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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: Shri Rama Kanta Panda & Shri Laliet Kumar
Before Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA.No.521/Hyd/2022 Assessment Year: 2018-19 Sri Venkateswara Reddy Vs. The Deputy Commissioner Pachhia, of Income Tax, R/o.Warangal. Central Circle 1(3), Hyderabad. PAN : ABLPP0688B. (Appellant) (Respondent) Assessee by: Sri K.C. Devdas. Revenue by: Sri K.P.R.R. Murthy. Date of hearing: 19.04.2023 Date of pronouncement: 25.04.2023 O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the assessee, feeling aggrieved by the order of Commissioner of Income Tax (Appeals) – 11, Hyderabad dt.11.08.2022 invoking proceedings under section 271AAC(1) of the Income Tax Act, 1961 (in short, “the Act”). 2. The grounds raised by the assessee read as under : “1. The Ld.CIT(A) erred in confirming the penalty order of learned Assessing Officer passed under section 271AAC of Rs.4,24,875 of Income Tax Act, 1961. 2 The Ld.CIT(A) erred in concluding that the amount disclosed by the appellant during the search had fit into the provisions of section 271AAB.
3. The Ld.CIT(A) erred in concluding the declaration of income by appellant during the course of search was not voluntary and therefore, the same is liable for levy of penalty under section 271AAB of the Act.
4. The ld.CIT(A) failed to appreciate the fact that the appellant initially declared an amount of Rs.1,00,00,000/- but returned an amount of Rs.2,24,82,820/- in the income tax returns filed under section 153A of the Act and therefore, the amount offered cannot be termed as not voluntary.
5. The ld.CIT(A) had erred in summarily rejecting the judicial views that sided the appellant.”
The brief facts of the case are that assessee has filed the return of income on 15.04.2019 for A.Y. 2018-19 admitting total income of Rs.1,28,76,330/- which included additional income of Rs.24,08,700/- on account of rental income, brokerage / commission income and interest income. Subsequently, a search and seizure operation u/s 132 of the Act was conducted on 09.08.2018 in the case of M/s. Moksha Infracon Pvt. Ltd and related parties including the assessee. Accordingly, notice u/s 153A of the Act was issued to the assessee on 21.04.2021 by accepting the returned income. Thereafter, the Assessing Officer had gone through the facts and circumstances of the case and since the assessee had declared the additional income of Rs.24,08,700/- only on account of search, the Assessing Officer held that the assessee is liable to levy of penalty u/s 271AAB(1A) of the Act and penalty proceedings were initiated and the Assessing Officer had passed the penalty order u/s 271AAB(1A) of the Act on 18.03.2022 levying penalty of Rs.7,22,610/-.
Feeling aggrieved by the penalty order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A) who dismissed the appeal of assessee by holding as under :
“6……….. It is clear that the appellant in the instant case has only taken the plea of putting quietus on the issues which was also not the case as the search operation u/s 132 led to the admission of income. It will not be out of place to mention that the incriminating material and evidences unearthed along with statements during the search and seizure operation u/s 132 of the I.T. Act ultimately lead to admission of income by the appellant and it was not even a voluntary disclosure. If not for the search u/s 132, there is no way the appellant would have admitted the undisclosed income. In view of the above discussion, the penalty of Rs.4,24,875/- levied u/s 271AAC(1) of the Act is hereby confirmed and the ground nos.1 and 2 are dismissed accordingly.”
5. Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
This is an appeal filed by the assessee feeling aggrieved by the penalty confirmed by the ld.CIT(A) for an amount of Rs.7,22,610/-. In this regard, our attention was drawn to the assessment order passed by the Assessing Officer wherein the Assessing Officer had made addition of Rs.24,08,700/- to the income of the assessee during the assessment. Para 4 and 5 of the said assessment order reads as under :
“4. During the course of search operation, number of loose sheets and diary were found and seized at the residence of Sri P.Venkateswar Reddy. When the assessee was confronted with the contents of some of the loose sheets, the assessee has stated that he has received chit amounts in cash and the same rotated for making investments, giving hand-loans and the same is unaccounted. The assessee, in his sworn statement, has admitted Rs.1,00,00,000/- as undisclosed income for various A.Y.s in his individual hands. The assessee has accepted the same and reiterated the above admission in the affidavit dated 27.08.2018. During the post search proceedings, the assessee has submitted a detailed breakup of the admissions and the details about the evidences gathered during the search, item-wise, assessment year-wise.
