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Income Tax Appellate Tribunal, BENCH ‘B’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM ]
Per Shri N.V.Vasudevan, JM :
This is an appeal by the Revenue against the order dated 19.02.2013 of CIT(A) Central-I, Kolkata, relating to AY 2008-09.
In this appeal the revenue has challenged the order of CIT(A) whereby the CIT(A) cancelled the order of AO imposing penalty on the assessee u/s 271AAA of the Act.
The facts and circumstances under which order of penalty was imposed on the assessee by the AO are as follows :- The assessee is a company. It is engaged in the business of housing and housing and real estate development;. There is a search and seizure operation conducted in the business premises of the assessee and the residential premises of one Shri Vivek Kumar Khatholia, who was the main person controlling the affairs of fort group of cases. The assessee is one of the group company of the Fort group. In the course of M/s. Fort Projects (P) Ltd. A./Y.2008-09 1 search documents marked RM-5 containing the details of money receipts totalling to Rs.9,02,00,000/- on sale of flats were found. The flats sold by the assessee in respect of which on-money was received was in receipt of a project at 24, Lee Road and 68, Hindusthan Park, Kolkata. The details of on-money payments on sale of flats were as follows :- Page Name of project Flat No. Area Name of On-money No. of buyer received in RM/5 cash by assessee 01 68,Hindusthan park 3493 S.ft. Smt.A.Das Rs.91.32 lakh 02 -do- 1778 s.ft. Smt.N.Kundu Rs.55.94 lakh 03 -do- 2AB/3AB 6986 s.ft. A.Ghosh & Rs.139.92 Ors. lakh 04 20,Lee Road 506 2514 s.ft. H.Tated Rs.25.14 lakh 05 -do- 403 2514 s.ft S.Bachawat Rs.26.14 lakh 06 -do- 404/504 5028 s.ft. R.Bachawat Rs.56.28 lakh 07 24, Lee Road 3B 2729 s.ft. Dilip Lahoti Rs.83.76 lakh 08 20, Lee Road 401 & 301 5029 s.ft. Om Jalan Rs.150.84 lakh 09 24, Lee Road 6C 2729 s.ft. Dilip Dugar Rs.136.45 lakh 10 -do- 6B 2729 s.ft. Ashok Rs.136.45 Surana lakh
As stated above, Sri Kathotia admitted receipt of the on-money and disclosed the total amount of Rs.9,02,00,000/-. The assessee company has included the amount in the returned income for the A.Y.2008-09.”
Penalty proceedings u/s 271AAA of the Act was initiated against the assessee. 3.1. It is noticed that assessment in the case of the assessee was done u/s 153C of the Act because the assessee was not subject to a search u/s 132 of the Act. The plea of the assessee in the penalty proceedings was that penalty u/s 271AAA of the Act cannot be levied in the case of the assessee because all the points fall within the - M/s. Fort Projects (P) Ltd. A./Y.2008-09 2 exception specified u/s 271AAA(2) of the Act. The relevant provision of section 271AAA reads as follows :-
“Section 271AAA of Income-Tax Act, 1961 deals with Penalty where search has been initiated
(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, 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.
(3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1).
(4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.
Explanation.—For the purposes of this section,—
(a) “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 - M/s. Fort Projects (P) Ltd. A./Y.2008-09 3
(B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; 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;
(b) “specified previous year” means the previous year—
(i) which has ended before the date of search, but the date of filing 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 said date; or (ii) in which search was conducted.]”
The AO however, rejected the plea of the assessee for the following reasons :
“In this case, the specified previous year is 2007-08 (relevant to A.Y.2008-09) and undisclosed income admitted by the assessee company is Rs.9,02,00,000/- but as per sub-section 2(ii) of section 271AAA, the assessee has failed to substanitate the manner in which the undisclosed income was derived i.e. the persons from whom the money was taken, and the exact amounts taken as on-money etc. Hence, the assessee is liable to penalty which would be calculated @10% of undisclosed income as laid down under seciton 271AAA of I.T.Act and this amount works out to Rs.90,20,000/-.
I, therefore, impose penalty of Rs.90,20,000/- u/s 271AAA of I.T.Act.”
On appeal by the assessee the CIT(A) cancelled the penalty imposed by the AO by observing as follows :- “7. I have pe4rused the relevant assessment order and the penalty order under appeal. I have also considered the submissions made on behalf of the appellant and the material on record. The provisions of section 271AAA were inserted in the statute by the Finance Act 2007 with effect from 01-04-2007. The provisions contained in sub-section (1) of section 271AAA provide that the AO may, .notwithstanding anything contained in any other provisions of the Act, direct that in a case where search has been initiated under section 132 on or after the 1st day of June 2007, 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 percent of the undisclosed income of the specified previous year. The meaning of ‘specified previous year' has also been defined in Explanation (b). As in the present case, the search was conducted on 28-02-2008, the previous year relevant to the M/s. Fort Projects (P) Ltd. A./Y.2008-09 4 assessment year 2008-09 falls within the category of the specified previous year. I find from the assessment order that the seized documents marked RM/5 contained detail of' on-money receipts totalling to Rs.9.02 crores on sale of flats in different projects of the appellant company, The director of the .appellant company Sri Vivek Kumar Kathotia admitted the on-money receipts in his statement u/s 132(4); and, made voluntary disclosure of such orr-money receipts. The disclosure so made was included in the return or the appellant company which was also accepted by .the AO in his assessment order. I therefore find merit in the argument that the.AO was not justified in holding. That the appellant failed to substantiate the manner in which the undisclosed income was derived. For, the admission of undisclosed was based on the documents seized in the search. The AO hash himself stated in the assessment order that the seized documents marked RM/5 contained detail of on-money receipts; and so, the manner in which the undisclosed income was derived has been substantiated by the seized documents themselves. The appellant has admitted the undisclosed income u/s.132(4) and specified the manner in which it was earned; and, the same was included in the return of income. The manner in which the undisclosed income was derived has been substantiated by the documents found in search. The appellant has also paid the tax along with interest on such undisclosed income. These facts are not in dispute. In such factual background, all the conditions as laid down in sub-section (2) of section 271AAA are satisfied; and consequently, the provisions of sub-section (1) are not applicable. The AO has imposed the penalty on the ground that the appellant failed to substantiate the manner in which the undisclosed income admitted u/s 132(4) was derived. The material on record suggest that the contention of the AO is factually incorrect as the manner of deriving .the undisclosed income is substantiated by the seized documents which has also been acknowledged in the assessment order.
Aggrieved by the order of the CIT(A) the revenue has preferred an appeal before the Tribunal.
Before us the ld. DR relied upon the order of AO. According to him the assessee has failed to substantiate the manner in which the undisclosed income was derived. We have considered his submissions and are of the view that the same is not acceptable as we have already seen from the order of the assessment that the assessee had disclosed the entire names and the quantum of moneys received as on–money on sale of flats. The plea of the assessee has been accepted by the AO while concluding the assessment. In such circumstances we are of the view that there was no basis for the AO to come to a conclusion that the assessee has failed to substantiate the manner in which the undisclosed was derived by it. We, therefore, are of the view that the CIT(A) was fully justified in cancelling the order of the AO imposing penalty u/s - M/s. Fort Projects (P) Ltd. A./Y.2008-09 5 271AAA of the Act. The ld. Counsel for the assessee also submitted before us that the provisions of section 271AAA of the Act are applicable only in the case of a persons who are subject to a search and in this regard he drew our attention to the decision of the Hon’ble ITAT, Ahmedabad Bench in the case of K.G.Developers, Surat vs DIT in for A.Y.2009-10 dated 13.09.2013 wherein it has been held as under :- “5. After hearing both the parties and perusing the record, we find that there is no dispute about the fact that no search operation u/s 132 of the Act was conducted in assessee’s case. Therefore provisions of section 271AAA are not attracted in his case because section 271AAA is applicable only in cases where search u/s 132 has been initiated which is clear from the plain reading of this section 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 [ 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.” In view of the above, we feel no need to interfere with the order passed by Ld.CIT(A) and the same is hereby uphold.”
4.1. On perusal of the assessment shows that the assessee has been framed u/s 153C of the Act. In such circumstances we are of the view that even on this basis the penalty imposed on the assessee cannot be sustained. For the reasons given above we uphold the order of the CIT(A) and dismiss this appeal by the revenue.
In the result the appeal of the revenue is dismissed.