AI Structured Summary
Not yet generated for this judgment
Judgment
PER SUDHIR KUMAR, JUDICIAL MEMBER:
This appeal by the Revenue is directed against the orders of the Commissioner of Income-tax (Appeals)-26 New Delhi [hereinafter referred to as “Ld.CIT(A)”] vide order dated 04-07-2023 arising out the penalty Order passed dated 25-03-2022 under section 271AAB (1) of the Income Tax Act, 1961 (in short “the Act”.
The Revenue has raised the following ground in appeal as under:
1.Whether in the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of Rs. 5,64,90,000/- levied u/s 271AAB(1) of the Act by holding that the assessee during the search operation has surrendered Rs.28,24,50,000/- in the statement recorded u/s 132(4) and thew same has been declared in the return of income and has ignored the findings of the AO that there was no evidence substantiating the disclosure of such amount of surrendered income during the course of recording of statement u/s 132(4) of the Act?
2.Whether in the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of Rs. 5,64,90,000/- of the Act by ignoring the fact that the AO in his penalty order dated 25-03-2022 has categorically stated that “ there, is no evidence (as per records available) substantiating the disclosure of such of surrendered income during the course of recording of statement u/s 132(4) and hence clause(b) of section 271AAB (1) of the Act, 1961 is applicable in this case where penalty is to be levied @ 20% of the undisclosed income”?
3.Whether in the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of Rs. 5,64,90,000/- of the Act by ignoring the fact that the surrendered amount has been deducted after the search and seizure conducted u/s 132 and the surrendered amount of Rs. 28,24,50,000/- is covered under the definition of undisclosed income under the explanation to section 271AAB?
4.That the appellant craves leave for reserving the right to amend modify alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
This appeal of the Revenue was allowed by the Tribunal vide order dated 30-07-2025. The assessee moved the miscellaneous application to recall the order and same was allowed by order dated 17-04-2026 by holding as under:
“3.On perusal of the aforesaid miscellaneous application from para 2 onwards, it is noticed that the main grievance of the assessee is that there was no undisclosed income within the meaning of section 271AAB as defined in the explanation of Section 271AAB of the Act which was argued by the Ld. AR at the time of main appeal hearing and that the same had not been taken note of by this Tribunal while passing the order. During the course of hearing the log book of the undersigned for the date of hearing of 15-05-2025 was called for by the bench and on verification of the same it was noticed that the ld. AR had indeed made arguments to the aforesaid fact by also placing reliance on case laws which is also supported by case law paper book filed by the ld. AR. Hence, it is established beyond doubt that the case laws relied upon by the ld AR had not been considered by the Tribunal while passing the order which would make the order of the Tribunal erroneous warranting rectification u/s 254(2) of the Act. The ld AR also placed heavy reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Honda Siel Ltd reported in 295ITR 466 in support of his contention, We have gone through the said decision and find the ratio decidendi thereon shall squarely apply to the facts of the instant case. Accordingly, we deem it fit to recall the order passed by this Tribunal dated 30-07-2025 in its entirety. The main appeal is fixed for hearing on 27-05-2026. Both the parties are informed in the open court about the scheduled date of hearing. No fresh notice would follow.
4.In the result, the MA of the assessee is allowed.
The brief facts of the case are that the assessee group is engaged in construction of road projects, execution of contractual works including the extension of widening of Highways construction of flyovers culverts rehabilitation/ strengthening of railway tracks. A Search and Seizure operation were carried out on DSC Group including the assessee. The assessment in the case of assessee was completed under section 143(3) of the Act on 31-03-2016 at the total loss of Rs.1,04,60,31,501/- against the return loss of Rs.1,05,45,78,526/- after making the following additions.
Addition u/s 69 on the basis of seized documents Rs.40,00,000/-
Addition u/s 69 on the basis of seized documents Rs.45,00,000/-
Disallowance u/s 14A Rs.47, 025/-.
