2016 (5) TMI 1346 - AT - Income Tax

Penalty levied u/s 271AAA - undisclosed income found as a consequence of search u/s 132 - Held that - As not in dispute that a search u/s 132 was conducted and thereupon it was found that the assessee has purchased a land as per the registered deed wherein the consideration money was ₹ 2,75,65,000/-. A statement u/s 132(4) was recorded and after confronting with the evidences an amount of ₹ 2 crores was offered being cash consideration over and above the sale consideration mentioned in the registered deed. As a consequence a revised return was filed. the assessment was completed u/s 143(3) and the income was assessed at ₹ 2,15,60,620/-. We have been informed that the surrendered amount u/s 132(4) was accepted as such by the AO. There is no dispute that the tax on the amount offered had also been paid by the assessee. Thus as perused the provisions of section 271AAA which has provided that a penalty at the rate of 10% is to be levied on the amount of undisclosed income found as a consequence of search u/s 132 of I.T. Act. However, vide sub-section (2) an exception is also provided that in a situation when the offer is made of the undisclosed income u/s 132(4) and it is specified the manner in which the income was earned and duly substantiated the manner in which the undisclosed income was derived and that the tax with interest was paid then out of the ambits of penalty provisions. Further it has also been brought on record that the income offered was duly disclosed in the books of accounts of the assessee and the manner in which the investment was made has also been duly incorporated in the accounts, moreover the tax was paid Hence we hereby hold that the learned CIT(Appeals) has rightly held that the question of levy of penalty u/s 271AAA was out of the scope of sub-section (1) but within the ambits of the exception prescribed under sub-section (2) of the said section. - Decided against revenue

Summary

Issues involved:
- Challenge to deletion of penalty under section 271AAA of the Income Tax Act.

Analysis:
1. The case involved an appeal by the Revenue against the deletion of a penalty under section 271AAA of the Income Tax Act. The penalty was imposed based on a search conducted at the premises of a company where it was found that additional cash payment was made over and above the disclosed consideration for a land purchase. The penalty was levied as the undisclosed income was detected during the search, and the AO considered it subject to penalty under section 271AAA.

2. The first appellate authority, the CIT(Appeals), deleted the penalty after considering submissions. The CIT(Appeals) noted that the cash payment was not reflected in the books of accounts, but the appellant had disclosed the income in the return filed for the relevant assessment year. The appellant argued that all conditions under section 271AAA were met, including admitting the undisclosed income, paying due taxes, and substantiating the manner in which the income was derived. The CIT(Appeals) analyzed each condition and found that the appellant had complied with them, ultimately concluding that the penalty was unjustified and directed its deletion.

3. Upon hearing both sides, the ITAT confirmed the CIT(Appeals) decision. The ITAT noted that the undisclosed income was offered under section 132(4) of the IT Act, the manner of earning the income was specified and substantiated, and taxes were paid. As per section 271AAA, a penalty is to be levied on undisclosed income found during a search, but an exception exists if the conditions specified are met. Since the appellant fulfilled these conditions, the ITAT upheld the decision to delete the penalty, as it fell within the exception provided under sub-section (2) of section 271AAA.

4. The judgment emphasized that the income was duly disclosed in the books of accounts, the investment manner was recorded, and taxes were paid, meeting the requirements for exemption from penalty under section 271AAA. Consequently, the ITAT dismissed the Revenue's appeal, affirming the CIT(Appeals) decision to delete the penalty.