TaxTMI 
TaxTMI 
2019 (4) TMI 1519
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....r(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 Total disclosure Penalty levied u/s 271AB Penalty dele....
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....nalty 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 assessee on plea that he had furnished inaccurate particulars of income was not justified. Further, in the case of Punjab Tyres [1986] 162 ITR 517 (Madh....
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....sment 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 the investigation wing in the post search investigation nor the Assessing Officer during assessment process found any discriminating evidence of undisclosed income other than the statement of ....
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....) 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 2013-14. Accordingly, penalty notice u/s. 271AAB(1)(c) was imposed for Rs. 43,35,000/- on 29.09.2016. The assessee preferred appeal against the order u/s. 271AAB(1)(c) before the CIT(A)- 20 Kolkata who has held in view of several cited court's decision including the d....
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....tion 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. It is also proposed to insert a new provision in the Act (section 271AAB) for levy of penalty in a case where search has been initiated on or after 1ste July, 2012. The new section provides that, - (i) If undisclosed income is admitted during the course of search, the taxpayer will be liable for penalty at the rate of 10% of undisclosed income subj....
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..... 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 authority on the basis of a judgment of the Appellate Tribunal, Muumbai, in the case of ITO (Central) v. Gope M Rochalani [IT Appeal No. 7737 (Mum.) of 2011, dated 25-05- 2013]. The aforesaid judgment, Mr. Khaitan submitted, has to be read in conjunction with clause (b) of Explanation 5A to section 271(1), which provides as follows: '(b) the due date for filing the return of in....
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....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 made by the Assessing Officer in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary." Above language clearly support the contention of office of undersigned. Considering the revenue involved which is Rs. 43,35,000/- and the facts of the Case discussed above, appeal before ITAT, if deem fit, maybe filed in this case." The assessee's argument on the other hand in Revenue's app....
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....e 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.? (B) Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred in not appreciating the facts that the specific charge have in a statement under sub section 4 of section 132 during the course of search and seizure operation admitted undisclosed income was mentioned in the notice? (c) Whether the benefit of Section 292BB was correctly denied to the AO/appellant by the ITIAT?" 10. It is in this factual backdrop that hon'ble high court had held that the Assessing Officer had....
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....ch 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 the Act and was not recorded in the books of accounts or other documents or transactions maintained in the normal course relating to such previous year. The second clause (ii) refers to income of the specified previous year represented, either wholly or partly, by an entry in respect of an expenses recorded in the books of accounts 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. 4.2 It is also submitted that in the first clause ....
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....ession 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 271AAB of the Act to mean the previous year which has ended before the date of search for which the return of income has not been furnished by the assessee and the due date of furnishing the return of income has not been expired. If the Statute intended to levy penalty under section 271AAB of the Act in respect of money, bullion, jewellery or other valuable article or thing or any entry in the books of accounts or other document recorded in the books of accounts in respect of the previous year in which search was conducted then in clause (i) of Explanation (b) of section 271MB the words "specified previous year" would have been used which ....
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....ertain 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 year 2009-10 under consideration, cannot be so construed. In his opinion, the assessment year 2008-09 was the correct 'specified previous year' in terms of Explanation (b)(i) to section 271AAA of the Act and further that sub-clause (ii) of the Explanation (b) was not attracted in the present case. This contention was strongly countered by the Id. DR. 5. It is seen from the assessment order that the search in this case was initiated on 11- 02-2009. The Id. AR has invited our attention towards the last panchnama, a copy of which has been placed on page 19 onwards of the paper book, which is dated 03-04- 2009. The dates of initiation and conclusion of search have not bee....
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.... 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 u/s.271AAA on the undisclosed income of the 'specified previous year' and penalty u/s.271(1)(c) is imposed with reference to other years covered under search assessments. Search in the extant case was conducted in the year 2009, which undoubtedly falls within the period stipulated in sub-section (1) of section 271 AAA. In such a scenario, penalty is liable to be imposed on undisclosed income of the 'specified previous year' u/s 271 AAA alone. The AO has treated assessment year 2009-10 as the 'specified previous year' and imposed the instant penalty. 7. Now the question arises about the determination of the 'specified previous year' as per sub-clause (i) of the Explanation (b) to section 271AAA, which provides that a 's....
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....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 different places to clearly convey that it is referring to the date of initiation of search or the conclusion of search, as the case may be. For example, section 153A dealing with assessment in case of search or requisition specifically uses the expression 'initiation of search' in second proviso to sub-section (1). Similarly, section 153C dealing with the assessment of income of any other person uses the expression 'initiation of search' in first proviso to sub-section (1). On the contrary, section 153B(2) provides that the authorization shall be deemed to have been executed in the case of search, on the 'conclusion of search' as recorded in the last panchnama. Section 158BE setting out time limit for completion of block assessment also provides under sub-section (2) th....
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....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' . On an analysis of the expression 'before the date of search' in the definition of 'undisclosed income', it amply transpires that it refers to the date of 'initiation of the search'. Our reasoning is that part (A) in clause (i) of the Explanation (a) refers to the undisclosed income etc. which has not been recorded in the books of account before the date of search. It necessarily has to be an income which is not found to be recorded at the time of initiation of search and it cannot be an income which is not found to be recorded at the time of conclusion of search. Once an item of income not recorded is found at the time of initiation of search, it will remain undisclosed even if the assessee during the course of search records it in its books of account. If we interpret it as referring to the date o....
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....', 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 contention of the assessee is, ergo, upheld." 15. We have given our thoughtful consideration to assessee's above last argument. It emerges from the learned co-ordinate bench's decision that the said assessee had made out a case of non-applicability of assessment year 2009-10 in a search conducted on 11.02.2009 whereas the instant taxpayer's case makes it clear that "specified previous year" in its case u/s. 271AAB Explanation (b)(ii) squarely applies in given facts and circumstances of the case. We wish to repeat here at the cost of brevity that impugned search is dated 20.12.2012. The assessee's last date of filing return u/s 139(1) was upto on 30.09.2012. The 'specified previous year" therefore has been rightly taken in the instant case to be financial year 2012- 13 under the above statutory provision. We conclude in these f....