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2016 (5) TMI 281 - ITAT KOLKATA

2016 (5) TMI 281 - ITAT KOLKATA - [2016] 47 ITR (Trib) 616 - Penalty under section 271AAA - voluntary disclosure - Held that:- The offer of undisclosed income of ₹ 2 crores was made voluntarily by the assessee without any detection by the Department and, accordingly, the argument of the learned Departmental representative 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 i .....

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by levy of penalty is in order is to be accepted, then it would make the immunity provisions contemplated under section 271AAA(2) of the Act redundant. The Legislature in its wisdom had given a thoughtful consideration on the facts and circumstances under which the assessee would not be invited with the levy of penalty pursuant to the search subject to fulfilment of certain conditions stipulated in the said section. Hence, in view of the above, we hold that the levy of penalty is not automatic a .....

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-I/12-13 dated February 4, 2013, against the order of the learned Assessing Officer for the assessment year 2009-10 levying penalty under section 271AAA of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). 2. The only issue to be decided in this appeal is as to whether the penalty under section 271AAA of the Act could be levied in the facts and circumstances of the case. 3. The assessee has raised the following grounds : "(1) That the learned Commissioner of Income- .....

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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 11.9.20 09. In the course of search and seizure operation in the office premises of the assessee jointly held with M/s Shree Salasar Properties & Finance Pvt Ltd and M/s Krishn a Trade & Commerce Pvt Ltd, the following books and documents were found / seized :- Annexure with Date Description Found Seized A Dt. 12-9-09 Books of .....

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ssee included the disclosure made during the course of search operations of ₹ 2,00,00,000/-. Pursuant to the search, the assessee filed a disclosure petition before the ADIT (Investigation), Unit-III(4), disclosing additional income of ₹ 2,00,00,000/- for this year as the assessee may not be able to instantly produce all the relevant documentation required by the department with regard to monies received from various parties including advances, margin money and deposits. The assessee .....

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- F&O Income ₹ 1,12,23,048/- Intraday trading income ₹ 79,46,637/- Brokerage income ₹ 19,26,662/- Mutual Fund Trading ₹ 55,94,908/- Other Income (including disclosure) ₹ 4,60,28 ,734/- ₹ 22, 72,396/- After deducting administrative cost of ₹ 3,70,13,193, finance charges of ₹ 1,05,57,283 and depreciation of ₹ 22,28,085, the assessee furnished a loss return of ₹ 4,71,01,220. The assessment was completed under section153A/143(3) of the .....

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aded that the said disclosure of ₹ 2,00,00,000 for the assessment year 2009-10 and ₹ 2,00,00,000 for the assessment year 2010-11 was made to avoid long drawn litigation and to buy peace as the assessee was instantly not able to produce all the relevant documentation or paper work as required by the Department. It was also pleaded that the disclosure petition also stated that the assessee has been carrying on bona fide and regular transactions. It was further pleaded that this claim a .....

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section 271AAA of the Act in the sum of ₹ 20,00,000 for the assessment year 2009-10 on the contention that the additional disclosure of ₹ 2,00,00,000 was not returned by the assessee in the return filed under section 139(1) of the Act but included only in the return filed under section153A of the Act. The penalty was also levied on the ground that but for the search, the assessee would not have come forward with the additional disclosure. Moreover, it was observed by the learned Asse .....

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ued that the search got concluded on November 7, 2009, being the last date of panchanama drawn by the authorised officer and the disclosure under section 132(4) of the Act was made by the assessee on November 7, 2009, on which date, the return of income under section 139(1) of the Act had already been filed. Hence, the assessee cannot be expected to offer the additional income in the return filed under section 139(1) of the Act for the assessment year 2009-10. It was also argued that in order to .....

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Assessing Officer with regard to the additional income offered by the assessee and, hence, the entire addition has been accepted by the learned Assessing Officer 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 under section 132(4) of the Act that the assessee had been carrying out regular and bona fide transactions which has not been disapproved by the learned Assessing Off .....

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t the disclosure made under section 132(4) of the Act does not represent any undisclosed asset or unrecorded entry in the books of account or false expenses and, accordingly, the said offer is completely outside the scope of the definition of undisclosed income defined in section 271AAA of the Act. The assessee also placed reliance on certain decisions before the learned Commissioner of Income-tax (Appeals) in support of its propositions. Without prejudice, it was further argued that the assesse .....

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ppreciated the contentions of the assessee and deleted the penalty. Aggrieved, the Revenue is in appeal before us. 7. The learned Departmental representative vehemently relied on the order of the learned Assessing Officer. In addition, he argued that the assessee had only tried to reduce his loss by ₹ 2 crores by offering the same as additional income under section 132(4) and it never had any intention to pay tax on the same. In response to this, the learned authorised representative reite .....

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t the learned Assessing Officer had not initiated any penalty proceedings under section 271AAA of the Act for the assessment year 2010-11, being the year of search, for the additional disclosure made under section 132(4) of the Act in the sum of ₹ 2 crores, in view of the fact that the same was offered in the return filed under section 139(1) of the Act. In this regard, it is pertinent to note that the assessee had time to file its return under section 139(1) of the Act and, hence, the ass .....

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assessee had filed the return under section 139(1) of the Act prior to the date of disclosure under section 132(4) of the Act. The assessee had made disclosure petition under section 132(4) of the Act substantiating the reasons for offering the additional income. For the sake of convenience, the disclosure petition under section 132(4) of the Act is reproduced hereunder : Disclosure petition under section 132(4) of the Act in the case of M/s. Salasar Stock Broking Ltd. "To The learned ADIT .....

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ave done transactions on behalf of various clients and on our self account. During the course of our transactions with various parties, we have received money from various parties including advances, margin money and deposits. Your goodself has raised a query on explaining the sources of all such advances and deposits and it appears that you have raised doubts on the genuineness of certain transactions earned out by us including the receipt of funds into our company. We have been carrying out re .....

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uments pertaining to the company were inventorised at our office premises at 4A, Clive Row, Suit No. 411, 301A, 301B, 301C Kolkata 700 001. Based on various seized documents, we hereby offer a sum of ₹ 7,00,00,000 as our income for the financial year 2009-10 up to the period of search. Reference may be made to seized document, SSB/6, pages 1 to 25 and 35-36. The aforesaid income have been deployed in the working capital of the company including securities and margin money with stock exchan .....

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isclosure statement, we find that the assessee had substantiated the fact that the income in the form of advances, margin money and deposits, etc., which might not be proved to the satisfaction of the Department with proper documentation and paper work. We also find that even the learned Assessing Officer had accepted the said offer for the said reason in his assessment order. We find that the assessee had not retracted from the disclosure petition. We find that the assessee had duly offered the .....

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losure petition under section 132(4) followed by filing of the return under section 153A of the Act. It is also pertinent to note that this offer has been voluntarily made by the assessee without any incriminating materials found during the course of search. Hence, it goes to prove beyond doubt that the offer of undisclosed income of ₹ 2 crores was made voluntarily by the assessee without any detection by the Department and, accordingly, the argument of the learned Departmental representat .....

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ment of the learned Departmental representative that since the asses see had not offered the said income in the return filed under section 139(1) of the Act thereby levy of penalty is in order is to be accepted, then it would make the immunity provisions contemplated under section 271AAA(2) of the Act redundant. The Legislature in its wisdom had given a thoughtful consideration on the facts and circumstances under which the assessee would not be invited with the levy of penalty pursuant to the s .....

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on the premises of the assessee on October 14, 15, 1987, and incriminating documents evidencing concealment of income by the assessee were unearthed apart from cash and jewellery found at the time of search. It was found that the appellant was maintaining double set of books and was accounting for only 50 per cent. of sales in the regular set of books. This fact was admitted by Shri J. S. Ramesh, a partner of the firm in the statement recorded under section 132(4) of the Act. Shri J. S. Ramesh .....

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milarly certain payments made were not being accounted for. All these were pointed out to the assessee. The assessee came forward with an offer of additional income. The assessee filed a revised return on March 31, 1989, declaring a total income for this year at ₹ 3,74,226 as against the earlier amount of ₹ 43,650. This was accepted and after verification the assessment was completed on December 29, 1989. During the course of recording the statement under section 132(4) of the Act, S .....

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tant Commissioner of Income-tax/Assessing Officer chose to levy maximum penalty under section 271(1)(c). While levying the penalty, the Assessing Officer repelled the contention of the appellant that a promise had been made not to levy the penalty, as there was no evidence to this effect on record. It was also held that the appellant was not entitled to the immunity given under section 132(4) read with section 271(1)(c) of the Act." The learned Commissioner of Income-tax (Appeals) deleted t .....

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er amounts for a large number of years unless he was promised some reciprocal benefit like not being visited with penalty ? The learned Departmental representative has tried to argue before us that a change of heart might have taken place as a result of which Sri Ramesh came forward with all the disclosures for different years voluntarily. But looking into the hard facts of life and the general experience of mankind, especially with regard to financial affairs, it would be difficult to accept su .....

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income was spread over a number of years as has been done in the present assessments. In view of the deposition given under section 132(4) followed by the co-operating attitude of the assessee in paying up the tax, it would be clear that no penalty under section271(1)(c) would have been leviable had the entire undisclosed income been assessed in the year of search. Instead of going for that simple way, Sri Ramesh went into the question of admitting undisclosed income on estimated basis for the d .....

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the basis of estimation of income for the earlier years as disclosed in the revised returns. The revised returns should, therefore, be considered as having been filed in good faith. So far as assessment of the undisclosed income is concerned, such revised returns would be sufficient evidence for that purpose. However, for levying penalty, some further and stronger evidences were surely required. In the cases relied upon by the learned Departmental representative, the search itself discovered the .....

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Department could not have been in a position to levy penalty for concealment in such a case. We are, therefore, of the opinion that the case law as cited by the Department, do not exactly support its case, so far as the present appeals are concerned. On the other hand, most of the judgments cited by the learned counsel for the assessee support the case of the assessee that on account of strong circumstantial evidences being there about inducement having been given by the Departmental authorities .....

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appeals are accepted with costs." 8.3. We find that the following decisions support the case of the assessee : (a) The decision of the co-ordinate Bench of the Cuttack Tribunal in the case of Pramod Kumar Jain v. Deputy CIT reported in [2013] 33 taxmann.com 651 (Cuttack-Trib.) "6. We have heard the rival contentions and perused the material available on record. On consideration of the facts and circumstances of the case, we are inclined to hold that no definition could be given to the .....

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have been agreed to of having fulfilled by the Assessing Officer in so far as the tax and interest has been recovered. Penalty has been levied after the tax has been recovered therefore answers the queries raised by the learned Departmental representative for that the said provisions become redundant was not the intention of the legislation. The manner, during the search operation, is noted by the search party which the Assessing Officer has acceded to. Therefore, following the decisions as reli .....

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