TMI Blog2021 (4) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of sale of land. Since it was not a regular course of the business of the assessee, he was not required to maintain books of accounts. The profit earned out of sale of land was given as advances to various persons which were recorded in the diary which has been placed as found during the course of search. On being asked during the course of search about this diary, the assessee stated the fact that it contains advances given to various persons totaling to ₹ 12.50 crore. This diary also contained certain other notings of money which was duly found recorded in the books of accounts of group companies and since the assessee was not having any business income and does not require to maintain regular books of account thus, the entry of advances were recorded in this diary maintained by assessee. As decided in MANISH AGARWALA [ 2018 (2) TMI 972 - ITAT KOLKATA] penalty u/s 271AAB is not mandatory but discretionary and therefore, the entire set of facts and circumstances of the case have to be examined carefully and penalty can be levied by the AO only after satisfying itself about the existence of circumstances warranting levy of penalty. The penalty cannot be imposed as a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all fairness, only wanted to make sure that each and every income admitted by him in the statements gets included in the return of income and therefore, a reference to the statements was necessary. Thus not filing of return within stipulated time was beyond the control of assessee, for which assessee could not be penalized as same constituted reasonable cause within the meaning of section 273B of the Act. Since due taxes have already been paid by assessee within the stipulated time thus delay in filing the return for the reasons beyond the control of the assessee constitute reasonable cause as has been held in the case of DCIT Patiala Vs. Hari Singh [ 2017 (9) TMI 1827 - ITAT CHANDIGARH] . AO while levying the penalty u/s 271AAB had not doubted the mode and manner of earning such income which was duly explained stand substantiated by the assessee in the return itself where it was stated that advances of ₹ 12.50 crores were made out of the income from land dealing. All these facts are undisputed and nowhere controverted by the department. However, the only dispute raised by the department is with respect to the filing of return of income after the expiry of specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. In this appeal, the assessee has also raised an additional ground and the same is reproduced as under: On the facts and in the circumstances of the case the Ld. Assessing Officer has grossly erred in not specifying the limb of section 271AAB of the Income Tax Act, 1961 (the Act) under which penalty was sought to be levied in the notice dated. 23.03.2016 issued u/s 274 r.w.s.271AAB of the Act, thus the notice so issued is void ab-initio and consequent penalty order so passed deserves to be held bad in law and penalty of ₹ 3,75,00,000/-levied by ld.AO deserves to be deleted. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. In this appeal, the assessee has raised an additional ground which is against the order of the ld. CIT(A) in confirming the penalty levied by the A.O. U/s 271AAB of the Income Tax Act, 1961 (in short, the Act). In this regard, the ld. AR appearing on behalf of the assessee has submitted that the show cause notice dated 23/3/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is one of the members. During the course of search, statements of the assessee and other persons were recorded. In the statement of the assessee recorded u/s 132(4) of the Act, income pertaining to the year under appeal was admitted. Thereafter assessee filed his return of income for the year under appeal, declaring total income at ₹ 12,50,88,490/- which includes a sum of ₹ 12,50,00,000/- being the profit from sale of land and further advanced for onward purchases. Assessment u/s 143(3) r.w.s. 153A was completed accepting the income declared by the assessee in the return of income filed. However the penalty proceedings u/s 271AAB were initiated separately. Thereafter vide impugned order penalty of ₹ 3,75,00,000/- being 30% of ₹ 12.50 crore was levied u/s 271AAB. 8. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the facts and circumstances of the case as well as material placed on record upheld the action of the A.O. Against which the assessee is in further appeal before the ITAT. 9. The assessee is basically aggrieved by the order of the ld. CIT(A) in confirming the penalty i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AB, the undisclosed income is defined as under (for the purpose of clarity, the relevant provisions are reproduced below):- Explanation.-For the purposes of this section,- (a) (b) (c) undisclosed income means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year to include this income in its return of income. Further the time for payment of first instalment of advance tax (i.e. 15.09.2013) had also not expired as on the date of search. Moreover it is not the case of the department that assessee would not have disclosed this income in the return to be filed after the close of financial year. It is further submitted that the case of the appellant is squarely covered with the recent decision of Hon ble ITAT Kolkata Bench in the case of Manish Agarwala in ITA No. 1479/Kol/2015 dated 09.02.2018 (case law compilation page 56-60). Brief facts of this case was that during the course of search in Nezone group of cases on 01.08.2012 various documents showing income from commodity transaction were found and the assessee alongwith other members of the group vide consolidated disclosure petition admitted undisclosed income, inter-alia including ₹ 3.00 crores relatable to assessee. The Hon ble Tribunal observed that assessee was not engaged in the business or profession as these transactions of speculative business of commodity were stray in nature and not part of the regular business. The Hon ble ITAT further observed that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 7.00 A.M. of 4.09.2013 where the preliminary statements of the assessee were recorded at his residence(APB 35) and it was on 05.09.2013 at 5.45 PM i.e. after almost 35 continues hours of search where search team was moving around the assessee, when the confessional statements were recorded at the office and the search was finally concluded (APB 16). During the course of search, statements of the assessee were taken at various times firstly at the time of starting of the search on 04.09.2013 and lastly in evening on 05.09.2013 when the action u/s 132 was concluded after physical search and verification of the entire house and business places of the assessee and his group companies. From the sequence of the events and seriatim of the statements recorded, it is very much clear that they were continuous statements recorded of assessee for almost 35 hours from the initiation of the search i.e. at around 7.00 A.M. in 04.09.2013 which is a torturous act and under these circumstances the statements of a normal human being especially a science graduate being senior citizen who is totally non-technical in accounts and further at an advance age of life could not be said to be free and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are more harsh in nature. In support of this contention further reliance is placed on the recent decision dated 09.02.2018 of Kolkata Bench of the Hon ble ITAT in the case of DCIT Vs. Manish Agarwala in ITA No. 1479/Kol/2015 (supra).The relevant observations of the Hon ble Tribunal are as under(case law compilation page 56-60): On the other hand, Ld. AR Shri Miraz D. Shah, supporting the decision of Ld. CIT(A) made contentions though taken up before the Ld. CIT(A) but has not been adjudicated on those averments, which the Ld. AR urges before us to consider while adjudicating the appeal of the Revenue. The Ld. AR also pointed out that the contentions which he is going to raise has been taken up before the AO also, however, according to Ld. Counsel, those legal arguments were not considered by the AO in the right perspective. The first contention of the Ld. AR is that since Sec. 271AAB of the Act is a penalty section it should be construed strictly, which we agree being it is a trite law that penalty provisions have to be strictly interpreted. Next contention of Ld. AR is that sec. 271AAB of the Act is not mandatory because Parliament in its wisdom has used the word ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the aforesaid order of Hon ble ITAT was in the case of DCIT, CC-2(2), Kolkata Vs. Amit Agarwal in ITA No. 1471, 1475 1476 of 2015 dated 10.11.2017. (Other two appeals were against Madan Lal Beswal Manoj Beswal of the same group). It is submitted that aforesaid orders were passed by the ITAT, Kolkata D Bench ex-parte on 10.11.2017, which on application filed by appellants, have been recalled in MA Nos. 218 to 220/Kol/2017 dated 12.01.2018 by observing as under: By virtue of these miscellaneous applications, the assessee seeks to recall the order passed by this Tribunal in I.T.A. Nos. 1471, 1475 1476/Kol/2015 in the hands of Amit Agarwal, Madan Lal Beswal and Manoj Beswal respectively for the assessment year 2013-14 on the ground that notice was not served on the assessee for the hearing and on certain factual error that had crept in the order of the Tribunal. The first preliminary objection raised by the Ld. AR was that the notice of hearing was not served on the assessee for the hearing scheduled on 06.11.2017 and hence, the assessee could not be present on the said date by way of personal appearance. The second objection raised by the Ld. AR was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over, recently the Hon ble ITAT Kolkatta Bench after re-fixing the above cases of Amit Agrawal, Madanlal Beswal etc. has finally decided the cases to the effect that penalty u/s 271AAB is not leviable (vide ITA No. 1475 1476/Kol/2015 dt. 14.03.2018). Thus these decisions so referred by Ld. CIT(A) now squarely support the case of appellant and not of department. It may be noted that the language of section 271AAB is similar to that of section 158BFA(2). Section 158BFA(2) provides that the assessing officer May direct that a person shall pay by way of penalty... . With reference to this section various courts including the Rajasthan High Court have held that penalty under this section is discretionary and not mandatory. Principle laid down in these cases is as under:- CIT Vs. Satyendra Kumar Dosi 315 ITR 172 (HC) (Raj.)