SH. CHETAN RUPAL,LUDHIANA vs. ACIT, CC-II, LUDHIANA

आदेश/ORDER

Per N.K.Saini, Vice President:

This is an appeal filed by the assessee against the order dated 7.12.2017 of learned Commissioner of Income Tax (Appeals)-5, Ludhiana (in short ‘CIT(A’).

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operation under section 132(1) of the Income Tax Act, 1961

(hereinafter referred to as ‘Act’) was carried out at the

business premises of the assessee on 24.10.2013.

found that the assessee at the time of search proceedings

u/s 132 of the Act, had admitted undisclosed income of Rs.

60,00,000/- under section 132(4) of the Act and the return

of income was filed on 31.7.2014. The Assessing Officer

initiated the penalty proceedings on the undisclosed income

under section 271AAB of the Act, and required the assessee

to show cause as to why the penalty under section 271AAB

of the Act should not be imposed. In response the assessee

submitted as under:

"It is respectfully submitted that a search u/s 132 of the Income Tax Act, 1961 was conducted at business premises of the group concerns on dated 24.10.2013. During the course of assessment proceedings a detailed reply with respect to income declared/surrender to cover various discrepancies subject to no penal action, added in the returned income and whole due tax thereon had been already deposited, was furnished/explained, which was surrendered u/s 132(4) of the Income Tax Act, 1961. In order to escape the rigours of penalty u/s 271AAB of the Income Tax Act, 1961 an assessee is required to specify and substantiate the manner in which the undisclosed income has been derived. The question of specifying the manner in which the income has been derived is duly answered and thus it can safely said that the assessee has duly complied with the relevant provisions and if provisions of section 271AAB are perused the opening sentence read as under:- 271AAB(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 July, 2012, the assessee shall

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pay by way of penalty, in addition to tax, if any, payable by him,-

It clearly shows that it is the discretion of the Ld. A.O. to levy or not to levy penalty u/s 271AAB in as much as the legislature in its own wisdom has used the word 'May' and not 'shall'. In view of the above, it is respectfully submitted that the penalty proceedings in question may kindly be filed as no such penalty is chargeable in the facts and circumstances of the case".

The Assessing Officer, however, did not find merit in

the submissions of the assessee and levied the penalty under

section 271AAB(1) of the Act, @ 10% of the undisclosed

income. Accordingly penalty of Rs. 6,00,000/- was levied.

Ld. CIT(A) and submitted that penalty was not mandatory as

it was the discretion of the Assessing Officer to levy or not to

levy the penalty as the legislature used the word “may” and

not “shall”. It was further stated that the assessee had

admitted undisclosed income under section 132(4) of the Act

and substantiated the manner of deriving the income and

also paid the tax together with interest in respect of

undisclosed income before the specified date, therefore, the

penalty under section 271AAB (1)of the Act was not leviable.

Ld. CIT(A) however did not find merit in the submission of

the assessee and sustained the penalty by observing in para

4.5 of the impugned order as under:

“The facts of the case, the order of the AO imposing the penalty and the arguments of the AR have been considered. The AO has mentioned that the assessee surrendered undisclosed income amounting to Rs. 60,00,000/- for the A.Y. under consideration on account of 'Income earned from trading of textiles fabrics and invested in

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jewellery, machinery and other personal assets etc/ as per the statement recorded u/s 132(4) dated 28.11.2013. The assessee offered this additional income over and above the normal income only after the search and seizure action undertaken by the Income Tax Authorities. On the other hand, the AR has submitted that the appellant has duly declared the income in his return of income along with the undisclosed income offered in the statement and has also specified the manner of earning such undisclosed income. Dues taxes along with interest have already been paid before filing the return. The AR further argued that the penalty u/s 271AAB is not automatic and cited certain judgments in support of his claim. As the search action in this case was conducted on 24.10.2013, therefore, provisions of section 271AAB are applicable. It is also not in dispute that the case of the assessee is covered under sub-section (l)(a) of Section 271AAB because in the submission filed before the AO, it was argued that penalty at a rate of 10% only is attracted in this case. During the appellate proceedings, the AR in the submissions has reproduced the provision of section 271AAB. The language of the Section is very clear and unambiguous that in a case where the assessee admits the undisclosed income under Section 132(4), pays the tax together with the interest on the undisclosed income before the specified date and also specifies the manner in which the undisclosed income was derived, then the assessee shall pay penalty equal to 10% of the undisclosed income. The AO has accepted that all these conditions are fulfilled in the case of the assessee in respect of the undisclosed income of Rs. 60,00,000/- surrendered after the search. The AR has not been able to rebut the findings of the AO during the appellate proceedings. Therefore, under the facts and the circumstances of the case and in view of the clear provisions of law, the penalty imposed by the AO in this case @ 10% of undisclosed income is found sustainable as per law and hence confirmed. Accordingly, this ground of appeal is dismissed.” 7. Now the assessee is in appeal.

u/s 271AAB of the Act levied by the Assessing Officer was

void abinitio because he has not taken the prior approval

under section 274(2) of the Act, which was accorded vide

letter No. 1034 dated 30.09.2016 while the penalty order

was passed by the Assessing Officer on 29.09.2016 i.e. prior

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to taking the approval from the Additional CIT, Central

Circle, Range Ludhiana.

supported the orders of the authorities below and further

submitted that there may be a typographical mistake in the

order passed under section 271AAB(1) of the Act and by

mistake the date was mentioned as 29.09.2016 while the

DCR number was dated 30.09.2016.

and perused the material available on the record. To resolve

the present controversy it is relevant to refer the provisions

contained in Section 274(2) of the Act which read as under:

“Section 274(1)………… (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner or Deputy Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Joint Commissioner.” 11. From the above provisions contained in section 274 of

the Act, it is crystal clear that the penalty under section

271AAB of the Act, which falls in Chapter XXI of the Act

shall not be imposed by the Assessing Officer until and

unless prior approval is taken from the concerned Joint

Commissioner of Income Tax (JCIT). The use of word “shall”

make it mandatory to take the prior approval of the

JCIT/Additional CIT before passing the order imposing the

penalty under section 271AAB of the Act. In the present case

it is crystal clear from the penalty order passed by the

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Assessing Officer that the order was passed on 29.09.2016 while the approval from the Additional CIT, Range Ludhiana was accorded vide letter no. 1034 dated 30.09.2016, which clearly established that the penalty order was passed by the Assessing Officer on 29.09.2016 before taking the approval from the concerned Additional CIT/JCIT. Therefore the penalty order passed by the Assessing Officer for levying the penalty under section 271AAB of the Act was void abinitio. In that view of the matter the impugned penalty levied u/s 271AAB of the Act by the Assessing Officer and sustained by the Ld. CIT(A) is deleted.

Sd/- Sd/- एन. के. सैनी संजय गग� (N.K. SAINI (SANJAY GARG ) �याय�क सद�य/ Judicial Member उपा�य�/ Vice President �दनांक /Dated: 24th April, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar