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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAM LAL NEGI
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 21.05.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2015-16.
The only issue raised by the assessee in various grounds of appeal is against the confirmation of penalty of Rs.4,50,000/- by Ld. CIT(A) as levied by the AO under section 271 AAB of the Act.
The facts in brief are that a search and seizure action under section 132(1) of the Act was conducted on M/s. Geochem Laboratories Pvt. Ltd. on 11.11.2014. Thus the assessee is not a searched person under section 132(1) of the Act. The assessee
2 M/s. Samta Services filed the return of income on 31.08.2015 declaring an income of Rs.6,28,570/-. In the course of search on M/S Geochem Laboratories Pvt Ltd., a sum of Rs.1,14,98,000/- was found and seized from the locker of M/s. Geochem Laboratories Pvt. Ltd. In the post search proceedings, it was explained that Rs.15 lakhs belonged to the assessee i.e. Samata Services and the said amount was received on sale of scrap generated by dismantling of godown owned by it. This amount was shown in the block of asset in the annual accounts filed along with the accounts for A.Y. 2015-16. The AO initiated penalty proceedings u/s 271AAB of the Act on the ground that Rs.15 lakhs was disclosed pursuant to search and seizure action of M/s. Geochem Laboratories Pvt. Ltd. on 11.11.2014 and therefore assessee has fit case for initiation of penalty under section 271AAB of the Act and finally a penalty of Rs.4,50,000/- was levied equal to 30% of the amount declared in the return vide order dated 31.05.2017 passed under section 271AAB of the Act.
In the appellate proceedings, the Ld. CIT(A) also dismissed the appeal of the assessee by holding that the penalty under section 271AAB was rightly imposed as the unaccounted cash on account of sales of scrap of godown was offered in the course of search and thus falls under the definition of undisclosed income as A.Y. 2015-16 within the definition of specified year and thus upheld the order passed by the AO.
After hearing both the parties and perusing the material on record, we observe that in this case the search was conducted on M/s. Geochem Laboratories Pvt. Ltd. and not on the assessee. A perusal of the provisions of section 271AAB(1)(a)(i)
3 M/s. Samta Services of the Act makes it clear that the AO may direct the assessee to pay by way of penalty whereas a search has been initiated under section 132 on or after 1st day of July 2012 in addition to the tax. In the present case the AO has levied penalty equal to 30% of the undisclosed income under section 271AAB under clause (c). We find merit in the submissions of the assessee that in the present case the assessee is not a searched person under section 132(1) and therefore penalty can not be imposed. The assessee relied on the decision of the Tribunal in the case of Coast Line Shipping (India) Pvt. Ltd. vs. DCIT in ITA No.4943/M/2018 A.Y. 2015-16 order dated 30.12.2019 which is a decision of the co-ordinate bench of the Tribunal in the case of sister concern wherein it has been held that the penalty under section 271AAB can only be imposed on the searched person. The operative part of the decision is reproduced as under:
“19. We have heard the rival submissions, perused the orders of the authorities below. In this case on a reading of the Assessment Order passed u/s. 143(3) of the Act for the A.Y. 2015-16 it is observed that search and seizure operation u/s. 132(1) was conducted on M/s. Geochem Laboratories Pvt. Ltd., on 11.11.2014. Consequent to this search operation the case of the assessee was also centralized with DCIT-(5)(1) for the purpose of assessments. The Assessing Officer completed the assessment u/s. 143(3) of the Act by making disallowance u/s. 14A r.w. Rule 8D and also interest on service tax. In the course of the assessment proceedings the Assessing Officer accepted the revised computation filed by the assessee reducing the WDV block of assets consequent to the adjustments made in the A.Y.2013-14 and A.Y. 2014-15. Assessing Officer also initiated penalty proceedings u/s. 271AAB of the Act and subsequently passed penalty order on 31.05.2017 levying penalty of ₹.2,83,200/- u/s. 271AAB(1)(c) of the Act. The penalty was sustained by the Ld.CIT(A).
The provisions of section 271AAB 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, [but before the date on which the Taxation Laws (Second Amendment) bill, 2016 receives the assent of the President], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, - - 4 M/s. Samta Services (a) a sum computed at the rate of ten per cent. of the undisclosed income of the specified previous year, if such assessee-- (i) in the course of the search, in a statement under sub- section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date-- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent. of the undisclosed income of the specified previous year, if such assessee-- (i) in the course of the search, in a statement under sub- section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date-- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum [computed at the rate of sixty per cent] of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b)."
As could be seen from the above, a plain reading of the provision suggests that penalty u/s. 271AAB of the Act is levied in a case where search has been initiated u/s. 132 of the Act on or after the first day of July, 2012. It is the contention of the assessee that no search has been initiated in its case u/s. 132 of the Act. We have perused the Assessment Order passed u/s. 143(3) of the Act on 30.11.2016 as well as the penalty order passed on 31.05.2017 u/s. 271AAB of the Act and found that the search and seizure operation u/s. 132 of the Act was conducted on M/s. Geochem Laboratories Pvt. Ltd., on 11.11.2014 and no where it is mentioned either in the assessment order or in the penalty order that search and seizure was initiated u/s. 132 of the Act in assessee's case. We have also perused the Assessment Orders for the A.Y. 2013-14 and A.Y. 2014-15 and found that search and seizure operation was conducted u/s. 132 of the Act on 11.11.2014 on M/s. Geochem Laboratories Pvt. Ltd., based on which the assessments were framed in assessee's case and nowhere in the Assessment Orders passed for the A.Y. 2013-14 and A.Y.2014-15 u/s. 153C of the Act, it has been mentioned that search was initiated in assessee's case. We also observed that penalty proceedings were initiated u/s. 271(1)(c) of the Act for the A.Y. 2013-14 and A.Y. 2014-15 in assessee case. Therefore, we are of the view that for levy of penalty u/s.271AAB of the Act, the first and foremost condition to be satisfied is that search u/s. 132 of the Act should have been initiated on the assessee for invoking the provisions of section 271AAB of the Act and levying penalty under this provision. Similar view has been taken by various Tribunals as referred to above. In the case before us since there 5 M/s. Samta Services was no search and seizure operation initiated u/s. 132 of the Act, the penalty proceedings initiated u/s.271AAB as against the provisions of statute. Thus, we quash the penalty order passed u/s. 271AAB of the Act for the A.Y. 2015- 16.
In the result, appeals of the assessee are allowed.”
Since the facts of the instant case are materially same, we are therefore inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the penalty on the ground that assessee is not a searched person under section 132(1) of the Act.
In the result the appeal of the assessee is allowed.
Order pronounced in the open court on 28.12.2020.