(case law compilation page 64-66) From a plain reading of sec. 158BFA(2) it does not appear that in all cases where undisclosed income is determined by the AO under cl. (c) of s. 158BC, the imposition of penalty shall follow as a natural consequence thereof. A discretion is vested with the AO to levy penalty in respect of undisclosed income. It canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, in view of the facts and circumstances of the case and the legal position emerging out of the aforesaid various decisions, it is submitted that Ld. AO has erred in imposing the penalty u/s 271AAB as the case of assessee in the context of its income of ₹ 12.50 crore so shown in the return of income does not fall within the ambit of undisclosed income for the purpose of section 271AAB and since the levy of penalty u/s 271AAB is not mandatory, therefore, penalty so levied in routine manner was unwarranted. It is therefore humbly prayed that penalty u/s 271AAB deserves to be deleted in its entirety and may kindly be deleted. Further reliance is placed on the following recent decisions delivered by various benches of ITAT: 1. DCIT Vs. Agam Saran Khemka ITA No. 1472 1477/Kol/2015 dt. 26.04.2018(case law compilation page 39-43) 2. DCIT Vs. Madan Lal Beswal ITA No. 1475 1476/Kol/2015 dt.14.3.2018 (case law compilation page 44-49) The Ld. AO completed the assessment by accepting the income declared by the assessee including the income of ₹ 12,50,00,000/- and penalty proceeding u/s 271AAB were initiated. While levying the penalty @ 30% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee regularly visited the office of the Ld. ADIT and Ld. AO and requested them many times for the supply of the copies of the statements however, the same were not provided till date. Further, the assessee has also requested in writing through various letters (APB 17-21) requesting for supply of copies of statements of assessee, however the requests of the assessee were not considered and the copies of the statements were not provided until the filing of return by the assessee. After the filing of return of income one more request was made on 20.03.2015 as the matter was under examination of Central Excise / Service Tax department who insisted upon the assessee to provide the copy of statement. This fact was stated before Ld. CIT(A) who based on this application, observed that assessee had made only one request i.e. on 20.03.2015 that too after filing of return but simultaneously failed to appreciate the fact that even after filing the return relevant copies of statements were not provided and assessee had to delay the filing of the return, as he did not file the return without actually going through the assertions made in the statements recorded u/s 132(4) during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um 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). As submitted above, the search was conducted on 04.09.2013 where in the course of search various loose papers and documents were impounded by the department and after request, copy of the loose papers and documents were provided to the assessee however, copy of the statements were not provided. Even after the filing of return, assessee made a request for the supply of the copy of the statements recorded during the course of search which was required to be submitted before the Central Excise Department who also summoned and questioned the assessee with regard to the additional income declared in the return of income (APB 1-5), however, till date despite of repeated requests in writing (APB 17-21) and by persona visits, the copy of statements have not been provided though the assessment stood completed and the penalty has been leviedsolely relying upon such statements of assessee. Assessee waited for the supply of the copy of the statements so that other income, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome a further request was made vide letter dated 20.03.2015 to the Ld. AO for supply of the copies of the statements which were required to be submitted before the Excise Authorities being hard pressed by the Central Excise department due to this alleged additional income of more than ₹ 75 crores which was never existed nor admitted. Further, the Ld. CIT(A) has observed that the statements of assessee have not been used by Ld. AO against the assessee and therefore, not providing the copy of statements has caused no prejudice to the assessee. In this regard it is submitted that the Ld. CIT(A) has committed gross error in ignoring and undermining the relevance and importance of the statements. In fact, the observation of Ld. CIT(A) clearly imply that he has simply assumed that the statements are of no importance. In this regard it is submitted that the fact whether the statements have been used against the assessee or not, has no bearing over the requirement of providing copies of statement to the assessee for the purpose of filing the return of income. It is submitted that since the assessee was required to show his true and correct income which was stated by him in his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department. However, the only dispute raised by the department is with respect to the filing of return of income after the expiry of specified time u/s 139(1). In this regard detailed submissions have already been made above to the effect that the assessee was prevented by sufficient causes, beyond the control of assessee, due to which he could not file the return within the stipulated time period and this constituted a reasonable cause within the meaning of section 273B. Therefore Ld. AO has completely erred in levying the penalty @ 30%, as the case of assessee is not at all covered in clause c of sub section (1) of section 271AAB. With these facts and circumstances, the Ld. AO at his best could have considered the case to be falling in clause (a) of section 271AAB(1) and may have levied penalty @ 10% of the additional income. Though in view of detailed submission made hereinabove, assessee had already submitted that it is not a case of levy any penalty u/s 271AAB and entire