TaxTMI 
TaxTMI 
2019 (10) TMI 395
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....is a partner in two partnership firms and deriving income in the form of interest and share in the profits from these two partnership firms. A search u/s 132 of the Act was conducted on 05.02.2015 in case of Bundi Silica Group, Kota and the assessee is part of the said Group. During the course of search proceedings, the statement of the assessee was recorded u/s 132(4) of the Act wherein he has declared undisclosed income of Rs. 2,05,00,000/- as additional income. Subsequently, the assessee e-filed its return of income on 29.09.2015 declaring total income of Rs. 2,31,97,900/- which includes additional income of Rs. 2,05,00,000/- offered to tax during the course of search. The assessment proceedings were subsequently completed u/s 143(3) r.w.s 153B(1)(b) wherein the returned income was accepted. The Assessing Officer separately initiated the penalty proceedings u/s 271AAB by way of issue of notice u/s 274 r.w.s 271AAB of the Act dated 09.12.2016 which was duly served on the assessee. 3. During the course of penalty proceedings, the Assessing Officer stated that all the essential requirement of section 271AAB(1)(a) are satisfied in the instant case and given that the assessee h....
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....as specified in the show casue notice issued u/s 271AAB read with section 274 of the Act. In support, reliance was placed on the Hon'ble Karnataka High Court decision in the case of CIT vs. M/s SSA's Emerald Meadows reported in 2015 (11) TMI 1620, in case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) and various decisions of the Co-ordinate Benches of the Tribunal. It was accordingly submitted that notice issued u/s 271AAB is bad in law and therefore, the penalty levy u/s 271AAB(1)(a) deserves to be deleted. 7. It was further submitted that the lower authorities have erred in holding the levy of penalty u/s 271AAB of the Act as mandatory in nature. Drawing support from the decision of the Co-ordinate Bench in case of DCIT vs. Manish Agarwal reported in 92 Taxmann.com 81, it was submitted that imposition of penalty u/s 271AAB is not mandatory but discretion in nature depending upon the facts and circumstances of the each case. 8. It was further submitted that in the search proceedings carried out at the assessee's premises, no evidence was found during the course of search except Annexure-AS Exhibit-11 wherein certain figures, dates and cryptic names we....
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.... made as there is no direct material which leads and establishes that any income received by the assessee which has not been declared by the assessee. The facts of the assessee's case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence there is no case for imposing penalty u/s 271AAB of the Act. Further, reliance was placed on the Co-ordinate Bench in decision in case of Sh. Rajendra Kumar Gupta vs. DCIT, CC-2, Jaipur (ITA No. 359/JP/2017 dated 18.01.2019) and it was submitted the facts of the said case squarely applies in case of assessee and therefore, the penalty so levied should be deleted. 9. It was further submitted that the assessee further declared a sum of Rs. 5,75,000/- on account of excess silver found during the course of search from residence. It is submitted that the silver items were personal items of the family members and holding is very old and reasonable looking to the size and status of family. The said silver items were received from both sides of relatives and friends at the time of marriage and thereafter on various other festivals and auspicious occasions. It is customary in Indian so....
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....stablish further that there is any undisclosed income so earned by the assessee. In this case, the search was conducted on 5.02.2015 wherein the statement of the assessee was recorded u/s 132(4) wherein he has surrendered the amount of Rs. 2,05,00,000. Subsequently, the assessee has disclosed the same in its return of income filed on 29.09.2015. Therefore, the assessee was having ample time to retract from said surrender, however there is no such retraction during post-search proceedings and even the assessee has included the same in its return of income. Even from the perusal of the assessee's statement, there is nothing which demonstrates that there is any forced surrender by the assessee. The contention of the ld AR therefore has thus no basis where he contends that the search party have exerted undue pressure and obtained surrender of income and therefore, there was no undisclosed income in the hands of the assessee. It was further submitted that the levy of penalty u/s 271AAB is mandatory is nature and reference was drawn to provisions of section 271AAA which provides for immunity from levy of penalty as against the provisions of section 271AAB wherein there is no such prov....
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....tatement recorded u/s 132(4) and therefore, there cannot be any question of said surrender of income not falling in the definition of undisclosed income. It was submitted that the penalty U/s 271AAB is mandatory in nature and is imposed at the varying rate of 10%, 20% or 30% depending on the fulfillment of certain conditions therein. It was submitted that all the conditions specified in Section 271AAB have been fulfilled in the instant case, therefore, the penalty U/s 271AAB being in the nature of mandatory penalty and there being no discretion with the Income tax authorities, the penalty so imposed by the AO was rightly confirmed by the ld CIT(A) and the order of the ld CIT(A) should be upheld. 14. In this regard, we refer to the provisions of Section 271AAB which begins with the stipulation that the Assessing officer may direct the assessee and the assessee shall pay the penalty as per clause (a) to (c) so satisfied in sub-section (1) to Section 271AAB. Further, as per sub- section (3) of Section 271AAB, the provisions of section 274 and section 275 as far as may be applied in relation to penalty under this section which means that before levying the penalty, the Assessi....
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....n 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 per cent 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, 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 per cent 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). (2) 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).....
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.... be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Once the opportunity is given to the assessee, the penalty cannot be mandatory and it is on the basis of the facts and merits placed before the A.O. Once the A.O. is bound by the Act to hear the assessee and to give reasonable opportunity to explain his case, there is no mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Hon'ble A.P. High Court in the case of Radhakrishna Vihar in ITTA No.740/2011 while dealing with the penalty u/s 158BFA held that 'we are of the opinion that while the words shall be liable under sub section (1) of section 158BFA of the Act that are entitled to be mandatory, the words may direct in sub section 2 there of intended to directory'. In other words, while payment of interest is mandatory levy of penalty is discretionary. It is trite position of law that discretion is vested and authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of the each case. Plain rea....
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.... date of search on 5.02.2015. Therefore, what has been found during the course of search is certain entries relating to undisclosed advances/investment in purchase of land. Besides the said entries, there are no other documents/material in terms of full particulars and address of the person to whom the advance has been given, any agreement to sell, the description and location of the property etc, which has been found during the course of search. The assessee HUF is a partner in two partnership firms and derives income from share in the profit and interest from such partnership firms which it has reported in its return of income and therefore, as far as maintenance of books of accounts is concerned, the assessee HUF not carrying on any business is thus not required to maintain regular books of accounts. The diary found during the course of search and seizure at the premises of the assessee contains the entries of advances given for purchase of land and therefore, the said amount of advance given for purchase of land can be recorded in the capital account of the assessee. Thus the transactions found recorded in the diary are to be recorded in the capital account of the asse....
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....rch under section 132. A cash advance per se represents an outflow of funds from the assessee's hand and an income per se represents an inflow of funds in the hands of the assessee. Therefore, once there is an inflow of funds by way of income, there can be subsequent outflow by way of an advance to any third party. Giving an advance and income thus connotes different meaning and connotation and thus cannot be used inter-changeably. In the definition of undisclosed income, where it talks about "income by way of any entry in the books of account or other documents or transactions found in the course of a search under section 132", what perhaps has been envisaged by the legislature is an inflow of funds in the hands of the assessee which has been found by way of any entry in the books of accounts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course and not vice-versa. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein such amounts may be deemed as income in absence of satisfactory explanation. In our view,....