9911796707
TMI Blog2019 (2) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... not come within the ambit and scope of the expression undisclosed income as defined for the purposes of Section 271AAB It has come on record that the Revenue seeks to rely upon the same very material as it was used in assessee s sister concern s case pertaining to the very search wherein its identical grievance stands declined vide above extracted detailed discussion. We adopt the said reasoning mutatis mutandis in the instant case as well as no distinction on facts and law has been pointed out at the Revenue s behest. The CIT(A) s order under challenge deleting the impugned penalty is confirmed accordingly. - Revenue s appeal is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... as promised some reciprocal benefits like not being visited by penalty. Thus, it was held that where additions have been made based on assessee's own offerings, penalty provision shall not lie. 7. I also agree with the recent decision of ITAT, Lucknow in the case of SandeepChandak vs. ACIT (2017) 186 TTJ (Lucknow) 265 in which it has been held that it is not mandatory to impose penalty u/s 271AAB in each and every case even if the assessee has made the default under the said provision. The Hon'ble ITAT has held as under. ""We have also gone through the provisions of s.271AAB and noted that this section specifies three different situations under which the penalty can be imposed on the assessee under different cls. (a),(b), and (c), the penalty has to be imposed on different rates. The AO has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the provisions of s. 271AAB are not mandatory which means that the penalty has (Sic-not) to be levied in each and every case wherever the assessee has made default as stated under cls. (a), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemently contends that during the course of hearing that the ld. CIT(A) has erred in law and on facts in deleting the impugned penalty. His case is that the Assessing Officer had rightly treated the assessee's additional income to the tune of ₹ 31,00,00,000/- to be representing its undisclosed income u/s 271AAB Explanation (C) of the Act. Our attention is invited to its detailed write-up filed during the course of hearing prima facie indicating impugned penalty based on relevant incriminating "ASHMI/1 to RASHMI/5, RASHMI/HD/1, RML-II/1 TO RMLII-5,RML-11/HD/1 & RML-II/PD/1 AND RCPL/1 to RCPL/7." 5. The Revenue's case therefore is that the Assessing Officer has successfully proved his case that assessee's income disclosed in such amended to its undisclosed income inviting the impugned penalty under the relevant statutory provision. We find no merit in Revenue's instant arguments. Mr. Tulsiyan has placed on record this tribunal's coordinate bench's in DCIT vs. M/s. Rashmi Metaliks Ltd.; ITA No.1608/Kol/2017 decided on 01.02.2019 pertaining to the very search as well as above stated incriminating documents deleting identified penalty vide following detailed discussion: "2. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , jewellery, cash etc. found in the course of search or for that matter any document or papers which were impounded and seized in the course of search. It was therefore claimed that the income voluntarily offered did not qualify as 'undisclosed income' as defined for the purposes of that section and hence no penalty was warranted u/s 271AAB of the Act. The Ld. AO was however of the opinion that unlike Section 271(1)(c) or 271AAA, the provisions contained in Section 271AAB were mandatory and automatic and once disclosure of income was made by an assessee in his statement u/s 132(4), then penalty had to be levied under Section 271AAB of the Act. According to AO the disclosure of ₹ 69 crores made by the assessee was with reference to seized documents bearing identification Mark RASHMI/1 to RASHMI/5 and RCPL/1 to RCPL/7 and therefore it qualified as 'undisclosed income' under Explanation (c) to Section 271AAB of the Act. The AO accordingly imposed penalty of ₹ 6,90,00,000/- under Section 271AAB(a) of the Act. Aggrieved by the action of the AO, the assessee preferred an appeal before the Ld. CIT(A) who deleted the penalty by observing as under: I have considered the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the penalty can be imposed on the assessee under different cls. (a), (b) and (c), the penalty has to be imposed on different rates. The A.O. has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the provisions of s. 271AAB are not mandatory which means that the penalty has (Sic-not) to be levied in each and every case wherever the assessee has made default as stated under cls. (a), (b) and (c) of the Act. Sub-s. (1) of s. 271AAB uses the word 'may' not 'shall'. 