DCIT, CC-2(2), KOLKATA, Kolkata V. Madan Lal Beswal, Kolkata

ITA 1475/KOL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1354 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Salary income; Transactions in derivatives; Source of fund; Question of law; Bonafide mistake
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1471/KOL/20 15 ASSESSMENT YEAR : 2013-1 4 DCIT,CC-2(2), KOLKATA -VS- AMIT AGARWAL [PAN: ABWPA 7376 C] (APPELLANT) (RESPONDENT ) I.T.A NO. 1475/KOL/2015 ASSESSMENT YEAR : 2013-1 4 DCIT,CC-2(2), KOLKATA -VS- MADAN LAL BESWAL [PAN: ADBPB 8910 G] (APPELLANT) (RESPONDENT ) I.T.A NO. 1476/KOL/20 15 ASSESSMENT YEAR : 2013-1 4 DCIT,CC-2(2), KOLKATA -VS- MANOJ BESWAL [PAN: ADBPB 8909 P] (APPELLANT) (RESPONDENT ) FOR THE APPELLANT : SHRI A.K.TIWARI, C IT FOR THE RESPONDENT : SHRI M.D.SHAH, AR DATE OF HEARING : 12.03.2018 DATE OF PRONOUNCEMENT : 14.03.2018 ORDER PER BENCH: 1. THESE APPEALS ARE FILED BY THE REVENUE AGAINST T HE ORDERS OF LD. CIT(A)-20, KOLKATA DATED 14.09.2015 FOR AY 2013-14 IN THE CASE OF SHRI AMIT AGARWAL, SHRI MADAN LAL BESWAL AND SHRI MANOJ BESWAL, BY WHICH HE DELETED T HE PENALTY IMPOSED U/S. 271AAB OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT). 2 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 2 2. BRIEFLY STATED FACTS ARE THAT THERE WAS A SEARCH AND SEIZURE OPERATION IN RESPECT OF NEZONE GROUP OF CASES ON 01.08.2012 AND ON SUBS EQUENT DATES; AND THE ASSESSEES BEFORE US ARE SHRI AMIT AGARWAL, SHRI MADAN LAL BES WAL AND SHRI MANOJ BESWAL WHO ARE ONE OF THE KEY PERSONS OF THIS GROUP. IN TH E PENALTY ORDER, THE LD AO NOTES THAT DURING THE COURSE OF POST SEARCH OPERATION, THE ASS ESSEES ADMITTED AN UNDISCLOSED INCOME OF RS.3,00,00,000/- FOR THE AY UNDER CONSIDE RATION IN THE FORM OF COMMODITY PROFIT VIDE A CONSOLIDATED DISCLOSURE PETITION FIL ED BY SHRI MANOJ BESWAL, CHAIRMAN OF NEZONE GROUP. THE DETAILS OF RETURNS FILED BY THE ASSESSEE ARE AS UNDER WHICH HAS BEEN ACKNOWLEDGED BY THE LD AO IN HIS ORDER :- SHRI AMIT AGARWAL ROI FILED ON 30.9.2013 DISCLOSI NG TOTAL INCOME OF RS 3,26,36,100/-. SHRI MADAN LAL BESWAL ROI FILED ON 30.9.2013 DISC LOSING TOTAL INCOME OF RS 5,66,21,960/-. SHRI MANOJ BESWAL ROI FILED ON 29.9.2013 DISCLOSI NG TOTAL INCOME OF RS 3,44,79,100/-. ACCORDING TO LD AO, ON VERIFICATION OF ACCOUNTS, HE NOTICED THAT THE ASSESSEE FOR THE RELEVANT YEAR DISCLOSED A SUM OF RS.3,00,00,000/- A ND HAD SHOWN THE SAME UNDER THE HEAD INCOME OUT OF SPECULATIVE BUSINESS FROM SALE OF CO MMODITIES. THEN THE LD AO NOTES THAT THE RETURN WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 29.08.2014 ACCEPTING THE RETUR NED INCOME AND PENALTY PROCEEDINGS WERE INITIATED U/S. 271AAB OF THE ACT O N THE AMOUNT DISCLOSED DURING SEARCH OF RS. 3 CR FOR THE GROUP AS A WHOLE AND A FTER SERVING THE PENALTY NOTICE U/S. 271AAB READ WITH SECTION 274 OF THE ACT ON THE ASSE SSEE ON 05.09.2014. IN RESPONSE, THE ASSESSEES SUBMITTED A WRITTEN SUBMISSION, WHICH WE NOTE HAS BEEN REPRODUCED BY THE LD AO IN THE ORDER PASSED U/S. 271AAB OF THE AC T DATED 24.02.2015. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEES, THE LD AO IMPOSED PENALTY U/S. 3 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 3 271AAB(1)(A) OF THE ACT BY OBSERVING THAT THE ENTIR E UNDISCLOSED INCOME CAN ONLY BE TREATED AS ARISING OUT OF DOCUMENTS/TRANSACTIONS/EV IDENCE FOUND IN THE COURSE OF SEARCH U/S. 132 OF THE ACT AND THE SAME WAS NOT ENTERED IN THE BOOKS OF ACCOUNT. AGGRIEVED, ASSESSEES PREFERRED AN APPEAL BEFORE THE LD. CIT(A) , WHO DELETED THE PENALTY BY OBSERVING AS UNDER: 8. I HAVE CONSIDERED THE FINDING OF THE AO IN THE PENALTY ORDER AND THE WRITTEN SUBMISSION AS WELL AS ORAL SUBMISSION MADE BY THE A R DURING THE APPELLATE PROCEEDINGS. I FIND THAT THE AO HAS ARRIVED AT THE CONCLUSION THAT HAD THERE BEEN NO SEARCH OPERATION U/S. 132 OF THE I. T. ACT, 1961, T HE ASSESSEE WOULD NOT HAVE DISCLOSED INCOME WHICH WAS FOUND RECORDED ON PAPERS AND RELAT ED DOCUMENTS IN THE OFFICE PREMISES OF THE ASSESSEE (BUT NOT RECORDED IN THE R EGULAR BOOKS OF ACCOUNTS ON DAY TO DAY BASIS). THE AO HAS NOT BROUGHT ON RECORD ANYTH ING TO PROVE THE INTENTION OF THE ASSESSEE TO DO SO. ON THE OTHER HAND, THE AR HAS E MPHASIZED THAT KEEPING PAPERS/DOCUMENTS CONTAINING ASSESSEES INCOME IN TH E SAFE CUSTODY IN THE OFFICE PREMISES SHOWS THAT THE ASSESSEE HAD NO INTENTION T O CONCEAL HIS INCOME. THE INCIDENCE OF NOT MAKING ENTRIES IN THE REGULAR BOOK S OF ACCOUNTS ON DAY TO DAY BASIS IS A BONAFIDE MISTAKE ON THE PART OF THE ACCOUNTANT FO R WHICH ASSESSEE COULD NOT BE PENALIZED. I THINK, THERE IS NO DOUBT THAT NOT MAK ING ENTRIES IN THE REGULAR BOOKS OF ACCOUNTS OF THE INCOME EARNED BY THE ASSESSEE, IS A MISTAKE ON THE PART OF THE ACCOUNTANT . BUT FOR THIS, IMPOSITION OF THE PENAL TY U/S. 271AAB OF THE I. T. ACT, 1961, (IN A SITUATION WHEN THERE WAS ENOUGH TIME LATE IN THE FY TO MAKE ENTRIES OF SUCH INCOME IN THE REGULAR BOOKS OF ACCOUNTS) IS NOT JUS TIFIED. IT IS SO, BECAUSE IT DOES NOT PROVE THE GUILTY MIND AND INTENTION TO CONCEAL THE INCOME ON THE PART OF THE ASSESSEE. IT ALSO DOES NOT PROVE THAT HAD THERE BEEN NO SEARC H OPERATION, THE ASSESSEE WOULD NOT HAVE DECLARED SUCH INCOME IN THE RETURN OF INCOME. ACCORDINGLY, ASSESSEES APPEAL ON GROUNDS NO. 1 AND 2 ARE ALLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ISSUE INVOLVED HEREIN IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE OF DCIT VS MANISH AGARWALA (AN OTHER MEMBER IN THE SAME NEZONE GROUP) IN ITA NO. 1479/KOL/2015 FOR AY 2013- 14 DATED 9.2.2018 BY THE ORDER OF THIS TRIBUNAL , WHEREIN IT WAS HELD AS UND ER:- 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO HAS LEVIED THE PENALTY U/S. 271AAB ON THE GROUND THAT THE INCOME FROM COMMODITY PROFIT HA S BEEN FOUND DURING SEARCH U/S. 132 OF THE ACT WHICH IS NOT REFLECTED IN THE REGULA R BOOKS OF ACCOUNT. THE AO HAS ACCEPTED THAT DURING SEARCH THE ASSESSEE HAS ADMITT ED U/S. 132(4) OF THE ACT THE 4 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 4 INCOME FROM SPECULATIVE TRADING. THE UNDISPUTED FA CTS THE AO HAS GIVEN FINDING PERTAINING TO THIS CASE IS AS FOLLOWS: I) THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHI CH THE INCOME WAS DERIVED. II) FURNISHED THE RETURN OF INCOME THEREIN AND III) PAID THE TAX ALONG WITH INTEREST. BASED ON THE SAID FINDING, ACCORDING TO AO, THE ASS ESSEE SATISFIES THE CONDITIONS ENUMERATED IN SEC. 271AAB(I)(A) OF THE ACT AND THER EAFTER LEVIED TEN PERCENT OF RS.3 CR., WHICH HAVE BEEN DELETED BY THE IMPUGNED ORDER OF LD. CIT(A). 