2012 (12) TMI 21 - AT - Income Tax

Penalty u/s 271AAA - search - undisclosed income - assessment framed u/s 153A - Revenue contesting deletion of penalty by CIT(A) - Held that - CIT(A) had deleted the penalty due to the following reasons - assessee had voluntarily disclosed the sum of Rs.50 lacs during the search proceedings with request that no penalty should be levied in respect of such disclosure - during the post search proceedings no specific question as regards manner of earning of undisclosed income or substantiation thereof was put forth by the revenue - assessee had also paid due tax for the undisclosed income declared voluntarily - when undisclosed income admitted by the assessee has been offered for tax in the return of income and the tax thereof duly paid, penalty cannot be levied, specifically, in the absence of any question in this respect by the AO. Reasons pointed out by the CIT(A) are justifiable for deleting the penalty levied u/s 271 AAA - Decided against Revenue

Summary

Issues:
- Appeal against order of CIT(A) deleting penalty under section 271AAA of the IT Act for assessment year 2009-10.

Analysis:
1. The revenue raised three grounds in the appeal, with the first ground challenging the deletion of the penalty of Rs.5,00,000/- imposed by the Assessing Officer under section 271AAA of the IT Act. The case involved a search action under section 132 of the Act, resulting in the assessee admitting undisclosed income of Rs.50,00,000/- under the head income from other sources. The Assessing Officer initiated penalty proceedings under section 271AAA and imposed a penalty of Rs.5,00,000/- due to the assessee's failure to fulfill certain conditions specified under the section.

2. The Assessing Officer's observations highlighted that the assessee did not fulfill the conditions specified under section 271AAA(2) regarding admitting the undisclosed income, substantiating its source, and paying the tax with interest. The assessee's case was deemed to fall under section 271AAA(1) as the manner of earning the undisclosed income was not specified or substantiated. The penalty was imposed accordingly.

3. The matter was taken before the CIT(A), who, after considering the facts and submissions, deleted the penalty levied by the AO. The CIT(A) based the decision on the voluntary disclosure of income during the search proceedings by the appellant's son, the payment of tax on the disclosed income, and the absence of specific questions regarding the manner of earning the undisclosed income during post-search or assessment proceedings.

4. The CIT(A) relied on the decision of the jurisdictional High Court of Gujarat in a similar case to support the deletion of the penalty, emphasizing that when undisclosed income is admitted, offered for tax, and tax is duly paid, penalty cannot be levied without specific questioning by the authorities. The CIT(A) concluded that the reasons provided justified the deletion of the penalty under section 271AAA.

5. In the final judgment, the Tribunal dismissed the revenue's appeal against the CIT(A)'s order. The Tribunal concurred with the CIT(A)'s reasoning and found no hesitation in confirming the decision to delete the penalty under section 271AAA of the IT Act.