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TMI Blog2020 (4) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income and specified previous year are fulfilled - Penalty, if at all is leviable, it can be levied only u/s 271AAA of the I.T.Act, 1961, but not u/s 271(1)(c) Arguments of the Ld. DR that although, provision of section 271AAA is applicable for specified previous year, but additions made in the assessment is on estimation basis, and therefore, the conditions prescribed u/s 271AAA are not fulfilled in order to levy penalty under said section is incorrect, because whether addition is made on estimation basis or on the basis of certain evidences, fact remains that the additions made in the assessment is pursuant to search conducted u/s 132 and such income is on the basis of incriminating material found, as a result of search. Therefore, we are of the considered view that the additions made in the assessment proceedings, is towards undisclosed income of a specified year and hence, penalty if at all is leviable, it can be levied only u/s 271AAA of the Act, but not under section 271(1)(c) AO was erred in levying penalty u/s 271(1)(c) in a cases, where the assessment has been completed for a specified previous year and addition has been made towards undisclosed income unearth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(l)(c) of the Act is bad in law and not sustainable in the eyes of law. 2. On the facts and circumstances of the appellant's case and in law, Ld Commissioner of income Tax (Appeals) erred in not quashing the penalty levied u/s 271(l)(c ) inspite of the fact that penalty provisions of 271(l)(c) are not applicable Co the facts since assesses fall under the provisions of section 271AAAoftheAct. 3. On the facts and circumstances of the appellant's case and in law the Ld Commissioner of Income Tax (Appeals) erred in confirming the action of Ld. Assessing Officer's in imposing penalty of ₹ 51,66,000/- (approx.) by invoking provisions of section 271(l)(c) of the Income Tax Act, 1961. 3. The revenue has raised the following grounds of appeal. On the facts and circumstances of the case, the Ld. CIT(A) has erred in limiting the penalty u/s 271(1 )(c) of ₹ 4,43,49,1 49/- to ₹ 58,46,280/- stating that the concealed income as per assessment order was reduced by ITAT from ₹ 13,04,77,050^ to Rs. l,72,20,000/- without appreciating that the Department has filed appeal u/s 260 A before the Hon ble High Court with respect to the same and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncealed particulars of incomer nor furnished inaccurate particulars of income. The Ld. AO, after considering relevant submissions of the assessee and also, taken support from certain judicial precedents, including the decision of Hon ble Supreme Court, in the case of Union of India vs Dharmendra Textile Processors ( 2008) 13 SCC 369, opined that the assessee has furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the I.T.Act, 1961and accordingly, levied penalty of ₹ 4,43,49,149/-, which is equivalent to 100% of tax sought to be evaded. 6. Aggrieved by the penalty order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged the penalty levied by the Ld. AO on technical ground, in light of certain judicial precedents, including the decision of Hon ble Supreme Court, in the case of CIT vs SSA s Emerald Meadows (2016) 73 taxmann.com 248 and argued that the penalty order passed by the Ld. AO is void ab-initio and liable to be quashed, because the Ld. AO has initiated penalty proceedings, without striking of inapplicable part of show cause notice issued u/s 274 r.w.s. 271(1)(c), which clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although, the Ld. AO has levied penalty on total additions made in assessment proceedings, but, fact remains that the ITAT has finally sustained additions to the extent of ₹ 1,72,20,000/-. Therefore, he opined that penalty, if at all is leviable, it can be levied only on the additions finally sustained by the ITAT and accordingly, sustained penalty levied by the Ld. AO u/s 271(1()(c) of the Act, to the extent of additions finally sustained by ITAT and balance penalty levied on the additions, which has been deleted by the ITAT has been deleted. The relevant findings of the Ld.CIT(A) are as under:- 6.5 It is seen from the above provisions that penalty under section 271AAA is leviable on the undisclosed income of the specified previous year In this case, assessment year 2009-10 is the specified previous year as the search happened on 29.02,2009. There is no dispute regarding the specified previous year. But the dispute is about the income on which penalty has been levied. The assessee's contention is penalty has to be levied under section 271AAA. Penalty under section 271AAA is leviable on the undisclosed income detected during the search. In this case penalty has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the assessee but the assessee failed to file any response, In the absence of any reply from the assessee, the AO levied penalty under section 271(1)(c) for concealment of particulars as well as furnishing of inaccurate particulars of income. This plea of the learned counsel is also rejected. 6.7 The third plea taken by the learned counsel is that on merits also the penalty cannot be sustained as it has been levied on the basis of an income which has been estimated- The learned counsel argued that the basic reasoning of bank deposit as well as statement recorded under section 132(4), on the basis of which the penalty was levied, has been quashed by the Tribunal. The Tribunal preferred to estimate certain incomes on ad hoc basis of expenditure and confirmed an addition of ₹ 28,70,000/-per month, Here again, the learned counsel has taken two arguments, one that no penalty can be levied when additions are made on estimations and two when the moot basis on which the penalty was levied was quashed in appeal, the penalty doesn't survive. For this argument he placed reliance on the judgment of the jurisdictional High Court in the case of Indermal Manaji vide 1TR number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly. This means the penalty on the differential amount of rupees ₹ 11,32,57,050 (13,04,77,050 - 1,72,20,000) is deleted. This ground of appeal is PARTLY ALLOWED. 8. The Ld. AR for the assessee, at the time of hearing submitted that penalty levied by the Ld. AO u/s 271(1(c) of the I.T.Act, 1961 is illegal and void ab-initio, because the Ld. AO has not recorded satisfaction, as required under the law before initiation of penalty proceedings, which is evident from the fact that the Ld. AO has issued show cause notice u/s 274 r.w.s. 271(1)(c) of the Act, without striking of inapplicable part of show cause notice. The Ld. AR, further submitted that the penalty levied by the Ld. AO u/s 271(1)(c) is illegal and void ab-initio, and the Ld. AO has levied penalty u/s 271(1)(c) of the Act, in spite of the fact that penalty provision of section 271(1)(c) of the Act, are not applicable, in a cases where search is conducted u/s 132 and the assessment year involved is a specified assessment year and in such situations penalty, if at all is leviable, it can be leviable under the provision of section 271AAA of the I.T.Act, 1961. The Ld. AR, further submitted that without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arguments of the assesee that penalty proceedings initiated u/s 271(1)(c) of the Act, consequent to show cause notice issued u/s 274 r.w.s. 271(1)(c) of the Act is illegal and void ab-initio, we find that the Ld. AO has recorded clear satisfaction as required under the law during the course of assessment proceedings, before initiate penalty proceedings u/s 271(1)(c). Therefore, we are of the considered view that there is no merit in legal arguments taken by the assessee and accordingly, ground No.1 of assesee appeal is rejected. Insofar as, the second legal arguments of the assessee that penalty levied u/s 271(1)(c), is illegal and void ab-intio, because penalty, if any is leviable in a cases, where search is conducted u/s 132, then it can be levied only u/s 271AAA of the Act, but not u/s 271(1)(c), we find that as per the provisions of section 271AAA of the Act, where search action has been conducted on or after 01/06/2007, penalty for concealment of income or furnishing of inaccurate particulars of income can be levied u/s 271AAA, if the assessment year involved is a specified previous year. As per the said provisions, the Ld. AO may, notwithstanding anything contained in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the considered view that the additions made in the assessment proceedings, is towards undisclosed income of a specified year and hence, penalty if at all is leviable, it can be levied only u/s 271AAA of the Act, but not under section 271(1)(c) of the I.T.Act, 1961. This proposition is supported by the decision of ITAT, Delhi bench, in the case of Aswani Kumar Arora vs ACIT (2016) 50 ITR 337 Delhi Tribunal, where it was held that assessee during search and seizure proceedings, had admitted certain undisclosed income, penalty if any should be levied u/s 271AAA and not u/s 271(1)(c) of the I.T.Act, 1961. The ITAT Ahmadabad Bench, in the case of Dr. Naman A. Shastria vs ACIT (2015) 155 ITD 1003 held that provisions of section 271AAA and 271(1)(c) are mutually exclusive and thus, once penalty initiated u/s 271AAA for specified previous year, there cannot be any occasion to impose penalty u/s 271(1)(c) of the I.T.Act, 1961. 11. In this view of the matter and considering the facts and circumstances of this case, we are of the considered view that the Ld. AO was erred in levying penalty u/s 271(1)(c) of the I.T.Act, 1961, in a cases, where the assessment has been comleted for a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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