'May' cannot be equated with 'shall' especially in penalty proceedings. Using the word 'may' in our opinion, gives a discretion to the A.O. to levy the penalty or not to levy, even if the assessee has made the default under the said provision. In view of aforesaid discussion, we set aside the order of CIT(A) and delete the penalty levied on the assessee.' 8. I find that during the search and seizure operation u/s 132 in this case no evidences regarding concealment/undisclosed income in the form of cash seizure/papers/documents/stock etc. were found and seized. Nothing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of search conducted u/s 132 of the Act. Not only the disclosure was made at the time of search conducted on 18.02.2013 but in the joint declaration dated 18.04.2013 the assessee along with Rashmi Cement Ltd & SajjanPatwari HUF reiterated its admission of paying tax on the undisclosed income of ₹ 69 crores which was found as a result of search conducted against Rashmi Group. The Ld. DR also brought to our attention that not only such undisclosed income of ₹ 69 crores was included in the returned income but the assessee had also credited such undisclosed income in its Profit & Loss Account for the relevant year. The Ld. DR submitted that once the assessee made a disclosure of income u/s 132(4) then in terms of provisions of Section 271AAB, levy of penalty was mandatory and therefore automatic. He submitted that the Ld. CIT(A) did not appreciate the schematic difference in enacting Section 271AAB in contradistinction to provisions of Section 271(1)(c) or 271AAA where the AO was given discretion in the matter of levying penalty. The Ld.CIT DR supported the action of the AO by relying on the decision of Hon'ble Allahabad High Court in the case of ACIT vs Sandeep Chandak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -clauses contemplated by clause (c) of the Explanation to Section 271AAB and therefore merely because the assessee had made offer to pay tax on income while recording his statement u/s 132(4) of the Act, that by itself did not lead to conclusion that income specified in the joint declaration u/s 132(4) was 'undisclosed income' for the purposes of Section 271AAB attracting rigors of penalty under that Section. He further submitted that the offer to pay tax on the additional income of ₹ 69 crores was made and acted upon by the assessee in good faith on the assurance given by the search party that the assessee would not be visited with any penal consequences. The assessee was therefore under bona fide belief that since it had acted upon its bona fide offer and the income did not come within the meaning of undisclosed income, it would not be visited with penalty u/s 271AAB of the Act. The Ld. AR argued that the Ld. CIT(A) correctly appreciated the true and correct purport of Section 271AAB and applying the ratio laid down by the Hon'ble Apex Court in the case of Sudardhan Silk &SareesVs CIT (300 ITR 205), he rightly deleted the penalty levied u/s 271AAB of the Act. The Ld. AR the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 274 deals with the procedure for levy of penalty, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Once the opportunity is given to the assessee, the penalty cannot be mandatory and it is on the basis of the facts and merits placed before the A.O. Once the A.O. is bound by the Act to hear the assessee and to give reasonable opportunity to explain his case, there is no mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Hon'ble A.P. High Court in the case of RadhakrishnaVihar in ITTA No.740/2011 while dealing with the penalty u/s 158BFA held that 'we are of the opinion that while the words shall be liable under sub section (1) of section 158BFA of the Act that are entitled to be mandatory, the words may direct in sub section 2 there of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the defect in the notice issued under section 271AAB on account of mentioning wrong provision of the Act being 271(1)(c) of the Act. The Hon'ble High Court after considering the fact that the show cause notice issued by the AO though mentions section 271(1) in the caption of the said notice, however, the body of the show cause notice clearly mentions section 271AAB, which was fully comprehended by the assessee as reveals in the reply filed by the assessee against the said show cause notice. Hence the Hon'ble High Court has held as under :- " The ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not 271AAB. In this respect, the copy of notice has been produced by the ld. A.R. before me. It is seen that the ld. A.R is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the words used in section 271AAB of the Act and the words used in section 158BFA(2) of the Act are identical. Hence, argued that the penalty section 271AAB of the Act penalty is not automatic and it is on the merits of each case. For ready reference, we reproduce 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 provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1 st 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 undisclosed income of the specified previous year, if such assessee- (i) in the course of 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) Substantiates the manner in which the undisclosed income was derived; and (iii) On or before the specified date- (A) pays the tax, together with interest, if any, in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Act, the words used are 'AO may direct' and 'the assessee shall pay by way of penalty'. Similar words are 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 view. Sub section (3) of section 271AAB: The provisions of section 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. 7. The legislature has included the provisions of section 274 and section 275 of the Act in 271AAB of the Act with clear intention to consider the imposition of penalty judicially. Section 274 deals with the procedure for levy of penalty, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Once the opportunity is given to the assessee, the penalty cannot be mandatory and it is on the basis of the facts and merits placed before the A.O. Once the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the said clause reads as follows: "undisclosed income" means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions 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. 12. From the foregoing definition of 'undisclosed income' we find that this expression is given a definite and specific meaning and the word has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny entry in the books of accounts or other documents or transactions found in the course of search. In this regard we may make useful reference to the relevant portion of the assessment order in which the assessee's voluntary offer in respect of ₹ 69 crores was discussed by the AO. "In a joint disclosure petition dated 18.04.2013, the assessee company along with M/s. Rashmi Cement Ltd. and Sajjan Kr. Patwari (HUF) disclosed ₹ 102.00 crores for the F.Y. 2012-13 relevant to the A.Y. 2013-14 on account of 'Estimated amount of Capital Employed plus profit on sales and commodity trading income' and 'miscellaneous income'. Out of the same, M/s. Rashmi Metaliks Ltd., M/s. Rashmi Cement Ltd. and SAjjan Kr. Patwari (HUF) disclosed ₹ 69 crores, ₹ 31 crores and ₹ 2 crores respectively. M/s. Rashmi Metaliks Ltd. has disclosed ₹ 69 crores on account of 'Estimated amount of Capital Emploued plus profit on sales and commodity trading income' and ₹ 1 crore on account of 'Misc. Income (Net) to cover up the probable errors and commissions' for the F.Y. 2012-13 relevant to the A.Y. 2013-14. It is seen from the return that the assessee has disclosed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From the foregoing discussion and material on record, we find that applying both the limbs contained in clause (c) of Explanation to Section 271AAB, the additional income of ₹ 69 crores offered by the assessee through its joint declaration was neither represented by any assets found in the course of search nor represented by any entry made in the books of accounts or other documents or transactions found in the course of search. We therefore find that the income voluntarily offered by the assessee did not come within the ambit and scope of the expression 'undisclosed income' as defined for the purposes of Section 271AAB of the Act. 17. From the plain reading of Section 271AAB we find that the levy of penalty is permissible if and only if there exists 'undisclosed income'. Finding or unearthing of undisclosed income in the course or as a result of search conducted u/s 132 of the Act is sine qua non for invoking penal provisions of Section 271AAB of the Act. Discovery and consequent assessment of undisclosed income is a condition precedent for levy of penalty under Section 271AAB of the Act. It has to be borne in mind that every offer of the assessee to pay tax on his or h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed such sum to tax solely based on the assessee's disclosure petition and there was no material brought on record to indicate that it was represented by any valuable asset or any entry found in any books or other documents seized in the course of search. The AO thereafter also levied penalty u/s 271AAB @ 10% which was deleted by Ld. CIT(A). On appeal this Tribunal upheld the order of Ld. CIT(A) by observing as under: "4. Learned Departmental Representative argued that the Assessing Officer had rightly imposed the impugned penalty in assessee's case @10% of his undisclosed income of ₹ 1 crore coming ₹ 10,00,000 in question. We find no substance in Revenue's instant arguments. We first of all make it clear that section 271AAB of the Act applies in relation to the impugned penalty @10% of the undisclosed income as stood defined in Explanation (c) thereto. There is no material in the case file to indicate that the assessee's undisclosed income represents any money, bullion, jewellery or valuable article or any entry in the books or other documents therein. We make it clear that we are dealing with a penalty provision in tax statute which is to be strictly interpreted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idences were found regarding ₹ 1 crore which was offered for taxation by the assessee suomoto in order to buy peace of mind. I also .find that neither the officers in the investigation wing in the post search investigation nor the Assessing Officer during assessment process found any discriminating evidence of undisclosed income other than the statement of the assessee for making the addition of ₹ 1 crore. Further I find that the AO has levied penalty u/s 271AAB (1)(a). This section reads like sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. Thus, it is clear that in order to levy penalty two things are essential (1) undisclosed income and (2) specified previous year. Here in this case ₹ 1 crore was offered for taxation by the assessee suomoto in the statement recorded at the time of search. From the ratio decided by the Hon'ble Supreme Court in the case of SudarshanSiik&Saries (supra), it is clear that only the statement of the assessee without any corroborating evidence cannot be the only basis for levying penalty. Here it is also clear that from the statement of the assessee one cannot point out which amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the basis of incriminating material. In the instant case a loose sheet was found according to the A.O., it was incriminating material evidencing the undisclosed income. In the penalty order the AO observed that loose sheet shows the cost per square feet is ₹ 3571/- per sft. and assessee stated to have submitted in sworn statement cost per sq. feet at ₹ 2200/- to ₹ 2300/- per sq. feet. However neither the AO nor the Ld.CIT(A) has verified the cost of construction with the books and projections found at the time of search. The counsel argued that it was mere projection but not the actuals. The write up heading also mentioned that summary of the projected profitability statement. There is no evidence to establish that projections reflected in the loose sheet is real. No other material was found during the course of search indicating the undisclosed income. There was no money, bullion, jewellery or valuable article or thing or entry in the books of accounts or documents transactions were found during the course of search indicating the assets not recorded in the books of accounts or other documents maintained in the normal course, wholly or partly. The revenue di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered the rival submissions as well as relevant material on record. At the outset, we note that the surrender of ₹ 1,65,38,920/- was made by the assessee during the course of search and Seizure proceedings and offered to tax for the year under consideration. The details of the surrendered income pertains to the year under consideration are as under:- On account of debtors (advances given) ₹ 80,00,000/- Unexplained cash found ₹ 10,00,000/- Accrued interest on debtors ₹ 20,00,000/- Excess stock found during search ₹ 55,38,920/- Total ₹ 1,65,38,920/- We find that out of these four items of surrenders only advances of ₹ 80,00,000/- is based on the incriminating material and all other items are not based on the seized material. The interest on advances/ debtors is only an estimated amount disclosed during the year but no record or any document was found during the search and seizure action. As regards the excess stock we find from the record as produced before us by the ld. DR that the valuation report is based on the market price of the gold Jewellery prevailing on the date of search as against the cost or realizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income. The AO levied penalty u/s 271AAB on such additional income offered to tax. The Tribunal noted that neither the Investigation Wing in the post search nor during the course of assessment proceedings, the Assessing Officer found any incriminating evidence of undisclosed income otherwise the declaration of the assessee for making the addition. Following the decision rendered in the case of ACIT Vs Kanwar Sain Gupta (supra), the Tribunal deleted the penalty levied u/s 271AAB of the Act. 23. Respectfully following the decisions in the foregoing and having regard to our finding that the income of ₹ 69 crores voluntarily offered to tax was not in the nature of 'undisclosed income' defined in clause (c) of Explanation to Section 271AAB, we hold that the Ld. CIT(A) was justified in cancelling the penalty levied u/s 271AAB of the Act. Accordingly the order of the Ld. CIT(A) is upheld for the reasons discussed above and the Revenue's appeal stands rejected." 6. Suffice to say, it has come on record that the Revenue seeks to rely upon the same very material as it was used in assessee's sister concern's case pertaining to the very search wherein its identical grievance ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