For the A.Y. 2018-19, during the post-search proceedings, the assessee has admitted additional income of Rs.24,08,700/- on account of interest income, brokerage and commission, rent on open land and chit surplus. In the return of income filed u/s 153A on 15.04.2019, the assessee has admitted an amount of Rs.24,08,700/- on the said issues and the same is treated as undisclosed income of the assessee for the A.Y. 2018-19.
After receipt of penalty notice, the Assessing Officer had imposed penalty u/s 271AAB(1A) of the Act and had recorded finding in para 3(iii) of order passed u/s 271AAB of the Act by observing as under : “3(iii). Further, the admission made during the course of search is based on the material seized during the course of search. The additional income offered squarely fits into the meaning of ‘undisclosed income’ stipulated u/s 271AAB(1A) of the Act.”
Before us, ld. AR had submitted that the income was disclosed by the assessee and thereafter has been taken into account by filing revised return of income and therefore, the income disclosed by the assessee will not come within the purview of section 271AAB(1A) of the Act. Our attention was drawn to the definition of ‘undisclosed income’ mentioned in section 271AAB(1A) of the Act. [Penalty where search has been initiated. 271AAB. (1) The Assessing Officer [or the Commissioner (Appeals)] may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 47[but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President48], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,— (a) a sum computed at the rate of ten 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, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date—
(A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income 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 [computed at the rate of sixty per cent] of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). 50[(1A) The Assessing Officer [or the Commissioner (Appeals)] may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,— (a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, if the assessee— (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date— (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a).]
On the other hand, the ld. DR relied upon the order passed by the ld.CIT(A). We have gone through the order passed by the lower authorities. Before we deal with the issue, it is essential to reproduce the definition of ‘undisclosed income’ mentioned in clause (c) of Explanation to section 271AAB which provides as under : Explanation.—For the purposes of this section,— (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued 51a[under section 148 orunder section 153A, as the case may be,] for furnishing of return of income expires, as the case may be; (b) "specified previous year" means the previous year— (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) "undisclosed income" means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has— (A) 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; or (B) otherwise not been disclosed to the 52[Principal Chief Commissioner or] Chief Commissioner or 52[Principal Commissioner or] Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.] 9.1. From the reading of definition of undisclosed income referred in clause (c) of the Explanation, it is abundantly clear that if any income of the specified previous year, falls any of the 7 category found during the search, which is not recorded on or before the date of search in the books of accounts maintained by the assessee then the said income would fall within the definition of ‘undisclosed income’. Once the income was found to be ‘undisclosed income’ within the meaning of clause (c) of the Explanation, then the Assessing Officer is required to impose penalty as provided under section 271AAB(1)(a) of the Act.
In the present case, the search and seizure action was carried out in the premises of group of M/s. Moksha Infracon Pvt. Ltd and M/s. Kaveri Erstwhile M/s. K V R Rail Infra Projects Pvt. Ltd on 09.08.2019 and notice u/s 153A of the Act was issued on 18.03.2019 and in response to the notice, the assessee had admitted an income of Rs.1,28,76,330/-. In Para 4 of the assessment order, reproduced hereinabove, the Assessing Officer had mentioned that the assessee in the sworn statement had admitted an amount of Rs.1 crore as undisclosed income for various assessment years and the above said aspect was accepted by the assessee in the affidavit filed on 27.08.2019. In our view, the above said fact of admitting the undisclosed income of various assessment years was not a stand alone admission of income but the admission of income was supported by the loose sheets etc., which were found during the course of search.
10.1 Admittedly, once the document which has the characteristics of ‘undisclosed income’ found and recovered during the course of search and based on such document, the assessee made the declaration and thereafter, filed return of income, then in that eventuality, in our view, the said income would partake the characteristics of ‘undisclosed income’. Hence, the action on the part of the Assessing Officer imposing penalty under section 271AAB(1A) and thereafter, confirming by the ld.CIT(A) cannot be faulted with. Accordingly, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.