TaxTMI 
TaxTMI 
2020 (9) TMI 1156
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.... and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty of Rs. 70,78,640/- levied by the Assessing Officer u/s 271AAA of the Income Tax Act, 1961 in respect of undisclosed income surrendered by the assessee u/s 132(4) of the Income Tax Act, 1961 without appreciating that such income was disclosed only because of search action and that the assessee did not specify and substantiate the manner of deriving such income during the search and disclosed in the return of income filed u/s 153A of the Income Tax Act, 1961. Kalyan Keti Toll Pvt. Ltd ITA No.928/Ind/2019 Assessment Year 2016-17 1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty of Rs. 1,33,78,415/- levied by the Assessing Officer u/s 271AAB(1)(a) in respect of surrender made by the assessee u/s 132(4) of the Income Tax Act, 1961 and disclosed in the return of income filed after search & seizure action which itself is the sufficient cause for levying of penalty in accordance with provisions of the Act.. 3. As both the appeals relates to different assessee(s) being part of same business group which we....
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....bunal, Indore (In short ITAT, Indore). Formal and initial penalty show cause notice dated 26.03.2014 was issued u/s 274 r.w.s. 271AAA alongwith the assessment order stating that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. The respondent filed a formal reply stating that the penalty proceedings be kept in abeyance as it has filed an appeal before the Ld. CIT(A) against the assessment order. It seems that taking cognizance of this reply, the penalty proceedings were kept in abeyance and no penalty order was passed, till the matter was pending with the appellate authorities. However, no further notice was issued and straightaway the penalty order was passed on 31.03.2018 levying penalty u/s 271AAA of Rs. 70,78,640/- @ 10% on income of Rs. 7,07,86,364/- stating that Rs. Rs. 6,96,91,395/- was offered during the search action u/s 132(4) and Rs. 10,94,969/- was offered in the return of income filed u/s 153A. 6. Being aggrieved by the penalty imposed by Ld. AO, the Respondent preferred an appeal before Ld. CIT(A) and the Ld. CIT(A) vide order dated 09.08.2019 in Appeal No. CIT(A)-3/BPL/IT11302/2018-19 allowed the respondent's appea....
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....by the Department was decided by the Hon'ble I.T.A.T., Indore on 30.11.2017. Thereafter final penalty order was passed and issued to the respondent, depriving it of any opportunity of being heard. Ld. Counsel for the assessee relied the finding of Ld. CIT(A) and also placed reliance on the following decisions and judgments:- On the proposition that penalty proceedings u/s 271AAA are invalid because of defective and invalid show cause notice (i) Hon'ble Chandigarh Tribunal in the case of Gillco Developers & Builders (P) Ltd V. DCIT in ITA No.168/Chd/ 2017. (ii) Hon'ble I.T.A.T. Chennai in the case of DCIT V/s Shri R. Elangovan ITA No.1199/CHNY/2017 order dated 05.04.2018. (iii) Hon'ble I.T.A.T. Jaipur in the case of Ravi Mathur Vs DCIT ITA No.969/JP/2017. (iv) Hon'ble Madhya Pradesh High Court in the case of Kulwant Singh Bhatia (2018) CCH 0303. On the proposition that the assessee is entitled to immunity as provided under section 271AAA(2) when the additional income was offered and also assessed as business income and also when the authorized officer while recording the statement u/s 132(4) did not put ....
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....M/s Keti Sangam Infrastructure (I) Ltd (supra) adjudicating the same issue of levy of penalty u/s 271AAA of the Act, allowed the grounds raised by the assessee observing as follows:- 4.1 Ground No. 1 to 3 - Through these ground of appeal, the appellant has challenged the levy of penalty of Rs. 70,78,640/-- u/s 271AAA of the Income Tax Act and also the initiation of the penalty proceedings u/s 271AAA and also the penalty show cause notice issued u/s 274. It is seen that the appellant filed its return of income u/s 139(1) on 20.09.2011 declaring an income of Rs. 11,84,65,740/-. including additional income of Rs. 6,85,96,426/- which was offered u/s 132(4). In response to notice issued u/s 153A, the appellant filed the return on 12.10.2013 declaring an income of Rs. 11,95,60,710/-. Including additional income of Rs. 6,85,96,426/- which was offered u/s 132(4). In addition to this the appellant offered an amount of Rs. 10,94,969/- on account of withdrawal of excessive depreciation which was erroneously claimed in the return filed under section 139(1). The AO completed, the assessment on 26.03.2014 on an income of Rs, 13,99,31,620/-- by making certain additions and disallow....
