TaxTMI 
TaxTMI 
2021 (4) TMI 163
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....dditional income of Rs. 12,50,00,000/- duly offered by the appellant on the basis of seized papers found during search while filing the return of income and further ignoring the fact that the appellant has substantiated the manner in which the income was derived and paid the due tax on this income, thus the penalty so levied on the wrongful appreciation of facts deserves to be deleted, more particularly when the additional income so declared under the head "Income from Business or Profession" was assessed as such without making any adverse remark over the mode and manner of earning of income in the assessment order. 2.2 That the Ld. CIT(A) has further erred in ignoring the fact that the additional income offered by the appellant while filing the return of income was admitted in the statement recorded u/s 132(4) during the course of search, thus the so penalty imposed on such income deserves to be deleted. 3. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal." In this appeal, the assessee has also raised an additional ground and the same is reproduced as under: "On the facts and....
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....ried out in any of the matter then it can be raised at any stage of appellate proceedings. Considering the totality of facts and circumstances and prayer of the assessee, we admit the additional ground raised by the assessee. 6. At the time of hearing of the appeal, the ld. AR appearing on behalf of the assessee do not want to press additional ground raised and prayed to dismiss the same as not pressed. The ld. CIT-DR has raised no objection if the additional ground is dismissed as not pressed. Therefore, in view of the prayer of the assessee, we dismiss the additional ground taken by the assessee being not pressed. 7. Now we deal with the other grounds raised by the assessee. In this regard, the brief facts of the case are that a search and seizure action u/s 132(1) of the Act and survey operation u/s 133A of the act was carried out on 04.09.2013 on the members of Okay plus- JKD group, of which assessee is one of the members. During the course of search, statements of the assessee and other persons were recorded. In the statement of the assessee recorded u/s 132(4) of the Act, income pertaining to the year under appeal was admitted. Thereafter assessee filed his return of income....
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....ness of the assessee, he was not required to maintain books of accounts. The profit earned out of sale of land was given as advances to various persons which was recorded in systematic manner in the diary (AS-4) (APB 28-34) which was found during the course of search. On being asked during the course of search about this diary, the assessee stated the correct fact that it contains advances given to various persons totalling to Rs. 12.50 crore and obviously admitted it to be his income. As stated above, this diary also contained certain other notings of money which was duly found recorded in the books of accounts of group companies and since the assessee was not having any business income and does not require to maintain regular books of account thus, the entry of advances were recorded in this diary maintained by assessee. As per the provisions of section 271AAB, the undisclosed income is defined as under (for the purpose of clarity, the relevant provisions are reproduced below):- Explanation.-For the purposes of this section,- (a) ......... (b) ......... (c) "undisclosed income" means- (i) any income of the specified previous year represented, either wholly or partly, b....
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....ary also contained other entries of other group concerns which are duly recorded in the books of accounts of the respective concerns. Since assessee was not required to maintain any books of accounts, these entries remained recorded in the diary itself maintained by assessee in regular course. Thus it is submitted that the income of Rs. 12.50 crore so reflected by way of entries is found recorded in the 'document' namely diary in the instant case maintained in regular /normal course by the appellant and is therefore not the 'undisclosed income' within the meaning of section 271AAB. It is further submitted that as a result of entire search nothing incriminating was found pertaining to the assessee. Moreover the search was conducted on 04.09.2013 i.e. in the early half of the Financial Year and assessee had enough time till the close of financial year to include this income in its return of income. Further the time for payment of first instalment of advance tax (i.e. 15.09.2013) had also not expired as on the date of search. Moreover it is not the case of the department that assessee would not have disclosed this income in the return to be filed after the close of financial year. ....
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....had also held to the effect that disclosure made on the basis of entries in the diary maintained in normal course would be covered as entries in 'documents' in the case where books of accounts are not maintained and therefore could not come within the ambit of 'Undisclosed Income'. Further heavy reliance have been placed by the Ld. AO as well as the Ld. CIT(A) on the statements of the assessee recorded u/s 132(4) to hold the income so declared by the assessee as undisclosed income. In this regard it is submitted that the statements recorded during the course of search were under the pressure created and the natural heat which generates due to the fact of search and this fact is further established from the sequence of events taken place where search u/s 132 was initiated at the business and residential premises at around 7.00 A.M. of 4.09.2013 where the preliminary statements of the assessee were recorded at his residence(APB 35) and it was on 05.09.2013 at 5.45 PM i.e. after almost 35 continues hours of search where search team was moving around the assessee, when the confessional statements were recorded at the office and the search was finally concluded (APB 16). During the co....
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....relevant circumstances. Therefore it is not mandatory to impose the penalty but a discretion is vested not to impose the penalty considering the facts and circumstances of that case which in section 271AAB is very heavily cast upon AO since having special circumstances. Hon'ble Supreme court in the following case has held as under: CIT Vs. P.K. Noorjahan 237 ITR 570 (SC)(case law compilation page 61-63) Unexplained investment - Scope of section 69 - ITO is not obliged to treat source of investment as income whenever explanation regarding it is not satisfactory - Word "MAY" in section 69 cannot be interpreted to mean "SHALL" - Income Tax Act, 1961, s. 69. This judgement, though is in context of sec. 69, but the ratio decided by hon'ble court will be equally applicable in penalty proceedings which are more harsh in nature. In support of this contention further reliance is placed on the recent decision dated 09.02.2018 of Kolkata Bench of the Hon'ble ITAT in the case of DCIT Vs. Manish Agarwala in ITA No. 1479/Kol/2015 (supra).The relevant observations of the Hon'ble Tribunal are as under(case law compilation page 56-60): "On the other hand, Ld. AR Shri Miraz D. Shah, suppor....
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....use 96 which explains the intention for introduction of particular amendment however the same cannot replace the provision of act where the word "may" is used and not "shall". In this regard various decisions have already been cited in the earlier paras of the submission. Hence, the observation of the Ld. CIT(A) that the penalty u/s 271AAB is mandatory is patently wrong and deserves to be ignored and excluded being made without properly appreciating the provision and language of the Act which is very much clear and inserted in the statute after long discussions before both the houses of parliament. The Ld. CIT(A) has observed in its order that 'recently Hon'ble Kolkata Tribunal has held that Penalty u/s 271AAB on undisclosed income is automatic in nature - 88 taxmann.com 288'. It is submitted that the aforesaid order of Hon'ble ITAT was in the case of DCIT, CC-2(2), Kolkata Vs. Amit Agarwal in ITA No. 1471, 1475 & 1476 of 2015 dated 10.11.2017. (Other two appeals were against Madan Lal Beswal & Manoj Beswal of the same group). It is submitted that aforesaid orders were passed by the ITAT, Kolkata 'D' Bench ex-parte on 10.11.2017, which on application filed by appellants, have b....
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.... Hence, in these facts and circumstances and in view of the aforesaid mistake of primary fact rightly pointed out by the ld. AR, we deem it fit to recall the orders of this Tribunal dated 10.11.2017 in the case of aforesaid assessees." In the aforesaid scenario, the legal position is that an order which has been recalled for de novo adjudication, is no order in the eyes of law and so it cannot be treated as a precedent. Hence, the CIT(A) has erred in placing reliance on the order which had already been recalled and is thus no order. On the other hand it is submitted that in the same group of cases the Hon'ble ITAT Kolkata Bench in the case of Manish Agarwal (supra) has decided the similar issue in favour of assessee holding that penalty u/s 271AAB is not leviable. Moreover, recently the Hon'ble ITAT Kolkatta Bench after re-fixing the above cases of Amit Agrawal, Madanlal Beswal etc. has finally decided the cases to the effect that penalty u/s 271AAB is not leviable (vide ITA No. 1475 & 1476/Kol/2015 dt. 14.03.2018). Thus these decisions so referred by Ld. CIT(A) now squarely support the case of appellant and not of department. It may be noted that the language of section 271A....
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....nterference. CIT vs. Dr. Giriraj Agarwal Giri (2012) 346 ITR 152 (Raj.)(HC)(case law compilation page 67-68) Imposition of penalty depends on facts and circumstances of each case. The AO imposed the penalty on so called three items of so called concealed income. Each item was examined, thoroughly and in detail, by the Commissioner of Income-Tax (Appeals) as well as the Income Tax Appellate Tribunal and by a reasoned order, both came to a conclusion that additions are based on estimation only. A fact or allegation based on estimation, cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly imposed by the Assessing Officer. Therefore appeal filed by Appellant rejected. Accordingly, in view of the facts and circumstances of the case and the legal position emerging out of the aforesaid various decisions, it is submitted that Ld. AO has erred in imposing the penalty u/s 271AAB as the case of assessee in the context of its income of Rs. 12.50 crore so shown in the return of income does not fall within the ambit of 'undisclosed income' for the purpose of section 271AAB and since the levy of penalty u/s 2....
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....9(1) of the Income Tax Act, 1961. The assessee has filed the return of income for the year under appeal after considering all the entries as contained in the seized documents and making reconciliation of the same and the income so declared in the return of income includes the income admitted during the course of search in statements recorded u/s 132(4) which was based on memory of the assessee. The return of income was filed beyond the statutory time limit provided u/s 139(1) solely for the reason that the copies of the statements recorded of the assessee, his family members and employees, wherein the stated surrender has been admitted by the assessee during the course of search, were not provided. Counsel of the assessee regularly visited the office of the Ld. ADIT and Ld. AO and requested them many times for the supply of the copies of the statements however, the same were not provided till date. Further, the assessee has also requested in writing through various letters (APB 17-21) requesting for supply of copies of statements of assessee, however the requests of the assessee were not considered and the copies of the statements were not provided until the filing of return by t....
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....gether with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii)on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). As submitted above, the search was conducted on 04.09.2013 where in the course of search various loose papers and documents were impounded by the department and after request, copy of the loose papers and documents were provided to the assessee however, copy of the statements were not provided. Even after th....
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....d provided u/s 139 of the Income Tax Act, 1961. The Central Excise Department vide letter dated 21.08.2014 has asked the assessee to file the details of the admission made during the course of search of additional income to the extent of Rs. 75.56 crores and after receiving such notices, assessee visited the office of the Ld. AO and ask him to supply such copies of the statements where that admission of more than Rs. 75 crores were made by assessee or his family members during the course of search conducted on 04.09.2013. Besides this written requests were also made on 15.05.2014, 08.07.2014 & 10.12.2014. However, even after filing of return of income a further request was made vide letter dated 20.03.2015 to the Ld. AO for supply of the copies of the statements which were required to be submitted before the Excise Authorities being hard pressed by the Central Excise department due to this alleged additional income of more than Rs. 75 crores which was never existed nor admitted. Further, the Ld. CIT(A) has observed that the statements of assessee have not been used by Ld. AO against the assessee and therefore, not providing the copy of statements has caused no prejudice to the as....
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....the return for the reasons beyond the control of the assessee constitute reasonable cause as has been held by Hon'ble Chandigarh bench of ITAT in the case of DCIT Patiala Vs. Hari Singh in ITA No. 598/Chd/2017 dt. 20.9.2017, (case laws compilation page 50-51). It is further submitted that the Ld. AO while levying the penalty u/s 271AAB had not doubted the mode and manner of earning such income which was duly explained stand substantiated by the assessee in the return itself where it was stated that advances of Rs. 12.50 crores were made out of the income from land dealing. All these facts are undisputed and nowhere controverted by the department. However, the only dispute raised by the department is with respect to the filing of return of income after the expiry of specified time u/s 139(1). In this regard detailed submissions have already been made above to the effect that the assessee was prevented by sufficient causes, beyond the control of assessee, due to which he could not file the return within the stipulated time period and this constituted a reasonable cause within the meaning of section 273B. Therefore Ld. AO has completely erred in levying the penalty @ 30%, as the c....
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....of the group were found and seized. One document / diary reflecting advances given totaling to Rs. 12.50 crores was found containing various entries of bank deposits and also advances given by assessee to certain individuals towards the purchases of land. These amounts of advances were explained in the statements u/s 132(4) of the Act as earned out of land deal and this income was over and above the regular salary income and was included in the total income shown by assessee in the return of income filed. 12. We observe that the assessee is having regular sources of income from salary and during the year assessee did some stray activity of sale of land. Since it was not a regular course of the business of the assessee, he was not required to maintain books of accounts. The profit earned out of sale of land was given as advances to various persons which were recorded in the diary which has been placed at paper book page No. 28-34, which was found during the course of search. On being asked during the course of search about this diary, the assessee stated the fact that it contains advances given to various persons totaling to Rs. 12.50 crore. This diary also contained certain other ....
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....it is a case where books of accounts were not required to be maintained as the assessee being having salary and interest income on a regular basis and sale of land being taken during the year itself that too in a stray manner, it is a case where only second limb of the aforesaid phrase is applicable i.e. whether the entry or entries of advances so found are recorded in the "Other documents" or not. If 'not recorded' then it will be a case of undisclosed income within the meaning of section 271AAB so represented by the entries. However, it is seen that the entries of advances were found recorded in the diary which was found and seized during the course of search and this diary also contained other entries of other group concerns which are duly recorded in the books of accounts of the respective concerns. Since assessee was not required to maintain any books of accounts, these entries remained recorded in the diary itself maintained by assessee in regular course. Thus according to assessee the income of Rs. 12.50 crore so reflected by way of entries is found recorded in the 'document' namely diary in the instant case maintained in regular /normal course by the appellant and is theref....
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....imposed as a matter of routine and should be levied only if the circumstances of a particular case so required. In the instant case also, income under question was entered in the 'other document' maintained in normal course and therefore, such income will not fall within the meaning of 'undisclosed income' as defined in section 271AAB of the Act. In another decision in the case of DCIT Vs. Subhash Chand Agarwal & Sons (HUF) in ITA No. 1430/Kol/2015 order dated 19.02.2018, the Coordinate Bench of Kolkata had also held to the effect that disclosure made on the basis of entries in the diary maintained in normal course would be covered as entries in 'documents' in the case where books of accounts are not maintained and therefore could not come within the ambit of 'Undisclosed Income'. 15. In section 271AAB of the Act, the Legislature has used the word "the assessing officer 'may'.......". Thus it is very evident that the assessing officer is not obliged to levy the penalty in each and every case in a routine manner. The A.O. has to apply his mind as to whether under the given facts and circumstances of the case justify and warranted the imposition of penalty. In our view, the said di....
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....the 2nd ground of Revenue fails and we hold that penalty u/s 271AAB of the Act is not mandatory and is discretionary." 16. With regard to the observation of the Ld. CIT(A) that the penalty u/s 271AAB is mandatory, we observe that the word used in the section 271AAB is 'may' and not 'shall'. The word 'May' indicates discretion of the authority either to levy or not to levy a penalty. In other words the imposition of penalty is not mandatory. Ld. CIT(A) referred to the explanatory notes clause 96 which explains the intention for introduction of particular amendment however the same cannot replace the provision of Act where the word "may" is used and not "shall". Hence, the observation of the Ld. CIT(A) that the penalty u/s 271AAB is mandatory is patently wrong and deserves to be ignored and excluded being made without properly appreciating the provision and language of the Act which is very much clear and inserted in the statute after long discussions before both the houses of parliament. The Ld. CIT(A) has observed in its order that 'recently the Kolkata Tribunal has held that Penalty u/s 271AAB on undisclosed income is automatic in nature - 88 taxmann.com 288'. We observe ....
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....of the Tribunal. On perusal of the fact available on record, we find that the finding recorded by this Tribunal in para 9 of its order dated 10.11.2017 that the assessee is mandated to maintain books of accounts u/s 44AA of the Act is factually incorrect and deserves to be rectified. This mistake of primary fact had led to a conclusion of upholding the levy of penalty u/s 271AAB of the Act. Hence, in these facts and circumstances and in view of the aforesaid mistake of primary fact rightly pointed out by the ld. AR, we deem it fit to recall the orders of this Tribunal dated 10.11.2017 in the case of aforesaid assessees." So considering the facts, we are of the view that an order which has been recalled for de novo adjudication, is no order in the eyes of law and so it cannot be treated as a precedent. The Coordinate Bench of ITAT Kolkata in the case of Manish Agarwal (supra) has decided the similar issue in favour of assessee holding that penalty u/s 271AAB is not leviable. Moreover, recently the Coordinate Bench of Kolkata ITAT after re-fixing the above cases of Amit Agrawal, Madanlal Beswal etc. has finally decided the cases to the effect that penalty u/s 271AAB is not leviabl....
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....use the expression used is "shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable", the first part of the section cannot be read as mandatory. Both CIT(A) and Tribunal have recorded reasons for exercise of their discretion in cancelling penalty which did not warrant interference. In the case of CIT vs. Dr. Giriraj Agarwal Giri (2012) 346 ITR 152 (Raj.) the Hon'ble Rajasthan High Court has held as under: Imposition of penalty depends on facts and circumstances of each case. The AO imposed the penalty on so called three items of so called concealed income. Each item was examined, thoroughly and in detail, by the Commissioner of Income-Tax (Appeals) as well as the Income Tax Appellate Tribunal and by a reasoned order, both came to a conclusion that additions are based on estimation only. A fact or allegation based on estimation, cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly imposed by the Assessing Officer. Therefore appeal filed by Appellant rejected. Even the Coordinate Benches of the ITAT under the similar facts have decided ....
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..../s 132(4), the assessee has surrendered the said amount and subsequently, offered the same in his return of income. The question that arises for consideration is whether the cash payment towards purchase of Villa at Suncity Township at Sikar Road, Jaipur and cash of Rs. 9 lacs found in possession of the assessee can be termed as undisclosed income within the meaning as defined in section 271AAB as undisclosed income under explanation (c) of section 271AAB of the Act. In this regard, we refer to the Co-ordinate Bench decision in the case of Silver & Art Palace vs. DCIT (supra) wherein it was held that the undisclosed investment by way of purchase of land can be subject matter of addition in the quantum proceedings but the same does not fall strictly within the meaning of undisclosed income as so defined in section 271AAB of the Act and deeming fiction u/s 69B cannot be extended and applied automatically in the context of section 271AAB of the Act. Further, the fact that the transaction so found recorded in a document has not been disputed by the Revenue. Given that the assessee is a salaried person who is not required to maintain any books of accounts and there is no mechanism to re....
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....ovided. The assessee had also requested in writing through various letters which have been placed at paper book page No. 17 to 21, requesting for supply of copies of statements of assessee. However the requests of the assessee were not considered and the copies of the statements were not provided until the filing of return by the assessee. After the filing of return of income one more request was made on 20.03.2015 as the matter was under examination of Central Excise / Service Tax department who insisted upon the assessee to provide the copy of statement. This fact was also stated by the assessee before Ld. CIT(A) who based on this application, observed that assessee had made only one request i.e. on 20.03.2015 that too after filing of return but simultaneously failed to appreciate the fact that even after filing the return relevant copies of statements were not provided and assessee had to delay the filing of the return, as he did not file the return without actually going through the assertions made in the statements recorded u/s 132(4) during the course of search. However, since liability towards interest u/s 234 was increasing continuously with the passage of time, assessee w....
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....total amount of Rs. 12.50 crore was stated to have been offered as additional income however, due to the fact that the copy of the statements recorded during the course of search were not provided therefore, as per assessee, the return of income could not be filed in time provided u/s 139(1). However, as per record, the return was filed in the extended time period provided u/s 139 of the Act. Even according to the assessee, the Central Excise Department vide letter dated 21.08.2014 has asked the assessee to file the details of the admission made during the course of search of additional income to the extent of Rs. 75.56 crores and after receiving such notices, assessee visited the office of the AO and asked him to supply such copies of the statements where that admission of more than Rs. 75 crores were made by assessee or his family members during the course of search conducted on 04.09.2013. Besides this written requests were also made on 15.05.2014, 08.07.2014 & 10.12.2014. However, even after filing of return of income a further request was made vide letter dated 20.03.2015 to the AO for supply of the copies of the statements which were required to be submitted before the Excise....