TaxTMI 
TaxTMI 
2020 (7) TMI 853
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..... Assessing Officer u/s 271AAB of the I.T. Act, 1961. 3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them. Ground No. 1 is regarding validity of initiation of penalty proceedings for want of specifying the default for which the AO sought to impose the penalty under section 271 AAB of the IT Act. 2. The assessee is an Individual and derives income from Salary/Remuneration from the company in which he is a Director as well as income from other sources. A search and seizure action under section 132 of the IT Act was carried out on 30.10.2014 in case of Mahima Group, Jaipur under which the assessee was also covered. In the course of search and seizure proceedings the assessee offered an income of Rs. 4,50,00,000/- as his additional income for the current year relevant to assessment year 2015-16. The assessee filed return of income on 31.08.2015 declaring total income of Rs. 4,90,59,810/- which includes the income of Rs. 4,50,00,000/- offered during the course of search. The assessment under section 143(3) read with section 153B(1)(b) of the Act was completed on 30th December, 2016 accepting the r....
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....time of issuing the show cause notice as the show cause notice issued by the AO do not specify the undisclosed income on which the assessee is required to show cause. Even the AO has not given any ground for levy of penalty for which the assessee could put his defense. Thus in the absence of specific charge against the assessee, he was not in a position to counter the show cause notice issued by the AO as well as his cogent reply to the show cause notice. Though the AO while passing the impugned order has imposed the penalty as per clause (a) of section 271AAB(1) of the Act, however, no such ground was specified in the show cause notice issued under section 271AAB read with section 274 of the Act. He has relied upon the decision of Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar.) as well as the decision in the case of CIT vs. SSA's Emerald Meadows, 73 taxmann.com 241. The SLP filed by the department against the said decision of the Hon'ble Karnataka High Court has been dismissed by the Hon'ble Supreme Court reported in 242 taxman 180 (SC). The Id. A/R has also relied upon the decision of Hon'ble Jurisdiction....
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....ainst the defect in notice is not acceptable as the alleged defect has caused no prejudice to the assessee. The ld. D/R has submitted that when the assessee himself has disclosed the undisclosed income during the course of search and seizure action, then the assessee was very much aware about the default which attracts the penalty under section 271AAB of the IT Act. She has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as the relevant material on record. The assessee has challenged the validity of initiation of the penalty proceedings under section 271AAB on the ground that the show cause notices issued by the AO are invalid for want of not specifying or making out a charge against the assessee which attracts the penalty under section 271AAB of the Act. For ready reference, we reproduce the notices dated 30.12.2016 and 26.05.2017 as under :- Thus it is clear that the AO has highlighted the charge in both the show cause notices as the assessee is liable for penalty for concealment of particulars of income/furnishing of inaccurate particulars of income. Except the date of notice, the contents of both the notices are mirror ....
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....ion as far as the quantum of the penalty is concerned. Therefore, the penalty sought to be levied by the AO in the show cause notice shall also specify the default and the consequential rate of penalty which the AO proposed to be levy. From the show cause notices it is apparent and evident that the AO has not even applied his mind but issued the notices one after another without even stating the primary charge required for levy of penalty under section 271AAB of the Act. Both the show cause notices are completely silent about the charge of undisclosed income discovered during the course of search and other defaults, if any, made by the assessee so as to attract the penalty under clauses (a), (b) or (c) of section 271AAB(1) of the IT Act. Therefore, on the face of the show cause notices it can be said that these are vague and suffering from serious defects which cannot be cured as the primary requirement of charge against the assessee is missing in both the notices. On the contrary, a completely wrong charge has been specified in these notices which cannot be a basis for levy of penalty under section 271AAB of the Act. Therefore, we find that the initiation of the penalty by issuing....
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....is of the surrender and then arrive to the conclusion that the income disclosed by the assessee falls in the definition of undisclosed income as stipulated in the explanation to the said section. Therefore, we do not agree with the contention of the ld. D/R that the levy of penalty under section 271AAB is mandatory simply because the AO has to first issue a show cause notice to the assessee and then has to make a decision for levy of penalty after considering the fact that all the conditions provided under section 271AAB are satisfied. At the outset, we note that an identical issue has been considered by the Coordinate Bench of this Tribunal in the case of Ravi Mathur vs. DCIT (supra) in para 4 to 6 as under :- "4. We have considered the rival submissions as well as relevant material on record. A search was conducted under section 132 of the IT Act on 30th October, 2014 at the premises of the assessee. The assessee in his statement recorded under section 132(4) has disclosed an income of Rs. 10,02,00,000/- in pursuant to the entries of advances given for purchase of land recorded in the pocket diary which was found and seized during the course of search and seizure action.....
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....date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President"], 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 before the specified date- (A) d....
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....ch has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) "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 2[Principal Chief Commissioner or] Chief Commissioner or [Principal 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 docume....
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....ed income but the facts of each case are required to be analyzed in objective manner so as to attract the provisions of section 271AAB of the Act. Since it is not automatic but the AO has to give a finding that the case of the assessee falls in the ambit of undisclosed income as defined in Explanation to the said section. Therefore, the provisions of section 271AAB stipulate that the AO may come to the conclusion that the assessee shall pay the penalty. The only mandatory aspect in the provision is the quantum of penalty as specified under clauses (a) to (c) of Sec. 271AAB(1) of the Act as 10% to 30% or more as against the discretion given to the AO as per the provisions of section 271(1)(c) of the Act where the AO has the discretion to levy the penalty from 100% to 300% of the tax sought to be evaded. Thus the AO is duty bound to come to the conclusion that the case of the assessee is fit for levy of penalty under section 271AAB and then only the quantum of penalty being 10% or 20% or 30% has to be determined subject to the explanation of the assessee for the defaults. 5. Before we proceed further, the decisions relied upon by the ld. D/R are to be considered. In the case....
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.... (supra), we find that the said decision was subsequently recalled by the Tribunal and a fresh order dated 14th March, 2018 was passed by the Tribunal in favour of the assessee. Therefore, the decision relied upon by the ld. D/R is no more in existence. 6. The question whether levy of penalty under section 271AAB by the AO is mandatory or discretionary has been considered by the Visakhapatnam Bench of this Tribunal in case of ACIT vs. M/s. Marvel Associates (supra) in para 5 to 7 as under :- 5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. During the appeal hearing, the Ld. A.R. vehemently argued that the A.O. has levied the penalty under the impression that the levy of penalty in the case of admission of income u/s 132(4) is mandatory. The Ld. A.R. further stated that penalty u/s 271AAB of the Act is not mandatory but discretionary. The provisions of section 271AAB of the Act is parimateria with that of section 158BFA of the Act relating to block assessment and accordingly argued that the levy of penalty under section 271AAB is not mandatory but discretionary. When there is reasonab....
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....imposed upon the assessee in respect of the undisclosed income referred to in sub- section (1). Section 158BFA(2): (2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC: Provided that no order imposing penalty shall be made in respect of a person if- (i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable. (iii) Evidence of tax paid is furnished along with the return; and (iv) An appeal is not filed against the assessment of that part of income which is shown in the return: Provided further that the provisions of the preceding proviso shall not apply where the undisclosed ....
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....rational manner depending upon the facts and circumstances of the each case. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case." Thus the Tribunal has held that the levy of penalty under section 271AAB is not mandatory but the AO has the discretion to take a decision and shall be based on judicious decision of the AO. Hence we fortify our view by the above decisions of Tribunal in case of ACIT vs. Marvel Associates." Thus the Tribunal has analyzed all the relevant provisions of the Act as well as various decisions on this point including the decision of Hon'ble Allahabad High Court in the case of Pr. CIT vs. Sandeep Chandak, 405 ITR 648 (Allahabad) relied upon by the ld. D/R and then arrived at the conclusion that the penalty under section 271AAB is not mandatory but the AO has the discretion to take a decision and the same should be based on judicious decision of the AO. Accordingly following the earlier decision of this Tribunal in the case of Ravi Mathur ....
