KISHAN KUMAR AGARWAL,SECUNDERABAD vs. ACIT., CENTRAL CIRCLE-2(4), HYDERABAD

The assessee being aggrieved by the order of the CIT (A) to the extent he had sustained the penalty imposed by the Assessing Officer has carried the matter before us.

We have heard AR of both the parties, perused the orders of the lower authorities and the material available on record as well as considered the judicial pronouncements that have been pressed into service by the learned AR to drive home his contentions.

Shri A Srinivas, learned Authorized Representative (AR) for the assessee, at the threshold of the hearing, submitted that the Assessing Officer had grossly erred in law and facts of the case in assuming jurisdiction for imposing penalty u/s 270A of Page 6 of 13 the Act. Elaborating on his contention, the learned AR submitted that the Assessing Officer while framing the assessment had initiated the impugned penalty proceedings u/s 270A of the Act for “concealment of income”. The learned AR to buttress his aforesaid contention had taken us through the assessment order. The learned AR submitted that as the Assessing Officer has initiated penalty proceedings for “concealment of income” but thereafter, had imposed the same for the alleged underreporting of income in consequence of misreporting thereof, it could safely be concluded that there was an absolute lack of satisfaction on his part qua the default for which the impugned penalty had been imposed.

Elaborating further on his contention, the learned AR submitted that even otherwise as the case of the assessee was covered by the provisions of section 271AAB(1A) of the Act, therefore, in the backdrop of the exception carved out in section 270A(6) of the Act, the amount of the undisclosed income referred to in section 271AAB was not exigible for imposition of penalty u/s 270A of the Act. The learned AR to fortify his contention has specifically drawn our attention to section 271AAB (1A) of the Act r.w.s. 270A(6)(e) of the Act. The learned AR, submitted that as the assessee was visited with search proceedings u/s 132 of the Act on 23/03/2018, therefore, his case was squarely covered by the penal provisions contemplated u/s 271AAB(1A) of the Act. Accordingly, the learned AR based on his aforesaid contention

Per contra, the learned Departmental Representative (DR) submitted that as provisions of section 271AAB were applicable only to the undisclosed income of the specified previous year viz, (i) the previous year which has ended before the search but the date of furnishing return of income under sub- section (1) of section 139 for such year had not expired before the date of search and the assessee has not furnished the return of income for the said year before such date; or (ii) the previous year in which the search was conducted; therefore, the case of the assessee for the subject year i.e. 2017-18 did not fall within the meaning of the “specified previous year” as was defined in the “Explanation” to section 271AAB(3) of the Act.

Apropos, the learned AR’s contention that the Assessing Officer had in the body of the assessment order without recording any satisfaction imposed penalty in the hands of the assessee u/s 270A of the Act, the learned DR submitted that the said contention was in itself misconceived. The learned DR submitted that unlike section 271(1)(c) of the Act, which placed an obligation on the Assessing Officer to record his satisfaction at the stage of initiating penalty proceedings, no such obligation was cast upon him in so far as the initiation of penalty u/s 270A of Page 8 of 13 the Act is concerned. The learned AR to buttress his contention had taken us through the aforesaid statutory provisions.

We have thoughtfully considered the contentions advanced by the learned representatives of both parties in the backdrop of the orders of the lower authorities.

As is discernible from the record a pocket diary (Parimala – Pink colour) consisting of 40 written pages was found and seized in the course of search & seizure proceedings conducted on the assessee u/s 132 of the Act. The diary consisted of handwritten information with dates and amounts mentioned against the same. On being queried, the assessee in his reply to Question No.8 of his statement recorded on oath, dated 17/04/2018, had stated that the scribbling in the diary was related to the payments which were made by him to the labour contractor for providing labour. However, the Assessing Officer observed that the aforesaid payments were not recorded in the books of account of the assessee. On being confronted, the assessee admitted that the aforesaid payments made to the labour contractor were not reflected in his books of account. Also, on being queried about the source of the cash payments, he candidly admitted that he could not produce any evidence in support of the source of the cash payments made to the labour contractor. Thereafter, the assessee had in his return of income filed u/s 153A of the Act offered the source of the aforementioned

