JUGAL KISHORE MAHESHWARI,JAIPUR vs. ACIT, JAIPUR

PER VIJAY PAL RAO, JM :

These two appeals by the assessee are directed against two separate orders

of ld. CIT (A)-4, Jaipur both dated 25.07.2016 arising from the penalty order passed

under section 271AAA of the I.T. Act for the assessment years 2011-12 and 2012-13

respectively. The assessee has raised common grounds in these appeals except the

quantum of appeal. The grounds for the assessment year 2011-12 are as under :-

“ 1. That on the facts and in the circumstances of the case the ld. CIT (A) is wrong, unjust and has erred in law in confirming penalty of Rs. 46120/- imposed by the ld. Assessing Officer u/s 271AAA of the Income Tax Act, 1961.

2 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

The assessee has also raised additional ground for both the assessment years. The

additional ground raised by the assessee is also common and read as under :-

“ 1(a) That on the facts and in the circumstances of the case penalty of Rs. 46120/- imposed u/s 271AAA of the I.T. Act, 1961 by the ld. Assessing Officer and confirmed by the ld. CIT (A)-4, Jaipur is wrong, unwarranted and bad in law in as much as provisions of sec. 271AAA are not at all attracted in the case of the appellant as no search u/s 132 of the I.T. Act 1961 was conducted.

additional ground and considered the relevant material on record. As it is clear from

the additional ground that the assessee has raised a legal issue regarding validity of

the penalty order passed under section 271AAA of the Act on the ground that there

was no search conducted under section 132 of the Act in the case of the assessee.

Since the additional ground raised by the assessee is purely legal in nature and for

its adjudication no fresh material or facts are required but the facts which are

undisputed and already on record can be considered for adjudication of the

additional ground raised by the assessee for both the years, hence in view of the

decision of the Hon’ble Supreme Court in the case of NTPC vs. CIT, 229 ITR 383

(SC) the additional ground raised by the assessee is admitted for adjudication on

merits.

29.06.2011 at the premises of M/s. Birani Safe Deposit Vaults Pvt. Ltd. It was found

from the record of M/s. Birani Safe Deposit Vaults Pvt. Ltd. that the locker no. 1084 was in the name of Shri Kailash Gupta. However, subsequently vide letter dated 5th

3 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

July, 2011 the assessee claimed that the locker no. 1084 belongs to him which is

appearing in the name of his employee Shri Kailash Gupta. Statement of the assessee was recorded under section 131 of the Act on 21st July, 2011 wherein the

assessee admitted the fact that said locker no. 1084 belongs to him. The AO initially

issued a notice under section 153A of the Act. However, subsequently the AO

dropped the proceedings initiated under section 153A and proceeded to frame the

assessment under section 153C of the Act. The AO has completed the assessment under section 153C read with section 143(3) of the Act on 24th March, 2014 on the

undisclosed income admitted and declared in the return of income of Rs. 28,70,284/-

for these two assessment years. For the year under consideration the assessee has

declared and offered the undisclosed income of Rs. 4,61,174/- and accordingly the

AO has accepted the returned income of Rs. 6,44,010/-. The AO, thereafter,

initiated the proceedings under section 271AAA of the Act and levied the penalty in

respect of the undisclosed income surrendered by the assessee. The assessee

challenged the action of the AO before the ld. CIT (A) but could not succeed.

material on record. The ld. A/R of the assessee has relied upon various decisions of

this Tribunal on the point that when there was no search under section 132 in the

case of the assessee then the penalty cannot be levied under section 271AAA of the

Act.

4.1. On the other hand, the ld. D/R has submitted that it is a case of detection of

benami locker maintained by the assessee during the course of search and seizure

action. When the locker was subject matter of search, then even if the authorization

4 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

warrant was not in the name of the assessee, the search was carried out on the

locker of the assessee. Thus the ld. D/R has submitted that the AO was justified in

imposing the penalty under section 271AAA of the Act.

the outset we note that this issue has been considered by the Coordinate Bench of

the Tribunal in the case of DCIT vs. Shri Ashish Kumar Gattani in ITA No. 1021/JP/2015 vide order dated 28th April, 2017 as well as in the case of P.C. Jain & Sons HUF in ITA Nos. 927 & 928/JP/2017 vide order dated 3rd May, 2018. Both

were relied upon by the ld. A/R of the assessee. In the latest decision in the case of

PC Jain & Sons HUF vs. ACIT (supra), the Tribunal has considered an identical issue

in para 5 as under :-

“5. Having considered the rival submissions as well as the relevant material on record, we note that there was no search and seizure action in the case of the assessee but the search was carried out in the case of Ganpati Lockers Pvt. Ltd. on 29th June, 2011. Subsequent to the search, the statement of the assessee was recorded under section 131 on 11th July, 2011 wherein the assessee has disclosed an income of Rs. 89,600/-. Therefore, there is no dispute that the assessee disclosed the income in the statement recorded under section 131 and not in the statement recorded under section 132(4) of the Act. Hence the provisions of section 271AAA cannot be resorted to levy the penalty when there was no search and seizure action resulting in disclosure of income by the assessee in the statement recorded under section 132(4) of the Act. The assessee has relied upon a series of decisions on this point including the decision of Hon’ble Gujarat High Court in the case of PCIT vs. Mukesh Bhai Raman Lal Prajapati in Tax

5 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

Appeal No. 434 of 2017 dated 24th July, 2017. The Hon’ble High Court has held in para 13 & 14 as under :-

“ 13. Sub section (2) of Section 271AAA thus while retaining the other requirements of avoiding penalty as provided in clause (ii) of Explanation 5 has now introduced an additional requirement of the assessee having to substantiate the manner in which, the undisclosed income was derived. It is this requirement which the counsel for the Revenue would place great emphasis on. According to her, onus is now entirely shifted on the assessee not only to make a disclosure of the undisclosed income but also to specify the manner, in which, the income has been derived and to substantiate the same. It was therefore, contended that the earlier decisions of this Court in case of Commissioner of Income Tax vs. Mahendra C. Shah and the decision of Allahabad High Court in case of Commissioner of Income Tax vs. Radha Kishan Goel rendered in backdrop of different statutory provisions would not automatically apply.

6 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

income would commence. When the base requirement itself fails, the question of denying the benefit of no penalty would not arise.”

In view of the facts and circumstances of the case when the disclosure was not made during the search and seizure action and in the statement recorded under section 132(4) and by following the decision of Hon’ble Gujarat High Court in the case of Mukesh Bhai Raman Lal Prajapati (supra), the provisions of section 271AAA are not attracted for levy of penalty in respect of the disclosure of income made by the assessee in the statement recorded under section 131 of the Act. Accordingly, we delete the penalty levied by the AO under section 271AAA for both the assessment years.”

In the case in hand, there is no dispute that the search was carried out at the premises of M/s. Birani Safe Deposit Vaults Pvt. Ltd. on 29th June, 2011. Since

locker no. 1084 was found during the search which was owned by the assessee and

surrendered the income in the statement recorded under section 131 of the Act, the

AO initiated the proceedings under section 153A. However, the AO dropped the

proceedings and completed the assessment under section 153C. The AO has

explained the initiation of proceedings under section 153A and subsequently

dropped the same in para 4 & 6 of the assessment order for the assessment year

2011-12 as under :-

“ 4. Further notice u/s 153A of the IT Act, 1961 was issued on 25.09.2012 which was duly served upon the assessee through speed post AD. In compliance to the notice issued, the assessee filed his return of income on 07.11.2012 declaring total income of Rs. 6,44,010/-.

7 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

Since both the assessments were framed under section 153C, therefore, it is evident

from the assessment order itself that the search was not carried out in the case of

the assessee and, therefore, in view of the decision of the Coordinate Bench of the

Tribunal in the case of PC Jain & Sons HUF (supra) as well as the decision of the

Hon’ble Gujarat High Court in the case of Principal CIT vs. Mukesh Bhai Raman Lal

Prajapati (supra), we hold that the provisions of section 271AAA are not attracted for

levy of penalty in respect of the disclosure of income made by the assessee in the

statement recorded under section 131 of the Act. Accordingly, we set aside the

penalty order passed by the AO under section 271AAA for both the assessment

years.

Order is pronounced in the open court on 08/06/2018.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Jaipur Dated:- 08/06/2018. Das/

8 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

9 ITA Nos. 843 & 844/JP/2016 Shri Jugal Kishore Maheshwari, Jaipur.