2015 (8) TMI 874 - AT - Income Tax

Penalty under section 271AAA - CIT(A) deleting the penalty noted that the disclosure of undisclosed income of ₹ 1 crore made was covered under the definition of undisclosed income as per Explanation (a) to section 271AAA of the Act - Held that - Ld. CIT(A) with respect to the satisfaction of the requirement of clause (i) of sub section 2 to section 271AAA has given a finding that Shri Dipesh shah, the brother of the assessee, in the statement recorded under section 132(4), had in reply to question number 34, while disclosing ₹ 1 crore for the assessee, had mentioned that it was declared on account of current year income which implied that the income is from business. With respect to the fulfilling the requirement of clause (ii) of sub section 2 to section 271AAA, Ld. CIT(A) has noted that the same was also satisfied as during the course of search the authorized officer did not ask any specific question on substantiating the manner in which income was derived, but however the assessee had clearly mentioned in the statement recorded under section 132(4) that the undisclosed income was current year s business income. Ld. CIT(A) has also noted that clause (iii) of subsection 2 of section 271AAA was also satisfied by the assessee as the assessee had paid the tax along with interest. Ld. CIT(A) has thus given a finding that that the 3 conditions specified under section 271AAA were satisfied by the assessee in the light of decisions of Hon ble Gujarat High Court and Allahabad High Court CIT v. Radha Krishna Goel 2005 (4) TMI 47 - ALLAHABAD High Court and therefore no penalty was leviable. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) nor has placed on record any contrary binding decision. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus the ground of Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271AAA.

Analysis:
The appeal filed by the Revenue was against the order of CIT(A)-II, Ahmedabad for A.Y. 2009-10. The case involved a search under section 132 of the Act at the assessee's premises, leading to a disclosure of undisclosed income of Rs. 1 crore made by the main director of a company, which included an amount made in the name of the assessee. The Assessing Officer (AO) levied a penalty under section 271AAA(1) of the Act for failure to specify the manner in which the income was derived. However, the CIT(A) deleted the penalty, stating that the disclosed income fell under the definition of 'undisclosed income' as per the Act.

The first condition under section 271AAA(2) required the admission of undisclosed income and specifying the manner in which it was derived during the search. The CIT(A) found that the brother of the assessee, in his statement recorded under section 132(4), had disclosed the income as current year business income, fulfilling the first condition. The second condition of substantiating the manner in which the income was derived was considered satisfied as well, as the authorized officer did not ask specific questions but the assessee clearly mentioned the undisclosed income was from the current year's business income.

Regarding the third condition of paying tax along with interest on the undisclosed income, it was confirmed that the assessee had indeed paid the tax and interest. The CIT(A) relied on principles laid down by the Honorable Gujarat High Court and Allahabad High Court to support the decision of deleting the penalty under section 271AAA. The Revenue failed to provide any material to challenge the CIT(A)'s findings, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271AAA, as the three conditions specified under the section were found to be satisfied by the assessee based on the statements recorded and the payment of tax and interest. The appeal of the Revenue was dismissed, and the order was pronounced on 13-08-2015.