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TMI Blog2019 (12) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... l the grounds of appeal are related to the levy of penalty u/s 271AAB(1)(a)(ii) of the Income Tax Act, 1961 (in short 'Act'). A search u/s 132 was carried out in this case on 27.04.2013 and consequent to the search action u/s 132, the assessment was completed u/s 153A of the Act vide order dated 17.03.2016. During the assessment proceedings, the Assessing Officer (AO) completed the assessment, accepting the income returned and initiated penalty proceedings u/s 271AAB of the Act. During the course of search, the Investigation team found incriminating material in the form of a note in I-pod with regard to rate quoted by the assessee for sale of plots @Rs. 4,600/- per square yard which was seized in the office and also in the residential premises of the partners / directors of the assessee firm. When the Income Tax department questioned the differences noticed in the seized material, Sri I.A.Raja Varma, Managing Partner of the assessee firm has given a statement on oath accepting to pay tax on the income in respect of the differences found during the course of search. Accordingly, the assessee filed a letter dated 21.05.2013 before the Asst.Director of Income Tax (Investigation) admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty proceedings. The AO not being convinced with the explanation of the assessee viewed that the assessee has not admitted the income voluntarily and admitted the undisclosed income because of search and seizure action undertaken u/s 132 of the Act. The AO further held that the details of unaccounted sale consideration received outside the books of accounts would have never come to the notice of the Department had the Department not conducted the search action, hence viewed that the case clearly falls under undisclosed income as defined u/s 271AAB of the Act. 3. With regard to quantum levy of penalty, the AO viewed that the penalty leviable u/s 271AAB is 10% in case where the assessee admits the income u/s 132(4) and specifies the manner in which such income has been derived, substantiates the manner in which undisclosed income was derived and pay the tax together with interest in respect of undisclosed income and files the return of income declaring such undisclosed income. In the instant case, the AO observed that the assessee has admitted the income, paid the taxes and filed the return of income before the due date and also paid the taxes along with the interest, but the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the material during the course of search. Had the search was not conducted in the instant case, the assessee would not have disclosed the undisclosed income and it would not have come to the notice of the department. Therefore, argued that it is a clear case of undisclosed income within the definition of 271AAB of the Act and concealment of income. Hence, argued that the Ld.CIT(A) has rightly held that the AO is justified in invoking the provisions of 271AAB of the Act. The Ld.DR further submitted that in the instant case, though the assessee had admitted the income, the assessee did not satisfy the conditions required for levying the penalty @10%, due to assessee's failure to explain the manner in which the undisclosed income was admitted. The Ld.DR argued that the Ld.CIT(A) erred in confirming the penalty @10% instead of 30%. The CIT(A) ought to have upheld the penalty levied by the AO. Accordingly, the Ld.DR requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue. 6. On the other hand, the Ld.AR submitted that the search u/s 132 was conducted in the business premises of the assessee and a note was found in the I-Pod quoting rate at Rs. 4600/- pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that Rs. 4,600/- was estimated sale price, it has admitted the additional income of Rs. 5,58,00,000/- for the impugned assessment year. Accordingly, the assessee filed the return of income admitting additional income and also paid the taxes. The AO levied the penalty @30% u/s 271AAB with an observation that the assessee has not explained the manner in which the undisclosed income was earned. On appeal, the Ld.CIT(A) restricted the penalty @10% finding that the assessee had satisfied the conditions for levying penalty @10%. The Ld.CIT(A) rejected the contention of the AO that the assessee had not disclosed the manner in which the undisclosed income was earned. We have carefully gone through the orders of the lower authorities and submissions made by the assessee during the appeal hearing and find that though the incriminating material was found indicating sale of plots at Rs. 4,600/- per sq.yd. the assessee admitted the income @3,700/- for Sunray Village and Rs. 2,700/- for Sunray Beach Front after deducting the expenditure which was paid outside the books of accounts and the AO had accepted the admission made by the assessee and completed the assessment. From the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crystalised during the period till the date of search in the impugned assessment year. Therefore, argued that the contention of the Ld.CIT(A) that the undisclosed income accounted on estimation basis is incorrect. The finding of the Ld.CIT(A) that it was purely on estimation basis is without any foundation. Once search is conducted and incriminating material was found, penalty is automatic and the AO has no discretion except to levy the penalty of 10% or 30% as provided in section 271AAB of the Act. Referring to page No.3 of the assessment order, the Ld.DR submitted that consequent to search conducted u/s 132 of the act, the assessee had admitted Rs. 14 crores of additional income for the A.Y. 2008- 09 to 2014-15. Referring to page No.11 of penalty order, the Ld.DR argued that once the search is conducted and admitted the undisclosed income, the AO has no option except to levy the penalty at the rate specified in clause (a), (b) and (c) of section depending on the conditions mentioned therein. In the instant case, though the assessee had satisfied the conditions with regard to admission of income, payment of taxes and filing the return of income, the assessee did not satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial available to the department to show that there was undisclosed income which comes to the ambit of 271AAB of the Act for the period from 01.04.2013 to 27.04.2013. Though in the earlier years, the assessee had admitted the additional income on the net consideration received, in the year under consideration the admission was only towards estimated profits for future period i.e. from 01.04.2013 to 31.04.2014. The AO also completed the assessment estimating the income @18% rejecting the books of accounts of the assessee company before depreciation. No material was also brought on record to support the estimation of income @18% on gross receipts. Though the AO completed the assessment on estimation of income, penalty was initiated u/s 271AAB instead of 271(1)(c). From the material gathered, submissions made by the assessee and from the records, we are of the considered view that no material was available with the department to hold that there was undisclosed income for the previous year ending 31.03.2014 till the date of search. Thus, there is no case for levying the penalty u/s 271AAB and we do not find any reason to interfere with the order of the Ld.CIT(A). Accordingly, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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