Case Law Details
Ashok B Sureban Vs ACIT (ITAT Bangalore)
AO levied penalty u/s. 271AAB of the Act on account of undisclosed income declared by the assessee during the post-survey proceedings on 6.8.2015. Against this, the assessee went in appeal before the CIT(Appeals). The CIT(Appeals) confirmed the levy of the penalty u/s. 271AAB of the Act. Aggrieved, the assessee is in appeal before ITAT.
At the outset the ld.AR argued reiterating the grounds of appeal that revenue authorities are not justified in imposing penalty on the assessee u/s. 271AAB of the Act since there was no search in the case of assessee u/s. 132 of the Act. He submitted that in these cases no search took place in the assessee’s case and actual search took placed in the case of M/s Vishwa Developers & Builders, Hubli u/s. 132 of the Act on 26.7.2012. Consequent to this search action, the assessee’s case is covered u/s. 153C of the Act and assessment order was framed in these assessment years u/s. 143(3) r.w.s. 153C of the Act. According to him, levy of penalty could be possible only in the hands, where search took place u/s. 132 of the Act, consequent to which assessment was framed u/s. 153A of the Act. Since in these cases, there was no search u/s. 132 of the Act, levy of penalty u/s. 271AAB of the Act is not at all justified. For this purpose, he relied on the order of the Coordinate Bench of this Tribunal in the case of Shri Suresh H. Kerudi in ITA Nos.2950 to 2955/Bang/2018, order dated 25.10.2019.
A perusal of the provisions of section 271AAB shows that the opening words are “penalty where search has been initiated” a perusal of the provisions under Section 271AAB also talks of the assessee declaring any undisclosed income in the course of the search in the statement under section 132(4). Admittedly in the present case, that is in the case of the assessee firm in appeal there has been no search.
We are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the provisions of section 271AAB could not be invoked in his case
FULL TEXT OF THE ITAT JUDGEMENT
These two appeals by the assessee are directed against the orders dated 3.10.2017 and 3.7.2017 of the CIT(Appeals), Hubli for the assessment years 2012-13 & 2013-14 respectively.
2. The assessee has raised the following grounds of appeal:-
1. The order of the learned Commissioner of Income-tax(Appeals) passed under Section 250 of the Act in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant’s case.
2. The appellant denies himself to be liable to a penalty of Rs.6,06,360/- (AY 2012-13) & Rs.22,94000/- (AY 2013-14) under section 271AAB of the Act, on the facts and circumstances of the case.
3. The learned CIT(A) was not justified in law in appreciating that the notice of penalty ought to have been issued under section 271(1)(c) of the Act, since the order of assessment has been passed under section 143(3) r.w.s 153C of the Act (AY 2012-13) under section 143(3) of the Act (AY 2013-14), on the facts and circumstances of the case.
4. The learned CIT(A) was not justified in appreciating that the search was conducted in the case of the firm and not in the case of the individual appellant, and hence the penalty if at all levied, ought to have been under section 271(1)(c) of the Act, on the facts and circumstances of the case.
5. The learned CIT(A) was not justified in law, in appreciating that the notice issued under section 271AAB of the Act, is bad in law on the facts and circumstances of the case.
6. Without prejudice and not conceding that the provisions of section 271AAB were not applicable to the facts of the case, the learned Assessing officer Is empowered to issue notice under section 271AAB of the Act for only one year and the notices issued for two years is against the scheme of the Act, which renders the notices for both the years as being without jurisdiction on the facts and circumstances of the case.
7. The learned CIT(A) was not justified in appreciating that the penalty order passed on an invalid notice is bad in law and the order of penalty passed is required to be set aside as bad in law on the facts and circumstances of the case.
8. Without further prejudice, the notice issued under section 271AAB is a bald notice and the AO has not specifically stated as to which particular limb of section 271AAB, and consequently the principles of natural justice is offended and the notice is bad in law and the orders passed consequent to an invalid notice is further bad in law and is required to be annulled on the facts and circumstances of the case.
9. The learned CIT(A) was not justified in appreciating that the notice issued under section 271AAB of the Act, is bad in law as the said notice does not put the appellant to notice, as to the clause, the appellant is required to respond to, and hence the consequent action taken is required to be set aside on the facts and circumstances of the case.
10. The learned CIT(A) failed to appreciate that the penalty was not automatic and that there is a discretionary power with the assessing officer not to levy penalty and the assessing officer ought to have exercised the discretion in the penalty proceedings and not to be resorted to as a routine matter of procedure, on the facts and circumstance of the case.
11. The learned CIT(A) ought to have appreciated the fact that the incomes offered in the regular return of income was not on account of undisclosed income, rather was offered to buy peace with the department and the penalty ought not to have been levied, on the facts and circumstances of the case.
12. The learned CIT(A) failed to appreciate that the provision of section 271AAB of the Act is not applicable and further without prejudice the clause (c) of section 271AAB (1) of the Act is not applicable, consequently the levy of penalty at 30% is not in accordance with law on the facts and circumstances of the case.
13. Without prejudice, the penalty levied at 30% under section 271AAB of the Act is erroneous and the penalty is required to be cancelled on the facts and circumstances of the case.
14. Without prejudice the penalty levied is highly excessive and is to be reduced substantially reduced on the facts and circumstances of the case.
15. The learned CIT(A) was not justified in appreciating that the order of penalty was bad in law, as the officer passing the order has not assumed proper jurisdiction over the case of the appellant, on the facts and circumstances of the case.
16. The Appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal urged above.
17. For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.
3. The facts of the case are that for these two assessment years, assessment was completed u/s. 143(3) r.w.s. 153C of the Income-tax Act, 1961 [the Act]. Later, the AO levied penalty u/s. 271AAB of the Act on account of undisclosed income declared by the assessee during the post-survey proceedings on 6.8.2015. Against this, the assessee went in appeal before the CIT(Appeals). The CIT(Appeals) confirmed the levy of the penalty u/s. 271AAB of the Act. Aggrieved, the assessee is in appeal before us.
4. At the outset the ld.AR argued reiterating the grounds of appeal that revenue authorities are not justified in imposing penalty on the assessee u/s. 271AAB of the Act since there was no search in the case of assessee u/s. 132 of the Act. He submitted that in these cases no search took place in the assessee’s case and actual search took placed in the case of M/s Vishwa Developers & Builders, Hubli u/s. 132 of the Act on 26.7.2012. Consequent to this search action, the assessee’s case is covered u/s. 153C of the Act and assessment order was framed in these assessment years u/s. 143(3) r.w.s. 153C of the Act. According to him, levy of penalty could be possible only in the hands, where search took place u/s. 132 of the Act, consequent to which assessment was framed u/s. 153A of the Act. Since in these cases, there was no search u/s. 132 of the Act, levy of penalty u/s. 271AAB of the Act is not at all justified. For this purpose, he relied on the order of the Coordinate Bench of this Tribunal in the case of Shri Suresh H. Kerudi in ITA Nos.2950 to 2955/Bang/2018, order dated 25.10.2019.
5. On the other hand, the ld. DR submitted that these grounds were not before the CIT(Appeals), as such for adjudication of the same, the issue may be remanded back to the CIT(Appeals) for his consideration.
6. We have heard both the parties and perused the material on record. Admittedly, there was a ground raised before the CIT(Appeals) as follows:-
“On the basis of aforementioned statement of facts and reasons, the Assessee prays for an Appeal on the following grounds:
1. That the Penalty order passed u/s 271AAB by the ACIT, Circle 3(1), Hubli on the basis of Assessment order passed u/s 153C by the ACIT (Central Circle), Belagum is bad in law (on account of reasons furnished in SI. No. 3 (a) to (d) above).
2. That the Penalty Notice initiated u/s 274 rws 271AAB is not proper and hence the same is bad in law (on account of reasons furnished in SI. No. 3 (b) above).
3. That the jurisdiction of passing the Penalty Order u/s 271AAB is not correct and hence the same is bad in law (on account of reasons furnished in sl. No. 4 (a) to 4 (e) above).
4. Notwithstanding anything contained herein above, that Merits of the case are not considered in passing the Penalty order and hence the same is bad in law (on account of reasons furnished in sl. No. 5 above).
5. That the Assessee prays for permitting to produce any other documents, clarifications, case laws, etc at the time of hearing with the kind permission of the Hon’ble C.I.T. (Appeals). Also prays that these grounds of appeal may allowed to be amended or modified with the kind permission of the Hon’ble C.I.T. (Appeals).
RELIEF CLAIMED :
On the Basis of aforementioned Grounds of Appeal, the Assessee prays:
1. To set aside in full the Penalty Order passed u/s 271AAB by the ACIT, Circle 3(1), Hubli.”
7. On a perusal of the above ground, we observe that admittedly the assessee had raised a ground with regard to passing of order u/s. 271AAB of the Act consequent to assessment order u/s. 153C of the Act. Being so, the ld. DR is not correct in arguing that there was no such ground raised before the first appellate authority. Even if there is no ground before the first appellate authority, the Tribunal is not precluded to adjudicate this ground being a legal ground.
8. Coming to the arguments of the ld. AR, we have to go through the provisions of section 271AAB of the Act, which reads as follows:-
“Penalty where search has been initiated.
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 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 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;
(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.”
9. We find that identical issue was considered by the Coordinate Bench of this Tribunal in the case of Shri Suresh H. Kerudi (supra) wherein it was held as under:-
“10. We have considered the rival submissions. We find that an identical plea was put forth by the assessee in the case of Shreeji Corporation (supra) and the Ahmedabad Bench of the Tribunal in its order accepted the stand and held as follows:-
“5. A perusal of the assessment order undisputedly points out that no search had taken place in the case of the assessee per se under s.132 of the Act. A bare reading of law codified in Section 271AAB(1) clearly provides that the AO may direct the assessee to pay a sum by way of penalty at specified percentage where undisclosed income of the specified previous year has been detected as a result of search under s.132 of the Act. Section 271AAB(1)(a) however simultaneously provides concessional treatment in the matter of penalty under s.271AAB where the assessee admits the undisclosed income in a statement under sub-section 4 of Section 132 of the Act subject to fulfillment of other conditions with which we are presently not concerned with. Therefore, it is manifest that applicability of Section 271AAB is integrally connected to search under s.132 of the Act. In the absence of search under s. 132 of the Act, the assessee has no occasion to avail the concessional treatment by way of admission under s.132(4) of the Act. Thus, we find obvious merits in the observations made by the first appellate authority that provisions of Section 271AAB of the Act are not applicable to the case of the assessee. In the absence of search under s.132 of the Act, the consequential or incidental assessment proceedings under s.153C of the Act will not, in our view, entitle the AO to usurp jurisdiction under s.271AAB of the Act for the purposes of imposition of penalty. Hence, we do not see any infirmity in the conclusion drawn by the CIT(A).”
11. The Pune Bench of the Tribunal in the case of Volga Dresses (supra) has also taken a similar view:-
“6. We have considered the rival submissions. A perusal of the provisions of section 271AAB shows that the opening words are “penalty where search has been initiated” a perusal of the provisions under Section 271AAB also talks of the assessee declaring any undisclosed income in the course of the search in the statement under section 132(4). Admittedly in the present case, that is in the case of the assessee firm in appeal there has been no search. Search admittedly is on the residence of one of the partner of the assessee firm. Further a perusal of the order of the learned CIT(A) also clearly shows that the learned CIT(A) has cancelled the penalty on the ground that there was no search in the case of the assessee firm. The revenue has not been able to point out as to how this finding of the learned CIT(A) is erroneous. This being so the finding of the learned CIT(A) on this issue stands confirmed.”
12. In view of the aforesaid decision of coordinate Benches, we are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the provisions of section 271AAB could not be invoked in his case.”
10. Since the issue in dispute before us is similar to that considered by the Tribunal in an earlier occasion, taking a consistent view, we are of the opinion that levy of penalty u/s. 271AAB of the Act in these two assessment years in the case of assessee is not at all justified. Accordingly we delete the penalty u/s. 271AAB of the Act in both the assessment years.
11. Since we have allowed the appeal of the assessee on legal issue, we refrain from going into the other grounds of appeals raised by the assessee.
12. In the result, both the appeals of the assessee are allowed. Pronounced in the open court on this 19th day of January, 2021.
