TMI Blog2023 (4) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... search and ld. AO has accepted the returned income filed by the assessee, therefore as relying on case Marvel Associates [ 2018 (3) TMI 946 - ITAT VISAKHAPATNAM] and Mothukuri Somabrahmam [ 2018 (3) TMI 947 - ITAT VISAKHAPATNAM] we fail to find any infirmity in the finding of ld. CIT(A) deleting the penalty levied u/s 271AAB(1)(a). Revenue appeal dismissed. - I.T.A. Nos. 133 , 134 & 135/GTY/2020 - - - Dated:- 13-4-2023 - DR. MANISH BORAD, ACCOUNTANT MEMBER And SRI SONJOY SARMA, JUDICIAL MEMBER Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue Sh. Kishor Jain, FCA, appeared on behalf of the Assessee Date of pronouncing the order : April 13th, 2023 ORDER Per Manish Borad , Accountant Member : The above captioned appeals filed by the Revenue pertaining to the Assessment Years (in short AY ) 2014-15, 2015-16 2016-17 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the Act ) by ld. Commissioner of Income-tax (Appeals), Guwahati-2, Guwahati [in short ld. CIT(A) ] dated 27.02.2020. 2. The Revenue is in appeal before the Tribunal raising the following grounds: I.T.A. No.: 133/GTY/2020: 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order for the sake of convenience and brevity. From perusal of the grounds, we notice that ITA No. 133 134/GTY/2020 are against the deletion of penalty levied by ld. AO u/s 271(1)(c) of the Act and ITA No. 135/GTY/2020 is against the deletion of penalty levied by ld. AO u/s 271AAB(1)(a) of the Act. 4. Facts in brief commonly applicable to all the three appeals are that a search and seizure action u/s 132 of the Act was conducted in the case of M/s. Hightech Constructions Group on 04.10.2016. Subsequently, the proceedings initiated u/s 153A of the Act and notices issued for filing the return. Though the assessee had already filed the original return of income u/s 139 of the Act, however, in compliance to the notice u/s 153A of the Act returns were again filed. For AY 2014-15 AY 2015-16 the regular return of income filed u/s 139 of the Act declaring the income at Rs. 7,04,58,179/- Rs. 9,05,12,240/-. However, in the return filed u/s 153A of the Act the assessee declared income at Rs. 9,26,88,580/- Rs. 11,25,16,290/- for AY 2014-15 AY 2015-16 respectively. Thus, the assessee declared additional income of Rs. 2,22,30,401/- Rs. 2,20,04,050/- in the return filed in complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant chose to offer such income for tax. It is also clear that such income was offered for tax by the Appellant only by way of a statement/letter of the Appellant on the free will and admission of the Appellant as evident from the relevant assessment order. Thus, it can be said that the offer of the said income for tax by the Appellant was purely voluntary. It is also clear that after such additional income was offered for tax by the Appellant through the said statement of the Appellant, honouring the statement so made and offering such income for tax, no retraction of such statement was made by the Appellant either before the Investigation Wing or before the A0. Even at the time of filing the return of income under Section 153A of the Act, after the date of search, the Appellant, dutifully declared such income in the said return and paid the admitted taxes on the same. It is also a relevant fact that in many cases, under subsequent legal counsel, the statements made by various assessees are retracted. Thus, no such intention transpires on the part of the Appellant to retract the voluntary statement so made. Thus, no intention transpires on the part of the Appellant to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in determining whether the same is mandatory or directory . No universal principle of law can be laid in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory . It is the duty of the Court to try to get at the real intention of the legislature by carefully analyzing the whole scope of the statute or the section or the phrase under consideration. As stated earlier, the question as to whether the statute or the provision is mandatory or directory , depends upon the language in which the intent is couched. However, in this case, the words may has been used which undoubtedly gives a judicial discretion to the Ld. AO to impose the penalty but only after judicially exercising the discretion of imposing the penalty on consideration of all relevant circumstances and evidences on record. Looking at the conspectus of the case of the Appellant, wherein, no incriminating material found by the Department during the course of search and seizure operation has been referred in the relevant assessment order as well as in the impugned penalty order, such income was offered for tax by the Appellant voluntarily through the statement r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was not even any false explanation given by the Appellant which was suggestive of the fact that the Appellant wanted to deliberately evade any taxes. Even though it cannot be said that the penal proceedings under the Income-tax Act, 1961 are in the nature of criminal proceedings and a higher degree of probability of the assessee being guilty of the charge needs to be applied in the case of penalty proceedings, but it can be certainly said that penalty would definitely need a different approach than what is required in the case of assessment proceedings. The facts and circumstances of an Appellant's case in a penal proceedings need to be looked and judged at from a different point of view altogether than the one which is done in the case of assessment proceedings. Suppose there is a case of a law abiding taxpayer who inadvertently omits to pay due taxes on a particular receipt. No doubt he is liable for paying the due taxes on that receipt but should he be additionally penalized for his inadvertence just because the Act stipulates the imposition of penalty? That is a difficult question to answer. There can be mechanical imposition of tax on a particular receipt or expense wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty prescribed in the statute is attracted. It may safely be concluded that the additional tax imposed by way of penalty is nothing but a punishment for a statutory offence and that instead of judicial punishment, the statute prescribes for a penalty being awarded by the Revenue authority in question. In the case of a statutory penalty, the proceeding to make such imposition is, however, not a penal or criminal proceeding. However, in the case of a penalty, in accordance with the principles of natural justice, the person charged must have a reasonable opportunity of meeting such charge and the onus of establishing the ingredients of the penalty lies on the authority seeking to punish the person and that a penalty cannot be awarded unless this onus is discharged by the authority. In this case, it cannot be said that the Appellant deliberately concealed the particulars of income or deliberately furnished inaccurate particulars of income or had hidden any of its income, Even from the assessment order, it does not appear that the Appellant had deliberately concealed his income or furnished inaccurate particulars of income or hide any of its income. No evidence of concealment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the assessee has declared additional income. At this juncture, we would like to refer to the decision of Coordinate Bench of Ahmedabad in the case of Guruprasad Infrastructure Pvt. Ltd. vs. DCIT [2019 (7) TMI 1549-ITAT Ahmedabad] where the head note of this decision considering similar issues reads as follows: Penalty u/s 271(1)(c) - income returned accepted by AO in order passed u/s 153 A r w s 143 (3) - HELD THAT:- There was no reference made to any incriminating document found during the search. Therefore, we are of the view that the addition of undisclosed income was based on the statement furnished under section 132(4) of the Act. At the time of the hearing, a query was raised to the Ld. DR whether the assessee disclosed the income in pursuance to the search based on the incriminating document, but he failed to bring any material on record. Therefore, in the absence of any documentary evidence, we infer that the income disclosed by the assessee was not based on the incriminating materials. Penalty under Explanation 5A to section 271(1)(c), the of the Act can be attracted if the assessee was found to be the owner of any money, bullion, jewellery or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of any other incriminating evidence, does not show that the assessee has concealed his income for the relevant assessment years. Considering that the non-obstante clause under Section 153A excludes the application of, inter alia, Section 139, it is clear that the revised return filed under Section 153A takes the place of the original return under Section 139, for the purposes of all other provisions of the Act. No difference between returned income and the assessed income, keeping in view the fact that the Revenue has not brought any material for levy of penalty - return filed in response to notice 153A of the Act needs to be treated as returned filed u/s 139 of the Act for the purpose of assessment, we hereby delete the penalty levy u/s 271(l)(c) of the Act. Penalty levied u/s 271AAB - Assessee has given a statement u/s 132(4) of the Act during the search and substantiated as to how the undisclosed income was derived (para 4.1 of AO), paid the taxes and filed the return. Hence, the assessee had made all the required conditions. At this juncture, it is to be adjudicated whether the levy of penalty is automatic or not under the present circumstances, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iterated that no incriminating material or any other documents or undisclosed assets, were discovered in the case of the appellant, either during the course of the search or during any post search investigation or even during the course of assessment proceedings which culminated in the assessment order under Section 143(3) of the Act. From a bare perusal of the above provisions, it is vivid and conspicuous that the penalty under Section 271AAB can be imposed only a. in respect of any undisclosed income, b. which income is 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, and C. which are found in the course of a search under section 132. Thus, it is clear that where the purported undisclosed income is represented by any asset which even is not found during the course of search, the corresponding income Cannot be made amenable to the rigors of the penalty under Section 271AAB of the Act. Thus, it is clear that Section 271 uses the word may' and not shall . The word may cannot be equated with shall especially in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that there transpired any intention on the part of the Appellant of hiding any such income from the Department or to not pay the amount of tax due to the exchequer or that the conduct of the Appellant was contumacious and there was an intention to evade any tax. In that scenario, the discretion which vested in the AO for imposition of penalty should have been exercised in favour of the Appellant. It is settled law that any imposition of penalty under the Income Tax Act, 1961 is discretionary and not mandatory and whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion to be exercised judicially and on consideration of all relevant circumstances. Thus, penalty should not be imposed mechanically but must be based on the facts and circumstances of each case. It is also an admitted position of law that penalty proceedings are distinct and separate from assessment proceedings. The Hon'ble Calcutta High Court in the case of Durga Kamal Rice Mills vs. CIT (2004) 265 ITR 25 (Cal.)] has held that quantum proceedings are different from penal proceedings. The Hon'ble Kerala High Court in the case of CIT vs. P.K. Narayanan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce of any income, it does not mean that the explanation furnished was false or that the assessee is guilty of deliberate suppression. Generally, a 'penalty' means a sum of money recoverable in a summary manner, for breach of some statutory provision. A penalty is provided for by a statute to punish a contravention of a statute or the doing of something which is prohibited by the statute. In order to enforce the mandatory provisions ofa statute, the Legislature may impose sanctions of either of two kinds i.e. either declare it as an offence under the general law of crimes and make the person guilty of such offence punishable judicially or alternatively provide that the contravention will be punishable extra-judicially, by the prescribed administrative authority by way of a penalty. Any penalty falls in the latter case. So a penalty may have slight affinity to a criminal offence in the sense that there is an offence in the broader sense, namely, a contravention of the mandate of the law and there is a punishment provided for such offence and the charge for which the punishment is awarded is that the statute has been contravened, either by doing what was prohibited or by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conclusively prove concealment of particulars of income or furnishing of inaccurate particulars of income by the Appellant. In the impugned penalty order or the assessment order, there is no shred of reference to any incriminating material whatsoever which was seized or recovered by the Investigation Wing either during the course of search proceedings or even later at the time of recording of the Statement under Section 132(4) of the Income Tax Act, 1961 and which was used by the Ld. AO for framing the assessment order and making the additions in the assessment order. The entire construction of the assessment order rests only on the bald edifice of a statement recorded under Section 132(4) of the Income Tax Act, 1961 in which the Appellant voluntarily and suo-motto disclosed the income. To sustain any penalty tangible evidence has to be brought on record to foist some culpability on the Appellant. In view of the above, (a) in the absence of anything incriminating against the Appellant being on record, (b) no evidence being on record that there was any contumacious conduct on the part of the Appellant to conceal particulars of income or an attempt to hide something or an atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of Section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Once the opportunity is given to the assessee, the penalty cannot be mandatory and it is on the basis of the facts and merits placed before the A.O. Once the A.O. is bound by the Act to hear the assessee and to give reasonable opportunity to explain his case, there is no mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Hon'ble A.P. High Court in the case of Radhakrishna Vihar in ITTA No.740/2011 while dealing with the penalty u/s 158BFA held that 'we are of the opinion that while the words shall be liable under sub Section (1) of Section 158BFA of the Act that are entitled to be mandatory, the words may direct in sub Section 2 there of intended to directory'. In other words, while payment of interest is mandatory levy of penalty is discretionary. It is trite position of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO observed that loose sheet shows the cost per square feet is Rs.3571/- per sft. and assessee stated to have submitted in sworn statement cost per sg. feet at Rs.2200/- to Rs.2300/- per sq. feet. However neither the AO nor the Ld. CIT(A) has verified the cost of construction with the books and projections found at the time of search. The counsel argued that it was mere projection but not the actuals. The write up heading also mentioned that summary of the projected profitability statement. There is no evidence to establish that projections reflected in the loose sheet is real. No other material was found during the course of search indicating the undisclosed income. There was no money, bullion, jewellery or valuable article or thing or entry in the books of accounts or documents transactions were found during the course of search indicating the assets not recorded in the books of accounts or other documents maintained in the normal course, wholly or partly. The revenue did not find any undisclosed asset, any other undisclosed income or the inflation of expenditure during the search/ assessment proceedings. Though a loose sheet of page No.107 of Annexure A/GS/MA/1 was found th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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