During the search operation the assessee surrendered the amount of Rs.28,24,50,000/-. Penalty proceedings under section 271AAB of the Act was initiated on the surrendered income of Rs.28,24,50,000/- and notice dated 31-03-2016 was issued to the assessee. In the response of the notice the assessee stated that during the pendency of appeal the penalty proceeding be kept in abeyance. The Ld. CIT(A) has partly allowed the appeal of the assessee vide order dated 18-06-2019 and on the surrender income penalty proceedings was initiated after receipt the order notice dated 21-01-2022 was issued. The Assessing Officer levied the penalty of Rs. 5,64,90,000/- being 20% of surrendered amount of Rs.28,24,50,000/-.
Aggrieved the order of the Assessing Officer the assessee preferred the appeal before the Ld. CIT(A) who vide his order dated 04-07-2023 allowed the appeal of the assessee. Being aggrieved the order of the Ld. CIT(A) the revenue is in appeal before the Tribunal.
The Ld. DR submitted that during the search operation the assessee surrendered the amount of Rs. 28,24,50,000/- in his statement recorded under section 132(4) of the Act and same was declared in the return of income. The surrender amount is covered under the definition of undisclosed income. The assessee could not substantiate the manner in which such income was received.
The ld AR submitted that under section 271AAB of the Act the penalty can be levied with respect to Undisclosed income as defined in clause (c) of Explanation and assessee’s case does not fall under the definition as mere s surrender of income is not enough for holding such income as undisclosed income. In the penalty notice no default of section 271AAB was refer. He also submitted that mere surrender amount is not the undisclosed income. The undisclosed income should either be represented by an asset which has been not been recorded in the books of account or should be represented by an expense by way any entry recorded in the books which is false and would not have been founded so. In the case of Laxman Nainani Jaipur vs. Deputy Commissioner of Income Tax in ITA no. 1029 to 1034 /JP/ 2019 dated 15-04-2020 the co-ordinate Jaipur Bench held as under:
65.On perusal of the aforesaid provisions, what therefore has to be determined is whether there is 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 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 and whether a finding to this effect has been recorded by the Assessing officer. On perusal of the penalty order, we however find that the only finding which has been recorded by the Assessing officer is that the assessee has made a surrender of undisclosed income of Rs 2,15,40,344 under various heads and all essential requirements/conditions prescribed under section 271AAB are satisfied and it is a fit case for levy of penalty and the AO accordingly levied penalty @ 10% of income so surrendered during the course of search. The question is whether the penalty is to be levied solely basis the surrender during the course of search, what was the necessity of bringing a specific definition of “undisclosed income” by the legislature while enacting the provisions of section 271AAB of the Act. In our view, once a specific definition of undisclosed income has been provided in section 271AAB, being a penal provision, the same must be strictly construed and the Assessing officer has to record a clear and specific finding to this effect and cannot be solely guided by the surrender made by the assessee during the course of search. Admittedly and undisputedly, in the instant case, there is no finding in the penalty order to this effect that undisclosed income so found and surrendered during the course of search falls under the definition of “undisclosed income” as so defined in section 271AAB and in absence thereof, on this ground itself, the impugned penalty proceedings deserve to be set-aside.
In the case of Principal Commissioner of Income Tax vs. Ind Swift Laboratories Ltd. (2023) 335 CTR (P&H) 1105 the Hon’ble Punjab & Haryana held that;
4.In the case of present assessee i.e. Ind. Swift Group of Companies (ITA No. 1304/ Chd/2017, the assessee -company had surrendered an income of Rs. 14,50,41,000/-to cover all discrepancies in seized documents, inventories etc. The CIT(A) had observed that with regard to seized documents an amount of Rs. 12,73,41,000/- was surrendered as unaccounted cash profit earned from trading from Crude Menthol Oil. Remaining amount of Rs. 1,77,00,000/- was surrendered in order to cover discrepancy, if any found in the seized documents. The CIT(A) through deleted the penalty in respect of the amount which tallied with the transactions of trading in crude Menthol Oil recorded in the seized documents, however he confirmed the penalty on the surrendered amount of Rs.1,77,00,000/- on the ground that the same was not represented by any specific asset, nor with any entry in the books of account or other documents or transaction found in the course of search and hence, does not fulfill the conditions for getting immunity from penalty under s.271AAA of the IT Act.
5.Upon filing of appeal against the said order the Tribunal Observed that the assessee had surrendered an amount of Rs. 14,50,41,000/- on account of the aforesaid discrepancies/ unaccounted transactions found during search action. With regard to the remaining amount of Rs.1,77,00,000/- which was with respect to the unaccounted transactions, the assessee had surrendered the said amount to cover up further discrepancies, if any found in the seized documents. The Tribunal returned a finding that the above said amount, which was surrendered did not relates to any information which had been got from the seized documents. Hence the amount of Rs. 1,77,00,000/- would fall within the definition of undisclosed income as per s. 271AA of the Act. The said section is reproduced as under:
“(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 any entry in the books of account or other documents or transactions found in the course of a search under s. 132 which has-
(A)Not ben 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 (Principal Chief CIT or) Chief CIT or (Principal CIT) CIT 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 expenses 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.”
6.Keeping in view the above said provisions, the Tribunal held that in the case of surrender of RS. 1,77,00,000/- except the seized documents otherwise nothing was found during the search action which would construe undisclosed income of the assessee as defined under the provisions of s. 271AAA of the Act. With these observations, the appeal filed by the assessee was allowed.
7.Learned counsel for the appellant has not been able to dispute the fact that as per definition of s. 271AAA of the Act, amount of Rs.1,77,00,000/- would fall in the category of undisclosed income. Hence, as per the above said provisions, the penalty has been rightly deleted by the Tribunal qua surrendering of amount of Rs. 1,77,00,000/-. So for as the amount of Rs.14,50,41,000/-is conserved this amount was surrendered keeping in view the discrepancies/ unaccounted transactions found in the seized documents during search conducted by the officers of the appellant Department on the premises of the assessee-company. Since unaccounted cash profit was earned from the trading from Crude Menthol Oil, the penalty has not been imposed by the CIT(A), which has been rightly upheld by the Tribunal. The CIT(A) has deleted the penalty imposed on the amount of Rs.12,73,41,000/- on the ground that Sh. Nav Rattan Munjal Promoted Director of the Groups Companies had specifically mentioned that these documents contained details of trading of Crude Menthol (CMO). In this backdrop, the CIT(A) had not levied penalty on the aforesaid amount.
8.After going through the impugned order, we are of the view that appeal filed by the Revenue, on this issue has been rightly dismissed. The impugned order has been passed after appreciating the facts in the right perspective and no ground is made out to interfere therein. No substantial question of law arises for consideration. Resultantly, finding no merits, the present appealsi.e.IT Appeal No.21 of 2020 and IT Appeal No.50of 2020 stand dismissed.
In the case in hand, there is no finding in the penalty order to this effect that undisclosed income so found and surrendered during the course of search falls under the definition of undisclosed income as so defined in section 271AAB of the Act. During the search and seizure operation the statement of Sh. Mohinder Singh Narula MD of the assessee was recorded in which he stated that to cover all the discrepancies he wants to offer Rs. 45 Crores as income for A.Y.2011-12. The Assessing Officer assumed that because there was no discussion on the surrender amount of Rs.28,24,50,000/- so surrender income was confirmed by the Ld. CIT(A) and on that basis he levied the penalty without holding that income was undisclosed income. Hence, the impugned penalty proceedings deserve to be set aside.
The ld. AR of the assessee submitted that two separate default was mentioned in the section 271AAB but in penalty notice or order the AO has not specified this default. Reliance is placed the judgement of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows in [2016]73 taxmann.com 241(Karnataka) dated 23-11-2025, against which the Hon’ble Supreme Court dismissed the SLP. Reliance also placed on the following judgements;
Padam Chand Pungliya Vs. ACIT (2020) 181 ITD 0261 (Jaipur)
Ashish Mittal vs. DCIT ITA NO. 8166/2019 dated 23-03-2021
iii) Asst. CIT vs. Marvel Associates (2018) 165 ITR (Trib) 0023 (Vishakhapatnam)
iv) M/s Rambhajo’s vs. ACIT (2019) 175 DTR 0161(Jaipur)
Shri Paras Mal Jain vs. DCIT ITA No. 353/2022 dated 22-06-2023(Jaipur)
The notices dated 8.9.2016 13.9.2021 issued by AO are reproduced as under :
OFFICE OF THE Asstt. Commissioner of Income Tax, Central Circle-14, Room No-354, 3rd Floor, ARA Centre, E-2, Jhandevalan Extension, New Delhi-110055.
F.No.ADCIT/CC-14/2016-17/
Dated :- 08.09.2016
NOTICE UNDER SECTION 271AAB OF THE I. T. ACT, 1961
To,
M/s DSC Limited, B-9, 3rd Floor, South Extension, Part-II, New Delhi-110057 (PAN: -AAACD0003D)
Where as in the course of proceedings before me for the assessment Year 2013-14 appears to me that you:-
"have undisclosed income of the specified previous year, as noted above, 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 transaction 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 Chief commissioner or Commissioner before the date of search; or
"have undisclosed income of the specified previous year, as noted above, 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.
You are hereby requested to appear before me at 11.30 A.M. on 15.09.2016 and show cause why an order imposing penalty on you should not be made under section 271AAB of the income tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271AAB.
(...)
(Harsh Siddharth Gautam) Asstt. Commissioner of Income Tax
The provision of section 271ABB(1) of the Act contains two separate defaults (i) where the assessee admits the undisclosed income and specifies the manner in which such income has been derived and (ii) where the assessee does not admit the undisclosed income, The Assessing Officer has not specified in the notice or in the assessment order as to which clause of sub section (1) is being invoked for levy of penalty. The AO has not specified in the notice or in the assessment order as to which clause of sub section (1) is being invoked for levy penalty and levied the penalty under section 271AAB(1)(b) of the Act. The Ld. CIT(A) has rightly held that the provisions of section 271AAB are not attracted in each and every case where income is offered for taxation in the statement under section 132(4) of the Act.
The ld. AR of the assessee submitted that the penalty order is barred by limitation. He further submitted that under Rule 27 of the Income Tax Rule 1962 he may raise the ground to support the order. He also submitted that the assessment order was passed on 31-03-2016 and during the appeal the penalty proceeding was kept in abeyance. The Ld. CIT(A) partly allowed the appeal vide order dated 18-06-2019 and show cause notice was issued on 21-01-2022 and the penalty proceedings was completed on 25-03-2022 which is time barred.
It is evident from the record that the assessment order was completed by AO on 31-03-2016 against which appeal was filed by the assessee which was partly allowed vide order dated 18-06-2019. The first notice for imposing the penalty was issued on 31-03-2016, 08-09-2016, and after that notice dated 13-09-2016 was issued but proceedings kept in abeyance due to pending of appeal before the Ld. CIT(A). The Assessing Officer again issued notice under section 274 read with section 271AAB(1) of the Act on 21-01-2022 mentioning the date of notices which were issued to the assessee. The penalty proceedings should be completed with in the six months from the end of the quarter of the in which the proceedings in course of which action for the imposition of penalty has been initiated are completed if the relevant assessment or other order is not the subject matter of an appeal under section 246 or section 246A or section 253. In the present case the penalty proceedings were completed beyond the six months. The appeal was decided on 18-06-2019 then the penalty proceeding should be completed within six months from the receiving the order of the Ld. CIT(A). The AO has issued dated 16-02-2021 while the appeal was decided vide order dated 18-06-2019 and penalty order was passed on 25-03-2022, so the penalty order passed by AO is beyond the time limit. The ground raised by the assessee is allowed.
We find that the Ld. CIT(A) has examined the issue in the right perspective and rightly deleted the penalty levied by the assessee. We do not find any reasons to interfere with the findings of the Ld. CIT(A), the appeal of the Revenue is liable to be dismissed.
In the result, the appeal of the Revenue is dismissed.