Ita v. After Hearing Learned Counsel

ITA No.370 of 2013 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.370 of 2013 (O&M)Date of decision: 14.7.2014 The Commissioner of Income Tax (Central) Ludhiana Vs, ..-.-- Appe Shri Parvinder Singh,Prop. M/s Mohinder Singh Jewellers, HaveliJamadar, Amritsar .....Responde CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’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 Section260A of the Income Tax Act, 1961 (in short, “the Act’) against the orderdated 25.7.2013, Annexure A.6 passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar, (in short, “the Tribunal’) in ITANo.385(ASR)/2012, for the assessment year 2009-10, claiming followingsubstantial questions of law:- “(1) Whether, on the facts and in the circumstances of the case,Hon’be ITAT is justified in law in interpretation of sectionQT|AAA in such a manner as to hold that the law had nointention in section 271 AAA for payment of tax together withinterest to pay the same within some time limit in particularbefore the due date of filing of return? (141) Whether, on the facts and in the circumstances of the casethe Hon’be ITAT was right in law in deleting the penalty leviedunder section 271AAA by holding that the immunity undersection 271AAA(2) cannot be denied only because entire taxalongwith interest was not paid before filing of income taxreturn or before concluding the assessment proceedings? ?DA few acts relevant for the decision of the controversy involvedas narrated in the appeal may be noticed. Search and seizure operation wasconducted on 5.2.2009 at the business premises of respondent at Shop No.1,Haveli Jamadar, Amritsar and cash amounting toLT89,30,000/- 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, ShriParvinder Singh made a disclosure ofv10 crores in the hands of hisproprietorship concern Mohinder Singh Jewellers, Amritsar. Vide letterdated 3.3.2009, the assessee had requested for adjustment of seized cashagainst 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 Actincluding the disclosed amount of=a10,00,00,000/-. No interest undersections 234A, 234B and 234C of the Act was determined as payable by theassessee in his return of income. The assessee had determined total advancetax of|43,51,30,000/- in his return of income. The return was processed on20.12.2010, Annexure A.1 creating a demand ofLy1,22,79,290/- includinginterest under section 234B of|22,16,382/- and under Section 234C ofL11,32,906/-. The assessee filed a rectification application dated 19.1.2011requesting for adjustment of seized cash against advance tax and fordeletion of interest charged under section 234B and revision of interestcharged under section 234C of the Act. The interest calculated by the ITA No.370 of 2013 (O&M) ITA No.370 of 2013 (O&M) assessee under section 234C of the Act amounted to410,43,602/-. The saidapplication was rejected by the Assistant Commissioner of Income Taxvide order dated 28.2.2011, Annexure A.3. Aggrieved by the order, theassessee filed appeal before the Commissioner of Income Tax (Appeals)|CIT(A)]. Vide order dated 12.3.2012, the appeal was allowed following thejudgment of this Court inCIT vs. Ashok Kumar,(2011) 334 ITR 355. Theappeals filed by the department were dismissed by the Tribunal and thisCourt in ITA No.95 of 2013 decided on 11.7.2013. Assessment wascompleted on 21.12.2010 at an income ofvO10,88,88,070/-. Penaltyproceedings under section 271 AAA of the Act were initiated as the assessehad not paid the due tax on the undisclosed income under the Act. Penaltyof|LV1,00,00,000/- was imposed vide order dated 23.6.2011 in terms ofsection 271AAA of the Act. Aggrieved by the order, the assessee filedappeal before the CIT(A). Vide order dated 13.7.2012, Annexure A.5, theappeal was allowed and the penalty was deleted holding that the allegedshort payment of interest was only on account of incorrect imposition ofinterest by the Assessing Officer. Feeling aggrieved, the revenue filedappeal before the Tribunal. Vide order dated 25.7.2013, Annexure A.6, theTribunal dismissed the appeal. Hence the instant appeal by the revenue. 3.Learned counsel for the revenue submitted that there was shortpayment of interest under Section 234C of the Act and therefore, CIT(A) aswell as the Tribunal were in error in deleting the penalty imposed undersection 271AAA of the Act. According to the learned counsel, once therewas a Short fall, the penalty was exigible and had been rightly imposed bythe Assessing officer. 4After hearing learned counsel for the appellant, we do not find ITA No.370 of 2013 (O&M) any merit in the appeal. 5 It would be apt to reproduce Section 271AAA of the Act which reads thus:- CITIAAA.(1) The Assessing Officer may, notwithstandinganything contained in any other provisions of this Act, directthat, in a case where search has been initiated undersection | 3on or after the lst day of June, 2007, the assessee shall pay byway of penalty, in addition to tax, if any, payable by him, a sumcomputed at the rate of ten per cent of the undisclosed incomeof the specified previous year, (2) Nothing contained in sub-section (1) shall apply if theASSESSCC,— (7) in the course of the search, in a statement under sub-section(4) ofsection 132, admits the undisclosed income and specifiesthe manner in which such income has been derived; (11) substantiates the manner in which the undisclosed incomewas derived; and (111) pays the tax, together with interest, if any, in respect of theundisclosed income. (3) No penalty under the provisions of clause (C) of sub-section(1) ofsection 271shall be imposed upon the assessee in respectof the undisclosed income referred to in sub-section (1), (4) The provisions ofsections 2/4andWTSShall, so far as maybe, apply in relation to the penalty referred to in this section,Explanation.—FKor the purposes of this section, (() “undisclosed income” means— (7) any income of the specified previous year represented, eitherwholly or partly, by any money, bullion, jewellery or othervaluable article or thing or any entry in the books of account orother documents or transactions found in the course of a searchundersection | 3, which has— (A) not been recorded on or before the date of search in thebooks of account or other documents maintained in the normalcourse relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner orCommissioner before the date of search; or (11) any income of the specified previous year represented,either wholly or partly, by any entry in respect of an expenserecorded in the books of account or other documentsmaintained in the normal course relating to the specifiedprevious year which is found to be false and would not havebeen found to be so had the search not been conducted; (A) not been recorded on or before the date of search in thebooks of account or other documents maintained in the normalcourse relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner orCommissioner before the date of search; or (11) any income of the specified previous year represented,either wholly or partly, by any entry in respect of an expenserecorded in the books of account or other documentsmaintained in the normal course relating to the specifiedprevious year which is found to be false and would not havebeen found to be so had the search not been conducted; (b) “specified previous year” means the previous year— (7) which has ended before the date of search, but the date offiling the return of income under sub-section (1) ofsection 139for such year has not expired before the date of search and theassessee has not furnished the return of income for the previousyear before the said date; or (11) in which search was conducted.” onThe aforesaid provision was inserted by Finance Act, 2007 witheffect from 1.4.2007. According to sub section (1), in a case where searchunder Section 132 of the Act is on or after Ist June 2007, the assessee isliable to pay by way of penalty calculated at the rate of ten percent of theundisclosed income of the specified year in addition to the tax payable byhim. However sub section (2) relaxes the rigour of this penalty provision ina Situation in which (1) in the course of the search, in a statement undersection 132(4), assessee admits the undisclosed income and specifies themanner in which such income has been derived; (ii) substantiates themanner in which the undisclosed income was derived; and (iii) pays the tax,together with interest, if any, in respect of the undisclosed income. UnderSub section (3), no penalty under Section 271(1) (c) of the Act shall beimposed on the undisclosed income referred to in sub section (1). Theprovisions of Sections 274 and 275 of the Act are made applicable inrelation to penalty leviable by virtue of sub section (4). Explanation ITA No.370 of 2013 (O&M) appended to the section clarifies and assigns meaning to “undisclosedincome” and “specified previous year’.|.In the present case, the non compliance of Section 271AAA(2)(411) of the Act was adjudicated by the CIT(A) in favour of the assessee.Accordingly, the assessee was held not liable for penalty under section271AAA of the Act. The CIT(A) while deleting the penalty had noticed asunder:- “4. I have considered the basis of penalty imposed by theAssessing Officer and the arguments of the AR on the issue. Itis seen that the penalty under Section 271AAA has beenimposed only because of alleged non compliance with theprovisions of section 271AAA (2) (iii) which stipulates thepayment of tax alongwith interest in respect of the undisclosedincome. The only issue is that the assessee was levied interestunder section 234B for short payment of advance tax due onthe income return which in turn was caused by inaction on thepart of the Assessing Officer to adjust the seized cash towardsadvance’ tax liability as requested by the assessee. Theassessee'S appeal against the order of the Assessing Officer torectify the order imposing interest under section 234B wasadjudicated by the undersigned. I have held that no interestunder Section 234B was leviable in view of the judgment ofHon’ble Jurisdictional High Court in the case ofCIT vs.Ashok Kumar334 ITR 355. This meant that the alleged shortpayment of interest was only on account of incorrectimposition of interest by the Assessing Officer which standsdeleted. Therefore the basis to impose penalty under section271 AAA in the form of non payment of taxes/interest does notsurvive and thus penalty imposed is directed to be deleted.” The Tribunal vide its order dated 25.7.2013, Annexure A.6 upheld the orderof the CIT(A), ITA No.370 of 2013 (O&M) The Tribunal vide its order dated 25.7.2013, Annexure A.6 upheld the orderof the CIT(A), ITA No.370 of 2013 (O&M) S_The findings recorded by the CIT(A) and the Tribunal arefindings of fact which have not been shown to be illegal or perverse in anymanner. Thus, the penalty under Section 271AAA of the Act had beenrightly deleted. No substantial question of law arises and consequently, theappeal stands dismissed, (Ajay Kumar Mittal)Judge July 14, 2014>5%9 (Jaspal Singh)Judge