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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Shri Rajesh Kumar, AM]
This is an appeal preferred by the assessee against the order of Learned Commissioner of Income-tax (Appeals)-20, Kolkata [hereinafter referred to Ld. ‘CIT(A)’] dated 31.01.2020 for the Assessment Year (in short “AY”) 2013-14.
Brief facts of the case are as noted by the Ld. CIT(A) is that a search & seizure action u/s 132(1) of the Income-tax Act, 1961 was conducted on the premises of the assessee on 13.12.2012. During the course of search proceedings assessee made a disclosure of Rs.45,50,000/-. This was in respect of the profit earned in commodity trading. This profit was not entered in the regular books of account till the date of search. This profit was reflected in the seized documents found at one of the premises of the assessee. This was subsequently disclosed in the return filed in response to notice u/s 153A of the Act. As the commodity profit was not entered in the books of account but was discovered at the time of search as entries recorded in seized
Assessment Year: 2013- Late Chiranjilal Agarwal (Legal Heir Sameer Agarwal.). incriminating documents, the AO initiated penalty proceedings u/s 271AAB of the Act. Assessee’s contention was that the disclosure u/s 132(4) of the Act does not amount to concealment of income by the assessee and since the same was recorded in a book (not regular books of account) however, the assessee intended to record the same later in the regular books, so it cannot be termed as undisclosed income. Hence, penalty u/s 271AAB of the Act is not leviable. However, AO did not accept assessee’s contention. AO was of the opinion that assessee had not disclosed this amount in the books of account as this was found in the incriminating material seized at the time of search, so penalty is leviable. Moreover, AO has also mentioned that the income declared of Rs.45.50 lakhs is covered by the definition of ‘undisclosed income’ as given in the Section 271AAB of the Act. Thus, rejecting assessee’s contention, the AO levied penalty of Rs.4,55,000/- u/s 271AAB(1)(a) of the Act.
Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the penalty. Aggrieved, the assessee is before us.
We have heard both the parties and perused the papers on record. At the outset, it has been brought to our notice by the Ld. A/R, Shri A.K. Tulsiyan that this business of commodity trading was done only in this assessment year i.e. in the year of search when it happened on 13.12.2012 (AY 2013-14). According to the Ld. A/R since this was the first year and this business was not conducted in the earlier years or subsequent years, the assessee was not aware of the nitty-gritty of the business and therefore, recorded the transactions in a different book other than the regular books of account. According to the Ld. A/R this document was seized and marked by the searched party as SA/1 and the profit disclosed in the same (commodity trading) was Rs.45,55,000/- which was recorded by the assessee in SA/1 and the assessee showed it in its return of income for AY 2013-14, total of Rs.63,50,320/- (includes Rs.45,55,000/- from commodity trading) which was accepted as such by the AO in the assessment order dated 27.03.2015 and the assessee had paid tax on it. Thus, according to the Ld. A/R, the profit from commodity trading was reflected and recorded in the document marked as SA/1 which was seized at the time of search and Assessment Year: 2013- Late Chiranjilal Agarwal (Legal Heir Sameer Agarwal.). the assessee had intended to record the same in the regular books of account before the financial year ends [there was more than 3 months from the date of search which took place on 13.12.2012]. Further, according to the Ld. A/R, this amount of Rs.45.50 lakhs could not be termed as ‘undisclosed income’ since it does not fall in the definition given u/s 271AAB of the Act wherein the definition of ‘undisclosed income’ has been given which is 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, – (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee – ** ** ** Explanation – For the purposes of this section, – (a) & (b)** (c) “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 [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] before the date of 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.”
According to the Ld. A/R, from the facts and circumstances disclosed above since the assessee was not engaged in the business of commodity trading in the earlier years or subsequent years and this business was done for the first time on experimental basis he was recording the transaction in another books of account (not regular books) and had all intention to record the same in the regular books of accounts before the end of the financial year. However, since the search took place on Assessment Year: 2013- Late Chiranjilal Agarwal (Legal Heir Sameer Agarwal.). 13.12.2012, the assessee could not enter the same in the regular books of accounts. According to Shri A.K. Tulsiyan, from a perusal of the definition of undisclosed income for the purpose of penalty u/s 271AAB of the Act, the meaning given therein is narrow. According to him, a close look at the definition reveals that only items which are un-recorded at the time of search will fall in its ken. According to him, if the assessee has not recorded about any money, bullion, jewellery or other valuable article or thing or any entry in the “books of account” or “other documents”, then only the same can be termed as an undisclosed income. However, in this case at the time when search was conducted and the book in which the assessee had recorded the commodity trading was seized and marked as SA/1, therefore according to Ld AR, the assessee had recorded in it (SA/1) the details about the commodity trading and its profit. Therefore, according to him, commodity profit would not fall in the ken of the ‘undisclosed income’ for the purpose of penalty u/s 271AAB of the Act since it was recorded in “other document” as stated in definition. So, according to him, no penalty u/s 271AAB of the Act was leviable as per law.
We find force in the contention of the assessee. We note that when the search took place on 13.12.2012 in the assessee’s premises, the commodity trading which is itself is speculative transaction has been found to be recorded in the ‘other document’ (seized & marked as SA/1) even though not in the books of account of the assessee, which has been retrieved from the assessee’s premises and the assessee during search declared u/s 132(4) of the Act Rs.45.50 lakhs (Rs.45,100/- from commodity trading profit and miscellaneous income of Rs.4,40,000/-) and filed return of income pursuant to notice u/s 153A of the Act which includes the total amount of Rs.63,50,320/- has been declared and the same has been accepted in toto by the AO. We note that since the penalty u/s 271AAB of the Act is levied on the amount of Rs.45,50,000/- and since the same has been found at the time of search and which has been found recorded in the ‘other document’ marked by the search team as SA/1, we are of the considered opinion that for the purpose of 271AAB of the Act, this amount from SA/1 cannot be termed as ‘undisclosed income’ as per the definition given under Section Assessment Year: 2013- Late Chiranjilal Agarwal (Legal Heir Sameer Agarwal.). 271AAB of the Act (supra) and therefore penalty u/s 271AAB of the Act cannot be levied in this case. Therefore we cancel the penalty levied by the AO/Ld. CIT(A).
In the result, the appeal of the assessee is allowed.