclosed income which was required to be entered in the normal books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash / jewellery but part of the settlement with the investigation wing so as to ease departmental pressure, to buy peace and end litigation etc. Otherwise, there was no occasion for filing any letter with the investigation wing as the authorised officer / investigation wing becomes function officio after completion of the searches which had concluded on a much earlier date. 12. The Ld. AR further submitted that the assessee disclosed ₹ 45,00,000/- in his return of income on account of purchase of shares but the search did not yield any evidence for payment of any such amount for the said purchases as only application for shares by the named corporate-applicants, blank transfer forms by shareholders, POA by them which were not completely filled in, blank receipt for the sale of shares, blank but signed sale bill which is undated and signed but undated delivery note for shares were found. The shares of ₹ 10/- each were issued by the company to various shareholders for a total amount of ₹ 95,00,000/- at a premium of ₹ 90/- to ₹ 190/- per share. In the Question No. 19 of the statement recorded of the assessee in the midnight at 1:00 am on 01/08/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee which included surrendered amount of ₹ 51,64,100/-. In fact in the Assessment Order, the Assessing Officer added another sum of ₹ 14,00,000/- as unexplained cash found at the time of search which in the second round after the Tribunal s order was deleted by the Assessing Officer whereby accepting this cash belonged to the other entities. This aspect is not denied by the revenue. The initiation of penalty u/s 271AAA in the Assessment order is based on the surrendered amount which cannot be termed as undisclosed income. In fact, by surrendering the said amount, the assessee has disclosed it before the Revenue authorities. The quantum assessment order has nowhere stated that the surrendered amount of ₹ 51,64,100 is an undisclosed income. The surrendered amount was declared in the return of income u/s 153A as misc. income. The Assessing Officer accepted this surrendered amount as misc. income as declared by the assessee in the return of income and levied the income tax on it accordingly. In the present case, even the penalty order is silent on subject of undisclosed income. Therefore, provisions u/s 271AAA will not come under the purview as it is specifically a pen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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