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2019 (4) TMI 620

s cash of ₹ 7,97,915 found in possession of the assessee during the course of search is concerned, there cannot be any dispute that the same represents undisclosed income so defined in section 271AAB and which has not been recorded in the books of accounts of the assessee at the time of search. Regarding the contention of the AR that such cash is out of past savings of the assessee, these are contentions which are relevant for determining the nature and source of such undisclosed income for the purposes of determining the quantum of penalty which the CIT(A) has duly considered and has upheld the levy of penalty @ 10% as against 30% levied by the AO. In the result, we confirm the levy of penalty @ 10% on the undisclosed income of ₹ 7,97,915 so sustained by the ld CIT(A). - Regarding cash advances to farmers for purchase of wheat - whether the advances so given to the farmers for purchase of wheat qualify as undisclosed income? - HELD THAT:- An advance represents an outflow of funds and what has been envisaged by the legislature while defining “undisclosed income” in section 271AAB is an inflow of funds which has not been recorded in the books of accounts on or before .....

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tances of the case and in law the ld. CIT(A) erred in applying the provisions of section 271AAB(1) (a) as against levy of penalty u/s 271AAB(1)(c) of I.Tax Act by ld. AO without issuing notice as required u/s 251 (2) of I. Tax Act. 3. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the penalty of ₹ 75,17,711/- u/s 271AAB(1)(a) of the Act out of penalty of ₹ 2,25,53,134/- imposed by the AO u/s 271AAB(1)(c) of the Act more so when:- a) the appellant was not having any undisclosed income within the meaning of section 271AAB of the Act, therefore no penalty under this section can be imposed on assessee. b) the penalty was levied by drawing the interference only from the statement recorded u/s 132(4) of the Act whereas there is no incriminating material or evidence was found during search to prove that the assessee was having undisclosed income. c) the penalty was imposed by holding that the appellant surrendered the bogus long term capital gain while no long term capital gain was surrendered by the appellant. Therefore the penalty was imposed on incorrect and misconceived finding. d) there is no finding/reason/conclusion in th .....

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ssessing Officer. Now, against the said finding of the ld. CIT(A), both the Revenue and the assessee are in appeal before us. 4. During the course of hearing, the ld. AR submitted that in the show cause notice, the AO has not specified the limb under which he proposes to levy the penalty u/s 271AAB of the Act which shows lack of application of mind on the part of the AO and basis such uncertain charge, the consequent proceedings are bad in law. It was further submitted that the AO has not recorded his satisfaction in the assessment order that the provisions of section 271AAB(1)(c) were attracted in the case of the assessee. The ld. A/R has further submitted that the levy of penalty under section 271AAB(1) of the Act is not automatic but the AO has to take a decision by considering all the conditions to be satisfied as provided under the said section. Since the disclosure and surrender of the amount does not fall in the definition of undisclosed income, therefore, the penalty under section 271AAB is not leviable in the case of the assessee merely because the assessee has declared and surrendered some income to tax. It was further submitted that it is undisputed that penalty is impos .....

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corded in the books of accounts or other documents. It is undisputed fact on record that the advance provided by the Appellant to the farmer for agriculture purpose for subsequent purchase of wheat was duly recorded in the diary maintained by the Appellant (Copy of seize diary is at PB Page 13-73), which falls under the definition of "other document" and the same was taken into account by the search and seizure team so as by Ld. AO. Therefore, considering the facts on record that the advance provided by the Appellant was recorded in the other documents of Appellant before the date of search, thus, case of Appellant is also out of the purview of explanation (c) (i) (A) to the Sub Section (3) of the Section-271AAB(1). Thus, it is altogether well established and clear that advance provided by the Appellant during the impugned assessment year is not covered under definition of "undisclosed income" for the purpose of Section 271AAB(1), as prescribed under explanation (c) to Sub Section (3) of Section 271AAB. Even otherwise, it is no matter as to what is alleged but it is in fact has to be proved that the Appellant is having undisclosed income, within the meaning of s .....

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t the assessee. Therefore, we uphold the order of the ld. CIT(A) on the aforesaid reasoning rendered by us. 7. It was further submitted that the advances recorded in documents are out of purview of provisions of section 271AAB of the Act. In this regard we will like to refer the finding of Jaipur ITAT given in the case of M/s Rambhao s v/s ACIT, Central Circle-1, Jaipur ITA No. 991/JP/2017 dated 12.10.2018 wherein in the identical issue, it was decided in favour of the assessee. In view of findings of ITAT, Jaipur Bench, Jaipur, the advances given to parties cannot be said to qualify as an undisclosed income in the context of section 271AAB. 8. It was further submitted that the saving of Appellant family since long being ₹ 7,97,915/- was also offered for tax though it was kept by the Appellant to meet out any eventuality or untoward incident in the family and the said savings were made during 20-25 years from the household expenses of the Appellant family and from petty gifts received time to time, which cannot termed as undisclosed income within the meaning of Section 271AAB. The same was offered for taxation only to avoid litigation. It was accordingly submitted that the pe .....

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9,200/-, it is noted that the assessee is proprietor of M/s Jagdamba kirana stores and is engaged in business of wholesale and retail trading of aata, maida, suji and kirana items and was required to maintain regular books of accounts in respect of his business activities. The slip pad and two notebooks found during the course of search and seizure at the residential premises of the assessee contains the entries of advances given for purchase of wheat. These transactions for purchase of wheat are thus part of regular business activity of the assessee and the advances so given are required to be entered in the regular books of accounts. Though these transactions are recorded in the notepad and two note books which are in nature of other documents , however the fact of the matter is that these transactions are regular business transactions which are required to be maintained in the regular books of accounts maintained in the normal course relating to such business and which has not been entered on or before the date of search. However, the question that remains is whether the advances so given to the farmers for purchase of wheat qualify as undisclosed income. An advance represents a .....

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ocuments or transactions found in the course of a search under section 132 , what perhaps has been envisaged by the legislature is an inflow of funds in the hands of the assessee which has been found recorded by way of any entry in the books of accounts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein such investments are deemed to be treated as income in absence of satisfactory explanation. In our view, the deeming fiction so envisaged under Section 69 and Section 69B where investments which are found either not recorded or found recorded at a lesser value in the books of accounts, and such investments are deemed to be income of the assessee of the year in which such investments have been made, cannot be extended and applied automatically in context of section 271AAB. It is a well-settled legal proposition that the deeming provisions are limited for the purposes that have been brought on the statute book and have therefore to be applied in the context of p .....

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