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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N V VASUDEVAN & SHRI G MANJUNATHA
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE
BEFORE SHRI N V VASUDEVAN, VICE PRESIDENT AND SHRI G MANJUNATHA, ACCOUNTANT MEMBER
ITA Nos. 2950 to 2955/Bang/2018 Assessment years : 2007-08 to 2012-13
Shri Suresh H. Kerudi, Vs. The Income Tax Officer, Near Lion’s School, Ward-1, Extension Area, Ward No.10, Bagalkot. Bagalkot – 587 105. PAN: ANXPK 7519G APPELLANT RESPONDENT
Appellant by : Shri S.V. Ravi Shankar, Advocate Respondent by : Shri Sunil Kumar Agarwal, Addl.CIT(DR-I), ITAT, Bangalore.
Date of hearing : 23.10.2019 Date of Pronouncement : 25.10.2019 O R D E R Per Bench These are appeals by the assessee against the 5 orders, all dated 05.07.2018 of the CIT(Appeals), Belagavi, relating to assessment years 2007-08 to 2012-13.
There is a delay of 8 days in filing all the appeals before the Tribunal. In the application for condonation of delay along with affidavit, it has been stated that the order of CIT(A) was received by the assessee on 23.8.2018 and the AR had sought certain additional documents for preparing the appeal. The relevant documents were in the custody of Dr.
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Somashekar H. Kerudi interacting with the CA of assessee, who was travelling outside the country on professional engagements and hence the documents could not be furnished to the AR in time. outside the country on professional engagements and hence the documents could not be furnished to the AR in time. After making available the documents to the AR, immediately the appeals were filed on 30.10.2018 wherein there was a delay of 8 days in filing the appeal due to the above reasons. It is prayed that the delay may be condoned in the interest of justice and appeal be heard on merits.
We are of the view that the delay in filing the appeals before the Tribunal was due to reasonable cause and therefore the delay in fling the appeals is condoned.
In all these appeals, the issue that requires adjudication is as to whether the revenue authorities were justified in imposing penalty on the assessee u/s. 271AAB of the Income-Tax Act, 1961 [“the Act”]. The admitted factual position is that assessee is an individual. He was a partner of a firm by name M/s. Kerudi Hospital & Research Centre. The partnership firm was subjected to a search u/s. 132 of the Act on 21.11.2012 at Bagalkot. Certain evidence was found during the course of such search and based on those documents proceedings u/s. 153C of the Act were initiated against the assessee in AYs 2007-08 to 2012-13. Various additions were made to the total income of the assessee in the order passed u/s. 153C of the Act r.w.s. 143(3) of the Act. In respect of those additions, penalty proceedings were initiated u/s. 271AAB of the Act.
Section 271AAB of the Act reads as follows:-
“Penalty where search has been initiated.
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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— (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 which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the
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specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.—For the purposes of this section,— (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be; (b) "specified previous year" means the previous year— (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (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 Chief Commissioner or Commissioner before the date of search; or
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(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.” 6. The AO imposed penalty on the assessee ignoring the plea of assessee that the amount brought to tax was accepted and taxes paid thereon just to purchase peace. The CIT(Appeals) confirmed the order of AO.
Aggrieved by the order of CIT(Appeals), the assessee has preferred the present appeals before the Tribunal.
Before the Tribunal, the assessee has challenged the order of CIT(Appeals) on the ground that imposition of penalty is bad in law. In this regard it was submitted that the provisions of section 271AAB(1) applies only to a person who is searched u/s. 132 of the Act and in respect of persons again whom assessments are framed u/s. 153C of the Act penalty cannot be imposed u/s. 271AAB of the Act. Our attention was drawn to the decision of ITAT Ahmedabad Bench in the case of DCIT v. Shreeji Corporation, IT(SS)A No.73 & 74/Ahd/2017 for AYs 2012-13 & 2-13-14 wherein on an identical plea the Ahmedabad Bench cancelled the order imposing penalty. Our attention was also drawn to the decision of ITAT Panaji Bench in the case of DCIT v. Volga Dresses in ITA Nos.201 & 201/PAN/2016 for AYs 2013-14 & 2014-15, order dated 27.03.2017 wherein similar decision was rendered.
The ld. DR relied on the order of CIT(Appeals).
We have considered the rival submissions. We find that an identical plea was put forth by the assessee in the case of Shreeji Corporation
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(supra) and the Ahmedabad Bench of the Tribunal in its order accepted the stand and held as follows:-
“5. A perusal of the assessment order undisputedly points out that no search had taken place in the case of the assessee per se under s.132 of the Act. A bare reading of law codified in Section 271AAB(1) clearly provides that the AO may direct the assessee to pay a sum by way of penalty at specified percentage where undisclosed income of the specified previous year has been detected as a result of search under s.132 of the Act. Section 271AAB(1)(a) however simultaneously provides concessional treatment in the matter of penalty under s.271AAB where the assessee admits the undisclosed income in a statement under sub- section 4 of Section 132 of the Act subject to fulfillment of other conditions with which we are presently not concerned with. Therefore, it is manifest that applicability of Section 271AAB is integrally connected to search under s.132 of the Act. In the absence of search under s. 132 of the Act, the assessee has no occasion to avail the concessional treatment by way of admission under s.132(4) of the Act. Thus, we find obvious merits in the observations made by the first appellate authority that provisions of Section 271AAB of the Act are not applicable to the case of the assessee. In the absence of search under s.132 of the Act, the consequential or incidental assessment proceedings under s.153C of the Act will not, in our view, entitle the AO to usurp jurisdiction under s.271AAB of the Act for the purposes of imposition of penalty. Hence, we do not see any infirmity in the conclusion drawn by the CIT(A).” 11. The Pune Bench of the Tribunal in the case of Volga Dresses (supra) has also taken a similar view:-
“6. We have considered the rival submissions. A perusal of the provisions of section 271AAB shows that the opening words are “penalty where search has been initiated” a perusal of the provisions under Section 271AAB also talks of the assessee declaring any undisclosed income in the course of the search in the statement under section 132(4). Admittedly in the present case, that is in the case of the assessee firm in appeal there has been no search. Search admittedly is on the residence of one of
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the partner of the assessee firm. Further a perusal of the order of the learned CIT(A) also clearly shows that the learned CIT(A) has cancelled the penalty on the ground that there was no search in the case of the assessee firm. The revenue has not been able to point out as to how this finding of the learned CIT(A) is erroneous. This being so the finding of the learned CIT(A) on this issue stands confirmed.” 12. In view of the aforesaid decision of coordinate Benches, we are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the provisions of section 271AAB could not be invoked in his case.
In view of the above conclusion, we are not dealing with the other aspects of imposing penalty raised by the assessee in the grounds of appeal.
In the result, all the appeals of the assessee are allowed.
Pronounced in the open court on this 25th day of October, 2019.
Sd/- Sd/-
( G MANJUNATHA ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT
Bangalore, Dated, the 25th October, 2019.
/ Desai Smurthy /
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Copy to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar, ITAT, Bangalore.