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TMI Blog2019 (4) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law the ld. CIT(A) erred in not holding the penalty order as wrong, bad in law, in-valid and void-ab-initio as the ld. AO initiated the penalty u/s 271AAB of Income Tax Act, 1961 without specifying the clause of section 271AAB of the Act in the penalty notice under which the penalty was initiated i.e. whether it is for clause (a) or clause (b) or clause (c) of section 271AAB(1) because the conditions for imposing the penalty under each such clauses are separate. 2. On the facts and in the circumstances 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 Rs. 75,17,711/- u/s 271AAB(1)(a) of the Act out of penalty of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 27.06.2018. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). The ld CIT(A) has returned a finding that the assessee has offered the income in the statement recorded u/s 132(4), offered the same in the return of income and paid the due tax thereon and thus, the assessee has satisfied all the conditions specified u/s 271AAB(1)(a) of the Act. Accordingly, he modified/reduced the penalty @ 10% of undisclosed income as against 30% levied by the Assessing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2016-17 was not applicable in the case of Appellant and therefore, the case of Appellant is beyond the purview of explanation (c)(i)(B) of Sub Section (3) of Section 271AAB. Now, the only and only point to cover the case of Appellant under definition of "undisclosed income" is whether the case of Appellant falls under explanation (c)(i)(A) of Section 271AAB, which inter alia provides that income should not have been recorded 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in Sec. 271AAB of the Act. So, Rs. 3 cr. Which was commodity profit recorded in the other document maintained by the assessee which was retrieved during search cannot be termed as 'undisclosed Income' in the definition given u/s 271AAB of the Act. Since Rs. 3 cr. cannot be termed as "undisclosed income' as per sec. 271AAB of the Act, no penalty can be levied against 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 Rs. 7,97,915/- was also offered for tax though it was kept by the Appellant to meet out any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of determining the quantum of penalty which the ld 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 Rs. 7,97,915 so sustained by the ld CIT(A). 12. Regarding cash advances to farmers for purchase of wheat amounting to Rs. 7,43,79,200/-, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Therefore, once there is an inflow of funds by way of income, there could be subsequent outflow by way of investment. Investment and income thus connotes different meaning and connotation and thus cannot be used interchangeably. In the definition of undisclosed income, where it talks about "income by way of any entry in the books of account or other documents 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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