penalty deserves to be deleted. Under these facts and in the circumstances of the case, it is again submitted that the case of the assessee does not fall within the ambit of undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some stray activity of sale of land. Since it was not a regular course of the business of the assessee, he was not required to maintain books of accounts. The profit earned out of sale of land was given as advances to various persons which were recorded in the diary which has been placed at paper book page No. 28-34, which was found during the course of search. On being asked during the course of search about this diary, the assessee stated the fact that it contains advances given to various persons totaling to ₹ 12.50 crore. This diary also contained certain other notings of money which was duly found recorded in the books of accounts of group companies and since the assessee was not having any business income and does not require to maintain regular books of account thus, the entry of advances were recorded in this diary maintained by assessee. 13. We observe that as per the provisions of Section 271AAB of the Act, the undisclosed income is defined as under (for the purpose of clarity, the relevant provisions are reproduced below):- Explanation.-For the purposes of this section,- (a) (b) (c) undisclosed income means- (i) any income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the diary which was found and seized during the course of search and this diary also contained other entries of other group concerns which are duly recorded in the books of accounts of the respective concerns. Since assessee was not required to maintain any books of accounts, these entries remained recorded in the diary itself maintained by assessee in regular course. Thus according to assessee the income of ₹ 12.50 crore so reflected by way of entries is found recorded in the document namely diary in the instant case maintained in regular /normal course by the appellant and is therefore not the undisclosed income within the meaning of section 271AAB. As a result of entire search, nothing incriminating was found pertaining to the assessee. After evaluating the entire facts, we concur with the submissions so made by the assessee. 14. We further observed that the search was conducted on 04.09.2013 i.e. in the early half of the Financial Year and assessee had enough time till the close of financial year to include this income in its return of income. Further the time for payment of first installment of advance tax (i.e. 15.09.2013) had also not expired as on the date of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diary maintained in normal course would be covered as entries in documents in the case where books of accounts are not maintained and therefore could not come within the ambit of Undisclosed Income . 15. In section 271AAB of the Act, the Legislature has used the word the assessing officer may . . Thus it is very evident that the assessing officer is not obliged to levy the penalty in each and every case in a routine manner. The A.O. has to apply his mind as to whether under the given facts and circumstances of the case justify and warranted the imposition of penalty. In our view, the said discretion is to be exercised judiciously having regard to the nature and extent of breach and other relevant circumstances. It is not mandatory to impose the penalty but discretion is vested not to impose the penalty considering the facts and circumstances of each case which as per section 271AAB heavily cast upon AO. The Coordinate Bench of Kolkata in the case of DCIT Vs. Manish Agarwala in ITA No. 1479/Kol/2015 (supra) has also held as under: On the other hand, Ld. AR Shri Miraz D. Shah, supporting the decision of Ld. CIT(A) made contentions though taken up before the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot replace the provision of Act where the word may is used and not shall . Hence, the observation of the Ld. CIT(A) that the penalty u/s 271AAB is mandatory is patently wrong and deserves to be ignored and excluded being made without properly appreciating the provision and language of the Act which is very much clear and inserted in the statute after long discussions before both the houses of parliament. The Ld. CIT(A) has observed in its order that recently the Kolkata Tribunal has held that Penalty u/s 271AAB on undisclosed income is automatic in nature 88 taxmann.com 288 . We observe that the aforesaid order of Kolkata ITAT was in the case of DCIT, CC-2(2), Kolkata Vs. Amit Agarwal in ITA No. 1471, 1475 1476 of 2015 dated 10.11.2017. (Other two appeals were against Madan Lal Beswal Manoj Beswal of the same group). The aforesaid orders were passed by the Coordinate Bench of ITAT, Kolkata D Bench ex-parte on 10.11.2017, which on application filed by assessee, have been recalled in MA Nos. 218 to 220/Kol/2017 dated 12.01.2018 by observing as under: By virtue of these miscellaneous applications, the assessee seeks to recall the order passed by this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10.11.2017 in the case of aforesaid assessees. So considering the facts, we are of the view that an order which has been recalled for de novo adjudication, is no order in the eyes of law and so it cannot be treated as a precedent. The Coordinate Bench of ITAT Kolkata in the case of Manish Agarwal (supra) has decided the similar issue in favour of assessee holding that penalty u/s 271AAB is not leviable. Moreover, recently the Coordinate Bench of Kolkata ITAT after re-fixing the above cases of Amit Agrawal, Madanlal Beswal etc. has finally decided the cases to the effect that penalty u/s 271AAB is not leviable (vide ITA No. 1475 1476/Kol/2015 dated 14.03.2018). Thus these decisions so referred by Ld. CIT(A) now squarely support the case of assessee and not of department. 17. We further observe that the language of section 271AAB is similar to that of section 158BFA(2). Section 158BFA(2) of the Act provides that the assessing officer May direct that a person shall pay by way of penalty... . With reference to this section various courts including the Hon ble Rajasthan High Court have held that penalty under this section is discretionary and not mandatory. In this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty on so called three items of so called concealed income. Each item was examined, thoroughly and in detail, by the Commissioner of Income-Tax (Appeals) as well as the Income Tax Appellate Tribunal and by a reasoned order, both came to a conclusion that additions are based on estimation only. A fact or allegation based on estimation, cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly imposed by the Assessing Officer. Therefore appeal filed by Appellant rejected. Even the Coordinate Benches of the ITAT under the similar facts have decided the matter in favour of the assessees in deleting the penalty in the case of (1) Shri Suresh Chand Mittal Vs. the DCIT, ITA No. 931/JP/2017 order dated 02/07/2018 (2) Shri Anju Mathur Vs DCIT, ITA No. 971/JP/2017 order dated 13/06/2018 (3) Shri Ravi Mathur Vs DCIT, ITA No. 969/JP/2017 order dated 13/06/2018 (4) Shri Ram Das maheshwari Vs PCIT, ITA No. 421/JP/2018 order dated 14/08/2018 (5) Shri Ashok Kumar Maheshwari Vs PCIT, in ITA No. 919/JP/2018 order dated 14/06/2018 (6) Shri Dinesh Kumar Agarwal Vs ACIT, in ITA No. 855 856/JP/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Bench decision in the case of Silver Art Palace vs. DCIT (supra) wherein it was held that the undisclosed investment by way of purchase of land can be subject matter of addition in the quantum proceedings but the same does not fall strictly within the meaning of undisclosed income as so defined in section 271AAB of the Act and deeming fiction u/s 69B cannot be extended and applied automatically in the context of section 271AAB of the Act. Further, the fact that the transaction so found recorded in a document has not been disputed by the Revenue. Given that the assessee is a salaried person who is not required to maintain any books of accounts and there is no mechanism to report the investment in the tax return, the said investment cannot be held as undisclosed investment and more so, undisclosed income so defined in section 271AAB of the Act. In light of the same, the investment of ₹ 17,16,594/- so found in purchase of Villa at Suncity Township at Sikar Road, Jaipur cannot be termed as undisclosed income within the meaning of undisclosed income as so defined u/s 271 AAB of the Act and penalty levied thereon is liable to be set aside. 18. It has been contended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who insisted upon the assessee to provide the copy of statement. This fact was also stated by the assessee before Ld. CIT(A) who based on this application, observed that assessee had made only one request i.e. on 20.03.2015 that too after filing of return but simultaneously failed to appreciate the fact that even after filing the return relevant copies of statements were not provided and assessee had to delay the filing of the return, as he did not file the return without actually going through the assertions made in the statements recorded u/s 132(4) during the course of search. However, since liability towards interest u/s 234 was increasing continuously with the passage of time, assessee was constrained to file the return of income without receiving and reconciling the statements with the income declared, and finally the same was filed on 12.02.2015 wherein due to delay, additional interest u/s 234A 234B was also deposited. Therefore, it can be seen that the assessee was prevented by sufficient cause from filing the return in time stipulated in section 139(1) and this cause was beyond the control of the assessee and solely for the failure on the part of the department to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has asked the assessee to file the details of the admission made during the course of search of additional income to the extent of ₹ 75.56 crores and after receiving such notices, assessee visited the office of the AO and asked him to supply such copies of the statements where that admission of more than ₹ 75 crores were made by assessee or his family members during the course of search conducted on 04.09.2013. Besides this written requests were also made on 15.05.2014, 08.07.2014 10.12.2014. However, even after filing of return of income a further request was made vide letter dated 20.03.2015 to the AO for supply of the copies of the statements which were required to be submitted before the Excise Authorities being hard pressed by the Central Excise department due to this alleged additional income of more than ₹ 75 crores which was never existed nor admitted by the assessee. 20. We further observe that the Ld. CIT(A) has observed that the statements of assessee have not been used by the AO against the assessee and therefore, not providing the copy of statements has caused no prejudice to the assessee. In fact, the observation of Ld. CIT(A) clearly imply that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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