TMI Blog2019 (4) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... issue pertaining to undisclosed income component as to whether the same related to income or expenditure side. We find no merit in assessee s instant technical plea going by learned co-ordinate bench s decision hereinabove relying upon hon'ble apex court s decision in cases Sandeep Chandak vs. PCIT [ 2018 (6) TMI 106 - SUPREME COURT OF INDIA] We therefore decline assessee s cross-objection. - ITA No.232/Kol/2017 & C.O. No.37/Kol/2017 (a/o ITA No.232/Kol/2017), ITA No.234/Kol/2017 & C.O. No.27/Kol/2017 (a/o ITA No.234/Kol/2017), ITA No.1485/Kol/2017 & C.O. No.84/Kol/2017 (a/o ITA No.1485/Kol/2017) - - - Dated:- 24-4-2019 - ITA No.1535/Kol/2017 C.O. No.88/Kol/2017 (a/o ITA No.1535/Kol/2017), ITA No.1541/Kol/2017 C.O. No.108/Kol/2017 (a/o ITA No.1541/Kol/2017), ITA No.2293/Kol/2017 C.O. No.107/Kol/2018 (a/o ITA No.2293/Kol/2017) Shri J.Sudhakar Reddy, Accountant Member And Shri S.S.Godara, Judicial Member For the Assessee : Shri A.K.Tibrewal, FCA And Shri Amit Agarwal, AR For the Revenue : Shri A.K.Siniigh, CIT-Sr.DR And Shhri Rabin Choudhury, Addl CIT-Sr-DR ORDER PER S.S.GOD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58260000 1738938 Dilip Kr. Modi 1485/K/17 84/K/17 33132500 1367500 34500000 345000 3313250 136750 Kamlesh Agarwal 1535/K/17 88/K/17 7600000 652350 8252350 2475705 2280000 195705 Niranjan Lal Agarwal 1541/K/17 108/K/17 14450000 -- 14450000 4353000 4353000 --- Murari Lal Agarwal 2293/K/17 107/K/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made oral submission as well as filed a written submission on this issue which is as under:- I re-iterate that such offering of ₹ 18,65,00,000/- was made suo moto and to buy peace and was not backed by any evidence of undisclosed income or any undisclosed assets / items that had been found / inventorised by the Department and as such on penalty u/s 71AAB should be imposed. The similar view has also been expressed by the Hon'ble High Court of Gujarat in the case of Girish Devchand Rajani [2013] 33 taxmann.com 174 (Gujarat) where it had been held that where assessee to buy peace and to avoid protracted litigation filed revised return disclosed disclosing additional income, imposition of penalty under section 271(1)(c) upon assessee on plea that he had furnished inaccurate particulars of income was not justified. Further, in the case of Punjab Tyres [1986] 162 ITR 517 (Madhya Pradesh), the Hon'ble High Court of Madhya Pradesh also held that when surrender is made to purchase peace or for other similar reason, surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings. I also rely on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en only partial evidence or no evidence in support of concealment was detected during the search, why would a person go to offer a higher amount unless he was promised some reciprocal benefits like not being visited by penalty. Thus, sit was held that where additions have been made based on assessee s own offerings, penalty provision shall not lie. I find that during the search and seizure operation u/s. 132 in this case evidences regarding concealment/undisclosed income in the form of cash seizure/papers/documents/stock etc were found and seized of the value of ₹ 1385737/- only. Nothing incriminating/no evidences were found regarding ₹ 186500000/- which was offered for taxation by the assessee suo moto in order to buy peace of mind. I also find that neither the offers in the investigation wing in the post search investigation nor the Assessing Officer during assessment process found any discriminating evidence of undisclosed income other than the statement of the assessee for making the addition of ₹ 186500000/-. Further I find that the AO has levied penalty u/s. 271AAB(1)(c). This section read like sum computed at the rate of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) Prasanna Dugar vs. CIT (2016) 70 taxmann.com 175 (SC) e) MAK Data (P) Ltd. vs. CIT (2013) 38 taxmann.com 448 (SC) The Revenue further files its written submissions to the following effect:- Statement of facts: In consequence of search seizure/survey operation carried out in the business premises of the assessee and in residential premises of the directors of the assessee on 13.02.2013, the assessee has admitted an undisclosed income of ₹ 1,44,50,000/- u/s. 132(4). The assessee has also submitted manner of earning of search income and application thereof in their disclosure petition u/s. 132(4) that The manner of earning of the same is out of business activities which are out of family business activities. The disclosed income of ₹ 1,44,50,000/- was considered as undisclosed income in the order passed u/s. 143(3) for the specified year 2013-14. Accordingly, penalty notice u/s. 271AAB(1)(c) was imposed for ₹ 43,35,000/- on 29.09.2016. The assessee preferred appeal against the order u/s. 271AAB(1)(c) before the CIT(A)- 20 Kolkata who has held in view of sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Min. 30%-Max 90% of the undisclosed income as per the discretion of Income-Tax Officer. Legislative intent is very clear that Sec. 271AAA and Sec 271AAB are mutually exclusive. Booth cannot be levied upon the as simultaneously. The sole intent of Sec. 271AAB is to fasten the loops of Sec. 271AAA and to forbid the defaulter to escape by any means whatsoever without paying taxes on unexplained moneys. Relevant part from the memorandum of the Budget year of introduction is produced below in verbatim.: Under the existing provisions of section 271AAA of the Income-tax Act, no penalty is levied if the assessee admits the undisclosed income in a statement under sub-[section (4) of section 132 recorded in the curse of search and specifies the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. As a result, undisclosed income ( for the current year in which search takes place or the previous year which has ended before the search and for which return is not yet due ) found during the course of search attracts a