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2017 (1) TMI 1193 - ITAT KOLKATA

2017 (1) TMI 1193 - ITAT KOLKATA - TMI - Penalty order u/s. 271(1)(c) - non mention of reasons - defective notice - Held that:- Assessee has clearly explained before us that the assessee has admitted the undisclosed income suo moto during the course of search. In the case under consideration, the AO had made the addition based on the estimate and not based on the seized documents. When the addition is based on the estimate the penalty cannot be levied. In addition to this, the ld. AR for the ass .....

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by the AO and confirmed by the ld. CIT(A) needs to be deleted. Accordingly, we delete the penalty u/s. 271(1)(c) - Decided in favour of assessee - I.T.A No. 91/Kol/2014 - Dated:- 13-1-2017 - Shri A. T. Varkey, JM And Dr. A. L. Saini, AM For the Appellant: Shri S. M. Surana, Advocate For the Respondent: Shri BaniBrata Dutta, JCIT, Sr. DR ORDER Per Dr. A. L. Saini, AM The captioned appeal filed by the assessee pertaining to Assessment Year 2008-09, is directed against the order passed by the Ld. C .....

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e Act was conducted in the M/s. Kaushalya Infrastructure Group of cases on 26/27.03.2009 and on subsequent dates. This included search also at the residence of the assessee. During the course of search, the search party found out some material where the search party seen that M/s. Kaushalya Infrastructure Group companies had paid higher amount than cost of land to Abu Mansoor Ali and his associates i.e. Mamud Ali Mondal and Arepan Bibi. Such excess amounts were never given back to the M/s. Kaush .....

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s initiated the penalty proceedings u/s. 271(1)(c) of the Act and levied penalty u/s. 271(1)(c) of the Act. When passing the penalty order u/s. 271(1)(c) of the Act the AO has observed the following: After reminder dated 20.06.2011, which was served on same date the assessee submitted in reply to the penalty notice on 27.06.2011. In his reply, he mainly stated that the addition was made in the relevant period on the basis of estimation and as such it cannot be termed as suppression of income and .....

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been filed within 30.09.2008 and latest by 31.03.2010. It is true that there is an element of estimation involved in the assessment u/s.143(3). But that was done under compelling circumstance. As already discussed, the assessee did not maintain any proper books of accounts. Neither could the assessee quantify the total land involvement by filing any supporting evidences. Even quantification of the same could not be gathered from the Kaushalya Group of Companies by issuance of notices u/s.133(6). .....

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ain percentage on the gross receipts by the assessee from the Kaushalya Group of Companies was the only reasonable method which could be applied under the given circumstance. In the reply to the penalty show cause notice the assessee has not raised any objection regarding the method of computation of total income, adopted in the assessment order, but has only objected against the percentage (1.35) applied. Butat the assessment stage he could not also justify the reason for adopting the percentag .....

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nd Surcharge …. ₹ 4,35,357/- Considering the facts that at the assessment stage, the assessee cooperated with this office in respect of various requisitions etc., I decide to restrict the quantum of penalty to 100% of tax sought to be evaded, which comes to ₹ 4,35,3571-. 3. Aggrieved from the penalty order of the AO, the assessee filed an appeal before the Ld. CIT(A) who has also confirmed the penalty observing the following: 5.1 On perusal of Explanation 5A of section 271(1)( .....

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urn of income for such previous year has been furnished before the said date but such income has not been declared therein or the due date of filing of return for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purpose of imposition of penalty u/s. 271(l)(c), be deemed to have concealed the particulars of his income or furnished i .....

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enalty. As per Explanation 5A to section 271(1)(c), noimmunity has been provided from the penalty if the undisclosed income was declared u/s 132(4) in the course of search proceedings as providedearlier by Explanation 5 of this section. Though, in the case of appellant, he did not disclose any income u/s 132(4) of the Act. In view of above, I am of the opinion that the AO was justified in imposing the penalty u/s. 271(1)(C) of the Act. His action is in accordance with the provisions of the Act. .....

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ion-(3) to section 271(1)(C) and the provisions of sec. 271(1)(C) were not applicable since the tax payer was not an assessee within the meaning of the provisions of Income Tax Act, 1961 at the time of search. 3. For that in view of the provisions contained in I.T. Act, 1961 making clear distinction between the word "Person" and word "Assessee" the tax payer was not liable to the penalty under sec. 271(1)(c). 4. For that the Ld. CIT(A) erred in confirming the action of the AO .....

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he course of search the manner of deriving the undisclosed income from land dealings was substantiated and the CIT(A) erred in assuming that the taxes were not paid on the assessed income. 7. For that the Ld. CIT(A) erred in confirming the action of the AO in imposing penalty when the additions to the return income was made only on estimate basis not on the basis of any seized document. 8. For that on the facts and circumstances of the case the order of the CIT(A) be modified and the assessee be .....

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between the word person and the word assessee . Section 2(7) of the Act defines the term assessee as follows: (7) "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such o .....

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ted or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation.-For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains; 6. The Ld AR for t .....

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owever, it is also important to note here that the assessee had admitted during the course of search and seizure regarding the undisclosed income. The assessee has suo moto admitted before the search party about his undisclosed income. The Ld. AR for the assessee also mentioned that in the case of assessee under consideration the addition was made by the AO passed on the estimate and not on the basis of seized documents. Ld. AR for the assessee has also invited our attention to the show cause no .....

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rmity in the notice issued by the AO u/s. 274 of the Act. But the Ld. AR for the assessee relied on the coordinate bench decision of this Tribunal in the case of Subhaprasanna Bhattacharya Vs. ACIT in ITA No. 1303/Kol/2010 cited by the Ld. AR for the assessee had an occasion to consider a similar issue in the identical facts, situation and the order passed by the AO imposing penalty u/s. 271(1)(c) of the Act was held to be invalid by the Tribunal relying on the decision of the Hon ble Karnataka .....

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