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....sessee. He has referred to the CBDT Circular No. 286 of 2003 dated 10th March, 2003 and submitted that the CBDT expressed its concern about the practice of confession of additional income during the course of search and seizure proceedings which do not serve any useful purpose in the absence of any evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed. Hence the ld. A/R has submitted that the Board has time and again advised the taxing authorities to avoid obtaining an admission/confession of undisclosed income under coercive/undue influence. He has then referred to the Circular dated 18th December, 2018 and submitted that the CBDT has repeated its earlier instructions. Thus the ld. A/R has submitted that in the absence of any undisclosed income indicated or discovered on the basis of seized material, the disclosure made in the statement under section 132(4) is not sufficient to levy the penalty under section 271AAB of the Act. In support of his contention, he has relied upon the following decisions :- Ravi Mathur vs. DCIT ITA No. 969/JP/2017 dated 13.06.2018. Dinesh Kumar Agarwal vs. ACIT ITA Nos. 855 & 856/....
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.... 5 (five) entries are recorded. The entries are in the nature of payments for land. Only certain names and amounts are written under the head ' Against Land'. Neither any description of the land is given in the seized material nor even the complete particulars of the persons except some names are appearing like Jagdish, Sita Ram, Suresh Chand, Shyam Kumar, Dharam Chand. The entries in the seized material do not reveal any income of the assessee but these are only the payments made by the assessee. Therefore, the seized material itself does not disclose any income for the year under consideration as the said payment may be representing the income of the past years or the income of some other person. The department has not made any enquiry about the particulars of the land as well as the persons to whom the alleged payment was made. Even no efforts were made to find out whether these payments were made against any particular transaction of purchase of land. It is also not on record whether these imaginary names found written in the seized material were having any land under their ownership or not. An identical issue has been considered by this Tribunal in the case of Gopal Da....
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....te the real transaction entered into by the assessee with the persons whose names are recorded in the seized material are either found or brought on record by the AO. The existence of the asset being land for which the alleged advances were given is essential to establish that the assessee has actually entered into these transactions and paid the advances. In the absence of such fact or the land for which the advances were given or the full particulars of the persons to show that the names appearing in the seized documents are real existing persons, these entries in the seized documents would not constitute undisclosed income on account of advances for land. Therefore, without ascertaining the full particulars of the persons in whose names the entries are made, it is possible that all these names are imaginary and not the names of any existing persons. The vague entries itself do not represent the real transaction and consequently the undisclosed income of the assessee. The Coordinate Bench of this Tribunal in case of Rajendra Kumar Gupta vs. DCIT (supra) has considered the issue of out flow of funds from the assessee can be an undisclosed income for the purpose of section 271AAB o....
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....In our view, the deeming fiction so envisaged under Section 69 and Section 69B cannot be extended and applied automatically in context of section 271AAB. It is a well-settled legal proposition that the deeming provisions are limited for the purposes that have been brought on the statute book and have therefore to be applied in the context of provisions wherein they have been brought on the statue book and not otherwise. In the instant case, the deeming provisions contained in section 69 and section 69B could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the AO has not even invoked the said deeming provisions in the quantum proceedings. Therefore, even on this account, the deeming fiction cannot be extended to the penalty proceedings which are separate and distinct from the assessment proceedings and more so, where the provisions of section 271AAB provide for a specific definition of undisclosed income. Where a specific definition of undisclosed income has been provided in Section 271AAB, being a penal provision, the same must be strictly construed and in light of satisfaction of conditio....
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....¤° विà¤à¤¾à¤—/Department of Income-tax कारà¥à¤¯à¤¾à¤²à¤¯, सहायक आयकर आयà¥à¤•à¥à¤¤, केनà¥à¤¦à¥à¤°à¥€à¤¯ वृत-1, जयपà¥à¤° (Office of the Assistant Commissioner of Income-tax, Central Circle-1, Jaipur) कमरा नं. à¤à¤¨.à¤. 103, नव केनà¥à¤¦à¥à¤°à¥€à¤¯ राजसà¥à¤µ à¤à¤µà¤¨, सà¥à¤Ÿà¥‡à¤šà¥à¤¯à¥‚ सरà¥à¤•à¤¿à¤², जयपà¥à¤° - 302005 (Room No. NA 103, New Central Revenue Building, Statue Circle, Jaipur - 302005) E-Mail :- [email protected] फोन/Phone : 0141-2227639 No. ACIT/CC-1/JPR/2016-17 851 Date: 30.12.20: PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961 PAN - AIGPM5610C To, Sh Nikhil Madan 8, Nikhil Apartment, 670 Adrash Nagar Jaipur. Whereas in the course of assessment proceedings before me for the A. Y. 20....