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2013 (5) TMI 280 - AT - Income TaxSales made outside the books of accounts - penalty u/s 271AAA - disclosure of Rs.20 crores by the Group in the statement recorded u/s 132(4)during the search operation - Held that - The taxes had been paid along with the interest in all these individual hands. Since a statement was given during the course of search u/s 132 admitting the undisclosed income of Rs.20 crores of the Group, the quantum of disclosure of income was affirmed by an affidavit by other person of the Group. The manner was also stated in the statement by which sun income was earned. Thus the Group has also substantiated the manner in which this undisclosed income was derived. In the statement recorded u/s 132(4) and in an affidavit dated 15.05.2009, the disclosure was maintained. The assessees of the Group have also paid the taxes applicable along with interest. In such a situation, the CIT (A) was not justified in sustaining the penalty u/s 271(1)(c) levied by the Assessing Officer. Considering all these facts and circumstances, we set aside the orders of the authorities below and direct to delete the penalty u/s 271AAA. In favour of assessee.
Issues Involved:
1. Legality of penalty under Section 271AAA of the Income-tax Act, 1961. 2. Assessment of disclosed income in the hands of individuals versus Association of Persons (AOP). 3. Credit for taxes paid by AOP in the hands of individual members. Detailed Analysis: 1. Legality of Penalty under Section 271AAA: The appeals challenged the penalty imposed under Section 271AAA of the Income-tax Act, 1961. The assessee argued that the conditions for exemption from penalty under this provision were met. Specifically, during the search operation, a statement under Section 132(4) was recorded, wherein Rs. 20 crores was disclosed as additional income. The statement was substantiated by an affidavit, and taxes along with interest were paid on the disclosed income. The assessee contended that they had specified and substantiated the manner of deriving the undisclosed income, thus fulfilling the conditions for exemption from penalty under Section 271AAA. 2. Assessment of Disclosed Income: The disclosed income of Rs. 20 crores was bifurcated into Rs. 7.5 crores for inventory discrepancies and Rs. 12.5 crores for income from a joint enterprise named "Sugandh Sansar." The income of Rs. 12.5 crores was initially assessed in the hands of the AOP but later divided equally among the three members of the AOP. The Assessing Officer chose to tax this income in the individual hands of the members, leading to a dispute. The CIT-VII, Delhi, in an order under Section 264 of the Income-tax Act, 1961, held that the income should be assessed in the hands of the "right person," meaning the individual members and not the AOP. This decision was based on the principle that the Income-tax Act does not allow the taxing authority to choose between taxing the AOP or its members individually. 3. Credit for Taxes Paid by AOP: The issue also involved the credit for taxes paid by the AOP. The AOP had paid taxes amounting to Rs. 4,10,15,740/-, which included cash seized during the search and self-assessment tax paid by the members. The CIT-VII, Delhi, directed that the taxes paid by the AOP should be adjusted in the hands of the individual members. The CIT (A) confirmed this adjustment, noting that the relief for self-assessment tax paid by the AOP should be granted to the individual members equally. Conclusion: The Tribunal concluded that the conditions for exemption from penalty under Section 271AAA were met, as the assessee had disclosed the income during the search, substantiated the manner of earning, and paid the applicable taxes. The Tribunal also agreed with the CIT-VII, Delhi, that the income should be assessed in the hands of the individual members and not the AOP. Consequently, the Tribunal set aside the orders of the lower authorities and directed the deletion of the penalty under Section 271AAA. Order: All three appeals of the assessees were allowed, and the penalty under Section 271AAA was deleted. The order was pronounced in open court on April 30, 2013.
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