TaxTMI 
TaxTMI 
2018 (11) TMI 1002
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....s. (b) The appellant craves leaves to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. ITA No.-3135/Del/2015 i. The Learned CIT(A) erred in fact and in law in confirming the penalty of Rs. 20,15,300 imposed u/s 271 AAA which is not only bad in law but also against the facts and circumstances of the case. ii. That the addition made, based on which penalty was imposed, was protective and not substantive. ITA no. 3136/Del/2015 i. The Learned CIT(A) erred in fact and in law in confirming the penalty of Rs. 2,00,000 imposed u/s 271 AAA which is not only bad in law but also against the facts and circumstances of the case. ii. That the addition made, based on which penalty was imposed, was protective and not substantive. ITA No. -3137/Del/2015 i. The Learned CIT(A) erred in fact and in law in partly confirming the penalty on a addition of Rs. 63,00,000 imposed u/s 271 (1)(c) which is not only bad in law but also against the facts and circumstances of the case. ITA No. 3155/Del/2015 i. The Learned CIT(A) erred in facts and in law i....
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....p was provided as follows: S.No. Name of the assessee A.Y. Amt. (Rs.) Remarks 1. M/s Nirala Developers (P) Ltd. 2012-13 19547000 No incriminating document found an seized, to be telescoped with the addition made, if any 2. M/s PAN Realtors (P) Ltd. 2012-13 50000000 No incriminating document found an seized, to be telescoped with the addition made, if any 3. M/s Nirala Infratech (P) Ltd. 2012-13 7500000 Reduction of WIP 4. M/s Nirala Housing (P) Ltd. 2011-12 20153000 Advances from customers to be adjusted in PCM 5. M/s Nirala Housing (P) Ltd. 2012-13 2000000 Advances from customers to be adjusted in PCM 6. Others 800000 To be telescoped Total 100000000 (3) In the case of NDPL, While filing the return of income on 21.03.2013 for AY 12- 13, the assessee included the additional business income Rs. 1,95,47,000 that was claimed as part of the surrendered income of Rs. 10 crores. While passing the assessment order, the AO made further additions of Rs. 3,75,387 on account of bogus payment to contractors; Rs. 10,65,117 and Rs. 1,31,27,456 on ....
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....the I.T. Act. The appellant did not contest the assessment order passed by the AO. In the penalty proceedings u/s 271AAA of I.T. Act, the AO referred to the provisions of section 271AAA of I.T. Act. The AO observed that while the provision required the assessee to offer undisclosed income in its return, substantiate the manner in which the undisclosed income was derived, and also pay the tax liability arising thereon, the appellant had not met any of these conditions; that undisclosed income had not been offered in the return of income; that the assessee was trying to 'fool the department' by its offer of undisclosed income in the form of current liabilities; that it had not substantiated the manner in which the unaccounted income had been derived; and that tax had also not been paid by it. With these observations, the AO imposed penalty u/s 271AAA @ 10% on undisclosed income of Rs. 2,01,53,000/- in AY 11-12 and on undisclosed income of Rs. 20,00,000 in AY 12-13, penalty thus imposed amounting to Rs. 20,15,300 and Rs. 2,00,000 respectively. (3.2) In the case of NHPL the AO also levied penalty U/s 271(1)(c) of I.T. Act amounting to Rs. 66,94,323/- in A.Y. 2011-12 and Rs. 25,6....
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....ire group for FYs relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the 'bifurcation' of the 'surrendered income' amongst 4 companies of the group was provided, as follows: 5. While filing the return of income on 21.03.2013 for AY 12-13, the appellant included the additional business income Rs. 1,95,47,000 that was claimed as part of the surrendered income of Rs. 10 crores. While passing the assessment order, the AO made additions of Rs. 3,75,387 on account of bogus payment to contractors; Rs. 10,65,117 and Rs. 1,31,27,456 on account of bogus payment to suppliers; Rs. 74,58,064 on account of bogus expenses; Rs. 8,00,000 that was part of the surrendered sum of Rs. 10 crores but had not been reflected as additional business income against any of the companies of the group; and Rs. 8,21,575 as disallowance u/s 14A. He also initiated penalty proceedings u/s 271AAA and 271(l)(c). While adjudicating the appeal filed by the appellant against the assessment order, the additions of Rs. 3,75,387 and Rs. 10,65,117 were deleted. It is a matter of record that no appeal was filed in respect of the addition of Rs. 1,31,27,456, while the appeal relating to th....
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.... disclosure and tax thereon, amounting to Rs. 2,40,000 also stood paid, since excess tax had been paid by the appellant while filing the return of income, resulting in refund claim of Rs. 5,47,810, which 'takes care' of payment of tax of Rs. 2,40,000. In this manner, according to the appellant, all the 3 conditions provided in sub-section (2) of section 271 AAA were met in respect of Rs. 8,00,000 as well. 8. The submissions of the appellant are considered. 8.1 The appellant has sought to claim that sub-section (1) of section 271AAA was not applicable to its case because it was covered by sub-section (2) that prohibits the application of subsection (1). Broadly, sub-section (1) of section 271AAA provides for imposition of penalty @ 10% of the undisclosed income, while sub-section (2) of section 271AAA stipulates that the provisions of sub-section (1) will not apply if the assessee admits to undisclosed income in a statement u/s 132(4) made in the course of search and specifies the manner in which it was derived, substantiates the manner in which such income was derived, and pays the tax and interest thereon. 8.2 The relevant facts of this case....
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.... before the AO on 20/3/2014, specifying the amounts and the companies in which the sums had been offered. 8.5 Moreover, while disclosing Rs. 10 crores, Sh Suresh Kumar Garg, Director of the appellant company, did not specify the manner in which it had been derived, instead, the reason given was 'to avoid litigation and to buy peace of mind'. In the letter of 20.03.2014, against the name of the appellant, the sum of Rs. 1,95,47,000 was disclosed as its 'additional business income', but no explanation, about the manner in which the quantification had been made, was stated. Most significantly, in the return of income filed on 21.03.2013, Rs. 1,95,47,000 was referred as 'business income declared' in note 20 relating to 'Other Income', and not included in the 'Revenue from Operations', which as per note 19 related to the 'sale of flats' and 'other operating incomes'. Thus, though the appellant used the words 'business income declared' in respect of Rs. 1,95,47,000, it is evident that it did not declare it as income from sale of flats or other such operating income. Therefore, the contention of the appellant, that it had specified and substantiated the ma....
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....nce the declaration by the appellant of Rs. 1,95,47,000 was the outcome of search, and it was not recorded in the books of accounts maintained in the normal course, and had also not been disclosed to the CCIT or CIT before the date of search, it constituted 'undisclosed income' of the appellant within the meaning conferred by Explanation (a) appended to section 271AAA. 8.9 The appellant has referred to some decisions, namely Crossing Infrastructure P Ltd (supra) and Pioneer Marbles & Interiors P Ltd (supra), but these do not help its case. In the case of the former, all the three conditions given in sub section (2) of section 271AAA had been met. The latter decision was in the context of timeline relating to payment of tax. In the case of the appellant, it has already been noted that clauses (i) and (ii) of sub section (2) of section 271AAA were not met. 8.10 However, the imposition of penalty u/s 271AAA in respect of Rs. 8,00,000, is erroneous. It is a matter of record that this sum was not offered by the appellant as its undisclosed income; in fact, the sum of Rs. 8,00,000 was added by the AO during the course of assessment. It is also a matter of record....
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....it 1(3), New Delhi, a sum of Rs. 10,00,00,000 as additional income of the entire group for FYs relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the 'bifurcation' of the 'surrendered income' amongst 4 companies of the group was provided as follows: S.N o. Premises of Assessee A.Y. Additional business income Remarks 1 Nirala Developers P.Ltd. 12-13 1,95,47,000 To be telescoped with addition made if any 2 PAN Realtors P Ltd. 12-13 5,00,00,000 3 Nirala Infratech P Ltd. 12-12 75,00,000 Reduction of WIP 4 NiralaHousing P Ltd. 12-13 20,00,000 Advance from customers to be adjusted in PCM 11-12 2,01,53,000 5 Others - 8,00,000 To be telescoped with addition made if any Total 10,00,00,000 5. When confronted with the seized material [pages 47- 48 of annexure A-4 found from H-121, Sector-63, Noida] by DDIT(lnv), Sh Rakesh Mahajan, a director in the appellant company, stated u/s 131(l)(a) on 26.12.2011 in response to query 23 that the 2 pages contained the same details with respect to flat no, customer name, rate, total amount re....
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.... in the return of income; that the assessee was trying to 'fool the department' by its offer of undisclosed income in the form of current liabilities; that it had not substantiated the manner in which the unaccounted income had been derived; and that tax had also not been paid by it. With these observations, the AO imposed penalty u/s 271AAA @ 10% on undisclosed income of Rs. 2,01,53,000 in AY 11-12 and on undisclosed income of Rs. 20,00,000 in AY 12-13, amounting to Rs. 20,15,300 and Rs. 2,00,000 respectively. Aggrieved by these orders, the appellant is in appeal. 8. In the written submissions, the AR has lodged a strong objection to the observation of the AO in para 4.1 of the impugned orders, where it was stated that the assessee was 'trying to fool the department by offering undisclosed income in the form of current liabilities and not paying any tax during the year'. He has requested that this remark of the AO may be deleted. While there is no provision to 'delete' the remarks of the AO in the appellate proceedings, in order to adjudicate upon the ground of appeal filed by the appellant in Form 35, it is essential to refer to the relevant facts of ....
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....ed on 20.3.2015, it was stated that the AO had only commented upon the appellant's conduct with reference to clauses (ii) and (iii) of sub section (2) of section 271AAA and that since he had 'not commented anything' as far as clause (i) was concerned, it may be 'assumed that he had accepted that the declaration/surrender was made u/s 132(4)'. It was submitted that in the event of any doubt, all IT records along with the appraisal report of the Investigation wing may be summoned to ascertain if the disclosure was made u/s 132(4) or not. Stating that since the search, a 'partition' had taken place amongst the erstwhile directors of the group, no documents were available with the appellant. Further, referring to the Indian Evidence Act, it was requested that in the event of drawing any adverse inference, the documentary evidence 'specially the appraisal report' may be shown to the appellant. With regard to clause (ii) of sub section (2) of section 271AAA, it was submitted that since the appellant had stated that the income was 'additional business income', the requirement of 'substantiating the manner in which undisclosed income was derived' was met and the conditi....
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....is thus crystal clear that the aforesaid disclosure of Rs. 10 crores was not made before the authorised officer upon examination on oath during the course of search as contemplated in section 132(4). This is also evident from the various statements recorded u/s 132(4) of Suresh Kumar Garg on 4.8.2011, 5.8.2011 and 30.9.2011; Sh Rakesh Mahajan on andl2.9.2011; and Sh Iftikhar Ahmed on 4.8.2011, none of which refer to any disclosure at all. 11.4 It is also noted that the disclosure of Rs. 10 crores was an omnibus declaration made by Sh S K Garg in respect of the entire group, without bifurcation and without specifying the manner in which it had been earned. The bifurcation of Rs. 10 crores came much later, when a letter was filed before the AO on 20/3/2014, specifying the amounts and the companies in which the sums had been offered. The specific admission, about Rs. 2,21,53,000 being the unaccounted cash receipts of the appellant company and its inclusion in the group disclosure of Rs. 10 crores, was made for the first time by Sh Rakesh Mahajan (who continues to be the key person in the appellant company even after 'partition' of the group), only in response to query 23 on u....
