Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R. C. SHARMA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 28.12.2016 passed by the Commissioner of Income Tax (Appeals) - 52, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2008- 09.
The revenue has raised the following grounds: - “
1. Whether on the facts and circumstances of the case and in law, the CIT(A) erred in deleting the penalty Rs.1,09,99,770 levied u/s 271AAA.”
2. The appellant craves to leave, to add, to amend and or to alter any of the ground of appeal, if need be.
ITA. NO. 1848/M/2017 A.Y. 2008-09
The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-52, Mumbai, may be set aside and that of the AO restored.” 3. The brief facts of the case are that the assessee was connected with the Faria Group of cases consisting of Shri Suresh Velji Faria, Dilip B. Patel, Velji Rupesh Faria and Shri Vinod Faria. A search and seizure action u/s 132(1) of the Act was carried out by the Directorate of I.T. (Inv.), Mumbai on 30.05.2008 on Vinod Faria and Milan Dalal group of cases on 30.05.2008. It was gathered that the assessee acted as a conduit for various transaction of receipts and payments of cash for sale/purchase of immovable properties, development rights, tenancy rights etc. in respect of above group and infact was the executive director of Genelec booking of the galas of Hi-speed project of M/s. Genelec Ltd. The Assessing Officer initiated the proceeding u/s 153C of the Act in the hands of the assessee for the year under assessment. Thereafter, the AO completed the assessment u/s 153C r.w. section 143(3) of the Act vide order date4d 29.12.2010 assessing an income of Rs.10,90,99,770/-. The AO also initiated the penalty in respect of the said addition. The appeal of the assessee against the said assessment was dismissed by Commissioner appeal by virtue of order dated 18.02.2013. Thereafter, the AO levied the penalty u/s 271AAA of the Act @ 10% on undisclosed income vide order dated 04.03.2014. The assessee filed an appeal before the CIT(A) who deleted the penalty, therefore, the revenue has filed the present appeal before us.
We have heard the argument and advanced by the Ld. Representative of the parties and perused the record. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - A.Y. 2008-09 “8. 1 have considered the facts of the cases, submissions and contentions of the appellant, as also the assessment order and penalty order of the AC. As regards non recording of satisfaction by the AO while initiating proceedings u/s 153C, 1 would like to say that this issue has already been considered by my Id. Predecessor while deciding the quantum appeal of the assessee. Further such an issue is not relevant here in penalty proceedings. However, the appellant's main contention is that as no search u/s.132 of the Act had been carried out in his case, the provisions of Sec,27lAAA are not attracted in his case. 9. 1 have considered the arguments of the assesses. Before proceeding further, 1 would like to reproduce the provisions of Sec 271AAA of the Act, as under:- "271AAA (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in. a case inhere search has been initiated under section 132 on or after day of June, 2007 but before the 1 day of July, 20121 the assesses shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate often percent the undisclosed income of the specified previous year, (2) Nothing contained in sub-section (1) shall apply if the assessee (ii) in the course of search, in a statement under sub-section (4} of section 132 admits the undisclosed income and specifies the m which such income has been derived; (u) substantiates the manner in which the undisclosed income derived; and (i) pays the tax, together with interest, if any, in respect of the undisclosed (3) No penalty under the provisions of douse (c) of sub-section^ of section 271 shall, be imposed upon the assesses in respect of the undisclosed income referred to in sub- section 1). (4} The provisions of section 274 and 275 shall, so far as may be, in relation to eh penalty referred to in this section. - For the purposes of this section, -(a} "undisclosed income" means - (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has— ITA. NO. 1848/M/2017 A.Y. 2008-09 (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner of Commissioner before the date of search; or (ii) any income of the specified previous year represented, wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; 10. It would be seen from the above provisions that the provisions of Sec.27lAAA will be attracted only in cases where search was initiated u/s.132 of the Act on or after 1/6/2007. Further, the penalty under this is leviable in respect of 'undisclosed income', and no penalty will be leviable, if the conditions specified in sub-section (2) of Sec.271AAA are satisfied.
It is seen that no search seizure action u/s.132 of the Act was initiated in the case of the present appellant and only some material relating to him was found during the search in case of Vinod Faria. This is also evident from the fact that the assessment in the case of the appellant was completed u/s. 143{3) read with Sec, l53C of the Act, and not u/s 143(3) read with Sec 153A. In the case of DCIT, Central Circle-4, Surat vs. M/$, K.G. Developers, the Hon’ble ITAT, Ahmedabad, has decided an identical issue of levy of penalty u/s 271AAA in cases covered u/s 153C and has held that Sec.271AAA is applicable only in cases where search u/s. 132 of the act was initiated implying that such penalty could not be levied in the cases covered u/s 153C of the Act. For clarity, the observations of the ITAT are reproduced as under :- "3. Brief facts of the case are that a search u/s. 132 was carried out at the residence of Shri Shailesh Gonawala, the partner of the firm on 20-01-2009. Shri Shailesh Gonawala, on behalf of the firm, made disclosure of unaccounted income of Rs.52,50,000/-. The assessee furnished its return of income declaring undisclosed income of Rs.52,50,000/- admitted by the partner of the firm, during the search u/s 132 of the Act Assessment was completed at declared income of Rs.52,50,000/-. Penalty proceedings u/s271AAA were initiated on admitted undisclosed income of Rs.52,50,000/- and after issuing show cause notice and after taking into consideration the assesses submission, AO levied penalty of Rs.5,20,500/- on the ground that the assessee did not describe the A.Y. 2008-09 manner in which such income was derived by him. as the assesses had not filed any specific details of the amount received. in appeal, this penalty was deleted by Ld. CIT(A) by observing under:- "5. / have considered the facts of the case, the order of the Assessing Officer levying penalty, the submissions of the appellant and the case laws relied upon. It is seen that there is no search. u/s. J32 in the case of the firm and accordingly, section 271 AAA is not applicable at all and therefore, the penalty u/s. 271AAA needs to be deleted out rightly as being illegal and bad in law since section 271AAA is applicable only in a case where search action u/s. 132 has been initiated. From the facts that in the case of the appellant firm, the assessment order for A. Y. 2008-09 was passed u/s. 143(3) r.w.s. 153C and from the copy of the Panchami in the case of Shri Shailesh Gonaurala, it is established that no search action was initiated in the case of the appellant firm and ongoing through the provisions of section 271AAA and the definition of the 'specified previous year' in sub clause {b( of Explanation 2 to section 271AAA, I agree with the appellant that the provisions of section 271AAA are not applicable in the present case of the appellant as no search action has been initiated u/s 132 of the IT. Act in the case of the appellant. As per the alternative arguments of the appellant and the case laws relied upon also, the penalty u/s. 271AAA is not leviable as all the three conditions provided in exception in subsection {2} of Section 271AAA, are fulfilled. Hence, the penalty of Rs.5,20,500/- as levied u/s. 271 AAA of the IT. Act by the Assessing Officer is deleted." 5 After hearing both the parties and perusing the record, ife find that there is no dispute about the fact that no search operation u/s 132 of the Act was conducted in assessee's case. Therefore, provisions of section 27IAAA are not attracted in his case because section 271AAA is applicable only in cases where search u/s 132 has been initiated which is clear from the plain reading of this section which, reads as under:- where search has been initiated.}271AAA. (1) The Assessing Officer may, notwithstanding anything "contained in any other provisions of this Act, direct that, m a case where search has been initiated under section 132 on or after the 3sr day of June, 2O07 {but before the 1s' day of July, 2012}, the assesses shall pan by way of penalty , in addition to tax, if any r payable by him, a sum A.Y. 2008-09 computed at the rate of ten per cent of the undisclosed income of the specified previous year.” In view of the above, we feel no need to interfere with the order passed by Ld. CIT (A) and the same is hereby upheld.
In the result, revenue's appeal is dismissed.' 12. In view of the fact that no search u/s.132 was initiated in the case of the appellant and respectfully following the decision of Hon'ble ITAT, Ahmedabad, in the case of DCIT, Central Circle-4, Surat vs. M/s. K.G. Developers, I hold that the provisions of Sec,27lAAA are no: applicable in the present case. Besides it is to be noted that sub section (2) of section 271AAA, provides for immunity from penalty if such income is surrendered in the statement u/s 132(4} during the course of search . However, no such opportunity is available to an assesses covered u/s 153C Therefore equity demands that such penalty should not be levied on persons covered u/s 153C. Therefore, penalty of Rs.1,09,99,770/-/- levied by the AO, u/s 271AAA of the act is directed to be deleted.”
On appraisal of the above said finding, we noticed that the no search and seizure action u/s 132 of the Act was initiated in the case of the assessee, therefore, no action was required in view of the provision u/s 271AAA of the Act because the concerned section speaks about the action only against the person against the whom the search and seizure action was taken u/s 132 of the Act. The CIT(A) has decided the matter of controversy on the basis of decision of the Hon’ble ITAT Ahmedabad Bench in the case of DCIT, Central Circle-4 Vs. M/s. K.G. Developers. At the time of argument, the Ld. Representative of the assessee has also relied upon the decision of the Hon’ble ITAT, Mumbai Bench in titled as DCIT Vs. Velji Rupshi Faria dated 31.08.2018 in which the penalty levied against the Velji Rupshi Faria a person connected to the present action u/s 132(1) of the Act has been ordered to be deleted being ITA. NO. 1848/M/2017 A.Y. 2008-09 the action was not initiated u/s 132(1) of the Act against the Velji Rupshi Faria. The said case is one of the group cases of the company against whom the action was initiated u/s 132(1) of the Act. The relevant finding has been given in para no. 7 which is hereby reproduced below: - “7. We have considered rival submissions and perused materials on record. From the ground raised
by the Department, it is evident, the Department accepts the fact that the Assessing Officer has imposed penalty under section 271AAA of the Act. That being the case, we proceed to examine the validity of the proceeding initiated under section 271AAA of the Act. A reading of the aforesaid provision makes it clear that only in case of a person in whose case search and seizure operation under section 132(1) of the Act is carried out on or after 1st Day of 2007 but before the 1st Day of July 2010, penalty proceedings under section 271AAA of the Act can be initiated. Thus, as per the aforesaid statutory provision, the primary condition for initiating penalty proceeding is, a person concerned must have been subjected to a search and seizure operation under section 132(1) of the Act. Undisputedly, in the facts of the present case, no search and seizure operation under section 132(1) of the Act was carried out in case of the assessee. This fact is clearly evident from the initiation and completion of proceedings under section 153C of the Act. Thus, the primary condition of section 271AAA of the Act remains unsatisfied. Even otherwise also, if penalty proceedings under section 271AAA of the Act is initiated against a person who is not subjected to search action under section 132(1) of the Act, the provision itself becomes unworkable as no declaration under section 132(4) of the Act is possible from any person other than the person against whom the search and seizure under section 132(1) is carried out. Thus, in such circumstances, sub–section (2) to section 271AAA of the Act cannot be given effect to. In view of the aforesaid, we agree with the learned Commissioner (Appeals) that initiation of penalty proceedings under section 271AAA of the Act in the instant case is invalid. Our aforesaid decision gets support from the decisions relied upon by the learned Authorised Representative. In view of the above, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised by the Revenue.”
6. Taking into account, all the facts and circumstances of the case, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this A.Y. 2008-09 appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue.