9911796707
TMI Blog2019 (8) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was carried out at the premises of the aforesaid assessees on 27.8.2015. During the search action, the assessee surrendered an amount of Rs. 2 cores as her additional income. Similar surrenders were made in the case of other assessees also. The Assessing Officer further observed that as per section271AAB of the Act, the levy of penalty was mandatory in the case of surrendered unexplained income found during the search action. He further observed that since the assessees herein above, had disclosed the sources of income and substantiated the manner of earning of such income and had paid the due taxes on such surrendered income, hence, the minimum penalty @ 10% under the provisions of section 271AAB(1) (a) of the Act was leviable. He, accordingly initiated penalty proceedings u/s 271AAB of the Act and levied the penalty @ 10% of surrendered undisclosed income in the case of the aforesaid assessees. 4. Being aggrieved by the above order of the Assessing Officer, the assessees preferred appeals before the Ld. CIT(A) but remained unsuccessful. 5. Before us, the Ld. Counsel for the assessees, at the outset, has submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT Vs. Rashmi Cement Ltd, ITA No. 1606/Kolkata/2017 order dated 28.2.2019((ITAT Kolkata Bench) 8. The Tribunal after analyzing the aforesaid decisions, wherein, reliance has been placed on the decisions of the Hon'ble High Courts has held that levy of penalty u/s 271AAB of the Act is not mandatory as the provisions of section 274 of the Act have been made applicable in relation to the penalty referred to section 271AAB of the Act. It has been held that the penalty u/s 271AAB will not be attracted if the surrendered income would not fall in the definition of 'undisclosed income' as defined under explanation to section 271AAB of the Act. The relevant part of the order of the Tribunal in 'M/s SEL Textiles Ltd. Vs DCIT' dated 18.04.2019(supra) for the purpose of ready reference is reproduced as under:- "6. The Ld. DR, on the other hand, has submitted that the assessee himself had surrendered an amount of Rs. 14,39,99,258/- as its undisclosed income of the year and since the assessee did not substantiate the manner of earning of the said income, hence, the Assessing officer rightly imposed the penalty under the provisions of seciton271AAB (1)(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty per cent 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 subsection (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (3) The provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced as under: " At the outset we note that it has been the submission of the AO as well as the Ld. DR that the levy of penalty under Section 271AAB is mandatory and automatic and therefore in the matter of levy of penalty the AO had no discretion once the assessee admits of any undisclosed income in his statement u/s 132(4) of the Act. Such a view goes against the words used in section 271AAB and section 274 of the Act. For saying so we note that if the intention of the Legislature to levy the penalty was mandatory and automatic then the right of appeal u/s 246A would not have been provided for by the Legislature against the order of penalty passed u/s 271AAB of the Act. We also note that while enacting Section 271AAB the Legislature has consciously used the word 'may' in contradistinction to the word 'shall' in the opening words of Section 271AAB of the Act. The choice of the expression 'may' and not 'shall' in the opening Section of 271AAB shows that the Legislature did not intend to make the levy of penalty statutory, automatic and binding on the AO but the AO was given discretion in the matter of levy of penalty. Our foregoing view finds support in the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct indicates that the imposition of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case." 9. As far as to the judgment of the Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) is concerned, we note that the facts of the present case are distinguishable from the facts involved in that judgment. In Sandeep Chandak (supra) the assessee had not only made the disclosure/surrender of the amount but also had specified the manner in which such income has been derived i.e. from the trading of F&O and derivatives and was advanced for purchase of land. That is not the case in the present appeal; there is no explanation by the assessee the manner of deriving the surrender made during search. As discussed in the foregoing, it is a matter of record that in the course of search no undisclosed asset or thing was found nor any incriminating material was found from which any undisclosed income or unexplained expenditure could be inferred. In the circumstances the bald offer made by the assessee to pay tax on additional i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores as its income for AY 2013-14. We however find that nothing has been brought on record by the AO which in any manner even suggested let alone proved with cogent material that the said income was actually represented either wholly or partly by any sum of money, bullion, jewellery or other valuable article or thing and which was found in the course of search. Since no sum of money, bullion, valuable or article equivalent to Rs. 69 crores was discovered by the Revenue in the course of search, the additional requirement of the same being found not recorded in the books or other documents was redundant. We therefore find that the conditions prescribed in first limb of clause (i) of clause (c) of Explanation were not satisfied. 13. The second limb of sub-clause (i) provides that 'undisclosed income' shall mean any income represented either wholly or partly by any entry in the books of accounts or other documents or transactions found in the course of search under Section 132 but which were not recorded on or before the date of search in the books of accounts or other documents maintained in the normal course relating to such previous year or otherwise not been disclosed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of Section 271AAB of the Act. 17. From the plain reading of Section 271AAB we find that the levy of penalty is permissible if and only if there exists 'undisclosed income'. Finding or unearthing of undisclosed income in the course or as a result of search conducted u/s 132 of the Act is sine qua non for invoking penal provisions of Section 271AAB of the Act. Discovery and consequent assessment of undisclosed income is a condition precedent for levy of penalty under Section 271AAB of the Act. It has to be borne in mind that every offer of the assessee to pay tax on his or her income in the course of recording of statement u/s 132 does not amount to finding of 'undisclosed income'. A mere offer or disclosure by an assessee to pay tax on some additional amount with a view to avoid protracted litigation cannot and does not amount to discovery of undisclosed income for the purposes of levy penalty u/s 271AAB of the Act. The Legislature has all along been conscious in providing for