Case Law Details
Jorbagh Tea Company Vs ACIT (ITAT Kolkata)
ITAT Kolkata held that in case where search has not been conducted upon the assessee, then penalty under section 271AAB of the Income Tax Act cannot be imposed.
Facts- A notice u/s. 153C of the Income Tax Act was issued to the assessee on 07.09.2015 calling for return of income for A.Y. 2008-09 to 2013-14. The assessee has filed the return of income for A.Y. 2013-14 on 15.09.2015 declaring total income at Rs.1,53,30,300/-. AO had issued a notice under section 143(2) for scrutinising this return. He passed an assessment order under section 143(3) read with section 153C of the Income Tax Act on 31.03.2016. AO has accepted the returned income by the assessee.
AO has initiated a penalty u/s. 271AAB of the Income Tax Act. AO has imposed a penalty of Rs.10,01,500/- vide its order dated 23.09.2016. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
Conclusion- Held that in case where search has not been conducted upon the assessee, then penalty under section 271AAB of the Income Tax Act cannot be imposed. The assessment in the present case has been framed under section 153C and not under section 153A, therefore, the assessee cannot be visited with penalty under the above provision. Accordingly we delete the penalty and allow the appeal of the assessee.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), Kolkata-20 dated 30th November, 2022 passed for assessment year 2013-14.
2. The solitary grievance of the assessee is that the ld. CIT(Appeals) has erred in confirming the penalty of Rs.10,01,500/- imposed by the ld. Assessing Officer under section 271AAB of the Income Tax Act.
3. Brief facts of the case are that a notice under section 153C of the Income Tax Act was issued to the assessee on 07.09.2015 calling for return of income for A.Y. 2008-09 to 2013-14. The assessee has filed the return of income for A.Y. 2013-14 on 15.09.2015 declaring total income at Rs.1,53,30,300/-. The ld. Assessing Officer had issued a notice under section 143(2) for scrutinising this return. He passed an assessment order under section 143(3) read with section 153C of the Income Tax Act on 31.03.2016. The ld. Assessing Officer has accepted the returned income by the assessee.
4. The ld. Assessing Officer has initiated a penalty under section 271AAB of the Income Tax Act. The ld. Assessing Officer has imposed a penalty of Rs.10,01,500/- vide its order dated 23.09.2016. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
5. Before us, ld. Counsel for the assessee submitted that penalty under section 271AAB could only be imposed if a search has been carried out upon the assessee under section 132 of the Income Tax Act. He submitted that in the present case, assessment has not been framed under section 153A read with section 143(3), rather it has been framed under section 153C of the Income Tax Act. Therefore, penalty is not imposable upon the assessee.
6. The ld. D.R., on the other hand, relied upon the orders of revenue authorities.
7. We have duly considered the rival contentions and gone through the record carefully. An identical situation has been considered by us in ITA No. 2335/KOL/2019. The discussions made by the Tribunal on this point read as under:-
“7. On due consideration of the facts and circumstances, we do not find any merit in this appeal because the opening line of section 271AAB contemplates that there should be a search for invoking this provision. For the facility of reference, we take note the relevant provision, which reads as under:-
“271AAB: (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 1s t 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 percent of the undisclosed income of the specified previous year, if such assessee-
(i) in the course of the search, in a statement under subsection (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.
8. A perusal of the above clause would reveal that it is applicable where search has been initiated under section 132 of the Income Tax Act. It is pertinent to observe that in the Scheme of Income Tax Act, if a search is being conducted upon the assessee and incriminating material was found, then notice under section 153A of the Income tax Act would be served inviting the assessee to file return of his income. However, during the course of search, if any incriminating material belonging to some other person than the searched person was found, then ld. Assessing Officer of the searched person would record his satisfaction demonstrating the fact that material belonging to other person was found and it exhibits the escapement of some income from taxation. This satisfaction note is to be transmitted to the ld. Assessing Officer, who is having jurisdiction on such other person and the ld. Assessing Officer of other person would issue notice under section 153C. Therefore, sections 153A and 153C deal with two different categories of assessees. The penalty leviable under section 271AAB is with respect to those assessees where search has been conducted. The case of the present assessee falls under second category. The assessment was made under section 153C of the Income Tax Act. We fail to understand from where the ld. Assessing Officer has brought this statement of disclosure. Statement under section 132(4) is to be recorded during the course of search to find out, whether any declaration is to be made by an assessee or not. The next fatuous attempt at the end of Assessing Officer is that taxable income determined by him in the assessment order is of Rs.1,25,82,290/-, which is almost equivalent to the returned income disclosed by the assessee. The penalty is to be computed by taking cognizance of the assessed income. Here the ld. Assessing Officer has imposed a penalty of Rs.1.98 crores without making any reference to the income determined in the hands of assessee, rather taking cognizance of the statement of searched person, who might have disclosed Rs.6.6 crores. It is totally against the law and the ld. 1s t Appellate Authority has rightly appreciated the facts and circumstances by deleting the penalty. We do not find any merit in the appeal. Hence it is dismissed”.
8. In the light of above, let us examine the facts of the present case. In ITA No. 2335/KOL/2019, ld. CIT(Appeals) had adopted the same reasoning which met the approval of the ITAT vide its order dated 4th August, 2022. A perusal of the above finding would reveal that in case where search has not been conducted upon the assessee, then penalty under section 271AAB of the Income Tax Act cannot be imposed. The assessment in the present case has been framed under section 153C and not under section 153A, therefore, the assessee cannot be visited with penalty under the above provision. Accordingly we delete the penalty and allow the appeal of the assessee.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on May 18th, 2023.
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