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....e was no satisfaction in the penalty order as well. It is also contended that the penalty order is vague as the AO has stated in Para 2 of the penalty order that the penalty proceedings were initiated under section 271AAA in accordance with Explanation SA of the section 271 of the Act and show cause notice was issued on 26.03.2014. It is contended that the Explanations 5A operate under all together different situations and not at all applicable for the year under consideration which is evident from the fact that penalty has been levied u/s 271AAA and not u/s 271(1)(c). This shows that penalty has been levied under confused state of mind. The appellant also contended that there is no satisfaction in the penalty order as the AO has not mentioned the details and nature of income offered by the appellant. The appellant further contended that the cash flow statement prepared by it, which was also filed before the Investigation Wing, and the income offered in various years on the basis of peak credit working was rejected by the AO in the assessment order and separate and independent additions were made by the AO in all the years. However, the cash flow statement and the peak credit worki....
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....e. After taking into consideration the assessment order and also the penalty order and all the contentions of the appellant carefully it is seen that while initiating the penalty proceedings in the assessment order the AO has simply stated that penalty proceedings are initiated U/S 271AAA and no reason has been given as to how the said penal provision is attracted in the case of the appellant. Therefore, no requisite satisfaction was drawn in the assessment order. From a perusal of the notice dated 26.03.2014 issued u/s 274, it is seen that both the charges i.e. concealment of particulars of income or furnishing inaccurate particulars of income, which are relevant for penalty u/s 271(1)(c) are mentioned therein and the. charges relevant for levy of penalty u/s 271AAA are not mentioned. Similarly a perusal of the penalty order shows that the nature and details of undisclosed income has not been discussed in the said order and penalty has been levied merely stating that the assessee has not disclosed the manner of deriving income. In the penalty order in Para 2 it is also stated that penalty proceedings are initiated in accordance with Explanation SA to section 271. ....
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....he Honourable ITAT was affirmed by the Honourable Jurisdictional High court. In the present case before me also the penalty show cause notice issued under section 274 was defective and no specific charge under section 271AAA was mentioned. Therefore, the proposition laid down by the Honourable Jurisdictional High Court of Madhya Pradesh is applicable in the present appeal also and it is held that the penalty proceedings initiated in this case are not as per law and the penalty so levied is wrong. The appellant has stated that in its other group cases also, wherein penalties were levied u/s 271AAA in the assessment proceedings carried out as a result of the same search and on similar charge of not explaining the manner of earning undisclosed income, have been deleted by the Honourable ITAT Indore Bench in the cases of M/s Keti Sangam Infrastructure (I) Ltd. and other group company appeals and also in the case of Shri Tikamchand Garg and other individual cases of the group, copies of such orders have also been filed. A perusal of the order passed in the case of Shri Tikamchand Garg in IT No.1027 & 1028/Ind/2016 and other case by Honourable Jurisdictional ITAT on 28.06.2017 f....
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....ing and also during the course of assessment proceedings which is well evident from the assessment order itself. We find that under the similar facts, we both the undersigned of this order have adjudicated the similar issue in assessee's another group concern M/s. Keti Sangam Infrastructure (I) Ltd and Keti-T Construction (India) Ltd (supra) wherein we after referring to our decision in the case of Smt. Shruti Garg ITA No.988/Ind/2016 (supra) deleted the penalty levied u/s 271AAA of the Act observing as follows:- "the assessees are eligible for getting immunity from paying penalty u/s 271AAA of the Act as the undisclosed income has been admitted during the course of search and the manner of earning income is from business sources, due taxes with interest have been paid, surrendered income has been offered as business income in returns of income filed and they have been accepted and assessed as business income only and in this manner the assessee has successfully fulfilled all the three conditions u/s 271AAA of the Act. Even otherwise, if the revenue has not asked specific question relating to the manner of deriving undisclosed income, the assessee while fulfilling the firs....
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....E GIVEN UNDER SECTION 139(2)/148 OF THE Income Tax Act 1961, No...... dated ..... or have without reasonable cause failed to furnish it within the allowed and the matter required by the side section 139(1) or by such notice. *Have without reasonable cause failed to comply with a notice under section 22(4)/32(2) of the India Income Tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act 1961. No. dated. have concealed the particulars of your Income or furnished inaccurate particulars of such Income. You are hereby requested to appear before me on 24.04.2014 at 3.30 PM and show cause why an order imposing a penalty on you should not be made under section 271AAA of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAA. Sd/- (Ram Kumar Yadava) Dy. Commissioner of Income Tax (Central) Indore 13. The above notice clearly spells out that the provisions under which....
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.... 20. A perusal of the above notice shows that though the Assessing officer has intended to initiate penalty proceedings u/s 271AAA(1) of the Act, however, the wording written in the body of the letter does not conform to the charges of the provisions of section 271AAA of the Act, rather, the assessee has been show caused on the charge of furnishing of inaccurate particulars of income, which falls under the scope and purview of section 271(1)(c) of the Act. The assessee, therefore, is not show caused for levy of penalty under the provisions of section 271AAA, rather for doing an act inviting penalty u/s 271(1)(c) of the Act, which otherwise is neither arising out of the facts of the case nor established against the assessee. Thus, the penalty proceedings conducted against the assessee u/s 271AAA of the Act were invalid at its very inception because of the defective and invalid show cause notice, rendering the entire penalty proceedings void abnitio. The penalty levied against the assessee is thus not sustainable on this score also. 14. As the above decision of Hon'ble Chandigarh Tribunal is squarely applicable on the assessee we therefore respectfully following the s....
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....CIT(A) allowed both the grounds and deleted the penalty levied u/s 271AAB of the Act. Aggrieved Revenue is now in appeal before the Tribunal. 17. Ld. Departmental Representative vehemently argued supporting order of Ld. A.O. 18. Ld. Counsel for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of Indore in the case of Dr. Rajesh Jain Vs. DCIT ITA No.905/Ind/2018 order dated 19.02.2020 for Assessment Year 2014-15 and Shri Vivek Chugh V/s ACIT ITA No.6/36/Ind/2017 order dated 28.03.2019. Ld. Counsel for the assessee also submitted that the facts of the instant case are same to the extent of issue of similar type of defective notice without specifying the specific charge against the assessee as mandated in Section 274 r.w.s. 271AAB of the Act. 19. Ld. Counsel for the assessee further submitted that on merits also the assessee has a strong case as penalty levied u/s 271AAB of the Act is leviable on undisclosed income whereas in the case of assessee there was not such undisclosed income. The income offered u/s 41(1) of the Act was in the regular return of income filed u/s 139(1) of the Act and the outstan....
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....case of ACIT Central Circle-2 v/s Marvel Associates (2018) 92 taxmann.com 109 dated 16.03.2018. 20. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred and relied by us. Revenue's sole grievance is against the deletion of penalty by Ld. CIT(A) levied by Ld. A.O u/s 271AAB of the Act at Rs. 1,33,78,415/-. We find that the assessee was subject to search u/s 132 of the Act on 4.9.15 and on the date of search statutory time left to file regular return of income for Assessment Year 201616 u/s 139(1) of the Act did not expired. It is further not disputed that before the issuance of notice u/s 143(2) of the Act, assessee had e-filed the return of income u/s 139(1) of the Act on 17.10.16 declaring income of Rs. 20,990/-. Further the income shown by the assessee in the return has been accepted by the Ld. A.O in the assessment order framed u/s 143(3) of the Act. The only dispute is with regard to the penalty levied u/s 271AAB of the Act @10% on the income offered u/s 41(1) of the Act at Rs. 13,37,84,149/- on account of cessation of liability. 21. We find that Ld. CIT(A) after dealing extensively with the facts of th....
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....sment order and the notice issued under section 274 was also a defective notice as no specific charge u/s 271AAB was mentioned against the appellant, on the contrary charges relevant for penalty u/s 271(1)(c) i.e. concealment of particulars of income and furnishing of inaccurate particulars of income were mentioned. The appellant has also challenged that the income offered by it was not undisclosed income. Referring to the assessment order, the penalty show cause notice and the penalty order, it is contended that no case of any undisclosed income has been made out by the AO. The appellant has challenged the levy of penalty u/s 271AAB on the ground that there was no satisfaction in the penalty order as well, as the appellant has not earned any undisclosed income as evident from the penalty order. It is also contended that the penalty order is vague as it is simply stated that the assessee has offered the amount to tax u/s 41(1) of the Act as cessation of liability, therefore, penalty is leviable U/S 271AAB(1)(a). It is also contended that the amount payable was duly reflecting in the books of accounts of the appellant and that the said liability was otherwise found in order and it i....
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....uly recorded in the books of the appellant and was on account of cost of the project which was capitalized in the books. The appellant has rightly taken the support of the decision of Honourable Supreme Court in CIT Vis Mahindra & Mahindra Ltd. (2018) 404 ITR 1 for the contention that if the liability is in respect of capital asset, the deduction claimed by the assessee is only on account of depreciation of such assets and the purchase amount or the expenditure is not debited to the trading account or to the profit and loss account, therefore, the cessation of liability in such case is not an income u/s 41 (1). It is also seen that no case of any undisclosed income has been made out either in the assessment or in the penalty order. It is rightly pointed out by the appellant that there is not even a whisper of 'undisclosed income' in the assessment order and also in the penalty order. There is no reference of any incriminating material or any other documents or record found during the search regarding the said contractor or regarding the liability appearing in the books of the appellant. There is nothing to suggest on record that the said liability was ingenuine or ....
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....e Learned counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that Learned Tribunal has rightly relying on the decision of CIT Vis Manjunatha Cotton Ginning Factory and CIT Vis SSA'S Emerald Meadows rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA. No(s) 912018, 10/2018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed". It is observed that facts of the present case under appeal before me are identical to that of the case of Kulwant Singh Bhatia (Supra) in so far as additional_ income was offered by the assessee in the returns filed after the search and penalties u/s 271(1)(c) were levied on the basis of show cause notice issued without striking off either of the two charges. Similarly in the present case penalty show cause issued under section 274 r.w.s . 271AAB mentioned wrong and inapplicable charges. In the case before the Honourable High Court, the penaltie....
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....ome Tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act 1961. No. dated. have concealed the particulars of your Income or furnished inaccurate particulars of such Income. You are hereby requested to appear before me on 29.11.2017 at 11.30 AM and show cause why an order imposing a penalty on you should not be made under section 271AAB of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAB. Sd/- (Vinita Dubey) Dy. Commissioner of Income Tax,Central Circle-2 Indore 23. We find that the above show cause notice is cryptic in nature and not in accordance with law since the notice issued for levying the penalty u/s 271AAB of the Act refers to the charges provided in Section 271(1(c) of the Act. When the penalty has been initiated u/s 271AAB of the Act then the charges should be those mentioned in Section 271AAB of the Act about the levy of penalty under various sub-c....
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.... of Section 271AAB and 274 of the Act which reads as follows:- Section 271AAB. '271AAB. Penalty where search has been initiated.- (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 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 und....
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....i) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account 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.'. Section 274 (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income- tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner.] (3) An income- tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer'] 9. From perusal of the above provision we observe that sub section 3 of Section 271AAB of the Act talks abo....
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....d to furnish it within the allowed and the manner required by the side section 139(1) or by such notice. *Have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the India Income Tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act 1961, No. dated. have concealed the particulars of your Income or furnished inaccurate particulars of such Income. You are hereby requested to appear before me on 21.04.2016 at 04.00 PM and show cause why an order imposing a penalty on you should not be made under section 271AAB of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAB. Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore 11. From going through the above notice issued to the assessee, we find that there is no mention about various conditions provided u/s 271 AAB of the Act. In the notice dated 22.03.2016 ....
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....appeal has been filed raising the following substantial questions of law. (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under Section 274 r.w.S. 271(1)(c) is bad in law and invalid despite the amendment of Section 271 (1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued under Section 274 without taking into consideration the assessment order When the assessing officer has specified that the assessee has concealed particulars of income? ....
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....penalty proceedings". View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that there was no merits in the petition filed by the Revenue. Considering the above cited judgments, we hold that the notice issued ujs.274 r.w.s. 271AAB of the Act, reproduced by us at para 5 above was not valid. Ex-consequenti, the penalty order is set aside. 14. The view taken by the Co-ordinate Bench of Chennai in the case of DCIT V/s R. Elangovan 1199/CHNY/2017 order dated 05.04.2018 has been subsequently followed by the Co-ordinate Bench of Jaipur in the case of Ravi Mathur Vs. DCIT, ITA No.969/JP/2017 holding that such show cause notice issued u/s 274 r.w.s. 271AAB of the Act are not sustainable in law". 15. As regards to judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) which has been relied by the Departmental Representative is concerned, we find that in the decision rendered by the Co-ordinate Bench of Jaipur in the....
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....atural justice has not been violated. Thus in view of above discussion penalty imposed by AO u/s. 271AAB of the Act is confirmed." Thus it was found by the Hon'ble High Court that the mistake in mentioning the section in the show cause notice is covered under section 292BB and the AO will get the benefit of the same. The said decision will not help the case of the revenue so far as the issue involves the merits of levy of penalty under section 271AAB. As regards the decision of Kolkata Benches of the Tribunal in the case of DCIT vs Amit Agrawal (TS-7675ITAT-2017(Kolkata)-O) (Supra), we find that the said decision was subsequently recalled by the Tribunal and a fresh order dated 14th March, 2018 was passed by the Tribunal in favour of the assessee. Therefore, the decision relied upon by the Ld D/R is no more in existence." 16. We, therefore respectfully following the judgment/decision referred above and in the given facts and circumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves t....
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....ount or other documents or transactions found in the course of a search under section 132, 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; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account 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.'. 27. From perusal of the above definition of undisclosed income for the purpose of levy of penalty u/s 271AAB of the Act, in our understanding one of the component for not treating the income as undisclosed income will be if such income stands duly recorded on or before the date of search in the books of accounts or other documents maintained in the normal course relating to such previous year. Now examining to facts of the instant case we fi....