tax at the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled income was established from any of the papers and documents found in the course of search in the panchanama of the assessee or in other panchanamas. The entire disclosure was made voluntarily and in good faith which is apparent from question and answer No.22 in the statement recorded under section 131 wherein the assessee categorically states that he is voluntarily disclosing the income even though no incriminating documents have been found and all the purchases and sales are correctly recorded and the disclosure was made just to cover the papers and documents which he may not be able to explain. The assessee bifurcated his own disclosure of ₹ 3.50 lakhs in respect to two parts, i.e. ₹ 70,00,000 for the assessment year 2008-09 and ₹ 2.80 lakhs for the assessment year 2009-10. On the basis of the disclosure, the assessee filed a return on March 31, 2010, offering a sum of ₹ 70,00,000 for taxation earned during the assessment year 2008-09. It is not in disputed that for the assessment year 2008-09, the assessee had earlier filed his return in which the aforesaid sums of ₹ 70,00,000 was not disclosed. The case of the assessee, as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstand that the meaning of the expression Voluntary in the context is that the statement made by him was not extorted from him by applying force. It is in that sense a voluntary disclosure which has been clarified by the assessee by stating in answer to question No. 23 that he had not given any statement under pressure and he did not want to rectify or modify the statement made by him. For the aforesaid reasons, we are of the opinion, that the order of the Tribunal in unsustainable in law and, therefore, is set aside. The order of the appellant authority is, therefore, restored. The appeal and the applications are thus disposed of. 3. In case of Mak Data Pvt Ltd. vs. CIT, Honourable SC have observed following: Assessee has only stated that he had surrendered the additional sums with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statue does not recognize those types of defences under the Explanation 1 to section 271(1)(c). It is strite law that the voluntary disclosure does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec. 271AAB Explanation (c) of the Act. The Revenue admittedly raises its arguments as per hon'ble apex court s decision in Sandeep Chandak (supra) declining the taxpayer s Special Leave petition in limine challenging hon'ble Allahabad high court s decision reviving the penalty therein. The Revenue s case appears to be carrying substance ab initio that as per hon'ble apex court s clinching observations whilst declining assessee s special leave petition that no ground was made out to interfere with the hon'ble high court s judgment under challenge. It does not stand on the correct side of law when we carefully study in all these legal developments. We find that the tribunal s co-ordinate bench s order in Sandeep Chandak vs. ACIT (2017) 185 TTJ 265 (Luc) had deleted sec. 271AAB penalty in issue primarily for the reasons that the Assessing Officer served only u/s. 271(1)(c) penalty notices, granted very short time to the taxpayer before levying the impugned penalty. It then observed that the Assessing Officer had not applied u/s 271AAB Explanations clause (a) to (c) as well in the given facts and circumstances. The Revenue preferred its appeal before hon'ble Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty applies in case of additional income defined under Explanation (c) of the Act. We therefore decline Revenue s three appeals. The assessee s cross objections No. 96 98/Kol/2017 supporting the CIT(A) s order to this extent are rendered infructuous. 11. We now advert to second assessee s cross objection No.97/Kol/2017 challenging correctness of the sustained penalty component to the extent ₹17 lac (supra) based on incriminating material found / seized during search. Its first argument is that the relevant penalty notice nowhere indicated as to under which limb the Assessing Officer had initiated the impugned penalty proceedings is not sustainable. We find this first argument to be devoid of any merit since the Assessing Officer made it clear in assessment order dated 06.06.2014 that he had already initiated u/s 271AAB proceedings. Hon'ble Allhabad high court s decision (supra) involved such an issue wherein their lordships made it clear that these proceedings are automatic in case of search followed by Sec. 132(4) statement involving admission of undisclosed income. The assessee s first argument is rejected therefore. 12. Mr. Tibrewa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified previous year would be found from reading of clause (ii) of Explanation (c) below section 271AAB of the Act. There the words specified previous year has been used for the purposes of levy of penalty under section 271AAB of the Act. Thus if it is found that the assessee has made some claim of bogus expenditure in the books of accounts of the year in which search is conducted and/or in the books of accounts of the previous year for which the previous year has ended but the due date of furnishing the return of income has not expired and the assessee has not furnished the return of income, in those cases penalty could be levied in as much as the phrase specified previous year has been used in clause (ii) to Explanation (c) below section 271AAB of the Act. 4.5 On the other hand the words such previous year have been used in clause (i) of Explanation (c) to Section 271MB of the Act. The word previous year has been defined in section 3 of the Income Tax Act, 1961 as under: 3. For the purposes of this Act, previous year means the financial year immediately preceding the assessment year: Provided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come declared does not carry any substance. 14. Lastly comes assessee s reliance of this tribunal co-ordinate bench s decision in Sanjay Dattatray Kakade vs. ACIT ITA No.932/Pun/2013 . Learned co-ordinate bench dealt with a search dated 11.02.2009 concluded on 03.04.2009 wherein the Assessing Officer had invoked sec. 271AAA for assessment year 2009-10. The Learned co-ordinate bench held in these facts and circumstances that specified previous year could not be taken to be assessment year 2009-10 as follows:- 2. Briefly stated, the facts of the case are that a search and seizure action u/s.132 of the Act was taken upon the assessee on 11-02-2009. Return was filed on 30.09.2010 declaring total income of ₹ 26,21,24,080/-. The AO assessed the total income at ₹ 28,20,70,090/-. Penalty of ₹ 57,70,620/- was imposed u/s.271 AAA on the undisclosed income of ₹ 5,77,06,205/-. The Id. CIT(A) dismissed the appeal of the assessee and also made an enhancement of penalty on a further income of ₹ 2,07,46,005/-, on which the AO had chosen not to impose penalty under this section. Aggrieved thereby, the assessee is in appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to be so had the search not been conducted; (b) specified previous year means the previous year- (i) which has ended before the date of search, but the date of filing 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year which ended on 31-03-2008 and the relevant assessment year would be 2008-09 and if we go with the Revenue and take the date of conclusion of search as the date of search, which is 3.4.2009, then the ' specified previous year would be the previous year which ended on 31-03-2009 and the relevant assessment year would be 2009-10. 8. Normally, there are three stages in case of a search. First is the initiation of process of search; second is the initiation of search; and third is conclusion of search. Section 132(1) of the Act provides that where Principal Director General etc., in consequence of the information in his possession, has reason to believe the existence of one of the three conditions, such as, any person is in possession money, bullion, jewellery or other valuable article of thing etc. and such money, bullion, jewellery etc., represents either wholly or partly income which has not been or would not be disclosed, then he may authorize any Additional Director etc., being the authorized officer, to enter and search any building, place, vessel etc., where he has reason to suspect that such undisclosed money, bullion, jewellery or other valuable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search ' as used in the provision. the Whereas the assessee is battling for pre-fixing the words 'initiation of' before the word ' search ' in the provision, the Revenue is strongly pitching for using the words ' conclusion of '. In the absence of any express usage of the appropriate pre-fix to the word 'search' in the language of the Explanation (b)(i) to section 271AAA of the Act, we need to discover the same on a harmonious reading of the provision in entirety. When so understood and on taking a holistic view of the mater, it turns out that the legislature intended to mean the 'date of search' in sub-clause (i) of clause (b) of the Explanation to section 271AAA as the ' date of initiation of search ' . We fortify our view by simultaneously reading clauses (a) and (b) of the Explanation to section 271AAA defining ' undisclosed income ' and ' specified previous year '. Firstly, it is pertinent to note that similar expression, namely, ' before the date of search ' has been used in both the clauses, viz., (a) and (b)(i) of the Explanation. We have set out supra the definition of ' undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construe the ' date of search ' as the date of conclusion of search, it would mean that any undisclosed income found during the course of search would become a disclosed income, if the assessee discloses it to the competent authority at any time during the continuation of search. Thus, if any income by way of certain money, bullion, jewellery etc. is found during the course of search which has not been recorded in the books of account, the assessee cannot escape the clutches of section 271AAA simply by recording or disclosing the same after the initiation but before the conclusion of search. Obviously, this cannot be the intention of the legislature to construe the expression ' date of search ' given in clause (a) of the Explanation to mean the ' date of conclusion of search '. It has to be the 'date of initiation of search' so that any income represented by any money, bullion, jewellery etc. found in the course of search but not recorded in the books is considered as ' undisclosed income' . Thus it becomes crystal clear that the expression ' before the date of search ' used in clause (a) of the Explanation refers to the ' date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision in AKA Logistics Pvt. Ltd. Ors. (supra) mutatis mutandis to confirm the CIT(A) s findings forming subject-matter challenge in Revenue s lead appeal ITA No.232/Kol/2017. 10. Coming to assessee s cross-objections seeking to delete impugned penalty in enterity, Mr. Tibrewal vehemently contends during the course of hearing that the Assessing Officer s penalty show-cause notice nowhere specified the limb in issue pertaining to undisclosed income component as to whether the same related to income or expenditure side. We find no merit in assessee s instant technical plea going by learned co-ordinate bench s decision hereinabove relying upon hon'ble apex court s decision in cases Sandeep Chandak vs. PCIT (2018) 93 taxman.com 406 (SC) (supra). We therefore decline assessee s cross-objection CO No.37/Kol/2017 as well. 10. Same order to follow in Revenue s remaining appeal(s) as well as assessee s cross-objection(s) herein since it has come on record that the same seek to revive and delete the Assessing Officer s penal action in entirety. The CIT(A) holds in all these cases that the impugned penalt(ies) has to be confirmed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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