2023 (8) TMI 26

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....gs were carried out at two residential premises belonging to one of the brothers Shri Raoof R. Dhanani (assessee before). Subsequently, assessment under section 143(3) of the Act was framed making addition to the tune of Rs.10,07,83,682/- to the returned income of the assessee under various heads. The matter went in appeal before the ld.CIT(A) who upheld the addition to the tune of Rs.9,83,23,914/- deleting the balance and on the addition confirmed by the ld.CIT(A) penalty under section 271(1)(c) of the Act was initiated and thereafter levied by the AO. The additions on which penalty was levied are as under: Para No. Nature of addition Amount of addition disputed before the ITAT 7 Addition on account of admission of income in assessment u/s.132(4) but to the extent not disputed in the return of income. Income admitted Rs.10 crores. Income disclosed in the return Rs.70 lacs. 9,30,00,000/- 9 Addition for unexplained jewellery found in the course of search. 22,05,147/- 10 Unexplained marriage expenses noticed in the course of search 31,18,767/-   Total Rs.9,83,23,914/- 3. The assessee carried the matter in appeal before the ld.CIT(A....

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....l(l)(c) of the I.T-. Act by observing that the penalty in this case has been imposed under Sec.271(l)(c) of the Act and not under the correct section i.e. Section 271 AAA of the Act, without appreciating the facts of the case discussed by the Assessing Officer on merits. (2) On the facts and in the circumstances of the case in law, the Ld.CIT(A) has erred in deleting the penalty by observing that the penalty was imposed under incorrect section, ignoring the prevailing jurisprudence that if an authority has a power under the law and merely because while exercising the power, the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law. (3) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in concluding that the correct section for levy of penalty is 271 AAA of the Act, ignoring the provisions of Section 271(l)(c) of the Act, which is applicable in the circumstances when the assessee has concealed the particulars of income or when he has furnished inaccurate....

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....nation to the section. He noted fulfillment of the other condition, that the impugned assessment year qualified as "specified previous year" since as per the definition of "specified previous year" it included the year in which search was concluded, which he found was the fact in the present case. Accordingly, he noted, assessee fulfilled all the conditions for levy of penalty under section 271AAA of the Act. 8. The Ld.DR was unable to controvert the above findings of the Ld.CIT(A) Therefore, we do not find any infirmity in the order of the ld.CIT(A) holding that the correct section for levy of penalty in the present case was under section 271AAA of the Act and not section 271(1)(c) which was invoked by the AO. We accordingly, find no merit in the ground no.1&3 raised by the Revenue, and the same are therefore dismissed. 9. Ground No.2 raised by the Revenue is to the effect that mere invocation of incorrect section would not invalidate order. The plea being that, if an authority has a power under the law, which he does not specifically refer to or a reference was made to a wrong provision of law while exercising his power that by itself will not vitiate the exercise of ....

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....the ld.CIT(A) deleting the penalty on account of incorrect invocation of section for levy of penalty. Adjudication of these grounds is a mere academic exercise. The grounds of the Revenue challenging the order of the Ld.CIT(A) deleting the penalty for other reasons also, is therefore not being dealt with by us. 14. In the result, appeal of the Revenue is dismissed in above terms. Order pronounced in the Court on 5th July, 2023 at Ahmedabad. ============= Document 1 5.4 It is essential to understand which provision of penalty under the Income tax Act is applicable in this case/ For the same it is seen that as per the Income-tax Act in cases where search has been initiated new penalty provisions were inserted vide sec.271AAA by Finance Act 2007 w.e.f 01/04/2007 (applicable for searches conducted between 01/04/2007 and 31/05/2012). The said provisions are reproduced as under- 'Penalty where search has been initiated. — 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007,....

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....ch was conducted.' s5:4.1 As per section 271AAA of the Act, specified previous year is defined in Explanation Income Document 2 (b), as above. This is a case of 2011-12. Search was conducted on 11/02/2011. Hence this AY is covered under the definition of specified previous year as per clause(ii) above. Now, subsequent to the Ld CIT )A) order the additions that are confirmed are as follows: Para No. Nature of addition 1 2 3 Addition on account of admission of income in statement u/s 132(4) (based on query related to entries in a pink colour note book seized as A- 3 pages 1 to 6) but to the extent not disclosed in the return of income. Income admitted Rs. 10 Crore. Income disclosed in return Rs 70 lacs. Balance amount added back and confirmed by the La CIT(A). Addition for unexplained jewellery found and inventorized in the course of search Unexplained marriage expenses u/s 69C of the Act on the basis of seized loose bunch marked as A-1 containing 16 pages in the course of search 5.4.2 It can be seen that all the three issues of addition are covered under the definition of "undisclosed income" as defined in the section as ....