COMMISSIONER OF INCOME TAX (CENTRAL) LDH V. PARVINDER SINGH PROP

ITA/370/2013

AI Insights

The case revolves around a penalty imposed under Section 271AAA of the Income Tax Act, 1961, following a search and seizure operation at the business premises of Shri Parvinder Singh, proprietor of Mohinder Singh Jewellers. The operation led to the seizure of a substantial amount of cash and subsequent disclosure of undisclosed income by the assessee. The Assessing Officer initially imposed a penalty for non-payment of tax on this undisclosed income, citing non-compliance with the payment provisions under Section 271AAA(2)(iii). However, both the CIT(A) and the Tribunal found that the penalty was unjustified as the alleged short payment of interest was due to an incorrect imposition of interest by the Assessing Officer, which had been addressed in favor of the assessee. Consequently, the High Court upheld the Tribunal's decision, dismissing the revenue's appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 730276 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 14-07-2014
• Assessment Year: misc
• Other Referred Cases: CIT vs. Ashok Kumar, (2011) 334 ITR 355
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Advance tax; Assessment; Interest; Penalty; Rectification Application; Search and seizure; Undisclosed income
• Section: 271(1)(c); 132; 139(1); 274; 234B; 260A; 234A; 234C; 132(4); 275; 271AAA

Judgement Text

"ITA No.370 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.370 of 2013 (O&M) Date of decision: 14.7.2014 The Commissioner of Income Tax (Central) Ludhiana ……Appellant Vs. Shri Parvinder Singh,Prop. M/s Mohinder Singh Jewellers, Haveli Jamadar, Amritsar …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr.Rajesh Katoch, Advocate for the appellant. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 25.7.2013, Annexure A.6 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (in short, “the Tribunal') in ITA No.385(ASR)/2012, for the assessment year 2009-10, claiming following substantial questions of law:- “(i) Whether, on the facts and in the circumstances of the case, Hon’be ITAT is justified in law in interpretation of section 271AAA in such a manner as to hold that the law had no intention in section 271AAA for payment of tax together with interest to pay the same within some time limit in particular before the due date of filing of return? GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.370 of 2013 (O&M) 2 (ii) Whether, on the facts and in the circumstances of the case, the Hon’be ITAT was right in law in deleting the penalty levied under section 271AAA by holding that the immunity under section 271AAA(2) cannot be denied only because entire tax alongwith interest was not paid before filing of income tax return or before concluding the assessment proceedings? 2. A few acts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. Search and seizure operation was conducted on 5.2.2009 at the business premises of respondent at Shop No.1, Haveli Jamadar, Amritsar and cash amounting to ` 89,30,000/- was seized. The same was deposited in the PD account of Commissioner of Income Tax (Central) Ludhiana. On the basis of excess stock and cash found, Shri Parvinder Singh made a disclosure of ` 10 crores in the hands of his proprietorship concern Mohinder Singh Jewellers, Amritsar. Vide letter dated 3.3.2009, the assessee had requested for adjustment of seized cash against his advance tax liability. Later a return declaring total income of ` 10,86,88,070/- was filed on 29.9.2009 under Section 139(1) of the Act including the disclosed amount of ` 10,00,00,000/-. No interest under Sections 234A, 234B and 234C of the Act was determined as payable by the assessee in his return of income. The assessee had determined total advance tax of `3,51,30,000/- in his return of income. The return was processed on 20.12.2010, Annexure A.1 creating a demand of ` 1,22,79,290/- including interest under section 234B of ` 22,16,382/- and under Section 234C of `11,32,906/-. The assessee filed a rectification application dated 19.1.2011 requesting for adjustment of seized cash against advance tax and for deletion of interest charged under section 234B and revision of interest charged under section 234C of the Act. The interest calculated by the GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.370 of 2013 (O&M) 3 assessee under section 234C of the Act amounted to `10,43,602/-. The said application was rejected by the Assistant Commissioner of Income Tax vide order dated 28.2.2011, Annexure A.3. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 12.3.2012, the appeal was allowed following the judgment of this Court in CIT vs. Ashok Kumar, (2011) 334 ITR 355. The appeals filed by the department were dismissed by the Tribunal and this Court in ITA No.95 of 2013 decided on 11.7.2013. Assessment was completed on 21.12.2010 at an income of ` 10,88,88,070/-. Penalty proceedings under section 271AAA of the Act were initiated as the assessee had not paid the due tax on the undisclosed income under the Act. Penalty of ` 1,00,00,000/- was imposed vide order dated 23.6.2011 in terms of section 271AAA of the Act. Aggrieved by the order, the assessee filed appeal before the CIT(A). Vide order dated 13.7.2012, Annexure A.5, the appeal was allowed and the penalty was deleted holding that the alleged short payment of interest was only on account of incorrect imposition of interest by the Assessing Officer. Feeling aggrieved, the revenue filed appeal before the Tribunal. Vide order dated 25.7.2013, Annexure A.6, the Tribunal dismissed the appeal. Hence the instant appeal by the revenue. 3. Learned counsel for the revenue submitted that there was short payment of interest under Section 234C of the Act and therefore, CIT(A) as well as the Tribunal were in error in deleting the penalty imposed under Section 271AAA of the Act. According to the learned counsel, once there was a short fall, the penalty was exigible and had been rightly imposed by the Assessing officer. 4. After hearing learned counsel for the appellant, we do not find GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.370 of 2013 (O&M) 4 any merit in the appeal. 5. It would be apt to reproduce Section 271AAA of the Act which reads thus:- “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, 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,— (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 GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.370 of 2013 (O&M) 5 (B) otherwise not been disclosed to the Chief 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; (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.” 6. The aforesaid provision was inserted by Finance Act, 2007 with effect from 1.4.2007. According to sub section (1), in a case where search under Section 132 of the Act is on or after Ist June 2007, the assessee is liable to pay by way of penalty calculated at the rate of ten percent of the undisclosed income of the specified year in addition to the tax payable by him. However sub section (2) relaxes the rigour of this penalty provision in a situation in which (i) in the course of the search, in a statement under section 132(4), assessee 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. Under Sub section (3), no penalty under Section 271(1) (c) of the Act shall be imposed on the undisclosed income referred to in sub section (1). The provisions of Sections 274 and 275 of the Act are made applicable in relation to penalty leviable by virtue of sub section (4). Explanation GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.370 of 2013 (O&M) 6 appended to the section clarifies and assigns meaning to “undisclosed income” and “specified previous year”. 7. In the present case, the non compliance of Section 271AAA(2) (iii) of the Act was adjudicated by the CIT(A) in favour of the assessee. Accordingly, the assessee was held not liable for penalty under section 271AAA of the Act. The CIT(A) while deleting the penalty had noticed as under:- “4. I have considered the basis of penalty imposed by the Assessing Officer and the arguments of the AR on the issue. It is seen that the penalty under Section 271AAA has been imposed only because of alleged non compliance with the provisions of section 271AAA (2) (iii) which stipulates the payment of tax alongwith interest in respect of the undisclosed income. The only issue is that the assessee was levied interest under section 234B for short payment of advance tax due on the income return which in turn was caused by inaction on the part of the Assessing Officer to adjust the seized cash towards advance tax liability as requested by the assessee. The assessee's appeal against the order of the Assessing Officer to rectify the order imposing interest under section 234B was adjudicated by the undersigned. I have held that no interest under Section 234B was leviable in view of the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. Ashok Kumar 334 ITR 355. This meant that the alleged short payment of interest was only on account of incorrect imposition of interest by the Assessing Officer which stands deleted. Therefore the basis to impose penalty under section 271AAA in the form of non payment of taxes/interest does not survive and thus penalty imposed is directed to be deleted.” The Tribunal vide its order dated 25.7.2013, Annexure A.6 upheld the order of the CIT(A). GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.370 of 2013 (O&M) 7 8. The findings recorded by the CIT(A) and the Tribunal are findings of fact which have not been shown to be illegal or perverse in any manner. Thus, the penalty under Section 271AAA of the Act had been rightly deleted. No substantial question of law arises and consequently, the appeal stands dismissed. (Ajay Kumar Mittal) Judge July 14, 2014 (Jaspal Singh) ‘gs’ Judge GURBAX SINGH 2014.08.26 11:39 I attest to the accuracy and integrity of this document High Court Chandigarh "