TaxTMI 
TaxTMI 
2020 (5) TMI 479
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....et, it is noted that all these appeals have been filed with a delay of 583 days. In this regard, the assessee has filed a prayer along with an affidavit for condonation of delay and has requested for admittance of appeals for adjudication on merits. 4. In this regard, the ld. AR has submitted that the assessee had appealed against the levy of penalty in all these cases before the ld CIT(A) who has confirmed the levy of penalty U/s 271(1)(c) of the Act for the assessment years 2008-09 to 2012-13 vide his consolidated order dated 06.10.2017 and separately has confirmed the levy of penalty U/s 271AAB of the IT Act earlier vide his order dated 06.02.2017 for the assessment year 2013-14. It was submitted that on the receipt of the orders of the ld. CIT(A), the issue of dismissal of the appeals against penalties by the ld. CIT(A) was discussed by the assessee with his local and regular counsel Shri V.K. Jain, FCA and he was of the view that no further appeal is required to be filed against these orders before the Tribunal looking into the facts involved in the case and the legal position. In view of Shri V.K. Jain, considering the facts of admission made by the assessee, the penal pro....
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....ere being any real income remaining undisclosed. Therefore, the income which got admitted had no legal sanctity. Hence the assessee made specific request to ld. PCIT of getting opinion of a technical expert, in the following words: "5. That a large amount of income got admitted was based on the evidence which falsely got created by the search team without there being any real income remaining undisclosed. Therefore, the income got admitted has no sanctity. 6. That the assessee wishes to get the evidences, on the basis of which admission was obtained, examined by a handwriting expert to bring the truth on the surface. Such report by the expert is being obtained which may take 2 weeks' time. 7. That your honour is also requested to obtain a report of an expert u/s 151 of the Civil Procedure Code, 1908 r.w Section 45 in The Indian Evidence Act, 1872. 8. It is therefore prayed that the subjected proceedings may kindly be dropped or alternatively be kept pending till the availability of the report." 7. It was submitted that in view of the above, the ld. Counsel was expecting that such proceedings u/s 279(1) would be dropped and hence there was s....
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....of the assessee and his counsel Shri V.K. Jain, FCA was also placed on record. 10. Further, reliance was placed on the decisions in case of Collector, Land Acquisition vs MST Katiji 1987 AIR 1353, 1987 SCR (2) 387, United Christmas Celebration Committee Charitable Trust vs. ITO (2017) 249 Taxman 372 (Mad), Hosanna Ministries vs. ITO, (2017) 152 DTR (Mad) 8, Mukesh Jesangbhai Patel vs. ITO (2013) 29 taxmann.com 389 (Guj), Vijay Vishin Meghani vs. DCIT (2017) 398 ITR 250 (Bom), and Ganesh Chawala vs. ITO (2008) 9 DTR Trib (Jp) (Trib). 11. It was accordingly submitted that delay in filing the present appeals may be condoned in the interest of justice and the appeals for all these years be admitted and heard on merits. 12. Per contra, the ld DR submitted that there is an inordinate delay of 583 days and such delay should not be condoned in a routine manner and that a distinction ought to be drawn between a case where the delay in inordinate, as it is in the case on hand i.e. of 583 days and in cases where the delay is of a few days. The ld DR further contended that the explanation put forward by the assessee for the delay does not amount to reasonable and sufficient cause whic....
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....Offences Court, Jaipur. On receipt of such information, the assessee again consulted with his local Counsel and another Counsel based in Jaipur and it was advised by the Counsel based in Jaipur that the assessee should immediately file appeal before the Tribunal against the levy of penalty. We therefore find that the assessee is all along diligent in pursuing his legal remedies against the action taken by the Department and has sought advice from his legal Counsels from time to time. Basis the advice of his legal Counsel, he didn't pursue any further appeal before the Tribunal against the order of the ld CIT(A) confirming the levy of penalty by the Assessing officer. However, given the subsequent developments wherein the prosecution proceedings were launched by the Department and the matter was pursued with the Department for dropping the prosecution proceedings and finally, when he came to know that the Department had decided to launch the prosecution proceedings, he again consulted another Counsel and he was advised to file appeal before the Tribunal against the levy of penalty. Such an advice is based on the premise that the Department has decided to launch the prosecution pr....
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....ice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon'ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. It was also held by the Hon'ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of male fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that the assessee has all along acted diligently in safeguarding his legal rights and availing the remedies available to him and has acted and taken action basis the advice and assistance sought from his legal Counsels. He was initially advised not to file any appeal against the confirmation of levy of penalty. However, due to subsequent developments wherein the assessee runs a serious ....
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....sk of prosecution. 16. Further, we refer to the decision of Hon'ble Madras High Court in case of Hosanna Ministries vs. ITO (Supra) wherein the Hon'ble High Court has condoned the delay of 1902 days in filing the appeal against the ld. CIT(A)'s order refusing the grant of registration u/s 12AA of the Act. In that case, the Hon'ble High Court has held that no doubt, the delay has to be explained with proper reasons but it does not mean that every day's delay must be explained. The Court must take a pragmatic view in appreciating the reasons attributable to the delay caused to the party to approach the Court of law and no pedantic view or approach to be adopted by the Court in considering the reasons given by the parties for delay in approaching the Court. 17. Further, we refer to the decision of Hon'ble Gujarat High Court in case of Mukesh Jesangbhai Patel vs. ITO (Supra) wherein the Hon'ble High Court has condoned the delay of over 600 days in filing the appeal. In that case, the Hon'ble High Court has drawn reference to the decision of Hon'ble Supreme Court in case of N. Balakrishna vs. M. Krishnamuthy [1998] 7 SCC 123 wherein it was held as under:- "6. In N. Balakr....
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.... proceedings and the position is quite otherwise. 19. Further, we refer to the decision of Co-ordinate Jaipur Bench decision in case of Ganesh Chawala vs. ITO (supra) wherein the Coordinate Bench has condoned the delay of about 43 months in filing the appeal wherein under similar circumstances, the assessee ran a risk of prosecution and the relevant findings of the Coordinate Bench reads as under:- "2. We have heard the rival contentions and perused the facts of the case. The tax due in the impugned case after the order of learned CIT(A) has been stated to be less than Rs. 1 lac and the seriousness has not been anticipated by the assessee and it was advised by the counsel that the tax should be paid to bring the litigation to an end. The taxes were not paid and the penalty under s. 271(1)(c) was imposed and the learned CIT has launched a prosecution under s. 276(1) r/w s. 277 of the Act before the Economic Offence Court. It has been stated that no opportunity had been given to the assessee before serving the order under s. 279 of the Act on 19th March, 2007. The assessee was not aware of this fact before the said service. Thereafter on the advise of the counsel, the mat....
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....adjudication on merits. ITA No. 1029/JP/2019 21. Now, coming to assessee's appeal relating to levy of penalty u/s 271(1)(c) for AY 2008-09 wherein the grounds of appeal taken by the assessee reads as under: "1. The impugned penalty order U/s 271(1)(c) of the Act dated 30.07.2015 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be quashed. 2. Rs. 6,800/-: The ld. CIT(A) erred in law as well as on the fact of the case in confirming the order of AO dated 30.07.2015 imposing penalty U/s 271(1)(c) of the Act of Rs. 6,800/- The penalty so imposed and confirmed, being totally contrary to the provisions of law and facts, hence the same kindly be deleted in full. 3. That the impugned show cause notice issued U/s 274 r/w 271(1)(c) of the Act, is quite vague and did not at all specify under which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment particulars of income or furnishing of inaccurate particulars of income. The impugned penalty based on such a notice being contrary to the provisions of law and facts kindly be quashed." 2....
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.... his consolidated order dated 06.10.2017 has sustained the levy of penalty u/s 271(1)(c) by the Assessing officer. As per ld. CIT(A), the assessee's primarily contention was that the penalty may not imposed as disclosure was offered to buy mental peace and he was not in agreement with this contention as there could not be bargain with the statute. It was further held by the ld. CIT(A) that the AO has specifically invoked explanation 5A while imposing of penalty u/s 271(1)(c) and order of the AO as such remained unrebutted before him. In the facts and circumstances of the case, the penalty imposed by the AO was therefore, confirmed. Against the said findings of the ld. CIT(A), the assessee is now in appeal before us. 24. During the course of hearing, the ld. AR submitted that the Assessing officer has levied the impugned penalty in all these years only on the basis of findings recorded by him in the respective assessment orders. It was submitted that it is a settled legal proposition that assessment and penalty proceedings are separate and distinct from each other. The order imposing penalty is quasi-criminal in nature and, thus, the burden lies on the Department to establish tha....
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....hat a penalty u/s 271(1)(c) of Rs. 6,800/- is imposed upon the assessee for concealment of income by furnishing inaccurate particulars of income. Thus, even while imposing the penalty, he was not sure on which limb he has imposed the penalty. It was submitted that the AO did not appreciate that the two limbs i.e. the concealment of income and furnishing of inaccurate particulars of income carry different connotations, as held in the case of T. Ashok Pai (2007) 292 ITR 11 (SC) which was taken note of in CIT & Anr. v. Manjunatha Cotton and Ginning Factory 359 ITR 565 (Karn). The use of both the limbs by the AO mechanically, clearly shows a complete non-application of mind on his part and the requisite satisfaction, this way, is not at all discernable from the assessment orders nor from the SCN of all these years. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory 359 ITR 565 (Karn), has held that notice u/s 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High Court has further laid down....
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....osure from the assessee without finding any incriminating material disclosing any undisclosed income. Applying the judicial guidelines in the facts of the present case, it can be very well demonstrated that in this case there was no undisclosed income and the AO merely and blindly relied upon the so called admission of a huge surrender which was made / obtained by the revenue to made the search a success. As a matter of fact, a careful and honest reading of the seized documents / assets etc. viz a viz the explanation given by the assessee during the course of the statement recorded u/s 132(4) on 19.12.2012 and again on 02.01.2013, will make it evidently clear that there was no occasion at all to make any admission of income. In fact, despite there being source explained, the figures were stressed to meet with the target of the surrender to be obtained by the search team. It was accordingly submitted that there is no basis for levy of penalty u/s 271(1)(c) and the same may be directed to be deleted for all these assessment years. 28. The ld DR is heard who has vehemently argued the matter. The ld DR submitted that it is a case where the search has been conducted on the assessee a....
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....during the course of search which has been subsequently been reported to tax in the return filed u/s 153A is therefore clear enough reflection of the mind of the AO and which clearly demonstrates that the Assessing Officer at the time of passing the assessment order was satisfied that the assessee is liable for penalty u/s 271(1)(c) of the Act qua the additional income. Therefore, as far as recording of satisfaction at the time of passing of the assessment order is concerned, we find that the same is clearly discernable from the reading of the assessment order and there is a direction to this effect by the Assessing officer. 30. Now coming to the contention of the ld AR regarding the specific limb/charge for levy of penalty not discernible from the show-cause notice issued u/s 271 r/w 275 dated 10.3.2015 and subsequent penalty order. In this regard, we refer to the notice issued u/s 271 r/w 275 dated 10.3.2015 wherein it has been stated as under: "whereas in the course of assessment proceedings for AY 2008-09, it appears that as per section 274 and 275 read with section 271(1)(c), you are liable for penalty for concealment of particulars of income or furnishing of inacc....
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....at the stage of initiation of penalty proceedings of the precise charge as to 'concealment of particulars of income' or "furnishing of inaccurate particulars of income'. In such circumstances, he may use slash between the two expressions at the time of initiation of penalty proceedings. However, during the penalty proceedings, he must get decisive, which should be reflected in the penalty order, as to whether the assessee is guilty of 'concealment of particulars of income' or 'furnishing of inaccurate particulars of such income'. Uncertain charge at the time of initiation of penalty, must necessarily be substituted with a conclusive default at the time of passing the penalty order. If the penalty is initiated with doubt and also concluded with a doubt as to the concealment of particulars of income or furnishing of inaccurate particulars of such income etc., the penalty order is vitiated. If on the other hand, if the penalty is initiated with an uncertain charge of 'concealment of particulars of income/furnishing of inaccurate particulars of income' etc., but the assessee is ultimately found to be guilty of a specific charge of either ....
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....by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income." 34. On perusal of the explanation 5A to section 271(1)(c), it lays down the following essential conditions which needs to be satisfied before the assessee is fastened with the penalty u/s 271(1)(c) of the Act: (1) Firstly, it talks about a situation where the search has been initiated u/s 132 on or after the 1st day of June, 2007. In the present case, the search has been conducted on the assessee on 19.12.2012. Therefore, this condition is satisfied in the instant case. (2) The second condition is that in the course of search so conducted, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year which has ended before the date of search. In the instant case, there is nothing on record which demonstrates th....
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....has not filed his return of income and due date for filing the return of income for "such previous year" has expired. In the instant case, the assessee has duly filed his return of income, therefore, this alternate third condition does not apply at first place. 35. Now, coming back to the second alternate condition as referred supra, it need to be examined whether the same is satisfied in the instant case or not. Only in a scenario where this condition is finally held to be satisfied, the levy of penalty can be held justified by invoking explanation 5A to section 271(1)(c) as all the three conditions need to be necessarily satisfied individually as well as cumulatively. This condition in turn has two limbs which needs to be satisfied cumulatively. 36. The first limb provides that whether during the course of search, the assessee is found to be owner of any income based on any entry in books of accounts or other documents or transactions. The second limb states that the assessee claims that such entry in the books of accounts or other documents or transactions represent his income wholly or in part for any previous year which has ended before the date of search. The firs....
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.... 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, the deeming fiction so envisaged under Section 69 and Section 69B cannot be extended and applied automatically in context of section 271(1)(c). It is a well-settled legal proposition that the deeming provisions are limited for the purposes that have been brought on the statute book and have therefore to be applied in the context of provisions wherein they have been brought on the statue book and not otherwise. In the instant case, the deeming provisions contained in section 69 and section 69B could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the AO has not even invoked the said deeming provisions in the quantum proceedings. Therefore, even on this account, the deeming fiction cannot be extended to the penalty proceedings which are separate and distinct from the assessment proceedings. Further, the second limb is also not satisfied as the assesse....
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.... ITA No. 1030-1033/JP/2019 39. Now, coming to assessee's appeal for A.Y. 2009-10 in ITA No. 1030/JP/2019. The facts of the case are that the assessee had filed original return of income on 22.09.2008 declaring total income of Rs. 74,23,320/- and in response to notice U/s 153A of the IT Act, the assessee filed his return of income on 10.12.2013 declaring total income of Rs. 77,10,470/- including additional income of Rs. 2,87,150/- which includes Rs. 2,50,000/- surrendered on account of payment of good work reward to employees and Rs. 36,350/- on account of expenses for repair/renovation of his house. The assessment was completed U/s 143(3) r.w.s 153A of the Act at Rs. 95,06,930/- and penalty proceedings U/s 271(1)(c) of the Act were separately initiated and show cause notice U/s 271(1)(c) dated 10.03.2015 was issued to the assessee. During the course of penalty proceeding, a fresh show cause notice dated 10.07.2015 was issued. In response, the assessee submitted that search was conducted at his residential and business premises and a piece of paper containing details of house repair of Rs. 36,350/- and payment of good work reward to the employees of the shop of Rs. 2,50,800/- wa....
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....the assessee. During the course of penalty proceeding, a fresh show cause notice dated 10.07.2015 was issued. In response, the assessee submitted that search was conducted at his business premises and residential house and a piece of paper containing details of purchase of gold, LCD and payment of good work reward to the employees of the shop of Rs. 2,95,200/- was found. It was further submitted that he had withdrawn Rs. 2,25,572/- for his household expenses and out of the same, his wife purchased gold and LCD. It was further submitted that the good work reward paid to the employees of the shop is for the business only and can be termed either as extra salary or bonus to the employees but it is not an income. He further submitted that as he was under mental tension, physically tired and was assured that no penal action will be taken, to avoid litigation and to purchase peace of mind, he surrendered the said amount as income and paid the tax and interest thereon. The submission so filed by the assessee was considered but not found satisfactory to the Assessing Officer. As per the Assessing Officer, the assessee in his return of income filed U/s 153A of the Act had disclosed addition....
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..... It was further held by the Assessing Officer that the assessee deliberately concealed his income and furnished inaccurate particulars of his income to the tune of Rs. 18,93,932/- in the original return filed U/s 139(1) of the Act on 19.09.2011. Therefore, the assessee is liable for penalty U/s 271(1)(c) r.w. explanation 5A. The Assessing Officer accordingly held that the assessee has furnished inaccurate particulars of income and concealed particulars of his income and it is a fit case for imposition of penalty U/s 271(1)(c) and penalty of Rs. 6,10,000/- was imposed upon the assessee for concealment of income by furnishing inaccurate particulars of income which, on appeal, has been confirmed by the ld CIT(A). 42. For A.Y. 2012-13 in ITA No. 1033/JP/2019, the facts of the case are that the assessee had filed his original return of income on 19.09.2011 declaring total income of Rs. 1,84,97,550/- and in response to notice U/s 153A of the IT Act, the assessee filed his return of income on 10.12.2013 declaring additional income of Rs. 2,07,17,980/- which includes Rs. 22,20,428/- surrendered on account of investment in jewellery, repair of house, good work reward, undisclosed paymen....
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....order of the AO as such remained unrebutted before him. In the facts and circumstances of the case, the penalty imposed by the AO was therefore, confirmed for all the respective assessment years. Against the said findings of the ld. CIT(A), the assessee is now in appeal before us. 44. In the aforesaid factual background, appeals have been filed by the assessee for the respective years wherein similar grounds of appeal have been taken by the assessee except for the change in the penalty amount. 45. During the course of hearing, both the parties fairly submitted that the facts and circumstances of these cases are exactly identical as in ITA No. 1029/JP/2019 and have reiterated their respective contentions and submission made therein. Therefore, our findings and direction contained in ITA No. 1498/JP/2018 shall apply mutatis mutandis to these appeals, the penalty is deleted and the orders of the lower authorities are set-aside. The matter is decided in favour of the assessee and against the Revenue. 1034/JP/2019 46. We now refer to assessee's appeal in ITA No. 1034/JP/2019 for A.Y 2013-14 wherein he has challenged the sustenance of levy of penalty u/s 271AAB and has taken ....
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.... ld CIT(A) and against the said findings, the assessee is in appeal before us. 49. During the course of hearing, it was submitted by the ld AR that from a perusal of the show cause notice issued u/s 274 r/w section 271AAB dated 10.03.2015, it is not at all clear as to for what precise charge, the appellant was asked to show cause viz. whether the charge is with regards to clause (a), clause (b) or clause (c) of section 271AAB. Rather the AO has simply mentioned "on assessed undisclosed income". Thus, he has not specified the default of the assessee in terms of clause (a) to (c) of section 271AAB of the Act. The said impugned show cause notice is issued in a routine manner without mentioning under which precise clause of section 271AAB(1) of the Act, the assessee is found liable for penalty. This has left the assessee hanging in confusion, as to on which limb the AO proposes to impose the said penalty and hence, seeking reply. It was further submitted that this confusion with the AO even continued while passing the impugned penalty order in as much as in the entire penalty order, there is no mention as to the precise charge on which the AO proposes to impose the said penalt....
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....which includes surrendered income of Rs. 2,02,00,000/-) in his return of income filed on 30.09.2013 and further surrendered additional income of Rs. 13,40,344/- through revised return of income filed on 26.02.2015 and thereby assessee surrendered total amount of Rs. 2,15,40,344/-. Therefore, the question whether the income disclosed by the assessee is "undisclosed income" in terms of the definition under section 271AAB of the Act has to be considered and decided in the penalty proceedings. Since the assessee has offered the said income in the return of income filed under section 139(1) of the Act, therefore, the question of taking any decision by the AO in the assessment proceedings about the true nature of surrender made by the assessee does not arise and only when the AO has proposed to levy the penalty then it is a pre-condition for invoking the provisions of section 271AAB that the said income disclosed by the assessee in the statement under Section 132(4) is an undisclosed income as per the definition provided under section 271AAB. Therefore, the AO in the proceedings u/s 271AAB has to examine all the facts of the case as well as the basis of the surrender and then arrive at t....
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....ed herein below. Particulars (A.Y. 2013-14) Income (Rs.) Remark Flat Booking 9,07,000/- As per seized diary marked as Annexure-AS, Ex-2, Pg 1 to 9 (refer statement dated 02.01.2013 Q-7 & Q-8 Flat Booking 19,37,000/- Flat Booking 16,00,000/- Flat Booking 17,00,000/- Flat Booking 23,00,000/- Flat Booking 21,00,000/- Flat Booking 41,00,000/- Flat Booking 21,00,000/- Flat Booking 13,35,000/- Flat Booking 3,35,800/- Total 1,84,14,800/- 54. A bare look will suggest that it was a deaf and dumb document in as much as no details at all as to whether the figures, represent is receipt or payment. If the figures really represent the alleged receipt on account of sale/booking of flats, there is no details at all, as to such receipts were towards: >No Flat No., related to which project as no name or project details have been given. > No name of the area or place or city has been mentioned. > Even no name of the buyer/person making payment of the advance, which is completely missing. 55. It was further submitted that there is no date appearing on each and every transaction whic....
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....es continue even on the next page 5 without mentioning the month. Assuming for the same month "vizsy 2011", the total comes to Rs. 17.24 lakh. These submissions and observations hold good even for the next pages 6-9 which starts from 01.04.20212 and the total comes to a huge amount of Rs. 1.84 crore. Hence, no addition was legally permissible. Kindly refer Jayanti Lal Patel v/s ACIT & Others (1997) 20 TW 546 (Raj), Ashwani Kumar Bharadwaj v/s DCIT (1998) 21 TW 358 (JP) and Ashwani Kumar v/s ITO (1992) 39 ITD 183 (Del). 56. It was further submitted that no iota of evidence were either found or has been referred to/relied upon by the search team or the AO, neither in the statements or the assessment or penalty order even, so as to justify the adverse inference drawn that it is income from flat booking. No corresponding asset is reported or alleged to have been found which was not accounted for/ not disclosed. On the contrary, in the statement recorded u/s 132(4) on 19.12.2012 and again on 02.01.2013, the assessee repeatedly answered that: (i) All the bookings have been duly accounted for in the accounts of the company engaged in the construction business viz Nainani Build....
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....d receipts on day to day basis on different dates. The different manner of writing, pressure exerted, using of pen and different colour of ink, strikingly shows the difference between the diaries found and used for addition i.e the diary marked as Annexure AS Exhibit 08 containing pages 1 to 3, and another diary marked as Annexure-AS, Exhibit-2, Pg 1 to 9, on the basis of which surrender was obtained. Whereas in the diary named as Mansa Special- Notebook seized on 19.12.12 as Annexure-AS Exhibit-08 containing pages 1 to 3 clearly against the human probabilities that if the same person has to write the paper/dairy etc, normally before starting the writing, he will remember his Guru / God and will address/ Name in the same manner but not differently. If a person is habitual to start with writing श्रीगणेशयनमः, he will start writing in this manner alone. Further entries like TDS, income tax etc. shows that these transactions were recorded for memorandum purpose and later on must have been taken into account and recorded in the regular books of accounts. Whatever might have been the reason but what clearly eme....
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....come for the specified previous year found during the course of search initiated under section 132 on or after the 1st day of July, 2012 or it provides for multiples charges, as so contended by the ld AR, in terms of clause (a), clause (b) or clause (c) to sub-section (1) to Section 271AAB of the Act. On close reading of provisions of Section 271AAB, we find that the primary condition or charge for levy of penalty is the existence of undisclosed income for the specified previous year found during the course of search in the case of assessee. Once the said primary condition or charge is satisfied, for the purposes of quantifying the penalty, the Assessing officer has to examine the satisfaction of ancillary conditions as specified under clause (a), clause (b) or clause (c) to sub-section (1) to Section 271AAB. Therefore, merely for the reason that the quantum of penalty varies from 10% to 30% subject to compliances with the ancilliary conditions, it cannot be said that where the AO has initiated the penalty under section 271AAB, there is any ambiguity in the charge or there is any lack of application of mind on part of the Assessing officer. Further, the levy of penalty under Sec....
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....re 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 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, 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; (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 inc....
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.... 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. 12. On reading of the above provisions, it provides that 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 sum computed at the rate of 10% of the undisclosed income of the specified previous year, if such assessee, in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and satisfies other conditions as provided in 271AAB(1)(a). It further provides that where the declaration of undisclosed income is not made by the searched person in the course of search but is declared in the return of income furnished for the specified previous year and subject to satisfaction of other conditions, penalty @ 20% is payable by him. It further provides that where the declaration of undisclosed income is neither made by the searched person in the course of search n....
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....h a clear-cut charge in the penalty order. In any case, existence of a clear-cut charge in penalty order is a must so as to validate any penalty order and so long as there is a clear finding in the penalty order, no infirmity can be said to arise in terms of initiating of such proceedings and subsequent penalty order. In this regard, reference can be made to the Third Member decision in case of HPCL Mittal Energy vs Add. CIT reported in 97 Taxmann.com 03. Though the said decision has been rendered in context of section 271(1)(C), it has laid down certain legal propositions revolving around initiation of penalty proceeding and charges towards levy of penalty and we found the same to be equally relevant in context of section 271AAB for the limited purposes of examining matters around charges towards levy of penalty and therefore, deem it relevant to consider the same for the purposes of present appeal. The Coordinate Bench in the aforesaid decision, after analyzing catena of judicial pronouncements, including the decision of Hon'ble Karnataka High Court in case of Manjunatha Cotton and Ginning Factory (supra), has held as under:- "15. The moot question is that what should be....
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....ulars of income' in the penalty order. If the charge is not levied in the above manner in all the three clear-cut situations discussed above in the penalty notice and also in the penalty order, the penalty order becomes unsustainable in law. 16. The Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton and Ginning Factory has held that a person who is accused of the conditions mentioned in section 271 should be made known about the grounds on which they intend imposing penalty on him as section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in section 271(l)(c) do not exist as such he is not liable to pay penalty. The Hon'ble High Court went on to hold that: 'Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income.... But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law..... Thus once the proce....
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....ther fourth situation as well. It may be when it is definitely a case of under-reporting of income by the assessee for which an addition/disallowance has been made, but the AO is not sure at the stage of initiation of penalty proceedings of the precise charge as to 'concealment of particulars of income' or "furnishing of inaccurate particulars of income'. In such circumstances, he may use slash between the two expressions at the time of initiation of penalty proceedings. However, during the penalty proceedings, he must get decisive, which should be reflected in the penalty order, as to whether the assessee is guilty of 'concealment of particulars of income' or 'furnishing of inaccurate particulars of such income'. Uncertain charge at the time of initiation of penalty, must necessarily be substituted with a conclusive default at the time of passing the penalty order. If the penalty is initiated with doubt and also concluded with a doubt as to the concealment of particulars of income or furnishing of inaccurate particulars of such income etc., the penalty order is vitiated. If on the other hand, if the penalty is initiated with an uncertain charge....
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....he Coordinate Bench (supra), an uncertain charge at the time of initiation of penalty has been made good and substituted with a conclusive default at the time of passing the penalty order and that in such a case, no fault can be found in the penalty order. In such a case, we donot see any legal infirmity in the initiation of penalty proceedings and consequent penalty order so passed by the Assessing officer and the contentions so raised by the ld AR in this regard cannot be accepted. 63. Now, coming to another contention raised by the ld AR wherein he has challenged the findings of the lower authorities that penalty U/s 271AAB is mandatory in nature and there is no discretion with the Income tax authorities. In this regard, we again 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....
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....rived. (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 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 subsection (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 sha....
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....d. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot 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 r....
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....books of account or other documents or transactions found in the course of a search under section 132, which has 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 and whether a finding to this effect has been recorded by the Assessing officer. On perusal of the penalty order, we however find that the only finding which has been recorded by the Assessing officer is that the assessee has made a surrender of undisclosed income of Rs. 2,15,40,344 under various heads and all essential requirements/conditions prescribed under section 271AAB are satisfied and it is a fit case for levy of penalty and the AO accordingly levied penalty @ 10% of income so surrendered during the course of search. The question is whether the penalty is to be levied solely basis the surrender during the course of search, what was the necessity of bringing a specific definition of "undisclosed income" by the legislature while enacting the provisions of section 271AAB of the Act. In our view, once a specific definition of undisclosed income has been provided in section 271AAB, being a penal provision, the s....
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....n respect of seized material i.e, Annexure AS - Exhibit 2, we find contradiction as against what he has stated earlier regarding receipt of payment against flat bookings. In question no. 7, he was asked to explain the figures in certain loose papers found during the course of search marked as Annexure AS - Exhibit 2. In response, he has submitted that at pages 6-9, he has received an amount of Rs. 1,84,14,800 which represents cash amount received on booking of flats on various dates during financial year 2012-13 which he surrenders and will pay taxes thereon as the same is not recorded in regular books of accounts. Therefore, unlike the responses to earlier questions, where he has stated that all payments on account of flat booking have been received through cheque except few payments and all such payments have been accounted for in the books of accounts of the company, in the latter part of the statement, he has submitted that cash has been received on account of booking of flats and which has not been accounted for in the books of accounts of the company. The question is given such contradiction, whether any further enquiry or investigation was carried on by the Assessing officer....
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....ly and undisputedly, the construction business was undertaken by the Company, M/s Nainani Builders Private Limited and not by the assessee in his individual capacity. The booking has been done by such company, the agreements have been entered into by such company with the buyers and the booking amount has been recorded in its books of accounts atleast to the extent of cheque payment which has not been disputed by the Revenue. Admittedly, the assessee is a Director in M/s Nainani Builders Private Limited and such transactions will remain the transactions of the company even though the same have been executed/undertaken by the Director in his fiduciary capacity on behalf of the company. A director represents the interest of the company he is representing and not his individual interest. Only in a scenario, where it is found that he is using such fiduciary capacity for his personal and individual interest and gain, corporate veil can be lifted. In the instant case, this is not even the case of the Revenue. In response to question no. 9 in his statement recorded u/s 132(4), he has stated that he has surrendered a total sum of Rs. 2,50,00,017/- which includes Rs. 1,92,03,797/- for finan....