Indian Kanoon - Search engine for Indian Law

2. That the assessee was in default to pay the tax together with interest in respect of undisclosed income and it is mentioned in sub section 2(iii) of Section 271 AAA of the Act that the assessee 'pays t he tax together with interest, if any, in respect of undisclosed income'. Therefore the learned CIT(A) has erred in law in allowing the relief.

3. The issue in appeal lies in a narrow compass of undisputed facts. On 30 t h August 2007, the assessee company and certain associated entities, collectively referred to as Pioneer Group, were subjected to search and seizure operations under section 132 of the Act. During the course of this operation, the assessee made a disclosure of Rs 50,00,000 . There is no dispute that the income so declared was included in the income subsequently returned by the assessee, vide income tax return filed on 28 t h September 2008. The assessment under section 143(3) was completed on 31 s t December 2009, but, while finalizing the assessment, the Assessing Officer also initiated the penalty proceedings under section 271 AAA and observed that "Since the assessee has not paid the full taxes and interest on disclosure made u/s 132(4), penalty proceedings under section 2 71AAA of the Act are initiated." In the resultant penalty proceedings, it was submitted by the assessee that while filing the income tax return and due to an inadvertent mistake, the assessee did not compute interest levy under se ction 234 C. It was for this reason that the self assessment taxes were underpaid by Rs 46,132 but the assessee paid over the shortfall, within permissible time, upon receiving the notice of demand under section 156. It was thus argued that the tax, together with applicable interest, was duly paid by the assessee, and, accordingly, the condition regard payment of tax and interest was duly complied with. The Assessing Officer was, therefore, urged to drop the penalty proceedings. However, the Assessing Offic er was not impressed with this submission. He rejected the submissions of the assessee and proceeded to impose the penalty by observing as follows:

Considering the facts and circumstances of the case, I am of the opinion that it is a fit case for imposition of penalty under section 271 AAA. The quantum of penalty is computed @ 10% of the amount of disclosure at Rs 50,00,000.

4. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) noted that "from a plain reading of the above section (i.e. 271AAA) it is apparent that if the conditions laid down unde r sub section 2 of Section 271 AAA are satisfied, no penalty will be imposed" and that "....in section 271AAA, there is no precondition that the tax along with interest must be paid before filing of return or any other specified date". It was in this backdro p, and in a situation in which it was an admitted position that due tax, along with interest, was paid before the penalty proceedings were concluded, the CIT(A) deleted the impugned penalty. The Assessing Officer is not satisfied with the stand so taken by the CIT(A) and is in appeal before us.

(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 1 s 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 1 s 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 I.T.A. No.: 1326/ Kol. / 2011 A s s e s s m e n t y e ar : 2 0 0 8 - 0 9 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 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 p roceedings 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 - somethin g 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 p articulars 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.