TaxTMI 
TaxTMI 
2018 (6) TMI 1744
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....ets/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 iincome 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 ld. 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 ld. 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 ultravirus 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 ld. Pr.CIT, Jaipur-1, Jaipur has erred in passing the order u/s 263 of the Income Tax Ac....
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.... 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 the interest of revenue and clearly calls for invocation of section 263 of the Income Tax Act 1961. 12. Keepi....
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....f Rs. 14,97,82,023/-. Even while passing the penalty order the Ld. 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 Ld. Pr. CIT-1 and she has quashed the penalty order passed by the Ld. 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 Ld. 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 Ld. 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 Ld. PCIT is erroneous and unlawful. In the penalty order the Ld. Assessing Officer has not referred to any clause of section 271AAB(1). As such the Ld. Pr. CIT is wrong in observing that the Ld....
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....- (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 Ld. Assessing Officer to have mention the specific clause of section 271AAB(1) while initiating the penalty proceedings. Before that the Ld. Assessing Officer was also required to have recorded his satisfaction in the assessment order regarding the specific default committed by the assessee. None of this has been done by the Ld. Assessing Officer. Therefore the very initiation of the penalty proceedings was unlawful. Similarly while issuing penalty notice the Ld. Assessing Officer has again not specified the clause of section 271AAB(1) for which penalty was initiated. The penalty notice is scanned below: - Thus in view of the a....
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....sessee 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 section 271(1)(c)-By virtue of disallowance which was disallowed was deemed to represent income in respect of which particulars had been concealed-Minimum penalty 100% of tax evaded on account of concealed income was worked out and penalty was levied u/s 271(1)(c)-CIT(A) upheld penalty u/s 271(1)(c)-Appellant-assessee challenged imposition of penalty u/s 271(1)(c)-Held, section 271(1)(c) empowered AO to impose penalty to extent specified if, in....
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....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 consequently, no penalty could be imposed on the assessee if there was no specific ground mentioned in notice-Tribunal at one point of time did observe that since specific contention was not raised by assessee before Appellate Authority, it was mixed question of law and fact and same might also be permissible-Relevant observations of Tribunal were referred in order passed in M.A.No.62/BANG/15 for rectification and Tribunal, had not accepted contention raised....
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....nalty order are scanned below: - The perusal of the aforesaid paras reveal that the Ld. Assessing Officer has passed the order in a routine manner. It is submitted that on the basis of the observations of the Ld. 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 Ld. Assessing Officer in the penalty order that assessee failed to substantiate his income during the assessment proceedings. But there is no such finding in the assessment order that assessee failed to substantiate his income. The copy of the assessment order is available on paper book page number 10 to 13. It is only during the course of assessment proceedings that assessee should have been afforded opportunity to substantiate his income. This was not done. Therefore the observation of the Ld. Assessing Officer in the penalty order is false that during the cou....
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....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 any query which remained unreplied or evaded in course of search or post search investigation-Revenue's Appeal dismissed. (ii) ASSISTANT COMMISSIONER OF INCOME TAX vs. RITU SINGAL (DELHI TRIBUNAL) (2016) 49 ITR (Trib) 0664 (Delhi) Penalty for failure to keep and maintain information and document in respect of international transaction- Deletion of Penalty- Search and seizure action u/s 132 was carried out in case of Company B''- Case of assessee was also covered u/s. 132- Assessee had filed return of income for AY 2010-11, electronically, declaring income of Rs....
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....id 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 raised by authorized officer, AO was not justified in imposing penalty u/s 271AAA specially when offered undisclosed income had been accepted and due tax had been paid by assessee-Penalty imposed u/s 271AAA set aside- Assessee's appeal allowed 4. Dispute Resolution Scheme under Finance Act, 2016- Order u/s 204(2) r.w.s. 206 of the Finance Act, 2016 dated 09.11.2016 by Pr. CIT (Central), Jaipur - Over and above the submission made in the forgoing paras it is submitted that during the course of proceedings u/s 263 it was brought to the kind notice of the Ld. Pr. CIT that the assessee has....
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....r 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." In her order the Ld. Pr. CIT has observed that assessee wrongly availed the benefit under the dispute resolution scheme - 2016 as he was not entitled for the same, it being a case of search. In this regard the submission of the assessee is that the assessee is not expected to know the scheme better than the officers of the department of the level of Pr. CIT (Central). The order passed u/s 204(2) r.w.s. 205 of the Finance Act 2016 dated 09.11.2016 is none other than by Pr. CIT (Central), Jaipur who deals only with search cases. The jurisdiction of Pr. CIT (Central) is exclusively were search and seizure cases. Further the matter of penalty u/s ....
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....een 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 of investment or otherwise, entered into by India with any other country or territory outside India. Thus, the certificate issued in terms of clauses of Direct Tax Dispute Resolution Scheme, 2016, the issue regarding levy of penalty U/s 271AAB of the Act got finalize. Further it has been also observed from the order of the ld. Pr.CIT that during the proceedings U/s 263 of the Act, ld. Pr.CIT has not arrived at a clear and final conclusion that penalty levied by the Assessing Officer @ 10% was not justified in view of the materials collected and statement recorded during the search. Ld. Pr.CIT in his order U/s 263 of the Act has directed that the penalty order dated ....