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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI RAJPAL YADAV, VP & SHRI DR. MANISH BORAD, AM
These appeals at the instance of the assessee are directed against the order of Commissioner of Income-tax (Appeals) [learned CIT (A)] even dated 21.07.2023. The penalties were levied by ACIT Circle 1 (1), Kolkata under section 271(1)(c) & 271AAB of the Act for A.Y. 2014-15 & 2015-16 respectively, vide even order dated 29th June, 2017. for A.Y. 2014- 15.
The sole issue for under consideration is that whether the learned CIT (A) erred in confirming the penalty levied by
The learned counsel for the assessee vehemently argued referring to the written submission.
The learned Departmental Representative supported the orders of the learned lower authorities.
We have heard the rival contentions and perused the records available on record. The assessee is aggrieved with the levy of under Section 271(1)(c) of the Act of ₹15,45,000/-. We observe that the assessee which is a private limited company and subjected to search under Section 132 of the Act on 17th March, 2015, was assessed under Section 153A read with section 143(3) of the Act, vide order dated 30th December, 2015. In the return filed in compliance to notice under Section 153A of the Act, assessee made a voluntarily disclosure of ₹50 lacs and offered it to tax. Perusal of the assessment order placed at page 19 to 21 of the Paper Book, clearly indicates that the learned Assessing Officer has not referred to any incriminating material and the disclosure made by the assessee has been accepted and only an addition for deemed dividend made on the basis of details furnished during the post search scrutiny proceedings. However, the learned Assessing Officer initiated the penalty proceedings under Section 271(1)(c) of the Act for the undisclosed income declared during the course of search and finally vide order dated 29th June, 2017, levied the impugned penalty
Before us, the learned counsel for the assessee on the strength of judicial pronouncements has submitted that where no incriminating material are found during the search proceedings and additional income is surrendered voluntarily and suo moto, then, there it cannot be construed that the assessee has concealed the particulars of income.
In the decisions referred by the learned counsel for the assessee in the written submission, we notice that the co- ordinate Bench of Jaipur in the case of DCIT vs. Smt. Indira Agrawal, Kota in dated 22nd March, 2019, held as under:-
“4.3 It is undisputed fact that the income surrendered during the search u/s 132(4) was duly included/ offered for tax while filing return of income u/s 153A and due taxes thereon was paid. The income surrendered and included/ offered for tax while filing return of income was accepted as such by the AO.
4.4 In above factual situation, the penalty u/s 271(1)(c) cannot be levied as the matter is covered one. Apart from the consideration given on the several case laws cited by the applicant it is worth to place the reliance on the decision Hon'ble ITAT, Jaipur Bench, Jaipur in the case of Ajay traders V/s DCIT, Central Circle, Alwar (ITA No. 296/ JP/2014) pronounced on 06.05.2016 as follows: -
4.3. We have heard rival contentions and perused the material on record. It is undisputed fact that during the It is undisputed fact that, the no incriminating documents were found during the course of search to prove the concealment of income and the penalty was imposed merely on the basis of income surrendered by the appellant in his statement and shown in the ITR filed u/s 153A of the Act. The income so surrender by the appellant was reported in the return filed u/s 153A which has been accepted without further addition. No incriminating documents are not used to alter the income reported by the appellant or prove the income so surrender by the applicant as real undisclosed 4.5 In view of the above discussions and considering the overall facts and attending circumstances of the appellant's case and with regards to the various juridical pronouncements discussed herein above, I found that it is undisputed fact in this case that the impugned income subjected to the assessment is only income which is surrendered by the appellant during the search and also disclosed in return of income filed under section 153A. There is no corroborative evidence/material /document in support of income so surrendered and offered for taxation and the same is only on the basis of the statement of the assessee recorded during search. The declared income is also finally assessed as such. Following, the decisions discussed in paras 4.4 the penalty levied on this account under section 271(1)(c) of the Income Tax Act is not sustainable and accordingly the same stands as cancelled. Accordingly, this ground of appeal 1 to 6 is allowed."
In view of the facts and circumstances of the case and a detailed discussion in the foregoing paras of this order, we do not find any error or illegality in the impugned order of the ld. CIT(A) in deleting the penalty U/s 271(1)(c) of the Act.”
Similar view was also taken by the Hon'ble Delhi High Courtin case of CIT v. Best. Infrastructure India Pvt. Ltd reported in (2017) 397 ITR 82, Delhi, where penalty levied under Section 271(1)(c) of the Act was deleted on the ground that the additional income surrendered by the
Further, Hon'ble Delhi High Courtin case of Raj Pal Bhatia (2011) 333 ITR 315 (Delhi) held that the statements recorded cannot be construe as a material found during the course of search for the purpose of Chapter 14B. Further, the co-ordinate Bench Jaipur in case of Ajay Traders Vs. DCIT in has held that if no incriminating documents are found during the course of search explanation 5A to Section 271(1)(c) of the Act is not applicable.
Respectfully following the ratio laid down by the Hon'ble Courts and co-ordinate Benches (referred supra) and considering the fact of the instant case that the penalty has been levied on the additional income been offered voluntarily in the statement recorded under Section 132(4) of the Act but no reference has been made to any corroborative incriminating material found during the course of search. We are inclined to hold that the learned CIT (A) erred in confirming the penalty levied by learned Assessing Officer under Section 271(1)(c) of the Act. Thus, finding of the learned CIT (A) is set aside and the impugned penalty of ₹15,45,000/- levied under Section 271(1)(c) of the Act is deleted. Effective grounds of appeal raised in are allowed.
On the other hand, the learned Departmental Representative vehemently argued supporting the orders of the learned lower authorities.
“271AAB. (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 July, 2012 but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,— (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee— (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date— (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee— (i) in the course of the search, in a statement under sub- section (4) of section-132, does not admit the undisclosed income; and (ii) on or before the specified date— (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b).
(a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, 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) on or before the specified date— (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a).
(2) No penalty under the provisions of section-270A or clause (c) of sub-section (1) of section-271 shall be imposed (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section.
Explanation.—For the purposes of this section,— (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section-139 or the date on which the period specified in the notice issued under section-153A for furnishing of return of income expires, as the case may be; (b) "specified previous year" means the previous year— (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section-139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) "undisclosed income" means— (i) 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— (A) 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; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.”
In the above Section the penalty amount specified at the rate mentioned in Sub clause (a), sub clause (b) and sub clause (c) of Section 271AAB(1) of the Act are to be computed on the undisclosed income. Further, we note that undisclosed income is defined in clause (c) of the explanation to section 271AAB (1) of the Act and the same means 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 during the course of a search, which are not recorded on or before the date of search in the books of account maintained in the normal course.
But under the given facts of the case, we find that no such incriminating material has been referred having nexus with the undisclosed income offered during the course of search. Now, this being the first step, which is sine qua non for proceeding ahead for visiting the assessee with the penalty under Section 271AAB of the Act and since the same is
Respectfully following the judicial precedents, which are squarely applicable on the facts of the case, we hereby set aside the finding of the learned CIT (A) and delete the impugned penalty of ₹5 lacs levied under Section 271AAB of the Act. The effective ground raised by the assessee in A.Y. 2015-16 is allowed.
In the result, both the appeals in & 974/KOL/2023, are allowed.
Order pronounced in the open court on 28th August, 2024.