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TMI Blog2021 (9) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... only in the furnishing inaccurate particulars of concealment of particulars in the return of income filed. CIT(A) finally held that the total undisclosed income found as per the definition for the purpose of penalty under section 271AAB of the Act is only ₹ 3,33,27,250/- and not ₹ 34,99,87,344/- as considered by Assessing Officer. The penalty imposable under the said section on the facts of this case is 10% of ₹ 3,33,27,250/-. CIT(A) worked out the penalty of ₹ 3,33,275/- and deleted remaining penalty. The Ld. CIT(A) took absolutely correct view, which we affirm. No contrary fact or law is brought to our notice to take other view. We have affirm the order of Ld. CIT(A) on the primary submissions of the learned Senior Counsel for the assessee, therefore, adjudication on other submissions of the assessee have become academic. So far as objection of ld. CIT-DR for the revenue is concern that the Ld. CIT(A) when survey proceedings at one premise has been converted into search, it became a search case and the entire disclosure made by assessee-firm on the basis of excess stock not recorded in their books of account to be considered at undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 131(1A) of the Act, wherein he made a disclosure of additional income of ₹ 34,99,87,3544/- (₹ 35 Cr. Approx). While replying the various questions asked during the recording statement, the partner of the assessee-firm gave the bifurcation disclosure in the following manner:- Question No. particulars Office at Amount (Rs) 10 cash Surat 6,71,753/- 11 to 13 Excess stock Surat 23,05,89,031/- 15 unaccounted income Surat 4,69,75,000/- 18 excess stock Mumbai 5,30,47,810/- 18 excess stock Delhi 1,02,03,750/- 18 other discrepancies Surat 85,00,000/- 3. The assessee filed its return of income for assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey proceeding was initiated which was later on converted into search and therefore, provision of sec. 153A was applicable to the assessee. The assessee has not questioned the validity of initiation of action under section153A of the Act. The Assessing Officer by referring the provision of section 271AAB of the Act levied the penalty @ 10% of undisclosed income of the specific previous year and worked out penalty of ₹ 3.49 Crores. 4. Aggrieved by the levy of penalty, the assessee filed appeal before the Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written statement. The submission of assessee is recorded in para-6 of the impugned order. The assessee in its written statement, in sum and substance stated that assessee-firm was subjected to survey proceeding under section 133A on 05.03.2013. The survey was initiated at Surat, Mumbai Delhi office of assessee-firm. The survey proceeding at Delhi office was later on converted into search proceeding and notice under section 153A was issued to the assessee. Assessment was finalized under section 143(3) r.w.s. 153A of the Act, whereas Assessing Officer initiated penalty under section 271AAB of the Act and levie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been recorded on or before the date of search in the books of account or a document maintained in the normal course relating to such previous year. The Ld. CIT(A) further examined the evidence related with physical stock of polish diamond found at Delhi office, which was 271.37 carat. However, the stock recorded as per book on the date of search only 134.36 carat. Though, Rahul Choksi at Delhi branch office had claimed that 91.66 carat of finished diamonds was also received from Mumbai office, and it was not found recorded in the books of account maintained in Delhi office, Mumbai nor any document maintained in the regular course of business. Thus, the Ld. CIT(A) was of the view that there was excess stock of finished diamond of 137.01 carat (271.37 134.36 carat) which was not recorded in regular books of account maintained nor in the document maintained at regular course of business. On the basis of aforesaid observation, the Ld. CIT(A) concluded that excess stock when valued on average ₹ 22,500/- per carat (on this average rate of entire stock found at Delhi office) comes to ₹ 3.08 Crores. Thus, the undisclosed income represented by diamond found at Delhi office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been converted into search, then it became a search case and the provision of section 153A got applicable. The assessee never claimed that the action initiating section 153A is not valid, during the assessment. The Ld. CIT(A) failed to appreciate that when survey proceedings at one premise has been converted into search, it became a search case and the entire disclosure made by assessee-firm on the basis of excess stock not recorded in their books of account to be considered at undisclosed income for the purpose of section 271AAB. 7. On the other hand, the Ld. Senior Counsel for the assessee supported the order of Ld. CIT(A). The Ld. Senior counsel submits that a survey was carried out at three offices of assessee-firm i.e., in Surat, Mumbai and Delhi respectively. The survey proceedings at Delhi was converted into a search proceeding. Shri Dilipbhai Babubhai Mehta, partner of assesseefirm made a disclosure of ₹ 34.99 Crores in a statement under section 131(1A) of the Act as recorded in para-2 of the penalty order. The Assessing Officer levied penalty of ₹ 3.49 Crores @ 10% of disclosure of ₹ 34.99 Crores. The assessee in its reply before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal vide ITA No. 1766/Ahd/2017. However, the same has been withdrawn on 04.03.2021, by settling the dispute under Vivad Se Visvas Scheme, 2020. 9. The Ld. Senior Counsel submits that for assessment year 2013- 14, normal assessment order was to be framed under section 143(3) of the Act. The Assessing Officer erroneously observed that assessment order had been passed under section 143(3) r.w.s. 153A. The section 153A is not applicable to the year of search and no notice under section 153A has been issued for the year under consideration. 10. In alternative submission, the Ld. Sr. counsel submits that in any case disclosure was made in the course of survey and the same has been considered while filing file return of income. Hence, the question of penalty on such disclosure was not arise. The Ld. Sr. counsel reiterated that disclosure in the question was made during the course of survey such disclosure has been considered by filing return of income and under such circumstances penalty cannot be levied. To support his submission, Ld. Sr. counsel of the assessee relied upon the following decision:- CIT vs. Roop Creation P. Ltd. Tax Appeal 621 of 2011 (Guj HC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished diamonds were also received from Mumbai office, however, it was not found recorded in the books of account maintained in Delhi office, Mumbai nor any document maintained in the regular course of business. On the basis of his observation, the Ld. CIT(A) was of the view that there was excess stock of finished diamond of 137.01 carat only, which was not recorded in regulars books of account maintained nor in the document maintained at regular course of business. The Ld. CIT(A) concluded that excess stock when valued on average ₹ 22500/- per carat (this average rate of entire stock found at Delhi office) comes to ₹ 3.08 Crores. The undisclosed income represented by diamond found at Delhi office plus cash of ₹ 25 lakh total of ₹ 3,33,27,250/-. 14. The Ld. CIT(A) on the basis of aforesaid observation further held that income which is detected during the survey under section 133A is neither covered in the section 271AAB nor in Explanation5A filed to section 271(1)(c) of the Act. The penalty has not been imposed under section 271(1)(c) and therefore whether penalty was imposable on income detected during the survey but disclosed in return of income filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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