Case Law Details

Case Name : Sonal Steels Trading Pvt. Ltd Vs ACIT (ITAT Chennai)
Appeal Number : ITA No. 396/CHNY/2018
Date of Judgement/Order : 23/07/2018
Related Assessment Year : 2014-15
Courts : All ITAT (6159) ITAT Chennai (261)

Sonal Steels Trading Pvt. Ltd Vs ACIT (ITAT Chennai)

Here admittedly, assessee was not maintaining any books. There was thus no question of recording any money, bullion, jewellery or any entry in any books. It is not disputed that assessee had not disclosed any receipts from bill trading before the date of search to the Revenue. Assessee had in the statement recorded u/s.132(4) of the Act accepted accommodation bill trading done by it with M/s. BGR Energy Systems Ltd and earning of 0.25% commission. Claim of the assessee is that such commission was accepted for purchasing peace from Department. However, this claim, in our opinion cannot be accepted since there is no alleviating clause in Section 273AAB of the Act. That apart, assessee has not filed its return within the time allowed u/s.139(1) of the Act but only after issue of notice u/s.142(1) of the Act. Thus in our opinion what was returned by the assessee fell within the definition of the term ‘’undisclosed income” coming under Explanation (c) to Section 271AAB of the Act. As to the contention of the assessee that, if at all penalty is levied u/s. 271AAB of the Act, then such levy should be under clause (a) of Sub Section (1), what we find is that for applying the said clause, it is a necessary pre-condition that assessee should have furnished the return of income before the specified date. Specified date is the due date for furnishing returned income u/s.139(1) of the Act. Admittedly, assessee had filed returned income after such date. Hence, in our opinion, assessee cannot take advantage of clause (a) of Sub Section(1) of Section 271AAB. In the circumstances, we are of the opinion that penalty was rightly levied and confirmed by the ld. Commissioner of Income Tax (Appeals).

FULL TEXT OF THE ITAT JUDGEMENT

In this appeal filed by the assessee, which is aggrieved on levy of penalty of T 96,780/- u/s. 271AAB of the Income Tax Act, 1961 (in short “the Act”). Alternatively its states that penalty which was levied at 30% of alleged undisclosed income should be restricted to 10% in accordance with clauses (a) of Sub Section(1) to Section 271AAB of the Act.

2. Facts apropos are that there was a search u/s. 132A of the Act in the premises of the assessee, who is engaged in steel trading business, on 18.02.2014. As per the ld. Assessing Officer, during the search, it was found that assessee was providing bogus bills to one M/s. BGR Energy Systems Ltd. It seems in the statement recorded u/s.132(4) of the Act at the time of search Managing Director of the assessee admitted receipt of commission of 0.25% on such accommodation bills given by it. Previous year relevant to the impugned assessment year is the year in which search was conducted. Assessee did not file any return within the time allowed u/s.139(1) of the Act. Ld. Assessing Officer issued notice u/s.143(2) of the Act and pursuant to such notice, on 07.08.2015 assessee filed a return admitting income of A.3,22,600/-. Returned income was accepted and the assessment completed.

3. Thereafter proceedings u/s. 271AAB of the Act was initiated and notice issued to the assessee on 31.03.2016. In response to the above notice, assessee stated as under:-

“…. I have furnished all the particulars before the investigation department and also jointly worked out the total income for this assessment year on estimated basis with deduction for expenses. The amount mentioned by the Investigation department of A3,22,600/- was admitted as income in the return of income on 07.08.2015 and paid self assessment tax of A1,32,599/-.”

According to the assessee, since what was returned by it was accepted by the Department, there was no concealment nor furnishing any inaccurate particulars. However, ld. Assessing Officer was of the opinion that income returned by the assessee, which included commission received on bill trading, fell within the meaning of undisclosed income u/s. 271AAB of the Act. Ld. Assessing Officer also noted that Section 271AAB of the Act did not have any alleviating Section like Section 273B and hence penalty had to be levied on such undisclosed income. Penalty of 30% of the undisclosed income of A3,22,600/- was levied u/s.271AAB (1) (c) of the Act.

4. Aggrieved, assessee moved in appeal before ld. Commissioner of Income Tax (Appeals). As per the assessee, income of A3,22,600/- returned was not based on the search conducted on 18.02.2014, nor based on books or other documents. According to the assessee, there was no books or evidence to show any receipt of commission @0.25%. Contention of the assessee was that it had returned the income to purchase peace from the Department. Main contention of the assessee was that it was an estimated income and not based on any seized material. Assessee also stated that it had co-operated with the Department and paid taxes. As per the assessee, the sum of A.3,22,600/- could not be considered as undisclosed income.

5. However, ld. Commissioner of Income Tax (Appeals) was not impressed by the above arguments. According to him, assessee was receiving cheque payments on bogus bills and thereafter withdrawing money from the bank and giving it back to the Company to whom the bills were issued, for a commission of 0.25%. Further, according to the ld. Commissioner of Income Tax (Appeals) assessee had admitted the income only due to the detection of issuing bogus bills during the search. He thus confirmed levy of penalty.

6. Now before us, the ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that there was no books or records found during the search, which would show that assessee had received any commission or assessee had indulged in any bill trading. As per the ld. Authorised Representative, assessee had agreed to return an income @0.25% turnover only to purchase peace. There was no undisclosed income in the books and therefore as per the ld. Authorised Representative, levy of penalty u/s. 271AAB was not warranted.

7. Per contra, ld. Departmental Representative submitted that assessee had admitted in the statement recorded during the course of search that it was receiving 0.25% commission on accommodation bills issued to M/s. BGR Energy Systems Ltd. But for the search, as per ld. Departmental Representative, assessee would not have come forward to show such amount in his return. As per the ld. Departmental Representative, return was not voluntarily filed but filed only after issue of notice u/s.142(1) of the Act. Thus according to him, levy of penalty u/s. 271AAB was justified.

8. We have considered the rival contentions and perused the orders of the authorities below. Before adverting to the issue involved, it would be apposite to have a look into Section 271AAB of the Act. The said section is reproduced hereunder:-

1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,—

(a) a sum computed at the rate of ten per cent. of the undisclosed income of the specified previous year, if such assessee—

(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived ;

(ii) substantiates the manner in which the undisclosed income was derived ; and

(iii) on or before the specified date—(A) pays the tax, together with interest, if any, in respect of the undisclosed income ; and

(B) furnishes the return of income for the specified previous year declaring such undisclosed income therein ;

(b) a sum computed at the rate of twenty per cent. of the undisclosed income of the specified previous year, if such assessee—

(i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income ; and

(ii) on or before the specified date—

(A) declares such income in the return of income furnished for the specified previous year ; and

(B) pays the tax, together with interest, if any, in respect of the undisclosed income ;

(C) a sum 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).

(2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1).

(3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section.

Explanation For the purposes of this section,—

(a) “specified date” means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be ;

(b) “specified previous year” means the previous year—

(i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search ; or

(ii) in which search was conducted ;

(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 Chief 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 been conducted’’.

Explanation (c) of the above section gives the definition of undisclosed income. For an income to be undisclosed, it should be represented either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books, which was not recorded in the books before the date of search. Here admittedly, assessee was not maintaining any books. There was thus no question of recording any money, bullion, jewellery or any entry in any books. It is not disputed that assessee had not disclosed any receipts from bill trading before the date of search to the Revenue. Assessee had in the statement recorded u/s.132(4) of the Act accepted accommodation bill trading done by it with M/s. BGR Energy Systems Ltd and earning of 0.25% commission. Claim of the assessee is that such commission was accepted for purchasing peace from Department. However, this claim, in our opinion cannot be accepted since there is no alleviating clause in Section 273AAB of the Act. That apart, assessee has not filed its return within the time allowed u/s.139(1) of the Act but only after issue of notice u/s.142(1) of the Act. Thus in our opinion what was returned by the assessee fell within the definition of the term ‘’undisclosed income” coming under Explanation (c) to Section 271AAB of the Act. As to the contention of the assessee that, if at all penalty is levied u/s. 271AAB of the Act, then such levy should be under clause (a) of Sub Section (1), what we find is that for applying the said clause, it is a necessary pre-condition that assessee should have furnished the return of income before the specified date. Specified date is the due date for furnishing returned income u/s.139(1) of the Act. Admittedly, assessee had filed returned income after such date. Hence, in our opinion, assessee cannot take advantage of clause (a) of Sub Section(1) of Section 271AAB. In the circumstances, we are of the opinion that penalty was rightly levied and confirmed by the ld. Commissioner of Income Tax (Appeals). We do not find any reason to interfere with the orders of the lower authorities.

9. In the result, the appeal of the assessee stands dismissed.

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