DCIT, CENTRAL CIRCLE - 1(1), KOLKATA vs. SHRI GOPAL KRISHNA AGARWAL , KOLKATA

The Revenue’s sole substantive grievance pleaded in the instant appeal seeks to reverse the CIT(A)’ action deleting sec. 271AAB penalty of DCIT, CC-1(1), Kol. Vs. Sh. Gopal Krishna Agarwal Page 2 ₹16052500/- imposed by the Assessing Officer in his order dated 22.09.2015. The CIT(A)’s detailed discussion to this effect reads as under:- “5. Discussion, and, Decision: My discussion will be mostly like-wise as for the AY 2012-13. 5.1 Foremost, the subject matter – what is that ‘undisclosed income’? It is only a mere statement. Though the statement is recorded u/s. 132(4), but in the absence of any identifiable income or asset, or, specific entry found in any books of account or documents or transactions - the statement is reduced to but a mere recorded statement. Such statements of ‘disclosure’ are obviously – to cooperate for the statistical success of the search, aka, to buy peace. 5.2 And the assessee has respected his cooperation – for he has shown it in the return of income filed u/s. 153A. But it is merely a typed line in the computation of income. What and where is that income? it still is in the void – unknown, unidentifiable. 5.3 ‘Undisclosed income’ for the purpose of the penalty – is defined in the Explanation (c) to the said section 271AAB. In this instant case the said Explanation (c) cannot be applied – for there is no found as a result of the search that can be identified or linked to the purported disclosure either 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 the search. Thus, in the absence of the requisite essential facts for the attraction of the penalty provisions itself –there is no locus standi for cause for the penalty. / JCIT has reproduced in the penalty order only the clause (a) to the sub- section (1) to the said section 271AAB –but is only regarding the quantum. Preceding to the clause (a), in the opening operative phrase of the section – is the word ‘may’. It is ‘may’ because the Explanation (c) definition of ‘undisclosed income’ has to first find place. And – as discussed above, the Explanation (c) does not find place in this instant case. So, in the impugned penalty order to reproduce the clause (a) to the sub- section (1) to the said section 271AAB – was only to put in some stuffing for the body of the penalty order. 5.5 The ACIT AO / JCIT has started the argument for imposing the penalty – that the assessee had not filed appeal against the assessment. This argument is out of context – for when the assessee had honoured the 132(4) statement, offered the additional amount in the return of income, and DCIT, CC-1(1), Kol. Vs. Sh. Gopal Krishna Agarwal Page 3 the assessment has been made accepting the returned income – then it is an illogical argument that the assessee has not filed appeal against the assessment order. In this context to, the ACIT AO has stated in the opening 2nd para of the impugned penalty order that in the assessment made that addition of the income stated u/s. 132(4) at ₹16,05,24,000/- was made. This is not so. The assessee had suo moto offered the said amount in the return of income filed u/s. 153A – as is evident from the statement of facts to the appeal memorandum. It is hereunder: GOPAL KRISHNA AGARWAL ASST. YEAR: 2013-14 STATEMENT OF FACTS BEFORE THE CIT(A)-20, KOLKATA A search & seizure operation under sec.132 of the Income Tax Act, 1961 was carried out by the Investigation Wing at the residence as well as business premises in respect of ‘Mahaluxmi Group’ and others and also at the residence of assessee on 03.07.2012 and on subsequent dates. During the course of search, various documents and books of account were found and seized from the office premises of assessee group. The assessee filed his return declaring total income of Rs.17,60,15,380/-. In the course of search and seizure operations, the assessee disclosed an additional income of Rs.16,05,25,000/- and the same was duly disclosed in his return of Income. Assessment under sec. 143(3) of the Act was completed on 31.03.2015 determining total income of Rs.17,60,23,230/-. Consequently, penalty proceedings under sec. 271AAB of the I. Tax Act was initiated and penalty of Rs.1,60,52,500/- being 10% of the income disclosed under sec. 132(4) of the Act was levied vide order dt. 22.09.2015. Being aggrieved, the assessee has come in appeal on the following grounds:- GROUNDS OF APPEAL 1) That the AO was wrong in imposing penalty of rs.1,60,52,500/- u/s 271AAB, being the 10% of the income disclosed under sec. 132(4) of the Act. The penalty so levied is wrong and need to be deleted. 2) The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing. Sd/- illegible. The appellant had suo-moto offered the income stated –honouring the statement u/s. 132(4). 5.6 Coming back to the crux of the issue – regarding income merely in statement recorded – there is the decision of the Hon'ble Supreme Court in Sudarshan Silk Mills Vs. CIT [2008 LL-0411 8.169 TAXMAN 321, 300 ITR DCIT, CC-1(1), Kol. Vs. Sh. Gopal Krishna Agarwal Page 4 205, 216 CTR 12] –that penalty for concealment purported undisclosed income offered merely in statement recorded during search in the absence of any specific evidence / asset / document / transactions found during the search is not justified.”

3. Learned CIT-DR vehemently contends during the course of hearing that the CIT(A) has erred in law and on facts in deleting the impugned penalty. More particularly, by not dealing with the factual matrix of the relevant issue and going by hon'ble apex court’s judgment in “Sudarshan Silk Mills” which does not apply in the facts of the instant case.