TaxTMI 
TaxTMI 
2024 (10) TMI 171
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch other. 2. For that the order of the ld. Commissioner of Income-tax (Appeals) and also the learned AO is bad both in law and on facts. 3. For that the order of the learned Commissioner of Income Tax (Appeal) and also the learned Assessing Officer. Is based on presumption, surmises and conjectures." 03. Assessee has further raised additional grounds: - i. That the penalty u/s 271(1)(c) of the Act cannot be levied without recording satisfaction and mentioning specific direction of Income Tax Settlement Commissioner (ITSC). ii. That the quantum appeal is admitted is admitted by the higher authority, it means that the issue is debatable and therefore, penalty u/s 271(1)(c) of the Act cannot be levied. iii. Ld. CIT (A) erred in enhancing the penalty without issuing show cause. 04. So far as in ITA Nos.54 & 55/PAT/2021 are concerned, the assessee has raised common grounds for A.Y. 2011-12 and 2012-13 against levy of penalty u/s 271AAA of the Act and the same reads as under: - "1. For that the grounds of appeal hereto are without prejudice to each other. 2. For that the order of the learned Commissioner of Income Tax (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al estate, retail chain, entertainment and hospital. Notices u/s 153A of the Act were issued for filing of return of income. However, assessee filed an application before the ld. ITSC on 5th June, 2014, for A.Y. 2006-07 to A.Y. 2012-13 but the applications were not allowed to proceed on account of short payment of tax and interest. 06. Subsequently, assessee again filed fresh application on 26th June, 2014, before the ITSC (IT & WST) Additional Bench, Kolkata for A.Ys. 2006-07 to 2014-15 (nine Assessment Years) and the same was admitted and the ld. ITSC passed the order u/s 245D (4) of the Act on 31st December, 2015. After passing the order of ld. ITSC, the demand was raised but the assessee failed to make the payment of total demand. As a result of which, ld. ITSC withdrawn immunity granted to the assessee vide order dated 31st December, 2015. The outstanding amount which remained payable by the assessee in compliance to the order of the ld. ITSC order for A.Y. 2006-07 to 2014-15 amounted to Rs. 2,74,40,648/-. When the ld. ITSC withdraw the immunity granted to the assessee, the assessee filed a Writ Petition before the Hon'ble High Court and on the date of hearing i.e. 25th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bmitted that the basic foundation of levying the penalty is to first issue the notice u/s 274 of the Act levying the specific charge against the assessee but no such exercise has been carried out. He also submitted that when the order of ITSC is invoked and demands have been recovered against tax liability calculated then how can the penalty to be imposed to the assessee. Alternative submission was also made and when the issue is debatable then the penalty cannot be levied. He also submitted that the action of ld. CIT (A) of enhancing the penalty to 300% is illegal, bad in law and violation of principle of natural justice as no show cause notice was issued to the assessee. 09. The brief synopsis filed by the ld. counsel for the assessee against the levy of penalty u/s 271(1)(c) of the Act is reproduced below: - Appeal against order u/s 271(1)(c) of Income tax Act, 1961 communicated vide DIN & Order No. ITA 56 /PAT/2021 in the case of M/S Patliputra Builders LTD. (2013-14). (ΡΑΝ: AACCP06293) Dates Particulars of events 29.07.2011 Search and seizure operation was conducted on the business and residential premises of the appellant and his family me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Hon'ble Settlement Commission the Issue will become debatable. Hence, when the Issue in debatable and penalty u/s 271(1)(c) Is unlawful. The assessee relied upon following case laws: CIT Vs. Advaita Estate Development Pvt. Ltd. (Bombay High Court) Ajaybhai I Gogia Vs. ITO (ITAT Rajkot) Enhancement of amount @300% by the CIT(A) without issuing show cause notice is unjustified In this present case the Ld. CIT(A) has enhanced the penalty leviable @ 300% without issuing any show cause notice to the assessee which is unjustified and bad in law. The Ld. CIT(A) in the entire appeal order nowhere mentioned that the show notice was issued as mandated by the Section 251(2) of the Income tax Act, before enhancing the penalty leviable @ 300%. The assessee has relied upon following case laws: Meetu Bansal Vs. DCIT (Uttarakhand High Court) Syed Maqsoodulla Vs. ITO (ITAT Bangalore) Syed Maqsoodulla Vs ITO (ITAT Bangalore) of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) 010. As regards the penalty u/s 271AAA of the Act, he submitted that the preliminary requirement for invoking penalty u/s 271AAA of the Act is basis of the statement recorded during the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed by the CIT(A). The CIT(A) has brushed aside the provision of section 271AAA which is mandatory to be verified. But in our case on the ground that the assessee is a habitual offender passed the appeal order which itself make order impugned. If the Ld. Has not mentioned about the statement recorded u/s 132(4) before imposing penalty u/s 271AAA the Ld. CIT(A) must mention about it in the appeal order. No statement was recorded during search and date of the statement recorded in not mentioned in the order. Enquiry was also no conducted in our case. In absence of statement enquiry is not possible. On that reason the Ld. AO has not conducted enquiry. Hence, in absence of both the mandatory ingredient penalty u/s 271AAA is not sustainable. The assessee has relied upon the following case law: Pr.CIT vs. M/s. Emirates Technologies Pvt. Ltd. (ITA No. 400/2017) order dated 18.07.2017 CIT vs. Mahendra C Shah reported as 299 ITR 305 (GJ) PCIT vs. Mukeshbhai Ramanlal Prajapati 398 ITR 0170(GJ) Page no.8 011. On the other hand, the ld. DR vehemently argued supporting the order of the ld. lower authorities and submitted that since the assessee did not follow the direction of ld. IT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the backdrop, these facts about the assessee's application to ld. ITSC having been accepted and the settlement amount stands deposited though not on schedule time but major part of the amount has been deposited immediately after passing the orders of learned ITSC. We note that there is no allegation against the assessee that the order of ld. ITSC u/s 245D (4) of the Act has been obtained by the assessee by any fraud or misrepresentation of facts as provided u/s 245D (6) of the Act. We also notice that when the assessee is unable to make payments in accordance with the order of ld. ITSC Section 245D(6A) of the Act comes into action and the same reads as under: - "Section 245D(6A) in The Income Tax Act, 1961 (6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments, the assessee shall be liable to pay simple interest at one and one-fourth per cent for every month or part of a month on the amount remaining unpaid from the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any satisfaction has been recorded by the learned AO. For reference we would like to reproduce below the penalty order u/s 271(1)(c) of the Act for A.Y. 2009-10, and the same reads as under:- "A search and seizure operation was conducted on 29/07/2011 in the business and residential premises of Shri Anil Kumar and his family members including their business concerns, namely M/s Patliputra Builders Ltd., M/s Patliputra Shoppers Plaza Pvt. Ltd. and other group companies. M/s Patliputra Builders Ltd. and its sister concerns are mainly engaged in the business of real estate, retail chain, entertainment and hospitality. Notice u/s 153A of the Income- tax Act, 1961 was issued on 08/02/2013 for filing of return of Income. However, the assessee filed settlement application before Hon'ble Settlement Commission, (IT & WT), Additional Bench, Kolkata on 05/06/2014 for A.Y. 2006-07 to 2012-13 (7 assessment years). However, the applications were not allowed to be proceeded with on account of short payment of tax and interest. Subsequently, the assessee filed fresh settlement application on 26/06/2014 before the Settlement Commission, (IT & WT), Additional Bench, Kolkata for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le ITSC has withdrawn immunity granted to the assessee earlier. The assessee is totally silent in that as pact. Hence, after withdrawal of immunity by the Hon'ble ITSC, the undisclosed income declared by the assessee for SOF as well as further amount of undisclosed income adjusted and determined by the Hon'ble ITSC is liable for penalty for concealment of income u/s 271(1)(c). Therefore, keeping in view facts of the case, I have left with no other option but to impose penalty u/s 271(1)(c) of the Income-tax Act, 1961 for concealment. Hence, penalty, as calculated below is being levied on this issue. Calculation of Penalty: (i) Income determined by Hon'ble Settlement Commission Rs. 6,56,65,495/- (ii) Returned income Rs. 96,03,759/- (iii) Tax on (i) above including surcharge Rs. 2,23,19,702/- (iv) Tax on (ii) above including surcharge Rs. 29,67,562/- (v) Undisclosed income declared by the assessee and further amount determined by the Hon'ble ITSC for A.Y. 2009-10 =Rs. 5,60,61,736/- (vi) Tax sought to be evaded on above (iii - iv) = Rs. 1,93,52,140/- (vii) Minimum penalty leviable @ 100% tax sought....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rdingly, did not initiate the penalty proceedings in the body of assessment order, he cannot proceed for penalty proceedings. The absence of direction for initiation of penalty proceedings under Section 271(1)(c) in the body of assessment order, cannot even be ratified by issue of notice under Section 271(1)(c) r.w.s. 274 along with assessment order or by taking recourse to Section 154/2928 otherwise it will render Section 271(1B) meaningless and otiose." 020. Madhushree Gupta vs. Union of India [2009] 183 TAXMAN 100 (DELHI)] held as under: - "in this case it was held that "an assessment order should contain at least a direction for initiation of penalty proceedings to constitute satisfaction of the AO for initiation of penalty proceedings under Section 271(1)(c). Even post Section 271(18), still a prima facie satisfaction of Assessing Officer that the case may deserve imposition of penalty should be discernible from order passed during the course of assessment proceedings." 021. In light of the above judgement on the legal ground itself, the assessee deserves to succeed as the penalty proceedings have not been initiated in accordance with law and they are void ab in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation. - For the purposes of this section,- (a) "undisclosed income" means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or (ii)any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... penalty and prosecution in the case of the assessee M/s Patliputra Builders Ltd. (PAN AACCP0629B) on 17th/18th January, 2018. Letters were issued on 28/06/2018 & 05/07/2018 for information regarding withdrawal of immunity from penalty and prosecution in the case of the assessee M/s Patliputra Builders Ltd. and also to provide final opportunity before passing penalty order u/s 271AAA of the Income-tax Act, 1961 on 02/07/2018. Compliance requested on 10/07/2018. On 13/07/2018, the assessee filed time petition for payment of income-tax through its director which is as under :- "... I would like to convey that our Patliputra Group is one of the reputed names in business community in the State of Bihar. For the past many years we are regular taxpayer and contributed significantly to State exchequer. However in the past few years, the business scenario of Bihar has been gloomy one. especially for real estate sector. Some policy changes of State Govt. have hit us hard and our revenue has been badly affected. As such we are facing lot of hardship in running day to day business affairs due to crunch of funds. Sir, I would like to categorically assure you....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee or not. As per section 271AAA(1) of the Act, the assessee can be held liable to pay penalty at the rate of 10% of undisclosed income of the specified previous year. Now, sub-section 1 of Section 271AAA of the Act will not apply if the assessee admits the undisclosed income in the statement given u/s 132(4) of the Act and specify/ substantiate the manner in which such income has been derived. Thus, for invoking of Section 271AAA of the Act, the condition is that the statement has to be recorded u/s 132(4) of the Act during the course of search and only in case of assessee is unable to answer in the statement as discussed above then the penalty u/s 271AAA of the Act can be levied. However, in the instant case, the fact placed before us by the ld. Counsel for the Assessee is that no statement of the director of the company was recorded and in support an affidavit has been filed by Mr. Anil Kumar, director of assessee company, stating that during the search proceedings no statement u/s 132(4) of the Act was recorded by the department at any stage. Once it is established that no statement of the Director of the assessee company was recorded u/s 132(4) of the Act, there cannot be an....