TaxTMI 
TaxTMI 
2018 (6) TMI 1743
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....se of search, various assets/books of account and documents were found and seized. The Assessing Officer passed penalty order on 20/08/2015 U/s 271AAB of the Act and levied the penalty @ 10% at Rs. 1,49,78,202/- on total undisclosed income of Rs. 14,97,82,023/-. The ld. Pr.CIT, Jaipur-1, Jaipur, has passed order U/s 263 of the Act and penalty imposed by the Assessing Officer is enhanced by Rs. 2,99,56,404/-. 3. Now the assessee is in appeal before the ITAT by taking following grounds of appeal: "1. In the facts and circumstances of the case the learned Pr. CIT, Jaipur- 1, Jaipur has erred in passing the order u/s 263 of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed. 2. In the facts and circumstances of the case the learned Pr. CIT, Jaipur- 1, Jaipur has erred in passing the order u/s 263 of the Income Tax Act, 1961 after issuing final certificate by the Pr. CIT- Central in Form- 5 under the Direct Tax Dispute Resolution Scheme, 2016 which is ultra-virus and against the principle of natural justice and without having any jurisdiction over the issue. 3. In the facts and circumstances of the case the learned Pr.CIT, Jaipur- 1, Ja....
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....g that of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 831 held that an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. In this case it is seen that the AO has not considered his own findings available on records while imposing penalty @ 10% under clause (a) of Sec. 271AAB the Act. The AO has without application of mind applied the wrong provision/clause of Sec. 271AAB to the facts available on record which has caused revenue loss to the minimum extent of Rs. 2,99,56,404/- as clause (c) of section 271AAB was to be applied to the facts of the case. This omission as made by the assessing officer resulting in an order which is erroneous as well as prejudicial to the interest of revenue. It has necessitated the initiation of proceedings under section 263 of the Income Tax Act. This has been done in a very mechanical way. This action of the AO has resulted in an erroneous penalty order under Section 271AAB of the Income Tax Act, which is clearly prejudicial to....
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..... Subsequently a penalty has been imposed by the Learned Assessing Officer u/s 271AAB of Rs. 1,49,71,202/- being 10% of the undisclosed income of Rs. 14,97,82,023/-. Even while passing the penalty order the Learned Assessing Officer has not specified the default of the assessee with respect of clause (a), (b) or (c) of section 271AAB(1). The penalty order has been passed u/s 271AAB. It is this penalty order which has been subjected to proceedings u/s 263 by the Learned Pr. CIT-1 and she has quashed the penalty order passed by the Learned Assessing Officer vide order dated 27.03.2018 and has directed to impose penalty more by Rs. 2,99,56,404/-. The directions of the Pr. CIT-1 are scanned below: - The perusal of the aforesaid concluding para of the order u/s 263 passed by PCIT-1 reveals the following: - (i) The Learned Assessing Officer has passed the penalty order without application of mind and applied the wrong provisions/clause of section 271AAB. (ii) The penalty order has been passed by the Learned PCIT in a routine and perfunctory manner by applying the incorrect clause of section 271AAB. It is submitted that the order passed u/s 263 by the Learned PC....
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.... (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)." The perusal of the aforesaid provisions reveals that there are three different defaults mentioned in cause (a), (b) & (c). It was incumbent upon the Learned Assessing Officer to have mention the specific clause of section 271AAB(1) while initiating the penalty proceedings. Before that the Learned Assessing Officer was also required to have recorded his satisfaction in the assessment order regarding the specific default committed by the ....
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....ty is not at all imposable in the case of the assessee despite the direction of the Pr. CIT given u/s 263 of the Income Tax Act, 1961 and hence the order u/s 263 deserves to be quashed. It is submitted that the above proposition is the settled position of law that penalty proceeding should be initiated lawfully under the specific provisions of the Act/specifying the particular limb of the section and intimating the assessee the specific clause/limb for which his defense/explanation is sought. The following case laws are quoted in support: - (i) AUTORIDERS INDIA PVT. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX (BOMBAY TRIBUNAL (2018) 161 DTR 0217 (Mumbai)(Trib), Penalty u/s 271(1)(c)-Concealment of income-Furnishing of inaccurate particulars of income-Validity of penalty order-Appellant-assessee company was incorporated under provisions of Companies Act, 1956- Assessee filed return of income at loss which was subjected to scrutiny u/s 143(3) and subsequently disallowance was made on account of foreign travelling expenses, Interest payment, Cash credits and interest on investments, thus, total disallowance made in original order was within meaning of sect....
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....ith order of imposition of penalty-Tribunal confirmed decision of CIT(A) in levy of penalty u/s 271(1)(c)-Held, during course of hearing assessee tendered copy of notice issued to assessee u/s 271(1)(c) for imposition of penalty, which as per assessee was part of record in proceedings before Tribunal-Revenue was unable to dispute that notice was issued by revenue for imposition of penalty u/s 271(1)(c)-Hence, said notice for purpose of consideration was taken on record-Said notice disclosed that it was printed notice and further no specific ground was mentioned, which might show that penalty could be imposed on particular ground for which said notice was issued-In case of M/s.Manjunatha Cotton and Ginning Factory, it was held that notice would have to specifically state ground mentioned in s 271(1)(c) as to whether it was for concealment of income or furnishing incorrect particulars of income said penalty proceedings was being initiated-That sending of printed form wherein grounds mentioned in s 271 of the Act would not satisfy requirement of law-Further, assessee should know ground which he had to meet specifically otherwise principles of natural justice would be violated and cons....
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.... OF 2016 AUGUST 5, 2016. 3. Order levying penalty u/s 271AAB of the Income Tax Act, 1961 is unlawful: - It is submitted that the Learned Assessing Officer has passed the order u/s 271AAB. In the entire penalty order the Learned Assessing Officer has not discussed under which clause (a), (b) or (c) of section 271AAB the assessee has defaulted or which clause (a), (b) or (c) of section 271AAB is applicable in the case for the assessee and in what manner. The relevant paras of the penalty order are scanned below: - The perusal of the aforesaid paras reveal that the Learned Assessing Officer has passed the order in a routine manner. It is submitted that on the basis of the observations of the Learned Assessing Officer that "The assessee has not substantiated this income. During assessment proceedings the assessee could not satisfactorily explain the source of the income and could nto produce any evidentiary documents in its favour". The Pr. CIT has observed in para 11 of her order as under: - The perusal of the aforesaid observation of the Pr. CIT reveals that entire order is based on the observation of the Learned Assessing Officer in the pena....
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....O accordingly imposed penalty on undisclosed income-CIT(A) deleted penalty holding that exception provided in section 271AAA for non-imposition of penalty had duly fulfilled-Held, as per section 271AAA(2)(i), one of conditions for obtaining relief from imposition of penalty under s.271AAA was that assessee in statement recorded under s.132(4) of the Act admitted undisclosed income and 'specifies manner' in which such income was derived-Revenue admitted that assessee had not failed to substantiate manner in which undisclosed income derived-Assessee had not failed to specify manner at first place when substantiation thereof had not been called into question by Revenue-Thus, case of Revenue required to be summarily dismissed on this ground alone-Income considered as undisclosed income in statement under s.132(4) had been duly incorporated in return filed pursuant to search-Revenue could not plead deficiency on part of assessee to specify manner which had not been called into question at time of search-Nowhere in assessment order or in penalty order, revenue made out case that manner of earning undisclosed income was enquired into post search stage either-Revenue had not pointed out an....
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....AT as mentioned in CIT(A)'s order, ITAT upheld order of CIT(A) wherein CIT(A) deleted penalty in dispute- Revenue's Appeal dismissed. (iii) NEERAT SINGAL vs. ASSISTANT COMMISSIONER OF INCOME TAX (DELHI TRIBUNAL) (2014) 101 DTR 0238 (Del) Search was carried out at premises of assessee in which certain documents were seized, assessee had surrendered certain amount as an undisclosed income which was also declared in his return of income for AY 2010-11-Due taxes thereon was also paid before filing of return and same was accepted-In statement u/s 132 (4) assessee stated that said income was derived from forward / speculative and property transactions carried out by him during financial year 2009-10-AO being not satisfied with explanation of assessee imposed penalty u/s 271AAA-CIT(A) upheld findings of AO-Held, penalty u/s 271AAA is not leviable where assessee specify manner in which an undisclosed income was derived and also substantiate manner-In instant case no query was raised by authorized officer during course of recording of statement of assessee u/s 132 (4) about manner in which undisclosed income has been derived and about its substantiation-In absence of query....
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.... by issue of certificate in form no. 5 of the Direct Tax Dispute Resolution Rules 2016 by the order F.No. Pr. CIT(Central)/Tech/2016-17/2347 dated 18.10.2016 and the assessee has also granted immunity from prosecution for the above penalty proceedings. In the Direct Tax Dispute Resolution Scheme 2016 sub-section (3) of section 204 which reads as under: - "Every order passed under sub-section (2), determining the sum payable under this Scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be re-opened in any other proceeding under the Income Tax Act or the Wealth-tax Act or under any other law for the time being in force, or as the case may be, under any agreement, whether for protection of investment or otherwise, entered into by India with any other country or territory outside India." So when the penalty levied u/s 271AAB of the Income Tax Act, 1961 of the assessee has been finalized by passing order under sub-section(2) of section 204 of the Direct Dispute Resolution Scheme 2016 there is no question of any revision u/s 263 of the Income Tax Act, 1961 which is clear violation of section 204 of the Act." ....
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.... levied U/s 271AAB (1)(a) of the Act. The assessee has filed an appeal against the order of levy of penalty by the Assessing Officer on 01/09/2015. During the pendency of appeal before the ld. CIT(A), the assessee filed an application under the Direct Tax Dispute Resolution Scheme, 2016. The Ld. Pr.CIT (Central), Jaipur has accepted the application under the Direct Tax Dispute Resolution Scheme, 2016 and issued certificate dated 09/11/2016. This fact establishes that the issue regarding levy of penalty attained finality. This certificate issued by the Ld. Pr.CIT(Central), Jaipur dated 09/11/2016 has not been withdrawn till date. By the certificate, the assessee has been granted immunity from prosecution also. Sub-section(3) of Section 204 of the Direct Tax Dispute Resolution Scheme, 2016 also provides that every order passed under sub-section (2), determining the sum payable under this Scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceedings under the Income Tax Act or the Wealth Tax or under any other law for the time being in force, or as the case may be, under any agreement, whether for protection....
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.... in future then the appeal of assessee before CIT(A) shall revive. In such a situation also the Pr.CIT shall not have jurisdiction to invoke provisions of Section 263 of the Act. There is no scope for treating the penalty order passed by the Assessing Officer as erroneous and prejudicial to the interest of revenue. Accordingly, the order U/s 263 of the Act passed by the ld. Pr.CIT is hereby quashed. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 14/06/2018. ============= Document 1 application of mind, would be an order failing in that In this case it is seen that the AO has not considered his own findings available on records while imposing penalty @ 10% under clause (a) of Sec. 271AAB the Act. The AO has without application of mind applied the wrong provision/clause of Sec. 271AAB to the facts available on record which has caused revenue loss to the minimum extent of Rs. 2,99,56,404 /- as clause (c) of section 271AAB was to be applied to the facts of the case. This omission as made by the assessing officer resulting in an order which is erroneous as well as prejudicial to the interest of revenue.....
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....g advance tax payment, if any. Penalty proceedings u/s 271AAB of the IT Act, 1961 has been initiated for undisclosed income by issue of notice u/s 274 r.w.s. 271AAB of the Act. Document 3 PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE I.T. ACT, 1961 PAN/GIR NO: ADAPM3717B To, Shri Ram Das Maheshwari, 69, Sukh Sagar, Sardar Patel Marg, Office of the Deputy Commissioner of Income tax, Central Circle-3, Jaipur. Dated. 13.3.2015 Dhuleshwar Garden, Jaipur Whereas in the course of preceding before me for the A.Y. 2013-14 it appears to me that as per section 274 and 275 read with the following sections(s) you are liable for penalty :- READ WITH SECTION 271(1)(b) 271(1)(c) 271A 271AAB 271B 271C 271D 271E 271F 272A(1) Barges Failed to comply with a notice under section 142(1) or section 143(2) or failed to comply with a direction under section 142(2A). Concealed particulars of income or furnished inaccurate particulars of income. Filed to keep, maintain or retain books of accounts, documents etc., as required u/s 44AA. On assessed undisclosed Income. Failed to get the accounts....
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....er by applying the incorrect clause of section 271AAB in the case of the assessee for imposing penalty. It is therefore liable to revision under explanation (2) clause (a), clause (b) of section 263 of the Income Tax Act. Therefore holding that there has been short levy of penalty of Rs. 2,99,56,404/- the penalty order dated 20/8/2015 is set aside on this issue with a direction to the assessing officer to pass the same in the case of the assessee denovo in accordance with law after making the necessary examination and verification regarding the issue under discussion.The AO is directed to finalize the penalty order keeping in view the facts of the case and correct application of law. However an opportunity to the assessee to state its case is to be allowed in the interest of natural justice. Document 5 11. While imposing the penalty u/s 271AAB of the act it is seen that the AO has also arrived at the conclusion that the assessee has not substantiated this income as during assessment proceedings the assessee could not satisfactorily explain the source of the income and could not produce any evidentiary documents in its favor. However while impos....