Income Tax Appellate Tribunal - Chandigarh
M/S Royal Lifestyle Jewellers Pvt. ... vs Dcit, Cc-I, Ludhiana on 21 June, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B' , CHANDIGARH
ी संजय गग , याय क सद!य एवं ीमती अ नपण
ू ा गु)ता, लेखा सद!य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.1585/Chd/2018
नधा रण वष / Assessment Year : 2016-17
M/s Royal Lifestyle Jewellers बनाम The D.C.I.T.,
Pvt. Ltd., Bathinda. Central Circle-1,
Ludhiana.
थायी लेखा सं./PAN NO: AABCA0185A
नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Adv.
राज व क ओर से/ Revenue by : Sh Manjit Singh, CIT DR
सन
ु वाई क तार!ख/Date of Hearing : 09.05.2019
उदघोषणा क तार!ख/Date of Pronouncement: 21.06.2019
आदे श/ORDER
Per Anna pur na G upta, Account ant Member Th e p re se n t a pp e a l ha s bee n fi l e d b y the a sse ssee a ga i nst the or de r of the C ommi ssi on e r of I ncome Ta x (A pp e a ls )-5 , Lu d hi a na [ (i n s hor t 'C I T(A )] ' d a te d 22 . 10 . 2 01 8 , up hol d i ng the lev y of pe n a l ty u /s 2 7 1 AA B of the I nc ome Ta x Act , 19 6 1 ( h e re i na fte r re fe r re d to a s 'Act '). 2 ITA No.1585/Chd/2018
A.Y.2016-17 2 . B r i e f l y s t a t e d a se a r ch u /s 1 32 w a s c a rr i e d out a t t he pr e mi s e s of the a ss e ssee on 1 1 .0 2 . 20 1 6 , d u ri n g t h e cou rse of w h ic h th e a ss e ssee h a d ad mit te d a nd su r re nde re d un di sc lo se d i nc ome of Rs. 2 ,8 3 , 0 0 , 00 0 /- i n th e s ta te me nt re cor de d on o a th u /s 1 32 { 4 ) o f th e Act . Th e Ass e s si ng Of fi ce r (A .O ) i ni ti a te d pe n a lt y p ro cee d in gs on th e sa i d in come u /s 2 7 1A AB of th e Ac t . In r e p l y to th e show -ca u se noti ce i ss ue d by th e AO, the a sse ssee a d mit te d t hat di sc lo sur e w a s ma d e a s p e r sta te me n t re cor de d u/s 1 3 2( 4 ) of th e Ac t, a n d c on te n de d t ha t th e n a ture a n d s our c e of suc h di sc lo sur e w a s e xp l a in e d at th e ti me of se a r c h a s w e l l a s d u ri n g t he a sse s sme n t p r ocee d in gs. I t w a s a l so su bmi tte d tha t th e imp u gne d i nc ome had be e n re t ur ned to ta x di sc lo si ng the same i n t he re tu rn fi l e d be f ore the spe ci f ie d da t e a nd tha t du e ta xe s a l ong wi th in te re st h a d b ee n p a id be fore f il i ng of t he re tur n . I t w a s f ur t he r con te n de d tha t the s ur re n de r had been ma d e su b je ct to no p e n a lt y. Th e r e for e it wa s co nte nde d t ha t the pe n a lty p r ocee d in gs in it ia t e d be d r op p e d . The re pl y of the a sses see was con si de re d b ut no t fo un d te n a b le by th e AO . Th e AO 3 ITA No.1585/Chd/2018 A.Y.2016-17 obs e r ve d th a t the a s se s se e h a d s ur r e n de re d i n come d ur i ng the se a r ch an d a d mit te d t ha t th is a mou nt of Rs. 2, 8 3 ,0 0 ,0 0 0 /- w a s be i ng offe re d a s b us in e s s inc ome to cove r any di sc re p a n cie s fo un d in th e se i ze d d oc ume n ts du r in g t he cou r se of se a r ch a nd a ls o to co ve r a ny ki n d of di sc r e p a nc ie s i n the re gu l a r bo oks of a cc oun t . Th e AO he l d tha t the i n come so su r r e n de re d w a s ye t to be re cor d e d i n the b ook s of a cc oun t a n d th e ref or e w a s in the n a tur e of "un di sc l ose d i ncome " a s de f ine d u /s 2 7 1A AB o f th e A ct thu s q u a l if yi ng for le vy o f pe na l ty un de r the s a id s e ct ion . Fu r the r on n otin g t ha t th e un di sc l ose d in co me h a d b e e n de cl a re d b y the a s se s see i n th e r e tur n f ile d a n d ta x a l ong wi th i nt e re st h ad b ee n p a i d the re on , the AO he l d t hat pe na l ty @ 1 0 % o f the u nd i scl ose d i n come w a s le vi ab le on the sa me a s p e r the p r ovi si on s of s ub cl a us e (a ) of sub se cti on (1 ) to se cti on 2 71 A AB of th e A ct. Ac cor d in gl y, th e AO l e v ie d pe na l ty of Rs. 2 8, 3 0 ,0 0 0 /- u /s 2 71 A AB o n t he su r re nde re d a moun t of Rs . 2, 8 3 ,0 0 ,0 0 0 /-. The Ld .C I T( A ) up he ld t he sa me .
3. B e f ore us, th e le a rne d c oun se l for t he a sse ssee re ite r a te d the a rg ume nts ma d e b e f ore the l ow e r a ut hor i ti es tha t th e sur re nde re d in co me w a s d e c la re d b y t he as se s se e i n 4 ITA No.1585/Chd/2018 A.Y.2016-17 hi s r e tur n , t a xes p a id th e re on, th e ma n n e r of ea r n in g t he sa me sp e c if ie d an d, t he re fore , no p e na l ty w a s le vi ab le a nd tha t e ve n other w is e pe n a lt y was not a u tom a ti c. He, the re fo re , con ten d e d th a t no pe na l ty w a s le vi abl e in t he pr e se n t ca se .
4. Th e Ld .D R, on t he othe r h a nd , h e a vi l y re l ie d on t he or de r of the Ld .C I T(A ) a n d p oi nt e d out tha t t he sur r e n de r wa s o n a c cou nt of d is cr e p a n cy in stoc k as we ll as p u r cha se /s a le /is sue /r ece ip t/a p p r ova l a nd o the r di sc r e p a nc ie s a s p e r v a r iou s a nne xu re s p re p a re d d u ri n g t he se a r c h. Th e i n c ome su r re nd e re d , the re f ore , re p re se nte d un di sc lo se d i n come a s de f ine d in th e e xp l a na ti on to su b- cl a use (c ) be l ow se cti on 2 7 1A AB ( 3 ) of th e A ct, a n d , the re f ore, the Ld . C I T( A) h a d r i gh tly c onf i rme d the pe n a lty le v ie d . The Ld. D R d r e w our a tte n ti on a t p a ge 5 of C I T(A ) 's or de r as un de r :
" As ad mi tted b y th e AR al so , the in c o me of Rs.2 , 8 3, 0 0 ,0 0 0 /- was su rren d ered d u ring th e se ar ch . A s per th e su bm i ssion s of th e as se ssee th e su rre nd er of Rs. 2 ,8 3 , 0 0, 0 0 0/- h as be en m ade to c over u p the d i sc rep an c ie s in stoc k as wel l as th e pu rc h a se / sal e / i ssu e /re ce i p t/ ap p rov al an d o th er d iscr e p anc ie s etc. a s per va riou s an ne xu re pre p ared a t the ti me of searc h. In th i s reg ard a gen e ral en tr y h as bee n p a sse d b y c red i ti n g a d iscl o su re of R s. 2 ,8 3 , 00 , 0 00 /- to th e prof it and l oss acc ou n t an d d eb ited to the re se rve ac c ou n t on 5 ITA No.1585/Chd/2018 A.Y.2016-17 ac cou n t of sto c k, re ce iv abl e an d o th er d iscr e p anc ie s a s requ ired . " T he A O ha s r igh tl y me n ti on ed th a t in th i s c a se, th e inc o me of Rs. 2 ,8 3 , 0 0, 0 0 0/- r epre se n ts 'u n d i sc l o se d inc o me' wi th i n th e me an in g of Expl an a ti on su b-c l au se ( c ) bel o w s ec ti on 2 7 1 AAB (3 ) an d th e ye ar un d er c on sid er a ti on f al l s wi th in th e d ef in i tion of 's pec if ie d prev io us ye ar' wi th in th e me an ing o f Ex pl an a ti on su b -c lau se ( b) . T he a sse sse e h a s su rre nd ere d th is a mou n t u n d er se c tio n 13 2 ( 4 ), the ref o re, prov is ion s of sec tion 27 1 AA B( l )( a) are a p pl ic a ble . T h e lan gu age of th e S ec tion i s ver y c le ar and u n a mb igu ou s th a t i n a ca se wh ere th e a sse ssee ad mi ts th e un d i scl o se d in co me u n d er S ec tion 13 2 ( 4 ), p a ys th e ta x to ge the r wi th th e in tere st o n th e u n di sc l o se d in co me bef ore th e spe c if ied da te a n d al so spec if ies th e man n er in wh i c h th e u n di sc l ose d in co me was de r ived an d f urn ish e s th e re turn of in c o me f o r th e spe c if ied prev io u s ye ar d ec l ar in g su c h u n di sc l o se d in co me the re in , th en th e a sse sse e sh al l p ay pen al ty e qu al to 1 0 % of th e u n di sc l o se d in c ome . T h e A O h ad me n ti on ed th a t a l l th e se c on d i tio ns are f u lf ill ed in th e c a se of th e a sse s see in respec t of th e u n di sc l o se d in c ome of Rs.2 , 8 3, 0 0 ,0 0 0 /- su rre nd ere d a s a re su l t of search . T he AR h as not bee n a bl e to reb u t th e f in d in g s of th e AO d u rin g th e a ppe ll a te proc eed ing s. T h eref ore, u n d er the f ac ts an d th e circ u mstan c e s of th e c ase an d in vie w of the c l e ar prov i sion s of l aw, th e pen al ty of Rs. 28 , 3 0 ,0 0 0 /- i mpo sed b y the A O u / s 2 7 1A AB in th i s c a se @ 1 0 % of u n d iscl o se d in c o me a s pe r prov is io n s of Sec tio n 2 7 1A AB ( l ) (a) is f o und su sta in a bl e as pe r l a w a nd h en ce c onf irme d" .
5. Th e Ld .D R f ur th e r sta te d th a t ide nti ca l i ss ue h as b e en a dj ud i ca t e d b y the I TA T i n it s o rd e r p a sse d i n the c a se of M /s S E L Te xt il e s Li mi te d Vs. D CIT in I TA N o. 69 5 / C h d/2 0 1 8 da t e d 1 8 .4 . 20 19 w h e re i n ide nti ca l s ur r e n de r ma d e on a ccou nt of d i sc re p a nc y in st ock was held to r e p re se nt 6 ITA No.1585/Chd/2018 A.Y.2016-17 un di sc lo se d i nc ome of t he a sse ssee a nd i t w a s he ld th a t t he pe na l ty h a d , ther e fore , ri ght ly be e n le vie d u/s 27 1 AA B of the Ac t. O ur a tten ti on wa s d r a w n to th e fi nd i ng s o f the I TA T a t p a r a 14 of th e or de r a s u nde r :
"14. However, so far as the surrendered amount of Rs.39.99 lacs is concerned, same was offered on account of profits on stock found short during the search action. Admittedly, the stock was found short during the search action. In fact, the Assessing officer apart from the above surrender of Rs.39.99 lacs has made further addition of Rs.2.58 cores on this issue. It is apparent that the aforesaid profit on short stock were not accounted for by the assessee but was only detected during the search action. However, the assessee has substantiated the manner of earning of the said income which include the surrender income of Rs.39.99 lacs, hence, penalty @ 10% is leviable on the aforesaid amount as per the provisions of section 271AAB (l)(a) of the I.T. Act.
14. In view of this, the penalty in this case is restricted to 10% of the surrendered income of Rs.39,99,158/- on account of stock found short as per the provisions of section 271AAB
(l)(a) of the Act. However, the remaining part of the penalty is ordered to be deleted."
6. The Ld.DR, therefore, contended that the Ld.CI T(A) had rightly upheld the penalty levied in the present case.
7. We have heard the rival contentions, perused the orders of the authorities below and also gone through the decisi on of the I TA T, C ha ndigarh Ben ch refe rred to before us. The issue before us relates to levy of penalty u/s 271AAB of the Act, which deals with levy 7 ITA No.1585/Chd/2018 A.Y.2016-17 of penalty in cases where search has been initiated u/s 132 of the Act, on or after the 1st day of July, 2010. As per the said section, the assessee is liable to pay penalty on the" undisclosed income" relating to the year in which search is conducted or the year in relation to which the date of furnishing of return has not expired before the date of search and no return has been furnished by the assessee, meaning thereby that as on the date of search the assessee still has time for furnishing the return of income for the year.
8. The undisclosed income has been defined in Explanation(c) below sub-section (3) of the section 271AAB as under:
"(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 54[Principal Chief Commissioner or] Chief Commissioner or 54[Principal 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 8 ITA No.1585/Chd/2018 A.Y.2016-17 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. It is evident from a plain reading of the above, that undisclosed income is any income represented by way of any asset or any document or transaction or any entry found not recorded before the date of search in the books of account.
10. The quantum of penalty varies from 10% to 60% depending upon the fulfillment/compliance with various conditions as specified in sub clause (a) to (c) of sub section (1) to the section 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 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-- 9 ITA No.1585/Chd/2018
A.Y.2016-17 (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; (B) Pays the tax, together with interest, if any, in respect of the undisclosed income;
(c) a sum [computed at the rate of sixty percent] of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b)."
11. In the facts of the case before us, the surrender of Rs.2.83 crores was made on account of discrepancy in stock. Thi s is evident fr om the fa ct so disclosed in the assessment order in the impugned year passed u/s 143(3) of the Act as under:
"2. The assessee is a company. It is maintaining books of account. The books of account were produced and examined on test check basis. In the year under consideration, the assessee has voluntarily declared an income of Rs.2,83,00,000/- being the amount of undisclosed income in the course of search operation under the head "Income from other sources" as on account of discrepancy in the stock. After discussion, the income of the assessee is assessed at 10 ITA No.1585/Chd/2018 A.Y.2016-17 Rs.3,06,72,760/-. As the income returned includes an amount of Rs.2,83,00,000/- being the undisclosed income within the meaning of section 132(4) of the I.T. Act, penalty proceedings u/s 271AAB is being initiated on this account."
12. Further this fact has remained uncontroverted thr ough out. Also Th e AO has levied penalty @10% of the surrendered/undisclosed income thus accepting that the assessee's case qualified for penalty as per clause(a) of section 271AAB of the Act as per which the assessee fulfilled the conditions of admitting to the undisclosed income in the statement recorded u/s 132(4() of the Act, specified the manner in which the income was derived, substantiated the same also and paid all taxes alongwith the interest on the same. The sole reason for levy of penalty therefore is that the surrendered income was in the nature of "undisclosed income" as defined in the section.
13. We are in agreement with the same. Admittedly, the surrender had been made on account of discrepancy/shortage in stock. Clearly, this short stock h ad not bee n accounted for by the a ssessee. The same therefore, we hold, has been rightly held to qualify as "undisclosed income" as per the definition of the same in section 271AAB of the Act. Moreover 11 ITA No.1585/Chd/2018 A.Y.2016-17 the issue is squarely covere d by the or der of the I TA T in the case of M/s SEL Textiles Limited (supra),wherein identical surrender made on account of the discrepancy in stock wa s hel d b y the I TA T to qualify as undisclosed income liable to penalty u/s 271AAB of the Act.
14. In view of the same, we uphold the order of the Ld.CI T(A) confirming the levy of penalty u/s 271AAB of the Act amounting to Rs.28,30,000/-.
15. I n the re s ul t, the a p p e a l of t he a sse s se e i s d is mi sse d.
O r de r p r o n o u n ce d i n t he O p e n C ou r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा गु)ता
(SANJAY GARG) (ANNAPURNA GUPTA)
याय क सद!य/Judicial Member लेखा सद!य/Accountant Member
-दनांक /Dated: 21st June, 2019
*रती*
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/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. )वभागीय ' त न0ध, आयकर अपील!य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar