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TMI Blog2019 (7) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said penalty of Rs. 60,00,000/-. 2. The assessee craves his right to add, amend or alter any of the grounds on or before the hearing." 4. Rival contentions have been heard and record perused. The facts in brief are that the assessee is a salaried person and also having income from other sources. He is Director of Balaji Industrial Engineering Ltd.. A search and seizure operation U/s 132 of the Act were carried out on 06/11/2012 at the various premises of Kanodia Group to which the assessee belongs. During the course of search, a red diary containing seven (7) pages was found from assessee's office wherein certain notings relate to cash advances was found recorded. There was total advance of Rs. 4.00 crores. Out of this Rs. 4.00 crores, the assessee surrendered Rs. 2.00 crores in his name and Rs. 2.00 crores in the name of his father Shri Kailash Kumar Kanodia (present assessee before us). In the statement given by Shri Kailash Kumar Kanodia U/s 132(4) of the Act, the A.O. impose the penalty @ 30% under clause (c) of sub section (1) of section 271AAB holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the decision of Shri Ravi Mathur Vs DCIT (Supra) in following subsequent judgments where if limb is not specified the penalty proceedings have been held to be void. * Shri Suresh Chand Mittal vs DCIT dated 2-7-2018(Supra) (CLC 81-116) (Internal Page 35) * Dinesh Kumar Agarwal vs ACIT (Supra) dated 24-7-2018 (CLC 117-167) (Internal page 45) * Padam Chand Pungliya vs ACIT (Supra) dated 5-4-2019 (CLC 251-289) (Internal page 31) * Shri Suraj Mal Bansal & Others vs DCIT (Supra) dated 8-4-2019 (CLC 290-313) (Internal Page 21) * Shri Gopal Das Sonkia vs DCIT ITA No. 306/JP/2018 dated 11-4-2019 (CLC 314-351) (Internal Page 24) He further argued that the penalty U/s 271AAB of the Act is not mandatory. For this purpose, reliance was placed on the following judicial pronouncements: * DCIT Vs Manish Agarwal (Supra) (CLC 1-12) * DCIT Vs. Madan Lal Beswal (Supra) (CLC 214-225) * Sanwar Mal Agarwal & DCIT Vs. Agam Saran Khemka (Supra) (CLC 226-233) * DCIT Vs Subhash Chandra Agarwal (Supra) (CLC 234-243) 7. As per the ld AR, the assessee was not carrying on any business, therefore, he was not required to maintain any regular books of account under the Income Tax Act. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax thereon before the specified date, the commitment from his side become final, conclusive and irretrievable. Statements u/s 132(4) is recorded under oath. Any admission during statements recorded under oath, if not acted upon, has penal consequences under the Indian penal code. The verification part of the return is also a declaration, which if found wrong, has penal consequences. Thus, the binding effect of the statement u/s 132(4) is as high as of verification contained in the return of income. In a peculiar situation of search, the verification in a return of income is repetition of what is admitted under oath u/s 132(4). As per the ld AR, it is worthwhile to note that in situation where nothing is admitted u/s 132(4), the first binding effect comes through the verification contained in the return of income. This concept is evident because in situation given in clause "a", filing of return is the last condition i.e. (iii)(B), whereas in situation given in clause "b" it is second last situation i.e. (ii)(A). He further submitted that a procedural lapse, when all other conditions are fulfilled, should not lead to penalizing the assessee by imposing the penalty at the rate of 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisions of law are to be applied on the facts already available on record. The omission of the above ground was inadvertent. This additional ground is taken as a matter of precaution. The issue is otherwise covered in Ground No. 1. Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383 (SC) held that "...Under section 254, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act, 1961. Since, he is not required to maintain any regular books of account, there is no question of recording the above transactions relating to cash advance given by the assessee in his books of account. (b) Since the assessee is not engaged in business or profession, the assessee's case falls in the second limb i.e. "or other documents" as stipulated in Explanation (c) of section 271AAB which describes undisclosed income for the purposes of this section. At the time of search, the transactions were found to be recorded in the 'Red Diary', which is 'other document', mentioned in above definition of undisclosed income. (c) There is no requirement in law to disclose income in respect of the assessment year relevant to previous year in which search is conducted to Chief Commissioner or Commissioner before the date of search. Even though, the A.O. has accepted the fact that the cash payments were recorded in the seized diary but alleged that it cannot be presumed that he is not maintaining any Statement of Affairs. (AO Penalty Order Page 5) since he is a director in many companies. In this regard, we observe that mere fact that assessee is director in many co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (ITA No. 969/JP/2017) dated 13-6-2018 (CLC 13-47) held that once the said income is found as recorded in the other documents maintained in the normal course, the income cannot be termed as "Undisclosed Income" as per section Explanation (c) to section 271AAB and no penalty can be levied against the assessee. Relevant para is reproduced hereunder: (Internal Page 34-35) "Therefore, when the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Hence, in view of the above facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilver & Art Palace vs DCIT ITA No. 236/JP/2018 dated 11-2-2019 (CLC 357-394), where Hon'ble ITAT Jaipur Bench held that such cash advances cannot be deemed as 'Undisclosed Income' for the purpose of section 271AAB. Relevant portion being para 42, 43 & 44 of the judgment is being reproduced hereunder: (Internal Page 35-38) "42. Now, coming to surrender made on account of cash advances for land purchases in the statement recorded u/s 132(4) of the Act. During the course of search, a diary has been found wherein there are notings relating to advance given to various persons towards purchase of land. 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been brought on the statue book and not otherwise. In the instant case, the deeming provisions are contained in section 69, 69A and section 69B and therefore, the same could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the AO has not even invoked the said deeming provisions in the quantum proceedings in the instant case. Therefore, even on this account, the deeming fiction cannot be extended to the penalty proceedings which are separate and distinct from the assessment proceedings and more so, where the provisions of section 271AAB provide for a specific definition of undisclosed income. Where a specific definition of undisclosed income has been provided in Section 271AAB, being a penal provision, the same must be strictly construed and in light of satisfaction of conditions specified therein and it is not expected to examine other provisions where the same has been defined or deemed for the purposes of bringing the amount to tax. 44. In light of above discussions and in the entirety of facts and circumstances of the case, the penalty U/s 271AAB is directed to be deleted on am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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