2014 (11) TMI 1031 - AT - Income Tax

Penalty u/s 271AAA - CIT(A) deleted the penalty - Held that - Even if we were to go along with the stand of the Assessing Officer that the credit for the seized cash could be given for tax liability only after completion of assessment yet it follows that the assessee has paid tax with interest as required by clause (iii) of sub-section (2) of section 271AAA of the Act. The phraseology of clause (iii) of sub-section (2) of section 271AAA of the Act is pari-materia with the third condition in clause (2) of Explanation 5 to section 271(1)(c) of the Act; and, therefore following the ratio of the judgement of the Hon ble Supreme Court in the case of Gebilal Kanhaialal HUF (2012 (9) TMI 297 - SUPREME COURT ), the CIT(A) made no mistake in holding that assessee has fulfilled the condition of clause (iii) of sub-section (2) of section 271AAA of the Act and accordingly the penalty levied by the Assessing Officer has been justifiably cancelled. - Decided in favour of assessee.

Summary

Issues:
- Dispute over deletion of penalty under section 271AAA of the Income-tax Act, 1961.

Analysis:
1. The appeal concerned the Revenue challenging the deletion of a penalty of Rs. 45,00,000 imposed under section 271AAA of the Act by the Commissioner of Income Tax (Appeals) for the assessment year 2010-11.

2. The case involved an individual in the real estate business who surrendered an income of Rs. 4,50,00,000 during a search and seizure action. The Assessing Officer accepted this additional income in the assessment but imposed a penalty under section 271AAA. The dispute centered around whether the conditions of section 271AAA(2) were met to avoid the penalty.

3. Section 271AAA mandates a penalty equivalent to 10% of undisclosed income for specified previous years. The key issue was the fulfillment of conditions under section 271AAA(2), which require admitting the undisclosed income, substantiating its source, and paying the tax with interest. Failure to meet any condition leads to penalty imposition.

4. The Assessing Officer argued that the taxpayer failed to pay the tax and interest fully on the surrendered income, as the cash seized during the search was not considered advance tax payment until after assessment completion. This non-compliance led to the penalty imposition.

5. The respondent's representative relied on a Supreme Court judgment to support their position that the conditions for penalty immunity were met, even if the seized cash was not immediately considered as tax payment. The Court's precedent emphasized the requirement to pay tax with interest, without specifying a time limit for payment.

6. The Tribunal upheld the Commissioner's decision to delete the penalty, citing the Supreme Court's judgment in a similar case. The Court's interpretation of the tax payment condition under a related provision was deemed applicable to this case, leading to the cancellation of the penalty.

7. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to delete the penalty under section 271AAA. The judgment highlighted the importance of meeting the specified conditions to avoid penalty imposition under the Income-tax Act.

8. The decision was pronounced in an open court on 28th November 2014, concluding the legal dispute over the penalty deletion in this particular case.