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Before: Shri Abraham P. George & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) 19, Chennai dated 15.03.2017 relevant to the assessment year 2008-09. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in deleting the penalty of ₹.22,38,721/- levied inadvertently under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short].
The appeal filed by the Revenue is delayed by 6 days, for which, the Revenue has filed petition for condonation of the delay, to which; the ld. Counsel for the assessee has not raised any serious objection. Consequently, the delay of 6 days in filing of the appeal stands condoned and the appeal is admitted for adjudication.
Brief facts of the case are that M/s. Aditya Trading Solutions Pvt. Ltd., a trading cum clearing Member of Multi Commodity Exchange of India Ltd. (MCX) and is carrying on broking activity in futures contracts in commodities such as gold, silver, pulses, etc. Information was received that this company has misused the facility to modify client codes which has resulted in creation of bogus loses to be set off against actual profit and spread profit to various entities to reduce the tax liability of several clients. The residence of the assessee, Shri C. V. Sunish, Managing Director of this group was also searched. Consequent to search, notice under section 153A of the Act was issued and the assessment was completed on 31.12.2009.
3.1 During the course of search at the residence of the assessee, 40 documents were seized which relate to the purchase of land at Sriperumpudur by Shri C. V. Sunish. In this answer to the sworn statement recorded on the day of search, he was asked to furnish the source for the above investments. The assessee has stated that for the purchase of the above properties, he had actually made a total payment of ₹.10 lakhs and he stated that this was taken as loan from friend but evidence for borrowal was not proved by the assessee. As regards 34 properties registered in the name of Shri. C. V. Sunish, the assessee has stated that all the above properties belong to Shri Cyril Joseph, his friend and also director of Aditya Realty Solutions Pvt. Ltd., which is the sister concern of M/s. Aditya Trading Solutions Pvt. Ltd. Shri Cyril Joseph has taken power of attorney from the sellers of these plots. It is stated that both Mr. Cyril Joseph and Mr. Sunish have decided, with their influence with banks, to register some properties in the assessee's name enabling to obtain loan and the same amount could be used by Shri Cyril Joseph for registering the nearby properties held by him in power of attorney. The assessee fled a letter from Shri Cyril Joseph, stating that all the above properties were registered to Mr. C.V. Sunish with the condition that Shri Sunish will pledge these properties and would pay him back and that he has not received any money so far. The above explanations given by Shri Cyril Joseph were not accepted by the Assessing officer and it was added as unexplained investment. On appeal, the ld. CIT(A) confirmed the addition of ₹.58,60,240/-.
3.2 On receipt of appellate order, one more opportunity was given to the assessee for levy of penalty under section 129 of the Act. After considering the submissions of the assessee, the Assessing Officer levied minimum penalty of 100% under section 271(1)(c) of the Act at ₹.22,38,721/-.
The assessee carried the matter in appeal before the ld. CIT(A). Since the assessments have been completed under section 153A of the Act and the Assessing Officer should have initiated and levied penalty under section 271AAA of the Act, the ld. CIT(A) deleted the penalty levied under section 271(1)(c) of the Act by following the decision in the case of Cario International v. DCIT and in the case of Dr. Naman A Shastri v. ACIT (ITAT Ahd. [2015] 63 Taxmann.com 363.
Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR vehemently argued that the Assessing Officer has rightly initiated the penalty proceedings under section 271AAA of the Act, subsequent show cause notices dated 31.12.2009 and 28.01.2014 were also issued by the Assessing Officer under the same section and that it was only in passing of the order, the Assessing Officer has inadvertently mentioned the section as 271(1)(c) of the Act, which is a curable mistake and that the levy of penalty was in substance and effect in conformity with and in accordance with the intent and purpose of the Act. It was also submitted that the ld. CIT(A) having co-terminus power as that of the Assessing Officer should have directed the Assessing Officer to levy the penalty under section 271AAA of the Act. Since levy of penalty is exigible under section 271AAA of the Act in the case of the assessee, the ld. DR pleaded for setting aside the order of the ld. CIT(A) and directing the Assessing Officer to pass penalty order under section 271AAA of the Act. On the other hand, by filing copy of the orders of the Tribunal, as referred in the appellate order, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).
We have heard both the sides, perused the materials available one record and gone through the orders of authorities below. We have also perused the case law filed by the ld. Counsel. Since the assessment was completed under section 143(3) r.w.s. 153A of the Act, being a search case where the search under section 132 of the Act was initiated, no doubt, the levy of penalty under section 271AAA of the Act is exigible. Even though the Assessing Officer initiated penalty proceedings under section 271AAA of the Act and issued notices, we find that the penalty was not levied under section 271AAA of the Act, but, it was wrongly levied under section 271(1)(c) of the Act. We have considered the submissions of the ld. DR that the penalty was levied under section 271(1)(c) of the Act inadvertently, but, we are unable to accept the above contention, because, there is clear distinction between the two provisions. Under section 271AAA of the Act, it is the Assessing Officer who could invoke such provision, whereas, under the provisions of section 271(1) of the Act any of the three authorities, viz., the Assessing Officer or the CIT(A) or the CIT could invoke the said provisions of section 271(1)(c) of the Act. Thus, we find that the mistake crept in the penalty order is not an inadvertent mistake, but, a procedural error, which is not curable and moreover, the case law relied on in the grounds of appeal
in the case of Action for Welfare & Awakening in Rural Environment [AWARE] v. DCIT 263 ITR
13. (AP) has no application to the facts of the present case.
6.1 While considering similar issue, in the case of Cario International v. DCIT in dated 11.10.2013, the Delhi Benches of the Tribunal held that when search took place, penalty provisions of section 271AAA of the Act were applicable, whereas, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act and imposed penalty under that provision against which there is specific bar for levying penalty as per sub-section 3 of section 271AAA of the Act so penalty under section 271(1)(c) of the Act cannot be imposed under the said provision. The Tribunal further held that the penalty levied under section 271(1)(c) of the Act and converted it into section 271AAA of the Act even on reduced amount cannot be held to be proper or legally justified at all.
6.2 Further, in the case of Dr. Naman A. Shastri v. ACIT [IT(SS)A No. 561 to 563/Ahd/2011 dated 29.09.2015] 155 ITD 1003, the Ahmedabad Benches of the Tribunal has held that penalty for undisclosed income, in respect of the assessment year in question could only be imposed, if at all, only under section 271AAA of the Act and not under section 271(1)(c) of the Act. Further, once penalty was initiated under section 271AAA of the Act in assessment order, there could not be any occasion to impose penalty under section 271(1)(c) of the Act and deleted the impugned penalty levied under section 271(1)(c) of the Act.
6.3 In view of the above facts and circumstances, we are of the considered opinion that the ld. CIT(A) has rightly followed the above case law in deleting the penalty levied under section 271(1)(c) of the Act. Thus, the ground raised by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 30th October, 2018 at Chennai.