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TMI Blog2019 (6) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... pite the physical verification and inventorization carried out of investigating team at the time of search then the mere details of payment for purchases in cash would not constitute undisclosed income as per the definition provided in explanation to Section 271AAB. Accordingly, the penalty levied u/s 271AAB is not sustainable and the same is liable to be deleted. - Decided in favour of assessee. - ITA No. 1014/JP/2016 - - - Dated:- 10-6-2019 - Shri Ramesh. C. Sharma, AM And Shri Vijay Pal Rao, JM For the Assessee : Shri Rajeev Sogani (CA) For the Revenue : Shri Ashok Bhatra (JCIT) ORDER PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 09.09.2016 of the ld. CIT(A), Jaipur arising from the penalty order passed U/s 271AAB of the I.T. Act for the assessment year 2013-14. The assessee has raised following ground:- 1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the penalty of ₹ 19,50,000/- under section 271AAB as imposed by ld. AO. The Action of the ld. CIT(A) is ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrendered a sum of ₹ 2 crore on his behalf and equal amount of ₹ 2 crore on behalf of his son Shri Abhishak Kanodia total amounting to ₹ 4 crore. Thereafter vide letter dated 25.01.2013 of Shri Kailash Kanodia also surrendered a sum of ₹ 65,00,000/- on behalf of the assessee company on account of cash purchase of raw material. The assessee filed its return of income U/s 139(1) of the Act on 28.09.2013 declaring total income as loss of ₹ 72,92,396/-. This loss was due to unabsorbed depreciation which has been carried forward. The assessee filed its revised return of income on 21.03.2015 in which undisclosed income of ₹ 65,00,000/- was also declared as surrendered vide letter dated 25.01.2013. The AO has completed the assessment on the revised return of income accepting the surrender income of ₹ 65,00,000/-. Subsequently, The AO initiated the proceedings U/s 271AAB of the Act by issuing show cause notice dated 19.08.2015. The assessee objected to the proposed levy of penalty U/s 271AAB of the Act. The AO while passing the order dated 29.09.2015 levied penalty @ 30% of undisclosed income amounting to ₹ 19,50,000/-. The assessee challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material therefore, no question was asked during the statement recorded U/s 132(4) of the Act regarding the said documents and consequently the assessee was not having any occasion to surrender the alleged income of ₹ 65,00,000/-. Subsequently, the assessee has voluntarily surrendered ₹ 65,00,000/- vide letter dated 25.01.2013 which was accepted by the department. Since the assessee has paid tax on the said surrender before the due date as provided u/s 271AAB(1)(a)(i) of the Act therefore, the mere declaration of the said amount in the revised return of income would not be a violation of provisions of Section 271AAB of the act to attract the penalty @ 30%. Hence, the ld. AR has submitted that in any case penalty @ 10% could have been levied instead of 30% of the surrendered income. 5.1 The ld. AR has also challenged the initiation of the penalty proceedings on the ground that the AO has not specified the limb/default of the assessee in the show cause notice issued U/s 271AAB r.w.s 274 of the Act and therefore, there is an illegality in the show cause notice which renders the impugned order passed U/s 271AAB of the Act as invalid. In support of his conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.) 7-9-12 15,00,000 21-09-12 10,00,000 11-10-12 20,00,000 No Date 4,00,000 No Date 16,00,000 Total 65,00,000 The details as recorded in the seized document is only purchase made by the assessee but at the same time the investigating team had inventoried the stock of the assessee and found no discrepancy as far as the physical stock and the stock recorded in the books of accounts. Therefore, there was no irregularity found in the books of accounts so far as the stock of raw material is concerned. Hence, even if the some purchases are made in cash if the said stock is duly recorded in the books of accounts as it is evident from the inventorisation made by the investigating team itself then it would not be held as undisclosed income. Thus, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just before the date of search on 4.9.2013. Therefore, what has been found during the course of search is certain entries relating to undisclosed investment in purchase of land. Besides the said entries, there are no other documents/material in terms of any agreement to sell, the description of the property etc, which has been found during the course of search. As per the definition of undisclosed income u/s 271AAB, the undisclosed investment in so called purchase of land cannot be stated to be income which is represented by any money, bullion, jewellery or other valuable article or thing. Whether it can then be said that such undisclosed investment represents income by way of any entry in the books of account or other documents or transactions found in the course of a search under section 132. An investment per se represents an outflow of funds from the assessee s hand and an income per se represents an inflow of funds in the hands of the assessee. Therefore, once there is an inflow of funds by way of income, there could be subsequent outflow by way of investment. Investment and income thus connotes different meaning and connotation and thus cannot be used interc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of bringing the amount to tax. In light of the same, the undisclosed investment by way of advance for purchase of land can be subject matter of addition in the quantum proceedings, as the same has been surrendered during the course of search in the statement recorded u/s 132(4) and offered in the return of income, however the same cannot be said to qualify as an undisclosed income in the context of section 271AAB read with the explanation thereto and penalty so levied thereon deserved to be set-aside. Thus, even there is payment for purchase of raw material the said outgo of money itself cannot be treated as undisclosed income of the assessee in the absence of corresponding asset found at the time of search. A similar view has been taken by this Tribunal in a series of decision as relied upon the ld. AR of the assessee. In view of the facts and circumstances of the case where there was no discrepancy found in the physical stock as well as stock recorded in the books of account despite the physical verification and inventorization carried out of investigating team at the time of search then the mere details of payment for purchases in cash would not constitute un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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