Shri Dhirajlal Thobhanbhai Aghara, Morbi V. The Asstt. Commr. of Income Tax, Cen. Cir.-1, RAJKOT-GUJARAT

ITA 157/RJT/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6490 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 04-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Income from undisclosed sources; Question of law; Tangible material; Set aside
• Section: 271(1)(c); 143(3); 142(1); 153A; 27; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.157/RJT/2017 (ASSESSMENT YEAR : 2013-14) SHRI DHIRAJLAL THOBHANBHAI AGHARA, JAYESH, BLOCK NO.20, SHRIMAD SOCIETY, NAZARBAUG ROAD, MORBI. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT. [PAN NO. ABIPA 4156 G] ( APPELLANT ) .. ( RESPONDENT ) I.T.A. NO.158/RJT/2017 (ASSESSMENT YEAR : 2013-14) SMT. GAURIBEN KARAMSHIBHAI AGHARA MATRU KRUPA, ANUPAM SOCIETY, NAZARBAUG ROAD, MORBI. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT. [PAN NO. ABIPA 4143 M] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI M. J. RANPURA , A.R . RESPONDENT BY : SHRI JITENDRA KUMAR, CIT-D.R. DATE OF HEARING 31/08/2018 DATE OF PRONOUNCEMENT 15/11/2018 O R D E R PER MS. MADHUMITA ROY - JM: BOTH THE APPEALS HAVE BEEN FILED BEFORE US BY THE ASSESSEE AGAINST THE ORDER DATED 01.02.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-11 FOR ASSESSMENT - 2 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 YEAR (A.Y.) 2013-14 ARISING OUT OF THE ORDER DATED 16.07.2015 PASSED U/S 271AAB OF THE INCOME TAX ACT (THE ACT) BY THE ASSISTANT COMMISSIO NER OF INCOME TAX, CENTRAL CIRCLE- 1, RAJKOT, WHEREBY AND WHEREUNDER THE PENALTY LEVIE D BY THE ASSESSING OFFICER HAS BEEN UPHELD BY THE FIRST APPELLATE AUTHORITY. SINCE, BOTH THE APPEALS PERTAIN TO SAME ORDERS THOS E ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED BY A COMMON ORDER. ITA NO.157/RJT/2017 IS BEING TAKEN UP AS THE LEAD C ASE BY US. FOLLOWING GROUNDS HAS BEEN TAKEN IN THIS APPEAL: 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 11, AHMEDABAD HAS ERRED IN LAW AS ALSO ON FACTS IN CONFIRMING THE PEN ALTY OF RS. 7,55,539/- LEVIED U/S 271 AAB OF THE ACT. THE PENALTY LEVIED U /S. 271 AAB OF THE ACT IS TOTALLY UNJUSTIFIED ON FACTS AS ALSO IN LAW, MAY KI NDLY BE DELETED. 3.0 YOUR HONOR'S APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, OR WITHDRAW ANY OR MORE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF APPEAL. 2. THE FACTS LEADING TO THE CASE IS THIS THAT A SEA RCH WAS CARRIED OUT U/S 132 OF THE ACT AT THE PREMISES OF THE ASSESSEE ON 17.01.2013. CONS EQUENTLY THE PROCEEDING U/S 153A OF THE ACT WAS INITIATED FOR A.Y. 2007-08 TO 2012-13. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY SINCE THE SEARCH WAS CONDUCTED RELEVAN T TO THE ASSESSMENT YEAR. ON 29.01.2014 THE ASSESSEE FILED THE RETURN OF INCOME SHOWING TOTAL INCOME OF RS.96,99,920/-. THEREAFTER, A NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 22.04.2014, THE SAME WAS SERVED UPON THE ASSESSEE FOLLOWED BY A FUR THER NOTICE DATED 12.06.2014 ALONG WITH DETAILED QUESTIONNAIRE ANNEXED WITH THE NOTICE U/S 142(1) OF THE ACT. VARIOUS DETAILS, IN REPLY TO THE SAID NOTICE WERE SUBMITTED BY ASSES SEE BEFORE THE LD AO; IT APPEARS THAT THE ASSESSEE MADE ADMISSION OF INCOME OF RS.75,55,392/- . ACCORDING TO THE LD AO SINCE THE - 3 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 SAID AMOUNT OF INCOME WAS UNEARTHED DUE TO SEARCH, PENALTY PROCEEDINGS U/S 271AAA WAS INITIATED. THE AO THEN ASSESSED THE INCOME OF T HE ASSESSEE AT RS.96,99,920/-. ULTIMATELY, LD AO IMPOSED PENALTY OF RS.7,55,539/- AS 10% OF THE UNDISCLOSED INCOME OF RS.75,55,392/- AS SPECIFIED IN THE PREVIO US YEAR. THE SAID WAS UPHELD BY THE FIRST APPELLATE AUTHORITY IN THE APPEAL PREFERRED B Y THE ASSESSEE. HENCE THE INSTANT APPEAL. 3. DURING THE PENALTY PROCEEDINGS, NOTICE U/S 274 R .W.S. 271AAA OF THE ACT WAS ISSUED ON 12.03.2015 FOR THE DECLARED AMOUNT OF RS. 75,55,392/- AS MADE BY THE ASSESSEE IN THE RETURN OF INCOME ON THE BASIS OF THE STATEME NT MADE BY FAMILY/BUSINESS HEAD NAMELY SHRI JITENDRA T. AGHARA RECORDED U/S 132(4) OF THE ACT, WHEREIN, HE WAS VOLUNTARILY ADMITTED THE ADDITIONAL INCOME OF RS.10 .80 CRORES ON AD-HOC BASIS ON BEHALF OF THE FAMILY MEMBERS AND GROUP CONCERNS AS A WHOLE . IN REPLY TO THE SAID NOTICE DATED 12.03.2015, THE ASSESSEE RAISED OBJECTION TOWARDS T HE MAINTAINABILITY OF THE PENALTY PROCEEDINGS AGAINST HIM IN VIEW OF THE PARTICULAR P ROVISION OF SECTION 271AAA OF THE ACT. 4. CONSIDERING THE SAME, THE LD AO ISSUED A CORRIGE NDUM DATED 25.06.2015 TO THE ORDER U/S 143(3) DATED 12.03.2015 AND SERVED THE SA ME WAS UPON THE ASSESSEE STATING THAT THE PENALTY PROCEEDINGS BE READ AS INITIATED U/S 27 1AAB INSTEAD OF SECTION 271AAA OF THE ACT. THE ASSESSEE AGAIN FILED A REPLY QUOTING T HAT THE PENALTY U/S 271AAB COULD NOT BE IMPOSED IN THE ABSENCE OF ANY INCREMENTING MATER IAL IN THE FORM OF CASH, GOLD, VALUABLES OF ANY DOCUMENT/ DATA EVIDENCING THE UNDI SCLOSED INCOME FOUND. HE FURTHER ADDED THAT THE FAMILY HEAD NAMELY SHRI JITENDRA T. AGHARA MADE HIS STATEMENT U/S 132(4) OF THE ACT VOLUNTARILY ADMITTING THE ADDITIONAL INC OME OF RS.10.80 CRORES ON AD-HOC BASIS ON BEHALF OF THE FAMILY MEMBERS AND GROUP CONCERNS AS A WHOLE, OUT OF WHICH, THE ASSESSEE HAS CONSIDERED THE INCOME OF RS.75,55,392/ - ON AD-HOC BASIS IN HIS RETURN OF - 4 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 INCOME FILED FOR THE ASSESSMENT YEAR UNDER CONSIDER ATION IN ORDER TO AVOID LONG DRAWN LITIGATION AND TO BUY PEACE OF MIND. IN THAT VIEW O F THE MATTER, THE ASSESSEE ASSERTED THAT SUCH RETURN OF INCOME ON AD-HOC BASIS CANNOT BE SAI D TO BE UNDISCLOSED INCOME PARTICULARLY WHERE NOTHING UNDISCLOSED WAS FOUND IN THE SAID SEARCH. THE ASSESSEE FURTHER ADDED THAT SINCE THE SAID ADDI TIONAL INCOME OF RS.75,55,392/- DECLARED IN THE RETURN OF INCOME OF THE ASSESSEE FI LED U/S 139 OF THE ACT IS ON AD-HOC BASIS TO COVER UP ANY DEFECTS OR DISCREPANCIES REMAINED I N THE BOOKS OF ACCOUNT, THE PROVISION OF THAT PARTICULAR ACT IS NOT