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2016 (4) TMI 711 - ITAT KOLKATA

2016 (4) TMI 711 - ITAT KOLKATA - TMI - Penalty u/s 271AAA - Held that:- There should be some undisclosed income in the form of money, bullion etc or any entry in the books of account or other documents and the same should be found in the course of search. It is undisputed that nothing incriminating was found during the course of search by the search party with regard to the aspect of share capital and loans which were ultimately offered to tax by the assessee in the sum of ₹ 1.75 crores. .....

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of the Act followed by the filing of return in response to section 153A of the Act and taxes paid thereon, then the assessee would not be invited with the levy of penalty. We find that if the argument of the Learned DR that since the assessee had not offered the said income in return filed u/s 139(1) of the Act thereby levy of penalty is in order is to be accepted, then it would make the immunity provisions contemplated u/s 271AAA(2) of the Act redundant. The legislature in its wisdom had given .....

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i M. Balaganesh, Accountant Member For the Appellant : Md. Ghayas Uddin Ansari, JCIT, ld.Sr.DR For the Respondent : Shri K.K. Chhaparia, FCA, ld.AR ORDER Shri M. Balaganesh, AM This appeal of the revenue arises out of the order of the Learned CIT(A), Central-I, Kolkata in Appeal No. 347/CC-V/CIT(A)C-I/12-13 dated 4.2.2013 against the order of the Learned AO for the Asst Year 2009-10 levying Penalty u/s 271AAA of the Income Tax Act , 1961 (hereinafter referred to as the Act ). 2. The only issue t .....

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ng the fact that the provisions of Clause (ii) of Sub- section (2) of Sec. 271AAA has not been fulfilled in the assessee s case. 4. The brief facts of this case are that a search and seizure operation was conducted in the business premises of the assessee on 11.9.2009. In the course of search and seizure operation in the office premises of the assessee jointly held with M/s Salasar Stock Broking Ltd and M/s Krishna Trade & Commerce Pvt. Ltd, the following books and documents were found / sei .....

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that M/s Elegant Share Broking Private Limited (PAN - AABCE4828J) was amalgamated with the assessee company by virtue of order of Hon ble Calcutta High Court dated 28.7.2009 with effective date as 1.4.2008. The Trial Balance of M/s Elegant Share Broking Private Limited as on 31.3.2009 was casted in the accounts of the assessee by journal entries. The Learned AO observed that during the financial year 2008-09, M/s Elegant Share Broking Private Limited had raised share capital including share pre .....

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u/s 153A of the Act offering ₹ 1,76,31,590/- ( ₹ 1,31,590/- + ₹ 1,75,00,000/-). The assessment was completed u/s 153A / 143(3) of the Act on 11.5.2011 determining total income of ₹ 1,79,63,280/-. Penalty proceedings u/s 271AAA of the Act was initiated by the Learned AO. 5. The assessee pleaded before the Learned AO that the assessee had made disclosure petition u/s 132(4) of the Act soon after the search. The assessee pleaded that the said disclosure of ₹ 1,75,00,0 .....

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ent proceedings, the Learned AO could not find any infirmity in the books of accounts. The assessee pleaded that it is entitled for immunity from levy of penalty as all the conditions stipulated in section 271AAA(2) of the Act have been satisfied. The Learned AO did not agree with the contentions of the assessee and proceeded to levy penalty u/s 271AAA of the Act in the sum of ₹ 17,50,000/- on the contention that the additional disclosure of ₹ 1,75,00,000/- was not returned by the as .....

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appeal, the assessee argued that the contention of the Learned AO that the disclosure made u/s 132(4) of the Act was not included in the return filed u/s 139(1) of the Act was not only factually incorrect but also misleading. It was argued that the search got concluded on 7.11.2009 being the last date of panchanama drawn by the authorized officer and the disclosure u/s 132(4) of the Act was made by the assessee on 7.11.2009 on which date, the return of income u/s 139(1) of the Act had already b .....

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n. It was also argued that there is absolutely no reference to any seized material brought on record by the Learned AO with regard to the additional income offered by the assessee and hence the entire addition has been accepted by the Learned AO only based on the offer made voluntarily by the assessee and not with reference to any seized materials. It was also argued by drawing attention to the disclosure petition u/s 132(4) of the Act that the assessee had been carrying out regular and bonafide .....

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t any undisclosed asset or unrecorded entry in the books of accounts or false expenses and accordingly the said offer is completely outside the scope of definition of undisclosed income defined in section 271AAA of the Act. The assessee also placed reliance on certain decisions before the Learned CIT(A) in support of its propositions. Without prejudice, it was further argued that the assessee is still entitled for immunity from levy of penalty even if the assessee was not able to substantiate th .....

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rder of the Learned AO. In response to this, the Learned AR reiterated the submissions made before the Learned CIT(A). 8. We have heard the rival submissions and perused the materials available on record. We find that the assessee had not disclosed the additional income in the return filed u/s 139(1) of the Act. For this, we are in agreement with the argument of the Learned AR that the return u/s 139(1) of the Act was filed much earlier to the date of disclosure petition u/s 132(4) of the Act an .....

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Annexe P-13,Chowringhee Square, Kolkata - 700 069 Respected Sir, Re : Disclosure consequent to search and seizure operations carried out by the Income Tax Department on our premises on 11th September' 2009/12th September' 2009 We are a Non Banking Financial Company and we are into the business of financial activities and related sector. In the last financial year, Elegant Stock Broking Private Limited got amalgamated into our Company with effect from 1.4.2008, pursuant to Kolkata High Co .....

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quired by the department. Hence to demonstrate our co-operative attitude and to avoid unnecessary long drawn litigations with the department and to buy peace, we are offering an additional income of ₹ 1,75,00,000/- for Financial year 2008-09, which include income of the said Elegant Stock Braking Private Limited which got amalgamated into the Company. These funds have been deployed in regular financial activities of the Company including advancing of loans and securities business. We shall .....

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vate Limited in the form of share capital and loans, the sources of which might not be proved to the satisfaction of the department with proper documentation and paper work. We also find that even the Learned AO had accepted the said offer for the said reason in his assessment order. Since the income pertains to the amalgamating company, it would be unfair to expect the amalgamated company (assessee herein) to substantiate the manner in which the undisclosed income was derived. In view of these .....

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d all the three conditions contemplated in section 271AAA(2) for claiming immunity from levy of penalty. 8.3. We find from the profit and loss account of the assessee, this additional income of ₹ 1.75 crores is not found credited in the books of accounts of the assessee as the same does not belong to the assessee and infact pertains to the amalgamating company. Hence the same is offered only in the return of income by the assessee. It is also pertinent to note that this offer has been volu .....

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as been initiated Explanation.-For the purposes of this section,- (a) "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 maintaine .....

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se 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 not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted. 8.4. From the above definition, it .....

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undisclosed income of ₹ 1.75 crores was made voluntarily by the assessee without any detection by the department and accordingly the argument of the Learned DR that but for the search, this income would not have been offered does not hold any water and deserves to be dismissed. It is already well settled that though the income is not disclosed in the return filed u/s 139(1) of the Act, but duly disclosed in the petition filed u/s 132(4) of the Act followed by the filing of return in respon .....

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nces under which the assessee would not be invited with the levy of penalty pursuant to the search subject to fulfillment of certain conditions stipulated in the said section . Hence in view of the above, we hold that the levy of penalty is not automatic and assessee is clearly entitled for immunity from levy of penalty. 8.5. We also find that the decision of the Hon ble Supreme Court in the case of Sudarshan Silks & Sarees vs CIT reported in (2008) 300 ITR 205 (SC) supports the case of the .....

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tatement recorded under section 132(4) of the Act. Shri 1.S. Ramesh is the person-incharge of the entire group. The total turnover suppressed by the assessee for the assessment year 1987-88 was found to be to the tune of ₹ 44,07,783. These have been discussed in detail in the order of assessment. Assessing Officer estimated that the sales of the assessee were ₹ 50,000 per day, whereas the accounted sales were not found even 50 per cent of the total sales. Apart from this, it was foun .....

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e statement under section 132(4) of the Act, Shri Ramesh agreed to declare such additional income as had been estimated by the search party in the office of the appellant and its sister concerns. On the basis of these calculations, revised returns were filed by the appellant for all the years under appeal. The income as per revised returns were also accepted in toto. In the course of assessment proceedings, penal action under section 271(1)(c) of the Act was initiated and, after considering the .....

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) deleted the levy of penalty u/s 271(1)(c ) of the Act. On second appeal by the revenue, the tribunal held as follows:- "Although there is nothing on record to show that he was given an assurance that no penalty would be levied, the fact however clearly suggest that such an inducement must have been given by the searching party. When only partial evidence in support of concealment for a very limited period was detected during the search, why would a man go to offer much higher amounts for .....

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of unexplained investments including unexplained stock was found at the time of search. Ultimately, almost the same amount of income was offered by the assessees over a number of years. As the tax rates over the entire period was more or less the same, the tax effect, either from the point of view of the Department, or the assessee would have more or less the same, had the entire undisclosed assets been subjected to tax in the year of search or the entire income was spread over a number of years .....

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in that process alone, he would avoid the levy of penalty by the departmental authorities. The facts and circumstances strongly indicate that an inducement and an allurement had been provided to him at the time of search in that matter. Again, although incriminating materials were found out during the search, such materials were however ultimately not used by the departmental authorities in making the assessments. The assessments were made totally on the basis of estimation income for the earli .....

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n clues to the undisclosed income and but for the statement made by Sri Ramesh, it would perhaps have not been possible for the Department to assess the undisclosed income over all these years in the way in which such assessments have been made. The only way for the department in such a case would have been to assess the entire amount of undisclosed investments for the year of search as has been discussed by us above, the Deptt. could not have been in a position to levy penalty for concealment i .....

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, no penalty can actually be levied by the Department." These findings have been finally approved by the Hon ble Supreme Court by observing as under:- 17. Accordingly, the orders under appeal are set aside and that of the CIT(Appeals) and Tribunal restored. It is held that in the facts and circumstances of the case, penalty under section 271(1)(c ) was not exigible. The appeals are accepted with costs. 8.6. We find that the following decisions support the case of the assessee :- a) Decision .....

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on. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance to notice u/s. 153A accounting the assets. Therefore, the case laws cited at the Bar clearly indicate that the penalty is not automatic if one of the purported condition is not fulfilled although all the conditions have been agreed to of having fulfilled by the Assessing Officer insofar as the tax and interest has been recovered. Penalty has been levied after the tax has been recov .....

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