Smt. Rekhaben K. Manglani, Godhra V. The Deputy Commissioner of Income Tax, Central Circle-1, Baroda

ITSSA 262/AHD/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4977 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 01-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. SINGH
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Documents seized; Set aside
• Section: 132; 271(1)(c); 143(3); 133A; 153A; 158BFA

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD (Conducted Through Virtual Court) ] ] BEFORE S/SHRI PRAMOD M. JAGTAP, VICE PRESIDENT AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER IT(SS)A No.261 and 262/Ahd/2017 Assessment Year :2011-12 and 2012-13 Rekhaben K. Mangalani 1215/1, Opp: Swaminarayan Complex Bamroli Road Godhara 389 001. PAN : AJPPM 3072 N Vs DCIT, Cent.Cir.1 Baroda. अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Written submissions Revenue by : Shri V.K. Singh, Sr.DR स ु नवाई क तार ख/Date o f Hearing : 23/02/2022 घोषणा क तार ख /Date of Pronouncemen t: 16/03/2022 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: These two appeals are filed by the assessee against the common order dated 28.2.2017 passed by Ld.Commissioner of Income-tax (Appeals)-12, Ahmedabad [for short “Ld.CIT(A)] in Appeal No.CIT(A)-12/623, 624/CC1/Brd/15-16 wherein penalty under section 271(1)(c) and 271AAB of the Income Tax Act, 1961 ("the Act" for short) relating to the assessment years 2011-12 and 2012-13 were imposed upon the assessee. We dispose of both the appeals by this consolidated order. 2. None appeared on behalf of the assessee. However, assessee has filed written submissions dated 7.10.2021. Therefore, after IT(SS)A No.261 and 262/Ahd/2017 2 hearing ld.DR and considering materials available on record, we proceed to dispose of both the appeals. 3. Brief facts of the case is that the assessee is an individual and was part of Dhanjimama Group of cases, wherein search and seizure operation under section 132 of the Act was conducted on 3.7.2012. Pursuant to the search, the assessee was issued notice under section 153A of the Act and she filed her return declaring an income totaling to Rs.59,02,900/- including of agriculture income of Rs.43,736/- relating to the Asstt.Year 2011-12. The income declared in the return was inclusive of additional income of Rs.51,22,067/- earned from sale of land and building which was disclosed during the course of search. Similarly, for the Asstt.Year 2012-13 in response to the notice under section 153A assessee filed return of income declaring total income at Rs.30,23,620/- which is inclusive of additional income of Rs.28,31,520/- earned from sale of land & building and disclosed during the course of search. The assessment under section 153A was completed on 30.1.2015 for the Asstt.Year 2011-12 accepting declared total income of Rs.52,02,900/-. Thereafter, the ld.AO initiated penalty proceedings under section 271(1)(c) of the Act with the following observation: “4. The assessee in his return of income has offered additional income of Rs.51,22,067/- which is as per the disclosure of additional income made during the course of search proceedings. This additional income has been offered due to search action and the findings thereof, thus the amount of Rs.51,22,067/- is undisclosed income of the assessee. Therefore, penalty proceedings u/s.271(1)(c) of the Act are initiated for this default.” 4. Similarly for the Asstt.Year 2012-13, the assessment under section 153A r.w.s 143(3) of the Act was framed on 30.1.2015 declaring declared income at 30,23,620/-, and thereafter initiated IT(SS)A No.261 and 262/Ahd/2017 3 penalty proceedings under section 271AAB of the Act with the following observation: “4. The assessee in his return of income has offered additional income of Rs.28,31,520/- which is as per the disclosure of additional income made during the course of search proceedings. This additional income has been offered due to search action and the findings thereof, thus the amount of Rs.28,31,520/- is undisclosed income of the assessee for the specified year as per section271AAB of the Act. Therefore, penalty proceedings under section 271AAB are initiated for this default.” 