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2020 (3) TMI 283

..... bench both the parties have replied that the AO has not dropped the penalty proceedings u/s 271(1)(c) before issue of show cause letter calling for explanation of assessee for levy of penalty u/s 271AAA. Therefore, we are of the considered opinion that the AO has applied his mind and initiated penalty u/s 271(1)(c) and conducted the proceedings u/s 271AAA. Having conducted the search and assessed the undisclosed income, the AO ought to have initiated the penalty proceedings u/s 271AAA instead of initiating the penalty u/s 271(1)(c). Hence, we are of the view that initiating the penalty u/s 271(1)(c) and conducting the proceedings u/s 271AAA is bad in law. The penalties u/s 271(1)(c) and 271AAA are attracted in different situations and both .....

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..... was found and seized marked as SRP/1 to 47 and the Assessing Officer (AO) made the addition of ₹ 1,58,59,811/- as undisclosed profit and initiated penalty u/s 271(1)(c) of the Act. 2.1. Similarly, in the case of Sri T.Satyanarayana, addition was made on account of undisclosed profit for an amount of ₹ 1,76,85,875/- and initiated the penalty u/s 271(1)(c) of the Act. Subsequently, the assessee went on appeal before the CIT(A), later on to ITAT and both the appellate authorities have allowed part relief to the assessee. The AO on receipt of Tribunal order, issued show cause notice dated 19.10.2012 and subsequently levied the penalty u/s 271AAA vide order dated 31.10.2012. Against which the assessee went on appeal before the CIT(A .....

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..... before the CIT(A), therefore, no fresh ground is raised by the assessee. Since the ground raised by the assessee is a legal issue and all the material stated to have been available in the information placed before the lower authorities, we admit the additional ground. 6. During the appeal hearing, the Ld.AR submitted that the AO had initiated the penalty u/s 271(1)(c) and thereafter issued the show cause notice for levy of penalty u/s 271AAA without dropping the notice issued earlier u/s 271(1)( c) of the Act, hence, submitted that the AO having initiated the penalty u/s 271(1)(c), he is not permitted to impose penalty u/s 271AAA. The Ld.AR further submitted that in the assessment the addition made was only in respect of undisclosed profits .....

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..... having initiated penalty proceedings in the manner of levying of penalty u/s 271(1)(c) for concealing the income, levy of penalty u/s 271AAA for undisclosed income is unsustainable. Similarly, the Ld.AR relied on the decision of ITAT Ahmedabad Bench in the case of Dr. Naman A. Shastri v. Assistant Commissioner of Income-tax, Central Circle 2 (3), Ahmedabad [2015] 63 taxmann.com 363 (Ahmedabad-Trib), wherein the coordinate bench held that initiation of penalty u/s 271AAA and levy of penalty u/s 271(1)(c) is not permissible. 7. Per contra, the Ld.DR submitted that though the AO had initiated the penalty u/s 271(1)(c), the AO has not levied the penalty u/s 271AAA, therefore, it is to be viewed that the penalty initiated u/s 271(1)(c) was drop .....

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..... was made. No other undisclosed income was also admitted by the assessee as observed from the assessment order. Therefore, it is evident that the AO had initiated the penalty duly applying his mind for the addition of undisclosed profits u/s 271(1)(c) of the Act and subsequently issued show cause notice for levying penalty u/s 271AAA of the Act pending finalization of penalty u/s 271(1)(c) which is incorrect action. For a query from the bench both the parties have replied that the AO has not dropped the penalty proceedings u/s 271(1)(c) before issue of show cause letter calling for explanation of assessee for levy of penalty u/s 271AAA. Therefore, we are of the considered opinion that the AO has applied his mind and initiated penalty u/s 27 .....

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