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Income Tax Appellate Tribunal, DIVISION BENCH’B’, CHANDIGARH
Before: SHRI N.K. SAINI & SHRI SANJAY GARG
PER N.K. SAINI, VICE PRESIDENT :
These two appeals by the Assessee are directed against the separate orders of the Ld. CIT(A)-2, Jalandhar each dt. 22/02/2018 for the Assessment Years 2013-14 and 2014-15 respectively.
Since the appeals having common issues involved were heard together, therefore these are being disposed off by this consolidated order for the sake of convenience and brevity.
First we shall deal with appeal in ITA No. 490/Chd/2018 for the Assessment Year 2013-14 wherein the assessee has raised only one effective ground which reads as under:
“ That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-2, Jalandhar upholding levy of penalty u/s 271AAB at Rs. 20,00,000/- is against law and facts on the file in as much no such penalty was exigible in the facts and circumstances of the case.” 4. Facts of the case in brief are that the search and seizure 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.
During the course of assessment proceedings it was found that the assessee at the time of search proceedings u/s 132 of the Act, had admitted undisclosed income of Rs. 2,00,00,000/- under section 132(4) of the Act and the return of income was filed on 07/07/2015. 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 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. 20,00,000/- was levied.
Being aggrieved the assessee carried the matter to the 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:
4.5 I have carefully considered the contentions of the appellant and find that provisions of section 271 AAB are applicable as the appellant has. not been able to rebut the findings of the AO during the appellate proceedings. Further, I find that no evidence has been brought on record in the course of present proceedings to substantiate the manner of deriving undisclosed income and the explanation given is found to be too generic. 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.
Now the assessee is in appeal.
Ld. Counsel for the assessee submitted that the penalty 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. 1036 dt. 30/09/2016 while the penalty order was passed by the Assessing Officer on 29/09/2016 i.e; prior to taking the approval from the Additional CIT, Central Circle, Range Ludhiana.
In her rival submissions the Ld. Sr. DR strongly supported the order 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 dt. 30/09/2016.
We have considered the submissions of both the parties 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.”
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 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. 1036 dt. 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 / J.C.I.T. 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.
For the A.Y. 2014-15 the facts are identical as were involved in the A.Y. 2013-14 the only difference is in the amount of penalty u/s 271 AAB of the Act levied by the Assessing Officer and sustained by the Ld. CIT(A), therefore, our findings given in the former part of this order shall apply mutatis mutandis. Accordingly the penalty levied by the Assessing Officer under section 271AAB of the Act and sustained by the Ld. CIT(A) for the A.Y. 2014-15 is also deleted.
In the result, both the above appeals of the Assessee are allowed.
(Order pronounced in the open Court on 22.04.2019 )
Sd/- Sd/- (SANJAY GARG) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT Dated : 22/04/2019 AG/rk Copy to: 1.The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT, 5. The DR