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2012 (3) TMI 473 - AT - Income TaxPenalty u/s 271AAA - Held that - Whatever question was put to assessee she replied she was not asked about the manner in which such income was earned and she was never asked to substantiate the manner in which the undisclosed income was derived. During assessment proceedings u/s 271AAA the question about manner in which income was derived were asked to assessee and she had replied to that. From here it implies that had this question been posed before her during recording of statement u/s 132(4) she might have replied that. The question of penalty as contained in section 271(1)( c) prior to 1.6.2007 has been decided by various High Courts. Before 1.6.2007 the penalty provisions on search & seizure were contained in section 271(1)( c) and immunity was granted to the assessee vide clause (2) of explanation 5 appended to section 271(1) (c). Provisions of clause (2) of explanation 5 appended to section 271(1)( c) are similar to immunity granted to assessee under clause (2) of section 271AAA. Considering the social environment it is not possible to expect from an assessee whether literate or illiterate to be specific and to the point regarding the conditions stipulated by Exception No. 2 while making statement under s. 132(4) of the Act In view of the above the penalty is deleted. - Decided in favour of assessee.
Issues Involved:
1. Applicability of the Supreme Court judgment in Hindustan Steel v. State of Orissa (1972) 83 ITR 26. 2. Whether the penalty under section 271AAA of the Income Tax Act, 1961, is justified. 3. Fulfillment of conditions under section 271AAA by the assessee. Issue-wise Detailed Analysis: 1. Applicability of the Supreme Court Judgment in Hindustan Steel v. State of Orissa (1972) 83 ITR 26: The appellant argued that the principles laid down in the Supreme Court judgment in Hindustan Steel v. State of Orissa (1972) 83 ITR 26 should apply. Specifically, the appellant contended that the penalty should not be imposed unless there was deliberate defiance of law or conduct that was contumacious or dishonest. The Tribunal agreed, noting that the imposition of penalty is a quasi-criminal proceeding and should be exercised judicially, considering all relevant circumstances. 2. Justification of Penalty under Section 271AAA: The Tribunal examined whether the penalty under section 271AAA was justified. The appellant had disclosed an additional income of Rs. 2.30 crores during a search and seizure operation but did not specify the manner in which the income was derived during the statement recorded under section 132(4). The Assessing Officer and CIT(A) had imposed the penalty on the grounds that the appellant failed to substantiate the manner in which the undisclosed income was derived. The Tribunal noted that the appellant had answered all questions posed during the search and was not specifically asked to explain the manner in which the income was derived. The Tribunal referenced the case of CIT v. Radha Kishan Goel (278 ITR 454), where it was held that unless the authorized officer asks specific questions regarding the manner of income derivation, the assessee cannot be penalized for not providing such details. 3. Fulfillment of Conditions under Section 271AAA: Section 271AAA stipulates that no penalty shall be imposed if the assessee, in the course of the search, admits the undisclosed income, specifies the manner in which it was derived, and pays the tax along with interest. The appellant argued that she had admitted the income and paid the tax but was not given an opportunity to specify the manner of derivation during the search. The Tribunal found that the appellant had complied with the conditions to the best of her knowledge and ability. The Tribunal emphasized that the Oath Administrator, representing the Income Tax Department, should have informed the appellant about the necessity to specify and substantiate the manner of income derivation to avoid penalty. The Tribunal cited the Hon'ble Gujarat High Court's decision in CIT v. Mahendra C. Shah (299 ITR 305), which supported the appellant's position that the authorized officer must explain the provisions in their entirety during the statement recording. Conclusion: The Tribunal concluded that the penalty under section 271AAA was not justified as the appellant was not asked to specify the manner in which the income was derived during the statement under section 132(4). The Tribunal allowed the appeal, deleting the penalty imposed on the appellant. Order: The appeal filed by the assessee was allowed, and the order was pronounced in the open court on the 30th day of March, 2012.
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