TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 561
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....er Section 253(4) of the Act. 2. All the captioned Appeals and Cross Objection being interconnected, were heard together and are being disposed of by this common order. ITA No.1044/Del/2021 (Assessee's Appeal) & Cross objection 59/Del/2023 3. Briefly stated, the assessee is a proprietor of 'M/s Krishna Constructions' and is engaged in the business of construction and related activities. A search and seizure operation under Section 132 of the Act was conducted at the premises of Raj Shyama Group of cases including the assessee on 11.08.2016. In the course of search, certain incriminating documents were found and seized as noted in para 5,6 & 7 of the assessment order dated 21/12/2018 passed under section 143(3) rws s. 153A of the Act. The copy of such incriminating documents found were scanned in the assessment order. The copy of documents were confronted to the assessee in the course of search while recording statement under s. 132(4) of the Act. The assessee however expressed his inability to provide bifurcation and whereabouts of part of sundry creditors found recorded in the documents found in the course of search. The assessee eventually admitted in statement that amount of ....
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....500/- towards unexplained money received, was imposed under s. 271AAB(1)(c) of the Act. 6. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) vide order dated 30.06.2021 endorsed the action of the AO to levy penalty under s. 271AAB of the Act but however modified the quantum of penalty. The CIT(A) reduced the penalty by taking shelter of clause (a) to s. 271AAB(1) of the Act in place of clause (c) invoked by the AO. The penalty imposed by AO @ 30% of the admitted amount was thus scaled down and modified to 10% of the admitted amount. The relevant operative paragraph of the order of the CIT(A) dealing with issue read as under: "6.15 However in case of addition of Rs. 52 crores, the disclosure was made during the search in the statement recorded on oath u/s 132(4) of IT Act of Shri Subhash Tyagi i.e. the assessee. In the disclosure statement, the assessee duly told that this income has generated out of cessation of liability of some creditors. The assessee also substantiated the manner in which the undisclosed income was derived by giving the list of creditors and their credit balances. Before the specified date the tax alongwith interest in respect of this und....
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....proposed to be levied." 13. The prayer for admission of additional Ground noted above which was not set forth in memorandum of appeal is being admitted for adjudication in terms of Rule 11 of the Income Tax [Appellate Tribunal] Rules, 1963 owing to the fact that the objection raised in the additional ground is legal in nature for which relevant facts are stated to be emanating from existed record. 14. When the matter was called for hearing, the ld. Counsel for the assessee pointed out that the penalty imposed by the AO and partially retained by the CIT(A) flouts the provisions of s. 271AAB of the Act. The Ld. Counsel pointed out the application of provisions of section 271AAB is not automatic. The Assessee has not resiled from the admission made and offered the same for taxation in the ROI and also paid taxes thereon. The statutory discretion thus required to be exercised in favour of the assessee. Besides, the show cause notice is vague and does not specify the particular limb of s. 271AAB of the Act which is proposed to be applied in the instant case. Also, there is no allegation towards presence of any undisclosed income by the AO. The ld counsel thus contended that the jurisd....
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.... of the Act does not violate any provision of the Act. Furthermore, there is no requirement of specifying any limb to clause (1) of the s. 271AAB of the Act, in exclusion to other limb(s) or sub-clause(s) in the show cause notice. The AO is entitled to invoke s. 271AAB in its entirety to cover all possibilities and eventualities. The case of assessee may fall in more than one limb for different kinds of undisclosed income. The provisions of s. 271AAB was rightly put in motion as a result of undisclosed income found and admitted in the course of search qua the specified previous year. The Ld. CIT-DR thus contended that the defenses raised on behalf of the assessee are quite shallow and without any substance. In the light of unassailable detection of false entries in the name of sundry creditors and corresponding expenses debited by way of bogus purchases, the modification of penalty amount by the CIT(A) is wholly unjustified. The CIT(DR) thus urged for restoration of the penalty quantified by the AO and cancellation of the modifications carried out by the CIT(A). 16. We have carefully considered the rival submissions and perused the material referred to and relied upon in the cours....
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....es found recorded in the books. The assessee readily agreed to offer a sum of Rs. 52 crore booked for the purposes of suppression of income as cessation of liabilities and further expressed his willingness to pay taxes on such sum. As a necessary corollary, in the wake of total absence of any particulars available on such unexplained entries entered in books towards creditors and corresponding inflated purchases, the assessee agreed to admit such entries as undisclosed income and offered to pay taxes thereon. The existence of undisclosed income found in the course of search is thus both explicit and implicit. A nuanced reading of statement recorded under s. 132(4) would reveal that the manner of creating such bogus creditors towards material purchases during the year was apparently quizzed and the assessee was found blank and wanting. The name of beneficiary creditors were not revealed despite pointed enquiry. The 'manner' giving rise to such credits thus did not surface in the course of enquiry. The next step of 'substantiation' of such entries was never achieved by the assessee nor could be, in the absence of availability of basic particulars being name and address of creditors p....
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.... tell-tale facts, the assessee admitted non existence of sundry creditors liability. The income arising from the incrementing documents found and admitted were included in the Return of Income filed after search and taxes etc. thereon were also paid. The assessee however seeks to allege that the pre-requisites of 271AAB (1) is not fulfilled in the instant case as there is no allegation of existence of any undisclosed income by the revenue. Besides, the assessee has duly specified the manner and also substantiated the manner qua the so called undisclosed income. The CIT(A) modified and scaled down the rate of levy of penalty from 30% to 10% on the ground that the assessee has provided the list of creditors and thus provided the manner of deriving undisclosed income and also substantiated such manner. 16.5 The plea of assessee towards non applicability of s. 271AAB, in our view, is devoid of any rationale. On the face of cogent evidences detected and admitted to be un-explainable liability, one may wonder as to what is the nature of such admitted suppression of income etc. The entries found recorded in the books as a result of creative accounting towards un-explained liabilities is ....
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....icult to pre-conceive and show cause the assessee qua the exact quantification of penalty at the initial stage of issue of show cause notice. Noticiably, for the purposes of s. 271AAB, there is no requirement in law to form any 'satisfaction' [as contemplated under s. 271(1B) for the purposes of s. 271(1)(c)] before initiating penalty proceedings. The provisions of s. 271AAB thus can not be read pari materia with that of s. 271(1)(c) of the Act. The scheme of Act merely provides for reasonable opportunity to the assessee while imposing penalty which opportunity was duly provided and availed. It is not the case of the assessee that no opportunity was provided in the course of penalty proceedings. The assessee has not raised any objections on such aspect before the AO. The assessee was also privy to all relevant facts. 16.6.2 There being no substance in the plea, the additional ground raised by the assessee on this score is liable to be dismissed. The cross objection raising the grievance similar to additional ground is also a damp squib. 17. As per the delineations made, the appeal of the assessee in ITA No. 1044/D/ 2021 as well as CO 59/Del/2023 are dismissed. ITA No.1342/Del/20....
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....nd factual basis and hence calls for restoration of action of the AO. 18.3 Per contra, the assessee contends that imposition of penalty under s. 271AAB itself is bad in law owing to non compliance of pre-requisites. Notwithstanding & without prejudice, the CIT(A) has adopted pragmatic approach and modified the penalty order in keeping with the factual matrix of the case. 19. A perusal of the first appellate order, as extracted earlier, shows that the CIT(A) by a cryptic and non-descript reasoning, modified the quantification of penalty qua non existent liability on account of material purchase on the ground that the list of creditor vouches for manner of deriving undisclosed income and also substantiation thereof as required under clause (a) of s. 271AAB of the Act. Needless to say, the powers exercised by the CIT(A) is quasi-judicial. The CIT(A) is expected to state reasons for coming to his conclusion. The CIT(A) has summarily brushed aside the action of AO and granted relief in the matter of quantification of penalty without any logical or sound reasoning. The issue towards existence of manner of deriving undisclosed income and substantiation thereof is fact oriented. There is....