TaxTMI 
TaxTMI 
2023 (3) TMI 513
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....ed as under: 1. The order of the Commissioner of Income Tax (Appeals) - 19, Chennai -600034 dated 11.07.2022 vide DIN & Order No.ITBA/APL/M/250/2022-23/1043795746(1) for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT(A) erred in confirming the levy of penalty u/s 270A of the Act in consequence to the assessment completed in terms of Section 153C of the Act without assigning proper reasons and justification. 3. The CIT(A) failed to appreciate that the levy of penalty u/s 270A of the Act on the facts and in the circumstances of the case was wrong, incorrect, erroneous, invalid, unjustified and not sustainable both on facts and in law. 4. The CIT(A) failed to appreciate that having issued the show cause notice without incorporating the precise charge, the consequential levy of penalty should be reckoned as bad in law. 5. The CIT(A) failed to appreciate that in any event the presumption of under reporting in consequence of any misreporting of income was wholly unjustified and ought to have appreciated that the estimated rental income assessed would not attract the penal provisi....
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....equent to search, the assessment has been completed u/s.143(3) of the Act r.w.s.153C of the Act, on 04.03.2021 and determined total income of Rs.79,64,670/- by making addition towards undisclosed income of Rs.6 lakhs towards unaccounted rental income. 4. Penalty proceedings u/s.270A of the Act, was initiated and called upon the assessee to explain 'as to why' penalty for underreporting of income, cannot be levied. In response, the assessee submitted that mere admission of undisclosed income towards rental income, does not per-se leads to conclusion that there is an undisclosed income within the meaning of Section 270A Explanation-C which attracts penalty provisions. The assessee further contended that although, he had admitted undisclosed income towards rental receipts, but such rental income has been derived on the basis of estimation without there being any reference to incriminating material found during the course of search for those assessment years. Therefore, the question of levying penalty for underreporting of income does not arise. The AO after considering relevant submissions of the assessee and also taken note of statement recorded from the assessee during the course....
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....lty proceedings initiated u/s 270A(9) on the ground of under reporting which is sought to be levied @ 200% of the amount of tax payable on under reported income i.e. 200% Tax on Rs.6,00,000/-. The calculation is worked out as under: Misreported Income Rs.6,00,000 Tax+SC+EC on above Rs.1, 85,400 200% of the above Rs.3,70,800 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee challenged penalty levied u/s.270A(9) of the Act, on the ground that additions made towards undisclosed income on account of rental receipt is only an estimation, which does not warrant levy of penalty. The Ld.CIT(A) after considering relevant submissions of the assessee and also by relying upon the decision of the Hon'ble Supreme Court in the case of MAK Data (P) Ltd. v. CIT reported in [2007] 161 Taxman 340 (SC), opined that additions made towards undisclosed income on account of rental receipts, is not on the basis of estimation, but quantification as per material found during the course of search. Further, had the search been not taken place, the income towards rental receipts would not have been disclosed....
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....ding & Rubber Industries 2014 Tax Pub(DT) 0183 (Raj- HC) Assistant CIT v. Allied Construction 2007 TaxPub (DT) 0115 (Del-Trib) Harigopal Singh v, CIT 2002 Taxpub (DT) 1625 (P & H-HC) On perusal of above-mentioned case-laws it was found that these are not relevant to the appellant case. In these decisions the penalty u/s 271(l)(c) for concealment of income was deleted by Hon'ble Courts and Tribunals where addition was made on estimation on total turnover or gross profit of the business. In the appellant's case the addition was made under the head "income form, house property" on the basis of extracts of the cash books which were seized during the search at Kolkata and Coimbatore containing details of unaccounted cash receipts and payments. In addition to this, section 23 of the act also gives a formula to determine the "Annual Value" of the property. In my considered view, this addition was not made on estimate basis. Thus, these case laws are not relevant to this case. The appellant failed on this ground. Therefore, I do not find any reason to interfere in penalty order of the AO, Hence, the penalty levied by the AO is confirmed. 6. The Ld. Counsel for the asses....
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....ng a bearing on total income. In this case, from the facts available on record, it is abundantly clear that although, the assessee has received rental receipts from properties, but said rental income has not been accounted in the books of accounts, which is having a bearing on total income computed for the impugned assessment years. Therefore, in our considered view, it is a clear case of misreporting of income, which attracts penalty u/s.270A of the Act. In so far as arguments of the Ld. Counsel for the assessee that additions made towards undisclosed income is only estimation of rental receipts without any reference to incriminating material found during the course of search, we find that during the course of search, incriminating documents with respect to rental income received for FYs 2013-14 to 2019-20, were found and impounded. Further, the assessee was called upon to question the documents and in response to a specific question, the assessee admitted to have received rental income, but failed to disclose rental income in the return of income filed for relevant to assessment year. Therefore, we are of the considered view that had search not been conducted, the assessee would ....
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....ompleted in terms of Section 153C of the Act without assigning proper reasons and justification. 3. The CIT(A) failed to appreciate that the levy of penalty u/s.271AAB of the Act on the facts and in the circumstances of the case was wrong, incorrect, erroneous, invalid, unjustified and not sustainable both on facts and in law. 4. The CIT(A) failed to appreciate that having issued the show cause notice without incorporating the precise charge, the consequential levy of penalty should be reckoned as bad in law. 5. The CIT(A) failed to appreciate that in any event the presumption of undisclosed income as a consequence to the search was wholly unjustified and ought to have appreciated that the estimated rental income assessed would not attract the penal provisions under consideration automatically. 6. The CIT(A) failed to appreciate that the findings from para 4.2 of the impugned order were wrong, incorrect, erroneous, invalid, unjustified and not sustainable both on facts and in law. 7. The CIT(A) failed to appreciate that the reference to seized materials was completely tangential as well as not relevant and hence ought to have appreciated....
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....32 of the Act. In response, the assessee submitted that additions made towards undisclosed income on account of rental receipts per-se does not lead to a conclusion that there is an undisclosed income within the meaning of s.270AAB of the Act, which warrants levy of penalty. The AO, however, was not convinced with the explanation of the assessee and according to the AO, during the course of search, the assessee had admitted undisclosed income in the statement recorded u/s.132(4) of the Act, towards rental receipts. However, does not reported said income in the return of income filed for relevant to assessment year and also paid tax together with interest, if any, in respect of undisclosed income. Therefore, the AO opined that it is a fit case for levy of penalty u/s. 271AAB (1A)(b) of the Act, @60% and thus, levied penalty of Rs.5,69,820/-. The relevant findings of the AO are as under: 6.0. I have perused the submission made by the assessee. However, the contention of the assessee is not acceptable. The case laws referred by the assessee are different and not applicable in assessee's case. It is pertinent to mention here that the undisclosed income of Rs.9,49,700/- was....
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....B of the Act. The relevant findings of the Ld. CIT(A) are as under: 4.2.1 I have considered the argument of the AR, facts of the ease, assessment order and perused the material placed before me. As per the appellant, the AO made addition on estimated rental income based on the loose sheets recovered during the search and the appellant did not contest against this addition in appeal only with a view to purchase peace with the department. The appellant further submitted that, since the quantum addition itself was made on estimated basis therefore the penalty cannot be levied for misreporting of income derived on estimation. 4.2.2 The submission in support of the ground cannot be accepted as the appellant did not disclose the said rental income for taxation neither at the time of filing return of income u/s 139(1) nor in response to the notice u/s 153C of the act. Only during the course of search proceedings, the appellant accepted the rental income. Further, appellant's claim to purchase peace with department is an afterthought made by the appellant. Thus, it is very clear that the appellant's intention was not to disclose the income. Being not contesting th....
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....ng the fact that the penalty u/s.271AAB of the Act, is not automatic and the AO must satisfy that there is an undisclosed income, which has not been recorded in the books of accounts of the assessee before the date of search. In this case, additions made by the AO towards rental receipts as undisclosed income is not based on any incriminating material found during the course of search in the possession of the AO. Further, estimated income towards rental receipt cannot be treated as undisclosed income. Thus, for the purpose of sec.271AAB of the Act, there must be two conditions for levy of penalty, as per which, there should be an undisclosed income and further, such income has not been recorded in the books of accounts of the assessee prior to the date of search. In this case, for assessment year in question, the date of filing of return has not been expired as on the date of search and thus, it cannot be said that rental income received by the assessee has not been recorded in the books of accounts. 16. The Ld. DR, on the other hand, supporting the order of the Ld. CIT(A), submitted that addition towards undisclosed income is not on estimation basis which is evident from the fa....
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....ct, and also specifies the manner in which such income has been derived. But, not paid tax together with interest in respect of undisclosed income and furnishes the return of income in the specified previous year on such undisclosed income on or before the specified date. 18. We find that the assessee has admitted undisclosed income in a statement recorded u/s.132(4) of the Act, towards rental receipts received from two properties. No doubt, rental receipts from said properties has not been declared to Income Tax even for earlier assessment years, but facts remain that due date for filing return of income for the AYs 2019-20 &2020-21 has not been expired on the date of search i.e. 30.04.2019, because, the due date for filing return of income u/s. 139(1) of the Act, for the AY 2019-20 expires on 31.07.2019 and for the AY 2020-21 expires on 31.07.2020. Therefore, when the due date for furnishing return of income was not expired as on the date of search, it cannot be said that rental income received from properties has not been disclosed for the purpose of tax before the date of search, more particularly, in respect of rental receipts. Because, had it been a case of the AO, undiscl....