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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-5, Chennai in dated 28.09.2018 for the assessment year 2008-09, wherein the ld.CIT(A) upheld the action of the AO in restoring the penalty levied u/s. 271(1)(c), while giving effect to the ITAT order, in the order dated 13.01.2017.
The facts in brief are that there was a search and seizure operation in the premises of Shri R. Rangarajan, Chairman of M/s. Vel Tech Group of Educational Institutions and his family members, in which Smt. R. Mahalakshmi, the assessee and the daughter of Shri R. Rangarajan was also covered. Before the search and seizure operation, the assessee filed her return u/s.139 admitting a total income of Rs.33,91,800/- on 17.10.2008. The assessee has not admitted any undisclosed income u/s. 132(4). Post search and seizure enquiry, the Revenue got confirmation from the sellers of the plots that they received on money payments from the assessee, when the such facts were brought to the assessee, she had admitted the on-money receipts of Rs.2,46,30,500/-. Subsequently, on issue of notice u/s. 153A, the assessee filed a return admitting the total income of Rs.2,02,62,800/- on 29.10.2010, in which she has claimed Rs.6,50,000/-towards agricultural income which was not declared in the original return. After examining the facts and circumstances of the assessee’s case, the Assessing Officer levied penalty on the concealed income of Rs.2,52,88,500/- [2,86,80,300-33,91,800] u/s. 271(1)(c) at Rs.78,30,787/-, which is 100% of tax sought to be evaded, by an order in F.No: CEN/11-(3)/PTY/271(1)(c)/11-12 dated 27.06.2011. On an appeal, the CIT (A) in his order in 12 dated 06.03.2013 directed the AO to levy penalty @ 10% u/s.271AAA on the undisclosed income of the assessee. Aggrieved by that order, the assessee as well as the Revenue filed appeals before the ITAT. The ITAT in its orders in ITA No. 986/Mds/2013 & ITA No. 1305/Mds/2013 dated 25.11.2016 allowed the assessee’s appeal and dismissed the Revenue’s appeal, respectively.
While giving effect to the ITAT order, supra, the AO restored the penalty levied u/s. 271(1)(c) in his order dated 13.01.2017. Aggrieved, the assessee filed an appeal before the CIT(A) and the ld the CIT(A) upheld the action of the AO. On the assessee’s appeal, this tribunal by its order for the assessment year 2008-09 dt 08.02.2018 remitted the issue back to the CIT(A) for giving a reasonable opportunity to assessee and then pass a speaking order. Consequently, the ld.CIT(A) upheld the action of the AO. Against that order of the ld.CIT(A), the assessee filed this appeal with the following grounds:
1. “The CIT(A) erred in confirming the penalty levied by the Assessing Office u/s 271(1)(c) of Rs.78,30,787/- and has grossly misinterpreted the order of the ITAT dated 25.11.2016.
2. The CIT(A) failed to consider the earlier order of the ITAT dated 25.11.2016 in the proper perspective, wherein it has clearly allowed the appeal of the Appellant and dismissed the appeal of the Revenue.
3. The CIT(A) ought to have seen that the Hon’ble Tribunal, in its order dated 25.11.2016 has no-where reinstated penalty u/s 271(1)(c).
4. The CIT(A) failed to see that in any event, levy of penalty u/s 271(1)(c) is unwarranted and uncalled for, in so far as the Appellant has neither concealed nor furnished inaccurate particulars of income.
5. The CIT(A) has gone wrong in not considering the detailed submissions of the Appellant and has disposed off the appeal in a casual and summary manner; this shows his non-application of mine. 6. Any other ground that may be adduced at the time of hearing.”
5. The AR inviting our attention to the ITAT order submitted that the assessee’s appeal in has been allowed and the Revenue’s appeal in ITA No.1305/Mds/2013 is dismissed. Since, these ITAT orders have become final, the order levied by the AO is not correct and hence the order passed by the CIT(A) is also not correct. Per contra, the DR submitted that the Assessing Officer passed the order u/s. 271(1)(c). On an appeal, the CIT(A) directed the AO to levy penalty u/s. 271AAA. The assessee as well as Revenue filed appeals against the directions of the CIT(A). When the ITAT held in the order in ITA No. 986/Mds/2013 that the penalty cannot be levied u/s. 271AAA, it is automatic that the levy of penalty made u/s. 271(1)(c) is confirmed. The assessee has not challenged the levy of penalty u/s. 271(1)(c) nor there is any finding against the levy of penalty 271(1)(c) in that order. On the other hand, the ld.DR invited our attention to the relevant portion of the order and submitted that there is a clear finding of the Tribunal in sustaining the penalty levied u/s. 271(1)(c) and hence the ld. DR pleaded that the order of the ld.CIT(A) may be confirmed.
