Section 271AAA r.w.s 132 and 153C – Where no search and seizure operation u/s. 132(1) was carried out in assessee’s case, initiation of penalty proceeding u/s. 271AAA by Assessing Officer was invalid.

21.  [2018] 196 TTJ 812 (Mumbai – Trib.) DCIT vs. Velji Rupshi Faria ITA No.: 1849/Mum/2017 A.Y.:  2008-09 Dated: 31^st August, 2018

Section 271AAA r.w.s 132 and 153C – Where no search and seizure operation u/s. 132(1) was carried out in assessee’s case, initiation of penalty proceeding u/s. 271AAA by Assessing Officer was invalid.

FACTS

The assessee was an individual and stated to be the key person pursuant to a search and seizure operation u/s. 132(1) of the Act in certain business concerns. The Assessing Officer (AO) initiated proceedings u/s. 153C of the Act against the assessee. Pursuant to the notice issued u/s. 153C of the Act, the assessee filed its return of income. During the assessment proceedings, the AO referring to the incriminating material found in course of search and seizure operation made a number of additions. While completing the assessment, the AO also initiated proceedings for imposition of penalty u/s. 271AAA of the Act. And then passed an order on 13^th March 2014.

Aggrieved by the assessment order, the assessee preferred an appeal to the CIT(A). The CIT(A) after considering the submissions of the assessee and having found that search and seizure operation u/s. 132(1) of the Act was not carried out in case of the assessee, followed the decision of the Tribunal, Ahmedabad Bench, in case of Dy. CIT vs. K.G. Developers, ITA No.1139/Ahd./ 2012, dated 13^th September 2013, and deleted the penalty imposed.

Being aggrieved by the CIT(A) order, the Revenue filed an appeal before the Tribunal.

HELD

The Tribunal held that only in case of a person in whose case search and seizure operation u/s. 132(1) of the Act was carried out on or after 1^st Day of 2007 but before the 1^st Day of July 2010, penalty proceedings u/s. 271AAA of the Act could be initiated. The primary condition for initiating penalty proceeding was, a person concerned must have been subjected to a search and seizure operation u/s. 132(1) of the Act. In present case, no search and seizure operation u/s. 132(1) of the Act was carried out. Thus, the primary condition of section 271AAA of the Act remained unsatisfied. Even otherwise also, if penalty proceedings u/s. 271AAA of the Act was initiated against a person who was not subjected to search action u/s. 132(1) of the Act, the provision itself became unworkable as no declaration u/s. 132(4) of the Act was possible from any person other than the person against whom the search and seizure u/s. 132(1) was carried out. In the end, the Tribunal upheld CIT(A) order.

NOTE: Section 271AAA was applicable for searches u/s. 132(1) initiated prior to the 1^st day of July, 2012. For searches initiated on or after the 1^st day of July, 2012, section 271AAB shall be applicable.