The Dy. CIT, Central Circle-3, Surat V. M/s. Star Rays, Surat

ITA 39/SRT/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7788 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 14-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S T BIDARI
• Keywords: Income from undisclosed sources; Loose papers; Set aside
• Section: 271(1)(c); 143(3); 133A; 153A; 139(1); 13; 6; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO. 39/SRT/2017 (AY 2013-14) (H EARING IN VIRTUAL COURT) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, AAYKAR BHAVAN, ROOM NO. 507, 5 TH FLOOR, MAJURA GATE, SURAT - 395001 VS M/S STAR RAYS SHIVAM CHAMBERS, KHAND BAZAR, VARACHHA ROAD, SURAT-395006 PAN: AAMFS 1942 B REVENUE / APPELLANT ASSESSEE /RESPONDENT ASSESSEE BY SH.TUSHAR HEMANI SENIOR ADVOCATE WITH SH. PARIMALSINH B. PARMAR, ADVOCATE REVENUE BY SH. S.T. BIDARI, CIT -DR DATE OF HEARING 15.07.2021 DATE OF PRONOUNCEMENT 26.08.2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- , [CIT(A)] SURAT DATED 30.05.2017FOR ASSESSMENT YEAR (AY) 2013-14.THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE SUMMARIZED AS UNDER:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE PENALTY LEVIED U/S 271AAB OF THE ACT OF RS.3,49,98,734/- TO THE EXTENT OF RS.33,32,725/-. THE LD. CIT(A) DID NOT APPRECIATE THE FACT WHEN SURVEY PROCEEDING AT ONE PREMISE HAS BEEN CONVERTED INTO SEARCH, THEN IT BECAME A SEARCH CASE AND PROVISIONS IN RESPECT TO SEARCH CASES ARE APPLICABLE TO THE TOTAL DISCLOSURE NOT TO THE PART DISCLOSURE MADE BY THE ASSESSEE FIRM. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE PENALTY ORDER MADE BY THE ASSESSING OFFICER. (3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN BUSINESS OF IMPORT OF ROUGH DIAMOND AND EXPORT OF POLISH DIAMOND. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON ASSESSEE GROUP ON 05.03.2013 AT SURAT, MUMBAI AND DELHI OFFICE PREMISES OF THE ASSESSEE-FIRM. DURING THE SURVEY CERTAIN INCRIMINATING EVIDENCES, DOCUMENTS AND OTHER MATERIAL INCLUDING CASH WERE FOUND. SURVEY PROCEEDING AT DELHI OFFICE WAS CONVERTED INTO SEARCH UNDER SECTION 132. STATEMENT OF SHRI DILIPBHAI BABUBHA MEHTA, PARTNER OF THE ASSESSEE-FIRM WAS RECORDED UNDER SECTION 131(1A) OF THE ACT, WHEREIN HE MADE A DISCLOSURE OF ADDITIONAL INCOME OF RS.34,99,87,3544/- (RS.35 CR. APPROX). WHILE REPLYING THE VARIOUS QUESTIONS ASKED DURING THE RECORDING STATEMENT, THE PARTNER OF THE ASSESSEE-FIRM GAVE THE BIFURCATION DISCLOSURE IN THE FOLLOWING MANNER:- QUESTION NO. PARTICULARS OFFICE AT AMOUNT (RS) 10 CASH SURAT 6,71,753/ - 11 TO 13 EXCESS STOCK SURAT 23,05,89,031/- 15 UNACCOUNTED INCOME SURAT 4,69,75,000/- 18 EXCESS STOCK MUMBAI 5,30,47,810/ - 18 EXCESS STOCK DELHI 1,02,03,750/- 18 OTHER DISCREPANCIES SURAT 85,00,000/- ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 3 3. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR (AY) 2013-14 ON 27.11.2013 DECLARING TOTAL INCOME AT RS.70.05 CRORE. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE PARTNER OF THE ASSESSEE MADE A DISCLOSURE ON THE BASIS OF LOOSE PAPERS; EXCESS STOCK FOUND AT SURAT, MUMBAI AND DELHI OFFICES AND ON ACCOUNT OF CASH FOUND AT SURAT OFFICE. A DISCLOSURE WAS MADE ON THE BASIS OF FACT THAT INCRIMINATING MATERIAL. THEREFORE, IT IS A FIT CASE FOR INITIATION OF PENALTY UNDER SECTION 271AAB OF THE ACT. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE UNDER SECTION 271AAB ON 23.03.2015 AND ANOTHER SET OF NOTICE ON02.09.2015. IN RESPONSE TO SHOW CAUSE NOTICES THE ASSESSEE FILED ITS REPLY DATED 19.09.2015. IN THE REPLY, THE ASSESSEE STATED THAT SURVEY PROCEEDINGS WERE INITIATED AT THREE PLACES AT SURAT, MUMBAI AND DELHI. IT IS AN ADMITTED FACT THAT SURVEY PROCEEDING IN DELHI OFFICE WAS CONVERTED INTO SEARCH PROCEEDING. DURING THE SURVEY PROCEEDING STATEMENT OF ONE OF THE PARTNER OF ASSESSEE WAS RECORDED UNDER SECTION 131(1A) OF THE ACT. AND PARTNER OF THE ASSESSEE-FIRM MADE A DISCLOSURE OF RS.35 CRORES (APPROX.) IN THE HAND OF ASSESSEE. HENCE, THE PROVISION OF SECTION 271AAB DOES NOT ATTRACT IN CASE OF ASSESSEE. ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 4 IT WAS FURTHER SUBMITTED THAT OUT OF TOTAL DISCLOSURE OF RS.34,99,87,300/-, DISCLOSURE OF RS.33,97,83,550/- PERTAINS TO DISCLOSURE MADE IN RESPECT OF SURAT AND MUMBAI OFFICE PREMISES ONLY, WHERE ONLY SURVEY PROCEEDINGS WAS INITIATED AND STATEMENT OF PARTNER UNDER SECTION 131(1A) WAS RECORDED. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER BY TAKING VIEW THAT THE SURVEY PROCEEDING WAS CONVERTED INTO SEARCH WITH REGARD TO DELHI OFFICE AND THE STATEMENT RECORDED AT SURAT AND MUMBAI OFFICE WAS OFF SUIT. SHRI RAHUL CHOKSI CAST HIS ONUS OF GIVING HIS STATEMENT ON HEAD OFFICE REPLY TO QUESTION NO. 39, HE STATED THE DIFFERENCE OF 45.35 CARAT SHOULD NOT COME ASIT IS PROBLEM OF HEAD OFFICE. THE ASSESSING OFFICER FURTHER HELD THAT THE CONTENTION OF ASSESSEE THAT PENALTY UNDER SECTION 271AAB OF THE ACT ARE APPLICABLE IN RESPECT OF UNDISCLOSED INCOME WHEN DURING SEARCH STATEMENT UNDER SECTION 132(4) WAS RECORDED AND THAT UNDISCLOSED INCOME AND THE SECTION 271AAB IS NOT APPLICABLE WHERE A SURVEY HAS BEEN INITIATED AND THE STATEMENT IS RECORDED UNDER SECTION 131(1A). THE ASSESSING OFFICER TOOK HIS VIEW THAT ASSESSEE OVERLOOK THE FACT THAT AT DELHI OFFICE PREMISES, THOUGH SURVEY PROCEEDING WAS INITIATED WHICH WAS LATER ON ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 5 CONVERTED INTO SEARCH AND THEREFORE, PROVISION OF SEC. 153A WAS APPLICABLE TO THE ASSESSEE. THE ASSESSEE HAS NOT QUESTIONED THE VALIDITY OF INITIATION OF ACTION UNDER SECTION153A OF THE ACT. THE ASSESSING OFFICER BY REFERRING THE PROVISION OF SECTION 271AAB OF THE ACT LEVIED THE PENALTY @ 10% OF UNDISCLOSED INCOME OF THE SPECIFIC PREVIOUS YEAR AND WORKED OUT PENALTY OF RS.3.49 CRORES. 