6. We heard the rival contentions. Since this Tribunal order in supra, is subject matter, in order to make things clear, we extract the relevant portion as under : “2. The assessee has raised following grounds of appeal: 2.1 The CIT(A) went wrong in directing the Assessing Officer to levy penalty u/s. 271 AAA of the Income Tax Act on the undisclosed income. 2.2 The CIT(A) having found that the penalty levied u/s. 271(1)(c) is untenable, ought to have quashed the entire order impugned before him. 2.3 The CIT(A) having found that the penalty levied by the Assessing Officer u/s. 271(1)(c) is untenable, also went wrong in giving such a direction without giving any specific opportunity to the appellant on such direction. 2.4 The CIT(A) has no jurisdiction to levy penalty different from the one levied by the Assessing Officer and therefore such a direction given by him is liable to be struck down for want of jurisdiction. 2.5 In any event the CIT(A) ought to have notice that the provisions of section 271AAA on the sum of Rs. 1,52,19,000/- is not applicable to facts of the present case and as such even on merits, the order of the CIT(A) to the contrary is liable to be vacated.
3. The Brief facts of the case are the assessee is an individual and Chairman of M/s. Vel Tech Group of Educational Institutions and the notice u/s. 153A r.w.s 153C of the I.T Act served on the assessee to file Return of Income. In compliance to the notice, the assessee filed return of income on 29.10.2010 admitting total income of Rs. 1,62,96,560/- subsequently notice u/s. 143(2) of the Act along with questionnaire was served. In compliance to the above notice, Ld. AR of the assessee appeared from to time and filed the details and explained that agricultural income of Rs. 12,75,000/- was received from M/s. Vel
Horticulture Ltd., in cash but the Ld. AO found that such income is in nature of the disclosed income and made addition to Returned income and passed order u/s. 153A r.w.s. 143(3) of the Act determining Assessed income of Rs. 1,75,71,560/-. Subsequently, the Ld. AO has initiated penalty proceedings and issued notice. In compliance, the Ld. AR appeared and explained that the assessee has admitted the income and paid taxes and immuned from penalty provisions as per explanation 5 to section 271(1)(c) of the Act. The Ld. AO relied on the submissions and provisions of law observed that the assessee has filed the Return of income u/s. 153A of the Act admitting the total income of Rs. 1,62,96,560/- and due to search u/s. 132 of the Act, income has been unearth. The Ld. AR explained that the disclosed income pertains to the said financial year and the difference in the total income was already furnished and covered by the Explanation 5 of 271(1)(c) of the Act. The Ld. AO found in the assessment order that assessee has various real estate transactions and Rs. 12,75,000/- was added as undisclosed income in the hands of assessee as there is no convincing explanations on agriculture income. Finally, the Ld. AO is of the opinion that the assessee has not disclosed the said information in Return of Income u/s. 139(1) of the Act but disclosed in Return of income filed in compliance to the notice u/s. 153A of the Act and the assessee could not produce any books of accounts or substantiate the claim and the income was offered under income from other sources and levied the penalty of Rs. 48,35,016/- and passed order dated 27.06.2011.
Aggrieved by the order of penalty the assessee has filed an appeal with the CIT(A). In the appellant proceedings, the Ld. AR of the assessee argued that the Ld. AO erred in levying penalty as the assessee has offered Rs. 1,52,19,000/- in Return of income filed in compliance to notice u/s. 153A of the Act. The income includes on money payments made to the sellers and agricultural income which is not liable to tax and was disclosed voluntarily. The assessee in assessment proceedings accepted the income of Rs. 1,52,19,000/- to buy peace with the Income Tax Department and therefore there is no concealment of income and penalty cannot be levied. Further, the agricultural income is not taxable and exempted from Income tax and penalty cannot be levied on the agricultural income. The Ld. CIT(A) considered the arguments and findings of the Assessing Officer made in the Assessment Order and the penalty order. The Ld. AR explained in the penalty proceedings that the assessee has admitted additional income to purchase peace and avoid
litigation and this amount was offered without any conditions. The Income Tax Department after the search has recorded statement on money payments made by the assessee which was already offered and the agricultural income is genuine source and is not taxable. Therefore, no penalty cannot be levied, the admission of income cannot be concealment of income and no impounded material was found in respect of transaction of on money payments and relied on the jurisdictional High Court decision and Tribunal decisions. The Ld. AR further explained that the penalty can be levied on the order passed u/s. 153C of the Act and not u/s. 153A of the Act. The Ld. CIT(A) on perusal of the provisions found that the Assessing Officer has justified his action and there is reference on provisions of section 153C along with 153A in the assessment order and assessment order cannot be invalid and relied on the provisions of section 292B of the Act and rejected the objections of the assessee. Further, the Ld. CIT(A) perused the provisions of Levy of penalty and found that the assessee has disclosed total income of Rs. Rs. 33,83,635/- in the Return of income filed on 17.10.2008, whereas the Due date of filing Return of income is 31.07.2008. Subsequently, in compliance to the notice u/s. 153A Return of income was filed on 29.03.2010 with total income of Rs. 1,62,92,560/-. The Ld. CIT(A) found that there was search operations u/s. 132 of the Act of Vel Tech Group of Institutions on 26.08.2008 and the assessment being assessment year 2008-09 and the provisions of section 271AAA of the Act are attracted and not the provisions of section 271(1)(c) of the Act and due to mistake in stating the wrong section, the order cannot be said to be void and defect is curable u/s. 292B of the Act. Further, the Ld. CIT(A) is of the opinion that section 271AAA of the Act was introduced from 01.04.2007 applicable from Finance Act 2007 and as per the provisions where the search has been initiated u/s. 132 of the Act on or after 1st June 2007, the assessee shall be liable to pay by way of penalty in addition to tax, if any payable by him as computed at the rate of 10% of undisclosed income of the specified previous year and dealt exhaustively on the provisions at page 5 and 6 of the order and conclude that the provisions of section 271AAA of the Act are applicable to the assessee. The Ld. CIT(A) found that the undisclosed income offered by the assessee and addition in the assessment proceedings are liable for penalty u/s. 271AAA of the Act and directed the Assessing Officer to levy penalty @ 10% of such undisclosed income of the assessee and partly allowed the appeal. Aggrieved the assessee has filed an appeal with the Tribunal.
Before us, the Ld. AR of the assessee argued that the CIT(A) erred in giving directions to the Assessing Officer for levy of penalty u/s. 271AAA of the Act on the undisclosed income. The Ld. CIT(A) having found that the penalty levied u/s. 271(1)(c) is not tenable should have vacated the entire penalty order and further erred in not providing specific opportunity to the appellant before giving directions to the Assessing Officer for levy of penalty and the provisions of section 271AAA of the Act are not applicable to the assessee and prayed for allowing the appeal on merits. Contra, the Ld. DR relied on the Assessing Officer order and opposed to the grounds.
We heard the rival submissions and perused the material on record and provisions of the Act. The Ld. AR argued that the assessee cannot be made liable to pay the penalty u/s. 271AAA of the Act. There was search u/s. 132 of the Act on 26.08.2008 and the Return of income was filed on 17.10.2008 disclosing the total income of Rs. 38,83,635/- and subsequently on receipt of notice u/s. 153A r.w.s. 153C of the Act the assessee filed the Return of Income on 29.10.2010 disclosing total income of Rs. 1,62,96,560/- and was considered by the Assessing Officer for the assessment purpose. The fact remains that the assessee has offered additional income and filed the Return of income to buy peace with the department and to avoid vexatious litigation and the Assessing Officer does not have any impugned document in support of undisclosed income. The Assessing Officer relied only on the statement of the assessee and the Return of income filed and levied penalty. The assessee has not retracted the statement on disclosure of income. The Ld. CIT(A) gave the directions to the Assessing Officer to levy penalty u/s. 271AAA of the Act as against provisions of section 271(1)(c) of the Act. We found that the statement is recorded by the Assessing Officer and the Ld. AO came to a unilateral conclusion that the search was initiated on assessee and because of such action income was disclosed by the assessee to the Income Tax Department. Prima facie due to search operations on M/s. Vel Tech Group of institutions the assessee was served with notice u/s. 153A of the Act and the assessee has filed Return of Income for the assessment year with disclosure of income as other income and which is not part of Regular Accounts and such income is liable for levy of penalty u/s. 271(1)(c) of the Act. We support our view on the decision of coordinate bench & 236/Mds/2013 dated 30.04.2013 of Assistant Commissioner of Income Tax Vs. Smt J.Mythilli on applicability of provisions of levy of penalty. Now the question arises whether the order of the Ld. CIT(A) giving directions to the Assessing
Officer to levy penalty u/s. 217AAA of the Act shall survive. We read the provisions of section 271AAA(1) of the Act as under:
(a) "The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that in a case where search has been initiated u/s. 132 on or after the 1st day of June, 2007 [but before the 1st day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten percent of the undisclosed income of the specified previous year".
(b) Specified previous year means the previous year- (i) Which has ended before the date of search, but the date of filing 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 said date; or (ii) in which search was conducted."
7. We perused the provisions and found that the directions of the CIT(A) to levy of penalty u/s. 271AAA cannot be sustained. On application of said provisions to the present case, the search u/s. 132 of the Act was conducted on 26.08.2008 and the due date of filing the Return of income of assessee is 31.07.2008 and the assessee has filed the Return of income on 17.10.2008, which is after the due date of Return of Income u/s. 139(1) of the Act and in compliance to the provisions of section 271AAA of the Act. The specified the previous year applicability for the year ended is 31.03.2008 and the present assessment year being assessment year 2008-09, and the due date u/s. 139(1) of the Act being 31.07.2008 and whereas search u/s. 132 of the Act took place on 26.08.2008 and the due date of filing Return of income u/s. 139(1) has already expired before the search. Hence, the penalty cannot be initiated. We considering the apparent facts, provisions of law and judicial decision are of the opinion that the Ld. CIT(A) does not have the power to give directions to levy penalty u/s. 271AAA on undisclosed income. Since, the orders of the Assessing Officer on penalty merged with the appellate authority, we are of the opinion that order of CIT(A) cannot be sustained and in the interest of justice, we dismiss the order of CIT(A) and allow the grounds of the assessee.”
6.1 From the above, particularly from the extracted para 6 supra, it is clear that that this Tribunal very clearly held that the levy u/s 271(1)(c) is confirmed. At the cost of repetition, the relevant portion is extracted below: “The fact remains that the assessee has offered additional income and filed the Return of income to buy peace with the department and to avoid vexatious litigation and the Assessing Officer does not have any impugned document in support of undisclosed income. The Assessing Officer relied only on the statement of the assessee and the Return of income filed and levied penalty. The assessee has not retracted the statement on disclosure of income. The Ld. CIT(A) gave the directions to the Assessing Officer to levy penalty u/s. 271AAA of the Act as against provisions of section 271(1)(c) of the Act. We found that the statement is recorded by the Assessing Officer and the Ld. AO came to a unilateral conclusion that the search was initiated on assessee and because of such action income was disclosed by the assessee to the Income Tax Department. Prima facie due to search operations on M/s. Vel Tech Group of institutions the assessee was served with notice u/s. 153A of the Act and the assessee has filed Return of Income for the assessment year with disclosure of income as other income and which is not part of Regular Accounts and such income is liable for levy of penalty u/s. 271(1)(c) of the Act. We support our view on the decision of coordinate bench & 236 /Mds/2013 dated 30.04.2013 of Assistant Commissioner of Income Tax Vs. Smt J.Mythilli on applicability of provisions of levy of penalty.”
Therefore, the reasoning of ld.CIT(A) that “thus the Hon’ble ITAT stated that – (i) the income disclosed by the assessee in the Return of Income which is not part of Regular Accounts is liable for levy of penalty u/s.271(1)(c) and (ii) the order of the CIT(A) directing the Assessing Officer to levy penalty u/s.271 AAA of the Income Tax Act on the undisclosed income cannot be sustained. Hence the action of the Assessing Officer to sustain the penalty u/s 271(1)(c) levied vide order dt 27/6/2011 in the revision order dt 13/1/2017 is upheld.” is justified and hence, we do not find any merit in the assessee’s appeal.
In the result, the assessee’s appeal is dismissed.
Order pronounced in the court on 10th of September, 2019 at Chennai.