SHRI DEEPAK KALRA,INDORE vs. THE DCIT (CENTRAL-I), INDORE

PER BENCH:

This bunch of 16 appeals by four different assessees are

directed against order of the CIT(A)-III, Indore dated

7.12.2016 for the assessment years 2007-08 to 2013-14.

All the appeals pertaining to the same group were taken up 2

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others together and are being disposed of by way of this

consolidated order for the sake of convenience and brevity.

First we take up ITA No.78/Ind/2017 in the case of SM &

SM Resorts N Hotels International Ltd. Vs. DCIT (Central)-

1, Indore. The assessee has raised following grounds of

appeals:

operation was carried out in the business as well as

residential premises of the appellant group, Indore

including the assessee along with other concerns/business

associates on 21.9.2012. Subsequently, a notice u/s 153A

of the Income Tax Act, 1961 (hereinafter called as ‘the Act’)

was issued. In response thereto, the assessee filed return

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others of income. The A.O. framed assessment u/s 153A r.w.s.

143(3) of the Act vide order dated 24.3.2015. While

framing the assessment, the A.O. also initiated penalty

proceedings u/s 271(1)(c) of the Act in the case of the

assessee for the assessment years 2010-11 & 2011-12 and

penalty u/s 271AAB of the Act for the assessment year

2012-13. Subsequently, the A.O. imposed a penalty u/s

271(1)(c) of the Act in respect of appeal under

consideration vide order dated 23.9.2015 thereby the

assessing officer imposed a penalty of Rs.92,700/- u/s

271(1)(c) of the Act. Against this, the assessee preferred an

appeal before the Ld. CIT(A), who after considering the

submissions dismissed the appeal. Now the assessee is in

further appeal before this Tribunal.

the penalty is bad in law and is contrary to the judicial

pronouncements, more particularly judgement of the 4

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others Hon'ble jurisdictional High Court rendered in the case of

PCIT-I Vs. Kulwant Singh Bhatia in ITA No.9 of 2018 (M.P.)

dated 9.5.2018. Ld. Counsel for the assessee submitted

that there is no specific charge by the assessing officer.

Further, it is contended that the Ld. CIT(A) did not consider

the submissions of the assessee. He submitted that the

A.O. ought to have made specific charge, moreover the

notice u/s 271(1)(c) of the Act dated 24.3.2015 is ex-facie

defective and contrary to the judgement of the Hon'ble

jurisdictional High Court in the case of PCIT-I Vs. Kulwant

Singh Bhatia (supra).

assessee and submitted that in pursuance to the notice,

the assessee participated into the proceedings and did not

raise any objection before the A.O. about the legality of the

notice dated 24.3.2015. Therefore, he submitted that

assessee cannot take shelter under the judgement of the 5

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others Hon'ble jurisdictional High Court, which was on the

different set of facts.

materials available on records and gone through the orders

of the authorities below. We find that the Ld. CIT(A) has

decided the issue in paras 3.1 to 3.6.2 of the impugned

order, which is reproduced as under:

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others

24.3.2015 do not contain the specific charge. The notice

dated 24.3.2015 is reproduced as under for the sake of

clarity:

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others 7. The Hon'ble jurisdictional High Court in the case of

PCIT-I Vs. Kulwant Singh Bhatia (supra) in paras 9 to 11

has held as under:

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others

suggesting that a valid notice was served on the assessee

for initiating proceedings u/s 271(1)(c) of the Act. This

Tribunal is bound by the judgement of the Hon'ble

jurisdictional High Court. Respectfully following the same

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others penalty proceedings initiated by the A.O. vide notice dated

24.3.2015 are held to be bad in law and contrary to the

judgement of the Hon'ble M.P. High Court in the case of

PCIT-I Vs. Kulwant Singh Bhatia (supra). Accordingly, the

impugned penalty order is hereby quashed, being bad in

law.

No.78/Ind/2017 is allowed.

ITA No.79/Ind/2017:

of the assessee, the facts and grounds are identical to ITA

No.78/Ind/2017 wherein we have held as under:-

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others

For the same reasoning the impugned penalty order is

hereby quashed being bad in law.

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others ITA No.80/Ind/2017:

penalty u/s 271AAB of the Act. The assessee has raised

following grounds of appeal:

operation was carried out in the business as well as

residential premises of the appellant group, Indore

including the assessee along with other concerns/business

associates on 21.9.2012. Subsequently, a notice u/s 153A

of the Income Tax Act, 1961 (hereinafter called as ‘the Act’)

was issued. In response thereto, the assessee filed return

of income. The A.O. framed assessment u/s 153A r.w.s.

143(3) of the Act vide order dated 24.3.2015. While 15

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others framing the assessment, the A.O. also initiated penalty

proceedings u/s 271(1)(c) of the Act in the case of the

assessee for the assessment years 2010-11 & 2011-12 and

penalty u/s 271AAB of the Act for the assessment year

2012-13. Subsequently, the A.O. imposed a penalty u/s

271AAB of the Act in respect of appeal under consideration

vide order dated 23.9.2015 thereby the assessing officer

imposed a penalty of Rs.1,50,000/- u/s 271AAB(1)(c) of the

Act i.e. pertaining to the assessment year 2012-13.

Against this, the assessee preferred an appeal before the

Ld. CIT(A), who after considering the submissions

dismissed the appeal. Now the assessee is in further

appeal before this Tribunal.

authorities below were not justified in levying and

confirming the same. He submitted that the disclosure of

income was not on the basis of any incriminating material. 16

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others He contended therefore, the imposition of penalty is

arbitrary and unjustified. Ld. Counsel for the assessee

relied upon the submissions made before the Ld. CIT(A).

supported orders of the authorities below. He submitted

that nowhere under the Act it is prescribed that the penalty

u/s 271AAB of the Act can be imposed only for the

additions made on the basis of incriminating material. He

further submitted that the judgement of the Hon'ble Apex

court rendered in the case of Mak Data Pvt. Ltd. Vs. CIT in

Civil appeal No.9772/2013 has rightly been applied.

materials available on record and gone through the orders

of the authorities below. There is no dispute with regard to

the fact that during the course of search, it was noticed by

the revenue authorities that the assessee had made

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others transaction for purchase of material in cash, which was not

recorded in the books of accounts. It was only when

confronted, the same was offered for taxation as income

from undisclosed sources. As per section 271AAB of the

Act, the A.O. can direct the assessee to pay a sum

computed @ 10% in the undisclosed income of the specified

previous year, if such assessee in the course of the search

in a statement under sub section 4 of section 132 of the

Act admits the undisclosed income and specifies the

manner in which such income has been derived. To

substantiate the manner in which the undisclosed income

was derived and on or before the specified date pays the

taxes together as interest, if any in respect of undisclosed

income and furnishes the return of income in the specified

previous year declaring such undisclosed income therein.

Another situation as stipulated by that provision is that

penalty @ 20% where in the course of search in a

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others statement under sub-section 4 of section 132 of the Act

does not admit the undisclosed income and on or before

the specified date declared such income in the return of

income furnished for the specified previous year and pays

the taxes together with interest, if any in respect of the

undisclosed income. Another situation is stipulated where

the assessee’s case is not covered by the aforesaid

conditions. The rate of penalty would be 60%. In the

present case, assessing officer has invoked the provisions

of section 271AAB(1)(c) of the Act on the basis that the

addition pertains to specified previous year and the

assessee could not specify and substantiate the manner in

which the undisclosed income has been derived. The Ld.

CIT(A) decided the issue in para 3.1 to 3.7 of his order

which is reproduced as under:

“3.1 I have gone through the assessment order and the appellant’s contentions. The crux of the submissions made before the Assessing Officer was that since the additional income was offered in the return filed in response to notice issued u/s 153A and no separate addition had been made, no penalty is 19

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others leviable. The Assessing Officer held that the assessee had offered the additional income only as a result of the search and seizure operation. The assessee has not filed any appeal against the assessment order. Further, the assessee could not explain the manner.

3.2 During the appellate proceedings it is again reiterated that the appellant has made disclosure of additional income amounting to Rs.5,00,000/- on account of various payments made in cash for material purchase as well as for labour/contractor payments as a precaution to safeguard from future litigation/penal actions. The said additional income was admitted during the course of search itself u/s 132(4) before Investigation Wing. The appellant has submitted that no incriminating documents/entries were found during the course of the search.

3.3. It is seen that the appellant in its submissions before the Assessing Officer and the undersigned is placing undue importance on the voluntary disclosure made to buy the peace of mind. The Hon'ble Supreme Court in the case of Mak Data (P) Ltd., (2013) 38 Taxmann.com 448 has held that the AO shall not be carried away by the plea of the assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”, “amicable settlement”, etc. to explain away its conduct.

3.4 The Financial Year under consideration was the specified previous year, hence provisions of section 271AAB would apply. It would be useful to reproduce the meaning of “undisclosed income” for levying the penalty u/s 271AAB of the Act. Same is provided as Explanation (c) to this Section 271AAB of the Act, and reproduced as under:

“Explanation For the purposes of this section,--

(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 accounts or other documents maintained in the normal couirse relating to such previous year; or

(B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or

(ii) any income of the specified previous year represented, either wholly 20

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others 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.”

3.5 In view of the additional income admitted u/s 132(4) and offered by the appellant in the return of income filed u/s 153A for A.Y. 2012-13 it is clear that there was undisclosed income which has been disclosed on account of various payments made in cash for material purchase as well as for labour/contractor payments of Rs.5,00,000/-. That there was undisclosed income of Rs.5,00,000/- which could not be explained on account of which additional income has been admitted, such income .

