SHRI SURESHKUMAR JETHALAL SHAH,,GODHRA vs. THE ACIT, CENTRAL CIRCLE-I,, BARODA

The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Appeals)-IV, Ahmedabad (‘CIT' in short), dated 06.06.2014 arising in the penalty order dated 27.09.2013 passed by the Assessing Officer (AO) under s. 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY 2011-12.

The grounds of appeal raised by the assessee read as under:

The learned Commissioner of the Income Tax (Appeal) -IV, Ahmedabad ["the CTT(A)"] erred in fact and in law in confirming the action of Assistant Commissioner of Income Tax, Central Circle-1, Baroda ("the AO") in levying penalty of Rs. 9,57,900 /- on account of undisclosed income u/s. 271(1)(c) of the Income Tax Act, 1961 ("the Act").

When the matter was called for hearing, the learned AR for the assessee submitted that a search action under s.132 of the Act was conducted in R. K. Construction Group of cases including assessee on 09.04.2010. The assessee filed return of income for AY 2011-12 under s.153A of the Act showing total income of Rs.22,48,290/-. The income was assessed at Rs.53,74,890/- after primarily making additions of Rs.31 Lakhs towards the difference of amount disclosed in the course of search proceedings not included in the return of income filed on which penalty was imposed amounting to Rs.9,57,900/-. In this context, the learned AR for the assessee submitted that the financial year relevant to AY 2011-12 is the year of search and therefore income declared and assessed in the return of income for AY 2011-12 would attract the provisions of Section 271AAA/271AAB of the Act, if any and provisions of Section 271(1)(c) of the Act has no application for the alleged concealment etc. in this context, the learned AR referred to and relied upon the decision of the co-ordinate bench in case of M/s. Sompura Marble Industries vs. DCIT & 1728/Ahd/2014 dated 11.01.2018.

Learned DR for the Revenue, on the other hand, relied upon the order of the authorities below.

We have carefully considered the rival submissions. As pointed out, the search has been conducted in the instant case on 09.04.2010 and consequently, the penalty could possibly be imposed under 271AAA of the Act alone where the ‘undisclosed income’ relates to ‘specified previous year’. The scheme and Section 271(1)(c) read with Explanation 5A thereto has no application as held by the co- ordinate bench in Sompura Marbles Industries (supra). The relevant operative para of the order of the co-ordinate bench is reproduced hereunder:

The aforementioned provision is applicable where search has been initiated after 01.06.2007 but before 01.07.2012. In the case in hand, the search was conducted on 21.04.2010. Therefore, the provisions of Section 271AAA squarely apply to the facts of the case in hand. There is no dispute that the assessee has paid taxes on the income disclosed and this fact has not been controverted anywhere.

At this juncture, it would be pertinent to mention that it is not a case of wrong mention of section but a case of levying penalty by specifically invoking the provisions of Section 271(1)(c) of the Act. Therefore, the findings of the ld. CIT(A) that provisions of Section 292B apply on the facts of the case are ill-founded and does not hold any water.

In our considered opinion and the understanding of the facts in issue qua the relevant provisions of the Act, the A.O. grossly erred in invoking the provisions of Section 271(1)(c) of the Act and further erred in levying penalty under that section. Considering the date of search and the relevant provisions of Section 271AAA of the Act, the A.O. ought to have proceeded by invoking the provisions of Section 271AAA of the Act failing which the penalty order is bad in law and deserve to be quashed.

For the sake of the completeness of adjudication, on the given facts of the case in hand, no penalty is leviable U/s 271AAA of the Act as the assessee fulfills all the mandatory condition mentioned under the provisions of Section 271AAA of the Act for getting immunity from the levy of penalty under the said section.

Considering the facts of the case in totality, in our considered opinion, penalty U/s. 271(1)(c) of the Act cannot be levied and also penalty U/s. 271AAA of the Act cannot be levied.”

In the result, the appeal filed by the assessee is allowed.