TMI Blog2019 (2) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 271AAB It has come on record that the Revenue seeks to rely upon the same very material as it was used in assessee s sister concern s case pertaining to the very search wherein its identical grievance stands declined vide above extracted detailed discussion. We adopt the said reasoning mutatis mutandis in the instant case as well as no distinction on facts and law has been pointed out at the Revenue s behest. The CIT(A) s order under challenge deleting the impugned penalty is confirmed accordingly. - Revenue s appeal is dismissed. - I.T.A Nos.1606/Kol/2017 - - - Dated:- 28-2-2019 - SHRI S. S. GODARA, JM AND DR. A. L. SAINI, AM For The Appellant : Shri Radhey Shyam, CIT-DR For The Respondent : Shri A. K. Tulsiyan, FCA ORDER Per Shri S. S. Godara: This Revenue s appeal for assessment year 2013-14 arises against the Commissioner of Income Tax(A)-20, Kolkata dated 13.04.2017 passed in Case No.1119/CC2(2)/CIT(A)/15-16 reversing Assessing Officer s action imposing penalty of ₹ 3,09,69,700/- in his order dated 30.09.2015 u/s 271AAB of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtial evidence or no evidence in support of the 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, it was held that where additions have been made based on assessee s own offerings, penalty provision shall not lie. 7. I also agree with the recent decision of ITAT, Lucknow in the case of SandeepChandak vs. ACIT (2017) 186 TTJ (Lucknow) 265 in which it has been held that it is not mandatory to impose penalty u/s 271AAB in each and every case even if the assessee has made the default under the said provision. The Hon ble ITAT has held as under. We have also gone through the provisions of s.271AAB and noted that this section specifies three different situations under which the penalty can be imposed on the assessee under different cls. (a),(b), and (c), the penalty has to be imposed on different rates. The AO has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the ratio decided by the Hon ble Supreme Court, the A.O is directed to levy penalty u/s 271AAB(1)(a) on ₹ 3,03,000/- only and not on rest of disclosure which was made suo moto in order to buy peace of mind. 4. Learned CIT-DR vehemently contends that during the course of hearing that the ld. CIT(A) has erred in law and on facts in deleting the impugned penalty. His case is that the Assessing Officer had rightly treated the assessee s additional income to the tune of ₹ 31,00,00,000/- to be representing its undisclosed income u/s 271AAB Explanation (C) of the Act. Our attention is invited to its detailed write-up filed during the course of hearing prima facie indicating impugned penalty based on relevant incriminating ASHMI/1 to RASHMI/5, RASHMI/HD/1, RML-II/1 TO RMLII-5,RML-11/HD/1 RML-II/PD/1 AND RCPL/1 to RCPL/7. 5. The Revenue s case therefore is that the Assessing Officer has successfully proved his case that assessee s income disclosed in such amended to its undisclosed income inviting the impugned penalty under the relevant statutory provision. We find no merit in Revenue s instant arguments. Mr. Tulsiyan has placed on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the additional income of ₹ 69,00,00,000/- formed part of the returned income which was loss of ₹ 72,76,45,862/-. The assessment thereafter was completed on 31.03.2015 after making certain additions/disallowances on other counts. In the assessment order the AO however initiated penalty proceedings in respect of the additional income of ₹ 69,00,00,000/- u/s 271AAB of the Act and show cause notice u/s.271AAB r.w.s. 274 of the Act was issued. 4. In the penalty proceedings, vide its letter dated 21/09/2015 the assessee submitted that income of ₹ 69 crores declared voluntarily was not represented by any assets, jewellery, cash etc. found in the course of search or for that matter any document or papers which were impounded and seized in the course of search. It was therefore claimed that the income voluntarily offered did not qualify as undisclosed income as defined for the purposes of that section and hence no penalty was warranted u/s 271AAB of the Act. The Ld. AO was however of the opinion that unlike Section 271(1)(c) or 271AAA, the provisions contained in Section 271AAB were mandatory and automatic and once disclosure of income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to offer a higher amount unless he was promised some reciprocal benefits like not being visited by penalty. Thus, it was held that where additions have been made based on assessee s own offerings, penalty provision shall not lie. 7. I also agree with the recent decision of ITAT, Lucknow in the case of Sandeep Chandak vs ACIT (2017) 186 TTJ (Lucknow) 265 in which it has been held that it is not mandatory to impose penalty u/s 271AAB in each and every case even if the assessee has made the default under the said provision. The Hon ble ITAT has held as under: We have also gone through the provisions of s. 271AAB and noted that this section specifies three different situations under which the penalty can be imposed on the assessee under different cls. (a), (b) and (c), the penalty has to be imposed on different rates. The A.O. has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the provisions of s. 271AAB are not mandatory which means that the penalty has (Sic-not) to be levied in each and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e justified. The Hon ble Supreme Court has also categorically decided the ratio that penalty cannot be levied on the amount offered by the assessee in order to bu7y peace of mind [in the case of Sudarshan Silk Sarees (supra). Thus, respectfully following the ratio decided by the Hon ble Supreme Court, the A.O. is directed to delete the penalty u/s 271AAB(1)(a). Accordingly, assessee s appeal on ground no. 1 is allowed. 5. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 6. We have heard both the parties and perused the material available on record. The Ld. DR appearing on behalf of the Revenue submitted that in the present case it is not in dispute that the disclosure of ₹ 69 crores was made by the assessee in the course of search conducted u/s 132 of the Act. Not only the disclosure was made at the time of search conducted on 18.02.2013 but in the joint declaration dated 18.04.2013 the assessee along with Rashmi Cement Ltd SajjanPatwari HUF reiterated its admission of paying tax on the undisclosed income of ₹ 69 crores which was found as a result of search conducted against Rashmi Group. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view to avoid protracted litigation and to buy peace of mind, the appellant had made voluntary offer to pay tax on income and acted upon such offer, such fact ipso facto does not lead to conclusion that such income was in the nature of undisclosed income for the purposes of clause (c) of Explanation to Section 271AAB of the Act. It was his argument that the expression undisclosed income was defined for the purposes of Section 271AAB in a specified manner and therefore it was obligatory on the AO s part to prove that the income voluntarily offered came within the ambit and scope of the expression undisclosed income as defined in clause (c) of the Explanation. According to Ld. AR the voluntary offer made by the assessee to pay tax on income of ₹ 69 crores did not fall within any of the specified sub-clauses contemplated by clause (c) of the Explanation to Section 271AAB and therefore merely because the assessee had made offer to pay tax on income while recording his statement u/s 132(4) of the Act, that by itself did not lead to conclusion that income specified in the joint declaration u/s 132(4) was undisclosed income for the purposes of Section 271AAB attracting rigo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh High Court ratio in Radha Krishna Vihar (infra). The following observations of the Tribunal in the said decision are relevant in this regard: 6. Careful reading of section 271AAB of the Act, the words used are 'AO may direct' and 'the assessee shall pay by way of penalty'. Similar words are used section 158BFA(2) of the Act. The word may direct indicates the discretion to the AO. Further, sub section (3) of section 271AAB of the Act, fortifies this view. Sub section (3) of section 271AAB: The provisions of section 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. 7. The legislature has included the provisions of section 274 and section 275 of the Act in 271AAB of the Act with clear intention to consider the imposition of penalty judicially. Section 274 deals with the procedure for levy of penalty, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of section 271AAB of the Act, it is evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer made by the assessee to pay tax on additional income in the statement u/s 132(4) cannot be considered to be undisclosed income within the meaning of sec. 271AAB of the Act. So the rigors of Section 271AAB of the Act is not attracted. Having regard to these material facts the judgment of Hon ble Allahabad High Court relied upon by the Ld. DR, has no application in the facts of the instant case. 10. We further note that the coordinate Bench of this Tribunal at Jaipur in the case of Shri Ravi Mathur vs. DCIT in ITA No. 969/JP/2017 dated 13.06.2018 after taking note of the decision of the Hon ble Allahabad High Court (supra), had recorded following findings to hold that levy of penalty u/s 271AAB is not automatic. 5. Before we proceed further, the decisions relied upon by the ld. D/R are to be considered. In the case of Principal CIT vs. SandeepChandak Others (supra) the issue before the Hon ble High Court was the defect in the notice issued under section 271AAB on account of mentioning wrong provision of the Act being 271(1)(c) of the Act. The Hon ble High Court after considering the fact that the show cause notice issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy 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 isparimateria 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 reasonable cause, the penalty is not exigible. The Ld. A.R. taken us to the section 271AAB of the Act and also section 158BFA(2) of the Act and argued that the words used in section 271AAB of the Act and the words used in section 158BFA(2) of the Act are identical. Hence, argued that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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. 11. So for the reasons as aforerstated and relying on the Hon ble Andhra Pradesh High Court ratio in Radha Krishna Vihar (supra), we cannot agree with the Revenue that the levy of penalty under Section 271AAB was mandatory and automatic. We further note that the penalty leviable under Section 271AAB must have necessary and proximate nexus with discovery of undisclosed income in the course or as a result of search. The expression undisclosed income for the purposes of levy of penalty u/s 271AAB has a definite and specific meaning and the said wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents maintained in the normal course relating to such previous year or otherwise not disclosed to the Commissioner before the date of search. From the bare perusal of the assessment order and the penalty order, we note that the assessee had voluntarily included ₹ 69 crores as its income for AY 2013-14. 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 in the course of search. Since no sum of money, bullion, valuable or article equivalent to ₹ 69 crores was discovered by the Revenue in the course of search, the additional requirement of the same being found not recorded in the books or other documents was redundant. We therefore find that the conditions prescribed in first limb of clause (i) of clause (c) of Explanation were not satisfied. 13. The second limb of sub-clause (i) provides that undisclosed income shall mean any income represented either wholly or partly by any entry in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try made in the books of accounts or other documents or transactions found in the course of search. In the penalty order, the AO has however tried to make out a case that the income of ₹ 69 crores was represented by the entries found recorded in seized documents RASHMI/1 to RASHMI/5 and RCPL/1 to RCPL/7. The AO has therefore tried to justify treating the said sum of ₹ 69 crores as undisclosed income within the meaning of clause (c). In this regard it is material to refer to Para 4.4 to 4.5 of the assessment order, which is as follows: 4.4 Documents found/seized during the course of search: During the course of search, the following documents were found and seized from the premises mentioned below: 4.5 The assessee was asked to furnish page wise explanation of the documents seized. Reply furnished by the assessee has been examined with reference to the seized documents. 15. From the foregoing findings of the AO, we note that in the assessment order u/s 143(3), the AO had admitted that the assessee had satisfactorily explained the contents of the documents identified as RASHMI/1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation 5A of Section 271(1)(c), Section 271AAA Section 271AAB, the Legislature has restricted the scope of penal provision only to undisclosed income and not assessed total income. Moreover the term/expression undisclosed income has been defined by the Legislature in all such penal provisions in a specific and restricted manner and not in an inclusive manner. For that reason the definition of undisclosed income nowhere provides that the said expression shall include all and every species of income but the word used is undisclosed income means . The conscious use of the expression means in contradistinction to the use of word includes indicate that the Legislature intended to restrict the scope of penal provisions only to income which came within the ken of the said expression and not beyond. Applying the definition of undisclosed income to the income of ₹ 69 crores, we find that such income was offered in the statement recorded u/s 132(4) of the Act at the time of search. However only for the said reason, it could not be brought within the ambit of undisclosed income particularly when such income was not represented by any valuable asset or entry in books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 26.12.2018 wherein identical issue had come up for consideration and the Tribunal upheld the CIT(A) s order deleting the levy of penalty since there was no material to suggest that the income offered to tax was a consequence of any valuable asset or any entry found in any books or other documents seized in the course of search. The relevant findings of the Tribunal are as follows: 4. Learned CIT.DR vehemently contends during the course of hearing that the Assessing Officer had rightly invoked the impugned penal provision as stipulated u/s 271AAB on account of search operation in issue conducted in assessee s case on 20.12.2012. He heavily relies upon assessee s admission stating his undisclosed income of ₹2,79,15,065/-. His case therefore is that the same formed sufficient reasons for the Assessing Officer to imposed the impugned penalty. We sought to know from learned CIT-DR as to whether the authorized officer had found any specified asset i.e. any money, bullion, jewellery or other valuable article or things as per explanation (c) forming of sec. 271AAB. There is no such material indicated during the course of hearing. We find that co-ordinate bench s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egorically decided the ratio that penalty cannot be levied on the amount offered by the assessee in order to buy peace of mind (in the case of Sudarshan Silk Saries (supra)]. Thus, respectfully following the ratio decided by the Hon'ble Supreme Court, the AO is directed to delete the penalty u/s 271AAB(1)(a). Accordingly, assessee's appeal on grounds no 1, 2 and 3 are allowed. 4. Learned Departmental Representative argued that the Assessing Officer had rightly imposed the impugned penalty in assessee's case @ 10% of his undisclosed income of ₹ 1 crore coming ₹ 10,00,000 in question. We find no substance in Revenue's instant arguments. We first of all make it clear that section 271AAB of the Act applies in relation to the impugned penalty @ 10% of the undisclosed income as stood defined in Explanation (c) thereto. There is no material in the case file to indicate that the assessee's undisclosed income represents any money, bullion, jewellery or valuable article or any entry in the books or other documents therein. We make it clear that we are dealing with a penalty provision in tax statute which is to be strictly interpreted. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement. The amount of ₹ 3571/- mentioned in the projections refers to cost and profit which is approximate sale price but not the cost as stated by the AO in the penalty order. The cost of construction in the projections projected at ₹ 2177/- which is in synch with the statement given by the assessee. The AO was happy with the disclosure given by the assessee and did not verify the factual position with the books of accounts and projections and bring the evidence to unearth the undisclosed income. Neither the A.O. nor the investigation wing linked the cost of profit or cost of asset to the entries in the books of accounts or to the sales conducted by the assessee to the sale deeds. Therefore, we are unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure. The Hon'ble ITAT Delhi Bench in the case of Ajay Sharma v. Dy. CIT [2013] 30 taxmann.com 109 held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee has not been declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the market price of the gold Jewellery prevailing on the date of search as against the cost or realization wherever is less. Therefore, the computation of excess stock based on the market price of the stock cannot be considered as undisclosed income of the assessee as it is the subject matter of regular assessment and cannot be regarded as undisclosed income based on incriminating material. There is no such fact either recorded during the search and seizure proceeding or in the assessment order or in the penalty proceeding to show that there was discrepancy in the stock as recorded in the books of account and found at the time of search. In the absence of any discrepancy in the quantity of stock the valuation of the stock is purely a question of assessment and cannot be held as undisclosed income detected during the course of search and seizure proceeding. Therefore, to the extent of excess stock based on the valuation report the disclosure of the income by the assessee would not fall in the category of undisclosed income as per explanation to Section 271AAB of the Act. It is not the case of the Revenue that any stock of jewellery was found which is not recorded in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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