Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
PER SHRI PRADIP KUMAR KEDIA, AM:
This bunch of captioned four appeals have been filed at the instance of the different assessees against the separate appellate orders of the Commissioner of Income Tax(Appeals)-11, Ahmedabad [CIT(A) in short] dated 01/02/2017, 08/09/2017, 20/07/2017 arising in the assessment orders passed under s.143(3) of
- 2 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 28/02/2015 & 24/03/2015 relevant to Assessment Year (AY) 2013-14.
In all the captioned 4 cases, the only issue agitated before the Tribunal is towards levy of penalty under s.271AAB of the Act by the Assessing Officer which was confirmed by the CIT(A)-11, Ahmedabad.
As all the appeals concerning the group cases involving the identical issue, all the matters were heard together and disposed of by this common order.
Briefly stated, a search action under s.132 of the Act was carried out at the premises of the assessee on 17/01/2013. As a consequence of search, the assessee filed return of income declaring Rs.3,42,73,700/- in the case of Shri Bharat T.Aghara in IT(ss)A No.88/Rjt/2017 for AY 2013-14 which included additional income declared by the assessee and amounting to Rs.2,61,13,250/- in the course of search. The Assessing Officer assessed the income so declared as such, together with some other small disallowances with which we are not presently concerned with. The Assessing Officer however initiated penalty proceedings under s.271AAA of the Act on the additional income declared amounting to Rs.2,61,13,250/- in pursuance of search. Subsequently, on receiving objections from the assessee, the Assessing Officer vide corrigendum dated 03/07/2015 to the assessment order, modified the penalty section and substituted the same by section 271AAB and continued penalty proceedings under that section. In terms of section 271AAB of the Act, the Assessing Officer imposed a penalty of Rs.26,11,325/- being 10% of the additional income declared vide order passed under s.271AAB of the Act.
- 3 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 5. The aforesaid action of the Assessing Officer was affirmed by the CIT(A) in the first appeal.
The assessee has agitated the action of the Revenue before the Tribunal and seeks to contend that conditions of section 271AAB is not satisfied and, therefore, penalty imposed by the Assessing Officer is not sustainable in law.
On consideration of rival submissions, we find that the issue has already been adjudicated in group cases viz. Shri Jitendrabhai Thakarshi Aghara vs. ACIT and two others in IT(ss)A Nos.1, 02 & 03/Rjt/2017 order dated 01/06/2018 on identical facts. The Co-ordinate Bench has deleted the penalty in the similarly placed facts. Similar decision was rendered in ITA No.157/Rjt/2017 for AY 2013-14 dated 15/11/2018 in some other group cases in the same search. The relevant portion of the said order reads as under :
“9. Adverting to the main grievance, the LA A.R for the assessee submitted at the outset that in the search action under section 132 carried out at the premises of the assessee on 17.01.2013, no unaccounted money, assets, investments etc. were recovered. The Ld. A.R adverted to the penalty order appealed against and submitted that it is admitted position that the assessee in the statement recorded under section 132(4) of the Act, admitted additional income on ad-hoc basis for the family & group concerns as a whole. Out of the voluntarily declarations of additional income, the assessee included Rs. 2,54,13,250/- on ad-hoc basis in his return of income. The income declared by the assessee hi the return of income was accepted in toto without any modification. The Ld. A.R pointed out from the penalty order that the declarations were made and honoured subsequently in the return of income filed only to avoid long drawn litigations and to buy peace of mind. The Ld. A.R vehemently reiterated its submission made before the AO that nothing incriminating hi the form of cash, gold, valuables or any documents .or data evidencing the undisclosed income was found. The Ld. A.R therefore contended that a declaration made on ad-hoc, basis to cover up defects or discrepancies in the books of account, if any, without any detection of falsity cannot be equated with the 'undisclosed income' as statutorily defined unite section 271AAB of the Act. To support its contention, the Ld, A.R submitted that for the purposes
- 4 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 of penalty, the AO has merely relied upon some ad-hoc declaration made in the statement recorded under section 132(4) of the Act without any making any reference to the particulars of unaccounted money, assets, investments or expenditure etc. giving rise to the disclosure so made. The Ld. AH thereafter referred to the provisions of section 271AAB and submitted that the scope of section 271AAB does not extend beyond the 'undisclosed income' as defined under section 271AAB of the Act. It was contended that in the absence of any findings in the penalty order on the particulars of undisclosed income represented by money, bullion, jewellery etc. etc. as defined, section 271AAB has no application. In reiteration, the Ld. A.R vehemently submitted that an ad-hoc declaration not backed by tangible items specified hi the statutory definition cannot be regarded as 'undisclosed income' for the purposes of section 271AAB of the Act. The Ld. A.R once again restated that Assessing Officer has also not made any reference to any incriminating material found in the course of search per se while assessing ad-hoc declaration and accepting the income filed by the assessee in its return of income. Similarly, no reference has been made to any incriminating material whatsoever for the purposes of imposition of penalty and therefore 'satisfaction' drawn by the AO for imposition of penalty is de horse any incriminating material and solely based on the conditional voluntary disclosure. It was thus contended that in the absence of any reference to the incriminating material, the claim of the assesses about the non existence of any 'undisclosed income' stands vindicated. The Ld. A.R thereafter adverted to the decision of the Co-ordinate Bench in the case of ACIT vs. Marble Associates (2018) 92 taxmann.com 109 (Vishakhapatnam) and the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. Niraj Jindal (2017) 393 ITR 1 (Delhi) to support its case for deletion of penalty.
