Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: Shri Sandeep Gosain & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the CIT(A)-48, Mumbai dated 29-01-2018 and it pertains to AY 2013-14. The assessee has raised the following grounds of appeal:-
“1) On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in levying a penalty of Rs.9,00,000/- u/s. 271AAB of the Income Tax Act, 1961, being 30% of the additional income of Rs.30,00,0007-, without considering the facts and circumstances of the case. 2) On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in imposing the penalty of Rs.9,00,000/- on the alleged plea that the assessee has not furnished any evidence or substantiate the manner in which 2 ITA 1859/Mum/2018 such income is earned, without considering the facts and circumstances of the case. 3) On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in imposing a penalty of Rs.9,00,000/- without appreciating the fact that the quantum of penalty imposed by him is not in accordance with the provision of section 271AAB of the Income Tax Act, 1961.”
The brief facts of the case are that a search and seizure action u/s 132 of the Income-tax Act, 1961 was carried out in the case of M/s Goldsukh Safety Vaults Ltd on 08-11-2012, in which the case of the assessee was also covered.
During the course of search cash amounting to Rs.30 lakhs was seized. The assessee declared the same as undisclosed income earned from bullion trading in the statement recorded u/s 132(4) of the Income-tax Act, 1961. Consequent to search, the assessee has filed return of income and disclosed undisclosed income admitted during the course of search towards cash seized and paid tax thereon. The AO completed assessment u/s 143(3), on 20-03-2015 determining total income of the assessee as per return of income filed accepting income disclosed during the course of search. Thereafter, penalty proceedings u/s 271AAB was initiated and called upon the assessee to explain as to why penalty shall not be levied for failure to substantiate the income offered during the course of search and explain the manner in which such income has been earned.
In response to notice, the assessee vide its letter dated 14-09-2015 submitted that the assessee has admitted undisclosed income in its statement recorded
3 ITA 1859/Mum/2018 u/s 132(4) and also substantiated the manner in which undisclosed income was derived by explaining the source of income; therefore, although the levy of penalty u/s 271AAB is applicable, but such penalty cannot be levied when the assessee has disclosed such income in its return of income and paid taxes thereon. The AO, after considering relevant facts and also taking note of the fact that the assessee has failed to substantiate the manner in which such income is derived, levied penalty @30% of total undisclosed income under clause (a) of sub section (1) of section 271AAB of the Act which works out to Rs.9,00,000/- penalty.
Aggrieved by the penalty order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has re-iterated its submissions made before the AO to argue that no penalty can be levied when the assessee has offered undisclosed income during the course of search in statement recorded u/s 132(4) and also disclosed such undisclosed income in his return of income by paying necessary tax. The assessee also relied upon certain judicial precedents.
The Ld.CIT(A), after considering relevant facts and also taking note of certain judicial precedents upheld penalty levied by the AO u/s 271AAB by holding that although the assessee has admitted undisclosed income and declared such income in its statement of total income, but failed to substantiate the manner in which such income has been derived; therefore, there is no error in the findings
4 ITA 1859/Mum/2018 recorded by the AO while levying penalty under clause (a) sub section (1) of section 271AAB. Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us.
The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in confirming the action of the AO in levying a penalty of Rs.9 lakhs u/s 271AAB of the I.T. Act, 1961 being 30% of the additional income of Rs.30 lakhs offered during the course of search without considering the fact that the assessee has substantiated the manner in which such undisclosed income has been derived, during the course of search, itself. The Ld.AR further submitted that the Ld.CIT(A) has erred in not considering the explanations offered by the assessee during search proceedings as well as penalty proceedings while levying penalty under clause (a) of sub section (1) of section 271AAB of Income-tax Act, 1961.
The Ld.AR, referring to provisions of section 271AAB submitted that as per the provisions, if the assessee admits undisclosed income and specified the manner in which such income has been derived during the course of search in a statement recorded u/s 132(4) and also substantiated the manner in which such undisclosed income was derived, coupled with payment of taxes applicable on such undisclosed income before furnishing return of income, then penalty @10% of the undisclosed income is leviable, but not @30% under clause (a) of sub section (1) of section 271AAB of the Act.
5 ITA 1859/Mum/2018
The Ld.DR, on the other hand, strongly supported the order of the Ld.CIT(A).
We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. There is no dispute with regard to applicability of provisions of section 271AAB of the Income-tax Act, 1961. The only dispute is with regard to sub clause under which penalty is imposable. The AO levied penalty under sub clause (a) to sub section (1) of section 271AAB on the ground that although the assessee has admitted undisclosed income and paid taxes on such income before filing return of income, but failed to substantiate the manner in which undisclosed income was derived. Therefore, he opined that it is a fit case for levy of penalty @30% of undisclosed income under sub clause (a) of section 271AAB of the Act. The assessee contends that if at all penalty can be levied, which can be levied under sub clause (a) to sub section (1) of section 271AAB @10%, because the assessee has admitted undisclosed income and specified the manner in which such income has been derived in the statement recorded u/s 132(4) of the Act. The assessee also substantiates the manner in which such undisclosed income was derived and paid tax together with interest, if any, in respect of undisclosed income and furnished return of income in the specified previous year declaring such undisclosed income. We find that the assessee has admitted undisclosed
6 ITA 1859/Mum/2018 income in its statement recorded u/s 132(4) and also specifies the manner in which such income has been derived while answering a specific question during the course of search, where it was categorically stated that it has earned undisclosed income from bullion trading activity. Once, the assessee has admitted undisclosed income in the statement recorded u/s 132(4) and specified the manner in which such income has been derived and also substantiates the manner in which such undisclosed income was derived, then once the assessee pays tax together with interest and furnishes the return of income declaring such undisclosed income, penalty u/s 271AAB could be imposed under sub clause (a) to sub section (1) of section 271AAB, but not under sub clause (c) of sub section (1) of section 271AAB. Therefore, we are of the considered view that the AO was erred in levying penalty @30% even though the assessee has explained and substantiated the manner in which such undisclosed income was derived. Hence, we direct the AO to levy penalty @10% of total undisclosed income u/s 271AAB of Income-tax Act, 1961.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 15 -05-2019.