DCIT, CC-2(2), KOLKATA, Kolkata V. Agam Saran Khemka, Kolkata

ITA 1477/KOL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6541 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURAV KUMAR
• Assessee Lawyers: M D SHAH LD
• Keywords: Search and seizure; Salary income; Transactions in derivatives; Source of fund; Question of law
• Section: 44AD; 132

Judgement Text

1 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M.BALAGANESH, AM] I.T.A. NO. 1472/KOL/2015 ASSESSMENT YEAR: 2013-14 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2), KOLKATA. VS. SANWAR MAL AGARWALA (PAN: ADTPA5153E) APPELLANT RESPONDENT & I.T.A. NO. 1477/KOL/2015 ASSESSMENT YEAR: 2013-14 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2), KOLKATA. VS. AGTAM SARAN KHEMKA (PAN: AFNPK3645K) APPELLANT RESPONDENT DATE OF HEARING 20.02.2018 DATE OF PRONOUNCEMENT 26.04.2018 FOR THE APPELLANT SHRI SAURAV KUMAR, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI M. D. SHAH, LD. AR ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEALS FILED BY THE REVENUE ARE AGAINST THE SEPARATE ORDERS OF LD. CIT(A), KOLKATA DATED 14.09.2015 FOR AY 2013-14. SINCE FAC TS ARE COMMON AND GROUNDS ARE IDENTICAL WE DISPOSE OF BOTH THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. AT THE OUTSET ITSELF, THE LD. COUNSEL FOR THE AS SESSEE SHRI M. D. SHAH DREW OUR ATTENTION TO THE FACT THAT THE PENALTY IMPOSED U/S. 271AAB OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS BASED ON SEARCH AND SEIZURE OPERATION CARRIED OUT AGAINST THE NEEZONE GROUP OF CASES ON 01.08.2012. IN THE PENALTY ORDER THE AO NOTES THAT ASSESSEE SHRI AGAM SARAN KHEMKA HAS ADMITTED AN UND ISCLOSED INCOME OF RS.1,50,00,000/- AND SHRI SANWAR MAL AGARWALA HAS A DMITTED AN UNDISCLOSED INCOME OF 2 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 RS.2,55,00,000/- FOR AY 2013-14 UNDER CONSIDERATION IN THE FORM OF COMMODITY PROFIT VIDE CONSOLIDATED DISCLOSURE PETITION FILED BY SHRI MANO J BISWAL, CHAIRMAN OF NEZONE GROUP. SIMILAR PENALTY IMPOSED U/S. 271AAB OF THE ACT IN R ESPECT OF SHRI SANWAR MAL AGARWAL WHO WAS ALSO ONE OF THE ASSESSEES WHOSE INCOME WAS ADMITTED AS UNDISCLOSED INCOME FROM COMMODITY PROFIT VIDE CONSOLIDATED DISCLOSURE PETIT ION FILED BY SHRI MANOJ BISWAL, CHAIRMAN, NEZONE GROUP WAS DELETED BY THE LD. CIT(A ) WHICH ACTION OF THE LD. CIT (A) HAS BEEN UPHELD BY THE TRIBUNAL IN ITA NO. 1479/KOL /2015 FOR AY 2013-14 BY OBSERVING AS UNDER: 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH 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 HAS BEEN FOUND DURING SEARCH U/S. 132 OF THE ACT WHICH IS NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THE AO HAS ACCEPT ED THAT DURING SEARCH THE ASSESSEE HAS ADMITTED U/S. 132(4) OF THE ACT THE INCOME FROM SPE CULATIVE TRADING. THE UNDISPUTED FACTS 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 THEREAFTER LEVI ED 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 OF PENAL TY AND CONTENDED BEFORE US THAT PENALTY U/S. 271AAB OF THE ACT IS MANDATORY AND THEREFORE, ACCORDING TO LD. DR, THE LD. CIT(A) ERRED IN DELETING THE PENALTY BY STATING THAT THE ASSESSE