2015 (8) TMI 756 - AT - Income Tax

Penalty proceedings u/s.271AAA - delay in payment of tax - assessment proceedings after search and seizure - CIT(A) deleted penalty - Held that - Although the assessee has not paid an amount of ₹ 40,99,998/- before filing of the return of income, however, the fact remains that the demand of ₹ 49,64,700/- raised by the AO for A.Y. 2010-11 vide order dated 29-12-2011 passed u/s.143(3) has been paid on 22-03-2012 which is much before 28-06- 2012, i.e., the date of penalty order passed u/s.271AAA for the year under appeal. Therefore, respectfully following the decision of the Kolkata Bench of the Tribunal in the case of Pioneer Marbles and Interiors Pvt. Ltd. (2012 (2) TMI 261 - ITAT, KOLKATA ) to hold no penalty u/s.271AAA can be levied if the assessee has paid the tax and interest due thereon within the time limit provided in notice of demand u/s.156 and also well before the penalty proceedings were concluded. we hold that no penalty u/s.271AAA is leviable in the instant case. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty proceedings under Section 271AAA of the Income Tax Act.
2. Whether the payment of tax and interest after filing the return but before the penalty order satisfies the conditions of Section 271AAA(2).
3. Interpretation of the term "undisclosed income" under Section 271AAA.
4. Applicability of judicial precedents and legislative amendments to the case.

Detailed Analysis:

1. Validity of Penalty Proceedings Under Section 271AAA:

The primary issue revolves around the penalty proceedings initiated by the Assessing Officer (AO) under Section 271AAA of the Income Tax Act. The AO noted that the assessee had declared income of Rs. 6,94,02,079 as Gross Profit (GP) from the project, which was in line with the income admitted during the search proceedings. However, the AO initiated penalty proceedings on the grounds that the assessee had not paid the total tax and interest due before filing the return of income, thereby failing to meet the conditions stipulated under Section 271AAA(2).

2. Payment of Tax and Interest:

The AO argued that the assessee had not paid the entire tax and interest before filing the return of income, which is a prerequisite for immunity from penalty under Section 271AAA. The AO observed that the tax payable was Rs. 2,11,46,696, and the interest payable was Rs. 14,51,222, totaling Rs. 2,25,97,918. However, the assessee had paid only Rs. 1,84,97,920 before the assessment, with the remaining Rs. 40,99,998 paid after the assessment but before the penalty order. The CIT(A) and the Tribunal found that since the balance amount was paid before the penalty order, the condition under Section 271AAA(2) was satisfied, following the precedent set by the Kolkata Bench of the Tribunal in the case of *DCIT vs. Pioneer Marbles and Interiors Pvt. Ltd.*.

3. Interpretation of "Undisclosed Income":

The AO considered the income declared by the assessee as "undisclosed income" under Section 271AAA. The assessee argued that the income was not undisclosed as it was recorded in the books of accounts and the transactions were conducted through bank cheques. The CIT(A) and the Tribunal held that the income declared during the search was included in the return of income and was subject to tax, thus not falling under the definition of "undisclosed income" as per Section 271AAA.

4. Applicability of Judicial Precedents and Legislative Amendments:

The CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of *ACIT vs. Gebilal Kanhaiyahal (HUF)* and the Kolkata Bench of the Tribunal in *Pioneer Marbles and Interiors Pvt. Ltd.* to conclude that the assessee had fulfilled the conditions under Section 271AAA(2). The Tribunal upheld this view, emphasizing that there is no specific time limit for the payment of tax and interest under Section 271AAA. The Tribunal also noted that the legislative amendments introduced by the Finance Act, 2013, which clarified that advance tax liability is not an existing liability, were not applicable retrospectively to the assessee's case.

Conclusion:

The Tribunal upheld the CIT(A)'s order, concluding that the assessee had met the conditions under Section 271AAA(2) by paying the tax and interest due before the penalty order was passed. Consequently, the penalty of Rs. 69,40,208 levied by the AO was deleted. The Tribunal also dismissed the appeal filed by the Revenue and the Cross Objection (CO) filed by the assessee as infructuous. The decision was pronounced in the open court on 12-08-2015.