TMI Blog2019 (6) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of Allahabad in the case of Sandeep Chandak [ 2017 (12) TMI 70 - ALLAHABAD HIGH COURT] that the provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed where a search and seizure operation is carried out in which the assessee have surrendered the amount u/s 132(4) statement of undisclosed income, specify the manner in which this income was derived, filed return of income, admit the same and had paid taxes and interest on the same, we find no infirmity in the order of CIT(A) and it is justified. Thus, ground no-1 raised by the assessee is dismissed. - ITA No.201/Kol/2018 - - - Dated:- 31-5-2019 - Sh. P.M. Jagtap, Vice President And Sh.S.S. Viswanethra Ravi, Judicial Member For the Appellant : Sh. Manish Tiwari, FCA For the Respondent : Sh. A.K.Nayak, CIT DR ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER This appeal filed by the assessee against the order dated 05.12.2017 passed by CIT(A)-15, Kolkata for AY 2014-15. 2. The only issue is to be decided as to whether the CIT(A) is justified in confirming the penalty imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the record, facts of crucial importance are as under:- 1. The cash was seized at the premises of Shri Krishan Chandra Bajaj at 2, M.D. Road, 1st floor, Room No.4, Kolkata-700007. 2. The statement was recorded during search action of assessee dated 15/5/2014 in which he admitted that 16.95 lakhs belong to him and ₹ 8 lakhs to M/s. disha Plastics and ₹ 30 lakhs belongs to M/s Shyam steel Industries Limited (in his answer to Q.No.10.) 3. Further, vide his letter dated 2.6.2016, the assessee accepted that entire seized cash during search action belongs to him in contravention to his statement. 4. During the search proceeding, the assessee had admitted in his statement that he does not maintain books of account and therefore, seized cash is not accounted. 5. Further, the income from brokerage ranges from ₹ 5 to 8 lakhs in earlier assessment years and had never touch to substantial amount of cash seized as found during search proceeding. It was only after search that assessee admitted the cash seized as his Income. 6. On all above facts, I am satisfied that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the undisclosed income of F.Y. 2013-14 6,61,890/- Penalty of ₹ 6,61,890/- being a sum computed at the rate of ten percent of the undisclosed income of F.Y. 2013-14 is imposed on the assessee u/s 271AAB of the I.T.Act, 1961. Penalty order is passed after approval of Addl. Commissioner of Income Tax, Range-50, Kolkata. 5. Aggrieved by the order of imposition of penalty, the assessee carried the matter to the CIT(A). We find that the assessee reiterated the same submissions as made before the AO in the first appellate proceedings. According to CIT(A), there was no fresh submissions as made available in the first appellate proceedings. The CIT(A) considering the facts and circumstances of the case together with the penalty order and submissions of the assessee confirmed the penalty imposed by the AO as under:- (i) A search and seizure operation u/s 132(1) was conducted on 24.04.2014, in the office premises at 2, M D Road, 1st floor, Room No. 4, Kolkata-7. During the course of search operation, cash' amounting to ₹ 66,18,900/- was found in the office premises a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial Pvt.Ltd. Jekay International Pvt.Ltd. vs DCIT in ITA No.1927 1928/Kol/2016 vide order dated 15.02.2019 and for better understanding the relevant portion is reproduced herein below:- ITA No.1927/KOL/2016 (AY:2013-14) 4. The Ld. Counsel for the assessee, Shri. M.Satnaliwala submitted that notice of penalty was issued by the AO u/s 271AAA of the Act while the penalty was finally imposed u/s 271AAB of the Act. He contended that the penalty notice issued by the AO, therefore, was defective and the penalty imposed in pursuance of such defective notice is not sustainable. He also contended that the specific limb of section 271AAB of the Act, was not mentioned by the AO as applicable to the facts of the assessee s case and in view of the same, penalty imposed u/s 271AAB of the Act is liable to be cancelled. He, submitted that commodity profit was earned by the assessee and since it was duly disclosed in the return of income it was not a case of undisclosed income attracting the penal provision of section 271AAB of the Act. 5. The Ld.CIT DR, Shri. Anand Kumar Kedia on the other hand submitted that even though at the top of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or according to the intent to the purpose of the provision. 8. Further, he replaced reliance on several case laws regarding questioning as to whether satisfaction must be recorded in the assessment order. The Ld. DR submits that the notice initiating penalty cannot be declared bad in law because it states the penalty proceedings are initiated, if otherwise it is to be seen from the record whether the AO has arrived at prima facie satisfaction for initiation of penalty proceedings. The AO discussed the facts and circumstances of the case leading to initiation of penalty proceedings under section 271AAB in his order i.e cash other valuables, jewellery, silver utensils and articles, bank accounts and seized documents. The AO clearly stated that the assessee admitted ₹ 5 crore as undisclosed income derived from the activity under commodity profit which was disclosed under section 132(4) of the Act and prayed to confirm the order of CIT (A). 9. Regarding the contention of failure of the AO to point out specifically a particular limb of section 271AAB of the Act, the Ld. DR submitted that section 271AAB has no such limbs and what are given therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, assessee's submission for dropping the penalty u/s 271AAB for fulfilling the three conditions is not applicable to the present case. However, in the case of the assessee the conditions laid down in sec.27l AAB(l)(a) are fulfilled as discussed under:- 1) Search conducted: 06.09.2012. 2) In course of search disclosure of ₹ 5,00,00,000/- was made. 3) Date of filing of return u/s 139 including disclosed income paying entire tax liability on 26.09.2013. The above proves that it is a fit case for levying penalty u/s 271 AAB of the IT. Act, 1961 for undisclosed income of the assessee. As a result, therefore, a penalty of ₹ 50,00,000/- (being 10% of the disclosed income of ₹ 5,00,00,000/-) is being levied upon the assessee. 13. It is noted from the above that the AO held the assessee to liable to pay penalty under section 271AAB of the Act by holding that a search was conducted on 06.09.2012 and a disclosure of ₹ 5 crores was made and paid tax liability including on the undisclosed income as admitted by the assessee during search proceedings. It is pertinent to note tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard are not tenable and they are liable to be rejected. 16. Further, we may place on record the principle laid down by the Hon ble High Court of Allahabad in the case of Sandip Chandak where, we find the same contention raised as the penalty initiated and imposed u/s 271AAB is not maintainable as authority issued notice u/s 274 r.w.s. 271 of the Act. The Hon ble High Court of Allahabad was pleased to observe that though notice was issued u/s 274 r.w.s 271 of the Act, the AO clearly indicated that the proceedings u/s 271AAB of the Act initiated and show caused the assessee to reply in writing on or before specified date and is sufficient to initiate and complete the penalty proceedings. 17. Further in respect of the arguments as advanced by the Ld.AR that no penalty should be levied when the assessee duly disclosed the manner of earning the said undisclosed income under the head commodity profit in the return of income. It is to be noted on perusal of the provision u/s 271AAB of the Act the predominant condition to attract penalty provisions u/s 271AAB of the Act, admission of undisclosed income, specifying and substantiating the manner in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) a sum which shall not be less than thirty percent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. 19. On reading of the above provision u/s 271AAB, explains that in a search case the AO may direct the assessee to pay penalty as computed at the rates specified in the clauses (a), (b) (c) of sub section (1) of 271AAB of the Act and the assessee shall pay penalty in addition to the tax on undisclosed income disclosed by the assessee made at the stage of making statement u/s 132(4) of the Act or during the assessment proceedings. In the present case as discussed above that the assessee accepted disclosure of ₹ 5,00,00,000/- as its undisclosed income from undisclosed source. It is also noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 crores each (₹ 4 lakh each by all the three assessees) and therefore, in view of the provisions of Section 271AAB the assessees are required to pay, by way of, penalty in addition to tax, if any, a sum computed @ 10% of undisclosed income of the specified period or previous years. In the case where the assessee in the course of search in a statement (under Section 4 of Section 132) admits the undisclosed income and specified manner in which such income has been derived, than the provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed. We have noticed that the penalty notice has been issued under Section 274 read with section 271. Section 274 provides that no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. In the instant case the penalty notice issued clearly indicates that the opportunity of being heard is provided to the assessee and therefore, the penalty notices has been issued under Section 274 read with section 271 calling upon the assessee to show cause in writing or in person which fulfill the requirement of Section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this reason, in my opinion, satisfaction of the AO is not required to be recorded by AO during assessment proceedings or at the time of completion of the proceedings. Thus, initiation of the penalty after the completion of assessment proceeding is not vitiated by law. The Ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not 271AAB. In this respect, the copy of notice has been produced by the Ld. A.R. before me. It is seen that the Ld. A.R. is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB. The assessee has also challenged that the principles of natural justice has not followed by the AO. The detailed submissions of A.R. in this regard has already been reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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