2015 (7) TMI 330 - AT - Income Tax

Penalty Section 271AAA r.ws. 271(1)(c) - CIT(A) deleted penalty levy - Held that - CIT (A) while deleting the penalty has noted that the disclosure made by the assessee of undisclosed income of ₹ 2 crore was covered under the definition of undisclosed income as per the Explanation (a) to Section 271AAA r.ws. 271(1)(c) of the Act, the assessee had specified the manner in which the undisclosed income was earned and had substantiated the manner in which unaccounted income was earned. The CIT (A) while relying on the decision of High Court in the case of CIT vs. Mahendra C. Shah 2008 (2) TMI 32 - GUJARAT HIGH COURT and CIT vs. Radha Kishan Goel 2005 (4) TMI 47 - ALLAHABAD High Court has held that the principles laid down by the aforesaid decision squarely applies to the facts and circumstances of the present case. Before us the Revenue as not brought any contrary binding decision in its support nor could demonstrate as to how the principles laid down by the decisions relied upon the CIT (A) are not applicable to the facts of the aforesaid case. - Decided against revenue.

Summary

Issues:
Appeal against CIT (A)'s order for Assessment Year 2008-09 regarding penalty under Section 271AAA of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of CIT (A)-II, Ahmedabad for Assessment Year 2008-09. The case involved a partnership firm engaged in construction activity where a search and seizure operation was conducted, resulting in a disclosure of Rs. 2 crore by the Managing Director during the search. The assessee filed its return declaring total income of Rs. 2,40,48,820, including the disclosed amount. Subsequently, penalty under Section 271AAA of Rs. 20 lac was levied by the Assessing Officer, which was deleted by CIT (A) based on specific arguments made by the assessee's representative.

CIT (A) considered the arguments presented by the assessee's representative, focusing on the definition of 'undisclosed income' as per Explanation (a) to Section 271AAA. The representative contended that the disclosed income fell within this definition, as the manner in which the income was derived was specified during the search operation. CIT (A) analyzed the assessment order and found that the penalty was initiated without proper satisfaction by the Assessing Officer regarding the applicability of Section 271AAA. The conditions under Section 271AAA(2) were examined, emphasizing the importance of admitting and specifying the manner of undisclosed income during the search.

The principles established by the High Courts in similar cases were cited to support the assessee's position. The CIT (A) referred to cases where the courts emphasized the need for the authorized officer to explain provisions to the assessee and ask relevant questions during the search operation. It was highlighted that substantial compliance with the conditions of Section 271AAA was sufficient, especially if the income was declared and taxes paid. The CIT (A) concluded that the Assessing Officer wrongly rejected the assessee's arguments and deleted the penalty based on the principles laid down by the High Courts.

The Revenue appealed against CIT (A)'s decision, but the Tribunal upheld the deletion of the penalty. The Tribunal found that the disclosure made by the assessee was in line with the definition of 'undisclosed income' under Section 271AAA and that the principles from previous court decisions were applicable to the case. The Revenue failed to provide contrary binding decisions or demonstrate why the principles relied upon by CIT (A) were not relevant. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the order of CIT (A) regarding the penalty under Section 271AAA for the Assessment Year 2008-09.