Ita/943/2016 Of Principal Commissioner Of Income Tax-2, Agra v. M/S D.d. Resorts Pvt. Ltd

$~19 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 943/2016PRINCIPAL COMMISSIONER OF INCOME TAX-2, AGRA ..... Appellant Through Mr. Balbir Singh, Sr. Adv. with Mr.Prakash Kumar, Ms. Rubal Maini and Ms. RashmiSingh, Advs. versus M/S D.D. RESORTS PVT. LTD. ..... RespondentThrough Mr. Sanjay Jain, ASG with Mr. DileepShivpuri, Sr. Standing Counsel and Mr. Vikrant A.Maheshwari, Adv. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRIO R D E R%21.03.2017 1.The revenue is aggrieved by an order of the Income Tax Appellate Tribunal (ITAT) whereby the penalty imposed underSection 271-AAA of the Income Tax Act, 1961 (‘the Act’, for short)was deleted. 2.The brief facts of the case are that the assessee was subjected toBlock Assessment under Section 153C of the Act on account of asearch conducted on Rajdarbar Group of cases and in the course ofwhich the statement of one Shri Rakesh Kumar Garg was recordedunder Section 132(4) of the Act. Shri Rakesh Kumar Garg made astatement to the effect that `5.00 crore belonged to the assessee. Thisstatement formed the basis for issuance of a notice under Section 153C of the Act. In response to the said notice, the assessee filed arevised return.After completion of the assessment, the AssessingOfficer (A.O.) issued a notice under Section 271-AAA of the Act andimposed `50.00 lakhs as penalty, being 10% of the undisclosedincome specified for that year. The assessee appealed to the CIT (A)but did not succeed. The ITAT granted relief based on the textualinterpretation of the provision i.e. Section 271-AAA of the Act. TheITAT relied upon the decisions of the Ahmadabad and MumbaiBenches in Mukesh S. Shah (ITA Number:1942/Ahd/2012), MrPravin S. Jain ( ITA 4005/M/2014), etc. The ITAT thereafter, hasheld as follows: “16. We have heard both the sides andperused the material on record. We find that inthis case, search u/s 132 of the Act was notcarried out in the case of the assessee companywhereas a survey was carried out u/s 133A ofthe Act at the project site of the assesseecompany; and additions were made on thebasis of statement recorded by Rakesh KumarGarg of M/s. Raj Darbar Group u/s 132(4) ofthe Act on the assessee company.The AOinitiated penalty u/s 271AAA of the Act andlevied a penalty of Rs.50 lakhs on the assesseecompany. The ld. CIT(A) has upheld the orderof the AO.The assessee is aggrieved by theorder of the ld. CIT(A) and has now preferredan appeal before us. The short question, that isbeing canvassed before us, is whether penaltyu/s271AAA can beinitiatedagainsttheassessee or not. The penalty u/s 271AAA canbe initiated against the assessee or not.Thepenalty u/s 271AAA can be triggered only ifsearch has been initiated against the assessee u/s 132 of the Act on or after 01.06.2007 andwithin 01[st]day of July, 2012. Now, the thrust ofthe argument is that no search u/s 132 has beencarried out against the assessee company, sopenalty u/s 271AAA cannot be initiated againstthe assessee company. In order to buttress, thisargument ofhis, he has also taken ourattentionto the fact that pursuant to the searchu/s 132 of the Act in the case of M/s. RajDarbar Group, section 153C proceedings wereinitiated against the assessee company. It waspointed out by the ld. AR that if the search hadbeen initiated u/s 132 of the assessee companythen, proceedings u/s 153A of the Act shouldhavebeeninitiatedagainsttheassesseecompany.We find that on a perusal of theassessmentorder,pursuanttothesearchcarried out at M/s. Rajdarbar Group, theproceedings were initiated u/s 153C against theassesseecompany;andthecasewastransferred to the Central Circle 5, New Delhiu/s 127 of the Act by the orders of CIT, Central– 1, New Delhi vide order dated 25.03.2010.Thus, we find force in the submission of the ld.AR that no search u/s 132 was initiated againsttheassesseecompanyandonlysurveyoperation u/s 133(4) was initiated against theassessee company. In the factual scenario, wehave to see whether an AO can initiate 271AAApenaltyprovisionsagainsttheassesseecompany.A bare reading of section 271AAAshows that, “the AO... ... direct that, in a casewhere search has been initiated u/s 132.....”which clearly spells out that section 271AAAprovisions get attracted only if search has beeninitiated u/s 132 of the Act. Here, in this case,we find that no search has been carried outagainst the assessee company.So, section 271AAAcannotbeinitiatedagainsttheassessee company.Therefore, we allow theclaim of the assessee and delete the penaltylevied against the assessee u/s 271AAA of theAct.” 3.The revenue argues that the ITAT’s decision flouts the lawsince there is no reference to Section 153A or Section 153C, butrather to Section 271-AAA of the Act which contemplates impositionof lower rate of penalty, upon completion of a Block Assessmentwherever a search yields undisclosed income.Thus, regardless ofwho the searched party is or where Section 153C of the Act isinvoked, penalty under that provision is justified and warranted. 4.In the present case, the notice under Section 153C was issued tothe assessee premised upon the statement made by a third party.Whilst the issuance of notice is undisputed in the sense that theamount – not only under AO’s opinion prima facie “belonged” to theassessee, as a result of the statement, rather it was affirmed by theassessee upon its filing a return including the said amount in theBlock Assessment filed by it. Arguen do, even if, it is taken that therevenue is correct in contending that Section 271-AAA of the Act perseis not excluded, nevertheless, the assessee would, in thecircumstances of this case, not be deprived of the benefit undersection 271AAA(2) of the Act.Even accepting the revenue’ssubmission that the assessee stands in the same position as that of asearched party, the benefit that arises for a searched party, who notonly surrenders the amount in the course of the search proceedingsbut also mentions it in the revised returns, cannot be denied on parity of reasoning. 5.In view of the foregoing reasons, the Court is of the opinionthat no substantial question arises. The appeal is dismissed. S. RAVINDRA BHAT, J MARCH 21, 2017/acm NAJMI WAZIRI, J