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TMI Blog2020 (5) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... nt appeals, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeals and he does not stand to benefit by resorting to such delay - there exists sufficient and reasonable cause for condoning the delay of 583 days in filing the present appeals where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred. In exercise of powers under section 253(5) of the Act, we hereby condone the delay of 583 days in filing the present appeals as we are satisfied that there was sufficient cause for not presenting the appeals within the prescribed time. Penalty proceedings u/s 271(1)(c) - additional income admitted during the course of search - HELD THAT:- The fact that the AO while passing the assessment order has taken note of said disclosure of the additional income by the assessee in his statement recorded u/s 132(4) during the course of search which has been subsequently been reported to tax in the return filed u/s 153A is therefore clear enough reflection of the mind of the AO and which clearly demonstrates that the Assessing Officer at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specified previous year found during the course of search in the case of assessee - HELD THAT:- In the instant case, the notice initiating the penalty proceedings talks about initiation of penalty proceedings u/s 271AAB of the Act in respect of undisclosed income of the specified previous year. While passing the penalty order, the Assessing officer has given a clear finding as reflected in para 7 to 9 of the penalty order that the assessee is liable for penalty U/s 271AAB(1)(a) which provides for levy of penalty @ 10% of the undisclosed income. As held by the Coordinate Bench HPCL MITTAL ENERGY LTD. [ 2018 (8) TMI 507 - ITAT AMRITSAR] an uncertain charge at the time of initiation of penalty has been made good and substituted with a conclusive default at the time of passing the penalty order and that in such a case, no fault can be found in the penalty order. In such a case, we donot see any legal infirmity in the initiation of penalty proceedings and consequent penalty order so passed by the Assessing officer and the contentions so raised by the ld AR in this regard cannot be accepted. As per sub-section (3) of Section 271AAB, the provisions of section 274 and section 275 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of undisclosed income as so defined in section 271AAB and in absence thereof, on this ground itself, the impugned penalty proceedings deserve to be set-aside. When it comes to penalty proceedings, it is a settled legal proposition that the quantum and penalty proceedings are independent proceedings and while levying penalty, the provisions have to be read strictly and only where the charge against the assessee is clearly established and the conditions specified therein are satisfied, the penalty can be levied. In the instant case, we therefore find that the charge that the assessee is found to be owner of income based on entries in certain loose papers not disclosed before the date of search not been satisfied, the levy of penalty cannot be held justified and deserve to be set-aside. Regarding levy of penalty on remaining surrendered during the course of search, the said surrender may be the basis for assessment but can t form the basis for levy of penalty which are separate and distinct proceedings in absence of a specific finding as to how the same qualify as an undisclosed income as so defined u/s 271AAB of the Act. Hence, penalty levied thereon is also liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prosecution proceedings would be launched. Search was carried out long back in 2012 and till the year 2016, there was no whisper of any proposed prosecution proceedings against the assessee. Hence, the assessee and the ld. Counsel were confident that there was no further chance of such an extreme and unpleasant action. Consequently, they never anticipated any seriousness in the matter. In addition, also with a view to further cooperate with the Department and to bring the litigation to an end, the ld. Counsel advised not to file further appeal. It is under this background that the assessee acted on the advice of the ld. Counsel and no further action was taken by him in terms of filing appeal before the Tribunal. 5. It was further submitted by the ld AR that the assessee is a layman, who is not aware of the complexities of tax laws. He even went to the extent of making surrender of such income even though there was no actual undisclosed income but only because of the pressure exerted by the Department to make the search successful and also on the assurance of the search team that no prosecution proceeding would be launched, he had agreed to make the surrender and pay taxes. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the month of July, 2019 when he was in the Department for his other matters, however, came to know that the Department has decided to launch prosecution u/s 276C(1) r.w.s. 277 of the Act before the Economic Offence Court, Jaipur which was an unexpected and most unfortunate development to the utter dismay of the assessee and his Counsel. 8. It was submitted by the ld AR that the prosecution where so launched, being very serious in nature and therefore, the assessee and his Counsel discussed the matter with another Counsel in Jaipur, who advised him that these prosecution proceedings are linked to confirmation of penalty by the ld CIT(A) and to immediately file second appeals before the Tribunal against the penalty orders passed by the ld. CIT(A) in all the years without any further delay. However, the assessee, who was all along under the impression that no further appeal was required to be filed as advised by his local Counsel earlier and hence the appeal papers might not be taken into use at a later point of time, had misplaced the original copies of the impugned orders ld. CIT (A) somewhere in his premises. Thereafter, efforts were made to search out the original appeal or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petition for condonation of delay in filing the present appeals be rejected and the appeals being barred by limitation, the same should be dismissed. 13. We have heard the rival contentions and perused the material available on record. There is no dispute that there has been a delay in filing the present appeals by 583 days. There is also no dispute that under section 253(5) of the Act, the Tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there was sufficient cause for not presenting the appeal within the prescribed time. The explanation of the assessee therefore becomes relevant to determine whether the same reflects sufficient cause on his part in not presenting the present appeals within the prescribed time. In the instant case, the assessee has explained that against the levy of penalty by the Assessing officer, he had pursued the matter before the ld CIT(A) wherein he didn t got any relief and thereafter, based on advice of his legal Counsel, he didn t pursue the matter any further and didn t file further appeal before the Tribunal. He was therefore of the belief that these matters have attained finality where he has paid th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal against such penalty before the Tribunal. The Hon ble Supreme Court, in G. L. Didwania v. ITO (1995) 224 ITR 687 (SC), has held that The Criminal Court no doubt has to give due regard to the result of any proceedings under the Act having bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. In K. C. Builder v. ACIT (2004) 265 ITR 562 (SC), the Hon ble Supreme Court held that when the penalty is cancelled, the prosecution for an offence u/s 276C for wilful evasion of tax cannot be proceeded with thereafter. Following this legal proposition, the Hon ble Bombay High Court, in case of Shashichand Jain Ors. v UOI (1995) 213 ITR 184 (Bom), has quashed prosecution proceedings on the basis of the cancellation of penalty by the Appellate Authority. We therefore find that there is a close connection between penalty and prosecution proceedings and therefore, to safeguard his interest in the prosecution proceedings, where the assessee has filed the present appeals, the assessee cannot be denied and deprived of his legal defence and pleadings which he can take in the course of the prosecution proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling of the present appeals and he does not stand to benefit by resorting to such delay. 15. In case of United Christmas Celebration Committee Charitable Trust vs. ITO (Supra), the Hon ble Madras High Court has condoned the delay of 1631 days in filing the appeal before the Tribunal against the order of ld. CIT(A) refusing registration u/s 12AA of the Act. In that case, the Hon ble High Court has held that in dealing with the matter, not only the period of delay has to be taken into account but also the quality of the explanation, the legal assistance, if any, sought and rendered to the litigant, and the detriment that condonation of delay would cause to the opposing party. These are aspects, if, looked at, closely, will enable the Court to come to a conclusion as to whether the delay was intentional and/or deliberate. Accordingly, the Hon ble High Court held that even though the period of delay is large, it is inclined to condone the delay especially in the circumstances of the present case for the reason that if the assessee would succeed on merits, it could hardly be said that it would cause detriment to the Revenue in the matter involving grant of registration. In the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h by observing as under: In every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Court should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss. 18. Further, we refer to the decision the Hon ble Bombay High Court in case of Vijay Vishin Meghani vs. DCIT (Supra) wherein it has referred to the decision in case of Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi Ors. AIR 1979 SC 1666 wherein the Hon ble Supreme Court has held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before us. No presumption can be made that the delay has been occasioned deliberately or on account of culpable negligence or on account of mala fides. The litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In our view the assessee has explained the delay of filing the appeal before us. Our views find support from the decision of Hon'ble Supreme Court of India in the case of Collector, Land Acquisition vs. Mst. Katiji Ors. (1987) 62 CTR (Syn)(SC) 23 : (1987) 167 ITR 471 (SC). 20. In light of above discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the assessee in his averments has made out a clear case that there was sufficient cause which being beyond the control of the assessee, prevented him from filing the appeals in time before the Tribunal. The assessee was diligent and has sought advice from his counsel from time to time and was not guilty of negligence on his part and it cannot be said that the delay was due to the negligence and inaction on the part of the assessee, which could have been avoided by the assessee if he had exercised due care and attention. Due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises of the assessee on 19.12.2012 and issuance of notice U/s 153A, the assessee filed his return of income on 10.12.2013 declaring total income of ₹ 85,68,900/- which includes additional income of ₹ 20,000/- surrendered during the course of search against purchase of gold ornaments. The assessment was completed U/s 143(3) r.w.s 153A of the Act at ₹ 85,68,900/- and penalty proceedings U/s 271(1)(c) of the Act were separately initiated and show cause notice U/s 271(1)(c) dated 10.03.2015 was issued to the assessee. During the course of penalty proceedings, a further show cause notice dated 10.07.2015 was issued. In response, the assessee submitted that search was conducted at his residence and a piece of paper containing details of purchase of gold ornaments worth ₹ 18,150/- was found. He further submitted that he had withdrawn ₹ 2,20,414/- for his household expenses and purchase of ornament was made out of the said withdrawals. He further submitted that as he was under mental tension, physically tired and was assured that no penal action will be taken, to avoid litigation and to purchase peace of mind, he surrendered the said amount as income and paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding that a particular receipt is income or that a deduction has wrongly been claimed intentionally, can t automatically be adopted, though a finding in the assessment proceedings constitutes good evidence in the penalty proceeding. In the penalty proceedings, the AO is bound to bring positive material showing intentional concealment. Also therefore, all the evidences filed explanation submitted requires a consideration afresh. The basic difference between the assessment proceedings and in the penalty proceedings is that whereas in the penalty proceedings, the evidence has to be again evaluated differently and with a view to conclusively ascertain the earning of the undisclosed income beyond any doubt, however, in the assessment proceedings even if the evidence is not conclusive, the income may be assessed. For imposing penalty, the AO must conclusively prove the earning of the undisclosed income. However, in this case, the AO merely alleged but failed to bring any material whatsoever by making independent inquires to support the imposition of the impugned penalty. 25. It was further submitted by the ld AR that the from perusal of the show cause notice issued u/s 274 r/w sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n High Court in case of Shewta Construction Co. Pvt. Ltd. v/s ITO (in DBITA No. 534/2008 vide their order dated 06.12.2016) held as under: 9. Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order. 27. It was further submitted that the AO in the proceedings u/s 271(1)(c) has to examine all the facts of the case as well as the basis of the surrender and then arrive at the conclusion that the income disclosed by the assessee falls in the definition of undisclosed income as stipulated in the explanation to the section 271(1)(c) of the Act. It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the course of search and thereafter, the assessee filed his return of income disclosing such income doesn t absolve the assessee from levy of penalty as explanation 5A to section 271(1)(c) is clearly attracted in the instant case. It was accordingly submitted that there is no infirmity in the order of the Assessing officer and which has rightly been confirmed by the ld CIT(A). The ld DR accordingly supported the findings of the lower authorities. 29. We have heard the rival contentions and pursued the material available on record. The assessee had filed his original return of income on 23.09.2008 declaring total income of ₹ 85,48,910. Thereafter, pursuant to search conducted on the premises of the assessee on 19.12.2012 and issuance of notice U/s 153A, the assessee filed his return of income on 10.12.2013 declaring total income of ₹ 85,68,900/- which includes additional income of ₹ 20,000/- surrendered during the course of search against purchase of gold ornaments. The Assessing officer has stated that since the assessee failed to give any details of the nature of undisclosed income and the manner in which it has been earned, the penalty provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. We therefore find that while issuing the notice u/s 271(1)(c), the specific charge in terms of concealment of particulars of income or furnishing of inaccurate particulars of income is not ascertainable. 31. We now refer to the penalty order dated 30.7.2015, wherein the AO has stated that the assessee in his return of income filed U/s 153A of the Act had disclosed additional income of ₹ 20,000/-. It was further held by the Assessing Officer that the assessee deliberately concealed his income and furnished inaccurate particulars of his income to the tune of ₹ 20,000/- in the original return filed U/s 139(1) of the Act on 23.09.2008. Therefore, the assessee is liable for penalty U/s 271(1)(c) of the Act. Further, he referred to the explanation 5A to section 271(1)(c) and held as under: I hold the assessee is guilty for furnishing of inaccurate particulars of income and concealing particulars of his income and find it to be a fit case for imposition of as provided U/s 271(1)(c) of Act. The AO accordingly levied penalty of ₹ 6,800/-on the assessee for concealment of income by furnishing inaccurate particulars of income. 32. We theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case, we find that uncertain charge at the time of initiation of penalty proceedings is followed by uncertain charge even at the time of passing the penalty proceedings as the Assessing officer has not specified as to how the assessee is found guilty of both concealment of income as well as furnishing inaccurate particulars of income. Further, the decision of Hon ble Rajasthan High Court in case of Sheveta Construction (Supra) wherein the Hon ble High Court has held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order also supports the case of the assessee. Therefore, the penalty order so passed by the Assessing officer cannot be sustained and deserved to be set-aside on this ground itself. 33. Now coming on the merits of the levy of the penalty, let s now examine the provisions of explanation 5A to section 271(1)(c) of the Act which has been invoked by the Assessing officer and the same reads as under:- [Explanation 5A - Where, in the course of a search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition is not relevant in the instant case and has not been dealt upon by us. (2A) The second alternate condition is that during the course of search, the assessee is found to be owner of any income based on any entry in books of accounts or other documents or transactions and the assessee claims that such entry in the books of accounts or other documents or transactions represent his income wholly or in part for any previous year which has ended before the date of search. We find that this condition is relevant in the instant case and we will examine whether this condition is satisfied or not in the subsequent paragraphs. (3) The third condition is that where the return of income for such previous year has been furnished before the said date but such income has not been declared therein. The phrase such previous year refers to the previous year which has ended before the date of search and such income refers to the income in respect of which the assessee is found to be owner of any money, bullion, jewellery or other valuable article or thing or any income based on any entry in books of accounts or other documents. The phrase said date refers to the date of search. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim and the admission by the assessee that such income represents his income for the said previous year. Therefore, there has to be finding by the Revenue that the assessee is the owner of such income for the relevant previous year and acceptance/admission by the assessee that such income represent his income wholly or in part for any previous year ended before the date of search. Further, such findings and admission should be based on any entry in books of accounts or other documents or transactions found during the course of search. Where either of the two limbs is satisfied and other limb is not satisfied, the penalty cannot be levied as the requirement is satisfaction of both the limbs individually and cumulatively and more so, in the context of deeming fiction so created by the explanation 5A which have to be read strictly. 37. In the facts of the present case, we find that the AO has recorded a finding that the assessee has declared additional income of ₹ 20,000/- surrendered during the course of search against purchase of gold ornaments and the same has been accepted and offered to tax subsequently in the return of income so filed in response to notice u/s 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We therefore find that where a specific definition of undisclosed income has been provided in explanation 5A to section 271(1)(c), 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. In light of the same, the undisclosed investment in gold ornaments 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 section 271(1)(c) read with the explanation 5A thereto. In any case, we find that there is no finding recorded by the Assessing officer that the assessee is found to be the owner of income based on any entry in books of accounts or other documents or transactions found during the course of search. Therefore, in absence of any finding in the penalty order to the effect that the assessee is found to be the owner of income based on any entry in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epair was done out of such withdrawals. It was further submitted that the good work reward was paid to the employees of the shop which is for the business only and can be termed either as extra salary or bonus to the employees but it is not an income. He further submitted that as he was under mental tension, physically tired and was assured that no penal action will be taken, to avoid litigation and to purchase peace of mind, he surrendered the said amount as income and paid the tax and interest thereon. The submission so filed by the assessee was considered but not found satisfactory to the Assessing Officer. As per the Assessing Officer, the assessee