4. AGGRIEVED BY THE LEVY OF PENALTY, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). BEFORE LD. CIT(A) THE ASSESSEE FILED DETAILED WRITTEN STATEMENT. THE SUBMISSION OF ASSESSEE IS RECORDED IN PARA-6 OF THE IMPUGNED ORDER. THE ASSESSEE IN ITS WRITTEN STATEMENT, IN SUM AND SUBSTANCE STATED THAT ASSESSEE-FIRM WAS SUBJECTED TO SURVEY PROCEEDING UNDER SECTION 133A ON 05.03.2013. THE SURVEY WAS INITIATED AT SURAT, MUMBAI & DELHI OFFICE OF ASSESSEE-FIRM. THE SURVEY PROCEEDING AT DELHI OFFICE WAS LATER ON CONVERTED INTO SEARCH PROCEEDING AND NOTICE UNDER SECTION 153A WAS ISSUED TO THE ASSESSEE. ASSESSMENT WAS FINALIZED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT, WHEREAS ASSESSING OFFICER INITIATED PENALTY UNDER SECTION 271AAB OF THE ACT AND LEVIED PENALTY OF RS.3.49 CRORES @ 10% OF DISCLOSURE OF RS.34.99 CRORES. THE ASSESSEE STATED PENALTY PROVISION UNDER ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 6 SECTION 271AAB ARE NOT APPLICABLE OF THE UNDISCLOSED UNEARTHED DURING THE SURVEY PROCEEDING. THIS SURVEY PROCEEDING WAS INITIATED ON 05.03.2013 AND CONCLUDED ON 07.03.2013 AND THE STATEMENT UNDER SECTION 131(1A) OF THE ACT WAS RECORDED. ONLY SURVEY ACTION AT DELHI OFFICE WAS CONVERTED INTO SEARCH OPERATION AND CONCLUDED ON 06.03.2013. IT IS CLEAR THAT SEARCH WAS NOT INITIATED IN ANY OFFICE OTHER THAN DELHI BRANCH OFFICE OF ASSESSEE- FIRM. FROM THE FINDING OF ASSESSING OFFICER, IT IS CLEAR THAT THE DISCLOSURE WAS MADE AT THE PREMISES WHICH WAS SUBJECTED TO SURVEY PROCEEDING OVERALL DISCLOSURE WAS MADE IN THE STATEMENT UNDER SECTION 131(1A) OF THE ACT. THE ASSESSING OFFICER OVERLOOKED THE DEFINITION OF UNDISCLOSED INCOME AS PRESCRIBED IN THE SECTION ITSELF. IT WAS ALSO STATED THAT FROM THE PROVISION OF SECTION ITSELF, IT IS CLEAR THAT PENALTY LEVIED IN RESPECT OF UNDISCLOSED INCOME FOUND DURING THE SEARCH CONDUCTED UNDER SECTION 132 OF THE ACT AND UNDISCLOSED INCOME IS FOUND. THE PENAL PROVISION OF SEC. 271AAB APPLIED ONLY IN RESPECT OF INCOME UNEARTHED ON DURING THE COURSE OF SEARCH PROCEEDING. THE PENAL PROVISION OF SECTION 271AAB CANNOT BE ARBITRARILY TRIGGERED. THUS, THE LEVY OF PENALTY ON THE DISCLOSURE MADE CONSEQUENT OF ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 7 SURVEY IS BAD IN LAW. THE ASSESSEE ALSO RELIED ON THE VARIOUS CASE LAWS. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, STATEMENT OF PARTNER RECORDED DURING THE SURVEY AND OTHER MATERIAL HELD THAT THERE IS NO DOUBT OR DISPUTE THAT THERE WAS A SURVEY UNDER SECTION133A AT SURAT, MUMBAI AND DELHI OFFICE. THE SURVEY AT DELHI OFFICE WAS CONVERTED INTO SEARCH. THE ONLY INCRIMINATING ASSET / EVIDENCE FOUND IN DELHI OFFICE WAS CASH OF RS.25 LAKH AND EXCESS STOCK OF DIAMOND AND ITS INCOMPLETE RECORD IN THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE OF ASSESSEES BUSINESS. A CASH OF RS.25 LAKH WAS ACCEPTED AS OUT OF BOOK AND IT WAS EXPLAINED THAT OUT OF THE UNDISCLOSED PARTNERS WITHDRAWAL NOT RECORDED IN THE BOOKS OF ACCOUNT AS PER ANNEXURE-A1, PAGE 36 FOUND AT SURAT OFFICE. THE LD. CIT(A) FURTHER HELD THAT DEFINITION OF UNDISCLOSED INCOME, BEING INCOME OF SPECIFIED PREVIOUS YEAR REPRESENTED THE MONEY FOUND IN THE COURSE OF SEARCH UNDER SECTION132 OF THE ACT, WHICH HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR A DOCUMENT MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR. THE LD. CIT(A) FURTHER ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 8 EXAMINED THE EVIDENCE RELATED WITH PHYSICAL STOCK OF POLISH DIAMOND FOUND AT DELHI OFFICE, WHICH WAS 271.37 CARAT. HOWEVER, THE STOCK RECORDED AS PER BOOK ON THE DATE OF SEARCH ONLY 134.36 CARAT. THOUGH, RAHUL CHOKSI AT DELHI BRANCH OFFICE HAD CLAIMED THAT 91.66 CARAT OF FINISHED DIAMONDS WAS ALSO RECEIVED FROM MUMBAI OFFICE, AND IT WAS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED IN DELHI OFFICE, MUMBAI NOR ANY DOCUMENT MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THUS, THE LD. CIT(A) WAS OF THE VIEW THAT THERE WAS EXCESS STOCK OF FINISHED DIAMOND OF 137.01 CARAT (271.37 134.36 CARAT) WHICH WAS NOT RECORDED IN REGULAR BOOKS OF ACCOUNT MAINTAINED NOR IN THE DOCUMENT MAINTAINED AT REGULAR COURSE OF BUSINESS. ON THE BASIS OF AFORESAID OBSERVATION, THE LD. CIT(A) CONCLUDED THAT EXCESS STOCK WHEN VALUED ON AVERAGE RS. 22,500/- PER CARAT (ON THIS AVERAGE RATE OF ENTIRE STOCK FOUND AT DELHI OFFICE) COMES TO RS.3.08 CRORES. THUS, THE UNDISCLOSED INCOME REPRESENTED BY DIAMOND FOUND AT DELHI OFFICE PLUS CASH OF RS.25 LAKH TOTAL OF RS.33,27,250/-. THE LD. CIT(A) FURTHER HELD THAT INCOME WHICH IS DETECTED DURING THE SURVEY IS NEITHER COVERED IN THE SECTION 271AAB NOR IN EXPLANATION 5A OF SECTION271(1)(C) OF THE ACT. ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 9 THE PENALTY HAS NOT BEEN IMPOSED UNDER SECTION 271(1)(C). THE LD. CIT(A) ALSO HELD THAT THE PENALTY UNDER SECTION 271(1)(C) IMPOSABLE ONLY IN FURNISHING INACCURATE PARTICULARS OF CONCEALMENT OF PARTICULARS IN THE RETURN OF INCOME FILED. THE LD. CIT(A) FINALLY HELD THAT THE TOTAL UNDISCLOSED INCOME FOUND AS PER THE DEFINITION FOR THE PURPOSE OF PENALTY UNDER SECTION 271AAB OF THE ACT IS ONLY RS.3,33,27,250/- AND NOT RS.34,99,87,344/- AS CONSIDERED BY ASSESSING OFFICER. THE PENALTY IMPOSABLE UNDER THE SAID SECTION ON THE FACTS OF THIS CASE WOULD BE 10% OF RS.3,33,27,250/-. THE LD. CIT(A) WORKED OUT THE PENALTY OF RS.3,33,275/- AND REMAINING PENALTY WAS DELETED. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED PRESENT APPEAL BEFORE US. 6. WE HAVE HEARD THE SUBMISSION OF SH. S.T BIDARI LEARNED COMMISSIONER OF INCOME TAX - DEPARTMENTAL REPRESENTATIVE (CIT-DR) FOR REVENUE AND, SHRI TUSHAR P. HEMANI LEARNED SENIOR ADVOCATE ASSISTED BY SHRI PARIMALSINH B PARMAR, ADVOCATE FOR THE ASSESSEE (LD SENIOR COUNSEL). THE LD. CIT-DR FOR THE REVENUE SUBMITS THAT A SURVEY ACTION WAS CARRIED OUT AT SURAT, MUMBAI AND DELHI OFFICE OF ASSESSEE-FIRM. SURVEY AT DELHI OFFICE ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 10 WAS CONVERTED INTO SEARCH. THE PARTNER OF ASSESSEE-FIRM MADE A DISCLOSURE OF RS.34.99 CRORES ON THE BASIS OF VARIOUS INCRIMINATING MATERIALS WHICH CONSISTS OF MONEY, BULLION AND