TaxTMI 
TaxTMI 
2018 (3) TMI 214
X X X X Extracts X X X X
X X X X Extracts X X X X
....n filed by Shri Manoj Beswal, Chairman of Nezone Group. Further, the ld AO acknowledges that the assessee has filed his return of income for AY 2013-14 on 30.09.2013 declaring a total income of Rs. 1,98,79,990/-. According to ld AO, on verification of accounts, he noticed that the assessee for the relevant year disclosed a sum of Rs. 2,00,00,000/- and had shown the same under the head "Income out of speculative transactions from sale of commodities". Then the ld AO notes that the return was selected for scrutiny and assessment was completed u/s. 143(3) of the Act on 29.08.2014 on a total income of Rs. 1,98,79,990/- (on the same income returned by the assessee in the ROI) and penalty proceedings were initiated u/s. 271AAB of the Act on the amount disclosed during search of Rs. 2 cr. and after serving the penalty notice u/s. 271AAB read with section 274 of the Act on the assessee on 05.09.2014. In response, the assessee submitted a written submission, which we note has been reproduced by the ld AO in the order passed u/s. 271AAB of the Act dated 24.02.2015. After considering the submission of the assessee, the ld AO imposed penalty u/s. 271AAB(1)(a) of the Act by observing that the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring search, the assessee has admitted u/s. 132(4) of the Act the income from speculative trading. The ld AO has given finding pertaining to this case in the following manner:- i) The assessee has substantiated the manner in which the income was derived. ii) Furnished the return of income therein and iii) Paid the tax along with interest. Based on the said finding, according to ld AO, the assessee satisfies the conditions enumerated in sec. 271AAB(i)(a) of the Act and thereafter levied ten percent of Rs. 2 cr., which have been deleted by the impugned order of ld CITA. 4. The ld DR brought to our notice that in the very same group case of Manoj Beswal & Ors. the Tribunal had confirmed the levy of penalty and contended before us that penalty u/s. 271AAB of the Act is mandatory and therefore, according to ld DR, the ld CIT(A) erred in deleting the penalty by stating that the assessee did not had any 'mens rea' not to disclose the amount in question. According to him, penalty has to be mandatorily levied u/s. 271AAB of the Act on the undisclosed income found during search. On the other hand, ld AR, supporting the decision of ld CITA made contentions tho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anoj Beswal respectively for the assessment year 2013-14 on the ground that notice was not served on the assessee for the hearing and on certain factual error that had crept in the order of the Tribunal. The first preliminary objection raised by the Ld. AR was that the notice of hearing was not served on the assessee for the hearing scheduled on 06.11.2017 and hence, the assessee could not be present on the said date by way of personal appearance. The second objection raised by the Ld. AR was that the Tribunal had stated in para 9 of its order that the assessee himself had accepted that he is engaged in commodities trading business and therefore mandated to maintain books of accounts in terms of section 44AA of the Act and thereby inferring that the assessee had reported the profit from commodities trading business under the head "income from business or profession". Based on this crucial finding, the Tribunal had concluded that since the transaction of commodities trading had not been entered by the assessee in his books of accounts as on the date of search on 01.08.2012 and thereby it takes the character of undisclosed income for which penalty u/s 271AAB of the Act is exigible. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out of speculative business from sale of commodities", and thereafter the ld AO confirmed the assessee's claim and thereafter total income was assessed by the ld AO as per the return submitted by the assessee. In the light of the aforesaid facts discerned from assessment order, the assessee's case is that for the first time in this Asst Year he was doing unsystematic speculative activity which earned income and, it was brought under the head "Income from Other Sources", and so, accordingly, he is not required to maintain books of account as stipulated in Sec. 44AA or Sec. 44AA(2)(ii) of the Act because, these provisions are only for assessees who are earning income under the head "Business or profession". We note that Sec. 44AA or Sec. 44AA(2)(ii) of the Act casts a duty upon the assessee who are into "Business or Profession" and such assessee's are bound to maintain books of account as stipulated therein. For appreciating this submission let us go through the provisions of law. "44AA. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession....
X X X X Extracts X X X X
X X X X Extracts X X X X
....visions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.]" So from a reading of the above provisions which clearly stipulates that assessee who are carrying on business or profession shall keep and maintain such books of account and other documents which may enable the ld AO to compute the total income. We note that assessee in the statement of total income filed before the ld AO has shown income only under two heads (i) salary income (ii) income from other sources. 6. We note that the ld AO has accepted the aforesaid statement of total income filed before him without contesting the claim of the assessee as to whether the assessee's claim of income other than from salary should be from "Income from Business". The confusion that has arisen in this case, we note is on the misdirection of ld AO in the assessment proceedings wherein the assessment order of the assessee, the ld AO has observed "during search and seizure operation, Shri Manoj Beswal had made a consolidated disclosure of Rs. 32 crore vide his disclosure petition. O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment of its profits and gains of business. That does not mean that until and unless the assessee commences its business, its income from any other source will not be taxed as held by the Hon'ble Supreme Court in the case of Tuticorin Alkali & Chemicals Ltd. Vs. CIT (1997) 227 ITR 172 (SC). It has been further held that when the question is whether a receipt of money is taxable or not or whether certain deduction from that receipt is principles of law and not in accordance with accountancy practice. Further, the Hon'ble Apex Court held that the question as to whether a principal receipt is of the nature of income and falls within the charge of sec. 4 of the Act is a question of law which has to be decided by the Court on the basis of the provisions of the Act and interpretation of the term 'income' given in a large number of decisions of the Hon'ble Supreme Court, High Court and Privy Council. After taking note of the Apex Court order as above, we note that the ld AO in the assessment order after having accepted the statement of total income (supra) and the return wherein the assessee has shown the income from commodities under the head "Income from Other Sources" cannot now af....
X X X X Extracts X X X X
X X X X Extracts X X X X
....12 need to be taken note of since undisputedly there was enough and more time for the assessee to submit the accounts during assessment proceedings which fact has been taken note of and concurred by the ld CITA. Thereafter, the ld AR drew our attention to the definition of 'undisclosed income' given under section 271AAB which reads as under: "Penalty where search has been initiated. '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, 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- ******** Explanation - For the purposes of this section, - (a) .......... (b) .......... (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 ac....