TaxTMI 
TaxTMI 
2019 (6) TMI 287
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....the assessee filed return of income declaring total income of Rs. 64,20,050/-. According to AO, the assessee owned up entire cash seized as his undisclosed and admitted that it was out of his income and offered to tax. The AO considering the same assessed the income at Rs. 65,19,550/- vide order dated 26.12.2016 by recording that penalty proceedings u/s 271AAB of the Act is being initiated separately. Accordingly, notice issued and initiated penalty proceedings as above. During the course of penalty proceedings, the assessee filed written submission dated 24.04.2017 which is reproduced herein below- "In his submission dated 24.04.2017, it was stated that "..........Your honour has issued notice for penalty u/s.AAB for A.Y. 2014-15. In this regard I would like to say that only cash was seized and no incriminating documents were seized from the possession of the assessee during the course of seizure on 24.04.2014. The cash seized was out of income for FY: 2013-14 that was shown in income tax return for AY: 2014-15. There was no undisclosed income on the part of the assessee. Further a sum of Rs. 99,503/- was disallowed as Interest paid to Bun«. In this regard it is sai....
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....ence which states (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, - (a) a sum computed at the rate of ten percent of the undisclosed income of the specified previous year, if such assessee - (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date - (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein: In case of assessee, the above conditions specified in section 271AAB of the Act are satisfied on the facts enlisted above. Therefore, I am firmly of the opinion and belief th....
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....records. penalty u/s 271AAB @ 10% on cash seized of Rs. 66,18,900/- is sustained. Hence, this ground of appeal is dismissed and the Assessing Officer is directed accordingly." 6. Heard both parties and perused material available on record. There is no dispute in respect of the date of search and seizure operation on 24.04.2014. Therefore, the applicability of section 271AAB of the Act is justified. There is no dispute in owning the cash seized during the course of search and seizure operation as undisclosed income of the assessee which is out of his professional income. There is no dispute that the assessee offering the same for taxation. There is no dispute in respect of payment of tax together with interest in respect of undisclosed income. There is no dispute in respect of filing of return of income to the specified previous year declaring such undisclosed income. Therefore, in our opinion the facts and circumstances in the present case fulfils the conditions as contemplated clause (a) in sub-section (1) of section 271AAB of the Act to impose penalty. Therefore, we find no infirmity in the order of CIT(A) and confirming the penalty imposed by the AO u/s 271AAB(i)(a) of the....
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....rence is made to a wrong provision of law that by itself does not vitiate the exercise of power so long as the power does exist. The Ld. DR argued that quoting of wrong provision by the competent authority does not take away the jurisdiction of the authority and on the sole ground, order of penalty cannot be vitiated. 7. Further, he argued that the assessee having responded through its authorised representative and having participated in the proceedings cannot be allowed to turn around and raised objection before the Tribunal seeking invalidation of the proceedings initiated by the authority alleging issuance notice u/s271AAA. If such defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid despite the fact the assessee had taken the notice as valid and responded to it in letter and spirit and participated in the proceedings the very purpose and objective of the provisions contained in section 292B of the Act would stand frustrated and defeated. The intent of the legislature is clear from the language implied in this provision on the alleged defective notice order cannot be declared invalid by reason of any mistake, defect or omission, i....
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....ome was filed on 26.09.2013 disclosing a total income of Rs. 7,94,66,300/-. The assessee through its representative appeared and produced the details requisitioned by the AO. The AO determined the total income of the assessee on Rs. 7,94,66,290/- which is inclusive of undisclosed income of Rs. 5 crores as admitted by the assessee vide its order dated 17.04.2015 under section 143(3) of the Act. 12. Having satisfied that it is a fit case for imposition of penalty under section 271AAB of the Act, the AO initiated proceedings under section 271AAB of the Act by issuing a notice dated 17.04.2014. The AO imposed penalty of Rs. 50,00,000/- under section 271AAB of the Act. The relevant portion of which is reproduced here in below:- "But in the instant case the search was conducted on 06.09.2012 which is after July,2012. Therefore provision of sec.271AAB of the IT. Act, 1961 instead of provision of sec.271AAA of the IT Act,1961 is applicable where a minimum sum computed at the rate of ten percent of undisclosed income of the specified previous year to be imposed as penalty irrespective of fulfilling the conditions laid down in sec.271AAB(1)(a) of the IT. Act,1961. Therefore....
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....er. Appeal on this ground is dismissed." 15. In answer to the submissions made by Ld. Counsel for the assessee that the penalty notice is defective and penalty imposed thereon is not maintainable that on perusal of the penalty notice which is at page No.20 of Paper Book, it is true the AO issued notice u/s 274 r.w.s. 271AAA of the Act. But, however, in the body of the said notice the AO clearly mentioned his intention why an order imposing penalty on you should not be made u/s 271AAB of the Act. Further, it is needless to say in response to the said notice, the assessee participated in the penalty proceedings and it is evident from the penalty order that the assessee specifically contended that the proceedings u/s 271AAB are not applicable for the search conducted u/s 132 of the Act. The Ld.DR as narrated above the submissions and case laws supporting that even though quoting of wrong provision by the competent authority does not take away jurisdiction of the authority and such orders cannot be vitiated on such sole ground. In our opinion, the submissions as made by the Ld.AR in this regard are not tenable and they are liable to be rejected. 16. Further, we may pl....
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....dmits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date - (A) pays the tax together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty percent of the undisclosed income of the specified previous year, if such assessee - (i) in the course of search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date - (A) declares such income in the return 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 percent 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). ....
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.... 271AAB of the Act where the assessee in the course of search in a statement (under sub-section 4 of Section 132) admits the undisclosed income and specifies manner in which such income has been derived, then the provisions of Section 271AAB automatically attracts. The relevant portion is reproduced hereunder for ready-reference:- "In the present case, the regular assessment proceedings are being carried out under Section 143(3), which is a proceeding of assessment as so stipulated under Section 143 and sub section (3) of Section 143 provides the procedure to be adopted by the assessing authority during the course of the assessment proceedings. provides the procedure for penalty where the search has been initiate Section 271AABed. In the present case, admittedly a search and seizure operation is carried out in which the assessees have surrendered the amount of Rs. 4 crores each (Rs. 4 lakh each by all the three assessees) and therefore, in view of the provisions of Section 271AAB the assessees are required to pay, by way of, penalty in addition to tax, if any, a sum computed @ 10% of undisclosed income of the specified period or previous years. In the case where t....
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....se the penalty under this section if following ingredients are fulfilled. 1. Search action u/s 132 of the Income Tax Act, 1961 should be initiated u/ s 132 on or after 01.06.2012. 2. The assessee has made disclosure of undisclosed income during the course of search action, has paid the tax together with interest and has filed return of income. 3. The assessee substantiates the manner in which he has earned the undisclosed income. From the analysis of the above Provisions of Act, it is clear that action of imposition of penalty u/s 271AAB(a) is independent of the enquiries made and subsequent additions made during course of assessment proceedings. In other words, this penalty is not based upon the facts gathered during course of assessment proceeding. It is dur to this reason, in my opinion, satisfaction of the AO is not required to be recorded by AO during assessment proceedings or at the time of completion of the proceedings. Thus, initiation of the penalty after the completion of assessment proceeding is not vitiated by law. The Ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not 271AAB. In t....