M/S RIVER VALLEY FLOUR MILLS PVT LTD,PATNA V. ACIT, CENTRAL CIRCLE-1, PATNA

ITA 14/PAT/2025

AI Insights

The case involves M/s River Valley Flour Mills Pvt. Ltd., which appealed against the penalty imposed by the Assessing Officer (AO) under section 271AAB for undisclosed income following a search operation under section 132(1) of the Income Tax Act. The search, conducted on 17.08.2014, did not yield any incriminating evidence directly linking to the undisclosed income declared by the assessee in their return for A.Y. 2015-16. The Tribunal examined whether the penalty was rightly imposed and concluded that the income disclosed was not based on any material found during the search, leading to the decision to set aside the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473714 (ITAT-PATNA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: MAK Data Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI KR. SINGAL
• Assessee Lawyers: S. K. TULSIYAN
• Keywords: Set aside
• Section: 142(1); 143(2); 153A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.14/PAT/2025 (Assessment Year:2015-16) M/s River Valley Flour Mills Pvt. ltd. 219, Ashiana Towers, Exhibition Road, Patna-844101, Bihar Vs. ACIT, Central Circle-1 Patna, Bihar (Appellant) (Respondent) PAN No. AAACD8209P Assessee by : Shri S.K. Tulsiyan, AR Revenue by : Shri Ashwani Kr. Singal, DR Date of hearing: 04.03.2025 Date of pronouncement : 11.03.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax, Patna-3 (hereinafter referred to as the “Ld. CIT(A)”] dated 31.12.2024 for the AY 2015-16. 02. The only issue raised in various grounds of appeal is against the order of ld. CIT (A), Patna-3, upholding the levy of penalty u/s 271AAB of the Act by the ld. AO, where the ld. AO has not recorded any satisfaction about the undisclosed income or undisclosed books of accounts, documents, money, bullion, jewellery or valuable article or thing even during the course of assessment or levy of penalty. 03. The facts in brief are that the assessee was subjected to search action u/s 132(1) of the Act on 17.08.2014, covering the residential and business premises of Gupta Nutrition Group of cases. The group is engaged in manufacturing and sale of atta, maida, sujji, bran etc. and has been pioneer in establishing flour mills in Bihar. The assessee Page | 2 ITA No.14/PAT/2025 M/s River Valley Flour Mills Pvt. ltd; A.Y. 2015-16 also belongs to the said group and was also covered in the said section. Accordingly, the notice u/s 142(1) of the Act was issued on 12.04.2026, which was complied with by the assessee vide written submission dated 12.05.2016, submitting that the assessee has already filed the return of income on 27.10.2015, declaring total income of ₹32,78,850/-. Thereafter, notice u/s 143(2) of the Act was issued on 17.06.2016 and questionnaire was also issued on 31.08.2016. During the course of assessment proceedings, the ld. Counsel of the assessee appeared and submitted the books of accounts / details and evidences as called for by the ld. Assessing Officer. On page no.2 of the assessment order, the ld. AO noted that the assessee has offered for taxation and disclosed an amount of ₹86,51,551/- as his undisclosed income during the year which was found during the search and accordingly, initiated the penalty proceedings u/s 271AAB of the Act. Apart from this, there was no observation/ satisfaction in the assessment order. Thereafter the penalty was imposed on the assessee vide order dated 28.06.2017, wherein it was stated that the assessee offered for taxation and undisclosed income of ₹86,51,551/-, which was found during the course of search after issuing the notice u/s 271AAB of the Act and taking into account the reply furnished by the assessee. Only observation of the AO while imposing penalty was that the assessee has declared an undisclosed income in the statement recorded u/s 132(4) of the Act during the course of search and has the same incorporated in the return filed u/s 153A and paid the due taxes. Accordingly, the penalty was imposed at the rate of 10% of the undisclosed income of ₹86,51,551/-. 04. In the appellate proceedings, the ld. CIT (A) confirmed the penalty by observing and holding as under:- Page | 3 ITA No.14/PAT/2025 M/s River Valley Flour Mills Pvt. ltd; A.Y. 2015-16 “From the above, it appears that the Ld. AR has not appreciated the word \"undisclosed income\" which has been duly explained at clause (a) of the explanation to the section 271AAB(1) of the Act. I find that the definition of undisclosed income given under the explanation is broad enough to bring into its fold even any entry in the books of accounts or the documents or transaction found during the course of search which was not disclosed to the income tax department prior to the date of search. Three is also no dispute that the such an income would not have been disclosed or brought to tax had the search not taken place in case of the appellant. I find that all the condition laid down u/s 271AAB(1)(a) to qualify for undisclosed income is fulfilled by the addition made by the AO in his assessment order. I have gone through the authority cited by the Ld. AR in his written submission. I find that the fact of that case of the appellant is distinguishable from the fact of case relied upon by the Ld. AR. There cannot be any dispute that the said addition does not fall within the meaning of the undisclosed income. The AO has passed a speaking order wherein he has tested the addition of Rs. 86,51,551/- under the provision contained u/s 271AAB(1A)(b) of the Act. Besides the above, the decision by the AO has to be applied under the fact and circumstances of the case and based on provision of law on the issue in question. Discretion never means an arbitrary decision and arbitrary option available to the AO. I further find that the ratio of decision of hon'ble Supreme Court in case of MAK Data Pvt. Ltd. (supra) has correctly been applied in case of the appellant. I further observe that the AO has passed a speaking order and has deliberated on the fact and circumstances of the case and provision applied in case of appellant. Therefore, it would not be appropriate to say that AO has levied penalty u/s 271AAB in automatic manner. With these observations, I hold that the AO has correctly levied penalty of Rs. 8,65,155/- computed @10% of unexplained income of Rs. 86,51,551/-. The penalty is confirmed. Accordingly, ground no. 1 & 2 are dismissed” 05. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee was subjected to search u/s 132(1) of the Act on 07.08.2014. Though, the assessee offered a sum of ₹4 crores in all the assessment years, during the course of recording of statement u/s 132(4) of the Act, which was not backed by any incriminating material found during the course of rch. Accordingly, the assessee did not offer the same to tax in the returns of income filed for the various assessment years. We note that the said amount as noted by the ld. AO was ₹86,51,551/- as offered and disclosed in the return of income for A.Y. 2015-16, was never part of the any disclosure made u/s 132(4) of the Act. We note that the disclosure of ₹4 crore made while recording the statement u/s 132(4) of the Act in the name of the assessee company was found to be incorrect by the assessee as there was no incriminating material Page | 4 ITA No.14/PAT/2025 M/s River Valley Flour Mills Pvt. ltd; A.Y. 2015-16 found during search and no such income was ever offered or assessed. We also note that no item of income or asset was linked to the disclosure made in the return of income. Disclosure of ₹86,51,551/- made in the return of income for A.Y. 2015-16 is purely voluntary disclosure made by the assessee and was not linked to any disclosure made in the statement recorded u/s 132(4) of the Act and therefore, the same does not fall within the ambit of Provisions of Section 271AAB of the Act. Moreover, there was no satisfaction recorded by the ld. AO either in the assessment order or in the penalty order qua the undisclosed income. Accordingly, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the penalty. 06. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11.03.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 11.03.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Patna "