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TMI Blog2019 (11) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions prescribed therein were satisfied by the assessee and directed to wrongly restrict the penalty at 10% of undisclosed income of the assessee." 3. The AO levied the penalty at 30% of the undisclosed income u/s. 271 AAB(1) (c) of the Income-tax Act, 1961, [hereinafter, the 'Act' in short] by observing as under:- "5. In this case, the assessee has made disclosure during the statement recorded under Oath u/s 132(4) of the Income Tax Act 1961. The assessee has included the above income of Rs. 3.64 crores in his return of income but did not make the full payment of tax and interest before the due date of filing return. In his submission the assessee has also categorically stated that the tax on disclosed income has been paid before filing of the return. But in the Act in Section 271AAB it is clearly written that TAX AND INTEREST has to be deposited before the filing of return. As per the computation filed by the assessee, it is seen that after allowing credit of TDS, the assess vas required to deposit Rs. 1,24,35,550/- and statutory interest on such taxes but before filing return the assessee could only deposit Rs. 50 lakhs on 26.06.2015 and Rs. 15,76,890/- on 24/09/2015. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Surcharge @ 10% 10,92,000/- Education Cess @ 3% 3,60,360/- Total 1,23,72,360/- Hence, an amount of Rs. 1,23,72,360/- is imposed u/s. 271AAB(1)( c ) of the Income Tax Act, 1961." 4. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who was pleased to restrict the penalty @ 10% of the undisclosed income by observing as under:- "I have considered the findings of the AO in the penalty order and perused the facts as narrated in the A/R 's written submissions. From the assessment order u/s. 143(3), I find that for the assessment year 2015-16, the return of income was filed by the assessee declaring total income Rs. 6,82, 91,580/- on which the tax payable was Rs. 2,30,14,032/-. In addition the assessee was also liable to pay interest u/s. 234B & 234C aggregating to Rs. 6,82,343/-. At the time of filing of return, the assessee had claimed credit for following payments; i) Tax Deducted at Source Rs. 1,05,78,485 ii) Credit for Cash Seized on 20.03.2015 Rs. 65,50,000 iii) Self Assessment Tax Rs. 65,67,890/- TOTAL Rs. 2,36,96,375/- In view of the credit claimed for the aforesaid sums, the assessee had claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en force find that the AO levied the penalty at the highest rate prescribed in clause (c) only because he found that the assessee had not paid entire ta liability due on undisclosed income of Rs. 3,64,00,000 / - prior to completion of assessment. Moreover the alleged shortfall of Rs. 58,04 ,670/- occurred solely because the credit for seized cash of Rs. 65,50,000'- was not allowed. In AO's opinion even the request for adjustment of seized cash against the tax liability for assessment year 2015-16 was made by the assessee much after the completion of the assessment and therefore the benefit of such set-off could not be allowed earlier and in that view of the matter he justified levy of penalty lunder clause (c) of Section 271AAB of the Act. From the material p before me, I however find that the credit for seized cash against the assessee's liability for assessment year 2015-16 was ultimately allowed by the AO himself on 11.01.2017 when an order u/s 154 was passed. From the documents available in the records, I find that the request for adjustment of seized cash against the tax payable on the 'undisclosed income' was made by the assessee in his statement u/ s 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income. On the other hand, the ld. AR fully supported the order of the ld. CIT(A). 6. We have heard both the parties and perused the records. We note that the assessee, the managing director of M/s Industrial Safety Products Ltd, had disclosed a sum of Rs. 15 crores on 20-03-2015 during search u/s. 132(4) of the Act (initial deposition), which inter-alia included Rs. 3.64 Cr. offered to tax in the name of the assessee. Detailed break-up of Rs. 3.64 crores was provided by the assessee in his statement u/s 132(4) dated 05-05-2015 (second deposition). In the same statement, the assessee also requested the authorized officer to allow credit of cash of Rs. 65,50,000/- seized on 20-03-2015 against the tax payable on the income of Rs. 3.64 crs. At the time of filing of return u/s 139 on 24.09.2015, the assessee reiterated his request for adjustment of seized cash against his tax liability for the relevant AY 2015-16. It was therefore assessee's case that he had discharged his liability to pay tax and interest on returned income taking into account the payment by way of cash adjustment of Rs. 65,50,000/- and self-assessment tax of Rs. 65,67,890/-. The assessee therefore claimed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes aggregating to Rs. 2,36,96,375/- by way of TDS, seized cash and self -assessment tax. We therefore find merit in the ld. AR's submission that there was no default of non-payment of tax and interest, as alleged on the assessed income, and therefore the ld. CIT(A) was right allowing the benefit of Section 271AAB(1)(a) of the Act. 9. We also observe that the alleged shortfall of tax prior to completion of assessment was only to the tune of Rs. 58,04,670/- because credit for seized cash of Rs. 65,50,000/- was not allowed by the AO. We find that the said cash was in possession of the Income-tax Department since 20-03-2015. It is not in dispute that after 20-03-2015, the assessee never had access to the said cash which was admittedly with the department till 11.01.2017 and remained in their custody. It is also undisputed that ultimately the said seized cash was appropriated by the AO against the assessee's tax liability for the AY 2015-16 in relation to income disclosed in the statement u/s 132(4) of the Act. We therefore find that the seized cash was appropriated by the Income-tax Department only towards satisfying the assessee's tax liability for AY 2015-16 and for no other pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their [revenue] own omission cannot be accepted. We accordingly uphold the ld. CIT(A)'s order restricting the penalty levied at 10% of the undisclosed income in the facts & circumstances of the case. So, we confirm the action of Ld CIT(A) and dismiss the Ground Nos. 1and 2 of the Revenue. 10. Ground No.3 raised by the Department is as under: "That, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in giving the benefit of Section 271AAB(1)(a) to the assessee just on the basis of payment of his tax liability on undisclosed income by way of adjustment of seized cash against the advance tax as held by him, ignoring the default of the assessee of not specifying the manner in which such income was derived and thus, not fulfilling other two conditions by the assessee and hence, no being eligible for the benefit of Section 271AA(1)(a)." 11. The ld. DR submitted that in order to claim benefit of Section 271AAB(1)(a), the assessee should have not only paid the tax & interest on undisclosed income prior to filing of the return, but the assessee should have also disclosed in his statement u/s 132(4) the manner in which such undisclosed income was earned an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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