E DID NOT HAD ANY MENS REA NOT TO DISCLOSE THE AMOUNT IN QUESTION. ACCORDING TO HIM, PENALTY HAS TO BE MANDATORILY LEVIED U/S. 271AAB OF THE ACT ON THE UNDISCLOSED INCOME FOUND DURING S EARCH. ON THE OTHER HAND, LD. AR SHRI MIRAZ D. SHAH, SUPPORTING THE DECISION OF LD. CIT(A ) MADE CONTENTIONS THOUGH TAKEN UP BEFORE 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 TAKEN UP BEFORE THE AO ALSO, HOWEVER, ACCORDING TO LD. COUNSEL, THOSE LEGA L ARGUMENTS WERE NOT CONSIDERED BY THE AO IN THE RIGHT PERSPECTIVE. THE FIRST CONTENTION O F 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 STRICTLY INTERPR ETED. NEXT CONTENTION OF LD. AR IS THAT SEC. 271AAB OF THE ACT IS NOT MANDATORY BECAUSE PARLIAME NT IN ITS WISDOM HAS USED THE WORD MAY AND NOT SHALL. SO, ACCORDING TO HIM, IT IS THE DISCRETION BESTOWED UPON THE AO WHETHER TO INITIATE AND IMPOSE PENALTY U/S. 271AAB OF THE A CT. WE AGREE WITH THE SAID CONTENTION OF LD. AR BECAUSE WHEN A SIMILAR ISSUE WAS ADJUDICATED BY ITAT LUCKNOW (THE AUTHOR OF THIS ORDER 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. 41 6, 417 AND 418/LKW/2016 DATED 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 THE ACT. SUB-SECTION (1) OF SEC. 271AAB OF THE ACT USES THE WORD MAY NOT SHALL. MAY CANNOT BE EQUATE D 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 MA DE THE DEFAULT UNDER THE SAID PROVISION. 3 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 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 PROCEED ING FURTHER, WE NOTE THAT THE EX PARTE ORDER PASSED BY THE COORDINATE BENCH RELIED UPON BY LD. DR, MANOJ BESWAL, SUPRA, HAVE BEEN RECALLED IN MA NOS. 218 TO 220/KOL/2017 DATED 12.01.2018 BY OBSERVING AS UNDER: BY VIRTUE OF THESE MISCELLANEOUS APPLICATIONS, THE ASSESSEE SEEKS TO RECALL THE ORDER PASSED BY THIS TRIBUNAL IN I.T.A. NOS. 1471, 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 F OR THE HEARING AND ON CERTAIN FACTUAL ERROR THAT HAD CREPT IN THE ORDER OF THE TRIBUNAL. THE FI RST PRELIMINARY OBJECTION RAISED BY THE LD. AR WAS THAT THE NOTICE OF HEARING WAS NOT SERVED ON THE ASSESSEE FOR THE HEARING SCHEDULED ON 06.11.2017 AND HENCE, THE ASSESSEE COULD NOT BE PRE SENT ON THE SAID DATE BY WAY OF PERSONAL APPEARANCE. THE SECOND OBJECTION RAISED BY THE LD. AR WAS THAT THE TRIBUNAL HAD STATED IN PARA 9 OF ITS ORDER THAT THE ASSESSEE HIMSELF HAD A CCEPTED THAT HE IS ENGAGED IN COMMODITIES TRADING BUSINESS AND THEREFORE MANDATED TO MAINTAIN BOOKS OF ACCOUNTS IN TERMS OF SECTION 44AA OF THE ACT AND THEREBY INFERRING THAT THE ASSE SSEE HAD REPORTED THE PROFIT FROM COMMODITIES TRADING BUSINESS UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION. BASED 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 TAKES THE CHARACTER OF UNDISCLOSED INCOME FOR WHICH PENALTY U/S 271AAB OF THE ACT IS EXIGIBLE. IN THIS REGARD, WE F IND THAT THE LD. AR DREW OUR ATTENTION TO THE COMPUTATION OF THE TOTAL INCOME WHEREIN THE ASSESSE E HAD OFFERED INCOME 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 O RDER VIDE COLUMN NO. 10 THAT THE ASSESSEE IS HAVING ONLY SALARY INCOME AND INCOME FROM OTHER SOU RCES. WE FIND THAT DUE TO THE ABSENCE OF THE ASSESSEE AT THE TIME OF HEARING THIS PARTICULAR FACT HAD ESCAPED THE ATTENTION OF THE TRIBUNAL. ON PERUSAL OF THE FACT AVAILABLE ON RECOR D, WE FIND THAT THE FINDING RECORDED BY THIS TRIBUNAL IN PARA 9 OF ITS ORDER DATED 10.11.2017 TH AT THE ASSESSEE IS MANDATED TO MAINTAIN BOOKS OF ACCOUNTS U/S 44AA OF THE ACT IS FACTUALLY INCORRECT AND DESERVES TO BE RECTIFIED. THIS MISTAKE 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. AR , 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 THE EYES OF LAW A ND 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 DECIDED BY THE TRIBUNAL NO LONGER SURVIVES AND CANNOT BE TREATED AS COVERED AGAINST THE ASSESSEE. 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 NEE D NOT MAINTAIN ANY BOOKS OF ACCOUNT AS PER THE ACT. ACCORDING TO LD. AR, UNDISPUTEDLY THE ASSESSEE WAS ENGAGED FOR THE FIRST TIME THIS AY ONLY IN TRADING OF COMMODITIES, THAT TOO WHICH W AS 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 INCOME FROM OTHER SOURCES, WHICH, ACCORD ING TO LD. AR WAS ACCEPTED AS SUCH BY THE AO AND DREW OUR ATTENTION TO PAGE ONE OF ASSESS MENT ORDER, (NOT THE PENALTY ORDER) WHEREIN WE NOTE THAT THE AO HAS ACKNOWLEDGED THAT T HE ASSESSEE OWNED UP RS. 3 CR. AS HIS INCOME FROM COMMODITY PROFIT AND IT HAS BEEN DISCLO SED IN HIS INCOME AND EXPENDITURE FOR AY 2013-14 UNDER THE HEAD INCOME OUT OF SPECULATIVE B USINESS FROM SALE 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 THE ASSESSEE. IN THE LIGHT OF THE AFORESAID FACTS DISCERNED FROM ASSESSMENT ORDER, THE ASSESSEES CASE IS THAT FOR THE FIRST TIME IN THIS AY HE WAS DOING UNSYSTEMATIC SPECULATIVE ACTIVITY WHICH EARNED INCO ME AND, IT WAS BROUGHT UNDER THE HEAD INCOME FROM OTHER SOURCES, AND SO, ACCORDINGLY, H E IS NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNT AS STIPULATED IN SEC. 44AA OR SEC. 44AA(2)( II) OF THE ACT BECAUSE, THESE PROVISIONS ARE 4 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 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 CAST S A DUTY UPON 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 SUBMISSI ON LET US GO THROUGH THE PROVISIONS OF LAW. 44AA. (1) EVERY PERSON CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSU LTANCY OR INTERIOR DECORATION OR ANY OTHER PROFESSION AS IS NOTIFIED BY THE BOARD IN THE OFFIC IAL GAZETTE SHALL KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE [ASSESSING] OFFICER 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 PROFESSION REFE RRED 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 GROSS RECEIPTS, AS THE CAS E MAY BE, IN BUSINESS OR PROFESSION EXCEED OR EXCEEDS [TEN LAKH] RUPEES IN ANY ONE OF THE THREE Y EARS IMMEDIATELY PRECEDING 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 LAK H TWENTY] THOUSAND RUPEES OR HIS TOTAL SALES, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFESSION ARE OR IS LIKELY TO EXCEED [TEN LAKH] RUPEES, [DURING SUCH PREVIOUS YEA R; OR (III) WHERE THE PROFITS AND GAINS FROM THE BUSINESS ARE D EEMED TO BE THE PROFITS AND GAINS OF THE ASSESSEE UNDER [SECTION 44AE] [OR SECTION 44BB OR S ECTION 44BBB], AS THE CASE MAY BE, AND THE ASSESSEE HAS CLAIMED HIS INCOME TO BE LOWER THA N THE PROFITS OR GAINS SO DEEMED TO BE THE PROFITS AND GAINS OF HIS BUSINESS, AS THE CASE 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 44AD AND HE HAS CLAIMED SUCH INCOME TO BE LOWER THAN THE PROFITS AND 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 W ITH 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 RULES, THE BOOK S OF ACCOUNT AND OTHER DOCUMENTS (INCLUDING INVENTORIES, WHEREVER NECESSARY) TO BE KEPT AND MAI NTAINED UNDER SUB-SECTION (1) OR SUB- SECTION (2), THE PARTICULARS TO BE CONTAINED THEREI N AND THE FORM AND THE MANNER IN WHICH AND THE PLACE AT WHICH THEY SHALL BE KEPT AND MAINTAINE D. (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-SECTION (1) OR SUB-SECTION (2) SHALL BE R ETAINED.] 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 COMPUTE THE TO TAL INCOME. WE NOTE THAT ASSESSEE IN THE STATEMENT OF TOTAL INCOME FILED BEFORE THE AO H AS SHOWN INCOME ONLY UNDER TWO HEADS (I) SALARY INCOME (II) INCOME FROM OTHER SOURCES. WE W OULD LIKE TO REPRODUCE THE SUMMARY OF TOTAL INCOME OF THE ASSESSEE FILED ALONG WITH THE R ETURN: 5 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 INCOME FROM SALARY RS. 45,57,600 INCOME FROM OTHER SOURCES RS.3,00,24,047 RS.3,45,81,647 6. WE NOTE THAT THE AO HAS ACCEPTED THE AFORESAID S TATEMENT OF TOTAL INCOME FILED BEFORE HIM WITHOUT CONTESTING THE CLAIM OF THE ASSESSEE AS TO WHETHER THE ASSESSEES CLAIM OF INCOME OTHER THAN FROM SALARY SHOULD BE FROM 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 OBSERV ED DURING SEARCH AND SEIZURE OPERATION, SHRI MANOJ BESWAL HAD MADE A CONSOLIDATED DISCLOSUR E OF RS.32 CRORE VIDE HIS DISCLOSURE 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 S OURCE 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 UND ER THE HEAD INCOME OUT OF SPECULATIVE BUSINESS FROM SALE OF COMMODITIES. VERIFICATION O F 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 TH E ASSESSEE BEFORE HIM, WHEREIN IT WAS SHOWN IN THE INCOME SIDE THAT IS RIGHT HAND COLUMN AS INCOME FROM SPECULATIVE BUSINESS FROM SALE OF COMMODITIES AND LEFT HAND SIDE COLUMN REFLECTS THE EXPENDITURE; AND AO CAME TO THE CONCLUSION THAT ASSESSEE HAS DISCLOSED UNDER TH E HEADING INCOME OUT OF SPECULATIVE BUSINESS FROM SALE OF COMMODITIES. THE CHARACTER O F A RECEIPT AND THE HEAD UNDER WHICH IT HAS TO BE TAXED IS NOT BASED ON THE NOMENCLATURE OF RECEIPT OF 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 & EXPENDITURE ACCO UNT AND THE DESCRIPTION GIVEN THEREIN CANNOT DETERMINE THE HEAD OF INCOME PRESCRIBED UNDE R CHAPTER IV OF THE ACT. THEREFORE, THE OBSERVATION OF THE AO IN ASSESSMENT ORDER IN THE LI GHT OF HIS ACTION OF ACCEPTING THE STATEMENT OF TOTAL INCOME FILED BY THE ASSESSEE ALONG WITH RE TURN WHICH WITHOUT BEING CONTESTED, IS ERRONEOUS, UNLESS THE AO WAS ABLE TO NEGATE THE CLA IM OF THE ASSESSEE BY BRINGING THE INCOME FROM COMMODITY TRANSACTIONS AS PART OF BUSINESS INC OME. IT SHOULD BE REMEMBERED THAT UNDER THE INCOME TAX ACT 1961, THE TOTAL INCOME OF AN ASS ESSEE/INDIVIDUAL/COMPANY IS CHARGEABLE TO TAX U/S. 4 OF THE ACT. THE TOTAL INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SECTION 14 OF THE ACT LAYS DOWN THAT F OR THE PURPOSE OF COMPUTATION, INCOME OF AN ASSESSEE HAS TO BE CLASSIFIED UNDER FIVE HEADS. IT IS POSSIBLE FOR AN ASSESSEE/INDIVIDUAL/COMPANY TO 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 UNDER WHICH AN ASSESSEES INCOME IS LIABLE TO BE ASSESSED TO TAX. IF AN ASSESSEE HAS NOT COMMENCED BUSINESS THERE CANNOT BE ANY QUESTION OF ASSESSMENT OF ITS PROFITS AND GAINS OF BUSINESS. THAT DOES NOT MEAN THAT UNTIL AND UNLESS THE ASSESSEE COMMENCES ITS BUSINESS, ITS INCOME FROM ANY OTHER SOURCE WILL NOT BE TAXED AS H ELD BY THE HONBLE SUPREME 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 RE CEIPT OF MONEY 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 INCOME AND FA LLS WITHIN THE CHARGE OF SEC. 4 OF THE ACT IS A QUESTION OF LAW WHICH HAS TO BE DECIDED BY THE COUR T ON THE BASIS OF THE PROVISIONS OF THE ACT AND INTERPRETATION OF THE TERM INCOME GIVEN IN A LARGE NUMBER OF DECISIONS OF THE HONBLE SUPREME COURT, HIGH 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 STATEMENT OF TOTAL INCOME (SUPRA) AND THE RETURN WHEREIN THE ASS ESSEE HAS SHOWN THE INCOME FROM COMMODITIES UNDER THE HEAD INCOME FROM OTHER SOURC ES CANNOT NOW AFTER PERUSAL OF INCOME & EXPENDITURE ACCOUNT DETERMINE THE CHARAC TER 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 AND (II) FROM OTH ER SOURCES AND THE INCOME OF RS. 3 CR. AS INCOME FROM OTHER SOURCES, WHICH WE FIND THE AO HAS NOT CONTESTED IN THE ASSESSMENT ORDER, 6 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 HAS THUS CRYSTALLIZED AND THE NECESSARY INFERENCE D RAWN IS THAT ASSESSEE AN INDIVIDUAL WHO WAS ADMITTEDLY A SALARIED PERSON ENGAGED IN THE PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION (THAT TOO FOR THE FIRST TIME) I N AN ACTIVITY FROM WHICH HE DERIVED INCOME FROM OTHER SOURCES ARE NOT REQUIRED TO MAINTAIN BO OKS OF ACCOUNT WHICH ARE APPLICABLE ONLY IF THE ASSESSEE WAS ENGAGED IN BUSINESS OR PROFESSI ON. HOWEVER, WE FURTHER NOTE THAT THE TRANSACTIONS WHICH YIELDED INCOME, THE ASSESSEE HAD IN FACT MAINTAINED RECORDS FROM WHICH THE AO WAS ABLE TO DEDUCE THE TRUE INCOME AND EXPEN DITURE 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 AS 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 HAVING ONLY SALARY INCOME AND INCOME FROM OTHER SOURCES. THUS FROM A PERUSAL OF THE ASSESSMENT OR DER, IT IS NOT IN DISPUTE THAT ASSESSEE IS NOT ENGAGED IN ANY BUSINESS. AND THE AO CANNOT CHANGE T HE CHARACTER OF INCOME IN A DERIVATIVE PROCEEDING WHICH IS AN OFF-SHOOT OF ASSESSMENT PROC EEDINGS I.E. THE PENALTY PROCEEDINGS WITHOUT CONTESTING AND MAKING A FINDING AGAINST THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT ORDER AS DISCUSSED ABOVE. 7. FINALLY, THE LD. AR SUBMITTED THAT DURING THE SE ARCH, THE SEARCH PARTY FOUND THE RECORDS OF THE ASSESSEES TRANSACTIONS IN SPECULATI VE COMMODITY FROM THE DRAWER OF ASSESSEES ACCOUNTANT FROM WHICH THE AO COULD COMPUTE THE INCO ME OF THE ASSESSEE FROM THE SAID TRANSACTION WHICH AMOUNT ASSESSEE DECLARED DURING S EARCH 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 UNDISPUTE DLY THERE WAS ENOUGH AND MORE TIME FOR THE ASSESSEE TO SUBMIT THE ACCOUNTS DURING ASSESSME NT PROCEEDINGS WHICH FACT HAS BEEN TAKEN NOTE OF AND CONCURRED BY THE LD. CIT(A). THEREAFTE R, THE LD. AR DREW OUR ATTENTION TO THE DEFINITION OF UNDISCLOSED INCOME GIVEN UNDER SECTIO N 271AAB WHICH READS AS UNDER: PENALTY WHERE SEARCH HAS BEEN INITIATED. '271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E 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 OTHER VALUABLE ARTICLE OR THI NG 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 SEAR CH 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 [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SEARCH; OR 7 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCO UNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YE AR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CO NDUCTED. 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 N OT REQUIRE TO MAINTAIN THE BOOKS OF ACCOUNT AS PER SEC. 44AA OR SEC. 44AA(2) OF THE ACT, THEREF ORE, THE ASSESSEES CASE FALLS IN THE SECOND LIMB I.E. OR OTHER DOCUMENTS AS STIPULATED U/S. 2 71AAB EXPLANATION (C) (SUPRA) WHICH DESCRIBES UNDISCLOSED INCOME FOR THE PURPOSES OF TH IS SECTION WHICH IS VERY IMPORTANT TO ADJUDICATE THIS ISSUE. THEREFORE, THE QUESTION IS WHEN THE SEARCH TOOK PLACE, THE ASSESSEES TRANSACTIONS (IN THIS CASE, THE SPECULATIVE TRANSAC TION) HAS BEEN FOUND TO BE RECORDED IN THE OTHER DOCUMENTS WHICH IS (RETRIEVED FROM THE ASSE SSEES 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 W HICH WAS 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 RELATING TO THE AY 2013-14, WHICH DOCUMENT WAS RETRIEVED DURING SEARCH, HENCE, THE AMOUNT OF RS. 3 CR. OFFERED BY THE ASSESSEE DOES NOT FALL IN THE KEN OF UNDISCLOSED INCOME DEFINED IN SEC. 271 AAB OF THE ACT. SO, RS. 3 CR. WHICH WAS COMMODITY PROFIT RECORDED IN THE OTHER DOCUMENT MAI NTAINED BY THE ASSESSEE WHICH WAS RETRIEVED DURING SEARCH CANNOT BE TERMED AS UNDISC LOSED INCOME IN THE DEFINITION GIVEN U/S. 271AAB OF THE ACT. SINCE RS. 3 CR. CANNOT BE TERME D 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. 3. SINCE THERE IS NO CHANGE IN FACTS AND LAW RES PECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TH E OTHER ASSESSEES WHO WERE SUBJECTED TO SEARCH AND WHO HAD OFFERED UNDISCLOSED INCOME FROM COMMODITY PROFIT CANNOT BE LEVIED PENALTY U/S. 271AAB OF THE ACT, IN THE FACTS AND CI RCUMSTANCES OF THS CASE, WE CONFIRM THE ORDER OF THE LD. LD. CIT(A) ON THE REASONS STATED A BOVE AND DISMISS BOTH THE APPEALS OF THE REVENUE. 4. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26.04.2018 SD/- SD/- (M. BALAGANESH) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26TH APRIL, 2018 JD.(SR.P.S.) 8 ITA NO.1472 & 1477/KOL/2015 SANWAR MAL AGARWALA & AGAM SARAN KHEMKA, AY- 2013-1 4 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CC-2(2), KOLKATA. 2 RESPONDENT (I) SHRI SANWAR MAL AGARWALA, BUDHI A BHAWAN, SATI JAYANTI ROAD, ATHGAON, GUWAHATI-781 001. (II) SHRI AGM SARAN KHEMKA, GC-213, SECTOR-III, SAL T LAKE CITY, KOL- 700 091. 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY