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TMI Blog2019 (2) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, Shri. M.Satnaliwala submitted that notice of penalty was issued by the AO u/s 271AAA of the Act while the penalty was finally imposed u/s 271AAB of the Act. He contended that the penalty notice issued by the AO, therefore, was defective and the penalty imposed in pursuance of such defective notice is not sustainable. He also contended that the specific limb of section 271AAB of the Act, was not mentioned by the AO as applicable to the facts of the assessee's case and in view of the same, penalty imposed u/s 271AAB of the Act is liable to be cancelled. He, submitted that commodity profit was earned by the assessee and since it was duly disclosed in the return of income it was not a case of undisclosed income attracting the penal provision of section 271AAB of the Act. 5. The Ld.CIT DR, Shri. Anand Kumar Kedia on the other hand submitted that even though at the top of the penalty notice, a reference was made to section 271AAA of the Act inadvertently and in the main body of the penalty notice there was a clear mention of section 271AAB. In support of the contention, The Ld.DR, Shri Kedia placed reliance in the case of Galaxy Nirman Private Limited and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs are initiated, if otherwise it is to be seen from the record whether the AO has arrived at prima facie satisfaction for initiation of penalty proceedings. The AO discussed the facts and circumstances of the case leading to initiation of penalty proceedings under section 271AAB in his order i.e cash & other valuables, jewellery, silver utensils and articles, bank accounts and seized documents. The AO clearly stated that the assessee admitted Rs. 5 crore as undisclosed income derived from the activity under commodity profit which was disclosed under section 132(4) of the Act and prayed to confirm the order of CIT (A). 9. Regarding the contention of failure of the AO to point out specifically a particular limb of section 271AAB of the Act, the Ld. DR submitted that section 271AAB has no such limbs and what are given therein are the different situations involving different rates of penalty. He contended that since the case of the assessee was covered by one situation attracting penalty under section 271AAB @ 10% of the undisclosed income, penalty @ 10% was rightly imposed under section 271AAB. He contended that the commodity profit was not reflected in the books of accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire tax liability on 26.09.2013. The above proves that it is a fit case for levying penalty u/s 271 AAB of the IT. Act, 1961 for undisclosed income of the assessee. As a result, therefore, a penalty of Rs. 50,00,000/- (being 10% of the disclosed income of Rs. 5,00,00,000/-) is being levied upon the assessee." 13. It is noted from the above that the AO held the assessee to liable to pay penalty under section 271AAB of the Act by holding that a search was conducted on 06.09.2012 and a disclosure of Rs. 5 crores was made and paid tax liability including on the undisclosed income as admitted by the assessee during search proceedings. It is pertinent to note that a total assessed income of the assessee as determined by the AO in the assessment proceedings is consists of the undisclosed income as mentioned above. 14. Aggrieved by the order of AO in imposing penalty, the assessee challenged the same before the CIT(A). The specific contention was made before the CIT(A) that penalty under section 271AAB is not mandatory for the reasons as there was no concealment of income, return was filed within due date, manner of earning income was also specified and tax and interest on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to reply in writing on or before specified date and is sufficient to initiate and complete the penalty proceedings. 17. Further in respect of the arguments as advanced by the Ld.AR that no penalty should be levied when the assessee duly disclosed the manner of earning the said undisclosed income under the head commodity profit in the return of income. It is to be noted on perusal of the provision u/s 271AAB of the Act the predominant condition to attract penalty provisions u/s 271AAB of the Act, admission of undisclosed income, specifying and substantiating the manner in which such income has been derived, paid the tax together with interest and furnishes return of income declaring such undisclosed income. Therefore, it is clear when the assessee admits the undisclosed income, specifies and substantiate the same, pays the tax together with interest and furnishes return of income, the penalty provisions u/s 271AAB of the Act would attract. Therefore, the contentions raised by the Ld.AR are not tenable and are rejected. 18. As discussed above, the AO levied penalty @ 10% under sub-section (1)(a) of section 271AAB of the Act on undisclosed income offered by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the tax on undisclosed income disclosed by the assessee made at the stage of making statement u/s 132(4) of the Act or during the assessment proceedings. In the present case as discussed above that the assessee accepted disclosure of Rs. 5,00,00,000/- as its undisclosed income from undisclosed source. It is also noted that the same has been computed as disclosure u/s 134(2) in the computation of total income in the assessment order. There is no dispute regarding the payment of tax together with interest in respect of such undisclosed income and the specified date of filing return of income. So, therefore, it is clear from the record that the assessee admitted undisclosed income and the statement was recorded u/s 132(4) of the Act to that effect. The assessee also explained the manner of such earning i.e. out of commodity profit at page No.18 of AO's order. In our opinion, the assessee is liable to pay penalty as the facts and circumstances of the present case fulfilled the conditions that required to attract penalty @ 10% in terms of clause (a) of sub-section (1) of section 271AAB of the Act i.e: under sub-clause (i) of clause (a) of section 271AAB(1) for the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is provided to the assessee and therefore, the penalty notices has been issued under Section 274 read with section 271 calling upon the assessee to show cause in writing or in person which fulfill the requirement of Section 274 of the Act. In the present case, the provisions of Section 271AAB are fully applicable as of the conditions so stipulated or attracts as a search has been initiated under Section 132 and during the course of search the statement of the assessee has been recorded under sub section (4) of Section 132, in which the assessees admit undisclosed income and specifies the manner in which such income has been derived. We have gone through the contents of the penalty notice and we find that in the penalty notice, which has been issued under Section 274 read with Section 271, the assessing authority has clearly indicated that the proceedings under Section 271AAB being initiated and the reply to the show cause notice in writing on or before the date so as indicated will be considered before any such order is made under Section 271 AAB. We find the substance in the submission of the learned counsel for the department and we noticed that the orders passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The detailed submissions of A.R. in this regard has already been reproduced above. The A.R. did not produce any evidence to show that he was not given proper opportunity of hearing. It is clear from the penalty order that the AO has given penalty notice and which was also replied by the assessee. Therefore, in my opinion, principle of natural justice has not been violated. Thus in view of above discussion penalty imposed by AO u/s 271AAB of the Act is confirmed." Since admittedly, no proceeding under Section 271(1)(c) are initiated by the assessing authority during the course of the assessment proceeding under Section 143(3), the impugned penalty proceedings under Section 271AAB are fully justified and are initiated in accordance with law. We find that the order of the ITAT cannot sustain, therefore, the same is set aside and the penalty orders under Section 271AAB passed by the assessing authority, confirmed by the CIT (Appeals), are affirmed and are restored." 21. The Hon'ble Supreme Court has upheld the above judgement and is reported as Sandeep Chandak vs Pr.CIT [2018] 93 taxmann.com 406 (SC) dated 23.04.2018. On perusal of the afore-mentioned decision, the Hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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