3.0 2012-13 5,00,000/- out of expenses claimed in Trading & P&L A/c

The assessee company has made cash payments for material purchase and labour/contractors payments which is unavoidable in the trade as that of the assessee company but considering the provisions of section 40A(3) as applicable in this relevant assessment year, and to avoid any further litigation in this matter, the assessee company wish to surrender this amount as its undisclosed income for A.Y. 2012-13.

3.1 Total surrender made by M/s. SM& SM Resorts N Hotels International Ltd. for A.Y. 2012-13 Rs.5,00,000/-

Therefore, twin conditions to attract levy of penalty u/s 271AAB being undisclosed income and the financial year being the specified previous year have been satisfied in the present case.

3.6 The Assessing Officer has levied penalty @ 30% u/s 271AAB (1)(c)holding that the assessee could not explain the manner in which the undisclosed income was derived in the instant casae a statement was given on the date of search disclosing additional income which was reiterated in the letter filed before the investigation wing. In the details of the surrender made by the appellant before the Investigation Wing only the details of the disclosure have been given and the manner of earning the undisclosed income has not been stated. As the manner of earning the undisclosed income has not been explained I hold that penalty is to be leived @ 30% of the undisclosed income u/s 271AAB(1)(c).

3.7 In view of the facts and circumstances of the case it is held that penalty is 21

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others leviable u/s 271AAB (1)(c) @ 30% of the undisclosed income Grouind Nos.1 and 2 are dismissed.” 16. It is recorded by the A.O. that during the course of

search evidences related to payment in cash for material

purchase was found and on examination of books of

accounts, it was found that these amounts were not

accounted for by the assessee. It is also stated by the

assessing officer that through this letter Shri Deepak Kalra

stated that these payments were made out of income from

undisclosed sources and admitted these amounts as

additional income from undisclosed sources. This fact is

not rebutted by the assessee by placing any contrary

material on record. Since there is no ambiguity under the

law and the assessee has not placed any material which

could suggest that these payments in cash for material

purchases was recorded in books of accounts before search

was conducted. The grounds raised in this appeal are

dismissed and order of the Ld. CIT(A) is affirmed.

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others ITA No.85/Ind/2017:

raised by the assessee are reproduced as under:

that the penalty so initiated is vitiated due to defective

notice issued by the A.O. He submitted that the penalty

order to be quashed on this ground alone in view of the

Hon'ble jurisdictional High Court decision in the case of

Principal CIT Vs. Kulwant Singh Bhatia in ITA No.9 of

2018.

Counsel for the assessee.

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others 20. We have heard the rival submissions, perused the

materials available on record and gone through the orders

of the authorities below. We find that the notices issued

for levy of penalty dated 24.3.2015 do not contain the

specific charges. The notices dated 24.3.2015 for the A.Y.

2007-08, is reproduced as under for the sake of clarity:

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others 21. The revenue has not brought any contrary

material suggesting that a valid notice was served on the

assessee for initiating proceedings u/s 271(1)(c) of the Act.

This Tribunal is bound by the judgement of the Hon'ble

jurisdictional High Court respectively following the same

penalty proceedings initiated by the A.O. vide notice dated

24.3.2015 are held to be bad in law and contrary to the

judgement of the Hon'ble M.P. High Court in the case of

PCIT-I Vs. Kulwant Singh Bhatia (supra). Accordingly, the

impugned penalty order is hereby quashed.

ITA No.85/Ind/2017 is allowed.

ITA Nos.86 to 87/Ind/2017:

these appeals of the assessee, the facts and grounds are

identical to ITA No.85/Ind/2017 adjudicated above and the

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others parties have adopted the same argument and based on the

findings given, the A.O. is directed to delete the penalty

and hence, these appeals of the assessee are also allowed.

ITA Nos.88 & 89/Ind/2017:

these appeals of the assessee, the facts and grounds are

identical to ITA No.80/Ind/2017 adjudicated above and the

parties have adopted the same argument. Based on the

findings given above, the grounds raised in these appeals

are dismissed.

ITA Nos.90 to 94/Ind/2017:

these appeals of the assessee, the facts and grounds are

identical to ITA No.78/Ind/2017 adjudicated above and the

parties have adopted the same argument. Based on the

findings given above, the A.O. is directed to delete the 26

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others penalty and hence, these appeals of the assessee are also

allowed.

ITA Nos.95 to 97/Ind/2017:

Sd/- Sd/-

(MANISH BORAD) (KULBHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER �दनांक /Dated : 10th January, 2019 VG/SPS 27

ITA Nos.78 to 80 & 85 to 97/Ind/2017 M/s. SM & SM Resorts N Hotels International Ltd., Indore and Shri Deepak Kalra, Indore & others Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order,

Asstt.Registrar, I.T.A.T., Indore