2013 (2) TMI 734 - AT - Income Tax

Penalty levied under s. 271AAA - Held that - Assessee had filed a revised return before completing the assessment. When that is the case the first return filed by the assessee is non est. The only valid return is the revised return filed by the assessee. In that return the amount admitted by the assessee at the time of search was offered for taxation. The assessee has paid the tax; he has paid the interest. He has not preferred any quantum appeal. He has also explained about the business and stated that the jewellery was acquired over a period of time. When all the pieces are put together we find that the CIT(A) is justified in holding that there is no ground to levy penalty in the present case under s. 271AAA. Accordingly the order passed by the CIT(A) is upheld.

Summary

Issues:
- Appeal against penalty levied under s. 271AAA of the IT Act, 1961 for relevant assessment year 2009-10.
- Compliance with the four conditions under s. 271AAA for penalty imposition.
- Validity of revised return filed by the assessee after admitting additional income during search.

Analysis:
1. The appeal was filed by the Revenue against the penalty levied under s. 271AAA of the IT Act, 1961 for the assessment year 2009-10. The penalty was imposed based on the assessee's admission of additional income during a search conducted under s. 132, wherein the assessee admitted an additional income of Rs. 38,45,416 related to jewellery, as opposed to the original admission of Rs. 10,98,146 in the return. The penalty was contested on the grounds that the assessee had not acted in accordance with the statement made during the search, resulting in the penalty imposition.

2. The CIT(A) in the first appeal found that the penalty could not be levied if the four conditions specified under s. 271AAA were satisfied by the assessee. These conditions included the admission of undisclosed income, specifying the manner of income derivation, substantiating the income source, and paying the tax with interest. The CIT(A) concluded that the assessee had met all these conditions, as the assessee admitted the income during search, filed a revised return offering the undisclosed income, explained the income sources, and paid the tax with interest, leading to the deletion of the penalty.

3. During the proceedings, the chartered accountant representing the assessee argued that the cash withdrawals of the family during the relevant period were sufficient to acquire the jewellery found during the search, implying no significant undisclosed income. Despite this, the assessee still offered the entire admitted income through a revised return. The revised return was deemed valid, as it superseded the original return, and the assessee had fulfilled all conditions under s. 271AAA, including tax payment and explanation of income sources. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing the validity of the revised return and the compliance with penalty conditions.

4. The Tribunal noted that the AO had erroneously focused on the original return, disregarding the revised return where the assessee declared the additional income admitted during the search. As the revised return was the valid submission, accompanied by tax payment and interest, and no quantum appeal was filed, the Tribunal concurred with the CIT(A)'s decision to dismiss the penalty under s. 271AAA. Ultimately, the appeal filed by the Revenue was dismissed, affirming the decision to delete the penalty.