The Ld. D.R, on the other hand, relied upon the order of the CIT(A) and submitted in furtherance mat where the assessee himself has admitted certain income in the course of search and included the same as part of return, the consequences of penalty under section 271AAB cannot be escaped
We have carefully considered the rival submissions and perused the orders of the authorities below and material placed on record. The core controversy involved in the present appeal is towards maintainability of imposition of penalty under section 271AAB hi the facts and circumstances of the case.
11.1 It is the case of the assessee that the income declared in. the return of income arises out of regular stream of income from various sources and ad-hoc declaration combinedly made for group concern and included in the return of income towards its share, does not tantamount to "undisclosed income" as codified in the Explanation-(c) below section 271AABoftheAct.
- 5 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14
11.2 To paddle its point of view, the assessee has strongly relied on the statutory definition of "undisclosed income". We find that identical issue came up for consideration in the case of Jasubhai Arjanbhai Vaghasia vs. ACIT, ITA No. 58/Rjt/2017 order dated 17.05,2018 in the context of section 271AAA of the Act. Therefore, it is considered expedient to reproduce the relevant operative para of the decision of the Co-ordinate Bench on the issue:- 8. We have carefully considered the rival submissions and perused the orders of the authorities below and material placed on record. The core controversy involved in the present appeal is towards maintainability of imposition of penalty under section 271AAA in the facts and circumstances of the case. 8.1 The case of the assessee is twofold (i) The income declared in the return of income amounting to Rs. 2,25,61,020/- arises out of the regular stream of income from various sources including Rs. 90 lakhs towards ad-hoc declaration and therefore there is no element of 'undisclosed income' as defined in the Explanation below section 271AAA of the Act. (ii) In the alternative, in any event, the incidence of penalty under section 271AAA cannot exceed Rs. 9 lakhs (10% of Rs. 90 lakhs) attributable to ad-hoc income. 8.2 To buttress its point of view, the assesses has strongly harped on the statutory definition of "undisclosed income". It -would therefore be apposite to reproduce section 271AAA of the Act for ready reference:- '271AAA. Penalty where search has been initiated,—(1) The Assessing Officer 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 June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable, by him, a sum computed at the rate often per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assesses,— (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) pays the tax, together-with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assesses in respect of the undisclosed income referred to in sub-section (1).
- 6 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.
Explanation.—For the purposes of this section,— (a) "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 Chief Commissioner or Commissioner, before the date of the 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;
(b) "specified previous year" means the previous year—
(i) which has ended before the date of search, but the date of filing the return of income under sub-section (!) of section 139 for such year has not expired before the date of search and the assesses has not furnished the return of income for the previous year before the said date.; or
(ii) in which search was conducted.
8.3. perusal of special provisions of section 271AAA, concerning search cases that it is applicable in respect of "undisclosed income" in contrast to "concealed income" relevant for the purposes of penalty proceedings under normal provisions of section 271(1)(c) of the Act. The applicability of penalty under section 271AAA thus revolves within the sphere of "undisclosed income ",
8.4. A plane reading of the aforesaid definition of 'undisclosed income' clearly shows that the undisclosed income should be represented by money, bullion jewellery or other valuable articles or things or any unrecorded entry as per documents found or any false entry recorded in the books of account etc. No such reference or nexus of disclosure to such specified items were made in the assessment order or in the penalty order. In view of the statutory definition of undisclosed income, a disclosure made merely to buy peace does not tantamount to 'undisclosed income' per se. The
- 7 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 applicability of section 271AAA is dependent upon the income falling within the sweet of clear and express definition of expression "undisclosed income". An ad-hoc and lumsum declaration as a consequent of search without any reference made by A.O 'towards any money, bullion, jewellery or other valuable articles or thing or any entry in the books of account etc. cannot be deemed to be automatically an undisclosed income for the purposes of imposition of penalty under section 271AAA of the Act. The onus is on A.O to bring on record material which points to 'undisclosed income' as defined under section 271AAA of the Act. As noted, no reference to underlying material is found in the orders of lower authorities. A simple disclosure made in the course of search under section 132(4) in itself cannot be deemed to be 'undisclosed income' in view of the limitations placed in the definition thereof. 9. Therefore we are of the considered view that in the absence of any incriminating material referred for the purposes of assessing alleged undisclosed income, the imposition of penalty under section 271 AAA is without any legal foundation and thus not permissible. 10. In view of the aforesaid discussion, we do not consider it necessary to advert to the alternative plea of the assessee for imposition of penalty with reference to ad-hoc amount of declaration alone. 11. The order of the Assessing Officer towards imposition of penalty under section 271AAA is therefore set aside and the Assessing Officer is directed to delete the penalty so imposed. 12. In the result appeal of the assesses is allowed.
11.3 As noted above, the Co-ordinate Bench has dealt with identical issue and held that in the absence of any reference to tangible material, mere act of acquiesce of ad-hoc income under section 132(4) of the Act. cannot be covered within the sweep of "undisclosed income" for the purposes of imposition of penalty under section 271AAA of the Act. In the present case, the penalty has been imposed in terms of the amended provision for imposition of penalty under section 271AAB of the Act. However, the definition of "undisclosed income" under erstwhile section 271AAA and section 271AAB are identical. Therefore, the plea of the assessee that in the absence of reference to any incriminating material, imposition of penalty under section 271AAB is without any legal foundation, gets support from the decision of Co-ordinate Bench.
11.4. It is also pertinent to state that the AO imposed penalty in a nonchalant manner and has probably mis-understood the imposition of penalty as an automatic consequence. The income offered has neither been related to specified previous year nor the reference was made any document etc, to cover the declaration within the sphere of 'undisclosed income'. Such summary action of the Assessing Officer functioning in quasi judicial capacity cannot be endorsed. The penalty order is thus vitiated due to non application of mind also. The order of the Assessing Officer dated 16.07.2015 towards imposition of penalty under
- 8 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 section 271AAB is therefore set aside and consequently, the Assessing Officer is directed to delete the penalty so imposed.”
At this stage, we would also like to refer to the decision of Hon’ble Allahabad High Court in the case of Principal Commissioner of Income Tax vs. Sandeep Chandak (2018) 93 taxmann.com 405 (Allahabad) relied upon on behalf of the Revenue to defend its case and submit that penalty under s.271AAB is exigible to the assessee on income surrendered in the statement under s.132(4) of the Act. However, on a closer study, we observe that there is a fundamental difference between facts of that case qua the facts of the present case. In the case before Hon’ble High Court, the declaration was made on the basis of various incriminating documents found and seized and the assessee has specified the manner of earning the undisclosed income mentioned in such documents. Thus, the undisclosed income with backed by inculpatory documents. In the instant case, in the absence of any incriminating documents, no corroboration of income declared under s.132(4) per se is available. Thus, such additional income on the basis of standalone statement under s.132(4) of the Act would not fall within the sweep of expression ‘undisclosed income’ contemplated for the purposes of section 271AAB of the Act as held by the Coordinate Bench in group cases. Therefore, to our mind, the aforesaid judgement of the Hon’ble Allahabad High Court do not come to the aid and assistance of the Revenue.
In parity with the decision rendered in the group cases in identical set of facts, we are disposed to hold in favour of the assessee. The appellate order passed by the CIT(A) is accordingly set aside and the Assessing Officer is directed to delete the penalty amounting to Rs.26,11,325/- so imposed u/s.271AAB of the Act.
