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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI N.V.VASUDEVAN, JM & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Assessee pertaining to the Assessment Year 2009-2010, is directed against the order passed by ld. CIT(A), Central-II, Kolkata in Appeal No.94/CC-XVIII/CIT(A)C-II/11-12, dated 19.11.2013, which in turn arises out of an order passed by the Assessing Officer (AO) Under Section 143(3) of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 31.12.2010.
Brief facts of the case qua the assessee are that a search and seizure operations u/s 132 of the Income Tax Act, 1961 were conducted in the M/s.Kaushalya Infrastructure Group of cases on 26/27.03.2009 and on subsequent dates (at certain spots). This included search also at the residence of the assessee at Vill: Raigachi, Azad Nagar, Rajarhat, 24 Pgs(N), Kolkata-136 by virtue of a search warrant dated 25.03.2009. During the course of search some diaries and documents/papers vide ID marks AMA/l to AMA/7 as per Annexure-'A' were found and seized. and some bank accounts as per Annexure-3 to Panchanama dated 27.03.2009. One diary with ID mark AM/1 vide Annexure-A to Panchanama dated 19.05.2009 was found and seized. On verification of above seized diaries and documents, it is observed that the same contained some rough entries of some of the land deals conducted by the assessee on behalf of M/s.Kaushalya Infrastructure Group of cases mentioning therein certain amounts received by the assessee through bank and cash and various expenses i.e. relating to payments made to land owners, payments towards registration cost and other related expenses incurred by the assessee in connection with land deals. It is also-observed that these rough entries were related to financial" year/2007 -08 & 2008-09 corresponding to the assessment years 2008-09 and 2009-10 only. Therefore based on these documents the AO has completed the assessment by making addition on estimated basis @1.35% of the gross amount received from Kaushalya Group companies amounting to Rs.17,76,43,101/- which comes to Rs.23,98,192/- which is considered as total income of the assessee for the assessment year 2009-2010 form his activities of land dealings. Therefore, the AO made the addition based on estimation basis @ Rs.23,98,192/-. The AO also initiated penalty proceedings u/s.271AAA of the I.T.Act.
Aggrieved from the order of AO u/s.271AAA, the assessee filed an appeal before the ld. CIT(A), who has confirmed the penalty levied by the AO u/s.271AAA of the Act observing the followings :-
3 Abu Mansur Ali “5. I have considered the' submission of the appellant and perused the assessment order as well as the penalty order. On careful consideration of facts and in law, I am of the opinion that the AO was justified in imposing the penalty u/s 271AAA of the Act because the income was found recorded in the seized diaries which were not the regular books of account of the appellant. Further, the similar nature of income pertaining to the preceding year i.e. A.Y. 2008-09 was also found recorded on these diaries and the appellant did not file the return u/s 139(1) of the Act for that year. The appellant came forward to admit the income as per the seized diaries only subsequent to the search operation both for A.Y. 2008-09 as well as A.Y. 2009-10. However, no declaration was made u/s 132( 4) of the Act. In fact, from the conduct of the appellant it is apparent that the income arising out of the transactions of land dealing as per the seized diaries was not meant for declaration in the return of income because no return was filed for the preceding year. Further, the AO has made estimation of income because the appellant has failed to substantiate the profit declared by him in the return of income. Again, in the 'course of appellate proceedings, the appellant as claimed that he has paid the tax along with interest on the income declared by him. However, on perusal of assessment order it is observed that the AO has assessed the income at Rs.24,01,946/- on which the tax liability along with interest was computed at Rs.9,65,222/-. There is no credit of pre-paid taxes. It means that the appellant had not paid the tax even on the returned income otherwise the AO would have given the credit for the same. Under the circumstances, I am of the view that the conditions as laid down in sub-section (2) of section 271AAA are not satisfied and, therefore, the AO has rightly imposed the penalty u/s 271AAA of the Act. The penalty imposed by him is confirmed. The ground no. 2 to 4 are dismissed.
Not being satisfied with the order of ld. CIT(A), the Assessee is in appeal before us and has taken the following grounds of appeal :-
1. For that the order of the Ld. CIT (A) is arbitrary, illegal and bad in law.
2. For that the Ld. CIT(A) erred in confirming the penalty when the tax payer filed the return before the due date provided in his case under Explanation-(3) to section 271 (1) (c) and the provisions of sec. 271AAA were not applicable since the tax payer was not an assessee within the meaning of the provisions of Income Tax Act, 1961 at the time of search.
3. For that in view of the provisions contained in IT. Act, 1961 making clear distinction between the word "Person" and word "Assessee" the tax payer was not liable to the penalty under sec. 271AAA.
4. For that the Ld. CIT(A) erred in confirming the action of the AO in imposing penalty U/s. 271AAA of Rs. 2,40,195/- being 10% of assessed income when even otherwise the assessee satisfied the conditions of 271AAA(2).
4 Abu Mansur Ali 5. For that the Ld. CIT(A) erred in confirming the action of the AO in imposing penalty when the undisclosed income was admitted during the course of search the manner of deriving the undisclosed income from land dealings was substantiated and the CIT(A) erred in assuming that the taxes were not paid on the assessed income.
For that the Ld. CIT(A) erred in confirming the action of the AO in imposing penalty when the additions to the return income was made only on estimate basis not on the basis of any seized document.
For that on the facts and circumstances of the case the order of the CIT(A) be modified and the assessee be given the relief prayed for.
For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing.
Although in this appeal, the assessee has raised eight grounds of appeal but at the time of hearing the solitary grievance of the assessee has been confined to the issue that the AO cannot impose penalty u/s.271AAA without any incrementing material found during the search. Besides the addition was made by the AO on estimated basis and not on the basis of any seized document therefore penalty u/s.271AAA should not be levied.
5.1. Ld. AR for the assessee has submitted before us that the AO has levied penalty u/s.271AAA without satisfying condition u/s.271AAA. The Ld. AR also submitted that undisclosed income was admitted during the course of search i.e. manner of verifying the undisclosed income from land dealings was substantiated and CIT(A) erred in assuming that the taxes were not paid on the assessed income. The Ld. AR for the assessee has submitted that in order to levy the penalty u/s.271AAA there should be an incriminating material. In assessee’s case under during the course of search. The assessee under consideration used to work for other party as a middleman and used to receive cash amount for land dealings. Besides, the Section 271AAA clearly says that penalty is levied on undisclosed income of the assessee but in this case there is no any undisclosed income based on the incriminating material found during the search action. Explanation to Section 271AAA defines the undisclosed income as any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year. The Ld. AR for the assessee also pointed out that the AO has made the addition on the basis of estimation and not on the basis of any seized document. Therefore, penalty u/s.271AAA should not be levied.
5.2. Ld. DR for the Revenue has primarily relied on the findings of the AO, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
5.3. Having heard the rival submissions, perused the material on record, we are of the view that there is merit in the submissions of the assessee, as the proposition canvassed by ld. AR for the assessee are supported by the facts narrated by him above and the case laws cited by him above. As 6 Abu Mansur Ali Ld. AR for the assessee has pointed out that during search and seizure no any incriminating material was found and there is no any undisclosed income belonging to the assessee under consideration i.e. search party did not find any undisclosed income pertaining to the assessee. In addition to this the AO made the addition based on estimation. All the figures are relating to Kaushalya Group, therefore, addition made by the AO is not based on any seized material but it is based only on estimation, surmise and conjecture. Therefore, penalty u/s.271AAA should not be levied. Considering the above factual position we are of the view that the penalty levied by the AO and confirmed by the ld. CIT(A) needs to be deleted. Accordingly, we delete the penalty u/s.271AAA. 5.4. In the result, the appeal filed by the Assessee, is allowed. Order pronounced in the open court on this 22/03/2017.