Ostensibly, the Assessing Officer, while framing the assessment, had initiated the penalty proceedings u/s 270A of the Act for concealment of income of Rs.54.19 lacs that was offered by the assessee as his additional income in the return of income filed u/s 153A of the Act. Thereafter, the Assessing Officer had imposed penalty u/s 270A of the Act for underreporting of income in consequence of misreporting of his income in consequence of misreporting thereof of Rs.33,48,942/-. As observed herein above, the CIT (A) has though principally concurred with the penalty imposed by the Assessing Officer, but, had scaled down the same to an amount of Rs.16,74,471/- (supra).

Apropos, the learned AR’s contention that as the Assessing Officer had in the body of the assessment order initiated the penalty proceedings u/s 270A of the Act for concealment of income, but, thereafter had saddled the assessee with the penalty for underreporting his income in consequence of misreporting thereof, therefore, he had wrongly assumed jurisdiction, we are unable to persuade ourselves to concur with the same. On a careful perusal of section 270A of the Act, it transpires that unlike the erstwhile section 271(1)(c) of the Act which obligated the Assessing Officer to record his satisfaction as Page 10 of 13 regards the specific default for which the penalty was sought to be initiated in the hands of the assessee, no such obligation can be traced in section 270A of the Act. All that can be gathered from a perusal of section 270A of the Act is that the Assessing Officer, inter alia, during the course of any proceedings under this Act directs that any person who had underreported his income shall be liable to pay a penalty in addition to tax, if any, on the underreported income. We are of a firm conviction as the Assessing Officer while framing the assessment vide his order u/s 143(3) r.w.s. 153A of the Act dated 23/11/2019, had initiated penalty proceedings u/s 270A of the Act, therefore, no infirmity can be related to the validity of the jurisdiction that was assumed by him for imposing the penalty in the hands of the assessee.

Apropos, the learned AR’s claim that as the assessee was subject to search proceedings on 23/03/2018, therefore, his case would be covered by the penal provisions of section 271AAB (1A) of the Act and thus, would be saved by the exception carved out in clause (iv) of sub-section (6) of section 270A of the Act, we find no substance in the same. We say so, for the reason that as pointed out by the learned DR and rightly so, as the provisions of section 271AAB apply exclusively to the undisclosed income of the “specified previous year” i.e., (i) the previous year which has ended before the search but the date of furnishing the return of income under sub-section (1) of section 139 for such year had not expired before the date of search and the assessee has not Page 11 of 13 furnished the return of income for the said year before such date; or (ii) the previous year in which the search was conducted, therefore, the case of the assessee who was visited with search proceedings u/s 132 of the Act on 23/03/2018, i.e., for the subject year i.e. 2017-18 would not fall within the meaning of the “specified previous year”. As the subject previous year i.e. financial year 2016-17 had ended before the date of search on 23/03/2018 and also, the “due date” for filing of the return of income under sub-section (1) of section 139 of the Act for the said year had way back expired, therefore, the same takes the case of the assessee beyond the meaning of “specified previous year”. Accordingly, as the case of the assessee does not fall within the scope and gamut of section 271AAB of the Act, therefore, it will not be saved by the exception contemplated in section 270A(6)(e) of the Act.

Apropos, the merits of the case, we are of the firm conviction that as the assessee had admitted that the scribblings in the seized diary found in his possession during the course of search proceedings were the unaccounted cash payments made by him to the labour contractor, therefore, we find no infirmity in the order of the CIT (A) who had principally concurred with the penalty imposed by the Assessing Officer u/s 270A of the Act. The Grounds of appeal No.2 to 4 are dismissed.

The Grounds of appeal Nos.1 & 5 being general in nature are dismissed as being not pressed.

Resultantly, the appeal filed by the assessee being devoid of any substance, is dismissed.