TaxTMI 
TaxTMI 
2018 (3) TMI 947
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.... bank pass books related to his wife Smt. Lakshmi Prabha and some of his ex-employees were found. Verification of bank account statements of his employees revealed that there were several cash deposits in these accounts. Similarly, gold, jewellery and diamonds were found to the extent of Rs. 75.16 lacs. Consequent to the search operations, the assessee had admitted the additional income of Rs. 2.5 crores for the assessment year 2009-10 to 2012-13 and accordingly filed the return of income. The assessment was completed u/s 143(3) of the Act on total income of Rs. 1,67,59,177/- for the year under consideration. The A.O. initiated penalty u/s 271(1)(c)/271AAB of the Act. The assessee admitted additional income for the assessment year 2013-14 with the following breakup: Sl. No. Description Amount 1 Cheques deposited into the bank account of my employees (present & former) 56,74,868.00 2 Gold jewellery weighing 1530.40 gms 55,94,482.00 3 22 carats of diamonds 11,79,350.00 4 Silver articles weighing 13.28 kg 7,43,568.00 5 Income from business of construction of apartment complex in the name of Sanjeevini Mansion 30,01,421.00 6 I....
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....also explained that marriage of Miss Sarat Chandrika was scheduled on 11.5.2013 and she stays in their house as she was brought up by him and his wife right from her childhood. However, the assessee had admitted the value of gold jewellery in his hands and filed the return of income. The A.O. issued a show cause notice u/s 271AAB and in response to the show cause notice, the assessee submitted that the gold and jewellery was not belonging to him. Only to purchase peace with the department and to avoid unnecessary litigation, pending the marriage of his brother's daughter, he had admitted the gold jewellery as his additional income. But the assessee stated that it was neither his income nor he has owned up the gold jwellery as acquired out of undisclosed income. Similarly, with regard to the cash deposits, the assessee argued before the assessing officer that he has no connection with the bank accounts and they are opened and operated by the employees themselves. He came forward and admitted the peak deposits as his income only to buy peace and save himself from protracted litigation. Therefore, requested to drop penalty proceedings. The A.O. not being convinced with the explanation....
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....us or false based on documentary evidences found in the course of search. Here in the present case, no documentary evidences establishing the falsity of claim of transportation charges paid to Sampoorna Logistics was found in the course of search. According to us the said expenditure cannot be held to be undisclosed income of the assessee for the purpose of levying penalty u/s. 271AAA of the Act. 14. Hon'ble Calcutta High Court in the case of CIT v. Sot-do Rice and Oil Mills 117 /TR 917 (Cat) held:- "the ITO and the IAC had proceed entirely on the basis of the disclosure made by the assessee. The Tribunal had found as a fact that the disclosure had no evidentiary value and was nothing but a scrap of paper and the finding had not been challenged by the revenue as perverse or based on irrelevant evidence or no evidence at all. Therefore, the finding of the Tribunal that the provisions of s. 271(1) were not attracted was not erroneous." Similarly, the Hon'ble Madras High Court in case of CIT vs. M. Pachamuthu 295 ITR 502 (Mad) held:- "Mere addition agreed to by the assessee during the course of survey would not empower the Assessing Officer ....
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....er section 271(1)(c) of the Income-tax Act, 1961, may be decided on the merits, did not amount to an admission of concealment of income and the levy of penalty on such basis was liable to be quashed." From the above, it is clear that penalty cannot be levied merely on the admission of the assessee and there must be some conclusive evidence before the Assessment Officer that entry made in the seized documents, represents undisclosed income of the assessee. In the instant case, in respect to the amount of Rs. 1,13,65,623/-, there is no evidence which proves that the entries recorded in the documents found during the course of search is over and above the income as declared by the assessee at Rs. 6.84 crores as undisclosed income and accepted by Revenue, in view of the above, we delete the penalty and allow the appeal of the assessee." 6. Further, the Ld. A.R. relied on the decision in respect of section 158BFA(2) in the case of Sadhu Ram Goyal Vs. DCIT 128 ITD 436 (2011). 7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. During the appeal hearing, the Ld. A.R. vehemently argued that penalt....
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.... 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 which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) 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). Section 158BFA(2): (2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC: Provided that no order imposing penalty shall be made in respect of a person if- (i) such person has furnished a return under clause (a) of section 158BC; (ii) t....
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....n ITTA No.740/2011 while dealing with the penalty u/s 158BFA(2) held that 'we are of the opinion that while the words shall be liable under sub section (1) of section 158BFA of the Act that are entitled to be mandatory, the words may direct in sub section 2 there of intended to directory'. In other words, while payment of interest is mandatory levy of penalty is discretionary. It is trite position of law that discretion is vested and authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of the each case. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case. 10. Having held that the penalty u/s 271AAB of the Act is not mandatory Now we proceed to decide the issue with regard to the circumstances under which the penalty is exigible u/s 271AAB of IT act. Section 271AAB reads as under: "(1) The Assessing Off icer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where sea....
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....e 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 (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....
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....concluded that the same represented the undisclosed income of the appellant. Therefore, I direct the Assessing Officer to cancel the penalty levied with regard to this amount of Rs. 56,74,868/- admitted by the appellant towards deposits in the accounts of the employees/ex-employees." 12. Since the A.O. did not collect any evidence to hold that the bank accounts were belonged to the assessee and being operated by the assessee, there is no case to hold that the admission made by the assessee represented the undisclosed income of the assessee with in the meaning of section 271AAB of the act Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. 13. With regard to the appeal of the assessee in ITA No.132/Vizag/2017 during the course of search proceedings, the A.O. found that the gold and jewellery of 1530.400 gms., the assessee explained that the gold and jewellery said to be belonging to (1) S. Chandrika, daughter of his brother of 770 gms (2) Smt. Sita, wife of his brother of 500 gms. (3) his wife of 250 gms. (4) balance 10.400 gms. belonging to the assessee. Similarly, in the case of diamonds amounting to Rs. 12,63,650/- were said to be belong....
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....wellery required to be examined in the hands of Miss S. Chandrika and Mrs. Sita wife of his brother and his wife for levy of penalty u/s 271AAB. The A.O. stopped his enquiries once the disclosure has been made by the assessee and did not make any further enquiry, therefore, the A.O. has not established that gold and jewellery was acquired from the sources of undisclosed income. As per the provisions of section 271AAB of the Act, the penalty is leviable only on undisclosed income. In the instant case, the A.O. has failed to establish the undisclosed income, hence, we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we cancel the penalty and set aside the order of the lower authorities. ITA 132/Vizag/2017: 17. The Ld. CIT(A) has confirmed the penalty of Rs. 14,32,717/- in respect of the gold jewellery as under: "6.8) With regard to admission made by the appellant towards jeweltery, silver articles and diamonds, the appellant submitted that the gold jewellery found at the residence was 1530.400 gms and, out of this, 770 gms belonged to his brothers daughter Ms.Sarat Chandrika and 500 gra-ms belonged to Smt. Sita, wife of his brother. O....