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2014 (3) TMI 505 - AT - Income TaxPenalty u/s 271AAA of the Act Failure to furnish accounts of clients - Held that - Mere failure of assessee to furnish accounts of the clients in which modification was done due to necessity of business and as per norms of exchange of the institution, an act of concealment of income or furnishing of inaccurate particulars of income, particularly, when complete identity of the clients were given with whom business of brokerage was carried on - Thus, inability to file confirmations was because it was not in the control of the assessee cannot constitute a concealment of income. Whatever income was generated in the past has been disclosed in the return of income filed for A.Y. 2008-09 in the form of assets, particularly, when no such income was found for this year - CIT(A) has given specific direction to allow telescopy of the addition - when the A.O. has made addition on account of assets, he is bound to allow the same for A.Y. 2006-07 and 2007-08 - income earned/an asset acquired out of such income cannot be taxed twice the decision in CIT Vs. Aryamal Balchand 1986 (4) TMI 14 - RAJASTHAN High Court followed - Penalty proceedings and quantum proceedings are separate and distinct and the parameters which are applicable to the assessment proceedings may not apply to penalty proceedings thus, no penalty is imposable in the case thus, the penalty imposed is set aside Decided in favour of Assessee.
Issues Involved:
1. Legality and validity of the penalty imposed under Section 271AAA of the Income-tax Act, 1961. 2. Entitlement to the benefit under sub-section (2) of Section 271AAA. 3. Justification of sustaining the penalty on undisclosed income. 4. Applicability of Explanation 5A to Section 271(1)(c) concerning the penalty. 5. Consideration of income disclosed in the form of assets and its impact on penalty imposition. Detailed Analysis: 1. Legality and Validity of Penalty under Section 271AAA: The case arose from a search conducted on the Singhvi Group, leading to a notice under Section 153A and subsequent assessment of the assessee's income. The assessee disclosed an income of Rs. 2,90,93,278, but the assessment was completed at Rs. 7,05,51,910. Penalty proceedings under Section 271AAA were initiated, resulting in a penalty of Rs. 13,72,200. The CIT(A) restricted the penalty to the undisclosed income of Rs. 44,28,239. The Tribunal found that the assessee had disclosed assets as income earned in the year of the search, fulfilling the conditions under Explanation 5 to Section 271(1)(c). Therefore, no penalty was exigible. 2. Entitlement to Benefit under Sub-section (2) of Section 271AAA: The assessee argued that no penalty was exigible under Section 271AAA. The Tribunal noted that the assessee disclosed assets as income earned in the year of the search, which related to earlier years. The Tribunal concluded that the assessee fulfilled all conditions under Explanation 5 to Section 271(1)(c), and thus, no penalty was exigible. 3. Justification of Sustaining Penalty on Undisclosed Income: The Tribunal observed that the Assessing Officer (A.O.) had imposed a penalty on the income surrendered, estimated as concealed income due to failure in furnishing confirmation of accounts for the assessment years 2006-07 to 2008-09. However, the Tribunal found that the inability to file confirmations was not within the control of the assessee and did not constitute concealment of income. The Tribunal held that the income disclosed in the return for A.Y. 2008-09 in the form of assets should not be a ground for penalty imposition. 4. Applicability of Explanation 5A to Section 271(1)(c): For the assessment years 2006-07 and 2007-08, the CIT(A) confirmed and enhanced the penalty under Explanation 5A to Section 271(1)(c). The Tribunal noted that the assessee had declared income based on investments and paid taxes accordingly. The Tribunal held that the income disclosed in the form of assets under Section 132(4) read with Explanation 5A and Section 271AAA should not attract a penalty. The Tribunal emphasized that the income disclosed was more than the income computed by the A.O., and thus, no penalty was justified. 5. Consideration of Income Disclosed in Form of Assets: The Tribunal found that the income disclosed by the assessee in the form of assets for A.Y. 2008-09 was more than the income assessed by the A.O. from client codes. The Tribunal concluded that this amounted to double addition and thus, the CIT(A) erred in confirming and enhancing the penalty. The Tribunal cited various decisions supporting the view that no penalty was imposable under these circumstances. Conclusion: The Tribunal allowed all three appeals of the assessee, ordering the deletion of the entire penalties imposed. The Tribunal emphasized that the assessee had disclosed income and paid taxes as per the modified statements, and no penalty was justified under the given facts and circumstances. The Tribunal's decision was pronounced on 12.03.2014.
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