ORDER

Per Shri A.T.Varkey, JM 

This appeal is filed by the Revenue against the order dated 13/04/2017 passed by the Ld. CIT(A)-21, Kolkata for the AY 2013-14 deleting the penalty which was levied by the AO u/s 271AAB of the Income-tax Act, 1961 (in short “Act”).

2. Briefly stated the facts of the case are that search and seizure operation under Section 132 of the Act was conducted on 18/02/2013 upon ‘Rashmi Group’ and the panchanama was drawn in the name of the assessee company. The assessee company is engaged in the business of manufacture of iron, steel and railway sidings operations. In the course of search the assessee company along with another group company, M/s Rashmi Cement Ltd and M/s Sajjan Kumar Patwari (HUF) offered to pay tax on sum of Rs.102 crores in a joint disclosure petition submitted before the DDIT(Inv), Kolkata. In the said disclosure petition, which is placed at Page 53 to 128 of the Paper Book, the Rashmi Group furnished its explanation in respect of assets found in the course of search in form of cash, jewellery& silver utensils and also the documents seized and impounded during the course of survey. It was mentioned in the joint petition that since on the date of search the promoters of ‘Rashmi Group’ had made an ad hoc disclosure of Rs.102 crores and therefore with a view to honor the initial statement the Rashmi Group agreed to pay tax on the additional income, break-up of which was as follows:

3. Acting in conformity with the aforesaid declaration, while filing its return for the AY 2013-14 the assessee company included additional income of Rs.69,00,00,000/- in the return filed on 30.09.2013 for the relevant AY 2013-14. Having included such additional income of Rs.69,00,00,000/- the assessee returned business loss of Rs.72,76,45,862/- for AY 2013-14. In the order u/s 143(3) the AO admitted that the additional income of Rs.69,00,00,000/- formed part of the returned income which was loss of Rs.72,76,45,862/-. The assessment thereafter was completed on 31.03.2015 after making certain additions/disallowances on other counts. In the assessment order the AO however initiated penalty proceedings in respect of the additional income of Rs.69,00,00,000/- u/s 271AAB of the Act and show cause notice u/s.271AAB r.w.s. 274 of the Act was issued.

4. In the penalty proceedings, vide its letter dated 21/09/2015 the assessee submitted that income of Rs.69 crores declared voluntarily was not represented by any assets, jewellery, cash etc. found in the course of search or for that matter any document or papers which were impounded and seized in the course of search. It was therefore claimed that the income voluntarily offered did not qualify as ‘undisclosed income’ as defined for the purposes of that section and hence no penalty was warranted u/s 271AAB of the Act. The Ld. AO was however of the opinion that unlike Section 271(1)(c) or 271AAA, the provisions contained in Section 271AAB were mandatory and automatic and once disclosure of income was made by an assessee in his statement u/s 132(4), then penalty had to be levied under Section 271AAB of the Act. According to AO the disclosure of Rs.69 crores made by the assessee was with reference to seized documents bearing identification Mark RASHMI/1 to RASHMI/5 and RCPL/1 to RCPL/7 and therefore it qualified as ‘undisclosed income’ under Explanation (c) to Section 271AAB of the Act. The AO accordingly imposed penalty of Rs.6,90,00,000/- under Section 271AAB(a) of the Act. Aggrieved by the action of the AO, the assessee preferred an appeal before the Ld. CIT(A) who deleted the penalty by observing as under:

I have considered the findings given by the A.O. in the penalty order and submissions made by the AR during the appellate proceeding. I find that the A.O. has taken the undisclosed income of the assessee on the amount declared suomoto by the assessee (f