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TMI Blog2024 (10) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the course of assessment proceedings prior to initiating the penalty proceedings. There is also no reference of any notice issued u/s 274 with respect to 271 of the Act. What is indicated in the said penalty order is that immediately after getting information about withdrawing of immunity from penalty and prosecution by ld. ITSC letters were issued to the assessee on 28th June, 2018, and 5th July, 2018, informing about the withdrawal of immunity from penalty and prosecution to which the assessee filed the reply on 13th July, 2018, stating that a major amount of tax liability has been paid off and some more time is required to deposit the remaining amount. The reply of the assessee is already captured in the penalty order reproduced above. Soon after receiving the reply of the assessee on 13th Jul, 2018, the ld. AO has framed the penalty order on 30th July, 2018, levying the penalty - The complete exercise carried out by the ld. AO levying penalty u/s 271(1)(c) of the Act is arbitrary and not in accordance with the law. Thus assessee deserves to succeed as the penalty proceedings have not been initiated in accordance with law and they are void ab initio. Levy of penalty u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause. 04. So far as in ITA Nos.54 55/PAT/2021 are concerned, the assessee has raised common grounds for A.Y. 2011-12 and 2012-13 against levy of penalty u/s 271AAA of the Act and the same reads as under: - 1. For that the grounds of appeal hereto are without prejudice to each other. 2. For that the order of the learned Commissioner of Income Tax (Appeal) and also the learned assessing officer is bad both in law and on facts. 3. For that the order of the learned Commissioner of Income Tax (Appeal) and also the learned assessing officer is based on presumption, surmises and conjectures. 4. For that the order of the learned Commissioner of Income Tax (Appeal) and also the Id. assessing officer is further violative of the settled principles of natural justice in as much as no opportunity much less adequate opportunity was ever afforded to the appellant to furnish its defence in course of assessment proceedings. 5. For that the learned assessing officer has erred in imposing penalty under section 271AAA of the Act equivalent to 10% of the amount of tax leviable notwithstanding the fact that the default if any. occurred due to reasons beyond the control of the appellant and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in compliance to the order of the ld. ITSC order for A.Y. 2006-07 to 2014-15 amounted to ₹ 2,74,40,648/-. When the ld. ITSC withdraw the immunity granted to the assessee, the assessee filed a Writ Petition before the Hon'ble High Court and on the date of hearing i.e. 25th August, 2021, the ld. counsel for the assessee stated that there was bonafide reason which prevented the assessee from making the payment and that the assessee is ready and willing to deposit the remaining amount. Hon'ble Court directed the assessee to pay ₹ 1 crore out of the amount of ₹ 2,72,40,648 on or before 09.09.2021 and the issue was left open. On the next date of hearing on 16th September, 2021, the proof of deposit of ₹ 1 crore was placed before the Hon'ble Court and Hon'ble High Court ordered to deposit the remaining amount. Writ Petition filed by the assessee was disposed off on 24th January, 2024 and the Hon'ble High Court held that the delayed payment made would be set off against the demands raised against the assessee either interest or principle due, as the statute mandates. 07. Now, on one hand the assessee has challenged the order of ld. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated vide DIN Order No. ITA 56 /PAT/2021 in the case of M/S Patliputra Builders LTD. (2013-14). ( : AACCP06293) Dates Particulars of events 29.07.2011 Search and seizure operation was conducted on the business and residential premises of the appellant and his family members. No statement was recorded during the search proceeding or after. 31.12.2015 The appellant moved before Hon'ble Settlement Commission and the Hon'ble ITSC passed order u/s 254 D (4). 25.01.2016 Demand notice u/s 156 was issued to the assessee giving effect to the order of amount ₹ 2,13,63,076/- 17/18th Jan. 2018 Settlement Commission had withdrawn Immunity from penalty and prosecution against the assessee 30.07.2018 Penalty order passed against the assessee u/s 271(1)(c) of the act Imposing penalty leviable @ 100% amounting to Rs. 1,93,52,140/- 15.03.2021 The appellant preferred appeal against the order of the Ld. AO and the Ld. CIT (Appeal) without looking in the merits of the case enhances the penalty leviable @ 300% of the tax sought to be evaded. Synopsis of Argument Without recording satisfaction and mentioning specific direction of the Hon'ble Settlement Commission penalty under sec. 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) 010. As regards the penalty u/s 271AAA of the Act, he submitted that the preliminary requirement for invoking penalty u/s 271AAA of the Act is basis of the statement recorded during the course of search u/s 132(4) of the Act. However, in the case of the assessee no such statement was recorded and in support to that an affidavit has been filed by the Director of the assessee company and therefore since the basic conditions which needs to be fulfilled for invoking penalty u/s 271AAA of the Act has not been complied by the Revenue authorities, the impugned penalty deserves to be deleted. A brief synopsis filed in this regard by the ld. counsel for the assessee reads as under: - Dates Particulars of events 29.07.2011 Search and seizure operation was conducted on the business and residential premises of the appellant and his family members. No statement was recorded during the search proceeding or after. 31.12.2015 The appellant moved before Hon'ble Settlement Commission and the Hon'ble ITSC passed order u/s 254 D (4). 25.01.2016 Demand notice u/s 156 was issued to the assessee giving effect to the order of amount ₹ 17,01,193/- 17/18th Jan. 2018 Settlement Commission ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supporting the order of the ld. lower authorities and submitted that since the assessee did not follow the direction of ld. ITSC by way of making payment within the scheduled time the immunity granted by ld. ITSC stood withdrawn and the penal provisions became applicable and the impugned penalties have rightly been levied. 012. We have heard the rival contentions and perused the records available on record. The assessee is aggrieved with levy of penalty u/s 271(1)(c) and 271AAA of the Act levied for the following assessment years: ITA No. A.Y. Penalty u/s Amount 54/PAT/2021 2011-12 271AAA 36,48,167 55/AT/2021 2012-13 271AAA 25,47,388 52/PAT/2021 2009-10 271(1)(c) 1,93,52,140 53/PAT/2021 2010-11 271(1)(c) 1,13,77,978 56/PAT/2021 2013-14 271(1)(c) 90,09,772 57/PAT/2021 2014-15 271(1)(c) 1,33,60,445 013. We note that post search action on the assessee, the application filed before the learned ITSC on 26th June, 2014, for A.Y. 2006-07 to A.Y. 2014-15 (nine years) was admitted and learned ITSC passed the order under Section 245D of the Act calculating the settlement amount for A.Y. 2006-07 to A.Y. 2014-15 at ₹ 6,51,35,358/-. In compliance to the said order the assessee immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the amount remaining unpaid from the date of expiry of the period of thirty-five days aforesaid. 016. Now, going through the above provision by Sub-Section 245D(6A) of the Act, we find that there is no mention about levy of penalty on an assessee if the tax is not paid within time limit. Further, the assessee has gone before the Hon'ble Jurisdictional High Court challenging the immunity withdrawn by ld. ITSC and also prayed for grant of installment to deposit the remaining amount payable to the Department as per the settlement amount ordered by ld. ITSC. As per the directions of Hon'ble Court assessee has deposited the outstanding amount. On one hand, penalty has been levied post withdrawing of immunity and on the other hand, the assessee was paying the outstanding amount as per the order of ld. ITSC dated 31st December, 2015. All these facts and circumstances indicates that parallel working is going on i.e. on one hand assessee was asked to deposit the amount as per the order of ld. ITSC dated 31st December, 2015, to which assessee deposited almost 60% of the tax settlement amount and paid the remaining amount as directed by the Hon ble High Court vide writ order (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Ys. 2006-07 to 2014-15 (9 assessment years). Subsequently, the Hon'ble Settlement Commission, (IT WT), Additional Bench, Kolkata had passed the order u/s 245D (4) on 31/12/2015. After receiving the Settlement order, the effect to the order was given and demand raised Rs 2,13,63,076/-. The demand notice u/s 156 was issued to the assessee on 25/01/2016. But, the assessee did not pay entire demand. Further, show cause was issued to the assessee for payment of demand on 27/07/2017 30/11/2017. But, the assessee did not pay the demand. The Hon'ble Settlement Commission, (IT WT), Additional Bench, Kolkata has withdrawn immunity from penalty and prosecution in the case of the assessee M/s Patliputra Builders Ltd. (PAN - AACCP0629B) on 17th/18th January, 2018. Letters were issued on 28/06/2018 05/07/2018 for information regarding withdrawal of immunity from penalty and prosecution in the case of the assessee M/s Patliputra Builders Ltd. and also to provide final opportunity before passing penalty order u/s 271(1)(c) of the Income-tax Act, 1961. Compliance requested on 12/07/2018. On 13/07/2018, the assessee filed time petition for payment of income-tax through its director whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of the Income tax Act. Rs. 5,80,56,420/- In the light of the facts and circumstances discussed in foregoing paras, penalty of Rs. 1,93,52,140/- is hereby imposed u/s 271(1)(c) of the Income-tax Act, 1961. This order is passed with the prior approval of Joint CIT, Central Range-1, Patna received vide letter no. JCIT/CR-1/Pat/Penalty Approval/2018-19/1014 dated 27/07/2018. 