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....the Hon'ble Tribunal noted that though no time limit had been set out in the statute, for immunity under sub section (2) of section 271AAA, tax and interest should have been paid well before the conclusion of the impugned penalty proceedings. In the case of the appellant, it is an admitted fact that tax was not paid on the undisclosed sums before the date of the impugned penalty orders. Therefore, clause (iii) of sub- section (2) of section 271AAA, requiring payment of tax, is also not fulfilled by the appellant. 11.8 Thus, the appellant cannot escape from the penalty envisaged in sub-section (1) of section 271AAA because clauses (i) and [ii] of sub-section (2) of section 271AAA are not met. 11.9 It may be also mentioned that penalty u/s 271AAA is rightly levied upon the appellant in AY 11-12 and AY 12-13, even though the additions made on account of seized material in the relevant assessment orders are made on protective basis. This is because the unaccounted receipt of Rs. 2,21,53,000 constitutes 'undisclosed income' for 'specified previous year' as defined in the Explanation appended to section 271AAA. 11.10 As per Explanation (a) appe....
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....documents relating to undisclosed income of Rs. 2,01,53,000 and Rs. 20,00,000 had been found in the course of search on the Nirala group and the unaccounted cash receipts were in respect of the specified previous years. In this manner, with all the ingredients referred in the definition of 'undisclosed income' and 'specified previous year', as per Explanation appended to section 271AAA, fulfilled, the imposition of penalty u/s 271AAA is confirmed in respect of AY 11-12 and AY 12-13. 11.13 The appellant has referred to some decisions, namely Crossing Infrastructure P Ltd (supra) and Pioneer Marbles & Interiors P Ltd (supra), but these do not help its case. In the case of the former, all the three conditions given in sub section (2) of section 271 AAA had been met. The latter decision was in the context of timeline relating to payment of tax. In the case of the appellant, it has already been noted that clauses (i) and (ii) in sub section (2) of section 271AAA were not met. The claim of the appellant about payment of Rs. 76.50 lakhs as advance tax for FY 14-15 is not relevant to the matter of 'undisclosed income' relating to previous years 10-11 and 11-12. 11.14 ....
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....rectors and shareholders in the Nirala group, disclosed before the DDIT Inv, Unit 1(3), New Delhi, a sum of Rs. 10,00,00,000 as additional income of the entire group for FYs relevant to AYs 11-12 and 12-13. Subsequently, before the AO, on 20/3/2014, the 'bifurcation' of the 'surrendered income' amongst 4 companies of the group was provided as follows: S.N o. Premises of Assessee A.Y. Additional business income Remarks 1 Nirala Developers P.Ltd. 12-13 1,95,47,000 To be telescoped with addition made if any 2 PAN Realtors P Ltd. 12-13 5,00,00,000 3 Nirala Infratech P Ltd. 12-12 75,00,000 Reduction of WIP 4 Nirala Housing P Ltd. 12-13 20,00,000 Advance from customers to be adjusted in PCM 11-12 2,01,53,000 5 Others - 8,00,000 To be telescoped with addition made if any Total 10,00,00,000 5. When confronted with the seized material [pages 47- 48 of annexure A-4 found from H-121, Sector-63, Noida] by DDIT(lnv), Sh Rakesh Mahajan, a director in the appellant company, stated u/s 131(l)(a) on 26.12.2011 in response to query 23 that the 2 pages containe....
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.... of these conditions. It was stated that undisclosed income had not been offered in the return of income; that the assessee was trying to 'fool the department' by its offer of undisclosed income in the form of current liabilities; that it had not substantiated the manner in which the unaccounted income had been derived; and that tax had also not been paid by it. With these observations, the AO imposed penalty u/s 271AAA @ 10% on undisclosed income of Rs. 2,01,53,000 in AY 11-12 and on undisclosed income of Rs. 20,00,000 in AY 12-13, amounting to Rs. 20,15,300 and Rs. 2,00,000 respectively. Aggrieved by these orders, the appellant is in appeal. 8. In the written submissions, the AR has lodged a strong objection to the observation of the AO in para 4.1 of the impugned orders, where it was stated that the assessee was 'trying to fool the department by offering undisclosed income in the form of current liabilities and not paying any tax during the year'. He has requested that this remark of the AO may be deleted. While there is no provision to 'delete' the remarks of the AO in the appellate proceedings, in order to adjudicate upon the ground of appeal filed....
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.... & Interiors P Ltd 144 TTJ 663 (Kol)." The present appeal before us in ITA No. 3531/Del/2015 is filed by Revenue against the aforesaid order of Ld. CIT(A) in the case of NHPL for A.Y. 2011-12. (4.2) NHPL also filed appeal against levy of penalty U/s 271(1)(c) of I.T. Act for A.Y. 2012-13. Vide a separate order dated 20th March, 2015 in appeal no. 426/2014-15, the Ld. CIT(A) deleted penalty in respect of aforesaid Rs. 20,00,000/- but confirmed penalty in respect of the aforesaid Rs. 63,00,000/-. The relevant portion of the order of the Ld. CIT(A) is reproduced as under: "3. The appellant is one of the companies of the Nirala Group that was searched on 04.08.2011. The group, including the appellant, is mainly engaged in the business of real estate development. The key persons of the group were Sh. Suresh Kumar Garg, Sh Rakesh Mahajan and Sh. Iftikhar Ahmed. The search resulted in cash seizure of Rs. 53,98,000 and jewellery seizure of Rs. 10,52,124. A number of incriminating documents were also found and seized. Specific mention is made to pages 47-48 of annexure A-4 found from H-121, Sector-63, Noida, the corporate office of the group, which inter alia referred of cash re....
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....ting standard AS-7, and in FY 10-11 and FY 11-12, the percentage of completion was below the bench mark of 25%, no income was declared for these years. When queried by the AO during the assessment proceedings, it was stated by the appellant that the unaccounted cash receipts of Rs. 2,21,53,000, which was received as advances from customers for its project, would be offered to tax in the succeeding financial years, based on AS-7 and the percentage completion method. While passing the assessment order, the AO rightly noted that the assertion of the appellant - that it will offer the cash receipts as income in succeeding years - 'cannot be verified at this stage'. Accordingly, he added the cash of Rs. 2,01,53,000 and Rs. 20,00,000 in AY 11-12 and AY 12-13 respectively, on a protective basis. He also stated that in the event the appellant offered the aforementioned cash receipts as income in succeeding years, after due verification, the protective additions in AY 11-12 and AY 12-13 to that extent would stand deleted. The AO also initiated penalty proceedings u/s 271AAA and 271(l)(c). The appellant did not contest the assessment order passed by the AO on 28.03.2014. 7. In the p....
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....d and accepted in the assessment orders. Therefore, the observation of the AO in the impugned order about the appellant 'trying to fool the department' is not consistent with the facts and observations made in the assessment order. 9. Coming to the contentions of the AR, it has been argued as per submission dated 17.3.2015, that the levy of penalty is against law, since the appellant's case 'comes squarely within the ambit of 271AAA(2)(i) and (hi)'. It was submitted that complete disclosure was made during the course of search and seizure proceedings, that the source was disclosed, and that the sum was in the nature of advance payments received from customers, an d shown as current liabilities in FY 10-11 and FY 11-12 since the prescribed percentage of completion had not been achieved then. Reference was made to clause (iii) of sub-section (2) of section 271AAA, where the payment of tax and interest on undisclosed income was qualified by the phrase 'if any'. It was argued that tax and interest on the undisclosed income became payable only when the income of the appellant from its project became taxable, based on the accounting standard AS-7 followed by ....
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.... in the course of search and specifies the manner in which it was derived, substantiates the manner in which such income was derived, and pays the tax and interest thereon. 11.2 The relevant facts of this case is that, while Suresh Kumar Garg disclosed Rs. 10 crores as 'additional business income' of the Nirala group for FY 10-11 and 11- 12, in which the cash of Rs. 2,21,53,000 pertaining to the appellant was subsequently claimed to be in eluded, the admission was not made u/s 132(4) of the Income Tax Act. The disclosure was in fact made by a typed letter addressed to DDIT(Inv), Unit-1(3), New Delhi, following search action on the Nirala group. This is evident from page 2 of the assessment order of the appellant for AY 11- 12 and 12-13, where the AO has reproduced the letter of Sh S K Garg to the DDIT. The said letter refers to the search on the group and seizure of certain valuables and documents and goes on to state that 'in order to avoid litigation and to buy peace of mind', disclosure of Rs. 10 crores was being made by the group as 'additional business income' for FY 10-11 and 11-12. 11.3 Now since the letter of disclosure, stands reproduced in th....
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....ntial document) is irrelevant. The other contention of the appellant, that since the AO did not make any specific comment, assumption may be made that the declaration/surrender was made u/s 132(4) - is also without merit. 11.6 The appellant has claimed that the clause (ii) of sub-section (2) of section 271AAA, that requires substantiation of the manner in which the undisclosed income was derived by the assessee, is met, since the seized material itself referred to it as cash advance received from customers against their booking of flat. In this regard, it is noted that since the appellant admitted about_Rs 2,21,53,000 being the unaccounted cash receipts of the appellant company on 26.12.2011 u/s 131(1A) in the chamber of DDIT(Inv), the fulfillment towards clause (ii) of sub-section (2) of section 271AAA - the substantiation 'about the manner in which the undisclosed income was derived - came about on that date. 11.7 The appellant has also claimed that clause (iii) of sub-section (2) of section 271AAA, relating to the payment of tax and interest, is applicable only if these were due and that since this was not so in its case, the condition was not applicable to....
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....total income' of any previous year relevant to assessment year, but with the income/earning in the generic sense of the term. Since as per the seized document, the appellant received cash of Rs. 2,21,53,000 from customers as part of advance against purchase of flats, and this was not recorded in its books of accounts maintained in the normal course, and had also not been disclosed to the CCIT or CIT before the date of search, it constituted its 'undisclosed income' within the meaning conferred by Explanation (a) appended to section 271AAA. 11.11 It is also relevant that the penalty u/s 271AAA applies only to 'specified previous year', which has been defined in Explanation (b) appended to section 271 AAA. Thus, the year in which search is conducted, and the year which had ended before the date of search but the date for filing the return of income u/s 139(1) had not expired before the date of search and the assessee had not furnished the return for that previous year, are 'specified previous year'. Since the date of search on the appellant was 4.8.2011, the previous year 10-11 had ended and the date for filing return u/s 139(1) had not expired and the a....
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..... 2,00,000 in AY 12-13, being 10% of undisclosed income on Rs. 2,01,53,000 and Rs. 20,00,000 respectively. Consequently, the penalty orders are confirmed." The present appeal before us in ITA No. 3137/Del/2015 filed by NHPL is against the aforesaid order of Ld. CIT(A). (5) At the time of hearing before us, the Ld. Counsel for assessee contended that penalty U/s 271(1)(c) of I.T. Act cannot be levied in respect of such income on which penalty U/s 271AAA has been levied, and for this purpose he drew our attention to Section 271AAA(3) of I.T. Act which expressly provides that 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). He further contented that no penalty can be levied either U/s 271(1)(c) or U/s 271AAA in respect of additions made on protective basis. He further submitted that the disclosure of Rs. 10,00,00,000/- made by the entire Nirala Group, which included disclosures by the NHPL and NDPL should be treated as disclosures made U/s 132(4) of I.T. Act for the purposes of Section 271AAA(2)(i) of I.T. Act and the disclosure made by Nirala Gr....
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....inted out that NHPL had failed to pay the taxes, together with interest in respect of the undisclosed income in accordance with Section 271AAA(2)(iii) of I.T. Act, even in respect of that income which was part of total disclosures of Rs. 10,00,00,000/- by the Nirala Group. Thus, he contended that both the assessees, NHPL and NDPL had failed to fulfill the requirement U/s 271AAA(2)(i) and 271AAA(2)(ii) of I.T. Act and accordingly the assessees were deservedly hit by Section 271AAA(1) of I.T. Act. He strongly relied on the orders of Ld. CIT(A) and AO and he also read out the relevant portions of their orders. In the case of NHPL, he submitted, even the provisions of Section 271AAA(2)(iii) of I.T. Act were not fulfilled; and thus the assessee was in any case hit by provisions of Section 271AAA(1) of I.T. Act. As far as penalty levied by the AO U/s 271(1)(c) of I.T. Act in the case of NHPL, for A.Y. 2011-12 and A.Y. 2012-13 is concerned, Ld. CIT(DR) relied on the orders of the AO. (7) We have heard both sides patiently and attentively. We have also carefully considered the materials on record. We have taken note of the case laws and judicial precedents brought to our notice by the L....
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.... be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4)............................ Explanation......................................." (8.1.1) On careful perusal of provisions of section 271AAA of I.T. Act, it can be readily inferred that, in a case where search was initiated U/s 132 of I.T. Act during the period from 1/6/2007 to 30/06/2012, the assessee is required to pay penalty amounting to 10% of the undisclosed income, as a general rule. The only exceptions to this general rule are the cases in which the three conditions prescribed U/s 271AAA(2) are cumulatively fulfilled. If any one of the three conditions prescribed in clauses (i),(ii),(iii) of sub-section (2) of section 271AAA is not fulfilled, the assessee does not get the benefit of Section 271AAA(2) of I.T. Act and becomes liable to pay penalty U/s 271AAA(1) of I.T. Act. Thus, the failure of an assessee to pay tax, together with interest, is a clear default, attracting the penalty U/s 271AAA(1) read with section 271AAA(2)(iii) of I.T. Act. In the appeals before us, NHPL having failed to pay tax together, with interest, is in clear default of Section 271....
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....ures made in this letter by the Nirala Group did not contain specifics of the manner in which such income has been derived. Thus, the two assessees in appeals before us are in clear default of Section 271AAA(2)(i) of I.T. Act; and are consequently, hit by Section 271AAA(1) of I.T. Act. (8.2) One of the contentions of the Ld. Counsel for the NHPL was that no penalty can be levied in respect of additions made by the Assessing Officer on protective basis. For these contentions, the Ld. Counsel for Assessee relied on the cases of Bhailal Manilal Patel (supra), Super Steel (Sales) Co. (supra), Abhay Kumar vs. ACIT (supra), and Surjeet Singh Mahan Singh vs. WTO (supra). However, on perusal of these precedents we find that the case of the Assessees in appeal before us is on entirely distinguishable facts. In the precedents cited by the Ld. Counsel for NHPL, the protective assessment was made on the respective assessees whereas substantive additions were made on some other assessees for the same assessment years; and in those cases the assessee in whose hands the income was liable to be taxed. However, in the case of NHPL before us, the protective addition has been made in the year unde....
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....s to be noted is that the additions made by the AO in the Assessment Orders have been accepted by the Assessees and no appeal was filed by the Assessees against the quantum additions made in the Assessment Orders. When an assessee accepts the protective additions made in assessment order by not filing any appeal against it, the character of the additions changes from protective addition to substantive addition. A valid presumption can legitimately arrived at, that the same income, which is assessed in the hands of the assessee in one year and has been accepted by the assessee, will not be offered by the assessee in any subsequent year. Subsequent conduct of NHPL, is not recognizing any income under Project completion Method, in any subsequent year, despite substantial lapse of time imparts validity to this presumption. Thus, the character of the income assessed in the Assessment Orders, changed from protective additions (at the time of Assessment Order) to substantive additions at the time when penalty orders were passed by the AO because the NHPL has accepted the additions by not filing the appeals. As the character of the additions, at the time of penalty orders U/s 271AAA of I.T....