in his return of income filed U/s 153A of the Act had disclosed additional income of ₹ 2,87,150/-. It was further held by the Assessing Officer that the assessee deliberately concealed his income and furnished inaccurate particulars of his income to the tune of ₹ 2,87,150/- in the original return filed U/s 139(1) of the Act on 22.09.2008. Therefore, the assessee is liable for penalty U/s 271(1)(c) r.w. explanation 5A. The Assessing Officer accordingly held that the assessee has furnished inaccurate particulars of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee deliberately concealed his income and furnished inaccurate particulars of his income to the tune of ₹ 5,80,257/- in the original return filed U/s 139(1) of the Act on 16.09.2010. Therefore, the assessee is liable for penalty U/s 271(1)(c) r/w explanation 5A. The Assessing Officer accordingly, held that the assessee has furnished inaccurate particulars of income and concealed particulars of his income and it is a fit case for imposition of penalty U/s 271(1)(c) and penalty of ₹ 2,10,000/- was imposed upon the assessee for concealment of income by furnishing inaccurate particulars of income which, on appeal, has been confirmed by the ld CIT(A). 41. For A.Y. 2011-12 in ITA No. 1032/JP/2019, the facts of the case are that the assessee had filed his original return of income on 19.09.2011 declaring total income of ₹ 1,30,18,640/- and in response to notice U/s 153A of the IT Act, the assessee had filed his return of income on 10.12.2013 declaring additional income of ₹ 18,93,932/- surrendered during the course of search on account of undisclosed cash expenses and investment in jewellery etc. The assessment was completed U/s 143(3) r.w.s 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed U/s 143(3) r.w.s 153A of the Act at ₹ 2,07,29,730/-and penalty proceedings were separately initiated and show cause notice U/s 271(1)(c) dated 10.03.2015 was issued. During the course of penalty proceeding, a fresh show cause notice dated 10.07.2015 was issued. In response, the assessee submitted that search was conducted at his business premises and residential house and during search, a few loose papers/rough papers were found, the entries on said papers were rough entries and does not have any correlation with his business/income. However, as he was under mental tension, physically tired and was assured that no penal action will be taken, therefore, to avoid litigation and to purchase peace of mind, he surrendered the said amount as income and paid the tax and interest thereon. The submission so filed by the assessee was considered but not found satisfactory to the Assessing Officer. As per the Assessing Officer, the assessee in his return of income filed U/s 153A of the Act had disclosed additional income of ₹ 22,20,428/-. It was further held by the Assessing Officer that the assessee deliberately concealed his income and furnished inaccurate particulars o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing grounds of appeal: 1. The impugned penalty order U/s 271AAB of the Act dated 07.08.2015 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be quashed. 2. ₹ 21,54,034/-: The ld. CIT(A) erred in law as well as on the fact of the case in law as well as on the facts of the case in confirming the order of AO dated 07.08.2015 imposing penalty U/s 271AAB of the act of ₹ 21,54,034/-. The penalty so imposed and confirmed, being totally contrary to the provisions of law and facts, hence the same kindly be deleted in full. 3. That the notice issued by the DCIT for initiating the penalty U/s 271AAB of the Act,1961 is not in accordance with law not being specifically pointing out the default for which the ld. AO sought to impose penalty U/s 271AAB. 47. The facts of the case are that for the year under consideration, the assessee had filed his original return of income on 30.09.2013 declaring total income of ₹ 3,85,23,770/- which includes additional income of ₹ 2,02,00,000/- offered to tax under the head income from business or profession as other income disclosed during the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpose the said penalty. The AO has not even stated the rate at which the penalty is being imposed i.e @10%, 20% or 30 to 90% as specified in clause (a), clause (b) or clause (c) of Section 271AAB respectively. He has simply imposed penalty stating as under: 7. As discussed above the assessee has made surrender of undisclosed income ₹ 2,15,40,344/- under various heads. I therefore proceed to levy penalty u/s 271 AAB of the IT Act, 1961 on the concealed amount of ₹ 2,15,40,344/- for the surrender made. Thus, the AO remained inconclusive till last when he imposed the penalty. It was submitted that the AO did not appreciate that the different charges specified in section 271AAB carry different connotation. It was further submitted that under similar circumstances, the Coordinate Benches of the Tribunal have quashed the penalty proceedings on account of deficiency in the show-cause notices. 50. It was further submitted that the impugned penalty u/s 271AAB has been imposed by the AO mainly on account of the so called admission made by the assessee during the course of the search in the statement recorded u/s 132(4) dated 19.12.2012 02.01.2013. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of the surrender and then arrive at the conclusion that the income disclosed by the assessee falls in the definition of undisclosed income as stipulated in the explanation to the said section. It was further submitted that the AO, in this case, has however never given a categorical finding that the income resulted in undisclosed income as per definition provided in the Explanation to section 271AAB(1) of the Act. 52. It was further submitted that if a reference is made to the so called admission made by the assessee in the statement recorded u/s 132(4) on dated 19.12.2012 02.01.2013, it will be a clear case of obtaining the disclosure from the assessee without finding any incriminating material disclosing any undisclosed income. The alleged seized material is nothing but containing some imaginary figures. Applying the judicial guidelines on the facts of the present case, it can be very well demonstrated that in this case there was no undisclosed income and the AO merely and blindly relied upon the so called admission of a huge surrender which was made / obtained by the revenue to made the search a success. As a matter of fact, a careful and honest reading of the sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt on account of sale/booking of flats, there is no details at all, as to such receipts were towards: No Flat No., related to which project as no name or project details have been given. No name of the area or place or city has been mentioned. Even no name of the buyer/person making payment of the advance, which is completely missing. 55. It was further submitted that there is no date appearing on each and every transaction which is an abnormal feature. It is a matter of common knowledge and human probability that on each and every transaction of receipt and payment, date is put, more particularly when it is a case which is out of books and noted in a diary. Surprisingly, on some entries date has been put and the transaction continue on the next page even. But all these transaction have been assumed to be falling within the F.Y. relating to that day. Surprisingly, in some of the cases, the date has been put at the last entry only, but even then, all transactions preceding such date, have been assumed to have taken place on that very date. The internal page 4 of diary starts from 01.4.2011, After recording some entries on 2 pages i.e. 4 5, the Pg 6, the next d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der even, so as to justify the adverse inference drawn that it is income from flat booking. No corresponding asset is reported or alleged to have been found which was not accounted for/ not disclosed. On the contrary, in the statement recorded u/s 132(4) on 19.12.2012 and again on 02.01.2013, the assessee repeatedly answered that: (i) All the bookings have been duly accounted for in the accounts of the company engaged in the construction business viz Nainani Builders (P) Ltd. (ii) All the bookings are normally taken through account payee cheque only. (iii) It was only in 1-2 stray cases where it was received in cash but there also official receipts of cash received were issued by the company. 57. It was further submitted that this real estate project was being undertaken and carried out by a Limited company Nainani Builders (P) Ltd. though belonging to the Nainani Group and not by assessee in his individual capacity. Another feature worth noting is that search was commenced on 10.15 AM at the residence of the assessee on 19.12.2012, then continued whole day and was concluded at the request of the assessee at 10.05 PM in the night, when the assessee complained of some me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner but not differently. If a person is habitual to start with writing श्रीगणेशयनमः, he will start writing in this manner alone. Further entries like TDS, income tax etc. shows that these transactions were recorded for memorandum purpose and later on must have been taken into account and recorded in the regular books of accounts. Whatever might have been the reason but what clearly emerges is that whereas AS-8 appears to be memorandum diary prepared and maintained in a normal and regular course whereas, diary AS-2 is nothing but a later creation of evidence being an attempt made to justify the huge amount of surrender obtained by the search team. Though one may say that it is a job of an expert but such difference are visible and such inference can be drawn even by a layman. Unfortunately however, the ld. CIT(A) did not at all pay any attention and summarily confirmed the levy of penalty by merely and conveniently relying upon the so called admission in the recorded statements. He neither paid any attention to the facts nor appreciated the evidences judiciously nor, he applied his mind on the legal posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified under clause (a), clause (b) or clause (c) to sub-section (1) to Section 271AAB. Therefore, merely for the reason that the quantum of penalty varies from 10% to 30% subject to compliances with the ancilliary conditions, it cannot be said that where the AO has initiated the penalty under section 271AAB, there is any ambiguity in the charge or there is any lack of application of mind on part of the Assessing officer. Further, the levy of penalty under Section 271AAB is not based on addition made and investigation/enquiry conducted during the course of assessment proceedings, rather it is based on search conducted on the assessee on or after the 1st day of July, 2012, in such a situation, where the penalty show-cause notice is issued u/s 271AAB, the Assessing officer is making the assessee aware of the charge against him in terms of undisclosed income found during the course of search and thus, the assessee is granted an opportunity to refute such charge and file his explanations/submissions. Unlike provisions of section 271(1)(c) which provides for separate charge of concealment of particulars of income or furnishing of inaccurate particulars of income , as invoked by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty percent but which shall not exceed ninety percent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) or sub-section (1A). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not made by the searched person in the course of search but is declared in the return of income furnished for the specified previous year and subject to satisfaction of other conditions, penalty @ 20% is payable by him. It further provides that where the declaration of undisclosed income is neither made by the searched person in the course of search nor declared in the return of income furnished for the specified previous year and additions are made during the course of assessment proceedings, penalty which can vary from 30% to 90% is payable by him. 13. Both the provisions as contained in section 271AAB(1)(a) and 271AAB(1)(c) thus provides for levy of penalty in cases where search has been initiated under section 132 on or after the 1st day of July, 2012 and quantum of penalty has been kept at 10% where there is declaration in the statement recorded during the course of search, and where there is neither a declaration in the statement u/s 132(4) recorded during the course of search nor a declaration in the return of income, the penalty has been kept at a higher pedestal which can vary from 30% to 90%. Further, it is noted that the provisions of section 271AAB overrides sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to consider the same for the purposes of present appeal. The Coordinate Bench in the aforesaid decision, after analyzing catena of judicial pronouncements, including the decision of Hon ble Karnataka High Court in case of Manjunatha Cotton and Ginning Factory (supra), has held as under:- 15. The moot question is that what should be the nature of specification of a charge by the AO at the stage of initiation of penalty proceedings and at the time of passing the penalty order. Is the AO required to specify in the penalty notice/order as to whether it is a case of 'concealment of particulars of income'; or 'furnishing of inaccurate particulars of income'; or both of them, which can be expressed by using the word 'and' between the two expressions. When the AO is satisfied that it is a clear-cut case of concealment of particulars of income, he must specify it so in the notice at the time of initiation of penalty proceedings and also in the penalty order. The AO cannot initiate penalty on the charge of 'concealment of particulars of income', but ultimately find the assessee guilty in the penalty order of 'furnishing inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income.... But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law .. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid'. 17. In Manu Engg. Works (supra) penalty was imposed by noting: 'that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income'. Striking down the penalty, the Hon'ble High Court held that: 'it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear-cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty order. If the penalty is initiated with doubt and also concluded with a doubt as to the concealment of particulars of income or furnishing of inaccurate particulars of such income etc., the penalty order is vitiated. If on the other hand, if the penalty is initiated with an uncertain charge of 'concealment of particulars of income/furnishing of inaccurate particulars of income' etc., but the assessee is ultimately found to be guilty of a specific charge of either 'concealment of particulars of income' or 'furnishing of inaccurate particulars of income', then no fault can be found in the penalty order. 22. In Manu Engineering Works (supra), the Hon'ble Gujarat High Court noticed that the charge at the stage of initiation of penalty proceedings as well in the penalty order was uncertain and the expression used at both the stages was concealment of particulars of income and/or furnishing of inaccurate particulars of such income. It struck down the penalty by holding that the assessee must have been found to be guilty of a certain charge in the penalty order. It, however, did not find anything amiss with the initiation of penalty on such u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e penalty as per clause (a) to (c) so satisfied in sub-section (1) to Section 271AAB. Further, as per sub-section (3) of Section 271AAB, the provisions of section 274 and section 275 as far as may be applied in relation to penalty under this section which means that before levying the penalty, the Assessing officer has to issue a show-cause granting an opportunity to the assessee. Thus, we find that the levy of penalty is not automatic but the Assessing officer has to decide based on facts and circumstances of the each case. It is a consistent view which has been taken by the various Co-ordinate Benches of the Tribunal and a useful reference can be drawn to the decision