M/s. Cliff Trexim Pvt. Ltd., , Kolkata V. DCIT, Central Circle - 3(2), Kolkata , Kolkata

ITA 430/KOL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2687 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 19-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMOL KAMAT
• Keywords: Search and seizure; Document seized; Documents seized; Set aside
• Section: 132; 139; 143(3); 153A; 274; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member] I.T.A. No. 430/Kol/2021 Assessment Year : 2012-13 M/s Cliff Trexim Pvt. Ltd. (PAN: AABCC 0961 E) Vs. DCIT, Central Circle-3(2), Kolkata Appellant Respondent Date of Hearing 24.05.2022 Date of Pronouncement 27 .06.2022 For the Appellant Shri Akkal Dudhwewala, FCA For the Respondent Shri Amol Kamat, CITDR ORDER Per Shri Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax(Appeals)-21, Kolkata [hereinafter referred to as ‘CIT(A)’] dated 24.09.2019 for the assessment year 2012-13. 2. The only issue raised in various ground by the assessee is against the confirmation of penalty of Rs. 4 Lakhs by Ld. CIT(A) as imposed by the AO @ 10% u/s 271AAA of the Income Tax Act, 1961 (hereinafter referred to as the Act) with reference to Rs. 40 Lakhs which was alleged to be undisclosed income. 3. Facts in brief are that a search and seizure operation u/s 132(1) was conducted on the assessee’s premises on 29.05.2012. The assessee filed original return of income on 30.11.2012 u/s 139(1) of the Act declaring total income of Rs. 70,76,490/- and also filed return in compliance to notice issued u/s 153A of the Act on 15.12.2014 declaring total income of Rs. 4,28,92,020/-. Finally, the assessment u/s 143(3) read with Section 153A of the Act was framed vide order dated 30.03.2015 at total income of Rs. 4,74,16,890/-. Pertinent to mention that the assessee had made a disclosure of Rs. 3,98,15,530/- during the course of search as per details as under: 2 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. Sl. No. Particulars Total amount 1 Loss of commodities offered as additional income 2,01,46,506/- 2 Loss of sarees offered as additional income 1,56,69,024/- 3 Discrepancies, Technical Adjustments & Misc. income 40,00,000/- Total 3,98,15,530/- As is apparent from the above , the assessee made two absolute disclosures one in respect of loss of loss of commodities of Rs. 2,01,46,506/- and second in respect of loss on sarees of Rs. 1,56,69,024/-. Whereas the third disclosure was made conditionally towards any discrepancy to the tune of Rs. 40,00,000/-which may be found in the books of accounts of the assessee . The assessee filed the return of income after reconciling various documents as seized by the search party. The assessee did not offer/disclose Rs. 40,00,000/- in the return of income filed u/s 153A on the ground that there was no such discrepancy found with reference to the seized material vis-à- vis books of accounts of the assessee. Thereafter the AO framed the assessment adding the said 40 lakhs on the ground that the assessee has made a disclosure u/s 132(4) of the Act which was also confirmed by the ld CIT(A) on the ground that the said addition was rightly made by the AO on the basis of disclosure made during search proceedings. 4. At the outset, the Ld. Counsel for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of co-ordinate bench in the case of sister concern M/s Garg Brothers Pvt. Ltd. vs. DCIT in ITA No. 431/Kol/2021 for AY 2012-13 vide order dated 23.03.2022 wherein identical issue has been decided in favour of the sister concern by holding that Rs. 40 Lakh is attributable to any money, bullion, jewellery or valuable article or thing or any entry or documents which has not been recorded in the books of accounts for previous year 2012-13 and 3 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. therefore the same does not fall within the ambit of undisclosed income for the purpose of levying penalty u/s 271AAA of the Act and accordingly the penalty was deleted by the tribunal. The Ld. Counsel also submitted that mere confirmation of addition by Ld. CIT(A) which was itself wrong and could have been deleted, had the assessee preferred an appeal against the quantum proceedings as no addition could be made on the basis of mere statement of the assessee and there has to be corroborating material justifying the addition irrespective of the fact of disclosure by the assessee during search. The Ld. Counsel of the assessee submitted that the said 40 lakh was only declared conditionally in order to cover any discrepancy / mistake in the books of accounts of the assessee and therefore was not disclosed in the return filed in response to the notice issued u/s 153A of the Act as no such discrepancy/mistake was found and therefore the penalty levied by the AO is wrong as it does not fall within the ambit of undisclosed income as contemplated in Section 271AAA of the Act. 5. The Ld. D.R. on the other hand strongly opposed the arguments of the ld. Counsel of the assessee by submitting that the addition in quantum proceedings has already attained finality as the assessee has not challenged the order of first appellate authority confirming the quantum addition before the tribunal. The ld DR stated that in view of these facts , the assessee cannot be allowed to agitate the issue at this stage though candidly conceding the fact that similar issue has been decided by the co- ordinate bench in the assessee’s sister concern as stated by the Ld. A.R. which was part of the same search and with similar facts. 6. Having heard the rival parties and perusing the material on record including the decision of the coordinate bench cited before us in the case of Garg Brothers Pvt. Ltd. (supra) which was also covered under same search and similar disclosure was made. We find that the issue is squarely covered in favour of the assessee by the said decision of Co-ordinate bench. The operative part is reproduced as under: “6. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the search operation u/s. 132 of the Act was conducted in Banktesh Group of cases on 29.05.2012. During search Shri Keshaw Kumar Bubna admitted in his statement 4 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. recorded u/s. 132(4) of the Act additional income of Rs.34 cr. for entire group which included his individual capacity, and that of his family members and that of various group companies. And out of this total Rs.34 crores, an amount of Rs.3,78,57,991/- was offered on behalf of assessee as its undisclosed income for taxation for AY 2012-13. Thereafter, the AO initiated assessment proceedings u/s. 153A of the Act against the assessee from AYs 2007-08 to 2012- 13. Pursuant to the notice u/s. 153A of the Act, the assessee filed return declaring total income of Rs.3,63,19,410/-. The assessment was completed u/s. 153A/143(3) of the Act on 30.03.2015 at an assessed income of Rs.4,05,53,450/- after making an addition of Rs.42.54 lacs on account of disallowance of discrepancy, technical adjustment and miscellaneous income to the tune of Rs.40 lakhs and certain disallowance under section 14A, amortization of capital issue expenditure. Thus, it is noted that the total undisclosed income of Rs.3,78,57,991/- which was offered as undisclosed income of assessee u/s. 132(4) of the Act was taxed by AO. 7. Thereafter, the AO had initiated the penalty proceedings u/s. 271AAA of the Act on the additional income admitted by the assessee in its statement u/s. 132(4) of the Act and which was declared in the return of income. Even though the assessee pleaded that the penalty as contemplated u/s. 271AAA of the Act is not attracted, since it satisfied all the three (3) conditions stipulated u/s. 271AAA(2) of the Act and since the fact remains that assessee has paid the entire amount of tax along with interest so it was contended that no penalty under sub-section (1) of section 271AAA of the Act was warranted. However, the AO did not agree and levied penalty @ 10% of the total amount of the entire undisclosed income of Rs.3,78,57,991/- which comes to Rs.37,85,799/-. On appeal, the Ld. CIT(A) has taken note of the fact that during the search operation Shri Keshaw Kumar Bubna the key person of the assessee company in his statement recorded u/s. 132(4) of the Act has disclosed the additional income of Rs.3,78,57,991/- for AY 2012-13 and accordingly, the assessee filed its return of income showing Rs.3,63,19,410/- u/s. 153A of the Act (as noted by AO in the assessment order dated 30.03.2015). The Ld. CIT(A) has found that AO while completing the assessment u/s. 153A/143(3) of the Act on 30.03.2015 had accepted the returned income after making, inter alia, the addition of Rs. 40 lacs on account of discrepancies, technical adjustment and miscellaneous income which was offered during search and through the disclosure petition but not included in the return of income filed in response to the notice u/s. 153A of the Act. The Ld. CIT(A) found that the AO’s action of levying penalty on the entire amount disclosed to the tune of Rs.3.78 cr. was erroneous. According to him, the assessee had fulfilled the condition as laid down in section 271AAA of the Act in respect of the amount of Rs.3,38,57,991/- and, therefore the balance of Rs.40 lacs only would fall in the ken of penalty u/s. 271AAA of the Act and, therefore, he levied 10% of Rs. 40 lacs which comes to Rs. 4 lacs which he upheld. Thus assessee got partial relief. The assessee still being dissatisfied is in appeal before us challenging the confirmation of penalty of Rs. 4 lacs. For adjudicating this issue let us have a look at Section 271AAA of the Act which reads as under: “Penalty where search has been initiated 271AAA. (1) The Assessing Officer may, notwithstanding 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 June, 2007, (but before the 1st day of July, 2012) the assessee shall pay by way of 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 specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,— 5 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. (i ) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii ) substantiates the manner in which the undisclosed income was derived; and (iii ) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of 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, so far as may be, apply in relation to the penalty referred to in this section. Explanation.—For the purposes of this section,— (a ) "undisclosed income" means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other 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 search 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 or Chief Commissioner or Principal or Commissioner before the date of the search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b ) "specified previous year" means the previous year— (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.” 8. From a bare reading of the aforesaid provision it is noted that sub-section (1) of section 271AAA empowers the AO to levy penalty under this sub-section, if search u/s. 132 of the Act has been initiated against an assessee between 01.06.2007 to 01.07.2012. However, it has to be borne in mind that if an assessee satisfies the condition specified in sub-section (2) of section 271AAA of the Act then no penalty u/s. 271AAA of the Act is leviable because the opening words of subsection (2) of section 271AAA of the Act reads “Nothing contained in sub-section (1) shall apply, if assessee” satisfies the conditions stipulated under clause (1), (ii) and (iii) of this sub- section. It is to be noted that it is not mandatory on the part of the AO to levy penalty as per this provision because the Parliament has used the opening words in sub- section (1) is “The AO may ......”. So, it is not mandatory that AO in every cases of search penalty u/s. 271AAA is leviable but it is discretionary. And as discussed, if the 6 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. assessee satisfies the conditions stipulated in sub-section (2), then no penalty is leviable u/s. 271AAA of the Act. But if the conditions stipulated under sub-section (2) of section 271AAA of the Act are not satisfied then the AO may levy penalty as per sub-section (1) of section 271AAA of the Act. And when we said that levy of penalty u/s. 271AAA of the Act is discretionary, we mean that is should be judicial discretion. With the aforesaid understanding let us examine whether the penalty as sustained by Ld. CIT(A) in respect of Rs.40 lakhs (10% of it ie,Rs. 4 lakhs) is legally sustainable. After examination of the facts, we note that the assessee in this case has satisfied the condition laid down in clause (i) of sub-section (2) since in the course of search in the statement under sub-section (4) of section 132 of the Act, Shri Bubna on behalf of assessee has admitted the undisclosed income of Rs.3.78 cr. (out of total disclosure of Rs.34 cr. for the whole group) and had specified the manner in which such income has been derived which is evident from page 6 of the paper book (disclosure petition dated 25.07.2012 filed before the DDIT (Inv.) (refer page 2 to 10 of paper book); coming to clause (ii) the assessee has substantiated the manner in which the undisclosed income was derived i.e. by producing the schedule 6 wherein it was shown that loss on commodities and sarees which was falsely claimed, so it was offered as additional income to the tune of Rs.3,38,57,991/-; and to be on the safe side and out of caution in its disclosure petition had offered the deficit/difference of Rs. 40 lacs (Rs.3.78 cr. – Rs.3.38 cr.) on account of any discrepancy, technical adjustment and miscellaneous income. We note that the AO has noted in the assessment order dated 30.03.2015 that the assessee had filed its return of income pursuant to notice u/s. 153A of the Act reflecting Rs.3,63,19,410/- and the balance amount as admitted during search [Rs.3,78,57,991/- (admission/disclosure petition) – Rs.3,38,57,991/-] to the tune of Rs. 40 lacs was also included in the assessment order passed by AO on 30.03.2015. this fact the Ld. CIT(A) has taken note of which according to him satisfies condition (i) and (ii) under sub-section (2) of section 271AAA of the Act in respect of Rs.3,38,57,991/-. And according to Ld. CIT(A), the other condition in clause (iii) also stands satisfied and so the AO erred in levying penalty u/s. 271AAA of the Act for the entire amount of Rs.3.,78 cr. when assessee has satisfied the condition in respect of Rs.3.38 cr. So, according to him, only the deficit portion i.e. Rs. 40 lacs is amenable to penalty u/s. 271AAA of the Act. However, according to assessee since all conditions have been satisfied in respect of the entire amount of Rs.3.78 cr. and since assessee has paid the tax together with interest in respect of the undisclosed income of Rs.3,78,57,991/- penalty u/s. 271AAA of the Act was not warranted. 9. The Ld. AR, has submitted an alternate argument that the amount of Rs. 40 lacs cannot be termed as ‘undisclosed income’ within the meaning of section 271AAA of the Act since it doesn’t fall in the definition of ‘undisclosed income’ given in the Explanation to section 271AAA of the Act. On consideration of this contention of the assessee, we note that in order to qualify as undisclosed income within the meaning of section 271AAA of the Act, [ that is in this case the amount of Rs. 40 lakh] should fall in the ken of the definition given therein (supra). In order to qualify as undisclosed income as per the definition given therein, one has to see whether this amount of Rs. 40 lakhs [sustained by the Ld. CIT(A)] was discovered by the searched party during search in the form of undisclosed money, bullion, jewelry or valuable article or thing or any entry in the books of account or other documents or transactions found in the course of search and which (i.e, the undisclosed facts as discovered), (A) has not been recorded on or before the date of search in the books of account or other documents maintained in the course relating to such previous year; or (B) otherwise not disclosed to the PCIT before date of search. Here (B) is not relevant. What is relevant is whether Rs. 40 lakhs (out of Rs.3.78 cr.) has been discovered during search in any 7 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. description given hereinabove viz. money, jewellery, transaction which has not been recorded in the books before search. Here in order to appreciate the contention of assessee that this Rs. 40 lakhs would not fall in the definition of ‘undisclosed income’ one has to see the surrounding facts and circumstances during search in assessee’s premises. It is an admitted fact that Shri Bubna during search has disclosed Rs. 34 crores as undisclosed income for the whole group, out of which Rs. 3.78 cr. was on behalf of assessee. Pursuant thereto assessee had filed the disclosure petition and had given details of the undisclosed income, wherein assessee had offered Rs.2,06,99,150/- which was falsely shown by assessee as loss on account of commodity business (BSL/06) and Rs.1,31,58,841/- (which was falsely shown by assessee as loss from business of sarees – BSL/05), which totals Rs.3,38,57,991/-. This amount qualifies as undisclosed income since by discovery of seized documents BSL-5 & 6 it revealed that assessee have falsely claimed loss from these two transactions this amount, so it qualifies as ‘undisclosed income’ i.e. Rs.3.38 cr.. However, the question is what about the deficit/difference of Rs.40 lakhs which has been offered by assessee Shri Bubna on behalf of assessee of Rs.3.78 cr (out of Rs.34 cr.) which assessee has not shown in its return pursuant to notice u/s. 153A of the Act. In this regard, it is noted that assessee in its disclosure petition has conditionally offered Rs. 40 lakhs to cover any other undisclosed income which has been unearthed during search. This action of assessee was out of abundant caution and conditional (provided there is material suggesting any undisclosed income un-earthed during search). However, finding that there was no other undisclosed income to identify with the seized materials/Panchanama, the assessee while filing the return of income of Rs.3.63 crores pursuant to section 153A notice did not offer Rs. 40 lakhs. However, the AO in the assessment order dated 30.03.2015, added Rs. 40 lakhs since assessee admitted Rs.3.78 cr. during search. And the Ld CIT(A) deleted penalty in respect of Rs.3.38 cr. but sustained Rs. 40 lakhs, which we do not countenance because, the addition of Rs. 40 lakhs, was not based on any material discovered during search in any form described therein the definition of un-disclosed income u/s 271AAA of the Act. It is noted that based on the bald statement of Shri Bubna Rs.3.78 cr. (out of Rs.34 cr.) was admitted which includes Rs 40 Lakhs. Since Rs. 40 lakhs cannot be attributed to any money, bullion, jewellery, article or transaction or entry or documents which has not been recorded in the books for the previous year (AY 2012- 13) when searched on 29.05.2012, the same cannot fall in the ken of the definition of undisclosed income for the purpose of levying penalty u/s. 271AAA of the Act. Having taking note that the amount of Rs. 40 lakhs has been brought to tax by the AO though not shown by the assessee in the Return of Income, the penalty u/s. 271`AAA of the Act cannot be legally sustained. So, the assessee succeeds. 10. In the result, assessee’s appeal is allowed.” Since the issue before us is identical, we ,therefore ,respectfully following the decision of the co-ordinate bench set aside the order of Ld. CIT(A) and direct the AO to delete the penalty. 8 ITA No. 430/Kol/2021 AY: 2012-13 M/s Cliff Trexim Pvt. Ltd. 6. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 27 th June, 2022 Sd/- Sd/- (Rajpal Yadav) (Rajesh Kumar) Vice-President Accountant Member Dated: 27 th June, 2022 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- M/s Cliff Trexim Pvt. Ltd., 57, Burtolla Street, 3 rd Floor, Kolkata- 700007 2. Respondent – DCIT, Centrals Circle-3(2), Kolkata 3. The CIT(A)- 21, Kolkata (Sent through e-mail) 4. Pr. CIT- Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata