Income Tax Appellate Tribunal - Ahmedabad
Smt. Lajwantiben M. Manglani,, Godhra vs The Deputy Commissioner Of Income Tax, ... on 18 February, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
(BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT
MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
IT(SS)A. No: 260/AHD/2017
(Assessment Year: 2012-13)
Lajwantiben M Manglani V/S The Deputy Commissioner
1215/1, Opposite of Income Tax Central
Swaminarayan Complex Circle-1, Baroda
Banroli Road, Road,
Godhra-389001
(Appellant) (Respondent)
PAN: ADFPM4822J
Appellant by: Shri Ketan Shah and Aman Shah, AR
Respondent by : Shri L. P. Jain, Sr. D.R.
(आदे श)/ORDER
Date of hearing : 22 -11-2019
Date of Pronouncement : 18 -02-2020
PER MAHAVIR PRASAD, JUDICIAL MEMBER
1. This appeal filed by the Assessee is directed against the order of the Ld. CIT(A)-12, Ahmedabad dated 28.02.2017 pertaining to A.Y. 2012-13 and following grounds have been taken:
2 IT(SS)A No. 260/Ahd/2017. A.Y. 2012-13 1.0 ORDER PASSED UNDER SECTION 271 (1) (C) IS BAD IN LAW.
1.01 On the facts and circumstances of appellant's case and in law, the Id. CIT (Appeal) has erred to appreciate the initiation of penalty proceedings is bad in law as it was silent on whether it is concealment of income or furnishing of inaccurate particulars of income as both can not exist at the same time. 1.02 Your appellant therefore prays Your Honour to hold so now and treat the penalty proceedings as bad in law.
2.00 IMPOSITION OF PENLATY TO THE TUNE OF RS. 2,70,377 /- ON ADDITION MADE ON ACCOUNT OF UNDISCLOSED INCOME.
2.01 On the facts and circumstances of appellant's case and in law, the Id. CIT (Appeals) has erred in confirming the levy of penalty to the tune of Rs. 2,70,377 /- under section 271AAB of the Act by the Id. AO on disclosure of additional income in the return of income filed under section 153A of the Income Tax Act, 1961 . While doing so, the Id. CIT (Appeals) failed to appreciate that the additional income did not have the character of undisclosed income admitted during the course of search proceedings. Additional income declared in the returned income is a voluntary act and therefore appellant cannot be held guilty for levying penalty under section 271AAB of theAct.
2.02 Your appellant prays to hold so now and delete the impugned penalty. 3.00 YOUR APPELLANY CRAVES LEAVE TO ADD, AMEND AND /OR DELETE ALL OR ANY GROUND(S) TAKE HEREINABOVE.
2. Facts of the case as emanated from the penalty order:
A search u/s 132 of the Income Tax Act was conducted in the Dhanjimama Group of cases including the case of the assessee on 03.07.2012. In the search proceedings, based on documents found, the assessee's part of disclosure was amounting to Rs.27,03,770/-. Consequent to the search action and based upon material found during the course of search, the proceedings u/s.!53A of the Act were initiated. Accordingly, notice u/s 153A was issued on 18.03.2014 and in compliance thereto the assessee filed its return of income on 29.07.2014 declaring total income at Rs.27,01,730/-. The assessee has made a disclosure of Rs. 27,03,770/-in the return of income filed in response to notice u/s 153A of the I. T. Act. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served to the assessee. Subsequently, the order u/s 153A I. w. s. 143(3) of the Act was passed on 30.01.2015 at the assessed income of Rs. 27,01,730 /-. 2.1 In this case, the disclosure of Rs. 27,03,770/- was made due to search and thus this amount was undisclosed income of the assessee for the specified year on which penalty proceedings u/s 271AAB of the Act were initiated for concealment of particulars of income. A notice u/s 271AAB dated 30.01.2015 was issued and duly served upon the assessee to show cause as to why penalty u/s 271AAB of the IT Act should not be imposed. In response, the assessee did not 3 IT(SS)A No. 260/Ahd/2017 . A.Y. 2012-13 submit any reply. Subsequently, the assessee was, in the interest of justice, given a final opportunity vide this office letter dated 14.05.2015 and was requested to either submit her explanation on or before 30.05.2015 as to why penalty should not be imposed or if she wishes to be heard in person, either she or her authorised representative may appear on or before that date. In response, the assessee filed her reply in this office as per letter dated 16.06.2015. The assessee, in this submission, has mainly contended that the search in her case was not carried out. Therefore, provisions of section 271AAB of the Act are not attracted in her case. The assessee further contended that the assessee's case, at the most, covered by the provisions of section 271AAA and not 271AAB of the Act. The contentions of the assessee in the submission are reproduced as under:-
"I have received captioned letter dated 14/05/2015 with regards to penalty proceedings u/s 271AAB of the Income Tax Act, 1961 ('the Act' for short) for A. Y.2012-13. In that respect I wish to submit as under:
1. I had filed return of income for A.Y.2012-13 and assessment was completed u/s 143(3) r.w.s. 153A of the Act without making any addition to my returned income. However, while passing assessment order for said assessment year, you have mentioned as under:
"The assessee in his return of income has offered additional income of Rs.27,03,770/- which is as per the disclosure of additional income made during the course of search proceedings. This addition income has been offered due to search action and the findings thereof, thus the amount of Rs.27,03,770/- is undisclosed income of the assessee for the specified year as per section 271AAB of the IT Act, Therefore, penalty proceedings u/s 271AAB are initiated for this default."
The said additional income of Rs.27,03,770/- was earned from profit on sale of /and or building.
2. I further wish to inform you that though I have filed return u/s 153A of the Act and certain amount was declared as additional income in the return, the same does not amount to income being declared under search proceedings. The declaration of additional income in the return was a voluntary act and there is no coronary to any specific document found during search. Therefore said additional income does not have a character of undisclosed found in search proceedings. In view thereof no penalty is liveable u/s 271AAB of the Act.
3. I further wish to inform you that, new section 271AAB of the Act relating to penalty where search has been initiated on or after 01.07.2012 is inserted by the Finance Act, 2012 and the same has been has also been made effective from 01.07.2012. Prior to that, penalty on search initiated cases were being dealt with by section 271AAA of the Act.
4. It may be noted that clause (a) of sub-section (1) of section 271AAB provides that in a case where search has been initiated under section 132 on or after 1-7- 2012, 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, if such assessee -
4 IT(SS)A No. 260/Ahd/2017. A.Y. 2012-13
(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.
As mentioned herein above, I had not declared any income in a statement u/s 132(4) of the Act during search therefore the question of levy of penalty u/s 271AAB does not arise. However, on the additional income declared in the return of income filed u/s 153A due taxes were paid with interest within specified date. Accordingly I have complied sub-clauses (ii) and (iii) of clause (a) of sub section (1) of section 271AAB of the Act. Since I do not fall under sub-clause (i) herein above, no penalty is leviable u/s 271AAB of the Act
5. The clause (b) of sub-section (1) of section 271AAB provides that the assessee shall pay by way of penalty, in addition to tax, if any payable by him, 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;
(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.
As mentioned herein above, I had neither declared any income in a statement u/s 132(4) of the Act during search nor was I have asked to admit any undisclosed income during search therefore the question of levy of penalty u/s 271AAB does not arise.
6. The clause (c) of sub-section (1) of section 271AAB provides that the assesses shall pay by way of penalty, in addition to tax, if any payable by him, 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 clauses (a} and (b).
On reading of above clause prima facie the legislative intention behind inserting above clause that in case there is a search and the assessee has made disclosure under statement recorded u/s 132(4) of the Act and said disclosure is not part of income disclosed in the return filed u/s 153A or when no admission of income is made during search though related documents of undisclosed income are found and no additional income is disclosed as part of return u/s 153A of the Act, in such a situation penalty can be levied under clause (c). However in my case, I had 5 IT(SS)A No. 260/Ahd/2017 . A.Y. 2012-13 neither declared any income in a statement u/s 132(4) of the Act during search nor was I have asked to admit any undisclosed income during search nor any document was found which suggested any undisclosed income nor any addition is done to my returned income, therefore the question of levy of penalty u/s 271AAB does not arise.
7. It may foe noted that since notice u/s 271AAB is already issued no penalty can be levied under any other section under the Act. it may be noted that sub-section (2) of new section provides that 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).
8. From reading of section 271AAB as a whole, it can very well be interpreted that penalty may be imposed by A.O. on search initiated cases. Here, I would like to bring to your kind notice that first of all, no search has been initiated on me. In fact, search was initiated on DhanrajManglani and others of Godhara. Therefore, I should not be made party for imposition of penalty u/s 271AAB of the Act.
3. But ld. A.O. did not agree with the contention of the assessee and levied the penalty of Rs. 2,70,377/-.
4. Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) who confirmed the penalty:
"I find no infirmity in the action of the AO in levying penalty. I, however, also find that the appellant's categorical contention that the disclosure u/s 132(4) is not made by the appellant herself but is made by Shri Dhanraj Manglani and therefore, penalty is not leviable has not been specifically and expressly dealt with by the Ld. AO. In this behalf, I may observe that if this argument of the appellant is taken to the logical end, the penalty at 20%, in place of 10% levied by the AO, would become payable by the appellant under clause (b) of section 271AAB because it remains indisputable that the "subject matter of disclosure" is indeed the incriminating documents/unaccounted assets which have not found any reference or entry in the regular books of accounts maintained by the appellant. However, I am also aware of Jurisdictional Tribunal decision in the case of Balaji Formalin Put. Ltd. dated 8/8/2013 of Hon'ble Ahmedabad Tribunal vide ITA No: 1274/Ahd/2012 has held that the disclosure made by the director of the Appellant company will entitle the assessee company to get immunity from provision of section 271AAA. In other words, the disclosure made on behalf of an assessee, if finally "honoured" by that assessee, is equivalent in law to the disclosure u/s 132(4) made by the assessee for the benefit of immunity u/s 6 IT(SS)A No. 260/Ahd/2017 . A.Y. 2012-13 271AAA. In the absence of such benefit, the penalty would become payable. The relevant part of the same is reproduced as under:
9 From the facts and circumstances of the case before us, we are of the considered view that the disclosure made by the director of the appellant company during the search proceedings on behalf of himself, sister concerns and group concerns will entitle the appellant company who is one amongst the group concerns, to claim benefit u/s 271AAA of the Act though its proceedings were completed u/s 133A read with section 143(3) of the Act. Therefore, we hereby delete the penalty levied by the learned AO which was further confirmed by the learned CIT(A).
It is thus clear that in law the "disclosure" made on behalf of the appellant only helps the appellant in not falling under clause (b) requiring levy of penalty @ 20% and thus pay only 10% of the penalty under clause (a) of s. 271AAB(1). Thus, I hold that appellant herself should be deemed to have made the disclosure u/s 132(4). The income offered in the return of income is undoubtedly "undisclosed income" for the "specified previous year" attracting s. 271AAB. Thus, there is no infirmity in the action of the Ld. AO in initiating and levying penalty u/s 271AAB(l)(a) and therefore, the order of the Ld. AO is confirmed. Penalty of Rs.2,70,377/- is sustained.
9. In the result, the appeal is dismissed.
10. In sum total, both the appeals are dismissed."
5. Now assessee has come before us by way of second statutory appeal.
6. We have gone through the relevant record and impugned order. The Co- ordinate Bench in similar facts and circumstances decided in favour of assessee and order arising from the same search in ITA No. 586/Ahd/2018 for the Assessment Year 2012-13 wherein Co-ordinate Bench has granted relief to the assessee with following observation:
16. The only issue raised by the assessee is that the ld. CIT-A erred in confirming the penalty imposed by the AO for Rs. 63,417.00 under section 271AAB of the Act.
17. The assessee has disclosed additional income of 6,34,172.00 in pursuance to the return filed under section 153A of the Act. The AO accordingly on such additional income disclosed by the assessee levied the penalty at the rate of 10% of additional income being 63,417.00 under the provisions of section 271AAB of the Act. The learned CIT (A) also confirmed the order of the AO.7 IT(SS)A No. 260/Ahd/2017
. A.Y. 2012-13 Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
18. The learned AR before us submitted that there was no undisclosed income available to the assessee within the meaning of explanation (c) to section 271 AAB of the Act. Therefore, there cannot be any penalty.
19. On the other hand, the learned DR vehemently supported the order of the authorities below.
20. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the explanation © to section 271AAB of the Act has a direct bearing on the on the issue on hand which reads as under:
"48[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 49[but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President50], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,--
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(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 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.]"
From the above provision, it is clear that the penalty shall be imposed under section 271AAB of the Act where there is undisclosed income within the meaning 8 IT(SS)A No. 260/Ahd/2017 . A.Y. 2012-13 of the explanation © to 271AAB of the Act. However, we note that there was no documentary evidence found by the search team suggesting that there was any undisclosed income of the assessee. As such the income disclosed by the assessee was voluntarily without having found any document in the course of search. We also note that there no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the ld. AR for the assessee. In holding so we draw support and guidance from the order of the Tribunal in the case of ACIT Vs. Marvel Associates reported in 170 ITD 353 wherein it was held as under:
"9. Penalty u/s 271AAB attracts on undisclosed income but not on admission made by the assessee u/s 132(4). The AO must establish that there is undisclosed income on the basis of incriminating material. In the instant case a loose sheet was found according to the A.O., it was incriminating material evidencing the undisclosed income. In the penalty order the AO observed that loose sheet shows the cost per square feet is Rs.3571/- per sft. and assessee stated to have submitted in sworn statement cost per sq. feet at Rs.2200/- to Rs.2300/- per sq. feet. However neither the AO nor the Ld.CIT(A) has verified the cost of construction with the books and projections found at the time of search. The counsel argued that it was mere projection but not the actuals. The write up heading also mentioned that summary of the projected profitability statement. There is no evidence to establish that projections reflected in the loose sheet is real. No other material was found during the course of search indicating the undisclosed income. There was no money, bullion, jewellery or valuable article or thing or entry in the books of accounts or documents transactions were found during the course of search indicating the assets not recorded in the books of accounts or other documents maintained in the normal course, wholly or partly. The revenue did not find any undisclosed asset, any other undisclosed income or the inflation of expenditure during the search/ assessment proceedings. Though a loose sheet of page No.107 of Annexure A/GS/MA/1 was found that does not indicate any suppression of income but it is only projection of profit statement. The amount of Rs.3571/- mentioned in the projections refers to cost and profit which is approximate sale price but not the cost as stated by the AO in the penalty order. The cost of construction in the projections projected at Rs.2177/- which is in synch with the statement given by the assessee. The AO was happy with the disclosure given by the assessee and did not verify the factual position with the books of accounts and projections and bring the evidence to unearth the undisclosed income. Neither the A.O. nor the investigation wing linked the cost of profit or cost of asset to the entries in the books of accounts or to the sales conducted by the assessee to the sale deeds. Therefore, we are unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure. The Hon'ble ITAT Delhi Bench in the case of Ajay Sharma v. Dy.9 IT(SS)A No. 260/Ahd/2017
. A.Y. 2012-13 CIT [2013] 30 taxmann.com 109 held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee has not been declared by the assessee. An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee. Hence penalty u/s 158BFA (2) of the Act is not leviable. The facts of the assessee's case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we set aside the order of the lower authorities and cancel the penalty u/s 271AAB of the Act."
In view of the above, we are not convinced with the penalty levied by the authorities below. Hence we reverse the order of the authorities below and direct the AO to delete the penalty levied by him under section 271 AAB of the Act. Hence the ground of appeal of the assessee is allowed.
21. In the result the appeal of the assessee is allowed.
22. In the combined result, all the six appeals filed by the assessee are allowed.
7. In parity with the aforesaid Co-ordinate Bench decision, we delete penalty imposed and confirmed by the lower authority and direct Assessing Officer to delete the penalty.
8. In the result, appeal filed by the Assessee is allowed.
Order pronounced in Open Court on 18 - 02- 2020
Sd/- Sd/-
(PRADIP KUMAR KEDIA) (MAHAVIR PRASAD)
ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER
Ahmedabad: Dated 18/02/2020
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -