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15.03.2021 The appellant preferred appeal against the order of the ld. AO and the ld. CIT (A) without looking in the merits of the case confirmed penalty leviable @10% of tax sought to be evaded.

Synopsis of Argument Without recording statement imposition Preliminary requirement for invoking penalty u/s of the penalty u/s 271AAA is not 271AAA is basis of statement recorded during the period sustainable. of search u/s 132(4) of the Act. But in our case no such statement was recorded. The director of the assessee company is submitting affidavit on oath containing that no statement was recorded during the search proceeding. (The affidavit is enclosed as annexure for your honour record.) Once the statement was not recorded the imposition of sec. 271AAA is invalid in any circumstances. The Ld. CIT(A) on the ground that the assessee is a habitual offender passed the appeal order which is not a basis to impose penalty u/s 271AAA. The Ld. CIT(A) has not verified that on the date of search statement was recorded u/s 132(4) of the Act by the Ld. AO. No merit was discussed appeal order was passed by the CIT(A). The CIT(A) has brushed aside the provision of section 271AAA which is mandatory to be verified. But in our case on theground that the assessee is a habitual offender passed the appeal orderwhich itself make order impugned. If the Ld. Has not mentioned aboutthe statement recorded u/s 132(4) before imposing penalty u/s 271AAAthe Ld. CIT(A) must mention about it in the appeal order. No statement was recorded during search and date of the statement recorded in not mentioned in the order. Enquiry was also noconducted in our case. In absence of statement enquiry is not possible. On that reason the Ld. AO has not conducted enquiry. Hence, in absence of both the mandatory ingredient penalty u/s 271AAA is not sustainable.

clear all tax dues against us.

The reply of the in view of the fact that the assessee is not tenable in view of the fact that the assessee failed to make payment of the demand determined by the Hon'ble ITSC and Hon'ble ITSC has withdrawn immunity granted to the assessee earlier. The assessee is totally silent in that as pact. Hence, after withdrawal of immunity by the Hon'ble ITSC, the undisclosed income declared by the assessee for SOF as well as further amount of undisclosed income adjusted and determined by the Hon'ble ITSC is liable for penalty u/s 271AAA. Keeping in view facts of the case, I have left with no other option but to impose penalty u/s 271AAA of the Income-tax Act, 1961. It is considered a fit case to levy a penalty of Rs. 36,48,167/- u/s 271AAA, being 10% of the amount of tax leviable in respect of the undisclosed income of Rs. 3,64,81,666/-. Hence, after considering fact of the case, penalty order passed u/s 271AAA of the Income-tax Act, 1961. Penalty of Rs. 36,48,167/- u/s 271AAA of the Income-tax Act, 1961 is imposed.

This order is passed with the prior approval of Joint CIT, Central Range- 1, Patna received vide letter no. JCIT/CR-1/Pat/Penalty Approval/2018- 19/1014 dated 27/07/2018.

Issue demand notice & challan accordingly."

024. While dealing with the penalty u/s 271(1)(c) of the Act, in the preceding paras, similar is the fact with regard to penalty order u/s 271AAA of the Act because, the ld. AO has not made any discussion about the conditions provided u/s 271AAA of the Act on the fulfilment of which the penalty could be levied. Revenue has also failed to place any evidence on record which could prove that whether any show cause notice was issued to the assessee prior to the passing the order levying penalty u/s 271AAA of the Act. The ld. AO has again followed the same course of action and jumped on the conclusions by levying penalty u/s 271AAA of the Act without even having Page | 23 ITA No.52 to 57/PAT/2021 Patliputra Builders Ltd; A.Y. 09-10 to 14-15 satisfied as to whether section 271AAA of the Act can be invoked in the case of the assessee or not. As per section 271AAA(1) of the Act, the assessee can be held liable to pay penalty at the rate of 10% of undisclosed income of the specified previous year. Now, sub-section 1 of Section 271AAA of the Act will not apply if the assessee admits the undisclosed income in the statement given u/s 132(4) of the Act and specify/ substantiate the manner in which such income has been derived. Thus, for invoking of Section 271AAA of the Act, the condition is that the statement has to be recorded u/s 132(4) of the Act during the course of search and only in case of assessee is unable to answer in the statement as discussed above then the penalty u/s 271AAA of the Act can be levied. However, in the instant case, the fact placed before us by the ld. Counsel for the Assessee is that no statement of the director of the company was recorded and in support an affidavit has been filed by Mr. Anil Kumar, director of assessee company, stating that during the search proceedings no statement u/s 132(4) of the Act was recorded by the department at any stage. Once it is established that no statement of the Director of the assessee company was recorded u/s 132(4) of the Act, there cannot be any mechanism to proceed with levy of penalty u/s 271AAA of the Act because assessee had no occasion to admit any undisclosed income and specify the manner in which such income has been derived. When the basic condition which are required to be fulfilled prior to visiting the assessee with the penalty u/s 271AAA of the Act are not present, then without being satisfied, the ld.

025. In the light of the above judgement/ decision, we find that in the penalty order u/s 271AAA of the Act, the ld. AO has not referred to any conditions prescribed u/s 271AAA of the Act nor there is any mentioned of any statement recorded u/s 132(4) of the Act nor is there any mention about the assessee having being asked to explain the manner of earning undisclosed income. Therefore, when the conditions prescribed u/s 271AAA of the Act remains to be fulfilled, the initiation of penalty proceedings u/s 271AAA of the Act are itself void, illegal and bad in law and therefore, the penalty proceedings u/s 271AAA of the Act for A.Ys. 2011-12 and 2012-13 are hereby quashed and impugned penalty levied u/s 271AAA of the Act are hereby deleted. Relevant grounds raised by the assessee for the said assessment years challenging the penalty levied u/s 271AAA of the Act are hereby allowed.