4. THE LD. DR BROUGHT TO OUR NOTICE THAT IN THE VER Y SAME GROUP CASE OF MANOJ BESWAL & ORS. THE TRIBUNAL HAD CONFIRMED THE LEVY O F PENALTY AND CONTENDED BEFORE US THAT PENALTY U/S. 271AAB OF THE ACT IS MANDATORY AN D THEREFORE, ACCORDING TO LD. DR, THE LD. CIT(A) ERRED IN DELETING THE PENALTY BY STA TING THAT THE ASSESSEE DID NOT HAD ANY MENS REA NOT TO DISCLOSE THE AMOUNT IN QUESTI ON. ACCORDING TO HIM, PENALTY HAS TO BE MANDATORILY LEVIED U/S. 271AAB OF THE ACT ON THE UNDISCLOSED INCOME FOUND DURING SEARCH. ON THE OTHER HAND, LD. AR SHRI MIRAZ D. SHAH, SUPPORTING THE DECISION OF LD. CIT(A) MADE CONTENTIONS THOUGH TAKEN UP BEFO RE THE LD. CIT(A) BUT HAS NOT BEEN ADJUDICATED ON THOSE AVERMENTS, WHICH THE LD. AR URGES BEFORE US TO CONSIDER WHILE ADJUDICATING THE APPEAL OF THE REVENUE. THE LD. AR ALSO POINTED OUT THAT THE CONTENTIONS WHICH HE IS GOING TO RAISE HAS BEEN TAK EN UP BEFORE THE AO ALSO, HOWEVER, ACCORDING TO LD. COUNSEL, THOSE LEGAL ARGUMENTS WER E NOT CONSIDERED BY THE AO IN THE RIGHT PERSPECTIVE. THE FIRST CONTENTION OF THE LD. AR IS THAT SINCE SEC. 271AAB OF THE ACT IS A PENALTY SECTION IT SHOULD BE CONSTRUED STR ICTLY, WHICH WE AGREE BEING IT IS A TRITE LAW THAT PENALTY PROVISIONS HAVE TO BE STRICT LY INTERPRETED. NEXT CONTENTION OF LD. AR IS THAT SEC. 271AAB OF THE ACT IS NOT MANDATORY BECAUSE PARLIAMENT IN ITS WISDOM HAS USED THE WORD MAY AND NOT SHALL. SO, ACCOR DING TO HIM, IT IS THE DISCRETION BESTOWED UPON THE AO WHETHER TO INITIATE AND IMPOSE PENALTY U/S. 271AAB OF THE ACT. WE AGREE WITH THE SAID CONTENTION OF LD. AR BECAUSE WHEN A SIMILAR ISSUE WAS ADJUDICATED BY ITAT LUCKNOW (THE AUTHOR OF THIS ORD ER WAS A MEMBER OF THE BENCH) IN SANDEEP CHANDAK & ORS. VS. CIT (2017) 55 ITR (TRIB) 209 AND 2017 (5) TMI 675- ITAT-LUCKNOW IN ITA NO. 416, 417 AND 418/LKW/2016 D ATED 30.01.2017 WHILE ADJUDICATING A CASE WHERE PENALTY WAS LEVIED UNDER SECTION 271AAB OF THE ACT IT WAS HELD THAT THE PROVISIONS OF SEC. 271AAB OF THE ACT ARE NOT MANDATORY, WHICH MEANS THAT PENALTY NEED NOT BE LEVIED IN EACH AND EVERY C ASE WHEREVER THE ASSESSEE HAS MADE DEFAULT AS STATED IN CLAUSES (A), (B) AND (C) OF T HE ACT. SUB-SECTION (1) OF SEC. 271AAB OF THE ACT USES THE WORD MAY NOT SHALL. MAY CANNOT BE EQUATED WITH SHALL ESPECIALLY IN PENALTY PROCEEDING. USING THE WORD MAY IN OUR OPINION, GIVES A DISCRETION TO THE AO TO LEVY THE PENALTY OR NOT TO LEVY, EVEN IF THE ASSESSEE HAS MADE THE DEFAULT UNDER THE SAID PROVISION. THEREFORE, THE 2 ND GROUND OF REVENUE FAILS AND WE HOLD THAT PENALTY U/S. 271AAB OF THE ACT IS NOT MANDATORY AND IS DISCRETIONARY. BEFORE PROCEEDING FURTHER, WE NOTE THAT THE EX PART E ORDER PASSED BY THE COORDINATE 5 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 5 BENCH RELIED UPON BY LD. DR, MANOJ BESWAL, SUPRA, H AVE BEEN RECALLED IN MA NOS. 218 TO 220/KOL/2017 DATED 12.01.2018 BY OBSERVING A S UNDER: BY VIRTUE OF THESE MISCELLANEOUS APPLICATIONS, THE ASSESSEE SEEKS TO RECALL THE ORDER PASSED BY THIS TRIBUNAL IN I.T.A. NOS. 14 71, 1475&1476/KOL/2015 IN THE HANDS OF AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL RESPECTIVELY FOR THE ASSESSMENT YEAR 2013-14 ON THE GROUND THAT NOTICE WAS NOT SERVED ON THE ASSESSEE FOR THE HEARING AND ON C ERTAIN FACTUAL ERROR THAT HAD CREPT IN THE ORDER OF THE TRIBUNAL. THE FIRST P RELIMINARY OBJECTION RAISED BY THE LD. AR WAS THAT THE NOTICE OF HEARING WAS NO T SERVED ON THE ASSESSEE FOR THE HEARING SCHEDULED ON 06.11.2017 AND HENCE, THE ASSESSEE COULD NOT BE PRESENT ON THE SAID DATE BY WAY OF PERSONAL APPEARA NCE. THE SECOND OBJECTION RAISED BY THE LD. AR WAS THAT THE TRIBUNA L HAD STATED IN PARA 9 OF ITS ORDER THAT THE ASSESSEE HIMSELF HAD ACCEPTED TH AT HE IS ENGAGED IN COMMODITIES TRADING BUSINESS AND THEREFORE MANDATED TO MAINTAIN BOOKS OF ACCOUNTS IN TERMS OF SECTION 44AA OF THE ACT AND TH EREBY INFERRING THAT THE ASSESSEE HAD REPORTED THE PROFIT FROM COMMODITIES T RADING BUSINESS UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. BASE D ON THIS CRUCIAL FINDING, THE TRIBUNAL HAD CONCLUDED THAT SINCE THE TRANSACTION OF COMMODITIES TRADING HAD NOT BEEN ENTERED BY THE ASSESSEE IN HI S BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH ON 01.08.2012 AND THEREBY IT TAK ES THE CHARACTER OF UNDISCLOSED INCOME FOR WHICH PENALTY U/S 271AAB OF THE ACT IS EXIGIBLE. IN THIS REGARD, WE FIND THAT THE LD. AR DREW OUR ATTEN TION TO THE COMPUTATION OF THE TOTAL INCOME WHEREIN THE ASSESSEE HAD OFFERED I NCOME FROM COMMODITY TRADING ONLY UNDER THE HEAD INCOME FROM OTHER SOURC ES. WE ALSO FIND THAT THE LD. AO HAD ALSO SPECIFICALLY STATED IN THE BODY OF THE ASSESSMENT ORDER VIDE COLUMN NO. 10 THAT THE ASSESSEE IS HAVING ONLY SALA RY INCOME AND INCOME FROM OTHER SOURCES. WE FIND THAT DUE TO THE ABSENCE OF THE ASSESSEE AT THE TIME OF HEARING THIS PARTICULAR FACT HAD ESCAPED THE ATT ENTION OF THE TRIBUNAL. ON PERUSAL OF THE FACT AVAILABLE ON RECORD, WE FIND TH AT THE FINDING RECORDED BY THIS TRIBUNAL IN PARA 9 OF ITS ORDER DATED 10.11.20 17 THAT THE ASSESSEE IS MANDATED TO MAINTAIN BOOKS OF ACCOUNTS U/S 44AA OF THE ACT IS FACTUALLY INCORRECT AND DESERVES TO BE RECTIFIED. THIS MISTAK E OF PRIMARY FACT HAD LEAD TO A CONCLUSION OF UPHOLDING THE LEVY OF PENALTY U/ S 271AAB OF THE ACT. HENCE, IN THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE AFORESAID MISTAKE OF PRIMARY FACT RIGHTLY POINTED OUT BY THE LD. A R , WE DEEM IT FIT TO RECALL THE ORDERS OF THIS TRIBUNAL DATED 10.11.2017 IN THE CASE OF AFORESAID ASSESSEES. IN THE AFORESAID SCENARIO, THE LEGAL POSITION IS T HAT AN ORDER WHICH HAS BEEN RECALLED FOR DE NOVO ADJUDICATION, IS NO ORDER IN T HE EYES OF LAW AND SO IT CANNOT BE TREATED AS A PRECEDENT. HENCE, THE RELIANCE PLACED BY THE LD. DR IN RESPECT OF ASSESSEES IN THE SAME GROUP CONCERN CASES AS DECID ED BY THE TRIBUNAL NO LONGER SURVIVES AND CANNOT BE TREATED AS COVERED AGAINST T HE ASSESSEE. 6 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 6 5. THE THIRD CONTENTION OF THE LD. AR IS THAT THE A SSESSEE IS AN INDIVIDUAL, WHO WAS DRAWING SALARY INCOME. SO, ACCORDING TO HIM, HE NEED NOT MAINTAIN ANY BOOKS OF ACCOUNT AS PER THE ACT. ACCORDING TO LD. AR, UNDISP UTEDLY THE ASSESSEE WAS ENGAGED FOR THE FIRST TIME THIS AY ONLY IN TRADING OF COMMO DITIES, THAT TOO WHICH WAS CONDUCTED IN A NON-SYSTEMATIC MANNER AND THE INCOME FROM IT WAS DULY OFFERED TO TAX BY THE ASSESSEE IN HIS RETURN OF INCOME UNDER THE HEAD IN COME FROM OTHER SOURCES, WHICH, ACCORDING TO LD. AR WAS ACCEPTED AS SUCH BY THE AO AND DREW OUR ATTENTION TO PAGE ONE OF ASSESSMENT ORDER, (NOT THE PENALTY ORDER) WH EREIN WE NOTE THAT THE AO HAS ACKNOWLEDGED THAT THE ASSESSEE OWNED UP RS. 3 CR. A S HIS INCOME FROM COMMODITY PROFIT AND IT HAS BEEN DISCLOSED IN HIS INCOME AND EXPENDITURE FOR AY 2013-14 UNDER THE HEAD INCOME OUT OF SPECULATIVE BUSINESS FROM S ALE OF COMMODITIES, AND THEREAFTER THE AO CONFIRMED THE ASSESSEES CLAIM AN D THEREAFTER TOTAL INCOME WAS ASSESSED BY THE AO AS PER THE RETURN SUBMITTED BY T HE ASSESSEE. IN THE LIGHT OF THE AFORESAID FACTS DISCERNED FROM ASSESSMENT ORDER, TH E ASSESSEES CASE IS THAT FOR THE FIRST TIME IN THIS AY HE WAS DOING UNSYSTEMATIC SPE CULATIVE ACTIVITY WHICH EARNED INCOME AND, IT WAS BROUGHT UNDER THE HEAD INCOME F ROM OTHER SOURCES, AND SO, ACCORDINGLY, HE IS NOT REQUIRED TO MAINTAIN BOOKS O F ACCOUNT AS STIPULATED IN SEC. 44AA OR SEC. 44AA(2)(II) OF THE ACT BECAUSE, THESE PROVISIONS ARE ONLY FOR ASSESSEES WHO ARE EARNING INCOME UNDER THE HEAD BUSINESS OR PROFESSION. WE NOTE THAT SEC. 44AA OR SEC. 44AA(2)(II) OF THE ACT CASTS A DUTY U PON THE ASSESSEE WHO ARE INTO BUSINESS OR PROFESSION AND SUCH ASSESSEES ARE BO UND TO MAINTAIN BOOKS OF ACCOUNT AS STIPULATED THEREIN. FOR APPRECIATING THIS SUBMI SSION LET US GO THROUGH THE PROVISIONS OF LAW. 44AA. (1) EVERY PERSON CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOU NTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ANY OTHER PRO FESSION AS IS NOTIFIED BY THE BOARD IN THE OFFICIAL GAZETTE SHALL KEEP AND MAINTA IN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE [ASSESSING] O FFICER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF T HIS ACT. (2) EVERY PERSON CARRYING ON BUSINESS OR PROFESSION [NOT BEING A PRO FESSION REFERRED TO IN SUB- SECTION (1)] SHALL, (I) IF HIS INCOME FROM BUSINESS OR PROFESSION EXCEEDS [ ONE LAKH TWENTY] THOUSAND RUPEES OR HIS TOTAL SALES, TURNOVER OR GRO SS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFESSION EXCEED OR EX CEEDS [TEN LAKH] RUPEES IN ANY ONE OF THE THREE YEARS IMMEDIATELY PR ECEDING THE PREVIOUS YEAR; OR (II) WHERE THE BUSINESS OR PROFESSION IS NEWLY SET UP IN ANY PREVIOUS YEAR, IF HIS INCOME FROM BUSINESS OR PROFESSION IS LIKELY TO EXCEED [ONE LAKH TWENTY] THOUSAND RUPEES OR HIS TOTAL SALES, TURNOVE R OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFESSION ARE O R IS LIKELY TO EXCEED [TEN LAKH] RUPEES, [DURING SUCH PREVIOUS YEAR; OR 7 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 7 (III) WHERE THE PROFITS AND GAINS FROM THE BUSINESS ARE D EEMED TO BE THE PROFITS AND GAINS OF THE ASSESSEE UNDER [SECTION 44 AE] [OR SECTION 44BB OR SECTION 44BBB], AS THE CASE MAY BE, AND THE ASSESSEE HAS CLAIMED HIS INCOME TO BE LOWER THAN THE PROFITS OR GAINS SO DEEMED TO BE THE PROFITS AND GAINS OF HIS BUSINESS, AS THE CA SE MAY BE, DURING SUCH [PREVIOUS YEAR; OR]] (IV) WHERE THE PROFITS AND GAINS FROM THE BUSINESS ARE D EEMED TO BE THE PROFITS AND GAINS OF THE ASSESSEE UNDER SECTION 44A D AND HE HAS CLAIMED SUCH INCOME TO BE LOWER THAN THE PROFITS AN D GAINS SO DEEMED TO BE THE PROFITS AND GAINS OF HIS BUSINESS AND HIS INCOME EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TA X DURING SUCH PREVIOUS YEAR,] KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER D OCUMENTS AS MAY ENABLE THE [ASSESSING] OFFICER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. (3) THE BOARD MAY, HAVING REGARD TO THE NATURE OF T HE BUSINESS OR PROFESSION CARRIED ON BY ANY CLASS OF PERSONS, PRESCRIBE, BY R ULES, THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS (INCLUDING INVENTORIES, WHEREVE R NECESSARY) TO BE KEPT AND MAINTAINED UNDER SUB-SECTION (1) OR SUB-SECTION (2), THE PARTICULARS TO BE CONTAINED THEREIN AND THE FORM AND THE MANNER IN WH ICH AND THE PLACE AT WHICH THEY SHALL BE KEPT AND MAINTAINED. (4) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (3), THE BOARD MAY PRESCRIBE, BY RULES, THE PERIOD FOR WHICH THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS TO BE KEPT AND MAINTAINED UNDER SUB-SECTI ON (1) OR SUB-SECTION (2) SHALL BE RETAINED.] SO FROM A READING OF THE ABOVE PROVISIONS WHICH CLE ARLY STIPULATES THAT ASSESSEE WHO ARE CARRYING ON BUSINESS OR PROFESSION SHALL KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH MAY ENABLE THE AO TO COMP UTE THE TOTAL INCOME. WE NOTE THAT ASSESSEE IN THE STATEMENT OF TOTAL INCOME FILE D BEFORE THE AO HAS SHOWN INCOME ONLY UNDER TWO HEADS (I) SALARY INCOME (II) INCOME FROM OTHER SOURCES. WE WOULD LIKE TO REPRODUCE THE SUMMARY OF TOTAL INCOME OF THE ASS ESSEE FILED ALONG WITH THE RETURN: INCOME FROM SALARY