SH. VINOD CHANDER SINHA,NEW DELHI vs. ACIT, NEW DELHI

The facts in brief are that the assessee was covered under search action u/s. 132 of the Income Tax Act, 1961 (hereinafter referred as the Act) pursuant whereto it filed its return of income for the block period AY 2009-10 declaring a total income of Rs. 41,93,730/- which included an amount of Rs. 35,00,000/- surrendered by the assessee as its undisclosed income in the course of search proceedings. Subsequently, the case was picked up for compulsory scrutiny and the order in the case of the assessee was passed accepting the return income of Rs. 41,93,730/- declared by the assessee after detailed scrutiny vide the assessment order dated 26.11.2010.

Being aggrieved with the aforesaid penalty order, assessee appealed before the Ld. CIT(A), who vide impugned order dated 20.3.2014 has dismissed the appeal of the Assessee.

Now the Assessee is aggrieved against the impugned order and filed the present appeal before the Tribunal.

Ld. Counsel of the assessee stated that the assessee was appointed as an Independent Director in M/s Koutons Retail India Ltd. and there was a search in Koutons group u/s 132 of the Income Tax Act, 1961 and assessee was also covered in this search u/s 132. He stated that during the search, cash of Rs. 35,00,000/- was seized from the locker of the assessee which was surrendered as income for the current financial year 2008-09 as income earned from advance received against sale of property. The assessee declared this sum as undisclosed income in the return filed for assessment year 2009-10 which was accepted by the AO while passing the order and returned income is accepted as it is which means that AO is satisfied about the manner and its substantiation during assessment and hence assessee should not be charged penalty u/s. 271AAA of the I.T. Act. He further stated that all the details with regard to cash seized from his locker were given. But AO has mentioned in the order that no explanation was offered in respect of undisclosed income. He stated that this observation is against the facts of the case as mentioned above as the assessee had filed detailed reply on 11-04-2011 and has personally attended the proceedings to explain the transaction, 5 which was not considered at all and AO ignored all the above explanations and imposed the penalty of Rs. 3,50,000/- vide order dated 30-05-2011. It was argued by the assessee’s counsel that it is difficult to comprehend how the assessee can be penalized for non-disclosure of any income when the due date for filing the return of income has not arrived. He stated that in the instant case the assessee filed his income tax return for the assessment year 2009-10 within the time stipulated under section 139 and has disclosed therein all the income earned by him during the previous year 2008-09, therefore, there is no question of penalizing the assessee under section 271AAA of the Income Tax Act, 1961 for non disclosure of income.

On the contrary, Ld. DR relied upon the orders of the authorities below and stated that the lower authorities has rightly levied the penalty upon the assessee which needs to be affirmed.

I have heard the both parties, perused and considered the relevant records available with me especially the impugned order passed by the Ld. CIT(A). I find that during the search, cash of Rs. 35,00,000/- was seized from the locker of the assessee. The assessee declared this sum as undisclosed income in the return filed for assessment year 2009-10.The assessee had given statement u/s 132(4) of the Act wherein the source of this undisclosed income and substantiated the manner in which this cash was earned. The assessee filed the return in response to notice u/s 153A for AY 2009-10 Rs. 41,93,730/- including Rs. 35,00,000/- as undisclosed income. The said return was assessed u/s 143(3) wherein the returned income of Rs. 41,93,730/- was accepted as it is but AO initiated penalty proceedings u/s 271AAA of the Act in the assessment order for cash seized from locker. The assessee was served with show cause notice for imposition of penalty u/s 271AAA to which assessee replied on 11/04/2011 but AO has not considered the reply filed in this regard by the assessee on 11-04-2011. From the records, it reveals that the assessee had attended the penalty proceedings on 12-05-2011 wherein all the details with regard to cash seized from his locker were given. But AO has mentioned in the order that no explanation was offered in respect of undisclosed income. In my view this observation of the AO is against the facts of the 7 case as mentioned above as the assessee had filed detailed reply on 11-04-2011 and has personally attended the proceedings to explain the transaction. But AO ignored all the above explanations and wrongly imposed the penalty of Rs.3,50,000/- vide order dated 30-05-2011. I find considerable cogency in the assessee’s counsel contention that during the search, cash of Rs. 35,00,000/- was seized from the locker of the assessee which was surrendered as income for the current financial year 2008-09 as income earned from advance received against sale of property. The assessee declared this sum as undisclosed income in the return filed for assessment year 2009-10 which was accepted by the AO while passing the order and returned income is accepted as it is which means that AO is satisfied about the manner and its substantiation during assessment and hence assessee should not be charged penalty u/s. 271AAA of the I.T. Act. In my considered opinion, it is difficult to comprehend how the assessee can be penalized for non-disclosure of any income when the due date for filing the return of income has not arrived. However, in the instant case the assessee filed his income tax return for the assessment year 2009-10 within the time stipulated under 8 section 139 and has disclosed therein all the income earned by him during the previous year 2008-09, therefore, there is no question of penalizing the assessee under section 271AAA of the Income Tax Act, 1961 for non disclosure of income. Hence, the penalty levied by the AO and affirmed by the ld. CIT(A) is not sustainable in the eyes of law. Therefore, I delete the penalty of Rs. 3,50,000/- levied u/s. 271AAA of the Income Tax Act, 1961 and accordingly, allow the appeal of the Assessee.

In the result, the appeal of the Assessee is allowed.