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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
The appeal preferred by the revenue and the Cross Objection filed by the assessee are against the order of the Ld. CIT(A)-20, Kolkata dated 26.09.2016 for AY 2013-14.
The revenue is against the action of the Ld. CIT(A) in deleting the penalty levied u/s. 271AAB of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) in violation of Rule 46A of the I. T. Rules, 1962 and the Cross Objection of the assessee is that of the AO ought not to have levied penalty u/s. 271AAB of the Act since no search was initiated in the case of the assessee company u/s. 132 of the Act.
CO No.78/Kol/2018 Cargo Solutions Pvt. Ltd., AY 2013-14
We not that the assessee has raised the legal issue in its Cross Objection so we are inclined to adjudicate the same first. Though the Ld. CIT, DR vehemently opposed the admission of the legal issue for the first time before us, we taking note of the Hon’ble Supreme court decision in NTPC Vs. CIT 229 ITR 383 (SC) are inclined to admit the legal issue which the assessee has raised for the first time before this Tribunal. The assessee has challenged the invocation of penalty proceeding u/s. 271AAB of the Act on the ground that the assessee company was not searched u/s. 132 of the Act.
Brief facts of the case are that in this case a survey operation was conducted against the assessee namely, Cargo Solutions Pvt. Ltd. on 16.10.2012 while search took place on the same day at the premises of Ghanashyam Misra Group of cases. After the survey operation conducted at the assessee’s premises on 16.10.2012 the AO issued 153C notice dated 18.02.2015, which is reproduced as under:
CO No.78/Kol/2018 Cargo Solutions Pvt. Ltd., AY 2013-14
CO No.78/Kol/2018 Cargo Solutions Pvt. Ltd., AY 2013-14 We note from the order sheet before us that when the matter was fixed for hearing on 7th time on 26.07.2018 this Tribunal passed the following interim order:
“Ld. AR A. K. Tibrewal, FCA and Ld. CIT, DR, A. K. Tiwari present for the assessee and Revenue. The Ld. Counsel for the assessee submits that the assessee as a respondent wants to raise a new legal issue to support the impugned order of the CIT(Appeal) cancelling the penalty imposed by the AO u/s. 271AAB(1)(a) on the ground that there was no search action conducted in the case of assessee. The Ld. DR seeks time to prepare the reply of the revenue on this issue. Since this issue is important, which is likely to arise in other cases also, this case is to back to ‘C’ Bench and hearing is adjourned to 24.09.2018. The Ld. DR is also directed to produce the relevant assessment records which is necessary for deciding this issue. Sd/- (SSG) Sd/ (PMJ) JM AM
We note that on 26.07.2018 the Ld. DR sought time to prepare the reply of the Revenue as to whether the penalty u/s. 271AAB would survive since there was no search u/s. 132 of the Act carried out against the assessee company. Even the Department was directed to produce the relevant assessment records. However, the Department could not controvert the challenge raised by the assessee that in its case on 16.10.2012 only survey u/s. 133A of the Act happened and not search u/s. 132 of the Act and also that the AO initiated 153C proceedings and not 153A proceedings against the assessee and framed the assessment order. From the perusal of the record of the survey proceedings placed before us, we note that there was a survey proceedings at the premises of the assessee on 16.10.2012 and on a perusal of the notice issued by the AO dated 18.02.2015, supra reveals that the AO intended to invoke sec. 153C proceedings against the assessee. In such a scenario, we find force in the challenge raised by the assessee that without search being initiated u/s. 132 of the Act against the assessee, penalty provisions envisaged in sec. 271AAB of the Act cannot be initiated against the assessee. A perusal of the heading to the provision of sec. 271AAB reads as “penalty where search has been initiated” and on further perusal of the provision of section 271AAB it reveals about the assessee’s disclosure by statement u/s. 132(4) about any undisclosed income in the course of search. Admittedly, in the present case, there has been no search u/s. 132 of the Act. Search happened in the case of Ghanshyam Misra Group of cases on 16.10.2012 and admittedly there was survey proceeding u/s. 133A on 16.10.2012 against the assessee company. We note that the AO
CO No.78/Kol/2018 Cargo Solutions Pvt. Ltd., AY 2013-14 has not initiated any 153A proceeding pursuant to the search and in case if the assessee had been search u/s. 132 of the Act, then proceedings u/s. 153A of the Act should have been initiated against the assessee. In this case, from a perusal of the notice reveals that the AO has initiated 153C proceedings against the assessee. In the light of the aforesaid facts, we are of the considered opinion that the penalty u/s. 271AAB could not have been initiated by the AO since there has been no search on the assessee company. Therefore, the assessee succeeds and the very initiation of penalty proceeding u/s. 271AAB of the Act is quoram non judice and non-est in the eyes of law and is, therefore, quashed. To come to such a conclusion, we rely on the coordinate bench decision in the case of DCIT Vs. Volga Dresses, in & 202/PAN/2016 for AYs 2013-14 and 2014-15 dated 27.03.2017. In the said case, it has been held as under:
“We have considered the rival submissions. A perusal of the provisions of section 271AAB shows that the opening words are “penalty where search has been initiated” a perusal of the provisions under section 271AAB also talks of the assessee declaring any undisclosed income in the course of the search in the statement under section 132(4). Admittedly in the present case, that is in the case of the assessee firm in appeal there has been no search. Search admittedly is on the residence of one of the partner of the assessee firm. Further a perusal of the order of the learned LD. CIT(A) also clearly shows that the learned CIT(A) has cancelled the penalty on the ground that there was no search in the case of the assessee firm. The revenue has not been able to point out as to how this finding of the learned CIT(A) is erroneous. This being so the finding of the learned CIT(A) on this issue stands confirmed.” Since we allow the legal issue raised by the assessee in its Cross Objection in respect of penalty proceedings u/s. 271AAB of the Act, the revenue appeal has become academic and infructuous. Therefore, we dismiss the revenue’s appeal and allow the Cross Objection of the assessee.
In the result, the appeal by the revenue is dismissed and the cross objection of assessee is allowed.
Order pronounced in the open court on 28th November, 2018. Sd/- Sd/- (M. Balaganesh) (A. T. Varkey) Accountant Member Judicial Member Dated: 28th November, 2018 Jd.(Sr.P.S.)
CO No.78/Kol/2018 Cargo Solutions Pvt. Ltd., AY 2013-14 Copy of the order forwarded to:
1 Appellant – DCIT, Central Circle-1(4), Kolkata 2 Respondent – M/s. Cargo Solutions Pvt. Ltd., 103, 2nd floor, Saheed Nagar, Bhubaneswr, Odisha-751007. 3 CIT(A)-20, Kolkata. (sent through e-mail) CIT , Kolkata. 4
5 DR, Kolkata Benches, Kolkata (sent through e-mail)