JEWELLERY, NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT. THE PARTNER OF ASSESSEE-FIRM CONSCIOUSLY MADE A DISCLOSURE OF ADDITION AL INCOME OF RS.34.99 CRORES, WHICH REPRESENTED THE UNDISCLOSED INCOME. THE STATEMENT GIVEN BY PARTNER OF ASSESSEE- FIRM IN FURTHERANCE OF SHRI DILIPBHAI BABUBHAI MEHTA OF RS.34.99 CRORES IN THE HANDS OF ASSESSEE-FIRM AND NO SEPARATE STATEMENT WITH REGARD TO DELHI OFFICE WAS MADE. HENCE, THE PROVISION OF SECTION 271AAB IS CLEARLY ATTRACTED IN THE PRESENT CASE. THE LD. CIT(A) WRONGLY HELD THAT PENALTY UNDER SECTION 271AAB IS IMPOSABLE ONLY WITH RESPECT TO THE INCRIMINATING MATERIAL AND CASH OF RS.25 LAKH AND DIFFERENCE OF STOCK OF DIAMOND FOUND AT DELHI OFFICE ONLY. THE LD. CIT-DR SUBMITS THAT ONCE AT SURVEY PROCEEDINGS AT ONE PREMISE HAD BEEN CONVERTED INTO SEARCH, THEN IT BECAME A SEARCH CASE AND THE PROVISION OF SECTION 153A GOT APPLICABLE. THE ASSESSEE NEVER CLAIMED THAT THE ACTION INITIATING SECTION 153A IS NOT VALID, DURING THE ASSESSMENT. THE LD. CIT(A) FAILED TO APPRECIATE THAT WHEN SURVEY ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 11 PROCEEDINGS AT ONE PREMISE HAS BEEN CONVERTED INTO SEARCH, IT BECAME A SEARCH CASE AND THE ENTIRE DISCLOSURE MADE BY ASSESSEE-FIRM ON THE BASIS OF EXCESS STOCK NOT RECORDED IN THEIR BOOKS OF ACCOUNT TO BE CONSIDERED AT UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 271AAB. 7. ON THE OTHER HAND, THE LD. SENIOR COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). THE LD. SENIOR COUNSEL SUBMITS THAT A SURVEY WAS CARRIED OUT AT THREE OFFICES OF ASSESSEE-FIRM I.E., IN SURAT, MUMBAI AND DELHI RESPECTIVELY. THE SURVEY PROCEEDINGS AT DELHI WAS CONVERTED INTO A SEARCH PROCEEDING. SHRI DILIPBHAI BABUBHAI MEHTA, PARTNER OF ASSESSEE- FIRM MADE A DISCLOSURE OF RS.34.99 CRORES IN A STATEMENT UNDER SECTION 131(1A) OF THE ACT AS RECORDED IN PARA-2 OF THE PENALTY ORDER. THE ASSESSING OFFICER LEVIED PENALTY OF RS.3.49 CRORES @ 10% OF DISCLOSURE OF RS.34.99 CRORES. THE ASSESSEE IN ITS REPLY BEFORE THE ASSESSING OFFICER HAS CLEARLY STATED THAT THERE WAS NO SEARCH PROCEEDING AT SURAT AND MUMBAI OFFICE PREMISES AND THE PROVISION OF SECTION 271AAB OF THE ACT CANNOT BE MADE APPLICABLE. THE ASSESSEE WHILE FILING ITS RETURN OF INCOME OFFERED THE ADDITIONAL INCOME DISCLOSED DURING THE SURVEY. A SURVEY WAS ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 12 CARRIED OUT ON 05.03.2013 AND THE TIME LIMIT FOR FILING RETURN OF INCOME UNDER SECTION 139 OF THE ACT HAD NOT EXPIRED. THUS, THE PROVISION OF SECTION 153A WAS WRONGLY INVOKED AGAINST THE ASSESSEE. THE LD. CIT(A) WHILE APPRECIATING THE FACT CLEARLY HELD THAT PENALTY UNDER SECTION 271(1)(C) IS IMPOSABLE ONLY IF THERE IS FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF PARTICULAR INCOME IN THE RETURN OF INCOME FIELD BY ASSESSEE. THE LD. CIT(A) FIND THAT ONLY SEARCH WAS CARRIED OUT AT DELHI OFFICE, WHICH RESULTED INTO DETECTION OF UNDISCLOSED INCOME CONSISTING OF RS.25 LAKH IN CASH AND EXCESS STOCK OF DIAMOND WHICH WERE VALUED AT RS.3.08 CRORES THEREBY TOTAL OF RS.3.33 CRORES. THE LD. CIT(A) CONFIRMED THE PENALTY OF RS.33.32 LACS UNDER SECTION 271AAB OF THE ACT BEING @ 10% OF SAID UNDISCLOSED INCOME AND BALANCE WAS DELETED. 