M/S. ASHWATHI PARA BOILERS AND BULK DRYERS,HOSPET vs. COMMISSIONER OF INCOME TAX, GULBARGA

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ITA 2172/BANG/2016Status: DisposedITAT Bangalore20 April 2018AY 2011-124 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 271AAA can only be invoked when a search is initiated under Section 132 and undisclosed income is found as a result of that action. In this case, the assessment was under Section 153C, and no search was initiated in the assessee's own case, thus the penalty was not sustainable.

What were the facts?

During a search in another company's premises, documents belonging to the assessee-firm were seized. Based on a statement from a related party, the assessee declared an additional income of Rs. 25 lakhs in response to a notice under Section 142, and this was accepted under Section 153C. Subsequently, a penalty was levied under Section 271AAA.

What were the issues?

Whether penalty under Section 271AAA is leviable when assessment is made under Section 153C and no search was conducted in the assessee's premises?

Which sections of the Income-tax Act were involved?

Section 271AAA,Section 142,Section 153C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, BENGALURU

For Appellant: Shri T.Srinivasa, CA
For Respondent: Shri B.R.Ramesh, JCIT(DR)
Hearing: 01/02/2018Pronounced: 20/04/2018

O R D E R

Per INTURI RAMA RAO, AM :

1.

This is an appeal filed by the assessee directed against the order of the learned Commissioner of Income-tax (Appeals), Gulbarga(Kalburgi) [CIT(A)] dated 30/09/2016 confirming penalty levied us/ 271AAA of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] for the assessment year 2011-12.

2.

The assessee raised the following grounds of appeal:

3. Briefly facts of the case are that the assessee is a partnership firm. There was a search and seizure action in the case of one company viz. M/s.ILC Industries, during the course of which the department seized certain documents stated to be belonging to the assessee-firm. Based on these documents, it was stated that one Mr.Somashekar had given a statement that income of Rs.25 lakhs would be declared in the hands of the assessee-firm. It is pertinent to state here that Shri Somashekar was not a partner in the assessee-firm. However, admittedly, the firm is related concern of Shri Somashekar. Based on the statement given by Shri Somashekar, an amount of Rs.25 lakhs was declared in the return of income filed in response to notice us/ 142 of the Act. The return of income was accepted by the Assessing Officer vide order u/s 153C. Subsequently, the AO issued a show cause notice to the assessee u/s 274 r.w.s. 271AAA of the Act proposing to levy penalty at the rate of 10% of undisclosed income. In response to said show cause notice, the assessee submitted that additional income was offered with the intention of buying peace with the department and the documents found as a result of 132 action do not belong to the assessee. However, the AO brushed aside the explanation offered and proceeded with the levy of penalty u/s Page 3 of 4 271AAA of the Act at the rate of 10% of undisclosed income i.e. Rs.2,50,000/- by order dated 26/09/2013.

4. On appeal before the ld.CIT(A), the ld.CIT(A) also confirmed the penalty by holding that the explanation offered by the assessee is not supported by any documents.

5.

Being aggrieved, the assessee is before us in the present appeal.

5.1 It is contended by the learned AR of the assessee that penalty u/s 271AAA is not leviable in the light of the following decisions:

5.2 On the other hand, learned Departmental Representative placed reliance on the orders of the lower authorities.

6.

We heard rival submissions and perused the material on record. In the present case, penalty proceedings u/s 271AAA r.w.s.274 were initiated on the ground that the assessee offered undisclosed income in the return of income filed in response to notice u/s 142. On mere perusal of the provisions of section 271AAA, it is clear that the provisions of section 271AAA can be invoked only in case where search has been initiated u/s 132 and undisclosed income is found as a result of such action. In the present case, return of income was filed in response to notice u/s 142. There is no material on record suggesting that search has been initiated in the assessee’s case. It is stated that search was initiated in the case of M/s.ILC Industries during the course of which certain documents stated to be belonging to the assessee were seized. There was no notice issued u/s 153A against the assessee. From the perusal of the order of assessment for assessment year 2011-12 it is clear that the assessment proceedings were initiated u/s 153C in which case provisions of section 271AAA cannot be invoked. Therefore, the Page 4 of 4 order imposing penalty us/ 271AAA cannot be sustained in the eyes of law. Accordingly, we delete the penalty.

7.

In the result, the appeal filed by the assessee is allowed.

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