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2019 (6) TMI 545

..... sked about the undisclosed income for purchase of iron ore as recorded in the exehibit-2 page 25 at the time of search then the disclosure made by the assessee vide letter dated 25.01.2013 on account of the cash purchases cannot be considered as undisclosed income for the purpose of levy of penalty u/s 271AAB. Neither the investigating team nor the AO during the assessment proceedings detected any excess stock or discrepancy in the stock as recorded in the books of accounts by the assessee in comparison to the stock which was found at the time of search and seizure action. Even there is payment for purchase of raw material the said outgo of money itself cannot be treated as undisclosed income of the assessee in the absence of corresponding asset found at the time of search. There was no discrepancy found in the physical stock as well as stock recorded in the books of account despite the physical verification and inventorization carried out of investigating team at the time of search then the mere details of payment for purchases in cash would not constitute undisclosed income as per the definition provided in explanation to Section 271AAB. Accordingly, the penalty levied u/s 271AAB .....

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..... vs. CIT 229 ITR 383 the additional ground raised by the assessee is admitted for adjudication along with the main ground of appeal. We may make it clear that the additional ground raised by the assessee is only a plea in respect of the main ground raised in the memo of appeal. 4. There was a search and seizure action U/s 132(1) of the Incometax Act on 06.11.2012 at various premises of Kanodia Group to which the assessee belongs. Thus, the assessee was also covered by the search and seizure action and statement of Shri kailash Kanodia a director of the assessee was recorded U/s 132(4) of the Act on 06.11.2012 & 07.11.2012. In those statements he disclosed/surrendered a sum of ₹ 2 crore on his behalf and equal amount of ₹ 2 crore on behalf of his son Shri Abhishak Kanodia total amounting to ₹ 4 crore. Thereafter vide letter dated 25.01.2013 of Shri Kailash Kanodia also surrendered a sum of ₹ 65,00,000/- on behalf of the assessee company on account of cash purchase of raw material. The assessee filed its return of income U/s 139(1) of the Act on 28.09.2013 declaring total income as loss of ₹ 72,92,396/-. This loss was due to unabsorbed depreciation w .....

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..... osed income and therefore, the penalty levied by the AO U/s 271AAB of the Act may be deleted. Alternatively, the ld. AR has submitted that the assessee filed letter dated 25.01.2013 whereby the surrender of ₹ 65,00,000/- was made with the special mention that the same may be treated as disclosure U/s 132(4) of the Act. The DDIT, Investigation has accepted the letter and did not object to the surrender and disclosure U/s 132(4) of the Act. The ld. AR has further submitted that since the department itself has not considered the documents exehibit-2 page 25 containing cash payments for purchase of raw material as incriminating material therefore, no question was asked during the statement recorded U/s 132(4) of the Act regarding the said documents and consequently the assessee was not having any occasion to surrender the alleged income of ₹ 65,00,000/-. Subsequently, the assessee has voluntarily surrendered ₹ 65,00,000/- vide letter dated 25.01.2013 which was accepted by the department. Since the assessee has paid tax on the said surrender before the due date as provided u/s 271AAB(1)(a)(i) of the Act therefore, the mere declaration of the said amount in the revised .....

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..... irector of the assessee company surrendered ₹ 2 crore each on his behalf as well as on behalf of his son Shri Abhishak Kanodia. Further, there was no question asked by the investigating team about any incriminating material or undisclosed income in respect of the cash purchase of raw material. We further note that the said seized documents exhibit-2 page 25 contains the details of purchase of raw material on various dates. The summary of the purchases as recorded in the said documents are as under:- Date of payment Amount (Rs.) 7-9-12 15,00,000 21-09-12 10,00,000 11-10-12 20,00,000 No Date 4,00,000 No Date 16,00,000 Total 65,00,000 The details as recorded in the seized document is only purchase made by the assessee but at the same time the investigating team had inventoried the stock of the assessee and found no discrepancy as far as the physical stock and the stock recorded in the books of accounts. Therefore, there was no irregularity found in the books of accounts so far as the stock of raw material is concerned. Hence, even if the some purchases are made in cash if the said stock is duly recorded in the books of accounts as it is evident from the inventorisation made by t .....

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..... e of such advance during the period 28.07.2013 to 3.9.2013 just before the date of search on 4.9.2013. Therefore, what has been found during the course of search is certain entries relating to undisclosed investment in purchase of land. Besides the said entries, there are no other documents/material in terms of any agreement to sell, the description of the property etc, which has been found during the course of search. As per the definition of undisclosed income u/s 271AAB, the undisclosed investment in so called purchase of land cannot be stated to be income which is represented by any money, bullion, jewellery or other valuable article or thing. Whether it can then be said that such undisclosed investment represents 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. An investment per se represents an outflow of funds from the assessee s hand and an income per se represents an inflow of funds in the hands of the assessee. 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 c .....

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..... purposes of bringing the amount to tax. In light of the same, the undisclosed investment by way of advance for purchase of land can be subject matter of addition in the quantum proceedings, as the same has been surrendered during the course of search in the statement recorded u/s 132(4) and offered in the return of income, however the same cannot be said to qualify as an undisclosed income in the context of section 271AAB read with the explanation thereto and penalty so levied thereon deserved to be set-aside. Thus, even there is payment for purchase of raw material the said outgo of money itself cannot be treated as undisclosed income of the assessee in the absence of corresponding asset found at the time of search. A similar view has been taken by this Tribunal in a series of decision as relied upon the ld. AR of the assessee. In view of the facts and circumstances of the case where there was no discrepancy found in the physical stock as well as stock recorded in the books of account despite the physical verification and inventorization carried out of investigating team at the time of search then the mere details of payment for purchases in cash would not constitute undisclosed i .....

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