TMI Blog2019 (7) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of undisclosed income, 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 . The cash advance cannot be deemed as undisclosed Income in the context of section 271AAB. For this proposition, reliance is placed on the judgment of Silver Art Palace vs DCIT [ 2019 (4) TMI 634 - ITAT JAIPUR] where Hon ble ITAT Jaipur Bench held that such cash advances cannot be deemed as Undisclosed Income for the purpose of section 271AAB. In view of the above discussion and respectfully following the judicial pronouncements (supra), we do not find any merit for imposition of penalty in respect of declared income which is not coming in the purview of undisclosed income as defined under clause (c) to explanation to Section 271AAB . It is pertinent to mention here that no contrary decision was brought to our notice by the ld DR so as to persuade us to deviate from the conclusion drawn in the above judicial pronouncements as referred and relied by us. - both the appeals of the assessees are allowed - ITA No. 164/JP/2017, ITA No. 165/JP/2017 - - - Dated:- 22-5-2019 - Shri Ramesh C Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the specified date, since return of income was filed on 22.11.2013 for the A.Y 2013-14 which was after the due date. 5. By the impugned order, the ld. CIT(A) upheld the penalty by observing that the assessee had filed return offering income of ₹ 2.00 crores after specified dates. Now the assessee is in appeal before us against the order of the ld. CIT(A) confirming the penalty so imposed U/s 271AAB of the Act. 6. It was argued by the ld. AR of the assessee that the penalty notice so issued is vague in so far as the specific limb was not mentioned. Our attention was also invited to the penalty notice issued U/s 274 read with Section 271AAB of the Act as placed at page No. 6 of the paper book. Accordingly, it was contended that while initiating the penalty proceedings u/s 271AAB, A.O. was not clear as to under which clause the case of assessee Company would fall. Therefore, it can be inferred that notice was issued by A.O. without prima facie satisfying himself about as to whether assessee has committed default at all or if yes, under which clause. Therefore, assessee could not get fair opportunity to explain or represent his cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r books of account under the Income Tax Act. Accordingly, there is no question of recording the transaction of cash advances in his books of account. He further contended that since the assessee is not carrying on any business, his case falls in second limb i.e. or other documents as stipulated in explanation-(c) of Section 271AAB of the Act, which describes undisclosed income for the purposes of this section. At the time of search, the transactions were found to be recorded in the Red Diary , which is other document , mentioned in above definition of undisclosed income. Accordingly, it was argued that it is not coming in the definition of undisclosed income as provided in Explanation (c) of Section 271AAB of the Act. For this purpose reliance was placed on the decision of Kolkata Bench in the case of DCIT Vs Manish Agarwal (supra), Jaipur Bench of the ITAT in the cases of Ravi Mathur Vs. DCIT, Anuj Mathur Vs DCIT, Shri Suresh Chand Mittal Vs DCIT, Shri Dinesh Agarwal Vs ACIT and Shri Ritesh Agarwal Vs DCIT (supra). He also invited our attention to the decision of the Coordinate bench of Visakhapatnam in the case of Pillala Ramakrishna Rao Vs ACIT (supra), ITAT K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a procedural lapse, when all other conditions are fulfilled, should not lead to penalizing the assessee by imposing the penalty at the rate of 30% in place of 10%. Assessee falls under 271AAB(1)(a) and AO as well as ld CIT(A) have erred in confirming the penalty under section 271AAB(1)(c). The sole reason of non-filing of return within due date should not become the deciding factor for imposing 30% penalty. The substantive conditions being admission of undisclosed income u/s 132(4), payment of tax thereon and including the same in the return of income. Once the substantive conditions are found complied with, there is no reason to penalize the assessee by imposing penalty at the rate of 30% instead of minimum penalty of 10%. The use of word may give discretion to the AO to impose or not to impose penalty. Similarly, the same word may confer further discretion on the AO to impose penalty at any of the three specified rates i.e. 10%, 20% and 30%. The AO has to use the discretion judicially. In the instant case, for a procedural lapse, when substantive requirements have been complied with, the AO did not act judiciously in imposing penalty at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/cross objection before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier 12. On the other hand, the ld DR has relied on the orders of the authorities below and contended that the A.O. was justified in levying penalty in respect of amounts surrendered during the course of search more particularly when return was not filed within the stipulated time as provided under the Act. 13. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in his books of account. (b) Since the assessee is not engaged in business or profession, the assessee's case falls in the second limb i.e. or other documents as stipulated in Explanation (c) of section 271AAB which describes undisclosed income for the purposes of this section. At the time of search, the transactions were found to be recorded in the Red Diary , which is other document , mentioned in above definition of undisclosed income. (c) There is no requirement in law to disclose income in respect of the assessment year relevant to previous year in which search is conducted to Chief Commissioner or Commissioner before the date of search. Even though, the A.O. has accepted the fact that the cash payments were recorded in the seized diary but alleged that it cannot be presumed that he is not maintaining any Statement of Affairs. (AO Penalty Order Page 5) since he is a director in many companies. In this regard, we observe that mere fact that assessee is director in many companies does not cast responsibility on the assessee to maintain books of account or so called Statement of Affairs. For this purpose reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid income is found as recorded in the other documents maintained in the normal course, the income cannot be termed as Undisclosed Income as per section Explanation (c) to section 271AAB and no penalty can be levied against the assessee. Relevant para is reproduced hereunder: (Internal Page 34-35) Therefore, when the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Hence, in view of the above facts and circumstances of the case as well as the various decisions on this point, we hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come in the context of section 271AAB. For this proposition, reliance is placed on the judgment of Silver Art Palace vs DCIT ITA No. 236/JP/2018 dated 11-2-2019 (CLC 357-394), where Hon ble ITAT Jaipur Bench held that such cash advances cannot be deemed as Undisclosed Income for the purpose of section 271AAB. Relevant portion being para 42, 43 44 of the judgment is being reproduced hereunder: (Internal Page 35-38) 42. Now, coming to surrender made on account of cash advances for land purchases in the statement recorded u/s 132(4) of the Act. During the course of search, a diary has been found wherein there are notings relating to advance given to various persons towards purchase of land. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions wherein they have been brought on the statue book and not otherwise. In the instant case, the deeming provisions are contained in section 69, 69A and section 69B and therefore, the same could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the AO has not even invoked the said deeming provisions in the quantum proceedings in the instant case. Therefore, even on this account, the deeming fiction cannot be extended to the penalty proceedings which are separate and distinct from the assessment proceedings and more so, where the provisions of section 271AAB provide for a specific definition of undisclosed income. Where a specific definition of undisclosed income has been provided in Section 271AAB, being a penal provision, the same must be strictly construed and in light of satisfaction of conditions specified therein and it is not expected to examine other provisions where the same has been defined or deemed for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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