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Dr Naman A Shastri Versus Assistant Commissioner of Income Tax Central Circle 2 (3) , Ahmedabad

Penalty under section 271(1)(c) and under section 271AAA - whether no penalty under section 271(1)(c) could be lawfully levied in the appellant’s case, since it was governed by the provisions of Section 271AAA(3)? - Held that:- We have upheld the plea of the assessee on merits that the penalty for undisclosed income’, on the given facts and in respect of the assessment year before us, could only be imposed, if at all, only under section 271AAA and not under section 271(1)(c). In any case, once t .....

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ed on the facts of this case, the initiation aspect of the penalty is anyway no more than academic. In view of these discussions, the Assessing Officer was clearly in error in invoking the provisions of Section 271(1)(c) on the facts of this case. We, therefore, delete the impugned penalty. - Decided in favour of assessee. - I.T.(SS)A No 561/Ahd/11, I.T.(SS)A No 562/Ahd/11, I.T.(SS)A No 563/Ahd/11 - Dated:- 29-9-2015 - Pramod Kumar AM and Rajpal Yadav JM For The Appellant : Mukesh M Patel and Pa .....

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Limited which was subjected to search and seizure operation on 21st August 2008, we are taking up the case of Dr Naman A Shastri as the lead case, and whatever we decide in this case, as the learned representatives fairly agree, will apply mutatis mutandis in other two cases as well. 3. In ITA No. 561/Ahd/11, the assessee, i.e. Dr Shastri, has called into question correctness of the order dated 8th September 2011 passed by the CIT(A), in the matter of penalty of ₹ 23,20,000 imposed on the .....

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ppellant s case, since it was governed by the provisions of Section 271AAA(3) which reads as under: No penalty under the provisions of clause (c) of sub section (1) of Section 271 shall be imposed on the assessee in respect of undisclosed income referred to sub section (1) 3. That the learned CIT(A) grievously erred in not appreciating the merits of the appellant s submissions that both on facts and in the circumstances of the appellant s case, as well as in law, the order under section 271(1)(c .....

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ee filed an income tax return disclosing an income of ₹ 98,70,610. In the income tax return so filed, the assessee, inter alia, disclosed an income of ₹ 68,00,000, as income from other sources, which was in respect of cash payment for his contribution for the acquisition of land for the hospital project. During the course of scrutiny assessment proceedings of this return, in a statement recorded under section 131(1), the assessee confirmed the fact of having paid cash of ₹ 68,0 .....

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ncontroverted, the Assessing Officer changed his mind and finally imposed the penalty, amounting to ₹ 23,20,000, under section 271(1)(c) of the Act in respect of this income of ₹ 68,00,000 which was treated as an undisclosed income of the assessee. Aggrieved, assessee carried the matter in appeal but without any success. The assessee is not satisfied and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered the fact .....

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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 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) pays the tax, together with interest, if any, in respect o .....

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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 the search; or (ii) an .....

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er 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 said date; or (ii) in which search was conducted. . 8. The scheme of Section, which governs penalty on undisclosed income for the specified previous year , is like this. In the cases in which search is initiated, the penalty under section 271AAA will come into play in respect of undisclosed income of specified previous .....

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of income tax return in respect of the same has not ended. Coming to the facts of the present case, the search took place on 21st August 2008, and, accordingly, the due date of filing income tax return in respect of the income of this previous year was on or before 30th September 2008. Clearly, even though the previous year ending 31st March 2008 relatable to the assessment year 2008-09, which is the year before us, had ended on 31st March 2008, the due date of filing of the income tax return ha .....

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osed income belongs to this year, an inevitable corollary to this finding, in view of the discussions eabove, is that the provisions of Section 271AAA will come into play. It is also important to bear in mind the fact that the situations in which provisions of Section 271AAA and the provisions of Section 271(1)(c) can apply are inherently mutually exclusive as Section 271AAA(3) clearly states that, (n)o penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed .....

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r section 271AAA in the cases of Dr Anil Jain, Dr Vishal Gupta and B Srinivas Mallaya. It is contended that it cannot be open to the Assessing Officer to take different stand in the cases of different assessees placed in the same situation. However, we see no need to deal with this contention since we have upheld the plea of the assessee on merits that the penalty for undisclosed income , on the given facts and in respect of the assessment year before us, could only be imposed, if at all, only u .....

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have held that penalty under section 271(1)(c) could not have been imposed on the facts of this case, the initiation aspect of the penalty is anyway no more than academic. In view of these discussions, the Assessing Officer was clearly in error in invoking the provisions of Section 271(1)(c) on the facts of this case. We, therefore, delete the impugned penalty. 9. Learned counsel, however, shows, what appears to be, a somewhat rare gesture of fairness. He submits that even though the time for im .....

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cious conduct on the part of the taxpayers and their advisors, which will hopefully inspire many more to follow such a path, we may only say that it is not open to us to suitably modify this penalty order under section 271(1)(c), or to partially confirm the order, to the extent of what would have been the quantum of penalty due under section 271AAA. We take learned counsel s submission on record and leave it for the Assessing Officer and the assessees to take the matter further. The impugned pen .....

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