RS. 45,57,600 INCOME FROM OTHER SOURCES RS.3,00,24,047 RS.3,45,81,647 8 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 8 6. WE NOTE THAT THE AO HAS ACCEPTED THE AFORESAID S TATEMENT OF TOTAL INCOME FILED BEFORE HIM WITHOUT CONTESTING THE CLAIM OF THE ASSE SSEE AS TO WHETHER THE ASSESSEES CLAIM OF INCOME OTHER THAN FROM SALARY SHOULD BE FR OM INCOME FROM BUSINESS. THE CONFUSION THAT HAS ARISEN IN THIS CASE, WE NOTE IS ON THE MISDIRECTION OF AO IN THE ASSESSMENT PROCEEDINGS WHEREIN THE ASSESSMENT ORDER OF THE ASSESSEE, THE AO HAS OBSERVED DURING SEARCH AND SEIZURE OPERATION, SHRI MANOJ BESWAL HAD MADE A CONSOLIDATED DISCLOSURE OF RS.32 CRORE VIDE HIS DIS CLOSURE PETITION. OUT OF THIS CONSOLIDATED DISCLOSURE, THE ASSESSEE OWNED UP RS. 3 CR. IN THE DISCLOSURE PETITION SHRI MANOJ BESWAL IT WAS STATED THAT THE SOURCE OF SUCH UNDISCLOSED INCOME WAS OUT OF COMMODITY PROFIT. IT HAS BEEN SUBMITTED THAT THE A MOUNT HAS ALREADY BEEN DISCLOSED IN HIS INCOME & EXPENDITURE ACCOUNT FOR THE AY 2013-14 UNDER THE HEAD INCOME OUT OF SPECULATIVE BUSINESS FROM SALE OF COMMODITIES. VE RIFICATION OF ACCOUNTS CONFIRMS HIS CLAIM. THIS OBSERVATION IS FLAWED BECAUSE, WE NOTE THAT AO GOT CARRIED AWAY BY PERUSAL OF THE INCOME & EXPENDITURE ACCOUNT FOR AY 2013-14 SUBMITTED BY THE ASSESSEE BEFORE HIM, WHEREIN IT WAS SHOWN IN THE IN COME SIDE THAT IS RIGHT HAND COLUMN AS INCOME FROM SPECULATIVE BUSINESS FROM SA LE OF COMMODITIES AND LEFT HAND SIDE COLUMN REFLECTS THE EXPENDITURE; AND AO C AME TO THE CONCLUSION THAT ASSESSEE HAS DISCLOSED UNDER THE HEADING INCOME OUT OF SPECULATIVE BUSINESS FROM SALE OF COMMODITIES. THE CHARACTER OF A RECEIPT AND THE HEAD UNDER WHICH IT HAS TO BE TAXED IS NOT BASED ON THE NOMENCLATURE OF RECEIPT O F INCOME SHOWN IN INCOME & EXPENDITURE ACCOUNT. ALL THE INCOMES OF REVENUE NA TURE WILL BE POSTED IN THE RIGHT HAND SIDE COLUMN OF INCOME IN THE INCOME & EXPEND ITURE ACCOUNT AND THE DESCRIPTION GIVEN THEREIN CANNOT DETERMINE THE HEAD OF INCOME PRESCRIBED UNDER CHAPTER IV OF THE ACT. THEREFORE, THE OBSERVATION O F THE AO IN ASSESSMENT ORDER IN THE LIGHT OF HIS ACTION OF ACCEPTING THE STATEMENT OF T OTAL INCOME FILED BY THE ASSESSEE ALONG WITH RETURN WHICH WITHOUT BEING CONTESTED, IS ERRONEOUS, UNLESS THE AO WAS ABLE TO NEGATE THE CLAIM OF THE ASSESSEE BY BRINGING THE INCOME FROM COMMODITY TRANSACTIONS AS PART OF BUSINESS INCOME. IT SHOULD BE REMEMBERED THAT UNDER THE INCOME TAX ACT 1961, THE TOTAL INCOME OF AN ASSESSE E/INDIVIDUAL/COMPANY IS CHARGEABLE TO TAX U/S. 4 OF THE ACT. THE TOTAL INC OME HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SECTION 14 OF THE ACT LAYS DOWN THAT FOR THE PURPOSE OF COMPUTATION, INCOME OF AN ASSESSEE HAS T O BE CLASSIFIED UNDER FIVE HEADS. IT IS POSSIBLE FOR AN ASSESSEE/INDIVIDUAL/COMPANY T O HAVE FIVE DIFFERENT SOURCES OF INCOME, EACH ONE OF IT WILL BE CHARGEABLE TO INCOME TAX ACT. PROFITS AND GAINS OF BUSINESS OR PROFESSION IS ONLY ONE OF THE HEADS UND ER WHICH AN ASSESSEES INCOME IS LIABLE TO BE ASSESSED TO TAX. IF AN ASSESSEE HAS N OT COMMENCED BUSINESS THERE CANNOT BE ANY QUESTION OF ASSESSMENT OF ITS PROFITS AND GA INS OF BUSINESS. THAT DOES NOT MEAN THAT UNTIL AND UNLESS THE ASSESSEE COMMENCES ITS BU SINESS, ITS INCOME FROM ANY OTHER SOURCE WILL NOT BE TAXED AS HELD BY THE HONBLE SUP REME COURT IN THE CASE OF TUTICORIN ALKALI & CHEMICALS LTD. VS. CIT (1997) 227 ITR 172 (SC). IT HAS BEEN FURTHER HELD THAT WHEN THE QUESTION IS WHETHER A RECEIPT OF MONE Y IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTION FROM THAT RECEIPT IS PRINCIPLES O F LAW AND NOT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE. FURTHER, THE HONBLE APEX COU RT HELD THAT THE QUESTION AS TO WHETHER A PRINCIPAL RECEIPT IS OF THE NATURE OF INC OME AND FALLS WITHIN THE CHARGE OF SEC. 4 OF THE ACT IS A QUESTION OF LAW WHICH HAS TO BE DECIDED BY THE COURT ON THE BASIS OF THE PROVISIONS OF THE ACT AND INTERPRETATION OF THE TERM INCOME GIVEN IN A LARGE 9 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 9 NUMBER OF DECISIONS OF THE HONBLE SUPREME COURT, H IGH COURT AND PRIVY COUNCIL. AFTER TAKING NOTE OF THE APEX COURT ORDER AS ABOVE, WE NOTE THAT THE AO IN THE ASSESSMENT ORDER AFTER HAVING ACCEPTED THE STATEMEN T OF TOTAL INCOME (SUPRA) AND THE RETURN WHEREIN THE ASSESSEE HAS SHOWN THE INCOME FR OM COMMODITIES UNDER THE HEAD INCOME FROM OTHER SOURCES CANNOT NOW AFTER PERUSA L OF INCOME & EXPENDITURE ACCOUNT DETERMINE THE CHARACTER OF TRANSACTION IN THE PENALTY PROCEEDINGS AS INCOME FROM BUSINESS OR PROFESSION WHICH APPROACH /ACTION IS ERRONEOUS. WE NOTE THAT THE ASSESSEE IN HIS STATEMENT OF TOTAL INCOME ALONG WITH RETURN HAS CLASSIFIED HIS INCOME UNDER TWO HEADS (I) SALARY A ND (II) FROM OTHER SOURCES AND THE INCOME OF RS. 3 CR. AS INCOME FROM OTHER SOURCES, W HICH WE FIND THE AO HAS NOT CONTESTED IN THE ASSESSMENT ORDER, HAS THUS CRYSTAL LIZED AND THE NECESSARY INFERENCE DRAWN IS THAT ASSESSEE AN INDIVIDUAL WHO WAS ADMITT EDLY A SALARIED PERSON ENGAGED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION (THAT TOO FOR THE FIRST TIME) IN AN ACTIVITY FROM WHICH HE DERIVED I NCOME FROM OTHER SOURCES ARE NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNT WHICH ARE APP LICABLE ONLY IF THE ASSESSEE WAS ENGAGED IN BUSINESS OR PROFESSION. HOWEVER, WE FUR THER NOTE THAT THE TRANSACTIONS WHICH YIELDED INCOME, THE ASSESSEE HAD IN FACT MAIN TAINED RECORDS FROM WHICH THE AO WAS ABLE TO DEDUCE THE TRUE INCOME AND EXPENDITURE OF THE ASSESSEE. WE NOTE THE AO IN THE ASSESSMENT ORDER HAS ACCEPTED THE RETURNED I NCOME COMPRISING OF INCOME FROM SALARY AND INCOME FROM OTHER SOURCES BY OBSERVING A S UNDER : TOTAL INCOME ASSESSED AS PER RETURN RS.3,44,65,120 /-. AND FURTHER WE NOTE THAT THE AO HAD SPECIFICALLY STATED IN THE BODY OF THE ASSESSMENT ORDER VIDE COLUMN NO. 10 THAT THE ASSESSEE IS HAVIN G ONLY SALARY INCOME AND INCOME FROM OTHER SOURCES. THUS FROM A PERUSAL OF THE AS SESSMENT ORDER, IT IS NOT IN DISPUTE THAT ASSESSEE IS NOT ENGAGED IN ANY BUSINESS. AND T HE AO CANNOT CHANGE THE CHARACTER OF INCOME IN A DERIVATIVE PROCEEDING WHICH IS AN OF F-SHOOT OF ASSESSMENT PROCEEDINGS I.E. THE PENALTY PROCEEDINGS WITHOUT CONTESTING AND MAKING A FINDING AGAINST THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT ORDER AS DISCUSSE D ABOVE. 7. FINALLY, THE LD. AR SUBMITTED THAT DURING THE SE ARCH, THE SEARCH PARTY FOUND THE RECORDS OF THE ASSESSEES TRANSACTIONS IN SPECU LATIVE COMMODITY FROM THE DRAWER OF ASSESSEES ACCOUNTANT FROM WHICH THE AO COULD COMPU TE THE INCOME OF THE ASSESSEE FROM THE SAID TRANSACTION WHICH AMOUNT ASSESSEE DEC LARED DURING SEARCH AND WHICH WAS DULY RETURNED AND WHICH FIGURE WAS ACCEPTED BY THE AO. ACCORDING TO LD. AR, THE FACT THAT SEARCH HAPPENED ON 01.08.2012 NEED TO BE TAKEN NOTE OF SINCE UNDISPUTEDLY THERE WAS ENOUGH AND MORE TIME FOR THE ASSESSEE TO SUBMIT THE ACCOUNTS DURING ASSESSMENT PROCEEDINGS WHICH FACT HAS BEEN TAKEN NO TE OF AND CONCURRED BY THE LD. CIT(A). THEREAFTER, THE LD. AR DREW OUR ATTENTION TO THE DEFINITION OF UNDISCLOSED INCOME GIVEN UNDER SECTION 271AAB WHICH READS AS UN DER: PENALTY WHERE SEARCH HAS BEEN INITIATED. 10 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 10 '271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING 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 ******** EXPLANATION FOR THE PURPOSES OF THIS SECTION, - (A) . (B) . (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHE R VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OT HER 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 SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NOR MAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SE ARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RE CORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHIC H IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD TH E SEARCH NOT BEEN CONDUCTED. ACCORDING TO THE LD. AR, FROM THE FACTS AND CIRCUMS TANCES DESCRIBED ABOVE, SINCE THE ASSESSEE IS NOT ENGAGED IN BUSINESS OR PROFESSION, HE DOES NOT REQUIRE TO MAINTAIN THE BOOKS OF ACCOUNT AS PER SEC. 44AA OR SEC. 44AA(2) O F THE ACT, THEREFORE, THE ASSESSEES CASE FALLS IN THE SECOND LIMB I.E. OR OTHER DOCUME NTS AS STIPULATED U/S. 271AAB EXPLANATION (C) (SUPRA) WHICH DESCRIBES UNDISCLOSED INCOME FOR THE PURPOSES OF THIS SECTION WHICH IS VERY IMPORTANT TO ADJUDICATE THIS ISSUE. THEREFORE, THE QUESTION IS WHEN THE SEARCH TOOK PLACE, THE ASSESSEES TRANSACT IONS (IN THIS CASE, THE SPECULATIVE TRANSACTION) HAS BEEN FOUND TO BE RECORDED IN THE OTHER DOCUMENTS WHICH IS (RETRIEVED FROM THE ASSESSEES ACCOUNTANTS DRAWER) AND BASED ON THAT THE ASSESSEE DECLARED RS. 3 CR. DURING SEARCH AND LATER RETURNED INCOME OF RS. 3 CR. AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WA S ACCEPTED BY THE AO IN TOTO. WE NOTE THAT SINCE THE INCOME UNDER QUESTION (RS. 3 CR.) WAS IN FACT ENTERED IN THE OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE R ELATING TO THE AY 2013-14, 11 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 11 WHICH DOCUMENT WAS RETRIEVED DURING SEARCH, HENCE, THE AMOUNT OF RS. 3 CR. OFFERED BY THE ASSESSEE DOES NOT FALL IN THE KEN OF UNDISCLOS ED INCOME DEFINED IN SEC. 271AAB OF THE ACT. SO, RS. 3 CR. WHICH WAS COMMODITY PROF IT RECORDED IN THE OTHER DOCUMENT MAINTAINED BY THE ASSESSEE WHICH WAS RETRIEVED DURI NG SEARCH CANNOT BE TERMED AS UNDISCLOSED INCOME IN THE DEFINITION GIVEN U/S. 2 71AAB OF THE ACT. SINCE RS. 3 CR. CANNOT BE TERMED AS UNDISCLOSED INCOME AS PER SEC . 271AAB OF THE ACT, NO PENALTY CAN BE LEVIED AGAINST THE ASSESSEE. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE AFORESAID REASONING RENDERED BY US. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 4. WE FIND THAT THE FACTS IN THE AFORESAID CASE AND THE DECISION RENDERED THEREON ARE SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CAS ES BEFORE US AND RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE APPEALS OF THE R EVENUE. 5. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 14.03.2 018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14.03.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. I) AMIT AGARWAL, DD TOWER, GS ROAD, CHRISTIAN BA STI, GUWAHATI-781001. (II) MADAN LAL BESWAL & MANOJ BESWAL, FLAT NO. 6N , LAKE TOWER, 87, SOUTHERN AVENUE, KOLKATA-700029. 12 ITA NOS.1471,1475&1476/KOL/2015 AMIT AGARWAL, MADAN LAL BESWAL AND MANOJ BESWAL A.YR.2013-14 12 2. DCIT, CIRCLE-2(2), KOLKATA, AAYAKAR BHAWAN POORV A, 110, SHANTI PALLY, 4 TH FLOOR, KOLKATA-700107. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S