Penal Provisions of S. 271AAB and 115BBE cannot Attract Once Search Addition and Amount declared u/s 132(4) Accepted by Assessee: ITAT [Read Order]

The Jaipur bench of Income Tax Appellate Tribunal (ITAT) recently held that penal provisions of section 271AAB and section 115 BBE could not be attracted if once search addition and amount has been accepted by the assessee and declared under section 132(4) Income Tax Act 1961.

Section 271AAB of Income Tax Act 1961 provides for imposition of penalty when an undisclosed income is found on search conducted by the authority.

Section 115BBE of Income Tax Act 1961 provides that if any amount received from unknown source that amount will be considered as income as per section 68,69 and 69A- 69D and are subject to 30 percent tax rate also the taxpayer is not entitled any claim for deduction,

Section 132(4) Income Tax Act 1961 states the Power of the authorizing officer to take oath of any person during the time of search and seizure who is found to be in possession of any book of account or documents.

Consequent to the search was carried out the various premises of the assessee Sandeep Sethi, assessee has declared Income from Salary, house property, short term capital gain, saving bank, Income from minor Shaurya Seth iand  Kashvi during the year.

Thereafter the department issued notice under section 142(1) of the Income Tax Act 1961 to furnish the return. In response to notice assessee furnished his return of income including the surrendered income of Rs. 89.05 lacs which had been accepted by the assessee during the course of search. Also penalty proceedings under section 271AAB (1)(a) of the Income-tax Act, 1961 is being initiated for undisclosed income which was unearthed during the course of search. Further the assessing officer (AO) makes an additional amount  as per section Section 115BBE Income Tax Act 1961 upon the unexplained jewelry. Against this order assesee filed an appeal before the ITAT.

 Rajeev Sogani counsel for the assessee submitted that Section 115BBE could not be invoked as the income has been voluntarily declared by the assessee, in his return of income.

Further Section 115BBE, amended vide Taxation Laws (Second Amendment) Act, 2016, could not be applied for the period before 15.12.2016, when the same received assent from the President of India

Assesee also contended that,

“provision section 115BBE is penal in nature it will not apply retrospectively because the increase in rate is after the disclosure made consequent upon the search and that time effective tax rate was 30 % whereas ld. AO has wrongly applied it with retrospective at 60 % for which the assent to increase the rate received the president assent on 15.12.2016 just after the demonetization on 08.11.2016.”

Further counsel for assessee contended that AO has invoked the provision of section 271AAB(1)(a) for the amount disclosed during the search proceeding and no separate notice of his intention to invoke the provision of section 115BBE was given to the assessee and thus the invoking of the provision of section 115BBE is against the principles of nature justice.

Sanjay Dhariwal counsel for the revenue confirmed the addition made by the assessing officer.

After considering the contentions of the both parties the division bench of ITAT comprising Rama Rathod Kamlesh Jayantbhai, (Accountant Member) and Sandeep Gosain (Judicial Member) allowed the appeal filed by the assessee and observed,

“Once the AO has already decided based on the fact that this is the case of search addition and amount declared under section 132(4) Income Tax Act 1961 accepted by the assessee and offered the same in the return of income filed the same will be in accordance with the penal provision of section 271AAB and invoking to provision of section 115BBE in this case is not in accordance with the law and is also against principles of nature justice.”

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