019. Now, going through the penalty order, referred (supra) for A.Y. 2009-10, we note that the learned AO has not referred to the assessment proceedings if any, carried out. The ld. AO has also not referred to any satisfaction having been recorded during the course of assessment proceedings prior to initiating the penalty proceedings. There is also no reference of any notice issued u/s 274 with respect to 271 of the Act. What is indicated in the said penalty order is that immediately after getting information about withdrawing of immunity from penalty and prosecution by ld. ITSC vide order dated 17th / 18th January 2018, letters were issued to the assessee on 28th June, 2018, and 5th July, 2018, informing about the withdrawal of immunity from penalty and prosecution to which the assessee filed the reply on 13th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s. 274 of the Act as neither there is any reference to any assessment order having been passed for the impugned assessments nor there is any reference to any notice issued u/s 274 of the Act which is a mandatory requirement prior to initiation of penalty proceedings u/s 271(1)(c) of the Act. Accordingly, the penalty proceedings-initiated u/s 271(1)(c) of the Act are held to be illegal and void ab-initio and therefore the alleged penalty orders framed u/s 271(1)(c) of the Act for A.Ys. 2009-10, 2010-11, 2013-14 and 2014-15 are hereby quashed and the penalty is levied therein u/s 271(1)(c) of the Act are hereby deleted. Legal grounds raised by the assessee challenging the validity of penalty order u/s 271(1)(c) of the Act are allowed. 022. Now, we take up the grounds challenging the levy of penalty u/s 271 AAA of the Act, which deals with the penalty levied under certain circumstances where search has been carried out u/s 132 of the Act. and for necessary reference Section 271 AAA of the Act is reproduced below: - Section 271AAA in The Income Tax Act, 1961 271AAA. [ Penalty where search has been initiated. [ Inserted by Act 22 of 2007, Section 77 (w.e.f. 1.4.2007).] (1) The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the previous year before the said date; or (ii)in which search was conducted.] 023. Before examining the facts of the case in light of the above provisions, we would first like to note the observation of the ld. AO in the penalty order u/s 271AAA of the Act and for reference, the penalty order for A.Y. 2011-12 is reproduced below: - A search and seizure operation was conducted on 29/07/2011 in the business and residential premises of Shri Anil Kumar and his family members including their business concerns, namely M/s Patliputra Builders Ltd., M/s Patliputra Shoppers Plaza Pvt. Ltd. and other group companies. M/s Patliputra Builders Ltd. and its sister concerns are mainly engaged in the business of real estate, retail chain, entertainment and hospitality. Notice u/s 153A of the Income- tax Act, 1961 was issued on 08/02/2013 for filing of return of Income. However, the assessee filed settlement application before Hon'ble Settlement Commission, (IT WT), Additional Bench, Kolkata on 05/06/2014 for A.Y. 2006-07 to 2012-13 (7 assessment years). However, the applications were not allowed to Tax interest. be proceeded with on account of short payment of tax and interest. Subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee failed to make payment of the demand determined by the Hon'ble ITSC and Hon'ble ITSC has withdrawn immunity granted to the assessee earlier. The assessee is totally silent in that as pact. Hence, after withdrawal of immunity by the Hon'ble ITSC, the undisclosed income declared by the assessee for SOF as well as further amount of undisclosed income adjusted and determined by the Hon'ble ITSC is liable for penalty u/s 271AAA. Keeping in view facts of the case, I have left with no other option but to impose penalty u/s 271AAA of the Income-tax Act, 1961. It is considered a fit case to levy a penalty of Rs. 36,48,167/- u/s 271AAA, being 10% of the amount of tax leviable in respect of the undisclosed income of Rs. 3,64,81,666/-. Hence, after considering fact of the case, penalty order passed u/s 271AAA of the Income-tax Act, 1961. Penalty of Rs. 36,48,167/- u/s 271AAA of the Income-tax Act, 1961 is imposed. This order is passed with the prior approval of Joint CIT, Central Range-1, Patna received vide letter no. JCIT/CR-1/Pat/Penalty Approval/2018-19/1014 dated 27/07/2018. Issue demand notice challan accordingly. 024. While dealing with the penalty u/s 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act has been wrongly levied by the ld. AO on account of not fulfilling the condition mentioned in Section 271AAA of the. We further find support from the judgement of Hon'ble Delhi High Court in case of M/s. Emirates Technologies Pvt. Ltd (supra), where Hon ble Court has held that when no specific query has been put to the assessee by drawing his attention to the provision of Section 271AAA of the Act, asking him to specify the manner in which the undisclosed income surrendered during the course of search, then the penalty is not leviable under that Section. 025. In the light of the above judgement/ decision, we find that in the penalty order u/s 271AAA of the Act, the ld. AO has not referred to any conditions prescribed u/s 271AAA of the Act nor there is any mentioned of any statement recorded u/s 132(4) of the Act nor is there any mention about the assessee having being asked to explain the manner of earning undisclosed income. Therefore, when the conditions prescribed u/s 271AAA of the Act remains to be fulfilled, the initiation of penalty proceedings u/s 271AAA of the Act are itself void, illegal and bad in law and therefore, the penalty proceedings u/s 271AAA of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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