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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “C” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री व ीम अहमद, लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI WASEEM AHMED, AM आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2013-14) Shri Pannalal Ukaram Prajapati Dy. Commissioner of Room No. 28, 4 th Floor, Income Tax, Damodar Niwas, 32/34 C.P. Central Circle-2(4), 8th बनाम/ Tank Road, Opp. Panjarpole, floor, CGO Building, M.K. Vs. Mumbai-400 004 road, Mumbai (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AQIPP7482K अपीलार्थी की ओर े / Appellant by : Shri Prakash Jhunjunwala, Shri Abhishek Jhunjhunwala, ARs’ प्रत्यर्थी की ओर े / Respondent by : Shri Kumar Padmapani Bora, DR ुिवाई की तारीख / Date of hearing: 11.11.2019 घोर्णा की तारीख / Date of pronouncement : 29.11.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal by assessee is arising out of order of the Commissioner of Income Tax (Appeals)]-48, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-48/I.T.-05/DC CC-2(4)/2017-18 vide dated 20.06.2018. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle-2(4), Mumbai (in short DCIT/ AO) for the A.Y. 2013-14 vide order dated 16.03.2015 2 | P a g e Shri Pannalal Ukaram Prajapati under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty under section 271AAB of the Act. For this, the assessee has raised the following 4 grounds: - “The appellant prefers an appeal against the order dated 20/05.2018 passed by Ld. Commissioner of Income Tax (Appeal)-48, Mumbai on following amongst other grounds each of which are without prejudice to any other: - 1.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the Penalty under section 271AAB of ₹7,95,000/- @ 10% of ₹79,50,000/- on ignoring the fact that no search under section 132 was initiated against the appellant; 2.0 The levy of Penalty under section 271AAB confirmed by Ld. CIT(A) of ₹7,95,000/- is erroneous since the notice under section 274 was issued in 3 | P a g e Shri Pannalal Ukaram Prajapati mechanical manner without framing a specific charge of the undisclosed income; 3.0 The levy of penalty is erroneous since Ld. AO had not recorded the satisfaction while initiating the Penalty under section 271AAB of the Act; 4.0 The Ld. CIT(A), before confirming the Penalty under section 271AAB, ought to have considered the bonafide explanation and existence of debate under which circumstances the levy of Penalty Under section 271aAAB is bad in law.”
At the outset, the learned Counsel of the assessee stated that the provisions of Section 271AAB of the Act are not at all applicable to the assessee. Hence, according to him, the penalty levied under section 271AAB of the Act is bad and illegal. Brief facts relating to this issue are that a search under section 132 of the Act was conducted in the case of one Shri Chandrakant Gavade on 09.11.2012. There was no search warrant under section 132 of the Act issued in the name of the assessee. During the course of search in the case of Shri Chandrakant Gavade, the unexplained money of ₹79,500/- found in the locker No. 400 held with Gold Sukh Safety Vaults Ltd. The assessee in a statement recorded under section 132(4) of the Act stated that it was engaged in the business of money
4 | P a g e Shri Pannalal Ukaram Prajapati transfer, wherein he had collected and delivered the money as per the directions of his clients of unorganized sector and earned commission of ₹100 to 130 per lakh. As the assessee could not prove the identity of the real owners of the funds and following the deeming provision of section 292C of the Act, the assessee admitted the money found during the course of search the third party i.e. Chandrakant Gavade amounting to ₹79.50 lacs is unaccounted money and paid the tax accordingly. The assessee filed his return of income disclosing this money found during the course of search and seized amounting to ₹79.50 lacs. The assessment was completed 143(3) read with section 153C of the Act dated 16.03.2015. The AO extrapolated the figures and made addition to the total income and estimated the total income at ₹1,36,42,784/-. The CIT(A) deleted the addition made on estimate basis but sustained the addition of unexplained money found and seized during the course of search on Gold Sukh Safety Vaults Ltd in locker No. 400 amounting to ₹79.50 lacs as unaccounted money. The AO issue penalty notice under section 271AAB of the Act and levied the penalty vide Para 6 as under: - “6. On considering the facts of the case and submissions of the assessee including case laws relied thereon, the penalty matter is decided as under: -
5 | P a g e Shri Pannalal Ukaram Prajapati a) The assessee has admitted undisclosed income in the stamen under sub section (4) of section 132. b) Specified the manner in which such income has been derived. c) Filed return on 15.11.2013 declaring total income, 82,06,510/- and vide letter filed on 13.11.2013, requested for the adjustment of the cash seized with the tax on such undisclosed income within the date specified.
Accordingly, the penalty u/s 271AAB is computed in understand manner: - a) Penalty u/s 271AAB(1)(a) @ 10% on ₹7,95,000/- undisclosed income of ₹79,50,000/- offered by the assessee during search in statement under section 132(4) and disclosed in return of income Total Penalty u/s271AAB Rs.7,95,000/- 4. Aggrieved, assessee preferred the appeal before CIT(A). Before CIT(A), the assessee contended that the penalty levied by AO under section 271AAB of the Act is without any provision and there was no search conducted on the assessee under section 132 of the Act but the CIT(A) noted that there is no need for levy of penalty under section 271AAB of the Act that search warrant should be in the name of the assessee. The CIT(A) admitted that there is no search warrant in the name of 6 | P a g e Shri Pannalal Ukaram Prajapati the assessee or no search is conducted in the case of assessee but the requirement for levy of penalty under section 271AAB of the Act is fulfilled for the reason that a statement under section 132(4) of the Act was recorded admitting undisclosed income. The CIT(A) dismissed the ground raised by assessee by observing in Para 5.2 as under: - “5.2 Ground No2: This ground is dismissed as there is no requirement of action u/s132 in this case of assessee himself. The following facts and law position will made it clear. It would be pertinent to quote relevant part of section 271AAB as below:
“In case, where search has been initiated under section 132 on or after 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-
7 | P a g e Shri Pannalal Ukaram Prajapati (i) In the course of search, in a statement under sub0- section (4) of section 132 admits the undisclosed income and specified 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; 5.2.1 A plain reading of section 271AAB shows that it merely means that statement under section 132(4) should have been recorded during the course of, where search has been initiated under 8 | P a g e Shri Pannalal Ukaram Prajapati section 132. Thus it is not compulsorily require that search warrant should be in the name of the assessee. The only two requirements are (i) a search should have been initiated and (ii) in the course or search statements under section 132(4) should be recorded admitting the undisclosed income.
The AO has levied minimum penalty of 10% as per clause (a) of section 271AAB. Therefore, the ground No. 2 has no force and is dismissed.”
Aggrieved, now assessee is in appeal before Tribunal.
Before us, assessee contended that this issue is covered by various decisions of co-ordinate benches of this Tribunal. He also stated that there is no search conducted under section 132 of the Act on the assessee and assessment was framed under section 153C of the Act as a result of cash found an addition of unexplained money found and seized during the course of search on Gold Sukh Safety Vaults Ltd in locker No. 400 amounting to ₹79.50 lacs as unaccounted money was made. Once, there is no search conducted under section 132 of the Act, no penalty can be levied under section 271AAB of the Act in view of the clear provisions of section 271AAB (1) because the opening words are that the AO may direct that in case where
9 | P a g e Shri Pannalal Ukaram Prajapati search has been initiated under section 132 of the Act, the assessee shall pay by way of penalty in addition to tax, if any, payable by him. That means that the primary condition for levy of penalty under section 271AAB of the Act is that a search should have been initiated under section 132 of the Act in the case of the assessee. But in the present case the search was initiated in the case of Shri Chandrakant Gawde on 08.11.2012 and no search warrant was issued under section 132 of the Act in the name of the assessee. Hence, very initiation and levy of penalty under section 271AAB of the Act is bad and illegal.
On the other hand, the learned Sr. DR heavily relied on the orders of the lower authorities.
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the search was initiated in the case of Shri Chandrakant Gawde on 08.11.2012 by issuing warrant under section 132 of the Act and no search warrant was issued under section 132 of the Act in the name of the assessee. We noted that there is no search conducted under section 132 of the Act on the assessee and assessment was framed under section 153C of the Act as a result of cash found an addition of unexplained money found and seized during the course of search on Gold Sukh Safety Vaults Ltd in locker No. 400 amounting to ₹79.50 lacs as unaccounted money was made. The AO initiated the penalty proceedings under section 271(1)(c) of the Act for furnishing of 10 | P a g e Shri Pannalal Ukaram Prajapati inaccurate particulars of income as well as under section 271AAB of the Act as the assessee failed to substantiate the manner of earning of income. And finally, the AO levied the penalty under section 271AAB of the Act. Now, the question arises whether a penalty under section 271AAB of the Act can be levied where no search was conducted under section 132 of the Act and there is no search warrant in the case of the assessee. This issue has been answered by co-ordinate Bench of this Tribunal in the following cases: - “1. DCIT vs. Cargo Solutions Pvt. Ltd. in & CO. No. 78/Kol/2018 dated 28.11.2018
DCIT vs. Volga Dresses in & 202/PAN/2016 dated 27.03.2017.
3 DCIT vs. Velji Rupshi Faria 97 Taxmann.com 460 Mum.ITAT 4 DCIT Vs. Shreeji Corporation in ITA No. 73&74/Ahd/2017”
From the above case laws, the one of the case decided by co-ordinate Bench in the case of DCIT vs. Cargo Solutions in & CO. No. 78/Kol/2018 dated 28.11.2018, wherein vide Para 5 read as under: -
11 | P a g e Shri Pannalal Ukaram Prajapati “5. We note that on 26.07.2018 the Ld. DR sought time to prepare the reply of the Revenue as to whether the penalty u/s. 271AAB would survive since there was no search u/s. 132 of the Act carried out against the assessee company. Even the Department was directed to produce the relevant assessment records. However, the Department could not controvert the challenge raised by the assessee that in its case on 16.10.2012 only survey u/s. 133A of the Act happened and not search u/s. 132 of the Act and also that the AO initiated 153C proceedings and not 153A proceedings against the assessee and framed the assessment order. From the perusal of the record of the survey proceedings placed before us, we note that there was a survey proceedings at the premises of the assessee on 16.10.2012 and on a perusal of the notice issued by the AO dated 18.02.2015, supra reveals that the AO intended to invoke sec. 153C proceedings against the assessee. In such a scenario, we find force in the challenge raised by the assessee that without search being
12 | P a g e Shri Pannalal Ukaram Prajapati initiated u/s. 132 of the Act against the assessee, penalty provisions envisaged in sec. 271AAB of the Act cannot be initiated against the assessee. A perusal of the heading to the provision of sec. 271AAB reads as “penalty where search has been initiated” and on further perusal of the provision of section 271AAB it reveals about the assessee’s disclosure by statement u/s. 132(4) about any undisclosed income in the course of search. Admittedly, in the present case, there has been no search u/s. 132 of the Act. Search happened in the case of Ghanshyam Misra Group of cases on 16.10.2012 and admittedly there was survey proceeding u/s. 133A on 16.10.2012 against the assessee company. We note that the AO has not initiated any 153A proceeding pursuant to the search and in case if the assessee had been search u/s. 132 of the Act, then proceedings u/s. 153A of the Act should have been initiated against the assessee. In this case, from a perusal of the notice reveals that the AO has initiated 153C proceedings against the assessee. In the 13 | P a g e Shri Pannalal Ukaram Prajapati light of the aforesaid facts, we are of the considered opinion that the penalty u/s. 271AAB could not have been initiated by the AO since there has been no search on the assessee company. Therefore, the assessee succeeds and the very initiation of penalty proceeding u/s. 271AAB of the Act is quoram non judice and non-est in the eyes of law and is, therefore, quashed. To come to such a conclusion, we rely on the coordinate bench decision in the case of DCIT Vs. Volga Dresses, in & 202/PAN/2016 for AYs 2013-14 and 2014-15 dated 27.03.2017. In the said case, it has been held as under: “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).
14 | P a g e Shri Pannalal Ukaram Prajapati 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 the partner of the assessee firm. Further a perusal of the order of the learned LD. 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.”
Since we allow the legal issue raised by the assessee in its Cross Objection in respect of penalty proceedings u/s. 271AAB of the Act, the revenue appeal has become academic and infructuous. Therefore, we dismiss the revenue’s appeal and allow the Cross Objection of the assessee.”