- 9 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14
In the result, appeal of the assessee in the case of Shri Bharatbhai T.Aghara in IT(ss) A No.88/Rjt/2017 for AY 2013-14 is allowed.
We shall now advert to other captioned appeals in ITA No.159/Rjt/2017, IT(ss)A Nos.159/Rjt/2017 & 89/Rjt/2017 involving identical issue. In the absence of any change in facts pointed out in the course of hearing by either side, our view in IT(ss)A No.88/Rjt/2017 for AY 2013-14(supra) shall apply mutatis mutandis. Thus, the grievance towards imposition of penalty on merits is adjudicated in favour of the assessee. Hence, the levy of penalty of Rs.1,87,500/- u/s.271AAB in ITA No.159/Rjt/2017, Rs.1,50,000/- in IT(ss)A No.159/Rjt/2017 and Rs.2,90,200/- in IT(ss)A No.89/Rjt/2017 stands deleted.
In the combined result, all the four captioned appeals are allowed.
This Order pronounced in Open Court on 16/ 05 /2019
Sd/- Sd/- ( RAJPAL YADAV ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 16/ 05 /2019
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
- 10 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-11, Ahmedabad 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,राजोकट/DR,ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, //स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation ..10.5.19 (dictation-pad 3-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …13.5.19 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….16.5.19 7. Date on which the file goes to the Bench Clerk…………………16.5.19 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ Conducted through E-Court at Ahmedabad ]
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
Sl. ITA/IT(ss)A No(s) Assessment Appeal(s) by Nos. Year (s) Appellant vs. Respondent Appellant (s) Respondent 1. ITA No.159/Rjt/17 2013-14 Shri Karmashibhai G.Aghara The ACIT “Matru Krupa” Central Anupam Society Circle-1 Nazarbaug Road, Morbi Rajkot PAN : ABIPA 4153 D 2. IT(ss)A 2013-14 Shri Narshibhai G.Aghara -do-Revenue No.159/Rjt/17 “Bansi” Somnath Society Opp.Diamond Hall, Morbi PAN : ABIPA 4152 C 3. IT(ss)A 2013-14 Shri Bharatbhai T. Aghara -do-Revenue No.88/Rjt/17 “Sneh Milan” Somnath Soceity Nr.Pran Nagar Ravapar Road, Morbi PAN : ABQPA 8615 G 4. IT(ss)A 2013-14 Shri Kapilbhai Karamshibhai -do-Revenue No.89/Rjt/17 Aghara “Matru Krupa” Anupam Society Nazarbaug Road, Morbi PAN: AGMPA 5493 P
Assessees by : Shri Mehul J. Ranpura, AR Revenue by : Shri B.B. Rajendra Prasad, CIT-DR
Date of Hearing 10/05/2019 Date of Pronouncement 16/05/2019
O R D E R
PER SHRI PRADIP KUMAR KEDIA, AM:
This bunch of captioned four appeals have been filed at the instance of the different assessees against the separate appellate orders of the Commissioner of Income Tax(Appeals)-11, Ahmedabad [CIT(A) in short] dated 01/02/2017, 08/09/2017, 20/07/2017 arising in the assessment orders passed under s.143(3) of
- 2 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 28/02/2015 & 24/03/2015 relevant to Assessment Year (AY) 2013-14.
In all the captioned 4 cases, the only issue agitated before the Tribunal is towards levy of penalty under s.271AAB of the Act by the Assessing Officer which was confirmed by the CIT(A)-11, Ahmedabad.
As all the appeals concerning the group cases involving the identical issue, all the matters were heard together and disposed of by this common order.
Briefly stated, a search action under s.132 of the Act was carried out at the premises of the assessee on 17/01/2013. As a consequence of search, the assessee filed return of income declaring Rs.3,42,73,700/- in the case of Shri Bharat T.Aghara in IT(ss)A No.88/Rjt/2017 for AY 2013-14 which included additional income declared by the assessee and amounting to Rs.2,61,13,250/- in the course of search. The Assessing Officer assessed the income so declared as such, together with some other small disallowances with which we are not presently concerned with. The Assessing Officer however initiated penalty proceedings under s.271AAA of the Act on the additional income declared amounting to Rs.2,61,13,250/- in pursuance of search. Subsequently, on receiving objections from the assessee, the Assessing Officer vide corrigendum dated 03/07/2015 to the assessment order, modified the penalty section and substituted the same by section 271AAB and continued penalty proceedings under that section. In terms of section 271AAB of the Act, the Assessing Officer imposed a penalty of Rs.26,11,325/- being 10% of the additional income declared vide order passed under s.271AAB of the Act.
- 3 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 5. The aforesaid action of the Assessing Officer was affirmed by the CIT(A) in the first appeal.
The assessee has agitated the action of the Revenue before the Tribunal and seeks to contend that conditions of section 271AAB is not satisfied and, therefore, penalty imposed by the Assessing Officer is not sustainable in law.
On consideration of rival submissions, we find that the issue has already been adjudicated in group cases viz. Shri Jitendrabhai Thakarshi Aghara vs. ACIT and two others in IT(ss)A Nos.1, 02 & 03/Rjt/2017 order dated 01/06/2018 on identical facts. The Co-ordinate Bench has deleted the penalty in the similarly placed facts. Similar decision was rendered in ITA No.157/Rjt/2017 for AY 2013-14 dated 15/11/2018 in some other group cases in the same search. The relevant portion of the said order reads as under :
“9. Adverting to the main grievance, the LA A.R for the assessee submitted at the outset that in the search action under section 132 carried out at the premises of the assessee on 17.01.2013, no unaccounted money, assets, investments etc. were recovered. The Ld. A.R adverted to the penalty order appealed against and submitted that it is admitted position that the assessee in the statement recorded under section 132(4) of the Act, admitted additional income on ad-hoc basis for the family & group concerns as a whole. Out of the voluntarily declarations of additional income, the assessee included Rs. 2,54,13,250/- on ad-hoc basis in his return of income. The income declared by the assessee hi the return of income was accepted in toto without any modification. The Ld. A.R pointed out from the penalty order that the declarations were made and honoured subsequently in the return of income filed only to avoid long drawn litigations and to buy peace of mind. The Ld. A.R vehemently reiterated its submission made before the AO that nothing incriminating hi the form of cash, gold, valuables or any documents .or data evidencing the undisclosed income was found. The Ld. A.R therefore contended that a declaration made on ad-hoc, basis to cover up defects or discrepancies in the books of account, if any, without any detection of falsity cannot be equated with the 'undisclosed income' as statutorily defined unite section 271AAB of the Act. To support its contention, the Ld, A.R submitted that for the purposes
- 4 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 of penalty, the AO has merely relied upon some ad-hoc declaration made in the statement recorded under section 132(4) of the Act without any making any reference to the particulars of unaccounted money, assets, investments or expenditure etc. giving rise to the disclosure so made. The Ld. AH thereafter referred to the provisions of section 271AAB and submitted that the scope of section 271AAB does not extend beyond the 'undisclosed income' as defined under section 271AAB of the Act. It was contended that in the absence of any findings in the penalty order on the particulars of undisclosed income represented by money, bullion, jewellery etc. etc. as defined, section 271AAB has no application. In reiteration, the Ld. A.R vehemently submitted that an ad-hoc declaration not backed by tangible items specified hi the statutory definition cannot be regarded as 'undisclosed income' for the purposes of section 271AAB of the Act. The Ld. A.R once again restated that Assessing Officer has also not made any reference to any incriminating material found in the course of search per se while assessing ad-hoc declaration and accepting the income filed by the assessee in its return of income. Similarly, no reference has been made to any incriminating material whatsoever for the purposes of imposition of penalty and therefore 'satisfaction' drawn by the AO for imposition of penalty is de horse any incriminating material and solely based on the conditional voluntary disclosure. It was thus contended that in the absence of any reference to the incriminating material, the claim of the assesses about the non existence of any 'undisclosed income' stands vindicated. The Ld. A.R thereafter adverted to the decision of the Co-ordinate Bench in the case of ACIT vs. Marble Associates (2018) 92 taxmann.com 109 (Vishakhapatnam) and the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. Niraj Jindal (2017) 393 ITR 1 (Delhi) to support its case for deletion of penalty.
The Ld. D.R, on the other hand, relied upon the order of the CIT(A) and submitted in furtherance mat where the assessee himself has admitted certain income in the course of search and included the same as part of return, the consequences of penalty under section 271AAB cannot be escaped
We have carefully considered the rival submissions and perused the orders of the authorities below and material placed on record. The core controversy involved in the present appeal is towards maintainability of imposition of penalty under section 271AAB hi the facts and circumstances of the case.
11.1 It is the case of the assessee that the income declared in. the return of income arises out of regular stream of income from various sources and ad-hoc declaration combinedly made for group concern and included in the return of income towards its share, does not tantamount to "undisclosed income" as codified in the Explanation-(c) below section 271AABoftheAct.
- 5 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14
11.2 To paddle its point of view, the assessee has strongly relied on the statutory definition of "undisclosed income". We find that identical issue came up for consideration in the case of Jasubhai Arjanbhai Vaghasia vs. ACIT, ITA No. 58/Rjt/2017 order dated 17.05,2018 in the context of section 271AAA of the Act. Therefore, it is considered expedient to reproduce the relevant operative para of the decision of the Co-ordinate Bench on the issue:- 8. We have carefully considered the rival submissions and perused the orders of the authorities below and material placed on record. The core controversy involved in the present appeal is towards maintainability of imposition of penalty under section 271AAA in the facts and circumstances of the case. 8.1 The case of the assessee is twofold (i) The income declared in the return of income amounting to Rs. 2,25,61,020/- arises out of the regular stream of income from various sources including Rs. 90 lakhs towards ad-hoc declaration and therefore there is no element of 'undisclosed income' as defined in the Explanation below section 271AAA of the Act. (ii) In the alternative, in any event, the incidence of penalty under section 271AAA cannot exceed Rs. 9 lakhs (10% of Rs. 90 lakhs) attributable to ad-hoc income. 8.2 To buttress its point of view, the assesses has strongly harped on the statutory definition of "undisclosed income". It -would therefore be apposite to reproduce section 271AAA of the Act for ready reference:- '271AAA. Penalty where search has been initiated,—(1) The Assessing Officer 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 June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable, by him, a sum computed at the rate often per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assesses,— (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) pays the tax, together-with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assesses in respect of the undisclosed income referred to in sub-section (1).
- 6 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.
Explanation.—For the purposes of this section,— (a) "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 Chief Commissioner or Commissioner, before the date of the 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;
(b) "specified previous year" means the previous year—
(i) which has ended before the date of search, but the date of filing the return of income under sub-section (!) of section 139 for such year has not expired before the date of search and the assesses has not furnished the return of income for the previous year before the said date.; or
(ii) in which search was conducted.
8.3. perusal of special provisions of section 271AAA, concerning search cases that it is applicable in respect of "undisclosed income" in contrast to "concealed income" relevant for the purposes of penalty proceedings under normal provisions of section 271(1)(c) of the Act. The applicability of penalty under section 271AAA thus revolves within the sphere of "undisclosed income ",
8.4. A plane reading of the aforesaid definition of 'undisclosed income' clearly shows that the undisclosed income should be represented by money, bullion jewellery or other valuable articles or things or any unrecorded entry as per documents found or any false entry recorded in the books of account etc. No such reference or nexus of disclosure to such specified items were made in the assessment order or in the penalty order. In view of the statutory definition of undisclosed income, a disclosure made merely to buy peace does not tantamount to 'undisclosed income' per se. The
- 7 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 applicability of section 271AAA is dependent upon the income falling within the sweet of clear and express definition of expression "undisclosed income". An ad-hoc and lumsum declaration as a consequent of search without any reference made by A.O 'towards any money, bullion, jewellery or other valuable articles or thing or any entry in the books of account etc. cannot be deemed to be automatically an undisclosed income for the purposes of imposition of penalty under section 271AAA of the Act. The onus is on A.O to bring on record material which points to 'undisclosed income' as defined under section 271AAA of the Act. As noted, no reference to underlying material is found in the orders of lower authorities. A simple disclosure made in the course of search under section 132(4) in itself cannot be deemed to be 'undisclosed income' in view of the limitations placed in the definition thereof. 9. Therefore we are of the considered view that in the absence of any incriminating material referred for the purposes of assessing alleged undisclosed income, the imposition of penalty under section 271 AAA is without any legal foundation and thus not permissible. 10. In view of the aforesaid discussion, we do not consider it necessary to advert to the alternative plea of the assessee for imposition of penalty with reference to ad-hoc amount of declaration alone. 11. The order of the Assessing Officer towards imposition of penalty under section 271AAA is therefore set aside and the Assessing Officer is directed to delete the penalty so imposed. 12. In the result appeal of the assesses is allowed.