8. THE LD. SENIOR COUNSEL OF THE ASSESSEE INVITED OUR ATTENTION ON THE DEFINITION OF UNDISCLOSED INCOME PRESCRIBED UNDER CLAUSE (C) OF EXPLANATION TO SECTION 271AAB, WHICH MEANS ANY INCOME OF SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY ANY MONEY, BULLION JEWELLERY OR OTHER VALUABLE ARTICLES OR THINGS OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 13 TRANSACTION FOUND IN THE COURSE OF SEARCH UNDER SECTION 132, WHICH HAS NOT BEEN RECORDED OR BEFORE THE SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE OF BUSINESS RELATING TO THE PREVIOUS YEAR OR OTHERWISE NOT DISCLOSED TO PRINCIPAL CHIEF COMMISSIONS OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OF COMMISSIONER OR XXXXX. THE LD. SENIOR COUNSEL OF THE ASSESSEE MADE EMPHASIS THAT IN THE PRESENT CASE THAT THERE IS NO SUCH UNDISCLOSED INCOME AT ALL ON WHICH PENALTY UNDER SECTION 271AAB SHOULD HAVE BEEN LEVIED. THE LD. SR. COUNSEL SUBMITS THAT AT THE COST OF REPETITION THAT UNDISCLOSED INCOME OR ASSET FOUND DURING THE COURSE OF SEARCH AT DELHI OFFICE. AND THE PENALTY UNDER SECTION 271AAB WAS LEVIABLE THEREON AND WAS RESTRICTED BY LD. CIT(A) AS SUCH. THE ASSESSEE FILED APPEAL AGAINST SUSTAINING SUCH PENALTY BY LD CIT(A), BEFORE TRIBUNAL VIDE ITA NO. 1766/AHD/2017. HOWEVER, THE SAME HAS BEEN WITHDRAWN ON 04.03.2021, BY SETTLING THE DISPUTE UNDER VIVAD SE VISVAS SCHEME, 2020. 9. THE LD. SENIOR COUNSEL SUBMITS THAT FOR ASSESSMENT YEAR 2013- 14, NORMAL ASSESSMENT ORDER WAS TO BE FRAMED UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER ERRONEOUSLY OBSERVED ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 14 THAT ASSESSMENT ORDER HAD BEEN PASSED UNDER SECTION 143(3) R.W.S. 153A. THE SECTION 153A IS NOT APPLICABLE TO THE YEAR OF SEARCH AND NO NOTICE UNDER SECTION 153A HAS BEEN ISSUED FOR THE YEAR UNDER CONSIDERATION. 10. IN ALTERNATIVE SUBMISSION, THE LD. SR. COUNSEL SUBMITS THAT IN ANY CASE DISCLOSURE WAS MADE IN THE COURSE OF SURVEY AND THE SAME HAS BEEN CONSIDERED WHILE FILING FILE RETURN OF INCOME. HENCE, THE QUESTION OF PENALTY ON SUCH DISCLOSURE WAS NOT ARISE. THE LD. SR. COUNSEL REITERATED THAT DISCLOSURE IN THE QUESTION WAS MADE DURING THE COURSE OF SURVEY SUCH DISCLOSURE HAS BEEN CONSIDERED BY FILING RETURN OF INCOME AND UNDER SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED. TO SUPPORT HIS SUBMISSION, LD. SR. COUNSEL OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISION:- CIT VS. ROOP CREATION P. LTD. TAX APPEAL 621 OF 2011 (GUJ HC) CIT VS. SAS PHARMACEUTICALS 335 ITR 259 (DEL HC) PCIT VS. R. UMEDBHAI JEWELLER P. LTD. TA 549 OF 2016 (GUJ ) DCIT VS. KANAIYALAL K THAKKAR ITA 1196/AHD/2010 (AHD) ITO VS. VALIBHAI KHANBHAI MANKAT ITA 1960/AHD/2011 (AHD) 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW CAREFULLY. WE HAVE ALSO DELIBERATED THE CASE LAW RELIED BY THE LD. SR. COUNSEL FOR THE ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 15 ASSESSEE. THE AO WHILE LEVYING THE PENALTY UNDER SECTION 271AAB HELD THAT THE ASSESSEE HAS NOT QUESTIONED THE VALIDITY OF INITIATION OF ACTION UNDER SECTION153A OF THE ACT. THE ASSESSEE OVERLOOK THE FACT THAT AT DELHI OFFICE PREMISES, THOUGH SURVEY PROCEEDING WAS INITIATED WHICH WAS LATER ON CONVERTED INTO SEARCH AND THEREFORE, PROVISION OF SECTION 153A WAS APPLICABLE TO THE ASSESSEE. AS NOTED ABOVE THAT BEFORE LD CIT(A) THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS THE LD. CIT(A) AFTER RECORDING AND CONSIDERING THE SUBMISSION OF ASSESSEE, STATEMENT OF PARTNER RECORDED DURING THE SURVEY AND OTHER MATERIAL HELD THAT THERE IS NO DOUBT OR DISPUTE THAT THERE WAS A SURVEY UNDER SECTION133A AT SURAT, MUMBAI AND DELHI OFFICE. 12. THE LD CIT(A) FURTHER HELD THAT SURVEY AT DELHI OFFICE WAS CONVERTED INTO SEARCH. THE ONLY INCRIMINATING ASSET OR EVIDENCE FOUND IN DELHI OFFICE WAS CASH OF RS.25 LAKH AND EXCESS STOCK OF DIAMOND AND ITS INCOMPLETE RECORD IN THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE OF ASSESSEES BUSINESS. A CASH OF RS.25 LAKH WAS ACCEPTED AS OUT OF BOOK AND IT WAS EXPLAINED THAT OUT OF THE UNDISCLOSED PARTNERS WITHDRAWAL NOT RECORDED IN THE BOOKS OF ACCOUNT AT SURAT OFFICE. THE LD. ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 16 CIT(A) FURTHER HELD THAT DEFINITION OF UNDISCLOSED INCOME, BEING INCOME OF SPECIFIED PREVIOUS YEAR REPRESENTED BY MONEY FOUND IN THE COURSE OF SEARCH UNDER SECTION132 OF THE ACT, WHICH HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR A DOCUMENT MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR. 13. WE FIND THAT THE LD. CIT(A) FURTHER EXAMINED THE EVIDENCE RELATED WITH PHYSICAL STOCK OF POLISH DIAMOND FOUND AT DELHI OFFICE, WHICH WERE 271.37 CARAT. HOWEVER, THE STOCK RECORDED AS PER BOOK ON THE DATE OF SEARCH ONLY 134.36 CARAT. IT WAS NOTED BY LD CIT(A) THAT THOUGH RAHUL CHOKSI AND DELHI BRANCH OFFICE HAD CLAIMED THAT 91.66 CARAT OF FINISHED DIAMONDS WERE ALSO RECEIVED FROM MUMBAI OFFICE, HOWEVER, IT WAS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED IN DELHI OFFICE, MUMBAI NOR ANY DOCUMENT MAINTAINED IN THE REGULAR COURSE OF BUSINESS. ON THE BASIS OF HIS OBSERVATION, THE LD. CIT(A) WAS OF THE VIEW THAT THERE WAS EXCESS STOCK OF FINISHED DIAMOND OF 137.01 CARAT ONLY, WHICH WAS NOT RECORDED IN REGULARS BOOKS OF ACCOUNT MAINTAINED NOR IN THE DOCUMENT MAINTAINED AT REGULAR COURSE OF BUSINESS. THE LD. CIT(A) CONCLUDED THAT EXCESS STOCK WHEN VALUED ON ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 17 AVERAGE RS. 22500/- PER CARAT (THIS AVERAGE RATE OF ENTIRE STOCK FOUND AT DELHI OFFICE) COMES TO RS.3.08 CRORES. THE UNDISCLOSED INCOME REPRESENTED BY DIAMOND FOUND AT DELHI OFFICE PLUS CASH OF RS.25 LAKH TOTAL OF RS.3,33,27,250/-. 14. THE LD. CIT(A) ON THE BASIS OF AFORESAID OBSERVATION FURTHER HELD THAT INCOME WHICH IS DETECTED DURING THE SURVEY UNDER SECTION 133A IS NEITHER COVERED IN THE SECTION 271AAB NOR IN EXPLANATION5A FILED TO SECTION 271(1)(C) OF THE ACT. THE PENALTY HAS NOT BEEN IMPOSED UNDER SECTION 271(1)(C) AND THEREFORE WHETHER PENALTY WAS IMPOSABLE ON INCOME DETECTED DURING THE SURVEY BUT DISCLOSED IN RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT (AS TIME FOR FILING RETURN WAS AVAILABLE) ITSELF IS ACADEMIC. THE LD. CIT(A) ALSO HELD THAT THE PENALTY UNDER SECTION 271(1)(C) IMPOSING ONLY IN THE FURNISHING INACCURATE PARTICULARS OF CONCEALMENT OF PARTICULARS IN THE RETURN OF INCOME FILED. THE LD. CIT(A) FINALLY HELD THAT THE TOTAL UNDISCLOSED INCOME FOUND AS PER THE DEFINITION FOR THE PURPOSE OF PENALTY UNDER SECTION 271AAB OF THE ACT IS ONLY RS.3,33,27,250/- AND NOT RS.34,99,87,344/- AS CONSIDERED BY ASSESSING OFFICER. THE PENALTY IMPOSABLE UNDER THE SAID SECTION ON THE FACTS OF THIS ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 18 CASE IS 10% OF RS.3,33,27,250/-. THE LD. CIT(A) WORKED OUT THE PENALTY OF RS.3,33,275/- AND DELETED REMAINING PENALTY. THE LD. CIT(A) TOOK ABSOLUTELY CORRECT VIEW, WHICH WE AFFIRM. NO CONTRARY FACT OR LAW IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. 15. CONSIDERING THE FACTS THAT WE HAVE AFFIRM THE ORDER OF LD. CIT(A) ON THE PRIMARY SUBMISSIONS OF THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE, THEREFORE, ADJUDICATION ON OTHER SUBMISSIONS OF THE ASSESSEE HAVE BECOME ACADEMIC. 16. AS RECORDED ABOVE THAT AGAINST UPHOLDING THE PENALTY TO THE EXTENT OF RS. 33,32,725/- UNDER SECTION 271AAB, THE ASSESSEE FILED APPEAL BEFORE TRIBUNAL, HOWEVER, THE ASSESSEE SETTLED THE DISPUTE WITH DEPARTMENT BY AVAILING THE BEFIT OF VIVAD SE VISVAS SCHEME-2020, THE ASSESSEE HAS WITHDRAWN ITS APPEAL VIDE ORDER DATED 04.03.2021 IN ITA NO. 1766/AHD/2017. 17. SO FAR AS OBJECTION OF LD. CIT-DR FOR THE REVENUE IS CONCERN THAT THE LD. CIT(A) WHEN SURVEY PROCEEDINGS AT ONE PREMISE HAS BEEN CONVERTED INTO SEARCH, IT BECAME A SEARCH CASE AND THE ENTIRE DISCLOSURE MADE BY ASSESSEE-FIRM ON THE BASIS OF EXCESS STOCK NOT RECORDED IN THEIR BOOKS OF ACCOUNT TO BE CONSIDERED AT UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 271AAB. THE ITA NO. 39/SRT/2017 M/S STAR RAYS (AY 2013-14) 19 OBJECTION OF THE LD CIT-DR IS NOT CONVINCING TO US AS SURVEY ACTION AT DELHI OFFICE ONLY HAS BEEN CONVERTED IN TO SEARCH ACTION. NO CASE LAW TO SUPPORT SUCH VIEW, IS BROUGHT TO OUR NOTICE. THE LD. CIT(A) WHILE PARTLY CONFIRMING THE PENALTY HAS CONSIDERED THE UNDISCLOSED INCOME FOUND AT DELHI OFFICE FOR THE PURPOSE OF PENALTY UNDER SECTION 271AAB. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/08/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- ( DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 26/08/2021 DKP. SR.P.S. O.S COPY TO: 1. APPELLANT-DCIT, C.C.-3, SURAT 2. RESPONDENT 3. CIT(A)-SURAT 4. CIT 5. DR 6. GUARD FILE BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, ITAT, SURAT