DCIT CEN CIR 4(4) CEN RG 4, MUMBAI vs. VELJI RUPSHI FARIA, MUMBAI

Brief facts are, the assessee is an individual. Pursuant to a search and seizure operation under section 132(1) of the Act in certain business concerns, wherein, the assessee is stated to be the key person, the Assessing Officer initiated proceedings under section 153C of the Act against the assessee. Pursuant to the notice issued under section 153C of the Act, the assessee filed its return of income. During the assessment proceedings, the Assessing Officer referring to the incriminating material found in course of search and seizure operation made a number of additions as a result of which the total income was determined at ` 7,40,04,778. While completing the assessment, the Assessing Officer also initiated proceedings for imposition of penalty under section 271AAA of the Act. In response to the show cause notice issued for imposition of penalty under section 271AAA of the Act, though, the assessee filed its explanation on 22nd March 2013, however, the Assessing Officer rejecting the explanation of the assessee proceeded to pass an order on 13th March 2014, imposing penalty of ` 74,00,477 under section 271AAA of the Act. Being

The learned Commissioner (Appeals) after considering the submissions of the assessee and having found that search and seizure operation under section 132(1) of the Act was not carried out in case of the assessee, followed the decision of the Tribunal, Ahmedabad Bench, in case of DCIT v/s M/s. K.G. Developers, ITA no.1139/Ahd./ 2012, dated 13th September 2013, and deleted the penalty imposed. Being aggrieved, the Revenue is in appeal before the Tribunal.

The learned Departmental Representative relied upon the ground raised.

The learned Departmental Representative strongly supporting the decision of the learned Commissioner (Appeals) also relied upon the following decisions:–

We have considered rival submissions and perused materials on record. From the ground raised by the Department, it is evident, the 4 Velji Rupshi Faria 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 5 Velji Rupshi Faria 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.

In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 31.08.2018