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2013 (8) TMI 965 - AT - Income TaxLevy of penalty u/s 271AAA - Undisclosed Income - Assessment u/s 153A post search and seizure u/s 132 - It was alleged that assessee has failed to specify and substantiate the manner in which the undisclosed income has been derived and it has further failed to pay the tax together with interest in respect of the above undisclosed income. - HELD THAT;- In absence of specific query raised, the assessee is not expected to specify the manner in which the undisclosed income was derived and substantiate it, still he has specified the manner substantiation of which cannot be disputed in absence of any adverse finding on the manner explained by the assessee and accepted as such in the assessment framed u/s 153A of the Act. The authority were not justify in imposing the penalty of ₹ 80 lacs u/s 271 AAA of the Act, thus directed to be deleted. Reference - Ashok Sharma and others vs. DCIT 2011 (12) TMI 541 - ITAT CUTTACK
Issues Involved:
1. Confirmation of penalty under Section 271AAA of the Income Tax Act. 2. Satisfaction of requirements under sub-section (2) of Section 271AAA by the assessee. 3. The manner of earning the undisclosed income. 4. Classification of the disclosed income as business income. 5. Applicability of Section 271AAA penalty provisions. 6. Payment of taxes on the undisclosed income. Detailed Analysis: Issue 1: Confirmation of Penalty under Section 271AAA The assessee appealed against the penalty of Rs. 80,00,000/- imposed by the DCIT, Central Circle-II, Faridabad, under Section 271AAA. The penalty was confirmed by the CIT(A) despite the assessee's claim of satisfying the requirements of sub-section (2) of Section 271AAA. Issue 2: Satisfaction of Requirements under Sub-section (2) of Section 271AAA The tribunal examined whether the assessee met the conditions under sub-section (2) of Section 271AAA, which include admitting undisclosed income during the search, specifying the manner in which it was derived, substantiating the manner, and paying the tax along with interest. The assessee argued that the undisclosed income was admitted and taxes were paid, but the authorities contended that the manner of earning the income was not sufficiently substantiated. Issue 3: The Manner of Earning the Undisclosed Income The assessee's director, in his statement, mentioned that the undisclosed income of Rs. 8 crores was from business operations related to an agreement to purchase agricultural land. However, the CIT(A) found this explanation too general and not adequately substantiated. The tribunal noted that no specific question was asked during the search about the manner of earning the income, and thus, the assessee's general statement should suffice. Issue 4: Classification of the Disclosed Income as Business Income The tribunal observed that the disclosed income was assessed under the head "business income" and not under any other head. This classification was accepted by the department in the assessment order, indicating that the manner of earning the income was from business operations. Issue 5: Applicability of Section 271AAA Penalty Provisions The tribunal referred to various judicial precedents, including the decisions of the Allahabad High Court in CIT vs. Radha Kishan Goel and the Gujarat High Court in CIT vs. Mahendra C. Shah, which held that if the income is declared and tax is paid, the manner of earning the income need not be specified explicitly unless specifically asked during the search. The tribunal concluded that the assessee's case fell within the purview of sub-section (2) of Section 271AAA, and the penalty was not justified. Issue 6: Payment of Taxes on the Undisclosed Income It was undisputed that the assessee had paid the taxes on the undisclosed income. The tribunal found that the assessee had complied with the requirement of paying taxes and interest on the undisclosed income, fulfilling one of the conditions for exemption from penalty under Section 271AAA. Conclusion: The tribunal held that the authorities below were not justified in imposing and sustaining the penalty of Rs. 80 lacs under Section 271AAA. The assessee had specified the manner of earning the income as business income, which was accepted in the assessment. The tribunal directed the deletion of the penalty, allowing the appeal in favor of the assessee. The order was pronounced in the open court on 8th August 2013.
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