DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 NOIDA, NOIDA vs. SANJAY SINGH, NOIDA

4. On facts and circumstances of the case and in law, the Ld. CIT (A) failed to appreciate that the mere statement u/s 132(4) that the cash found during search was out of cash received from earlier advances given was only a bald statement without any evidence/detail to support the same and hence the burden u/s 69A could not have been said to have been discharged.

Ors.

6. On facts and circumstances of the case and in law, the Ld. CIT (A) failed to allude to the relevant facts and provisions of law to arrive at the correct conclusion.

8. That the appellant craves leave to add or amend any other more ground of appeal as state above as and when needs for doing so may arise.” 2.1 In nutshell, the Revenue, in Quantum appeal vide argumentative grounds, has challenged the deletion of Rs. 2.00 Crores by the Ld. CIT(A). The appeal of the Revenue revolves around the reasoning that Rs. 2.00 Crores was not part of the surrendered income of Rs. 9.00 Crores.

2.2 In Penalty appeal, the Revenue has challenged the finding of the Ld. the CIT(A); i.e. upholding of penalty @ 10% as against 30% levied by the Assessing Officer ((hereinafter, ‘AO’). In C.O., the assessee has questioned the basis of upholding of penalty @ 10%.

: 3. The assessee was searched under section 132 of the Income Tax Act, 1961 (hereinafter, the ‘Act’) on 30.09.2015 along with AIRWIL Group of cases, a Real Estate Developer of Noida, Uttar Pradesh. Various incriminating documents were seized from the premises of the assessee. The assessment of AY 2016-17 was completed under section 143(3) of the Act at income of Rs.11,88,88,240/- as against the returned income of Rs.9,88,88,240/-. During the course of search proceedings, the statement Ors. of the assessee was recorded under section 132(4) of the Act, wherein he had surrendered the income of Rs.9.00 Crores for the relevant year i.e. F.Y. 2015-16 in which the search had taken place. The one and only addition of Rs.2.00 Crores was made in the returned income on the reasoning that the sum of Rs.2.00 Crores was not part of the surrendered income of Rs.9.00 Crores. The relevant part of the assessment order is reproduced hereunder:- “5.4 The claim of the assessee is not tenable and cannot be accepted as the same seems to be afterthought as the entries mentioned at Page No. 3, 4 & 6 of LP-1, on the basis of which surrender was made, nowhere mentioned regarding the cash of Rs.2,00,00,000/- was available with the assessee, which was found during search operation. Therefore, the amount of Rs 2,00,00,000/- deserves to be added to the total income of the assessee for the year as undisclosed money in the hands of the assessee under section 69A of Income The Act, 1961. Penalty u/s 271AAB of the Act is initiated on account of undisclosed income detected during the search operation. [Unexplained Cash Rs. 2,00,00,000/-]”

In appeal, the Ld. CIT(A) knocked off the said addition of Rs.2.00 crores. Aggrieved, the Revenue filed appeal before the Tribunal.

Ors.

5. On the other hand, the Ld. Authorized Representative (hereinafter, the ‘AR’) submitted that the assessee was involved in the business of sale of plot as a real estate developer. He used to advance sum not only through banking channel but also through cash during the prcess of acquisition of plots as stock in trade. The advances given by him to various persons, in case the deal did not finalize, got refunded subsequently. He submitted that the advance of Rs.2.00 Crores given by the assessee for a plot did not materialize finally, so he got the said amount refunded back. Since this was undisclosed income; therefore, the same was surrendered as income in the statement recorded under section 132(4) of the Act. Hence, separate addition on this score was not called for. The Ld. AR placed emphasis on the following parts of the statement recorded under section 132(4) of the Act, which read asunder:- “उपरो� �ा� नकद धन राशी म� से �पये एक करोड़ नौ लाख उ�नासी हजार ितन सौ उ�नीस मा� मेरा Business entity (क�पनी) को Booked of A/cम� दज� है (cash in hand) तथा इसके सा�य के �प म�, म� cash Books as on date तथा क�पनी �रजो�यूशन ��तुत कर रहा हूँ Iशेष धन रािश �पये दो करोड़ मा� मेर� क�पनी को Books of A/c म� एव मेर� Books of A/c म� दज� नह�ं है अतः मै यह धन रािश �पये दो करोड़ मा� �व� वष� 2015-16 म� अपने िनजी हाथ� म� अघो�षत आय के �प म� सर�डर करता हूँ I म� इस पर िनयम अनुसार आयकर अदा क�ँगा I यह सर�डर, म�ने �वे�छा से अपनी मानिसक शांित के िलए �कया है I मेरा िनवेदन है �क इसके कारण कोई द�डा�मक काय�वाह� मेरे �व�धन कर� जाएगी I जैसा �क आपको िनवेदन है �क मेरा Real Estate का काम है एवं ................ जमीन खर�द हेतु बयाना �दया जो �क मेरे िनवास से �ा� डायर� (�पाइरल) जो �क Ors. आपके LP-1 म� सी�ड है म� भी दज� है I �कसी कारण यह सौदा पूण� न हो पाने के कारण ; मुझे मेरा �दया हुआ बयाना ; �पये दो करोड़ मा� �क रकम मुझे वापस 28/09/2015 को �ा� हुई यह वापसी को हुई �ा� रकम दो करोड़ �पये ह� आपको मेरे घर से आज काय�वाह� के दौरान �ा� हुआ है I उपरो� पेज� पर मेरे �ारा �कये जाने वाले जमीन को खर�द – फरो�त का �ववरण दज� है I एवं यह �व� – वष� 2015- 2016 से स�ब��धत लेन-देन है I जैसा �क म�ने �पछले उ�र म� बताया है �क मै Real Estate का काम करता हूँ अतः इसी स�बंध म� म�ने �व� वष� 2015-2016 म� कुछ जमीन सौद� के बयाने के तौर पर कुल �पया नौ करोड़ मा� नकद म� �दया था �जसक� तार�ख वार� �ववरण इन पेज� पर िलखी है I म� यहाँ �प� करना चाहूँगा �क जैसा �� सं�या 7 म� म�ने बताया है �क इन �पये नौ करोड़ म� से ह� �पये दो करोड़ वापस िमला था जो आज काय�वाह� के दौरान सीज हुआ है I जी नह�ं यह धन रािश मेर� Books of A/c म� दज� नह�ं है I अतः म� अपनी �वे�छा से अपनी मानिसक शांित के िलए कुल �पये नौ करोड़ मा� �व� - वष� 2015-16 म� अघो�षत आय के �प म� सर�डर करता हूँ I म� यहाँ यह �प� करना चाहूँगा �क �� सं�या 5 म�, मेरे �ारा सर�डर �कया हुआ �पया दो करोड़ इस कुल �पये नौ करोड़ म� शािमल है I जैसा �क डायर� क� Entry से भी �प� है I इस �कार म� �व� – वष� 2015-2016 म� अपने हाथ म� कुल �पये नौ करोड़ मा� अघो�षत आय के �प म� सर�डर करता हूँ तथा िनवेदन करता हूँ �क मेरे �व�ध कोई भी द�डा�मक काय�वाह� नह�ं �क जाएगी I म� पुनः �प� कर रहा हूँ �क उपरो� अघो�षत आय �व� – वष� 2015-2016 म� मेर� िनयिमत आय के अित�र� एवं उपर से होगी I” 5.1 The Ld. AR also placed emphasis on the para 5.4 of the impugned order, which reads as under: - “5.4 From the above stated discussion it is evident that the incriminating documents at page 3, 4 & 6 of LP-1 was found during 7 Ors. the course of search action u/s 132 of Act. Shri Sanjay Singh, Director M/s. Oasis Buildmart (India) Pvt Ltd. was specifically confronted with these seized incriminating documents, who surrendered Rs 9,00,00,000/- on the basis of incriminating documents found and seized at LP-1 for this relevant assessment year. Further, Shri Sanjay Singh has not retracted his statement and honoured the surrender of income of Rs. 9,00,00,000/- on the basis of incriminating documents LP-1. Further, in a specific answer to question no 7. of the sworn statement appellant has specifically mentioned that Rs 2,00,00,000/- seized, during the search operation was out of advance received back on 28.09 2015 against the advance given on 07.04.2015, which is recorded on Page No. 3 of LP-1 against purchase of land. The appellant has specifically mentioned that he is into the business of purchase and sale of land and as part of such business transaction only, appellant has entered into the transaction of Rs. 9,00,00,000/-, which were recorded on Page No. 3, 4 and 6 of LP-1 and out of such sum only, Rs. 2,00,00,000/- was received back by appellant, which was found during search. The fact that appellant has specifically mentioned that sum of Rs. 2,00,00,000/- is part of Rs 9,00,00,000/- and was part of advance received back is clearly mentioned in statement u/s 132(4) of Income Tax Act, 1961 itself in response to Ques No 7 Ques No. 9 and Ques No 10. The mention of the AO that the appellant has separately offered a sum of Rs 2,00,00,000/- to tax is completely wrong and far away from the facts of the case and statement of the appellant recorded during search proceedings. The appellant in response to Ques No. 7, Ques No. 9 and Ques No. 10 has again and again stated that such sum of Rs. 2,00,00,000/- was part of Rs. 9,00,00,000/- surrendered by him. It is also to be mentioned that the Ld. AO has not brought on record anything contrary in support of his claim that such sum of Rs. 2,00,00,000/- is not part of Rs 9,00,00,000/- surrendered by appellant or such sum was not part of advance received back by the assessee on 28.09.2015 against the advance given on 07.04.2015 as recorded on page no. 3 of LP-1. Thus, it is concluded that the cash seizure of Rs 2,00,00,000/- includes the total surrender of Rs 9,00,00,000/- made by the appellant, during this relevant assessment year. Therefore, further addition made by the AO of Rs. 2,00,00,000/- would tantamount to double addition of the same amount, which is impermissible in low.”

Ors. 5.2 The Ld. AR further submitted that the statement recorded under section 132(4) of the Act had to believe true and complete until proved otherwise with the help of corroboratory evidence. The statement under section 132(4) of the Act had been recorded during the course of search operations when the assessee was under stress and wanted to come out of the clean. He further submitted that the Ld. CIT-DR had not brought any material on the record to contradict the findings of the CIT(A). Hence, the order of the Ld. CIT(A) required to be upheld.

C.O. No.84/Del/2024: 7. The assessee has surrendered the income of Rs.9.00 Crores during the course of search proceedings as evident from the above. The AO levied penalty @ 30% on such income under section 271AAB(1)(a) of the Act on the reasoning that the assessee did not fulfill the terms and conditions laid down under section 271AAB(1)(a) of the Act and the assessee has also not divulged the source and manner of earning such income. On the other hand, the Ld. CIT(A) has held otherwise and has given a categorical finding that the assessee has fulfilled the terms and conditions laid down under section 271AAB(1)(a) of the Act and thus, the penalty was leviable @ 10% instead of 30%. Aggrieved, the Revenue filed appeal challenging the finding of the Ld. CIT(A). Against the said penalty appeal, the assessee filed CO challenging the validity of the penalty on technical reasons. The Ld. AR submitted that the AO has issued the notice dated 30.12.2017 under section 274 r.w.s. 271 of the Act. In the said penalty notice, the AO has not strike off the non-applicable defaults. A copy of the said penalty notice dated 30.12.2017 wherein the AO has mentioned that “why penalty under section 271AAB of the Act may not be imposed upon you.” Further, the Ld. Ors. AR submitted that the AO has not specified the charge liable for penalty under section 271AAB(1) of the Act. Therefore, the penalty levied under section 271AB(1)(a) of the act was not leviable at all. In support of the argument, the Ld. AR placed reliance on the decision of the co-ordinate Bench in the case of Jaina Marketing & Associates, 162 taxman.com 439 wherein it was held that the penalty notice should specify and convey the charge against the assessee for which penalty has been proposed to be levied. He drew our attention to the relevant portion of the said decision as under: “21. As could be seen from the above the notice issued u/s 271AAB of the Act, it does not depict the charge against the Jaina Marketing & Associates, Delhi assessee as to under which Clause (a), (b) or (c) or Section 271AAB (1) or Clause (a) or (b) of 271 AAB (1A) of the Act penalty is leviable on the assessee. Therefore, we 0are of the opinion that the notice initiating penalty u/s 271AAB of the Act is vague and the assessee was not made aware of the actual charge on which the penalty proceedings will be initiated on the assessee. The various judicial precedents have held that the penalty notice should be clear enough to convey the assessee about the charge which is to be levied against him/her/it for levying penalty for the contravention of the related provisions of the Act.

"5.1 In case of Shri Padam Chand Pungliya vs. ACIT (supra), the Coordinate Bench has held at para 5 page 7 of its order as under:- "It is pertinent to note that the disclosure of additional income in the statement recorded under section 132(4) Itself is not sufficient to levy the penalty under section 271AAB of the Act until and unless the income so disclosed by the assessee falls in the definition of 11 Ors. undisclosed income defined in the explanation to section 271AAB(1) of the Act. Therefore, the question whether the income disclosed by the assessee is undisclosed income in terms of the definition under section 271AAB of the Act has to be considered and decided in the penalty Since the assessee has offered the said income in the return of income filed under section 139(1) of the Act, therefore, the question of taking any decision by the AO in the assessment proceedings about the true nature of surrender made by the assessee does not arise and only when the AO has proposed to levy the penalty then it is a pre-condition for invoking the provisions of section 271AAB that the said income disclosed by the assessee in the statement under section 132(4) is an undisclosed income as per the definition provided under section 271AAB. Therefore, the AO in the proceedings uno section 271AAB has to examine all the facts of the case as well as the basis of the surrender and then arrive to the conclusion that income disclosed by the assessee falls in the definition of undisclosed income as stipulated in the explanation to the said section. Therefore, we do not agree with the contention of the Id. D/R that the levy of penalty under section 271AAB is mandatory simply because the AO has to first issue a show cause notice to the assessee and then has to make a decision for levy of penalty after considering the fact that all the conditions provided under section 271AAB are satisfied."

It is evident from the show cause notice issued under section 274 read with section 271AAB (APB Page 1) that the AO was not clear as to on what precise charge the appellant was asked to show cause, whether the assessee shall pay by way of penalty under clause (a), (b) or (c) of section 271AAB. The AO has just mentioned "deliberately concealed the true income". Thus, the AO without mentioning specific default of the assessee in terms of clause (a), (b) or (c) of section 271AAB of the Act, the, show cause notice issued in routine manner cannot be considered a valid notice in the eyes of law and accordingly the levy of penalty against the assessee is held to be void ab initio.Further, the assessee has substantiated the undisclosed cash available, as to the extent of surrendered income of Rs. 8,73,000/-.

6. In view of the above, considering the peculiar facts, the grievance of the assessee is accepted as genuine and as such the order of the Id. CIT (A) sustaining the penalty is hereby quashed.

22. The Indore Bench of the Tribunal in in the case of Shri Ashok Bhatia vs. DCIT vide order dated 05.02.2020 held as under:- "8. From perusal of the above provision we observe that sub section 3 of Section 271AAB of the Act talks about issuing the notice u/s 274 of the Act.So for initiating the penalty proceedings u/s 271AAB of the Act the first step to be taken by 1d. A.O is to issue a valid notice u/s 274 of the Act. Sub- section (1) to Section 274 of the Act provides a procedure that "No order imposing a penalty under this Chapter shall he made unless the assessee has been heard, or has been given a reasonable opportunity of being heard". To comply with this requirement the notice u/s 274 should be clear enough to convey the assessee about the charge which is to be leveled against him/her/it for levying the penalty for the contravention of the related provisions of the Act which in the instant case relates to not surrendering of undisclosed amount during the course of search which is subsequently admitted during the course of assessment and not challenged before the Ld. CIT(A). So it was incumbent for Ld. A.O that in the notice issued u/s 274 of the Act he should have mentioned that penalty u/s 271AAB of the Act may be levied on 10/20/30% since the assessee falls in Clauses (a)/(b)/(c) of section 271AAB of the Act. He should have further mentioned that as the assessee’s case falls under clause-c of section 271AAB of the Act, why she should not be visited by penalty (30% of the undisclosed income. Against this charge the assessee should have been given a reasonable opportunity of being heard.From going through the above three notices issued to the assessee on 22.03.2016, 03.06.2016 and 16.09.2016, we find that there is no mention about various conditions provided u/s 271 AAB of the Act. The Ld. A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the Section 271AAB of the Act in the notice it does not talk anything about the provision of section 271AAB. Certainly, such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee. Hon'ble Jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia (supra) dealt the issue of defective notice issued u/s 274 r.w.s.

Ors. 271(1)(c) of the Act and Hon'ble court after relying judgment of Hon'ble Supreme Court in the case of CIT V/s Manjunatha Cotton Ginning Factory and CIT v/s SSA'S Emerald Meadows (supra) held that such show cause notices would not satisfy the requirement of law as notice was not specific. Merely issuing notice in general proforma will negate the very purpose of natural justice. Hon'ble Apex Court in the case of Dilip N Shrof 161 Taxmann 218 held that "the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice".

"From the perusal of the above proposition, we observe that sub section 3 of section 271AAB of the Act talks about issuing the notice u/s 274 of the Act. So for initiating the penalty proceedings u/s 271 AAB of the Act, the first step to be taken by Id. Assessing Officer issue a valid notice u/s 274 of the Act provides a procedure that "No order imposing a penalty under this Chapter shall be made unless the assessee has been heard. or has been given a reasonable opportunity of being heard." To comply with this requirement the notice u/s 274 should be clear enough to convey the assessee about charge which is to be leveled against him/her it for levying penalty for contravention of the related provisions of the Act. So it was incumbent for Id. AO that in the notice issued u/s 274 of the Act should have Ors. mentioned that penalty u/s 271AAB of the Act may be levied @ 10/20/30% since the assessee falls in Clauses (a)/(b)/(c) of section 271AAB of the Act. He should have further mentioned that as the assesseee's case falls under Clause-c of section 271AAB of the Act, why he should not be visited by the penalty (i.e. 30% of the undisclosed income. Against this charge. the assessee should have been given reasonable opportunity of being heard.

10. From going through the above notice issued to the assessee on 28.12.2017. we find that there is no mention about various conditions provided u/s 27IAAB of the Act. The Id. AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically' is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee".