TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 387
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.... the part disclosure made by the assessee firm. (2) On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the penalty order made by the Assessing Officer. (3) It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. 2. Brief facts of the case are that the assessee is a firm engaged in business of import of rough diamond and export of polish diamond. A survey under section 133A of the Act was carried out on assessee group on 05.03.2013 at Surat, Mumbai and Delhi office premises of the assessee-firm. During the survey certain incriminating evidences, documents and other material including cash were found. Survey proceeding at Delhi office was converted into search under section 132. Statement of Shri Dilipbhai Babubha Mehta, partner of the assessee-firm was recorded under section 131(1A) of the Act, wherein he made a disclosure of additional income of Rs. 34,99,87,3544/- (Rs. 35 Cr. Approx). While replying the various questions asked during the recording statement, the partner of the assessee-firm gave the bifurcation disclosure in the following manner:- Questio....
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....n respect of undisclosed income when during search statement under section 132(4) was recorded and that undisclosed income and the section 271AAB is not applicable where a survey has been initiated and the statement is recorded under section 131(1A). The Assessing Officer took his view that assessee overlook the fact that at Delhi office premises, though survey proceeding was initiated which was later on converted into search and therefore, provision of sec. 153A was applicable to the assessee. The assessee has not questioned the validity of initiation of action under section153A of the Act. The Assessing Officer by referring the provision of section 271AAB of the Act levied the penalty @ 10% of undisclosed income of the specific previous year and worked out penalty of Rs. 3.49 Crores. 4. Aggrieved by the levy of penalty, the assessee filed appeal before the Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written statement. The submission of assessee is recorded in para-6 of the impugned order. The assessee in its written statement, in sum and substance stated that assessee-firm was subjected to survey proceeding under section 133A on 05.03.2013. The survey was initiated....
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.... of the undisclosed partner's withdrawal not recorded in the books of account as per annexure-A1, page 36 found at Surat office. The Ld. CIT(A) further held that definition of undisclosed income, being income of specified previous year represented the money found in the course of search under section132 of the Act, which has not been recorded on or before the date of search in the books of account or a document maintained in the normal course relating to such previous year. The Ld. CIT(A) further examined the evidence related with physical stock of polish diamond found at Delhi office, which was 271.37 carat. However, the stock recorded as per book on the date of search only 134.36 carat. Though, Rahul Choksi at Delhi branch office had claimed that 91.66 carat of finished diamonds was also received from Mumbai office, and it was not found recorded in the books of account maintained in Delhi office, Mumbai nor any document maintained in the regular course of business. Thus, the Ld. CIT(A) was of the view that there was excess stock of finished diamond of 137.01 carat (271.37 - 134.36 carat) which was not recorded in regular books of account maintained nor in the document maintained ....
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.... CIT(A) wrongly held that penalty under section 271AAB is imposable only with respect to the incriminating material and cash of Rs. 25 lakh and difference of stock of diamond found at Delhi office only. The Ld. CIT-DR submits that once at survey proceedings at one premise had been converted into search, then it became a search case and the provision of section 153A got applicable. The assessee never claimed that the action initiating section 153A is not valid, during the assessment. The Ld. CIT(A) failed to appreciate that when survey proceedings at one premise has been converted into search, it became a search case and the entire disclosure made by assessee-firm on the basis of excess stock not recorded in their books of account to be considered at undisclosed income for the purpose of section 271AAB. 7. On the other hand, the Ld. Senior Counsel for the assessee supported the order of Ld. CIT(A). The Ld. Senior counsel submits that a survey was carried out at three offices of assessee-firm i.e., in Surat, Mumbai and Delhi respectively. The survey proceedings at Delhi was converted into a search proceeding. Shri Dilipbhai Babubhai Mehta, partner of assesseefirm made a disclosure o....
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....e or asset found during the course of search at Delhi office. And the penalty under section 271AAB was leviable thereon and was restricted by Ld. CIT(A) as such. The assessee filed appeal against sustaining such penalty by ld CIT(A), before Tribunal vide ITA No. 1766/Ahd/2017. However, the same has been withdrawn on 04.03.2021, by settling the dispute under Vivad Se Visvas Scheme, 2020. 9. The Ld. Senior Counsel submits that for assessment year 2013- 14, normal assessment order was to be framed under section 143(3) of the Act. The Assessing Officer erroneously observed that assessment order had been passed under section 143(3) r.w.s. 153A. The section 153A is not applicable to the "year of search" and no notice under section 153A has been issued for the year under consideration. 10. In alternative submission, the Ld. Sr. counsel submits that in any case disclosure was made in the course of survey and the same has been considered while filing file return of income. Hence, the question of penalty on such disclosure was not arise. The Ld. Sr. counsel reiterated that disclosure in the question was made during the course of survey such disclosure has been considered by filing return o....
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....1.37 carat. However, the stock recorded as per book on the date of search only 134.36 carat. It was noted by ld CIT(A) that though Rahul Choksi and Delhi branch office had claimed that 91.66 carat of finished diamonds were also received from Mumbai office, however, it was not found recorded in the books of account maintained in Delhi office, Mumbai nor any document maintained in the regular course of business. On the basis of his observation, the Ld. CIT(A) was of the view that there was excess stock of finished diamond of 137.01 carat only, which was not recorded in regulars books of account maintained nor in the document maintained at regular course of business. The Ld. CIT(A) concluded that excess stock when valued on average Rs. 22500/- per carat (this average rate of entire stock found at Delhi office) comes to Rs. 3.08 Crores. The undisclosed income represented by diamond found at Delhi office plus cash of Rs. 25 lakh total of Rs. 3,33,27,250/-. 14. The Ld. CIT(A) on the basis of aforesaid observation further held that income which is detected during the survey under section 133A is neither covered in the section 271AAB nor in Explanation5A filed to section 271(1)(c) of the ....