JAI KUMAR KANKARIA,KOLKATA vs. PCIT, CENTRAL-1, KOLKATA, KOLKATA

3. The brief facts of this appeal is that there was a search and seizure operation carried out in respect of ‘Kankaria Group’ of cases on 11.10.2012. The assessee is one of the key persons of this group. During the course of search and seizure operation, the assessee admitted and disclosed income of Rs. 5 crores for the assessment year 2013-14

Jai Kumar Kankaria A.Yr.2013-14 on account of jewellery vide disclosure petition u/s 132(4) of the Act made before the DDIT(Inv.). The assessee filed his return of income for the assessment year 2013-14 on 26.09.2013 declaring total income of Rs. 5,72,71,760/- which admittedly included the disclosure of Rs. 5 crores made pursuant to the search. The assessee also paid the taxes for this disclosure of Rs. 5 crores in December, 2012 itself as advance tax. The assessment was completed by the Ld. AO u/s 143(3) on 13.03.2015 determining the total income of Rs. 5,93,89,544/-. The difference between assessed income and the return of income was only on account of disallowance made u/s 14A of the Act read with Rule 8D of the Rules. Hence, effectively, the return of income of the assessee has been accepted by the Ld. AO subject to further disallowance made u/s 14A of the Act. The Ld. AO on completion of assessment initiated penalty proceedings u/s 271AAB of the Act. During the course of penalty proceedings, the ld AO observed that the assessee has duly complied with the provisions of 271AAB(1)(a) of the Act by complying all the three cumulative conditions prescribed thereon and accordingly levied penalty @ 10% of undisclosed income in the sum of Rs. 50 lacs. (10% of 5 crores). The assessee did not prefer any appeal against the order and it was stated by the Ld. AR that the said penalty of Rs. 50 lacs. was also paid by the assessee.

4. Later the Ld. CIT sought to revise the said penalty order passed u/s 271AAB of the Act by the Ld. AO on 30.07.2015, on the ground that the Ld. AO ought to have levied minimum 30% of undisclosed income as penalty as against 10% levied by him, thereby treating his order erroneous and in as much as it is prejudicial to the interest of the Revenue. The basic premise of the Ld. CIT for issuing show cause notice in this regard was that the assessee has filed his return of income u/s 139(1) of the Act on 26.09.2013 which is beyond the specified date as prescribed u/s 139(1) of the Act and hence, the assessee does not specify the third mandatory requirement of filing the return of income before the specified date in terms of 271AAB (1)(a)(iii) of the Act. According to the Ld. CIT the due date of filing the return of income for the assessee would be 31st July, 2013 2

Jai Kumar Kankaria A.Yr.2013-14 and since, the return was filed on 26.09.2013 and in view of the fact the assessee is not liable for tax audit, in the opinion of the Ld. CIT, the assessee has not satisfied the cumulative condition prescribed u/s 271AAB(1)(a)(iii)(B) of the Act. In response to the show cause notice, the assessee through Authorized Representative stated that, in the instant case, the assessee is subject to tax audit and hence the due date of filing of return of income would be 30.09.013. The assessee also furnished a copy of the tax audit report on 03.06.2013 before the office of Additional Commissioner of Income Tax, Range-II (Central), Kolkata duly enclosing Form 3CB and 3CD together with annexures. The Ld. CIT however found from the ‘general audit information’ column of return of income for the assessment year 2013 where, in response to query made in the return of income as “Are you liable for audit”, the assessee had responded in the negative. In other words, according to the Ld. CIT, the assessee had stated that he is not liable for tax audit for the assessment year 2013-14 as per information furnished by him in the return of income in the relevant column thereon. Accordingly, he concluded that the contention of the assessee that he is liable for tax audit requires further enquiry/verification by the Ld. AO to verify as to whether the assessee is actually liable to tax audit and whether such tax audit had been actually conducted in the case of the assessee for the year under appeal. He directed that due date of filing of return of income would depend on this verification, which would in turn decide the applicability of provisions of 271AAB(1)(a) or 271AAB(1)(c) i.e. 10% or 30% of undisclosed income , as the case may be, for levy of penalty thereon. Accordingly, he treated the order of penalty u/s 271AAB of the Act passed by the Ld. AO on 30.07.2015 as erroneous and prejudicial to the interest of the Revenue and set aside the same by invoking revisionary jurisdiction u/s 263 of the Act. Aggrieved the assessee is in appeal before us on the following grounds: 1. For that on the facts of the case the order passed by the Ld. CIT, (Central)-1, Kolkata u/s 263 is completely arbitrary, unjustified and illegal.

Jai Kumar Kankaria A.Yr.2013-14 2. For the on the facts of the case the order of the Ld. Pr. CIT (Central)-1, Kolkata passed u/s 263 dated 30.03.2017 should be quashed.

5. For that on the facts of the case, the Ld. Pr. CIT (Central)-1, Kolkata was wrong in passing the order u/s 263 by setting aside the penalty order u/s 271AAB(1)(a), for reexamining and proper enquiries to ascertain the due date of return filing of return income, although the Audit Report u/s 44AB as on 31.03.2013 has been done on 31.05.2013 which was duly filed in the office of Addl. CIT, R-II, Central, Kolkata on 03.06.2013 and filed the return u/s 139(1) within due dated i.e. 26.09.2014, therefore, the direction given by the Ld. Pr. CIT to AO is completely arbitrary, unjustified and illegal.

7. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.

Jai Kumar Kankaria A.Yr.2013-14 within the meaning of 271AAB of the Act. We find from page 12 of the paper book filed by the assessee that the assessee had indeed got his accounts tax audited u/s 44AB of the Act had furnished the tax audit report in Form 3CB and 3CD dated 31.05.2013 together with its annexures on 03.06.2013 before the office of Addl. CIT, Range-II (Central), Kolkata. The seal of the Income tax Department stand as an evidence to this effect. Once, the accounts are liable for tax audit and the tax audit report has been filed before the Ld. AO much before the due date, the due date of filing of return of income (specified date) would be 30th September, 2013 and accordingly the assessee having filed the return of income on 26.09.2013 would have to be considered as having filed within time. Hence, in our opinion, the assessee’s case squarely falls only under 271AAB(1)(a) of the Act and is accordingly eligible only for 10% levy of penalty thereon, which has been rightly levied by the Ld. AO. Hence, there cannot be any error that could be attributed in the said order of the Ld. AO. We find that the Ld. CIT is only treating to substitute his own opinion in the place of opinion already framed by the Ld. AO, which in our considered view, is not permissible as per law. We find that the Ld. AO had taken one possible view in the matter. In this regard we find that the reliance placed by the Ld. AR on the decision of the co-ordinate Bench of this Tribunal in the case of Bangiya Gramin Vikash Bank vs. CIT in dated 12.05.2017 supports the case of the assessee wherein it was held that : “10………………………….. It was a possible view which the AO has taken and just because CIT does not agree with the view expressed by the AO jurisdiction u/s 263 of the Act cannot be invoked. The decision of the Hon'ble Supreme Court in the case of Malabar Industries Ltd. 243 ITR 83 clearly supports the plea of the assessee in this regard. Besides the above, we are also of the view that the AO had made proper enquiries before concluding the assessment and since the CIT has invoked the jurisdiction u/s 263 of the Act for failure on the part of the AO to make proper enquiries the action of CIT on this issue cannot be sustained.”

Jai Kumar Kankaria A.Yr.2013-14 that initiation of the proceeding u/s 263 of the Act by the CIT was not justified, and that the Tribunal was right in holding that after examining the record of the assessee in exercise of powers u/s 263, where the CIT finds that the AO had not initiated penalty proceedings, he cannot direct the AO to initiate the penalty proceedings u/s 271(1)(c) of the Act. Accordingly, it was held that initiation of the proceeding u/s 263 of the Act was not justified and to the order of the Tribunal cancelling the revision order passed by the CIT was upheld by the Hon’ble Punjab & Haryana High Court.

Order pronounced in the Court on 18.08.2017