of the Co-ordinate Bench in case of ACIT vs Marvel Associates reported in 92 taxmann.com 109 wherein it was held as under: 5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. During the appeal hearing, the Ld. A.R. vehemently argued that the A.O. has levied the penalty under the impression that the levy of penalty in the case of admission of income u/s 132(4) is mandatory. The Ld. A.R. further stated that penalty u/s 271AAB of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). Section 158BFA(2): (2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC: Provided that no order imposing penalty shall be made in respect of a person if- (i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable. (iii) Evidence of tax paid is furnished along with the return; and (iv) An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words, while payment of interest is mandatory levy of penalty is discretionary. It is trite position of law that discretion is vested and authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of the each case. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case. Therefore, we agree with the contentions of the ld AR that the levy of penalty under section 271AAB is not mandatory and it depends upon specific facts and circumstances of each case as to whether the same warrant the levy of penalty. 64. In the instant case, it therefore needs to be examined the basis and findings of the Assessing officer for levy of penalty. For the purposes of levy of penalty u/s 271AAB, what has to be examined is whether the charge of undisclosed income for the specified previous year found during the course of search in the case of the assessee is satisfied or not. The term undisclosed income has been specifically defined in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 271AAB of the Act. In our view, once a specific definition of undisclosed income has been provided in section 271AAB, being a penal provision, the same must be strictly construed and the Assessing officer has to record a clear and specific finding to this effect and cannot be solely guided by the surrender made by the assessee during the course of search. Admittedly and undisputedly, in the instant case, there is no finding in the penalty order to this effect that undisclosed income so found and surrendered during the course of search falls under the definition of undisclosed income as so defined in section 271AAB and in absence thereof, on this ground itself, the impugned penalty proceedings deserve to be set-aside. 66. Having said that, let s look at the statement of the assessee recorded u/s 132(4) dated 2.01.2013 and the seized material in context of admission by assessee of ₹ 1.84 Crores on account of alleged flat bookings which forms the main reason for levy of penalty in the instant case. In response to question no. 5, he has stated that he, along with his wife are directors in M/s Nainani Builders Private Limited which is executing a real-estate pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted for in the books of accounts of the company. The question is given such contradiction, whether any further enquiry or investigation was carried on by the Assessing officer during the course of penalty proceedings to determine what sum of money has been received and in what mode and manner and to what extent, the same has been recorded in the books of accounts of the company and to what extent, it remains undisclosed and not recorded in the books of accounts regular maintained. However, we find that there is no such enquiry or investigation and consequentially, no such finding recorded by the Assessing officer in the penalty order. 67. Further, if we look at the figures in the loose papers found during the course of search marked as Annexure AS Exhibit 2, which have been stated to be reflecting amount received in cash towards booking of flats, all we found that there are certain entries stating the amount received in cash towards booking, however, there is no mention of name of the real estate project, name of the assessee, name of flat buyers who have booked the flats, the date when the amount was received (except against few entries), the flat numbers and area specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to question no. 9 in his statement recorded u/s 132(4), he has stated that he has surrendered a total sum of ₹ 2,50,00,017/- which includes ₹ 1,92,03,797/- for financial year 2012-13 and the said amount is surrendered as undisclosed income on his behalf, his family members and his company on account of receipt of cash income. Therefore, basis the statement of the assessee, where he has also stated clearly that the surrender on account of flats booking amount has been made on account of the company, we find that it is the company to which such entries in the loose papers relates and belongs and not to the assessee. Further, the occasion to record such transactions will arise in the hands of the company which is maintaining books of accounts in the normal course relating to such construction business and not in the hands of the assessee. Therefore, the charge u/s 271AAB that such transactions are 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 can only be fastened in the hands of the company and not that of the assessee. The fact that the assessee has decla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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