11.3 As noted above, the Co-ordinate Bench has dealt with identical issue and held that in the absence of any reference to tangible material, mere act of acquiesce of ad-hoc income under section 132(4) of the Act. cannot be covered within the sweep of "undisclosed income" for the purposes of imposition of penalty under section 271AAA of the Act. In the present case, the penalty has been imposed in terms of the amended provision for imposition of penalty under section 271AAB of the Act. However, the definition of "undisclosed income" under erstwhile section 271AAA and section 271AAB are identical. Therefore, the plea of the assessee that in the absence of reference to any incriminating material, imposition of penalty under section 271AAB is without any legal foundation, gets support from the decision of Co-ordinate Bench.
11.4. It is also pertinent to state that the AO imposed penalty in a nonchalant manner and has probably mis-understood the imposition of penalty as an automatic consequence. The income offered has neither been related to specified previous year nor the reference was made any document etc, to cover the declaration within the sphere of 'undisclosed income'. Such summary action of the Assessing Officer functioning in quasi judicial capacity cannot be endorsed. The penalty order is thus vitiated due to non application of mind also. The order of the Assessing Officer dated 16.07.2015 towards imposition of penalty under
- 8 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14 section 271AAB is therefore set aside and consequently, the Assessing Officer is directed to delete the penalty so imposed.”
At this stage, we would also like to refer to the decision of Hon’ble Allahabad High Court in the case of Principal Commissioner of Income Tax vs. Sandeep Chandak (2018) 93 taxmann.com 405 (Allahabad) relied upon on behalf of the Revenue to defend its case and submit that penalty under s.271AAB is exigible to the assessee on income surrendered in the statement under s.132(4) of the Act. However, on a closer study, we observe that there is a fundamental difference between facts of that case qua the facts of the present case. In the case before Hon’ble High Court, the declaration was made on the basis of various incriminating documents found and seized and the assessee has specified the manner of earning the undisclosed income mentioned in such documents. Thus, the undisclosed income with backed by inculpatory documents. In the instant case, in the absence of any incriminating documents, no corroboration of income declared under s.132(4) per se is available. Thus, such additional income on the basis of standalone statement under s.132(4) of the Act would not fall within the sweep of expression ‘undisclosed income’ contemplated for the purposes of section 271AAB of the Act as held by the Coordinate Bench in group cases. Therefore, to our mind, the aforesaid judgement of the Hon’ble Allahabad High Court do not come to the aid and assistance of the Revenue.
In parity with the decision rendered in the group cases in identical set of facts, we are disposed to hold in favour of the assessee. The appellate order passed by the CIT(A) is accordingly set aside and the Assessing Officer is directed to delete the penalty amounting to Rs.26,11,325/- so imposed u/s.271AAB of the Act.
- 9 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14
In the result, appeal of the assessee in the case of Shri Bharatbhai T.Aghara in IT(ss) A No.88/Rjt/2017 for AY 2013-14 is allowed.
We shall now advert to other captioned appeals in ITA No.159/Rjt/2017, IT(ss)A Nos.159/Rjt/2017 & 89/Rjt/2017 involving identical issue. In the absence of any change in facts pointed out in the course of hearing by either side, our view in IT(ss)A No.88/Rjt/2017 for AY 2013-14(supra) shall apply mutatis mutandis. Thus, the grievance towards imposition of penalty on merits is adjudicated in favour of the assessee. Hence, the levy of penalty of Rs.1,87,500/- u/s.271AAB in ITA No.159/Rjt/2017, Rs.1,50,000/- in IT(ss)A No.159/Rjt/2017 and Rs.2,90,200/- in IT(ss)A No.89/Rjt/2017 stands deleted.
In the combined result, all the four captioned appeals are allowed.
This Order pronounced in Open Court on 16/ 05 /2019
Sd/- Sd/- ( RAJPAL YADAV ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 16/ 05 /2019
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
- 10 - ITA No.159/Rjt/2017 & IT(ss)A No.159/Rjt/2017, IT(ss)A Nos.88 & 89/Rjt/2017 Shri Karamshibhai G.Aghara & 3 Ors. vs. ACIT Asst.Year – 2013-14
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-11, Ahmedabad 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,राजोकट/DR,ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, //स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation ..10.5.19 (dictation-pad 3-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …13.5.19 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….16.5.19 7. Date on which the file goes to the Bench Clerk…………………16.5.19 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………