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Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice-(KZ) & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap, Vice-President (KZ):- This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-20, Kolkata dated 11.04.2017, whereby he restricted the penalty imposed by the Assessing Officer under section 271AAB of the Income Tax Act, 1961 in respect of the undisclosed income of Rs.3,95,58,272/- only to the extent to which it was in respect of the undisclosed income of Rs.17,58,272/-.
The assessee in the present case is an individual. A search and seizure action was conducted at the residence of the assessee on 13.02.2013 as well as on subsequent dates. During the course of the said action, the assessee surrendered his undisclosed income to the extent of Rs.3,95,58,272/- in the statement recorded under section 132(4) of the Act. Thereafter the return of income for the year under consideration was filed by the assessee on 10.02.2014 declaring total income of Rs.3,88,57,160/-. In the assessment completed under section 143(3) vide an order dated 13.10.2015, the entire income of Rs.3,95,58,272/- surrendered by the assessee during the course of search was brought to tax by the Assessing Officer as undisclosed income of the assessee. Penalty proceedings under section 271AAB were also initiated by the Assessing Officer and since the explanation offered by the assessee in response to the show-cause notice issued during the course of the said proceedings was not found satisfactory by him, the Assessing Officer imposed penalty under section 271AAB of the Act at the rate of 30% of the undisclosed income admitted and surrendered under section 132(4) of the Act.
The penalty imposed by the Assessing Officer under section 271AAB was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made on behalf of the assessee as well as the material available on record, the ld. CIT(Appeals) restricted the penalty imposed by the Assessing Officer under section 271AAB only to the extent it was in respect of the undisclosed income of Rs.17,58,272/- for the following reasons given in his impugned order:- “I have considered the findings given by the AO in the penalty order and submissions made by the AR during the appellate proceeding. I find that the AO has taken the undisclosed income of the assessee on the amount declared suo moto by the assessee (for which no evidence, papers / documents, stock, cash etc were found during the search operation) in order to buy peace of mind and avoid any further litigation. The assessee has brought on record the case law of Dilip N Shroff vs CIT (2007) 291 ITR 519 (SC). In this case law the Hon'ble Supreme Court has held that imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature, but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. The AR has also brought on record the case of Pubjab Tyres (Pubjab Tyres [1986] 162 ITR 517 (Madhya Pradesh), the Hon'ble High Court of Madhya Pradesh) in which it was held that when surrender is made to purchase peace or for other similar reason, surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings.
I have considered the findings given by the AO in the penalty order and submissions made by the AR during the appellate proceeding. I find that the AO has taken the undisclosed income of the assessee found during the search operation u/s 132 (for which evidences, documents/papers, stock, cash etc were found) along with the amount declared suo moto by the assessee (for which no evidence, papers/documents, stock, cash etc were found during the search operation) in order to buy peace of mind and avoid any further litigation. The assessee has brought on record the case law of Dilip N Shroff vs CIT (2007) 291 ITR 519 (SC). In this case law the Hon'ble Supreme Court has held that imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature, but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. The AR has also brought on record the case of Pubjab Tyres (Pubjab Tyres [1986] 162 ITR 517 (Madhya Pradesh), the Hon'ble High Court of Madhya Pradesh) in which it was held that when surrender is made to purchase peace or for other similar reason, surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings.
The AR has brought on record the case law of Sudharsan Silk and Sarees, 300 ITR 30 (Supreme Court) in this case, the Hon'ble Supreme Court has held that if the appellant offers any amount for taxation for the purpose of purchasing peace and assessment has been made based upon the aforesaid offerings, even if no assurance in writing is given by the searching party, it may be clearly inferred that such an inducement must have been given by the searching party. When only partial evidence or no evidence in support of concealment was detected during the search, why would a person go to offer a higher amount unless he was promised some reciprocal benefits like not being visited by penalty. Thus, it was held that where additions have been made based on assessee's own offerings, penalty provision shall not lie.
I find that during the search and seizure operation ix] s 132 in this case evidences regarding concealment/undisclosed income in the form of cash seizure / papers / documen ts / stock etc were found and seized of the value of Rs.17 ,58,272/ - only. Nothing incriminating/ no evidences were found regarding Rs.3,78,00,000/- which was offered for taxation by the assessee suo moto in order to buy peace of mind. I also find that neither the officers in the investigation wing in the post search investigation nor the Assessing Officer during assessment process found any discriminating evidence of undisclosed income other than the statement of the assessee for making the addition of Rs.3,78,00,000/-.
Further I find that the AO has levied penalty u/s 271AAB(1)(c). This section reads like sum computed at the rate of ten per cent of the undisclosed income of the specified previous year.
Thus, it is clear that in order to levy penalty two things are essential: (1) undisclosed income and (2) specified previous year. Here in this case Rs.3,78,00,000 / - was offered for taxation by the assessee suo moto in the statement recorded at the time of search. From the ratio decided by the Hon'ble Supreme Court in the case of Sudarshan Silk & Saries (supra), it is clear that only the statement of the assessee without any corroborating evidence cannot be the only basis for levying penalty. Here it is also clear that from the statement of the assessee one cannot point out which amount of undisclosed income pertains to which specified previous year. In this situation, where nothing is clear from assessee’s statement recorded at the time of search, the action of the AO to levy penalty u/s 271AAB(I)(c) on the amount offered by the assessee suo moto to buy peace of mind, cannot be justified. The Hon'ble Supreme Court has also categorically decided the ratio that penalty cannot be levied on the amount offered by the assessee in order to buy peace of mind [in the case of Sudarshan Silk & Saries (supra)]. Thus, respectfully following the ratio decided by the Hon'ble Supreme Court, the AO is directed to calculate and levy penalty u/s 271AAB(I)(c) on Rs.17,58,272/- only. Accordingly, assessee's appeal on grounds no 1 and 2 are partly allowed”.
Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee before us has raised a preliminary issue that the penalty proceedings having been initiated by the Assessing Officer against a dead person, initiation itself was bad-in-law and the penalty imposed under section 271AAB is not sustainable. He has pointed out that the notice initiating penalty proceedings under section 271AAB was issued by the Assessing Officer on 13.10.2015 in the name of the assessee, who had already expired on 29.04.2015. He has filed a copy of the relevant death certificate and contended that the penalty notice thus was issued by the Assessing Officer in the name of a dead person, which is not enforceable in law. Since this contention of the ld. Counsel for the assessee is duly supported by the decision of the Hon’ble Madras High Court in the case of Alamelu Veerappan –vs.- ITO (2018) 95 taxmann.com 155 (Madras), we accept the same and hold that the penalty proceedings initiated by the Assessing Officer against a dead person was not enforceable in law and the penalty imposed under section 271AAB in pursuance of such invalid initiation is not sustainable. We accordingly uphold the impugned order of the ld. CIT(Appeals) although on a different ground and dismiss this appeal of the Revenue.