TaxTMI 
TaxTMI 
2019 (3) TMI 209
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibuting reasons thereof to compilation of necessary documents and procedural formalities at various departmental levels. The assessees are fair enough in not disputing the said pleadings during the course of hearing. We therefore condone the impugned identical delay of 25 days' in filing of these three Revenue's appeals to be neither intentional nor deliberate. These three appeals are now taken up for adjudication on merits. 3. Coming to merits, we find that the Assessing Officer levied the impugned penalt(ies) of Rs.45 lac, Rs.38.50 lac and Rs.35.50 lac in case of all thee assessees cases @ 10% of additional income disclosures amounting to Rs.4.5 corres, Rs.4.02 crores and Rs.3.55 crores; respectively. The CIT(A) has deleted first and third penalt(ies) in enterity and restricted second one to the tune of Rs.17 lac in his lower appellate order. The Revenue seeks to revive the Assessing Officer's action in all of its three appeal(s) whereas the assessees' corresponding three Cross Objections support the CIT(A)'s order deleting the impugned penalt(ies) in first and third cases and further seeks to delete the remaining penalty of Rs.17 lac in second one. Both the learned represe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppropriate at this stage to treat Revenue's appeals and second assessee Ambey Mining Pvt. Ltd. Cross Objections i.e. ITA No.1607/Kol/2017 and C.O. No.97/Kol/2017 as the "lead" cases comprising CIT(A)'s following detailed discussion:- "3. I have considered the finding of the AO in the assessment order and the written submissions as well as oral submissions made by the AR during the appellate proceedings. 4. Appeal on grounds no 1, 2 and 3 are against the imposition of penalty u/s 271AAB (1)(a). Brief facts Of the case are that a) Search and seizure proceedings were conducted on 20-12-2012 and thereafter at the residential as well as business premises of BLA Group. Panchanama was also drawn in the name of the assessee. b) During the course of search proceeding, while making the statement u/s 132(4) of the Act, an amount of Rs. 4,02,00,000/- was offered to tax in the hands of assessee as additional income in FY 2012-13. Break-up of disclosure of Rs. 4,02,00,000/- consists of following- Cash 17,00,000/- Others 3,85,00,000/- TOTAL 4,02,00,000/- c) In the previous year relevant to the assessment year 2013-14, the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt or other documents maintained in the normal course of business. By virtue of the very nature of disclosure by the assessee himself, that such unaccounted income was generated out of transactions in business it was involved in the additional income of Rs. 3,85,00,000/- disclosed only during the course of search & seizure operation partakes the character of undisclosed income. 6. During the appellate proceedings the AR has made oral submission as well as filed a written submission on this issue which is as under: Aggrieved by the said penalty order of the Assessing officer, we have filed an appeal before your good-self to consider the above matter in the principle of natural justice. We re-iterate that such offering of Rs. 3,85,00,000/- was made suo moto and to buy peace and was not backed by any evidence of undisclosed income or any undisclosed assets / items that had been found / inventorised by the Department and as such no penalty u/s 271AAB should be imposed. The similar view has also been expressed by the Hon'ble High Court of Gujarat in the case of Girish Devchand Rajani [2013] 33 taxmann.com 174 (Gujarat) where it had been held that Where assessee to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ason, surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings. The AR has brought on record the case law of Sudharsan Silk and Sarees, 300 ITR 30 (Supreme Court) in this case, the Hon'ble Supreme Court has held that if the appellant offers any amount for taxation for the purpose of purchasing peace and assessment has been made based upon the aforesaid offerings, even if no assurance in writing is given by the searching party, it may be clearly inferred that such an inducement must have been given by the searching party. When only partial evidence or no evidence in support of concealment was detected during the search, why would a person go to offer a higher amount unless he was promised some reciprocal benefits like not being visited by penalty. Thus, it was held that where additions have been made based on assessee's own offerings, penalty provision shall not lie. I find that during the search and seizure operation u/s 132 in this case evidences regarding concealment/undisclosed income in the form of cash seizure/papers/documents/stock etc were found and seized of the value of Rs. 17,00,000/- only. Nothing incrimi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ose cases the department carries out search action u/s 132 of the Act. Mr.Nayak submits that it is nowhere necessary for the Assessing Officer to establish a direct link between the incriminating material or money, bullion, jewellery or books of account so as to prove undisclosed income of the searched-assessee as stipulated u/s 271AAB Explanation (c) of the Act. His contention; if taken in plain terms, is that the impugned penal provision comes into play the moment the searched-assessee declares any additional income. The Revenue further pleads that impugned penal provision automatically applies in a search instance involving declaration of additional income as per hon'ble apex court [2018] 93 taxmann.com 406 (SC) Sandeep Chandak vs. PCIT containing the relevant headnote to this effect. Learned CIT-DR case therefore is that hon'ble apex court's decision settles the law and therefore, we ought to confirm the impugned penalt(ies) in all three cases. 8. These three assessees place a very strong reliance on the CIT(A)'s findings that the impugned penalt(ies) could only be levied if the undisclosed income in issue is found to have been derived from the specified categories o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty therein. The Revenue's case appears to be carrying substance ab initio that as per hon'ble apex court's clinching observations whilst declining assessee's special leave petition that no ground was made out to interfere with the hon'ble high court's judgment under challenge. It does not stand on the correct side of law when we carefully study in all these legal developments. We find that the tribunal's co-ordinate bench's order in Sandeep Chandak vs. ACIT (2017) 185 TTJ 265 (Luc) had deleted sec. 271AAB penalty in issue primarily for the reasons that the Assessing Officer served only u/s. 271(1)(c) penalty notices, granted very short time to the taxpayer before levying the impugned penalty. It then observed that the Assessing Officer had not applied u/s 271AAB Explanations clause (a) to (c) as well in the given facts and circumstances. The Revenue preferred its appeal before hon'ble Allahabad high court finally culminating in judgment reported as (2018) 93 taxmann.405 (All) PCIT Vs. Sandeep Chadak. It raised three substantial question of law in its appeal as follows:- "(A) Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nging correctness of the sustained penalty component to the extent Rs.17 lac (supra) based on incriminating material found / seized during search. Its first argument is that the relevant penalty notice nowhere indicated as to under which limb the Assessing Officer had initiated the impugned penalty proceedings is not sustainable. We find this first argument to be devoid of any merit since the Assessing Officer made it clear in assessment order dated 06.06.2014 that he had already initiated u/s 271AAB proceedings. Hon'ble Allhabad high court's decision (supra) involved such an issue wherein their lordships made it clear that these proceedings are automatic in case of search followed by Sec. 132(4) statement involving admission of undisclosed income. The assessee's first argument is rejected therefore. 12. Mr. Tibrewal thereafter files a written note raising yet another legal plea as follows:- "4. Penalty under section 271AAB could be levied on "Undisclosed Income" of the "Specified Previous Year". The first clause (i) refers to income of the specified previous year represented by - (i) any money, bullion, jewellery or other valuable article or thing, or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts of the previous year for which the previous year has ended but the due date of furnishing the return of income has not expired and the assessee has not furnished the return of income, in those cases penalty could be levied in as much as the phrase "specified previous year" has been used in clause (ii) to Explanation (c) below section 271AAB of the Act. 4.5 On the other hand the words such previous year have been used in clause (i) of Explanation (c) to Section 271MB of the Act. The word "previous year" has been defined in section 3 of the Income Tax Act, 1961 as under: "3. For the purposes of this Act, "previous year" means the financial year immediately preceding the assessment year: Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year." Thus "Previous Year" and "specified previous year" carry different meanings for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear 2009-10 as follows:- "2. Briefly stated, the facts of the case are that a search and seizure action u/s.132 of the Act was taken upon the assessee on 11-02-2009. Return was filed on 30.09.2010 declaring total income of Rs. 26,21,24,080/-. The AO assessed the total income at Rs. 28,20,70,090/-. Penalty of Rs. 57,70,620/- was imposed u/s.271 AAA on the undisclosed income of Rs. 5,77,06,205/-. The Id. CIT(A) dismissed the appeal of the assessee and also made an enhancement of penalty on a further income of Rs. 2,07,46,005/-, on which the AO had chosen not to impose penalty under this section. Aggrieved thereby, the assessee is in appeal before the Tribunal. 3. We have heard the rival submissions and gone through the relevant material on record. The assessee raised certain grounds in the memorandum of appeal. Thereafter, certain additional grounds were filed and eventually modified additional grounds of appeal were filed, challenging the impugned order on certain legal issues as well as on merits. 4. We will first espouse the legal issues urged on behalf of the assessee in seriatim. The first legal issue taken up by the Id. AR is that the penalty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us 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.]" (some parts italicized by us) 6. Sub-section (1) of section 271 AAA provides that penalty shall be computed @ 10% of the undisclosed income of the 'specified previous year' where search is initiated after 01-06-2007 but before 01-07-2012. Sub-section (3) of section 271 AAA provides that in case penalty is imposed under sub-section (1), then the provisions of section 271(1)(c) shall not apply in respect of such undisclosed income. When we consider the prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion, has reason to believe the existence of one of the three conditions, such as, any person is in possession money, bullion, jewellery or other valuable article of thing etc. and such money, bullion, jewellery etc., represents either wholly or partly income which has not been or would not be disclosed, then he may authorize any Additional Director etc., being the authorized officer, to enter and search any building, place, vessel etc., where he has reason to suspect that such undisclosed money, bullion, jewellery or other valuable article or things are kept. This is the stage of authorization of search by the Principal Director General etc., which is the first stage in our discussion, being, the initiation of process of search. Pursuant to such first stage, that is, authorization of search action by the Principal Director General etc., the authorized officer physically enters the building etc. and carries out the actual search. This is the second stage in our discussion, which is initiation of search. When the entire search is concluded by the authorized officer and a final panchnama is drawn, then we enter the third stage, that is, the search is concluded. 9. The legisl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;date of initiation of search' . We fortify our view by simultaneously reading clauses (a) and (b) of the Explanation to section 271AAA defining 'undisclosed income' and 'specified previous year'. Firstly, it is pertinent to note that similar expression, namely, 'before the date of search' has been used in both the clauses, viz., (a) and (b)(i) of the Explanation. We have set out supra the definition of 'undisclosed income' in the Explanation (a) in two sub-clauses (i) and (ii), dealing with broader categories of any income represented by unexplained assets etc. and any income represented by false expenses. We are restricting ourselves to sub-clause (i), which defines 'undisclosed income' to mean any income represented by any money, bullion, jewellery etc. found in the course of a search 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'. The expression 'before the date of search, in Explanation (b)(i) has al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'date of conclusion of search'. It has to be the 'date of initiation of search' so that any income represented by any money, bullion, jewellery etc. found in the course of search but not recorded in the books is considered as 'undisclosed income'. Thus it becomes crystal clear that the expression 'before the date of search' used in clause (a) of the Explanation refers to the 'date of search' as the date of 'initiation of search' and not the date of 'conclusion of search'. As the same expression of 'before the date of search' has been used in the definition of 'specified previous year', we hold that on a tuneful reading of clauses (a) and (b) of the Explanation to section 271AAA, the 'date of search' in the Explanation (b) is also the 'date of initiation of search and not the 'date of initiation of search' as the 'date of search', the 'specified previous year' in terms of sub-clause (i) of clause (b) of Explanation to section 271AAA becomes the year ending 31-03-2008, being, the previous year which ended before the date of search on 11-02-2009. Going by this interpretation of the prov....