TaxTMI 
TaxTMI 
2025 (2) TMI 583
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....er of land from the landowners to Mr. Hashim Moosa/his nominees. No other payment, except a reimbursement under Clause 11, was contemplated under this MOU. 4. A transaction was entered into between Mr.Hashim Moosa and the Space Employees' Co-operative Society Ltd. (in short 'Society') on 26th September, 2009. It was in order to facilitate purchase of land for this transaction that the MOU dated 19th January, 2009 was entered into by the Appellant with Mr. Hashim Moosa. 5. A search and seizure operation was carried out at the Appellant's premises on 25th November, 2010 under Section 132 of the Act 1961. As recorded in paragraph 4 of the assessment order dated 15th March, 2013, the Appellant disclosed an income of Rs.2,27,65,580/- (Rupees Two Crores Twenty Seven Lakhs Sixty Five Thousand Five Hundred Eighty Only) as a consequence of the search and seizure. 6. A notice dated 21st August, 2012 under Section 142(1) of the Act 1961 was issued to the Appellant calling for return of income for Assessment Year ('AY') 2011-2012. The Appellant filed his return of income on 05th November, 2012. The Appellant returned a total income of Rs.4,77,11,330/- (Rupees Four Crores Seventy Seven Lakhs....
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....tas of land and received total sale consideration of Rs.10,29,87,500/-. The consideration received by them works out to Rs.55,00,000/- per acre. 5.3 Though, the assessee had admitted that he had undertaken transaction and had promised to get alternative lands to Mr. NHR Prasad Reddy & Sharab Reddy, he had not offered any income on this count before the DDIT (Inv.) The assessee has offered an amount of Rs.2,49,90,000/- during the course of assessment proceedings under the head income from other sources (income from assignment of rights) being the difference between the cost of lands which he has acquired on behalf of the brothers and cost of lands at which it is transferred to society." (emphasis supplied) 8. On 30th September, 2013, an order imposing penalty under Section 271AAA of the Act 1961 was passed against the Appellant for AY 2011- 2012. The Respondent imposed penalty on the Appellant solely on the ground that the Appellant did not make payment of tax and penalty in terms of Section 271AAA(2) of the Act 1961 after receipt of Show Cause Notice and considering the entire received income as the undisclosed income. 9. On the same day, another order imposing penalty und....
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....ion 132(4) is partly complied with, with a delay, in the absence of specific period for such compliance specified in the Sub-clause (iii) of Section 271AAA of the Act?" 14. Vide the impugned judgment dated 02nd August, 2022, the High Court dismissed the appeal of the Appellant. The relevant portion of the impugned judgment is reproduced hereinbelow:- "10. Undisputed facts of the case are, according to the learned advocate for the assessee, the assessee had admitted an undisclosed income of 2,27,65,580/- and filed returns showing income of Rs.4,78,02,616/-. The principal argument is that nothing was found during the course of search; assessee had voluntarily filed return of income more than what he had admitted before the DDIT. According to him, machinery Section has thus failed and therefore, penalty cannot be imposed. 11. Sub-section (1) of Section 271-AAA of the Act reads as follows: "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 [but before the 1st day of July, 2012], the assessee shall pay by way of penalty....
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....is for the assessee to demonstrate that income so surrendered falls in the definition of undisclosed income as so defined. As we have held earlier, it is for the Assessing Officer to record a specific finding that undisclosed income as so defined has been found based on tangible verifiable material found during the course of search and the onus is thus on the Assessing officer (and not on the assessee) to satisfy the conditions before the charge for levy of penalty is fastened on the assessee. The assessee might be seeking immunity under section 271AAA(2) but before that the charge for levy of penalty has to be satisfied by the AO and for that, it for the AO to record a specific finding as to the fulfillment of conditions specified therein and which apparently has not been fulfilled in the instant case...." (emphasis supplied). 18. He submitted that the authorities and the High Court ignored the law laid down by this Court in Dilip N. Shroff vs. CIT [(2007) 6 SCC 329], wherein it was held that the imposition of penalty is not mandatory. He pointed out that in the context of Section 271AAB, analogous to the provision in question, i.e. Section 271AAA, the aforesaid proposition of l....
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....able article or thing found in the course of search u/s 132 and which was not recorded on or before the date of search in the books of accounts or other documents maintained in the normal course relating to such previous year or otherwise not disclosed to the Commissioner before the date of search..... 22. We however find that nothing has been brought on record by the AO which in any manner even suggested let alone proved with cogent material that the said income was actually represented either wholly or partly by any sum of money, bullion, jewellery or other valuable article or thing and which was found as a result of search......" 23. Without prejudice to the above submissions, he stated that the penalty could not have been imposed on the entire returned income for FY 2010-2011. At the highest, and without prejudice to the submission that the Declaration in paragraph 4 of the assessment order had no co-relation to the documents seized during search, he submitted that penalty could have been imposed on the alleged undisclosed income of Rs.2,27,65,580/- (Rupees Two Crores Twenty Seven Lakhs Sixty Five Thousand Five Hundred Eighty Only) referred to in the said declaration at pa....
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....ons 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, [but before the 1st day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee, - (i) in the course of search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income." xxx xxx xxx 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....
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....nt) under Section 271AAA of the Act 1961 is normally not leviable. EXPRESSION 'UNDISCLOSED INCOME' 34. The expression 'Undisclosed Income' has been defined in Explanation (a) appended to Section 271AAA of the Act 1961. This Court is of the view that as Section 271AAA is a penalty provision, it has to be strictly construed. The fact that the assessee has surrendered some undisclosed income during the course of search or that the surrender is emerging out of the statements recorded during the course of search is not sufficient to fasten the levy of penalty. The onus is on the Assessing Officer to satisfy the condition precedent stipulated in the said Explanation, before the charge for levy of penalty is fastened on the assessee. 35. Consequently, it is obligatory on the part of the Assessing Officer to demonstrate and prove that undisclosed income of the specified previous year was found during the course of search or as a result of the search. EXPRESSION 'SPECIFIED PREVIOUS YEAR' 36. Further, the expression 'specified previous year' has been defined in Explanation (b) appended to Section 271AAA of the Act 1961. Since in the present case, the search was conducted on 25th Novem....