Income Tax Appellate Tribunal - Pune
M/S. Tapadia & Kasliwal Associates,, ... vs Assessee on 12 August, 2015
आयकर अपील
य अ धकरण] iq.ks यायपीठ "बी" iq.ks म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी आर. के. पांडा, लेखा सद य
एवं ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.1430/PN/2013
"नधा%रण वष% / Assessment Year : 2010-11
Dy.CIT, Central Circle, .......... अपीलाथ /
Aurangabad Appellant
बनाम v/s
M/s. Tapadia & Kasliwal Associates, .......... यथ /
215-216, Apna Bazar, Respondent
Jalna Road, Aurangabad-431001
PAN No.AAEFT1753F
CO No. 74/PN/2014
(Assessment Year 2010-11)
M/s. Tapadia & Kasliwal Associates,
215-216, Apna Bazar,
Jalna Road, Aurangabad-431001
PAN No.AAEFT1753F .. Cross Objector
बनाम v/s
Dy.CIT, Central Circle,
Aurangabad .. Respondent
नधा रती क ओर से / Assessee by : Shri S.N. Puranik
यथ क ओर से / Department by : Shri.B.C. Malakar
Singh
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :05.08.2015 Date of Pronouncement:12.08.2015
2
ITA No.1430/PN/2013 and
CO No.74/PN/2014
आदे श / ORDER
PER R.K. PANDA, AM :
This appeal filed by the Revenue and the CO filed by the assessee are directed against the order dated 02-04-2013 of the CIT(A), Aurangabad relating to Assessment Year 2010-11.
2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of construction of shopping mall. A search u/s.132 of the I.T. Act was conducted on 19-01-2010 at the business and residential premises of different members/associate concerns of the Tapadia Khinvansara and power groups of Aurangabad. The assessee was also covered. During the course of search, various registers and documents were seized from the premises of Shri Sanjay Kasliwal at 215-216, Apna Bazar, Jalgaon Road, Aurangabad. In response to notice u/s.142(1), the assessee filed his return of income on 27-09-2011 declaring total income at Rs.6,84,35,910/-. During the course of assessment proceedings the AO noted that during the course of search proceedings at the office premises of Shri Jugal Kishore Tapadia and Tapadia Construction Ltd. statement of Shri Jugal Kishore Tapadia was recorded on 09-03-2010 by the ADIT (Investigation), Aurangabad. In reply to Question No.24 of the statement, Shri Jugal Kishore Tapadia, who is a partner of the firm, had admitted income of Rs. 7 lakhs for the impugned assessment year. The AO noted that the assessee in the return of income filed has declared income of Rs.6,94,02,079/- as GP from the project. He observed that this income is in pursuance to the declaration of income made by the assessee during the search, 3 ITA No.1430/PN/2013 and CO No.74/PN/2014 therefore, he determined the income of the assessee at Rs.6,84,35,910/- which is as per the return of income. The AO subsequently initiated penalty proceedings u/s.271AAA of the I.T. Act. He noted that the assessee in his computation of income had given a note which reads as under :
"NOTE : During the year under consideration, the possession of basement floor & ground floor keeping some balance work of hyper market is handed over to Pusti Enterprises Pvt. Ltd., the purchaser for carrying the fit out works. The proportionate sale consideration and proportionate profit on basement floor and ground floor on the basis of possession has been offered to tax during the year in accordance with & to include the amount declared by Shri Jugalkishor C. Tapadiya during the course of search & seizure proceedings on dated 09-03-2010."
3. According to the AO the income so declared as per the above note is undisclosed income for which the penalty proceedings u/s.271AAA of the Act was initiated on the quantum of Rs.6,94,02,079/-. The assessee in his reply to such penalty notice submitted that the firm has offered profit on basement floor and ground floor of the hyper market which is being constructed by the firm at Garkheda, Aurangabad and which is agreed to be sold to Pusti Enterprises Pvt. Ltd. The income has been declared in the statement recorded u/s.132(4) of the I.T. Act by one of the partners of the firm Shri Jugal Kishore Tapadia. The firm has also paid tax on the income offered. The particulars of this disclosure are duly furnished during assessment proceedings which are accepted. Accordingly, the assessee requested the AO to drop the penalty proceedings u/s.271AAA.
4. However, the AO was not satisfied with the explanation given by the assessee. He referred to the provisions of sub-section (2) of section 4 ITA No.1430/PN/2013 and CO No.74/PN/2014 271AAA of the I.T. Act according to which penalty is not imposable subject to fulfillment of the following conditions :
"(i) In the course of search, in a statement under sub-section (4) of sec.132, admits the undisclosed income and specifies the manner in which such income has been derived;
(ii) Substantiates the manner in which undisclosed income was derived; and
(iii) Pays the tax, together with interest, if any, in respect of the undisclosed income."
He observed that the tax payable on the returned income was Rs.2,11,46,696/- and interest payable till filing of the return was Rs.14,51,222/-. Therefore, the assessee should have paid Rs.2,25,97,918/- by way of tax and interest till the date of filing of return of income. However, till that date and even on completion of assessment the assessee has paid only Rs.1,84,97,920/- and the balance amount of Rs.40,99,998/- was recovered after assessment. Therefore, the condition laid down in the provisions of section 271AAA(2) of the Act does not get satisfied. He observed that as per the provisions of section 140A(1) of the Act, it is the responsibility of every assessee to pay the tax and interest payable, if any, before furnishing of return of income. Since the assessee has not paid the total tax and interest before furnishing the return of income, therefore, the assessee, according to the AO, is not eligible for the purpose of section 271AAA(2). The AO accordingly levied penalty of Rs.69,40,208/- being 10% of the undisclosed income of Rs.6,94,02,079/- u/s.271AAA of the I.T. Act.
5. Before CIT(A) it was submitted that the assessee has received advance consideration by bank cheques and the sale of the property 5 ITA No.1430/PN/2013 and CO No.74/PN/2014 and possession of the property in respect of which the said advance was received was given in subsequent year relevant to A.Y. 2013-14 and therefore infact the income taxed by the AO in the year under appeal is not the income of the assessee for A.Y. 2010-11. Therefore, the said amount of Rs.6,94,02,079/- has been incorrectly assessed in A.Y. 2010-11 and therefore cannot be considered as the undisclosed income of A.Y. 2010-11. Accordingly, the levy of penalty is not valid. It was argued that since the consideration has been received by bank cheques and since all the transactions have been recorded in books of accounts and the income offered to tax on proportionate basis in A.Y. 2010-11 on the basis of entries recorded in the books of account, the same cannot be considered as undisclosed income of the assessee.
6. The assessee further argued that as per provisions of section 132B, existing liability is to be adjusted against the cash seized and such advance tax liability is the existing liability of the assessee. The seized cash has to be adjusted against the said liability. It was brought to the notice of the Ld.CIT(A) that as per the amendment to section 132B by the Finance Act 2013 w.e.f. 01-06-2013, the existing liability will not include advance tax liability w.e.f. 01-06-2013. It has been mentioned in the memorandum explaining the provisions of Finance Bill 2013 (Clause 31) that various courts have held that advance tax liability is existing liability. It has been further mentioned that the legislative intent behind this provision is to ensure recovery of outstanding tax, interest etc. which may arise subsequent to assessment pursuant to search action. It was argued that even if the intention of the legislature mentioned above is considered then also the tax on income disclosed is to be regarded as fully paid on 6 ITA No.1430/PN/2013 and CO No.74/PN/2014 completion of the assessment. It was accordingly argued that the third condition that the assessee pays the tax together with interest, if any, in respect of the undisclosed income is also fulfilled.
7. It was brought to the notice of the CIT(A) that payment of Rs.49,64,700/- raised by the AO for A.Y. 2010-11 vide order u/s.143(3) dated 29-12-2011 was paid on 22-03-2012, i.e., much before 28-06-2012, i.e. the date of penalty order u/s.271AAA for A.Y. 2010-11. Relying on the decision of the Kolkata Bench of the Tribunal in the case of DCIT Vs. Pioneer Marbles and Interiors Pvt. Ltd. reported in (2012) 14 ITR 608 it was argued that no penalty u/s.271AAA can be levied if the assessee has paid the tax and interest due thereon within the time limit provided in notice of demand u/s.156 and also well before the penalty proceedings were concluded. Relying on various decisions it was argued that no penalty u/s.271AAA of the I.T. Act could be levied on the assessee.
8. Based on the arguments advanced by the assessee and relying on the decision of Hon'ble Supreme Court in the case of ACIT Vs. Gebilal Kanhaiyahal (HUF) reported in 252 ITR 435 and the decision of the Kolkata Bench of the Tribunal in the case of Pioneer Marbles and Interiors Pvt. Ltd. (Supra) the Ld.CIT(A) deleted the penalty levied u/s.271AAA by holding that the assessee has fulfilled the condition laid down in clause (iii) of sub-section (2) of section 271AAA since the assessee has paid the demand of Rs.49,64,700/- much before the date of penalty order passed u/s.271AAA for the year under appeal.
9. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds :
7ITA No.1430/PN/2013 and CO No.74/PN/2014
"1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of Rs. 69,40,208/- imposed u/s 271AAAof the Act.
2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the cash seized at the time of search should be considered as 'Advance Tax' payment, as the Explanation to Section 132B of the I.T. Act, is clarificatory in nature, and hence, to be considered as retrospective.
3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the decision of the Hon'ble Supreme Court, in the case of ACIT vs. Gebilal Kanhaiyalal (HUF) (S.C.) [252 CTR 345], the facts of which are distinguishable from the facts of the assessee's case, as in the present case, the assessee has paid lesser tax at the time of filing of return of income.
4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the provisions of Section 140A(3), which compels the payment of tax and interest, before filing of return of income.
5) The appellant craves leave to add, alter, modify, delete, and amend any of the grounds, as per the circumstances of the case.
6) The appellant prays leave to adduce such further evidence to substantiate its case, as the occasion may demand."
10. The Ld. Departmental Representative strongly challenged the order of the CIT(A). He submitted that since the assessee has not paid the taxes and interest due before filing of the return of income, therefore, the third condition prescribed in provisions of section 271AAA(2) is not fulfilled. Referring to the said provision he submitted that for non levy of penalty the assessee has to pay the tax together with interest, if any, in respect of the undisclosed income which was admitted in the statement recorded u/s.132(4) and the assessee is able to substantiate the manner in which such undisclosed income was derived. Since in the instant case the assessee has not paid the taxes due together with interest in respect of such undisclosed income, therefore, he is not entitled to the immunity granted in section 271AAA. He submitted that various case laws relied on by the 8 ITA No.1430/PN/2013 and CO No.74/PN/2014 assessee before the CIT(A) are not applicable to the facts of the present case. He accordingly submitted that the order of the CIT(A) be reversed and that of the AO be restored.
11. The Ld. Counsel for the assessee on the other hand while supporting the order of the CIT(A) submitted that the assessee had filed the return of income disclosing total income of Rs.6,84,35,910/- as disclosed by the partner of the firm during the course of search. The assessee has paid an amount of Rs.1,84,97,920/- towards income tax before filing of the return of income. The balance amount of Rs.40,99,998/- was paid on 22-03-2012 after the completion of assessment but much before the penalty order which was passed on 28-06-2013. Referring to pages 17 to 23 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the letter addressed to the ADIT on 16-09-2010 and 22-06-2010 requesting adjustment of seized cash against the tax payable in respect of the firm. He submitted that the department has neither adjusted the cash seized nor communicated refusal for adjustment of such cash against the tax payable by the firm. Referring to the provisions of section 271AAA he submitted that the Act does not prescribe any time limit for payment of the taxes. Referring to Explanation to provisions of section 139(9) he submitted that the Act clearly lays down that return of income shall be treated as defective if the tax together with interest, if any, arrived in accordance with the provisions of section 140A has not been paid on or before the date of filing of the return. This has been inserted by the Finance Act, 2013 w.e.f.01-06-2013. Referring to provisions of section 140A(3) he submitted that as per the said provision w.e.f,. 01-04-1980 if any assessee fails to pay the whole or 9 ITA No.1430/PN/2013 and CO No.74/PN/2014 any part of such tax or interest or both in accordance with the provisions of sub-section (1) he shall without prejudice to any other consequences which he may incur be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid and all the provisions of this Act shall apply accordingly. Referring to proviso to sub-section (2) to section 158BFA he submitted that no order imposing penalty u/s.158BFA shall be made in respect of a person if (1) such person has furnished a return under clause (a) of 158BC, (2) the tax payable on the basis of such return has been paid or if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable and (3) evidence of tax paid is furnished along with the return. However, in the provisions of section 271AAA there is no such condition as to when such tax has to be paid. He accordingly submitted that since the assessee has paid the tax due after completion of the assessment and before the penalty order was passed, therefore, the order of the CIT(A) is in accordance with the law and therefore the same should be upheld and the grounds raised by the Revenue should be dismissed. In his alternate contention he submitted that the penalty, if any is leviable, has to be restricted to 10% of the unpaid tax.
12. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the search took place on 19-01-2010 during which the partner of the firm had admitted undisclosed income of Rs.6.94 crores in his statement recorded u/s.132(4) as income from business of builders. We find the 10 ITA No.1430/PN/2013 and CO No.74/PN/2014 assessee filed the return of income on 27-09-2011 declaring the aforesaid income of Rs.6,94,02,079/-. Although the tax payable and interest payable on such income comes to Rs.2,25,97,918 (tax Rs.2,11,46,696/- + interest Rs.14,51,222/-) we find the assessee had paid an amount of Rs.1,84,97,920/- only till completion of assessment. Thus, the assessee has paid less by Rs.40,99,998/- for which the AO held that the assessee had not paid tax due together with interest, if any, in respect of the undisclosed income and therefore penalty u/s.271AAA is leviable on the assessee firm. The AO accordingly levied penalty of Rs.69,40,208/- which has been deleted by the CIT(A).
13. It is the case of the Revenue that since the assessee has not paid the entire tax and interest before filing of the return of income, therefore, penalty u/s.271AAA is leviable. It is the case of the assessee that the balance amount of Rs.40,99,998/- has been paid on 22-03- 2012 which is much before 28-06-2012, i.e. the date of penalty order passed u/s.271AAA. Since there is no time limit prescribed for payment of tax u/s.271AAA and since the assessee has paid the entire tax along with interest due before passing of the penalty order, therefore, no penalty u/s.271AAA is leviable on the assessee.
14. We find an identical issue had come up before the Kolkata Bench of the Tribunal in the case of DCIT Vs. Pioneer Marbles and Interiors Pvt. Ltd. reported in 144 TTJ 663. In that case, the assessee company was subject to search and seizure operations u/s.132 during which the assessee made the disclosure of Rs.50 lakhs. The income so declared was included in the income subsequently returned by the assessee which was accepted by the AO in the assessment order. 11 ITA No.1430/PN/2013 and CO No.74/PN/2014 However, the AO initiated penalty proceedings u/s.271AAA on the ground that the assessee had not paid full tax and interest on disclosure made u/s.132(4). It was argued by the assessee that while filing the return of income it had not computed levy of interest u/s.234C due to inadvertent mistake but the assessee had paid overall shortfall within permissible time, i.e. upon receiving the notice of demand u/s.156. The AO rejected the contention of the assessee and levied penalty u/s.271AAA. The CIT(A) cancelled such penalty holding that due taxes along with interest was paid before the penalty proceedings were concluded. On further appeal by the Revenue the Tribunal dismissed the appeal filed by the Revenue and upheld the order of the CIT(A) by observing as under :
"6. We find that Section 271 AAA, which is applicable in respect of undisclosed income unearthed as a result of search operations carried out on or after 1s t June 2007, provides as follows:
Penalty where search has been initiated.
271AAA. (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 June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the 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) pays the tax, together with interest, if any, in respect of the undisclosed income.
(3) 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).
(4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.12 ITA No.1430/PN/2013 and CO No.74/PN/2014
Explanation : For the purposes of this section,--
(a) "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;
(b) "specified previous year" means the previous year--
(i) which has ended before the date of search, but the date of filing 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 said date; or
(ii) in which search was conducted.
7. We find that under the scheme of Section 271 AAA, there is a complete paradigm shift so far as penalty in respect of unaccounted income unearthed as a result of search operation carried out on or after 1s t June 2007 is concerned. Unlike in the case of penalty under section 271(1)(c), Section 271 AAA, without any reference to findings or presumptions of concealment of income or the findings or presumptions of furnishing of inaccurate particulars, provides that in respect of unaccounted income in the cases where search initiated after 1s t June 2007, the assessee is to pay a penalty @ 10% of unaccounted income. Sub section 2 of Section 271 AAA, however, relaxes the rigour of this penalty provision in a situation in which (i) in the course of the search, in a statement under section 132(4), 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) pays the tax, together with interest, if any, in respect of the undisclosed income. While payment of taxes, along with interest, by the assessee is one of the conditions precedent for availing the immunity under section 271AAA(2), there is no time limit set out for such payments by the assessee. Once a time limit for payment of tax and interest has not been set out by the statute, it cannot indeed be open to the Assessing Officer to read such a time limit into the scheme of the Section or to infer one. There is thus no legally sustainable basis for the stand of the Assessing Officer that in a situation in which due tax and interest has not been paid in full before filing of the relevant 13 ITA No.1430/PN/2013 and CO No.74/PN/2014 income tax return, the assessee will not be eligible for immunity under section 271 AAA(2).
8. While dealing with Explanation 5 to Section 271(1)(c), which is broadly on the same lines, Hon'ble Gujarat High Court, in the case of CIT Vs Mahendra C Shah (299 ITR 305) has observed that, " ......there is no prescription about the point of time when the tax had to be paid qua the amount of income declared in the statement under section 132(4) of the Act". We must, however, point out that even after making these specific observations Their Lordships had to treat the conclusion of assessment proceedings as outer limit for making payment of tax and interest but that was because of the peculiar nature of penalty provisions under section 271(1)(c) wherein Assessing Officer has to record the satisfaction in the course of assessment proceedings itse lf - something which is not a condition precedent for imposition of penalty under section 271 AAA. Their Lordships had held that "...However, the outer limit has to be the point of time when the assessment proceedings are undertaken by the Assessing Officer because the opening portion of section 271(1) of the Act requires the Assessing Officer to record satisfaction in the course of such proceedings, and the satisfaction has to be as regards the concealment of particulars of income or furnishing inaccurate particulars of income." Section 271 AAA, as the statute unambiguously provides, does not require any subjective satisfaction of the Assessing Officer to be arrived at during the assessment proceedings, and, therefore, the outer limit of payment before the conclusion of assessment proceedings will not come into play.
9. In our considered view, therefore, on the facts of the present case wherein entire tax and interest has been duly paid well within the time limit for payment of notice of demand under section 156 and well before the penalty proceedings were concluded, the assessee could not be denied the immunity under section 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings.
10. For the reasons set out above, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
11. In the result, the appeal is dismissed."
15. Since in the instant case although the assessee has not paid an amount of Rs.40,99,998/- before filing of the return of income, however, the fact remains that the demand of Rs.49,64,700/- raised by the AO for A.Y. 2010-11 vide order dated 29-12-2011 passed u/s.143(3) has been paid on 22-03-2012 which is much before 28-06- 2012, i.e., the date of penalty order passed u/s.271AAA for the year under appeal. Therefore, respectfully following the decision of the Kolkata Bench of the Tribunal in the case of Pioneer Marbles and 14 ITA No.1430/PN/2013 and CO No.74/PN/2014 Interiors Pvt. Ltd. (Supra), we hold that no penalty u/s.271AAA is leviable in the instant case. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed.
16. Since the appeal filed by the Revenue is dismissed the CO filed by the assessee becomes infructuous and accordingly the same is dismissed.
17. In the result, both the appeal filed by the Revenue as well as CO filed by the Assessee are dismissed.
Order pronounced in the open court on 12-08-2015.
Sd/- Sd/-
(VIKAS AWASTHY) (R.K. PANDA)
या"यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
iq.ks Pune; #दनांक Dated : 12th August, 2015.
lrh'k
आदे श क( )"त+ल प अ,े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु(त(अपील)s / The CIT(A),Aurangabad
4. आयकर आय( ु तs / The CIT, Aurangabad
5. +वभागीय त न.ध, आयकर अपील य अ.धकरण, "बी" iq.ks / DR, ITAT, "B" Pune;
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER,स या+पत त //True C स या+पत त //True Copy// व र2ठ नजी स.चव / Sr. Private Secretary आयकर अपील य अ.धकरण, iq.ks / ITAT, Pune