Andhra Pradesh High Court - Amravati

The Pr. Commissioner Of Income Tax ... vs M/S Silemankhan And Mahaboobkhan on 12 July, 2021

        THE HON'BLE SRI JUSTICE JOYMALYA BAGCHI
                           AND
         THE HON'BLE SRI JUSTICE K.SURESH REDDY

                        I.T.T.A. No.11 of 2021
                 (Taken up through video conferencing)

JUDGMENT: (Per Hon'ble Sri Justice Joymalya Bagchi)


      The Appeal is filed under Section 260A of the Income Tax

Act, 1961 (for short, 'the Act') and prayer has been made for its

admission on the following questions of law:


   "1. Whether the Hon'ble ITAT is right in holding that penalty
   cannot be invoked u/s.271AAB in a case where the partner of
   assessee firm admitted unaccounted income u/s.132(4) of the
   I.T.Act during the search, wherein the assessee firm was covered
   by survey operation u/s.133A of the I.T.Act as consequent to
   search operation?

   2. Whether the Hon'ble ITAT is right in holding that penalty
   u/s.271AAB is to be invoked only in the cases of persons where
   assessment completed u/s.153A of the I.T.Act where as the
   provisions speak of search case and not searched persons?

   3. Whether the Hon'ble ITAT is right in holding that penalty
   levided u/s.271AAB is not relevant section in a case where
   assessment was completed u/s.153C in connection with the
   search initiated u/s.132?

   4. Whether the Hon'ble ITAT is right in referring in phrase 'search
   initiated u/s.132' in the Section 271AAB of the I.T.Act is limited
   to a person on whom search was conducted where as the
   intention of law is to cover entire search case?

   5. Any other ground that may urged at the time of hearing."

      Ms.M.Kiranmayee, learned Senior Standing Counsel for

Income Tax appearing for the appellant, submits that the Income

Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam

(for short, 'the Tribunal') erred in law in setting aside the penalty
                                         2



imposed under Section 271AAB of the Act as the undisclosed

income had been found in the course of search conducted under

Section 132 of the Act.        She submitted that in the statements

recorded under Section 132(4) of the Act the partners of the firm

admitted on money receipt from one M/s.N.S.Vaishno Devi

Developers (India) Pvt. Ltd for sale of property and pursuant to

such statement jurisdictional assessing officer issued notice under

Section 53C of the Act upon the assessee-firm whereupon the firm

submitted      return     admitting         the   additional   income     of

Rs.15,73,00,000/- and additional tax was imposed on the assessee

upon assessment by the assessing Officer under Section 143(a)

read with 153C of the Act. Thereafter, penalty proceeding under

Section 271AAB of the Act was initiated and the penalty imposed.

As the undisclosed income was found in the course of search,

imposition of penalty under Section 271AAB of the Act was lawful

and the Tribunal erred in setting aside the penalty.


      We have considered the issue in the light of the materials on

record and the settled principle of law relating to imposition of

penalty under Section 271AAB of the Act.               Relevant portion of

Section 271AAB of the Act reads as follows:


      "271AAB.Penalty where search has been initiated-


       (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 July, 2012 (but before the
            date on which the Taxation Laws (Second Amendment)
            Bill, 2016 receives the assent of the President), the
            assessee shall pay by way of penalty, in additional to tax,
            if any, payable by him,-"
                                             3



        A plain reading of the said provision makes it amply clear

that penalty under the provision may be imposed only when search

has been initiated against the assessee. Admittedly, in the present

case, search was conducted under Section 132 of the Act in the

group cases of M/s. Khan Mohammed Diamonds and Jewellers

Private Limited, Guntur, on 19.10.2016 and not against the

respondent-assessee.             Pursuant       to    such search,         survey   of

operation under Section 133A of the Act was conducted and notice

was issued under Section 153C of the Act on the assessee,

whereupon the latter submitted return of income admitting the

additional income. The Tribunal referring to the proposition of law

that no penalty under Section 271AAB of the Act be imposed when

search under Section 132 of the Act has not been conducted

against the assessee as appearing from the consistent view taken

by various benches of the Tribunal in Suresh H.Kerudi Vs.

Income Tax Officer1, DCIT Vs. M/s. Volga Dresses2, Rajendra

Kumar Jain Vs. DCIT3 and DCIT Vs. M/s. Shreeji Corporation4

came to a finding that the imposition of penalty was without

authority of law.

The unequivocal legal position appearing from the aforesaid

discussion is that no penalty under Section 271AAB of the Act may

be imposed where search under Section 132 of the Act has not

been conducted against the assessee. It is admitted no search

under Section 132 of the Act had been conducted in the premises

of the assessee-firm. On the other hand, in the course of search

under Section 132A of the Act against M/s.N.S. Vaishno Devi

(2019) 76 ITR (Trb) 44 (ITAT (Bang)

ITA Nos.201 & 201/PAN/2016 for Ays 2013-14 & 2014-15, delivered on 27.03.2017

ITA No.80 & 81/Viz/2017 delivered on 11.08.2017

Developers (India) Pvt. Ltd, statements of partners of the firm were

recorded and pursuant thereto notice under Section 156C of the

Act was issued upon the assessee-firm. When return of income is

filed in response to notice under Section 156C of the Act by a

person other than the penalty who has not been searched in

execution of warrant under Section 132 of the Act penalty under

Section 271AAB of the Act cannot be imposed. Notice under

Section 156C of the Act is incidental the search proceedings under

Section 132 thereof and cannot be a foundation to impose penalty

on the assessee who has not been searched. In view of such fact,

we are of the opinion there is no perversity or illegality in the

finding of the Tribunal as follows:

"5.3 In the instant case, no search was conducted u/s 132 and only survey u/s 133A was conducted and the assessment order was passed u/s 153C r.w.s.143(3) of the act. Therefore, respectfully following the view taken by the coordinate bench of ITAT we hold that the Ld.CIT(A) has rightly cancelled the penalty levied u/s 271AAB of the Act and we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Accordingly, the appeal of the revenue is dismissed."

This legal position is based on the clear and unequivocal

meaning transpiring from the words used in section and cannot

yield to any other interpretation. The view has been consistently

followed by various benches of the Tribunal, as aforesaid, and has

become binding on the Department in those cases. No contrary

view either of any High Court or the Apex Court has been placed

before us. In the light of the settled proposition of law that Section

271AAB of the Act cannot be invoked to impose penalty when

search has not been conducted under Section 132 of the Act

IT(SS)A No.73 & 74/Ahd/2017 for Ays 2012-13 and 2013-14

against the assessee and return of income is in response to notice

under Section 156C of the Act which is a consequential or