APPLICABLE NEITHER TH E SAID INCOME COULD BE SAID TO HAVE EARNED FROM UNDISCLOSED SOURCES; THE SAME CANNOT BE TERMED AS UNDISCLOSED INCOME, SO AS TO LEVY PENALTY U/S 271AAB OF THE ACT. HOWEVER, THE LD AO DID NOT ACCEPT THE CONTENTION MA DE BY THE ASSESSEE AND HE THEREFORE IMPOSED PENALTY OF RS.7,55,539/- I.E @10% OF THE UN DISCLOSED INCOME OF RS.75,55,392/- OF THE SPECIFIED PREVIOUS YEAR WITH THE FOLLOWING O BSERVATION: 3. ASSESSEE'S CASE FALLS U/S. 271AAB (1)(A) OF THE ACT. IN THIS CASE, (I) THE ASSESSEE'S FAMILY / BUSINESS HEAD NAMELY SH RI JITENDRA T. AGHARA HAD VOLUNTARILY ADMITTED THE ADDITIONAL INCOME OF R S.10.80 CRORES ON AD-HOC BASIS ON BEHALF OF THE FAMILY MEMBERS AND GROUP CONCERNS AS A WHOLE DURING THE COURSE OF STATEMENT RECORDED U/S. 132(4) OF THE ACT ON 19.01.2013. OUT OF WHICH, THE ASSESSEE HAS CONSIDERED THE INCOME OF RS.75,55,392/- ON AD-HOC B ASIS IN HIS RETURN OF INCOME. ALSO SHRI MANSUKHBHAI H. KAILA, O NE OF THE DIRECTORS OF SIMPOLO GROUP OF COMPANIES, HAD CONFIR MED THAT THIS DISCLOSURE IS ACCEPTABLE TO ALL THE DIRECTORS OF TH E CO. VIDE HIS STATEMENT U/S.132(4) DTD.14.03.2013. (II) SUBSTANTIATED THE MANNER IN WHICH SUCH INCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE- (A) ASSESSEE PAID THE TAX, TOGETHER WITH INTEREST, IF A NY, IN RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHED THE RETURN OF INCOME FOR THE SPECIFIE D PREVIOUS YEAR - 5 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 DECLARING SUCH UNDISCLOSED INCOME THEREIN; 4. HENCE, IT IS CLEAR THAT ASSESSEE'S CASE FALLS I N THE AMBIT OF SECTION 271AAB (1)(A) OF THE ACT, ACCORDINGLY, I AM SATISFIED THAT PENALTY U/S.271AAB IS LEVIABLE IN THE CASE OF THE ASSESSEE AT THE RATE OF 10% OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR WAS RS.75,55,392/-, TEN PERCENT OF SUCH UNDISCLOSED INCOME WORKS OUT TO RS.7,55,539/- IN APPEAL THE LD CIT(A) REITERATED THE CONTENTION M ADE BY THE LEARNED ASSESSING OFFICER PARTICULARLY STATING THAT THE ASSESSEE MADE DISCLOSURE OF UNACCOUNTED INCOME DURING THE COURSE OF SEARCH IN HIS STATEMENT RECORD ED U/S 132(4) OF THE ACT. THE SEARCH WAS CONDUCTED ON 17.01.2013 AND THEREFORE THE PROVI SION OF SECTION 271AAB WOULD BE APPLICABLE AND THE ASSESSEE IS LIABLE FOR IMPOSITIO N OF PENALTY @10% OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. FURTHER THAT THE INCOME SINCE DISCLOSED AND ADMITTED U/S 132(4) AND THE ASSESSEE ALSO PAID TAX ALONG WITH INTEREST THEREON BEFORE THE SPECIFIED DATE MENTIONED IN THE NOTICE U/S 153A FOR FURNISHING RETURN OF INCOME AND FURNISHES HIS RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME FULFILLS THE CONDITIONS IMPOSED BY CLAUSE (A ) OF SECTION 271AAB. BEING AGGRIEVED BY AND/OR DISSATISFIED WITH THE SAI D ORDER OF PENALTY WHICH SUBSEQUENTLY WAS CONFIRMED BY THE FIRST APPELLATE AUTHORITY THE INSTANT APPEAL HAS BEEN FILED BEFORE US BY THE ASSESSEE. AT THE TIME OF THE HEARING OF THE MATTER, THE LD. R EPRESENTATIVE OF THE ASSESSEE VEHEMENTLY ARGUED AGAINST THE ORDER IMPUGNED BEFORE US. HE CONTENDED THE AO HAS ASSESSED THE INCOME U/S 143(3) OF THE ACT WITHOUT A NY MODIFICATION OF THE RETURN OF INCOME. THEREAFTER, THE LD AO INITIATED THE PENALTY PROCEEDINGS U/S 271AAA OF THE ACT ON THE ADDITIONAL INCOME DECLARED BY THE ASSESSEE T O THE TUNE OF RS.75,55,392/- AND ONLY UPON RECEIVING THE OBJECTION MADE BY THE ASSESSEE B Y AND UNDER THE CORRIGENDUM DATED - 6 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 25.06.2015 THE PENALTY PROCEEDINGS HAS BEEN SOUGHT TO BE INITIATED U/S 271AAB INSTEAD OF SECTION 271AAA OF THE ACT. FURTHER THAT DURING THE SEARCH NO UNACCOUNTED MONEY , ASSET, INVESTMENT OR EXPENDITURE WAS RECOVERED IN THE APPELLANT PLACE. ONLY ON THE B ASIS OF THE STATEMENT RECORDED U/S 132(4) MADE BY THE GROUP HEAD IN ORDER TO BUY PEACE OF MIND AND TO AVOID LONG DRAWN LITIGATION, THE AD-HOC ADDITIONAL INCOME OF RS.75,5 5,392/- WAS ADMITTED BY THE ASSESSEE. FURTHER CASE MADE OUT BY THE LD COUNSEL FOR THE ASS ESSEE IS THAT THE SEARCH WAS CONDUCTED ON 17.01.2013 WHEN THE DUE DATE OF FILING OF RETURN OF THE SPECIFIED PREVIOUS YEAR I.E. F.Y. 2012-13 NOT EXPIRED AND THEREFORE THE ASSESSEE HAD TO FILE THE RETURN OF INCOME U/S 139 OF THE ACT WHICH HE DID ON 29.09.2014 DECLARING TOTAL INCOME OF RS.96,99,920/- INCLUDING THE SAID AD-HOC INCOME OF RS.75,55,392/-. THE LD. REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY ARGUED AGAINST THE TERMED UNDI SCLOSED INCOME USED BY THE LD ASSESSING OFFICER WHILE IMPOSING PENALTY IN ORDER T O JUSTIFY THEIR ACTION. ACCORDING TO THE LEARNED AR AS PER THE EXPLANATION TO SECTION 27 1AAB OF THE ACT THE TERM UNDISCLOSED INCOME IS NOT SPECIFIED BY THE CONDUCT OF THE ASSESSEE AS THE ADDITIONAL INCOME DECLARED BY HIM WAS ON AD-HOC BASIS PARTICUL ARLY WHEN THE SAME WAS NOT REPRESENTED EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOU NTS OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF SEARCH U/S 132 OF THE ACT. N EITHER THE DOCUMENTS NOR THE ENTRY EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER D OCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR FOUN D TO BE FALSE OR THE SAME WOULD NOT HAVE BEEN FOUND TO BE SO HAD THERE BEEN NO SEARCH C ONDUCTED BY THE AUTHORITIES. SINCE, THE INCOME OFFERED BY THE ASSESSEE WAS NOT ON ACCOU NT OF ANY EARNED UNACCOUNTED INCOME OR EXPENSE OR ASSESSMENT OR INVESTMENT FOUND DURING THE SEARCH THE SAME DOES NOT COME UNDER THE PURVIEW OF THE TERM UNDISCLOSED INCOME AS SPECIFIED U/S 271AAB OF THE ACT. - 7 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 THE LD COUNSEL FOR THE ASSESSEE FURTHER RELIED UPON THE ORDERS PASSED BY THE CO-ORDINATE BENCH IN IT(SS)A NO.1, 2 & 3/RJT/2017 FOR A.Y/ 2013 -14 IN SUPPORT OF HIS ARGUMENT FOR QUASHING THE PENALTY. ON THE CONTRARY, THE LD REPRE SENTATIVE OF THE DEPARTMENT RELIES UPON THE ORDER PASSED BY THE AUTHORITIES BELOW. FURTHER THAT HE HAS ARGUED THAT SINCE THE ASSESSEE HAS HIMSELF ADMITTED CERTAIN INCOME DURING THE SEARCH PROCEEDINGS AND INCLUDED THE SAME AT PART OF THE RETURN PENALTY U/S 271AAA A S SIGNIFICANCE THEREOF CANNOT BE ESCAPED. 5. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE PARTIES, HAVE PERUSED THE ORDER PASSED BY THE AUTHORITIES BELOW AS ALSO THE O RDER PASSED BY THE CO-ORDINATE BENCH RELIED UPON BY THE LD REPRESENTATIVE OF THE ASSESSE E. THE MOOT POINT INVOLVED IN THIS PARTICULAR CASE IN THIS AS TO WHETHER IN THE PRESEN T FACTS AND CIRCUMSTANCES OF THE CASE THE IMPOSITION OF PENALTY U/S 271AAB IS JUSTIFIABLE. IT APPEARS FROM THE RECORDS AND OTHER DOCUMENTS THAT THE ASSESSEE HAS DECLARED INCOME IN QUESTION TO THE TUNE OF RS.75,55,392/- TOWARDS HIS SHARES ON THE BASIS OF THE STATEMENT RE CORDED U/S 132(4) OF THE ACT MADE BY THE FAMILY/ BUSINESS HEAD SHRI JITENDRA T. AGHARA; SAME CANNOT BE AN UNDISCLOSED INCOME AS NARRATED IN EXPLANATION C OF SECTION 271AAB. I N FACT, IN THIS PARTICULAR CASE, THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN WAS A CCEPTED IN TOTO WITHOUT ANY MODIFICATION MADE BY THE LD AR. NO INCRIMINATING MA TERIAL IN THE FORM OF CASH, JEWELLERY, BULLION, VALUABLES OR ANY OTHER DOCUMENT S OR DATA EVIDENCING THE UNDISCLOSED INCOME WAS FOUND BY THE LD AO. NEITHER ANY DEFECT N OR DISCREPANCIES IN THE BOOKS OF ACCOUNTS HAS BEEN FOUND ON THE BASIS OF WHICH SAID INCOME COULD BE EQUATED WITH UNDISCLOSED INCOME AS DEFINED U/S 271AAB OF THE A CT. IT APPEARS FROM THE RECORDS THAT NO REFERENCE HAS B EEN MADE BY THE LD AO TOWARDS ANY INCRIMINATING MATERIAL ON WHICH THE AO HAS SHOWN HI S SATISFACTION FOR THE PURPOSE OF - 8 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 IMPOSITION OF PENALTY RATHER SUCH DISCLOSURE BY THE ASSESSEE SEEMS TO BE SOLELY BASED ON CONDITIONAL VOLUNTARILY DISCLOSURE. WE HAVE ALSO GONE THROUGH THE ORDER PASSED BY CO-OR DINATE BENCH ON THIS PARTICULAR ASPECT OF THE MATTER WHICH CAME TO A FINDING THAT T HE AO HAS IMPOSED THE PENALTY IN A NONCHALANT MANNER AND HAS PROBABLY MISUNDERSTOOD TH E IMPOSITION OF PENALTY AS AN AUTOMATIC CONSEQUENCE. SUCH SUMMARY ACTION OF THE A SSESSING OFFICER FUNCTIONING IN QUASI JUDICIAL CAPACITY CANNOT BE ENDORSED. THE RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED HEREIN BELOW: 11.2 TO PADDLE ITS POINT OF VIEW, THE ASSESSEE HAS STRONGLY RELIED ON THE STATUTORY DEFINITION OF UNDISCLOSED INCOME. WE FIND THAT ID ENTICAL ISSUE CAME UP FOR CONSIDERATION IN THE CASE OF JASUBHAI ARJANBHAI VAG HASIA VS. ACIT, ITA NO. 58/RJT/2017 ORDER DATED 17.05.2018 IN THE CONTEXT O F SECTION 271AAA OF THE ACT. THEREFORE, IT IS CONSIDERED EXPEDIENT TO REPRODUCE THE RELEVANT OPERATIVE PARA OF THE DECISION OF THE CO-ORDINATE BENCH ON THE ISSUE: - 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND MATERIAL PLACED ON RECORD. THE CORE CONTROVERSY INVOLVED IN THE PRESENT APPEAL IS TOWAR DS MAINTAINABILITY OF IMPOSITION OF PENALTY UNDER SECTION 271AAA IN THE F ACTS AND CIRCUMSTANCES OF THE CASE. 8.1 THE CASE OF THE ASSESSEE IS TWO FOLD (I) THE IN COME DECLARED IN THE RETURN OF INCOME AMOUNTING TO RS. 2,25,61,020/- ARISES OUT OF THE REGULAR STREAM OF INCOME FROM VARIOUS SOURCES INCLUDING RS. 90 LAKHS TOWARDS AD-HOC DECLARATION AND THEREFORE THERE IS NO ELEMENT OF UNDISCLOSED I NCOME AS DEFINED IN THE EXPLANATION BELOW SECTION 271AAA OF THE ACT. (II) I N THE ALTERNATIVE, IN ANY EVENT, THE INCIDENCE OF PENALTY UNDER SECTION 271AAA CANNO T EXCEED RS. 9 LAKHS (10% OF RS. 90 LAKHS) ATTRIBUTABLE TO AD-HOC INCOME. 8.2 TO BUTTRESS ITS POINT OF VIEW, THE ASSESSEE HAS STRONGLY HARPED ON THE STATUTORY DEFINITION OF UNDISCLOSED INCOME. IT WO ULD THEREFORE BE APPOSITE TO REPRODUCE SECTION 271AAA OF THE ACT FOR READY REFER ENCE:- 271AAA. PENALTY WHERE SEARCH HAS BEEN INITIATED.( 1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS B EEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSE SSEE SHALL PAY BY WAY OF - 9 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 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 SP ECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, (I ) IN THE COURSE OF THE SEARCH, IN A S TATEMENT UNDER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II ) SUBSTANTIATES THE MANNER IN WHICH T HE UNDISCLOSED INCOME WAS DERIVED; AND (III ) PAYS THE TAX, TOGETHER WITH INTER EST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). (4) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, S O FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECT ION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A ) '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 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 SE ARCH 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 CHIEF COM MISSIONER OR COMMISSIONER BEFORE THE DATE OF THE SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR RE PRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RE CORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FA LSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED; (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 1 39 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSE SSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE T HE SAID DATE; OR - 10 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 (II) IN WHICH SEARCH WAS CONDUCTED. 8.3 A PERUSAL OF SPECIAL PROVISIONS OF SECTION 271A AA, CONCERNING SEARCH CASES SHOW THAT IT IS APPLICABLE IN RESPECT OF UND ISCLOSED INCOME IN CONTRAST TO CONCEALED INCOME RELEVANT FOR THE PURPOSES OF PEN ALTY PROCEEDINGS UNDER NORMAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT. THE APPLICABILITY OF PENALTY UNDER SECTION 271AAA THUS REVOLVES WITHIN THE SPHER E OF UNDISCLOSED INCOME. 8.4. A PLANE READING OF THE AFORESAID DEFINITION OF UNDISCLOSED INCOME CLEARLY SHOWS THAT THE UNDISCLOSED INCOME SHOULD BE REPRESE NTED BY MONEY, BULLION JEWELLERY OR OTHER VALUABLE ARTICLES OR THINGS OR A NY UNRECORDED ENTRY AS PER DOCUMENTS FOUND OR ANY FALSE ENTRY RECORDED IN THE BOOKS OF ACCOUNT ETC. NO SUCH REFERENCE OR NEXUS OF DISCLOSURE TO SUCH SPECIFIED ITEMS WERE MADE IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER. IN VIEW O F THE STATUTORY DEFINITION OF UNDISCLOSED INCOME, A DISCLOSURE MADE MERELY TO BUY PEACE DOES NOT TANTAMOUNT TO UNDISCLOSED INCOME PER SE. THE APPLICABILITY O F SECTION 271AAA IS DEPENDENT UPON THE INCOME FALLING WITHIN THE SWEET OF CLEAR A ND EXPRESS DEFINITION OF EXPRESSION UNDISCLOSED INCOME. AN AD-HOC AND LUMS UM DECLARATION AS A CONSEQUENT OF SEARCH WITHOUT ANY REFERENCE MADE BY A.O TOWARDS ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES OR TH ING OR ANY ENTRY IN THE BOOKS OF ACCOUNT ETC. CANNOT BE DEEMED TO BE AUTOMATICALLY A N UNDISCLOSED INCOME FOR THE PURPOSES OF IMPOSITION OF PENALTY UNDER SECTION 271 AAA OF THE ACT. THE ONUS IS ON A.O TO BRING ON RECORD MATERIAL WHICH POINTS TO UNDISCLOSED INCOME AS DEFINED UNDER SECTION 271AAA OF THE ACT. AS NOTED, NO REFERENCE TO UNDERLYING MATERIAL IS FOUND IN THE ORDERS OF LOWER AUTHORITIE S. A SIMPLE DISCLOSURE MADE IN THE COURSE OF SEARCH UNDER SECTION 132(4) IN ITSELF CANNOT BE DEEMED TO BE UNDISCLOSED INCOME IN VIEW OF THE LIMITATIONS PLA CED IN THE DEFINITION THEREOF. 9. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL REFERRED FOR THE PURPOSES OF ASSESSING ALLEGED UNDISCLOSED INCOME, THE IMPOSITION OF PENALTY UNDER SECTION 271 AAA IS WITHOUT ANY LEGAL FOUNDATION AND THUS NOT PERMISSIBLE. 10. IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT CONSIDER IT NECESSARY TO ADVERT TO THE ALTERNATIVE PLEA OF THE ASSESSEE FOR IMPOSITION OF PENALTY WITH REFERENCE TO AD-HOC AMOUNT OF DECLARATION ALONE. 11. THE ORDER OF THE ASSESSING OFFICER TOWARDS IMPO SITION OF PENALTY UNDER SECTION 271AAA IS THEREFORE SET ASIDE AND THE ASSES SING OFFICER IS DIRECTED TO DELETE THE PENALTY SO IMPOSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . - 11 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 11.3 AS NOTED ABOVE, THE CO-ORDINATE BENCH HAS DEAL T WITH IDENTICAL ISSUE AND HELD THAT IN THE ABSENCE OF ANY REFERENCE TO TANGIB LE MATERIAL, MERE ACT OF ACQUIESCE OF AD-HOC INCOME UNDER SECTION 132(4) OF THE ACT CANNOT BE COVERED WITHIN THE SWEEP OF UNDISCLOSED INCOME FOR THE PU RPOSES OF IMPOSITION OF PENALTY UNDER SECTION 271AAA OF THE ACT. IN THE PRE SENT CASE, THE PENALTY HAS BEEN IMPOSED IN TERMS OF THE AMENDED PROVISION FOR IMPOS ITION OF PENALTY UNDER SECTION 271AAB OF THE ACT. HOWEVER, THE DEFINITION OF UNDI SCLOSED INCOME UNDER ERSTWHILE SECTION 271AAA AND SECTION 271AAB ARE IDE NTICAL. THEREFORE, THE PLEA OF THE ASSESSEE THAT IN THE ABSENCE OF REFERENCE TO ANY INCRIMINATING MATERIAL, IMPOSITION OF PENALTY UNDER SECTION 271AAB IS WITHO UT ANY LEGAL FOUNDATION, GETS SUPPORT FROM THE DECISION OF CO-ORDINATE BENCH. 11.4 IT IS ALSO PERTINENT TO STATE THAT THE AO IMPO SED PENALTY IN A NONCHALANT MANNER AND HAS PROBABLY MIS-UNDERSTOOD THE IMPOSITI ON OF PENALTY AS AN AUTOMATIC CONSEQUENCE. THE INCOME OFFERED HAS NEITH ER BEEN RELATED TO SPECIFIED PREVIOUS YEAR NOR THE REFERENCE WAS MADE ANY DOCUME NT ETC. TO COVER THE DECLARATION WITHIN THE SPHERE OF UNDISCLOSED INCOM E. SUCH SUMMARY ACTION OF THE ASSESSING OFFICER FUNCTIONING IN QUASI JUDICIAL CAP ACITY CANNOT BE ENDORSED. THE PENALTY ORDER IS THUS VITIATED DUE TO NON APPLICATI ON OF MIND ALSO. THE ORDER OF THE ASSESSING OFFICER DATED 16.07.2015 TOWARDS IMPOSITI ON OF PENALTY UNDER SECTION 271AAB IS THEREFORE SET ASIDE AND CONSEQUENTLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY SO IMPOSED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 01/RJT/2017 IS ALLOWED IN PART. 13. WE SHALL NOW ADVERT TO OTHER CAPTAINED APPEALS IN IT(SS) NOS 02 & 03/RJT/2017 INVOLVING IDENTICAL ISSUE. IN THE ABSEN CE OF ANY CHANGE IN FACTS POINTED OUT IN THE COURSE OF HEARING BY EITHER SIDE , OUR VIEW IN IT(SS) NO. 01/RJT/2017 SHALL APPLY MUTATIS MUTANDIS. THUS, WHI LE THE ADDITIONAL GROUNDS RAISED IN THIS APPEALS ARE DISMISSED, THE MAIN GRIE VANCE TOWARDS IMPOSITION OF PENALTY ON MERITS IS ADJUDICATED IN FAVOUR OF THE A SSESSEE. THE PENALTY OF RS. 2,21,350/- IN IT(SS) NO. 02/RJT/2017 & RS. 2,00,000 /- IN IT(SS) NO. 03/RJT/2017 STANDS DELETED. THUS IDENTICAL QUESTION OF LAW HAS BEEN DECIDED BY THE CO-ORDINATE BENCH ON THE IDENTICAL FACTS AS REFERRED ABOVE WHICH FINALLY CON CLUDED THAT IN THE ABSENCE OF ANY REFERENCE TO TANGIBLE MATERIAL, MERE ACT OF ACQUIES CE OF AD-HOC INCOME U/S 132(4) OF THE - 12 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 ACT CANNOT BE DESCRIBED AS UNDISCLOSED INCOME FOR THE PURPOSE OF IMPOSITION OF PENALTY U/S 271AAA OF THE ACT. THE PENALTY HEREIN WAS IMPOS ED IN THE AMENDED PROVISION U/S 271AAB OF THE ACT. NEEDLESS TO MENTION THAT THE DEF INITION OF UNDISCLOSED INCOME UNDER ERSTWHILE SECTION 271AAA AND SECTION 271AAB A RE IDENTICAL. IN THAT VIEW OF THE MATTER THE PENALTY IMPOSED BY T HE LD ASSESSING OFFICER CONFIRMED BY THE FIRST APPELLATE AUTHORITY WITHOUT BEING SUPPORT ED BY ANY INCRIMINATING MATERIAL IS DEVOID OF ANY MERIT AND THE PENALTY OF RS.7,55,539/ - IS THUS HEREBY DELETED. 6. SINCE IN ITA NO.158/RJT/2017 THE IDENTICAL ISSUE IS INVOLVED AND IN THE ABSENCE OF ANY CHANGED CIRCUMSTANCES THE VIEW TAKEN IN ITA NO. 157/RJT/2017 SHALL APPLY MUTATIS MUTANDIS TOWARDS THE IMPOSITION OF PENALTY ON MERIT S WHICH HAS BEEN ADJUDICATED BY US IN FAVOUR OF THE ASSESSEE. THE PENALTY, IN THAT CAS E TO THE TUNE OF RS.35,000/- IS HEREBY DELETED. 7. IN COMBINED RESULT, BOTH THE APPEALS ARE ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 15/11/2018 SD/- SD/- ( WASEEM AHMED ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER PRITI YADAV, SR.PS - 13 - ITA NOS.157 & 158/RJT/2017 ASST.YEAR 2013-14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)- 11, AHMEDABAD. 5. , , ! /DR,ITAT, RAJKOT 6. '# $% / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , ! / ITAT, RAJKOT 1. DATE OF DICTATION 05/11/2018 (DICTATION PAGES 10) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/11/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 14/11/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER