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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-21, Kolkata dated 20.03.2015 confirming the levy of penalty u/s. 271AAA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2011-12. Shri A. K. Tulsyan, Ld. Authorized Representative appeared on behalf of assessee and Shri A.K. Tiwari, Ld. Departmental Representative appeared on behalf of Revenue. 2. Solitary issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the penalty levied by Assessing Officer u/s 271AAA of the Act for ₹ 1 lakh.
ITA No.685/Kol/2015 A.Y. 2011-12 Subhajit Kr. Ghosh Vs. DCITCC-XXV, Kol. Page 2 3. Briefly, the facts of the present case the assessee is an individual and deriving his income from salary and other source of income. A search was conducted u/s. 132 of the Act on 27.01.2011 and 28.01.2011 in case of Warren Tea Group, the assessee was one of the Director of Warren Tea Ltd. Therefore, he was also searched u/s 132 of the Act. The assessee in his statement recorded u/s 132(4) of the Act has declared an undisclosed income of ₹ 10, lakh only. The break-up of undisclosed income and its application as disclosed u/s 132(4) of the Act. Sl. Particulars Reference FY Amount (Rs) 1 Cash found at 1A, Cooper 10-11 4,35,600 Street,Kolkakta-26 2 Jewellery found at 1A, Sch-10 10-11 2,99,974 Cooper St. Kolkata-26 3 Jewellery foud atd locker 10-11 2,41,119 No.13/2118 with UCO Bank, Hazra Road Branch, Kolkata 4 Misc. & other income (net) 10-11 23,307 Total 10,00,000 The Assessing Officer framed the assessment u/s. 143(3) at the income disclosed by assessee including the income declared u/s 132(4) of the Act in his return of income. However AO initiated the penalty proceedings u/s. 271AAA of the Act on account of income disclosed u/s. 132(4) of the Act. Subsequently, AO issued notice u/s 271AAA of the Act for levying the penalty. In this regard, assessee submitted that it has earned undisclosed income from share and commodity dealing business activities. The impugned income was duly disclosed in the income tax return filed within due date as specified u/s. 139(1) of the Act. The assessee also submitted that he has fulfilled all the condition prescribed u/s 271AAA of the Act from the immunity of penalty. Therefore, no penalty in such a situation is warranted. However, AO disregarded the contention of assessee by observing that conditions prescribed from immunity u/s 271AAA of the Act have not been fulfilled by A.Y. 2011-12 Subhajit Kr. Ghosh Vs. DCITCC-XXV, Kol. Page 3 assessee. Therefore, the AO imposed penalty @ 10% of the undisclosed income declared in the statement furnished u/s 132(4) of the Act.
Aggrieved, assessee preferred an appeal before Ld. CIT. The assessee before Ld. CIT(A) submitted that search was conducted on 27.01.2011 whereas the due date for filing return income for the year under consideration was not expired. The undisclosed income was duly offered to tax before filing the income tax return as specified u/s 139(1) of the Act. During search proceedings, no detection of concealed income was found by the Revenue. Therefore, there was no concealed income declared by assessee 4.1 The amount seized by search team for ₹2,35,600/- was claimed as pre- paid tax in the income tax returns and the balance amount of tax duly paid as self-assessment tax. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the penalty levied by AO by observing as under:- “5. I have considered the submission of the appellant and perused the penalty order as well as the assessment order. It is observed that in the case of appellant the search operation u/s. 132 of the Act was conducted on 27.01.2011 and by the time neither the relevant previous year has ended nor the due date of filing the return of income was lapsed. There is no dispute on the fact that the appellant had accepted thee additional income of Rs.10 lakhs in the course of search in the statement recorded u/s. 132(4) of the Act. Further, the appellant has filed his return of income for the e AY 2011-12 u/s 139(1) of the Act on 14.07.2011 declaring total income of Rs.46,67,859/- which includes the additional income of Rs.10 lakhs admitted by him u/s. 1321(4) of the Act. As per the return of income the appellant has worked out the total tax liability on the returned income at Rs.12,91,989/-. Out of this tax liability the appellant claimed credit of TDS of Rs.9,56,413/- and credit of seized cash of Rs.2,35,600/- as payment of advance tax. The balance amount of Rs.1,00,000/- was paid by the appellant as self-assessment tax. Thus, as per the return of income there was claim of refund of Rs.24/-. However, on perusal of the declaration petition dated 28.03.2011 filed before the ADIT (Inv.) Unit-II(3), Kolkata, it is observed that nowhere in the course of search the appellant specified the manner in which such income was derived and also did not substantiates the manner in which the undisclosed income was derived. He simply admitted the undisclosed income of Rs.10 lakhs which was applied in certain portion of jewellery found in the course of search as well as the cash. Even if, on the basis of seized cash lying with the department and as claimed in the return of income. It is presumed that the appellant has paid the tax on the undisclosed income but the conditions as mentioned u/s.271AAA(2)(i) and 271AAA(2)(ii) were not satisfied. Under the circumstances, I am of the opinion that the AO was justified in imposing the A.Y. 2011-12 Subhajit Kr. Ghosh Vs. DCITCC-XXV, Kol. Page 4 penalty u/s. 271AAA of the Act amounting to Rs.1 lakh. The penalty so imposed is confirmed. The ground no. 1 is dismissed” Aggrieved, the assessee challenged this issue before this Tribunal.
Ld. AR for the assessee filed a various case laws which are placed on record and reiterated the same submissions that were made before Ld. CIT(A) whereas Ld. DR vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the material available on record and perused the cited case law. In the instant case, the income was disclosed by assessee in his statement u/s 132(4) of the Act. The income disclosed by assessee was duly accepted by the AO while framing assessment proceedings u/s. 143(3) of the Act. However, the AO has levied the penalty u/s 271AAA of the Act for ₹ 1 lakh which was subsequently confirmed by Ld. CIT(A). The assessee can claim immunity from the penalty levied u/s. 271AAA of the Act in certain circumstances which reads as under:- [Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 53[but before the 1st day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,— (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. As per the order of Ld. CIT(A) the assessee failed to substantiate manner by which the undisclosed income was earned by him. Therefore, penalty u/s. 271AA of the Act was levied. However, we note that Hon'ble ITAT in the case of DCIT vs. Pioneer Marbles & Interiors Pvt. Ltd. reported 144 TTJ 663 has held as under:- A.Y. 2011-12 Subhajit Kr. Ghosh Vs. DCITCC-XXV, Kol. Page 5 “on the facts of the instant case wherein entire tax and interest has been duly paid well within the time-limit for payment of notice of demand under section 156 and well before the penalty proceedings were concluded, the assessee could not be denied the immunity under section 271AAA(2) only because entire tax, along with interest, was not paid before filing of income-tax return or, for that purpose, before concluding the assessment proceedings.” Similarly, the Hon'ble ITAT Cuttack Bench in the case of Pramod Kumar Jain vs. DCIT reported 149 TTJ 36 (CTK) has held as under : “Held that no definition could be given to the 'specified manner' insofar as the very statement on oath under section 132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance of notice under section 153A accounting the assets. Therefore, the penalty is not automatic if one of the purported conditions is not fulfilled although all the conditions have been agreed to of having fulfilled by the Assessing Officer insofar as the tax and interest have been recovered. In view of the above the levy of penalty under section 271AAA was not justified” Similarly, the Hon'ble ITAT Kolkata Bench in the case of DCIT vs. Salasar Stock Broking Limited reported 181 TTJ 526 has held as under : “Held that the offer of Rs. 2 crores has been made voluntarily by the assessee in the disclosure petition under section 132(4) followed by filing of the return under section 153A. it is also pertinent to note that this offer has been voluntarily made by the assessee without any incriminating materials found during the course of search. Hence, it goes to prove beyond doubt that the offer of undisclosed income of Rs. 2 crores was made voluntarily by the assessee without any detection by the department and, accordingly, the argument of the departmental representative that but for the search, this income would not have been offered does not hold any water and deserves to be dismissed. Thus, the assessee is entitled for immunity from levy of penalty under section 271AAA(2) and, accordingly, the penalty levied by the Assessing Officer is cancelled.” From the above order, we observe that it is not necessary to substantiate manner in which income was derived by assessee from undisclosed source in the given facts & circumstances. It is because no prescribed method to find the manner in such income was generated has been prescribed under the statute. Therefore, respectfully following the same, we hold that the penalty levied by AO and upheld by Ld. CIT(A) is not sustainable. In view of these facts and circumstances of the case and in view of various case laws