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TMI Blog2019 (4) TMI 1518X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) , KOLKATA VERSUS AKA LOGISTICS PVT. LTD., AMBEY MINING PVT. LTD., M/S CALCUTTA INDUSTRIAL SUPPLY CORP. [ 2019 (3) TMI 209 - ITAT KOLKATA] Validity of sec. 271AAB proceedings in a show cause indicating sec. 271(1)(c) action - penalty show cause notice did not specify the specific charge / clause of sec. 271AB - HELD THAT:- Revenue has sufficiently proved right from the beginning that the assessee s undisclosed income is based on corroborative material found during the course of search relations to impugned assessment year 2013-14 only. Learned coordinate bench has already taken sufficient note of all these judicial precedents in identical backdrop of facts. Hon'ble apex court s decision in Sandeep Chadak [ 2018 (6) TMI 106 - SUPREME COURT OF INDIA] has admittedly declined the very argument challenging validity of sec. 271AAB proceedings in a show cause indicating sec. 271(1)(c) action. We do not find any prejudice caused to the assessee once the AO had initiated sec. 271AAB proceedings to the instant lead case Condonation of delay in filing objections 548 days - various procedural formalities and compilation of necessary records - HELD THAT:- The Revenue is fair e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue s appeal(s) and assessees cross objection; as the case may be, raise identical issue of correctness of u/s 271AAB penalt(ies) imposed by the Assessing Officer and partly upheld in the lower appellate proceeding. Learned authorized representative has filed a detailed compilation chart of the necessary facts and figures to the following effect:- Name of assessee group ITA No . CO No. Suo moto disclosure Disclosure of cash/jewellery/Others Total disclosure Penalty levied u/s 271AB Penalty deleted by CIT(A) Penalty confirmed by CIT(A) Akshara Vinimay Pvt. Ltd. 214/K/17 29/K/17 33500000 16250000 49750000 4975000 3350000 1625000 Squoosh En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -- Alissa Nirmans Pvt Ltd 226/K/17 104/K/18 22500000 -- 22500000 2250000 2250000 -- Mishra Brick Fields Pvt Ltd. Tax effect 33/K/17 20000000 5000000 25000000 2500000 2000000 500000 Likewish Vinimay Pvt Ltd. Tax effect 92/K/17 20000000 5000000 25000000 2500000 2000000 500000 4. It is in this backdrop of facts that we treat Revenue s appeal ITA No.225/Kol/2017 and cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd the case law of Dilip N Shroff vs CIT (2007) 291 ITR 519 (SC). In this case law the Hon'ble Supreme Court has held that imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature, but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. The AR has also brought on record the case of Punjab Tyres Punjab Tyres [1986] 162 ITR 517 (Madhya Pradesh), the Hon'ble High Court of Madhya Pradesh) in which it was held that when surrender is made to purchase peace or for other similar reason, surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings. The AR has brought on record the case law of Sudharsan Silk and Sarees, 300 ITR 30 (Supreme Court) in this case, the Hon'ble Supreme Court has held that if the appellant offers any amount for taxation for the purpose of purchasing peace and assessment has been made based upon the aforesaid offerings, even if no assurance in writing is given by the searching party, it may be clearly inferred that such an inducement must have been given by the searching party. When o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio decided by the Hon'ble Supreme Court, the AO is directed to delete the penalty u/s. 271AAB(1)(a). 6. We have given our thoughtful consideration to rival contentions. The Revenue vehemently contends during the course of hearing that the Assessing Officer had rightly imposed the impugned penalty in assessee s case for the reason that its search disclosure (supra) attracted the above penal provision in entirety. It is reiterated that the assessee s search disclosure amounted to undisclosed income within the meaning of section 271AAB Explanation (c) of the Act being in the nature of money / bullion / jewellery or other valuable article or thing as specified by the legislature. He quotes hon'ble apex court s recent decision in Sandeep Chandak vs. Pr.CIT (2018) 93.taxmann.com 406 (SC) for pleading that the impugned penalty provision are automatic the normal assessee makes disclosure of its undisclosed income during the course of search. The taxpayer on the other hand strongly supports the CIT(A) s findings deleting the impugned penalty mainly on the ground that the disclosure in issue was made suo motu without any corroborating material found o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anations clause (a) to (c) as well in the given facts and circumstances. The Revenue preferred its appeal before hon'ble Allahabad high court finally culminating in judgment reported as (2018) 93 taxmann.405 (All) PCIT Vs. Sandeep Chadak. It raised three substantial question of law in its appeal as follows:- (A) Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred in not appreciating the facts that the notice was issued for imposition of penalty u/s. 271AAB and not for imposition of penalty u/s 271(a)(c) of the Act.? (B) Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred in not appreciating the facts that the specific charge have in a statement under sub section 4 of section 132 during the course of search and seizure operation admitted undisclosed income was mentioned in the notice? (c) Whether the benefit of Section 292BB was correctly denied to the AO/appellant by the ITIAT? 10. It is in this factual backdrop that hon'ble high court had held that the Assessing Officer had issued the relevant notice u/s 271(1)(c) r.w.s. 274 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t involving admission of undisclosed income. The assessee s first argument is rejected therefore. 12. Mr. Tibrewal thereafter files a written note raising yet another legal plea as follows:- 4. Penalty under section 271AAB could be levied on Undisclosed Income of the Specified Previous Year . The first clause (i) refers to income of the specified previous year represented by - (i) any money, bullion, jewellery or other valuable article or thing, or (ii) any entry in the books of accounts or other documents or transactions found in the course of search u/s 132 of the Act and was not recorded in the books of accounts or other documents or transactions maintained in the normal course relating to such previous year. The second clause (ii) refers to income of the specified previous year represented, either wholly or partly, by an entry in respect of an expenses recorded in the books of accounts 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , previous year means the financial year immediately preceding the assessment year: Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year. Thus Previous Year and specified previous year carry different meanings for two different situations as stated herein above. The words previous year has been used in clause (i) of Explanation (b) of Section 271AAB of the Act to mean the previous year which has ended before the date of search for which the return of income has not been furnished by the assessee and the due date of furnishing the return of income has not been expired. If the Statute intended to levy penalty under section 271AAB of the Act in respect of money, bullion, jewellery or other valuable article or thing or any entry in the books of accounts or other document recorded in the books of accounts in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO had chosen not to impose penalty under this section. Aggrieved thereby, the assessee is in appeal before the Tribunal. 3. We have heard the rival submissions and gone through the relevant material on record. The assessee raised certain grounds in the memorandum of appeal. Thereafter, certain additional grounds were filed and eventually modified additional grounds of appeal were filed, challenging the impugned order on certain legal issues as well as on merits. 4. We will first espouse the legal issues urged on behalf of the assessee in seriatim. The first legal issue taken up by the Id. AR is that the penalty u/s.271 AAA be deleted as the same can be imposed only in respect of 'specified previous year' and the assessment year 2009-10 under consideration, cannot be so construed. In his opinion, the assessment year 2008-09 was the correct 'specified previous year' in terms of Explanation (b)(i) to section 271AAA of the Act and further that sub-clause (ii) of the Explanation (b) was not attracted in the present case. This contention was strongly countered by the Id. DR. 5. It is seen from the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.] (some parts italicized by us) 6. Sub-section (1) of section 271 AAA provides that penalty shall be computed @ 10% of the undisclosed income of the ' specified previous year ' where search is initiated after 01-06-2007 but before 01-07-2012. Sub-section (3) of section 271 AAA provides that in case penalty is imposed under sub-section (1), then the provisions of section 271(1)(c) shall not apply in respect of such undisclosed income. When we consider the provisions of section 271(1)(c) in juxtaposition to section 271AAA, it is manifested that in case of a search, penalty is imposed u/s.271AAA on the undisclosed income of the ' specified previous year ' and penalty u/s.271(1)(c) is imposed with reference to other years covered under search assessments. Search in the extant case was conducted in the year 2009, which undoubtedly falls within the period stipulated in sub-section (1) of section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace, vessel etc., where he has reason to suspect that such undisclosed money, bullion, jewellery or other valuable article or things are kept. This is the stage of authorization of search by the Principal Director General etc., which is the first stage in our discussion, being, the initiation of process of search. Pursuant to such first stage, that is, authorization of search action by the Principal Director General etc., the authorized officer physically enters the building etc. and carries out the actual search. This is the second stage in our discussion, which is initiation of search. When the entire search is concluded by the authorized officer and a final panchnama is drawn, then we enter the third stage, that is, the search is concluded. 9. The legislature has used the word ' search ' preceded by the words ' initiation of ' or ' conclusion of at different places to clearly convey that it is referring to the date of initiation of search or the conclusion of search, as the case may be. For example, section 153A dealing with assessment in case of search or requisition specifically uses the expression 'initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been used in both the clauses, viz., (a) and (b)(i) of the Explanation. We have set out supra the definition of ' undisclosed income' in the Explanation (a) in two subclauses (i) and (ii), dealing with broader categories of any income represented by unexplained assets etc. and any income represented by false expenses. We are restricting ourselves to sub-clause (i), which defines 'undisclosed income' to mean any income represented by any money, bullion, jewellery etc. found in the course of a search 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 Chief Commissioner or Commissioner before the date of search'. The expression 'before the date of search, in Explanation (b)(i) has also been used without any pre-fix of 'initiation of' or 'conclusion of' . On an analysis of the expression 'before the date of search ' in the definition of ' undisclosed income ', it amply transpires that it refers to the date of ' initiation of the search '. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the expression ' before the date of search ' used in clause (a) of the Explanation refers to the ' date of search ' as the date of ' initiation of search ' and not the date of ' conclusion of search '. As the same expression of ' before the date of search ' has been used in the definition of ' specified previous year ', we hold that on a tuneful reading of clauses (a) and (b) of the Explanation to section 271AAA, the ' date of search ' in the Explanation (b) is also the ' date of initiation of search and not the ' date of initiation of search ' as the date of search , the ' specified previous year ' in terms of sub-clause (i) of clause (b) of Explanation to section 271AAA becomes the year ending 31-03-2008, being, the previous year which ended before the date of search on 11-02-2009. Going by this interpretation of the provision, the A.Y. 2009-10 cannot be considered as the 'specified previous year'. The contention of the assessee is, ergo, upheld. 15. We have given our thoughtful consideration to assessee s above last argument. It emerges from the learned co-ordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue has sufficiently proved right from the beginning that the assessee s undisclosed income is based on corroborative material found during the course of search relations to impugned assessment year 2013-14 only. Learned coordinate bench has already taken sufficient note of all these judicial precedents in identical backdrop of facts. Hon'ble apex court s decision in Sandeep Chadak case (supra) has admittedly declined the very argument challenging validity of sec. 271AAB proceedings in a show cause indicating sec. 271(1)(c) action. We do not find any prejudice caused to the assessee once the Assessing Officer had initiated sec. 271AAB proceedings to the instant lead case. We reject the assessee s CO No. 105/Kol/2018 therefore as well. 8. Same order to follow in Revenue s remaining appeal(s) as well as assessees cross objection(s). We make it clear before parting that we have affirmed the CIT(A) s findings in all these cases deleting the impugned penalt(ies) not based on any corroborative evidence satisfying the relevant parameters of undisclosed income envisaged u/s. 271AAB Explanation (c) and confirm the remaining component thereof in assessees cross objection( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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