Penalty – Penalty u/s 271AAB in search cases – Income-tax survey – Survey of assessee firm pursuant to search and seizure of another group – No assessment u/s 153A – Where search u/s 132 has not been conducted penalty cannot be levied u/s 271AAB

Penalty – Penalty u/s 271AAB in search cases – Income-tax survey – Survey of assessee firm pursuant to search and seizure of another group – No assessment u/s 153A – Where search u/s 132 has not been conducted penalty cannot be levied u/s 271AAB

In the course of a search conducted u/s 132A against an entity, the statements of its partners were recorded u/s 132(4). Pursuant thereto, a survey u/s 133A was conducted in the assessee firm and a notice was issued u/s 153C, whereupon the assessee filed a return admitting additional income. The Tribunal, referring to the proposition of law that no penalty u/s 271AAB could be imposed when search u/s 132 was not conducted against the assessee and the consistent view taken by the Tribunal, held that the imposition of penalty u/s 271AAB was illegal.

On appeal by the Revenue, the Andhra Pradesh High Court upheld the decision of the Tribunal and held as under:

‘i) When the return of income is filed in response to a notice u/s 153C by an assessee in whose case search has not been conducted u/s 132, penalty u/s 271AAB cannot be imposed. Penalty under the provision can be imposed only when a search has been initiated against the assessee.

ii) No penalty u/s 271AAB could be imposed when admittedly a search u/s 132 had not been conducted in the assessee’s premises. The notice issued u/s 153C was incidental to the search proceedings of the searched party and could not be a foundation to impose penalty against the assessee u/s 271AAB. The legal position was based on the clear and unequivocal meaning transpiring from the words used in the section and cannot yield to any other interpretation. The view had been consistently followed by the Tribunal and was binding on the Department in such cases. No contrary view either of any High Court or the Supreme Court had been placed.

iii) In the light of the settled proposition of law, the provisions of section 271AAB could not be invoked to impose penalty on the assessee on whom search was not conducted. There was no perversity or illegality in the finding of the Tribunal. No question of law arose.’