TaxTMI 
TaxTMI 
TaxTMI 
2025 (2) TMI 1221
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....ed u/s 153A/143(3). Presently, we are concerned with AY 2014-15 for which the assessee filed return declaring a total income of Rs. 14,45,690/- on 30.03.3016 in response to notice u/s 153A but the AO completed assessment at a total income of Rs. 17,21,79,560/- after making certain additions vide assessment-order dated 30.12.2016. Simultaneously, the AO initiated penalty proceeding u/s 271AAB vide notice dated 30.12.2016 u/s 274 r.w.s. 271AAB which culminated into passing of penalty-order dated 21.03.2022 imposing a penalty of Rs. 1,63,64,882/- u/s 271AAB(1)(b) @ 60% on undisclosed income of Rs. 2,72,74,804/-. The five issues for which this penalty was imposed, have been neatly noted by CIT(A) in Para 2.1 to 2.5 of impugned order, we re-produce the same: "2.1 The return of income for the AY 2014-15 was filed on 28/11/2014 u/s 139(1) of the Act declaring total income of Rs. 14,35,62,680/-. In response to the notice u/s 153A of the Act, the assessee had filed return of income on 30/03/2016 for the AY 2014-15, declaring total income at Rs. 14,45,690/- The appellant had revised the deduction u/s 80-IA of the Act to Rs. 17,91,52,742/- in computation of income u/s 153A of the Act. The a....
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....ting document, it was found that the PATH group has sold a Crusher at Village-Doll, Distt. Dhar. The Crusher was sold in AY 2011-12 but the depreciation on the same was claimed consistently by the appellant and onwards when the appellant was confronted with this fact, the appellant offered undisclosed income in the submission. Addition of Rs. 2,12,774/- was made to the total income of the assessee for the AY 2014-15 and penalty proceedings u/s 271AAB was initiated on this issue." 3. Aggrieved by penalty-order, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come in next appeal before us assailing the orders of lower-authorities. 4. The assessee has raised following grounds: "1. The Ld. CIT(A) erred in confirming penalty u/s 271AAB of the I.T. Act is against the law and without appreciating the law and the facts of case. He is failed to appreciate that Penalty u/s 271AAB can be pressed into service only on existence of undisclosed income. 2. The Ld. CIT(A) failed to appreciate that penalty contemplated under section 271AAB of the Income Tax Act is not mandatory rather the imposition of penalty under the said section is upon the di....
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....sing 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 July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the 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) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or befo....
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....t been conducted." 7. Then, Ld. AR carried us to the show-notices dated 30.12.2016 & 04.01.2022 issued by AO u/s 274 read with section 271AAB, placed at Page 116 & 132 of Paper-Book, the same are scanned and re-produced here for immediate reference: 8. Thereafter, Ld. AR submitted that the AO has, in the notice dated 31.12.2016 by which the penalty proceeding was initiated, mentioned "you have disclosed/undisclosed income u/s 132(4) of the Act during specified previous year". Further, in the subsequent notice dated 04.01.2022 also, the AO has mentioned that "a search was conducted in your case and you were found to have undisclosed income." Ld. AR submitted that the AO has made vague allegations against assessee and there is no specific charge made out by the AO as to under which clause (a), (b) or (c) of section 271AAB(1), penalty was leviable on assessee. Ld. AR submitted that the notice u/s 274 sets in motion the penalty-proceeding and it has to be a very clear notice. According to Ld. AR, by mentioning that the assessee "you have disclosed/undisclosed income u/s 132(4) of the Act during specified previous year" or "a search was conducted in your case and you were found to hav....
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....s already discussed in assessment order in details. It is also a fact that notice dated 04/01/2022 was issued through ITBA and it was clearly mentioned that "a search was conducted in your case and you were found to have undisclosed income." In the assessment-order the AO has discussed the entire issue in details and initiated penalty proceedings u/s 271AAB of the Act. The assessee company quoted various decisions. The same was perused carefully. It is found that the facts of this case are different from the quoted case laws and thus find not applicable in this case. (v) Regarding the contention of the assessee that the notice issued u/s 271AAB of the Act is silent about any default. In the notice dated 30/12/2016, it was clearly mentioned that "have disclosed/undisclosed income U/s 132(4) of the Act during specified previous year". Another notice was also issued through ITBA." CIT(A)'s order: "4.2.2 Ground No. 4, 5 & 8: Through this grounds of appeal, the appellant has contested that penalty u/s 271AAB can be pressed into service only on existence of undisclosed income (within the meaning of Explanation below 271AAB) and if the notice does not make mention of such essenti....
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....discloses income in the statements u/s 132(4) and simultaneously other prescribed conditions are also satisfied; Clause (b) deals a different situation where the assessee does not disclose/admit income in the statements u/s 132(4) but satisfies other prescribed conditions; and Clause (c) deals a case not covered under (a) or (b). However, in the notice dated 30.12.2016 the AO has mentioned "you have disclosed/ undisclosed income u/s 132(4) of the Act during specified previous year" and in subsequent notice dated 04.01.2022, the AO has mentioned "a search was conducted in your case and you were found to have undisclosed income." Ld. AR is very correct in submitting that the notices issued by AO do not specify the exact charge of default committed by assessee or the clause/limb of section 271ABB under which the assessee's case would fall. From these notices, it is discernible that the AO was not even clear in his mind as to the default committed by assessee. Therefore, the case of assessee is certainly covered by decisions of Hon'ble Supreme Court in SSA'S Emerald Meadows, Hon'ble Jurisdictional High Court in Kulwant Singh Bhatia, ITAT Indore in Shri Ashok Bhatia and ITAT Indore in M....
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.... made out by the Assessing Officer either while passing the assessment order, or while issuing impugned penalty notice; that in such circumstances also, no penalty was exigible u/s 271AAB. The ld. Counsel for the assessee placed reliance on the Judgment of the Hon'ble Madras High Court in the case of 'Principal Commissioner of Income Tax v/s Shri R. Elangovan' in appeal Nos. 770 and 771 of 2018. 7.1 Reliance has also been placed on the decision dated 20.03.2024, of the Delhi Bench of the Tribunal in the case of 'Jaina Marketing & Associates Vs DCIT', passed in ITA Nos. 225 & 226/Del/2023, for assessment years 2018-19 and 2019-20. 8. On the other hand, the ld. DR has placed strong reliance on the impugned order, contending that as correctly observed by the ld. CIT(A), the Finance Act, 2012 inserted Section 271AAB in the Act, which provided for levy of penalty for concealment of income for the specified period at different rates; that the rates vary from 10% to 90%, depending on whether the undisclosed income has been admitted or not, whether the due taxes have been paid or not, and other conditions; that the perusal of the said section reveals that the penalt....
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....he notice initiating penalty u/s 271 AAB of the Act is vague and the assessee was not made aware of the actual charge on which the penalty proceedings will be initiated on the assessee. The various judicial precedents, as discussed in the following paras have held that the penalty notice should be clear enough to convey to the assessee, the exact charge which is to be levied against him/her/it for levying penalty for the contravention of the related provisions of the Act. 10. An identical question came for consideration before the Jaipur bench of the Tribunal in the case of 'Sri. Mahaveer Prasad Agarwal Vs. The DCIT', in ITA No. 1218/JP/2019, vide order dated 02-06-2022, wherein a similar notice had been issued to the assessee, therein and the Tribunal held as under: '5.1 In case of Shri Padam Chand Pungliya vs. ACIT (supra), the Coordinate Bench has held at para 5 page 7 of its order as under :- "It is pertinent to note that the disclosure of additional income in the statement recorded under section 132(4) Itself is not sufficient to levy the penalty under section 271AAB of the Act until and unless the income so disclosed by the assessee falls in the definition o....
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....accepted as genuine and as such the order of the Id. CIT (A) sustaining the penalty is hereby quashed. 7. In the result, appeal of the assessee is allowed.' 10.1 The Indore Bench of the Tribunal, in ITA No. 869/lnd/2018, in the case of 'Shri Ashok Bhatia vs. DCIT', vide order dated 05.02.2020, held as under: "8. From perusal of the above provision we observe that sub section 3 of Section 271AAB of the Act talks about issuing the notice u/s 274 of the Act. So for initiating the penalty proceedings u/s 271AAB of the Act the first step to be taken by ld. A.O is to issue a valid notice u/s 274 of the Act. Sub-section (1) to Section 274 of the Act provides a procedure that "No order imposing a penalty under this Chapter shall he made unless the assessee has been heard, or has been given a reasonable opportunity of being heard". To comply with this requirement the notice u/s 274 should, be clear enough to convey the assessee about the charge which is to be leveled against him/her/it for levying the penalty for the contravention of the related provisions of the Act which in the instant case relates to not surrendering of undisclosed amount during the course of search whi....
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....cumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act. does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty of Rs. 64,22,348/- stands deleted. Thus assessee succeeds on legal ground challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act." 10.2 The Kolkata Bench of the ITAT, in the case of 'Sushil Kumar Paul vs. ACIT' in ITA No. 2274/Kol/2019, vide order dated 15.12.2022, held as under:- "From the perusal of the above proposition, we observe that sub-section 3 of section 271AAB of the Act talks about issuing the notice u/s 274 of the Act. So for initiating the penalty proceedings u/s 271 AAB of the Act, the first step to be taken by Ld. Assessing Officer issue a valid notice u/s 274 of the Act provides a procedure that "No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard." To comply with this requirement, the notice u/s 274 should b....
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....venue is that the notice issued by the Assessing Officer while imposing penalty clearly stated that it was a notice issued under Section 274 read with Section 271AAB of the Act. Therefore, the assessee was aware that he had to face penalty proceedings initiated under Section 271AAB of the Act. That apart, the assessee submitted two replies and was also heard in person and thereafter penalty was imposed. Hence, it is submitted that the order passed by the Tribunal setting aside the penalty in its entirety is not sustainable. The learned Senior Standing Counsel has also referred to Sections 274 and 275 of the Act. 12. In support of his contention, the learned Senior Standing Counsel has placed reliance on the decision of the Allahabad High Court in the case of PCIT Vs. Sandeep Chandak [reported in (2018) 93 Taxmann.com 405]. 13. Per contra, Mr. N.V. Narayanan, learned counsel appearing for the respondent-assessee would submit that the notice issued prior to initiation of penalty proceedings did not specify as to under which limb of Section 271AAB of the Act, the Assessing Officer proposed to levy penalty, that this defect goes to the root of the matter and vitiates the entire pro....
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....ee, in the course of search, makes a statement, in which, he admits the undisclosed income and specifies the manner, in which, such income has been derived, then the provisions of Section 271AAB of the Act would automatically get attracted. There can be no quarrel over this proposition. But, once the provisions get attracted, it is incumbent on the part of the Assessing Officer to specify as to under which clause in 271AAB(1) of the Act, he intends to proceed against the assessee. In the instant case, in the absence of such material in the penalty notice, it has to be held that the notice is defective. 17. The decisions of the Karnataka High Court in the cases of Manjunatha Cotton and Ginning Factory and SSA's Emerald Meadows and the decision of this Court in the case of Babuji Jacob clearly support our above conclusion. For all the above reasons, we find no grounds to interfere with the common order passed by the Tribunal. 18. Accordingly, the above tax case appeals are dismissed confirming the common impugned order passed by the Tribunal. No costs. Consequently, the connected CMP is also dismissed." 11.2 So far as regards the decision of the Amritsar Bench of the Tribun....