TaxTMI 
TaxTMI 
2019 (4) TMI 1519
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....me Tax (Appeals)-20, Kolkata's identical order(s) upholding / partly confirming the Assessing Officer's action imposing the penalt(ies) in issue; involving proceedings u//s 271AAB of the Income Tax Act, 1961; in short 'the Act'. Relevant assessment year in all these cases are assessment years 2013-14 & 2014-15. 2. It transpires at the outset that one of the Revenue's appeal ITA No.2293/Kol/2017 suffers 130 days' delay in filing. It has placed on record its condonation petition stating reasons thereof to various procedural formalities and compilation of the necessary records at departmental level. The assessee is fair enough in not disputing correctness of the said condonation averments. We therefore condone the above identical delay in Revenue's appeal. The same is now taken up for adjudication on merits. 3. Heard both the Revenue as swell as all these assessees vehemently reiterating their respective stands against and in support of the impugned penalty(ies) imposed by the Assessing Officer and partly upheld in the lower appellate proceedings to the following effect:- Name of assessee ITA No. CO No. Suo moto disclosure Disclosure of cash/jewellery/Others To....
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....g any undisclosed income or assets found or seized during the course of search. The Assessing Officer thus levied the impugned penalty of Rs.6,00,25,721/-. 6. The assessee preferred appeal. The CIT(A) has partly affirmed the impugned penalty of Rs.1,35,85,737/- only to the extent of the undisclosed income corroborating evidence found / seized during the course of search as follows:- "During the appellate proceedings the AR has made oral submission as well as filed a written submission on this issue which is as under:- ' I re-iterate that such offering of Rs. 18,65,00,000/- 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 on penalty u/s 71AAB 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 buy peace and to avoid protracted litigation filed revised return disclosed disclosing additional income, imposition of penalty under section 271(1)(c) upon assess....
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....ilk and Sarees, 300 ITR 30 (SC) 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, sit 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. 1385737/- only. Nothing incriminating/no evidences were found regarding Rs. 186500000/- which was offered for taxation by the assessee suo moto in order to buy peace of mind. I also find that neither the offers in th....
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....,00,85,737/- comprising various head(s) (supra). Our attention is also invited to various case laws:- a) CIT vs. Punjab Tyres (1986) 162 ITR 517 (MP) b) P.CIT vs. Dr. Vandana Gupta (2018) 92 taxmann.com 229 (Del) c) Sandeep Chandak vs. PCIT (2018) 93 taxmann.com 406(SC) d) Prasanna Dugar vs. CIT (2016) 70 taxmann.com 175 (SC) e) MAK Data (P) Ltd. vs. CIT (2013) 38 taxmann.com 448 (SC) The Revenue further files its written submissions to the following effect:- "Statement of facts: In consequence of search & seizure/survey operation carried out in the business premises of the assessee and in residential premises of the directors of the assessee on 13.02.2013, the assessee has admitted an undisclosed income of Rs. 1,44,50,000/- u/s. 132(4). The assessee has also submitted manner of earning of search income and application thereof in their disclosure petition u/s. 132(4) that "The manner of earning of the same is out of business activities which are out of family business activities." The disclosed income of Rs. 1,44,50,000/- was considered as undisclosed income in the order passed u/s. 143(3) for the specified year 2013....
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....271AAA and Sec 271AAB are mutually exclusive. Booth cannot be levied upon the as simultaneously. The sole intent of Sec. 271AAB is to fasten the loops of Sec. 271AAA and to forbid the defaulter to escape by any means whatsoever without paying taxes on unexplained moneys. Relevant part from the memorandum of the Budget year of introduction is produced below in verbatim.: 'Under the existing provisions of section 271AAA of the Income-tax Act, no penalty is levied if the assessee admits the undisclosed income in a statement under sub-[section (4) of section 132 recorded in the curse of search and specifies the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. As a result, undisclosed income (for the current year in which search takes place or the previous year which has ended before the search and for which return is not yet due) found during the course of search attracts a tax at the rate of 30% and no penalty is leviable. In order to strengthen the penal provisions, it is proposed to provide that the provisions of section 271AAA will not be applicable for searches conducted before 1st July, 2010....
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....stion and answer No.22 in the statement recorded under section 131 wherein the assessee categorically states that he is voluntarily disclosing the income even though no incriminating documents have been found and all the purchases and sales are correctly recorded and the disclosure was made just to cover the papers and documents which he may not be able to explain. The assessee bifurcated his own disclosure of Rs. 3.50 lakhs in respect to two parts, i.e. Rs. 70,00,000 for the assessment year 2008-09 and Rs. 2.80 lakhs for the assessment year 2009-10." On the basis of the disclosure, the assessee filed a return on March 31, 2010, offering a sum of Rs. 70,00,000 for taxation earned during the assessment year 2008-09. It is not in disputed that for the assessment year 2008-09, the assessee had earlier filed his return in which the aforesaid sums of Rs. 70,00,000 was not disclosed. The case of the assessee, as such, came squarely within the provision of section 271(1)(c) of the Income-tax Act. The Assessing Officer passed an order of penalty, as indicated earlier, which was affirmed by the appellate authority. The Tribunal interfered with the order of the appellate au....
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....nt to rectify or modify the statement made by him. For the aforesaid reasons, we are of the opinion, that the order of the Tribunal in unsustainable in law and, therefore, is set aside. The order of the appellant authority is, therefore, restored. The appeal and the applications are thus disposed of." 3. In case of Mak Data Pvt Ltd. vs. CIT, Honourable SC have observed following: "Assessee has only stated that he had surrendered the additional sums with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statue does not recognize those types of defences under the Explanation 1 to section 271(1)(c). It is strite law that the voluntary disclosure does not release the assessee from the mischief. Of penal proceedings under section 271(1)(c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved form penalty. [para 7]. The surrender of income on this case is not voluntary in the sense that the offer of surrender was made in view of detection ....
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....ial 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 in not appreciating the facts that the notice was issued for imposition of penalty u/s. 271AAB and not for imposition of penalty u/s 271(a)(c) of the Act.? ....
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..... 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 (ii) any entry in the books of accounts or other documents or transactions found in the course of search u/s 132 of ....
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....e 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 two different situations as stated herein above. The words "previous year" has been used in clause (i) of Explanation (b) of Section 271A....
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....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 u/s.271 AAA be deleted as the same can be imposed only in respect of 'specified previous year' and the assessment y....
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....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 provisions of section 271(1)(c) in juxtaposition to section 271AAA, it is manifested that in case of a search, penalty is imposed....
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...., 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 legislature has used the word 'search' preceded by the words 'initiation of' or 'conclusion of' at dif....
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.... (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 subclauses (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 also been used without any pre-fix of 'initiation of' or 'conclusion of' . O....
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....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 provision, the A.Y. 2009-10 cannot be considered as the 'specified previous year'. The contenti....