2013 (4) TMI 820 - AT - Income Tax

Levy of penalty u/s 271AAA - search u/s 132 - Held that - CIT(A) while deleting the penalty has given a finding that the assessee had admitted the income at the time of search and disclosed the same in the return of income filed u/s 153 of the Act and paid tax and also disclosed the manner in which the income was earned. Nothing has been brought on record by the Revenue to controvert the findings of the learned CIT(A). In view of the aforesaid facts, we find no reasons to interfere with the order of the learned CIT(A) and thus, the ground of appeal of the Revenue is hereby dismissed.

Summary

Issues Involved:
Levy of penalty under section 271AAA of the IT Act for undisclosed income.

Analysis:

Issue 1: Levy of Penalty under Section 271AAA
The appeal was filed by the revenue challenging the order of the CIT(A) regarding the levy of penalty under section 271AAA of the IT Act for the assessment year 2009-10. The assessee disclosed an undisclosed income of &8377; 45,00,000 during a search operation, and the penalty was imposed by the AO based on the view that without the search, the amount would not have been disclosed. The CIT(A) deleted the penalty, leading to the revenue's appeal before the ITAT.

Issue 2: Substantiation of Undisclosed Income
The revenue argued that the assessee did not substantiate how the undisclosed income was derived during the search proceedings. They contended that the conditions under section 271AAA were not fulfilled by the assessee, thus making him ineligible for immunity from penalty. The revenue supported the AO's decision to levy the penalty.

Issue 3: Immunity from Penalty
On the other hand, the assessee's representative highlighted that the group disclosed the income during the search proceedings, specified its source, and paid the tax with interest from the seized amount. Citing section 271AAA(2) of the Act, it was argued that the assessee should be granted immunity from penalty due to the timely disclosure and payment of tax. Case laws were also referenced to support this argument.

Issue 4: Judicial Precedents and Legal Interpretation
The ITAT examined the facts, noting that the assessee had declared the undisclosed income, paid tax, and disclosed the source during the search operation, which was accepted by the AO. Referring to legal precedents, the ITAT emphasized that unless specific questions were asked regarding the source of income during the search, the failure to provide such details does not warrant penalty imposition. The ITAT upheld the CIT(A)'s decision to delete the penalty, as the revenue failed to provide evidence contradicting the CIT(A)'s findings.

In conclusion, the ITAT dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the penalty imposed under section 271AAA of the IT Act. The judgment emphasized the importance of timely disclosure and the absence of evidence to challenge the CIT(A)'s findings, ultimately leading to the dismissal of the appeal.