levy of penalty only in respect of "undisclosed income". We find that in all penal provisions such as Explanation 5A of Section 271(1)(c), Section 271AAA & Section 271AAB, the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1 crore coming Rs. 10,00,000 in question. We find no substance in Revenue's instant arguments. We first of all make it clear that section 271AAB of the Act applies in relation to the impugned penalty @10% of the undisclosed income as stood defined in Explanation (c) thereto. There is no material in the case file to indicate that the assessee's undisclosed income represents any money, bullion, jewellery or valuable article or any entry in the books or other documents therein. We make it clear that we are dealing with a penalty provision in tax statute which is to be strictly interpreted. We therefore are of the opinion that the CIT(A) has rightly deleted the impugned penalty as the assesee's search statement nowhere indicated the corresponding undisclosed income as per specific requirement in the Act. The CIT(A)'s findings under challenge deleting penalty in question are accordingly confirmed." 19. We also rely on the decision of this coordinate Bench of Tribunal in the case of DCIT Vs Liladhar Agarwal in ITA No. 1605/Kol/2017 dated 26.12.2018 wherein identical issue had come up for consideration and the Tribunal upheld the CIT(A)'s order deleting the levy of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosure given by the assessee and did not verify the factual position with the books of accounts and projections and bring the evidence to unearth the undisclosed income. Neither the A.O. nor the investigation wing linked the cost of profit or cost of asset to the entries in the books of accounts or to the sales conducted by the assessee to the sale deeds. Therefore, we are unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure. The Hon'ble ITAT Delhi Bench in the case of Ajay Sharma v. Dy. CIT [2013] 30 taxmann.com 109 held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee has not been declared by the assessee. An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee. Hence penalty u/s 158BFA (2) of the Act is not leviable. The facts of the assessee's case shows that there was no undisclosed income found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... screpancy in the stock as recorded in the books of account and found at the time of search. In the absence of any discrepancy in the quantity of stock the valuation of the stock is purely a question of assessment and cannot be held as undisclosed income detected during the course of search and seizure proceeding. Therefore, to the extent of excess stock based on the valuation report the disclosure of the income by the assessee would not fall in the category of undisclosed income as per explanation to Section 271AAB of the Act. It is not the case of the Revenue that any stock of jewellery was found which is not recorded in the books of account but the value of stock is computed based on the valuation report of the departmental valuer. Once the difference in the value of stock is only due to market price as against the cost of the said stock, the same will not fall in the ambit of undisclosed income as defined under clause-(c) of explanation -1 of section 271AAB of the Act. 19. Similarly the accrued interest of Rs. 20,00,000/- is also only estimated and not based on any incriminating documents. This amount was estimated as there were advances as per the entries of the seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) of the Act and independently scrutinized and verified the different heads of income and expenditure and computed the additional income of Rs. 33,13,304/- on account of stock found short during search action, however, giving the assessee set off of amount of Rs. 39,99,158/- surrendered under the head 'profit on stock found short' added the balance amount of Rs. 2,58,20,577/- into the income of the assessee on account of stock found short during the search action. Apart from that, the Assessing officer had made the additional disallowance of Rs. 2,83,98,545/- under section 14A of the Act which was in addition to the suo motu disallowance of Rs. 3,45,49,868/- returned by the assessee in this respect in his Income tax return. The Assessing officer also made an addition of Rs. 2,25,54,011/- u/s 36 (1)(iii) of the Act. Though the assessee during the assessment proceedings submitted that the set off of Rs. 14 crores declared on account of disallowance by the assessee of expenses/additions be given to the assessee, however, the Assessing officer rejected the above contention of the assessee since the assessee had not given any bifurcation of any surrendered income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diency. So far as the disallowance u/s 36(1)(v) was concerned, a plea was taken that the contribution to Employees Provident Fund was made within the stipulated period and that no disallowance was attracted. 12. Considering the nature of disallowance made by the Assessing officer and the plea of the assessee, it is quite apparent that the issue of disallowance of expenditure on the aforesaid three issues was a debatable one and in fact in the light of the various decisions of the Hon'ble High Courts, the assessee has a fair case on merits and that it cannot be said that there was any intentional act on the part of the assessee to claim any inadmissible expenditure, rather, the assessee had put a bonafide claim of the allowance/expenditure on these issues. What we wish to convey through the aforesaid discussion is that even despite certain disallowances made by the Assessing officer, as discussed above, it cannot be said that assessee had claimed any inadmissible expenditure which would fall within the definition of "undisclosed income" as defined under the provisions of section 271AAB of the Act. Except the aforesaid disallowance mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 271AAB (1)(a) of the Act. However, the remaining part of the penalty is ordered to be deleted." 9. From the perusal of the above decision, it can be noticed that the Tribunal has categorically held that if no incriminating material is found during the search action and the surrendered income does not fall in the definition of undisclosed income as defined u/s 271AAB of the Act, the penalty is not warranted. The Coordinate Bench of the Tribunal has also discussed the proposition of law laid down by the Hon'ble Allahabad High Court in the 'Principal CIT vs Sandeep Chandak and Ors.' (supra) and has held that the facts of the said case are distinguishable and do not apply to the facts of the case in which no incriminating material is found during the search action. 10. However,, Ld. Counsel for the assessee has been fair enough to admit that it is not in all the cases that no incriminating material was found. That certain items of jewellery of silver were found / noticed during the search action, the source of income from which as held by the Assessing Officer also stood explained and also the manner of earning of the income wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