5. In the penalty proceedings under section 271(1)(c) of the Act, the ld.AO imposed a penalty to the tune of Rs.51,22,067/- for the Asstt.Year 2011-12 and Rs.2,83,152/- under section 271AAB for the Asstt.Year 2012-13. Aggrieved by the levy of penalties under sections 271(1)(c) and 271AAB of the Act, the assessee preferred appeal before the ld.CIT(A). However, the ld.CIT(A) confirmed both the penalties by observing as under: “6. All the authorities relied upon by the appellant deal with the factual scenario when no seized assets/documents formed the basis of "additional income" shown in the return u/s 153A. The cases also pertain to Explanation 5 and not 5A. The facts in the present case being different and in view of Prasanna Dugar (supra), I hold that these decisions are not applicable. In view of the discussion as above, I am of the considered view that the Ld. AO is right in initiating and in levying penalty u/s 271(l)(c) r.w. Explanation 5A. I may also mention that in para 4 of the assessment order the ld.AOhas observed that the amount of Rs.17,05,618/- included in the return of income by the appellant is "undisclosed income" of the f appellant and therefore for this reason only the penal proceedings are initiated. This, in my opinion, would seem to imply that the proceedings have been initiated on the strength of deeming provisions of Explanation 5A which, incidentally, do not differentiate between "concealment of particulars of income" or "furnishing of inaccurate particulars of income". In view of this, I am of the considered view that the Jurisdictional High Court decision in the case of Sorathia Engineering (supra), relied upon by the appellant, with respect, would not apply. Thus, I find no reason to interfere with the orders levying penalty passed by the AO. Accordingly, I uphold the penalty of Rs. 51,22,067/- levied by the AO and consequently dismiss the appeal filed by the appellant. IT(SS)A No.261 and 262/Ahd/2017 4 ***** **** ***** Appeal No.CIT(A)-12/624/CC l/Brd/2015-16 [271AAB] (A.Y.2O12-13) 8. The only differentiating fact for this appeal vis-a-vis that for the A.Y.2011-12 is that the AO initiated and levied the penalty u/s 271AAB with regard to "disclosure" u/s 132(4) made on behalf of the appellant. The undisputed facts are that Shri Dhanraj Manglani on behalf of the appellant, made disclosure of income of Rs.28,31,520/- for the year under reference based on the cash flow/books prepared after the search on the basis of incriminating seized documents. It is also undisputed, as is clearly discernible from the statement u/s 132(4) of Shri Manglani (supra), that the underlying transactions which resulted into such disclosure were not recorded in the regular books of accounts. Thus, the income declared in the return filed u/s 153A after the search is clearly "undisclosed income" for the "specified previous year" within the meaning of clause (c)(A) and clause (b)(i) of Explanation below section 271AAB. Thus, the facts of the case are squarely covered by section 271AAB(l)(a). Before the AO, in response to show-cause notice dated 14/5/2015, the appellant made submissions dated 16/6/2015. The main submissions {reproduced by the AO) are that no addition to the returned income is made, the appellant herself has not made any disclosure u/s 132(4), that the provisions of section 271AAB are applicable w.e.f. A.Y.2013- 14 only, and also that the discretionary penalty cannot and should not be levied in a routine way. The AO however, effectively dealt with each and every contention of the appellant and has summarized in para 4 on page 8 of the penalty order as to why the penalty u/s 271AAB is called for. In substance the AO holds that the appellant's case is squarely covered by the provisions of section 271AAB and therefore, the penalty is to be levied. The Ld. AR more or less reiterated the submissions made before the AO in written submissions filed as also during the course of hearing. 8.1 After considering the material on record, I find no infirmity in the action of the AO in levying penalty. I, however, also find that the appellant's categorical contention that the disclosure u/s 132(4) is not made by the appellant herself but is made by Shri Dhanraj Manglani and therefore, penalty is not leviable has not been specifically and expressly dealt with by the Ld. AO. In this behalf, I may observe that if this argument of the appellant is taken to the logical end, the penalty at 20%, in place of 10% levied by the AO, would become payable by the appellant under clause (b) of section 271AAB because it remains indisputable that the "subject matter of disclosure" is indeed the incriminating documents/unaccounted assets which have not found any reference or entry in the regular books of accounts maintained by the appellant. However, I am also aware of IT(SS)A No.261 and 262/Ahd/2017 5 Jurisdictional Tribunal decision in the case of Balaji Formalin Put Ltd. dated 8/8/2013 of Honble Ahmedabad Tribunal vide ITA No: 1274/Ahd/2012 wherein it has been held that the disclosure made by the director of the company will entitle the assessee company to get immunity from provision of section 271AAA. In the absence of such benefit, the penalty would become payable u/s 271AAA, or accordingly, would become payable at 20% u/s 271AAB(l)(b) in place of only 10% u/s 271AAB(l)(a). The relevant part of the decision is reproduced as under: 9. From the facts and circumstances of the case before us, we are of the considered view that the disclosure made by the director of the appellant company during the search proceedings on behalf of himself, sister concerns and group concerns will entitle the appellant company who is one amongst the group concerns, to claim benefit u/s 271AAA of the Act though its proceedings were completed u/s 133A read with section 143(3) of the Act. Therefore, we hereby delete the penalty levied by the learned AO which was further confirmed by the learned CIT(A). 8.2 It is thus clear that in law the "disclosure" made on behalf of the appellant only helps the appellant in not falling under clause (b) requiring levy of penalty @ 20% and thus pay only 10% of the penalty under clause (a) of s. 271AAB(1). The "disclosure u/s 132(4)" is not a pre-requisite for levy of penalty by AO but is merely a pre-requisite for benefit of immunity u/s 271AAA or for benefit of lesser rate of penalty u/s 271AAB. Thus, I hold that appellant herself should be deemed to have made the disclosure u/s 132(4) and should be granted the benefit of being penalized under clause (a) and not under clause (b) of section 271AAB, as has rightly been done by the AO. The income offered in the return of income is undoubtedly "undisclosed income" for the "specified previous year" attracting s. 271AAB. Thus, there is no infirmity in the action of the Ld. AO in initiating and levying penalty u/s 271AAB(1)(a) and therefore, the order of the Ld. AO is confirmed. Penalty of Rs.2,83,152/-is sustained.” 6. Aggrieved by the confirmation of penalties by the ld.CIT(A), the assessee is in further appeal before the Tribunal. 7. In the written submissions, it is inter alia pleaded by the assessee that penalty in case of other assessees who are part of the same group and were also subject of the same search, involving identical facts and circumstances, has been deleted by the Tribunal in assessee’s husband case viz. Kamlesh D. Manglani in IT(SS)A No.261 and 262/Ahd/2017 6 IT(SS)A.No.564 to 567/Ahd/2018. She also filed a copy of order of the Tribunal dated 18.12.2019, which is placed on record. It is a well considered order, and applying the same ratio, case of the present assessee be also decided on the similar line. 8. In reply thereof, the ld.DR could not controvert applicability or otherwise of the above decision of the Tribunal to the facts of the present case. However, the ld.DR supported orders of the lower authorities and submitted that penalties levied under section 271(1)(c) and 271AAB of the Act are to be upheld in the present case. 9. We have given our thoughtful consideration to the matter and gone through the materials on record. The case law cited by the assessee in the written submissions in Kamlesh D. Manglani (supra), we find that assessee’s case is also covered by the decision of Co-ordinate Bench where the Tribunal while dealing with similar set of facts and circumstances, deleted both the penalties imposed under section 271(1)(c) and 271AAB of the Act. The relevant parts of the observation of the Co-ordinate Bench read as under: Section 271(1)(c) of the Act “8. We have heard the rival contentions of both the parties and perused the materials available on record. The penalty in the case on hand was levied under explanation 5A of section 271(1)(c) of the Act which reads as under: "[Explanation 5A.--Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of-- (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or IT(SS)A No.261 and 262/Ahd/2017 7 (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,-- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.]" 8.1 A plain reading of the provisions reveals that the penalty shall be levied if the assessee in the course of such initiated under section 132 of the Act was found to be the owner of any money, bullion, jewellery or other valuable article or there is some income based on the entry in the books of accounts/documents. Then, it shall be presumed that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. However in the case on hand, we note that there is no such allegation made by the authorities below as discussed above. 8.2 Thus, it is transpired that the assessee has disclosed additional income in the return issued under section 153A of the Act voluntarily and without having found any income by the Revenue in the manner provided under explanation 5A to section 271(1)(c) of the Act. As such, there was not found any undisclosed income by the Revenue in the course of such conducted under section 132 of the Act. 8.3 Similarly, there was also no mentioned of any incriminating document in relation to the addition of Rs.3,77,790.00 on the basis of which the addition was made by the Revenue. Thus, it is inferred that such addition was not based on the document found during the course of search. 8.4 Now the question arises, whether the assessee can be visited with the penalty with respect to the income disclosed by him in such proceedings voluntarily and without finding any incriminating document during the course of search. To our mind the answer stands in favour of the assessee. In holding so we draw support and IT(SS)A No.261 and 262/Ahd/2017 8 guidance from the order of ITAT in the case of Ajay Traders Vs. DCIT reported in 81 taxmann.com 463, wherein it was held as under: "The assessee disclosed an additional income on account of unaccounted sales. Based on said disclosures, the Assessing Officer imposed penalty under section 271(1)(c) by invoking Explanation 5A to said section. Held that it was undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs.15 lacs and requested not to impose penalty under section 271(1)(c). The Assessing Officer imposed the penalty by invoking the Explanation 5A to section 271(1)(c) penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, the penalty was to be deleted." 8.5 From the above order, it is clear that there cannot be any penalty under explanation 5A to section 271(1)(c) of the Act until and unless it supported on the basis of incriminating document. 8.6 At the time of the hearing, a query was raised to the Ld. DR whether the income disclosed by the assessee in pursuance to the search was based on the incriminating document, but he failed to bring any material on record. Therefore, in the absence of any documentary evidence, we infer that the additional income offered to tax and addition of other business income cannot be subject to the penalty under explanation 5A to section 271(1)(c) of the Act. 8.7 We are also conscious to the fact that the impugned penalty was deleted in the case of other assessees who were part of the group and subject to the same search vis- a-vis involving identical facts and circumstances. The details of such cases have already been incorporated in the submission filed by the assessee as discussed above. Accordingly, we hold that there cannot be any penalty under explanation 5A to section 271(1)(c) of the Act in the given facts and circumstances. Hence the ground of appeal of the assessee is allowed.” Section 271AAB of the Act 15. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that IT(SS)A No.261 and 262/Ahd/2017 9 the explanation(c) to section 271AAB of the Act has a direct bearing on the issue on hand which reads as under: "48[Penalty where search has been initiated. 271AAB. (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 July, 2012 49[but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President50], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,-- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX (c) "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 54[Principal Chief Commissioner or] Chief Commissioner or 54[Principal Commissioner or] Commissioner before the date of 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.]" 15.1 From the above provision, it is clear that the penalty shall be imposed under section 271AAB of the Act where there is undisclosed income within the meaning of the explanation (c) to 271AAB of the Act. However, we note that there was no documentary evidence found by the search team suggesting that there was any undisclosed income of the assessee. As such the voluntary income disclosed by the assessee and the addition made by the AO was without having found any incriminating document in the course of search. We also note that there no reference made by the authorities below to the IT(SS)A No.261 and 262/Ahd/2017 10 documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the ld. AR for the assessee. In holding so we draw support and guidance from the order of the Tribunal in the case of ACIT Vs. Marvel Associates reported in 170 ITD 353 wherein it was held as under: "9. Penalty u/s 271AAB attracts on undisclosed income but not on admission made by the assessee u/s 132(4). The AO must establish that there is undisclosed income on the basis of incriminating material. In the instant case a loose sheet was found according to the A.O., it was incriminating material evidencing the undisclosed income. In the penalty order the AO observed that loose sheet shows the cost per square feet is Rs.3571/- per sft. and assessee stated to have submitted in sworn statement cost per sq. feet at Rs.2200/- to Rs.2300/- per sq. feet. However neither the AO nor the Ld.CIT(A) has verified the cost of construction with the books and projections found at the time of search. The counsel argued that it was mere projection but not the actuals. The write up heading also mentioned that summary of the projected profitability statement. There is no evidence to establish that projections reflected in the loose sheet is real. No other material was found during the course of search indicating the undisclosed income. There was no money, bullion, jewellery or valuable article or thing or entry in the books of accounts or documents transactions were found during the course of search indicating the assets not recorded in the books of accounts or other documents maintained in the normal course, wholly or partly. The revenue did not find any undisclosed asset, any other undisclosed income or the inflation of expenditure during the search/ assessment proceedings. Though a loose sheet of page No.107 of Annexure A/GS/MA/1 was found that does not indicate any suppression of income but it is only projection of profit statement. The amount of Rs.3571/- mentioned in the projections refers to cost and profit which is approximate sale price but not the cost as stated by the AO in the penalty order. The cost of construction in the projections projected at Rs.2177/- which is in synch with the statement given by the assessee. The AO was happy with the disclosure given by the assessee and did not verify the factual position with the books of accounts and projections and bring the evidence to unearth the undisclosed income. Neither the A.O. nor the investigation wing linked the cost of profit or cost of asset to the entries in the books of accounts or to the sales conducted by the assessee to the sale deeds. Therefore, we are unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure. The Hon'ble ITAT Delhi Bench in the IT(SS)A No.261 and 262/Ahd/2017 11 case of Ajay Sharma v. Dy. CIT [2013] 30 taxmann.com 109 held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee has not been declared by the assessee. An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee. Hence penalty u/s 158BFA (2) of the Act is not leviable. The facts of the assessee's case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we set aside the order of the lower authorities and cancel the penalty u/s 271AAB of the Act." 15.2 We are also conscious to the fact that the impugned penalty was deleted in the case of other assessees who were part of the group and subject to the same search vis-a-vis involving identical facts and circumstances. The details of such cases have already been incorporated in the submission filed by the assessee as discussed above somewhere in the preceding paragraph. In view of the above, we are not convinced with the penalty levied by the authorities below. Hence we set aside the order of the ld. CIT-A and direct the AO to delete the penalty levied by him under section 271 AAB of the Act. Hence the ground of appeal of the assessee is allowed.” 10. In the present cases on hand, the AO made assessment under section 153A on total income including additional income offered by the assessee only, without there being any incriminating material found during the course of search. This additional income was offered by the assessee voluntarily and paid taxes thereon. For the Assessment year 2011-12, the AO had imposed penalty under section 271(1)(c) of the Act for the income voluntarily admitted in the return during the assessment under section 153A of the Act. It is settled position of the law that penalty can be imposed only when there is concealment of the income or for furnishing inaccurate particulars of income. In the instant case, there is no concealment of income or furnishing of inaccurate particulars of income. IT(SS)A No.261 and 262/Ahd/2017 12 Impugned penalty was levied based on the income offered voluntary in the return subsequent to the assessment made under section 153A of the Act. Therefore, following the Co-ordinate Bench’s decision in the assessee’s own group cases cited (supra), we delete the impugned penalty imposed under section 271(1)(c) of the Act in the present case. Thus, this ground of appeal of the assessee is allowed. 11. So far as levy of penalty under section 271AAB of the Act for the Asstt.Year 2012-13 is concerned, we find that the basis for imposition of the penalty is that the assessee has disclosed certain income from undisclosed sources in the return of income and paid taxes thereupon. The same was not based on any incriminating seized material found during the course of search. Since additional income voluntarily offered to tax does not fall within the meaning “undisclosed income”, provisions of section 271AAB of the Act would not be attracted. This issue also covered in favour of the assessee in the group cases cited (supra). Therefore, respectfully following the Co-ordinate Bench’s decision in the assessee’s group cases in ITA No.556/Ahd/2018 and 25 others vide order dated 18.12.2019 we delete the penalty levied under section 271AAB of the Act, and allow this ground of appeal. 12. In the result, both the appeals of the assessee are allowed. Order pronounced in the Court on 16 th March, 2022 at Ahmedabad. Sd/- Sd/- (PRAMOD M. JAGTAP) VICE-PRESIDENT (T.R. SENTHIL KUMAR) JUDICIAL MEMBER Ahmedabad, dated 16/03/2022