Jai Maa Jagdamba Flour (P.) Ltd. V. Principal Commissioner of Income Tax

The current legal matter revolves around an appeal filed by the Appellant-Department against an order dated 05.01.2021 issued by the Income Tax Appellate Tribunal (ITAT), Kolkata ‘Ranchi E-Court’ Bench. This appeal pertains to the assessment year 2014-15. The ITAT’s order in question upheld the decision of the Commissioner of Income Tax (CIT) Appeal, which had dismissed the penalty imposed by the Assessing Officer, thereby ruling against the revenue.

The case stems from a search and seizure operation conducted under Section 132 of the Income Tax Act, 1961, on 03.09.2014, at the business and residential premises of Jagdamba Group, of which the respondent is a member. No incriminating material was found pertaining to the respondent during this search. Subsequently, the Assessing Officer issued a notice under Section 153A of the Act on 25/26.02.2015, requiring the respondent to furnish their income tax return. The respondent complied and filed their return of income on 07.03.2016, declaring a loss of Rs. 2,40,73,444/-.

To verify the authenticity of the filed return, the Assessing Officer issued a notice under Section 143(2) of the Act on 10/11.08.2016. Additionally, a

The case revolves around an appeal filed by the Revenue against an order dated 11.10.2018 issued by the CIT (Appeals), pertaining to the assessment year 2014-15. The appeal was lodged with the Learned ITAT, which, in its decision dated 05.01.2021, upheld the CIT (Appeal)’s order, prompting the Revenue to challenge it further.

The appeal before the court, admitted on 03.08.2022, raised two primary grounds. Firstly, it questioned whether the ITAT was justified in affirming the CIT (Appeal)’s order without considering that the penalty imposed under section 271(1)(c) was based on concealed particulars in the return, rather than on undisclosed income discovered during a search, as per explanation (c) to section 271AAB. Secondly, it contested whether the ITAT’s decision was flawed and warranted reversal.

Mr. R.N. Sahay, representing the Revenue, argued that both the CIT (Appeal)’s order and the ITAT’s decision were flawed. While acknowledging that section 271AAB, introduced from 1.7.2012, aimed to address cases of searches conducted between July 1, 2012, and December 15, 2016, he contended that the penalty prescribed therein applied to “undisclosed income,” as defined by the section. However, in the case at hand, no incriminating evidence, such as books of account or audit reports, was discovered during the search conducted on 3.09.2014. This absence of evidence raised doubts regarding the existence of any undisclosed income for the specified previous year, which forms the basis for imposing penalties under section 271AAB.

In essence, the dispute centers on the interpretation of section 271AAB and whether the penalty can be applied solely based on the initiation of a search without concrete evidence of undisclosed income. The Revenue argues that the absence of incriminating documents during the search negates the imposition of penalties under the said provision. The outcome of the case hinges on the court’s assessment of the statutory provisions and the evidence presented by both parties.