2015 (10) TMI 1607 - AT - Income Tax

Penalty u/s. 271AAA - CIT(A) deleted penalty levy - Held that - CIT(A) while deleting the penalty has noted that Assessee had disclosed the amount in the statement made u/s. 132(4), has substantiated the undisclosed income by quantifying the amount of ₹ 25 crore and thus the requirement of specifying the manner for which the income has been earned has been complied by the Assessee. He has further given a finding that the A.O in principle has accepted the disclosure and the method of earning the income. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A). Considering the aforesaid facts, we are of the view that ld. CIT(A) has rightly deleted the penalty and therefore we find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty u/s. 271AAA by CIT (A) for assessment year 2008-09.

Analysis:
The case involved a partnership firm engaged in construction, where a search u/s. 132 revealed undisclosed income of Rs. 25 crores for FY 2007-08. The firm declared total income of Rs. 28,89,31,220/- for A.Y. 08-09, including the undisclosed amount. The assessing officer (A.O.) imposed a penalty of Rs. 2,50,00,000/- u/s. 271AAA for not providing particulars of the undisclosed income, which was later deleted by CIT (A). The first condition under section 271AAA(2) required admission and specification of undisclosed income, which the firm fulfilled by admitting Rs. 25 crores and specifying its derivation during the search. The second condition mandated substantiation of the income's derivation, which the A.O. acknowledged by discussing evidence of on-money receipts and estimating additional income based on such receipts. The A.O. also recognized the payment of tax and interest on the undisclosed income, meeting the third condition. The A.O.'s contradictory stance on the evidence supporting the income's derivation led to the penalty's deletion by CIT (A).

The Revenue's appeal challenged the deletion of the penalty, but the ITAT upheld CIT (A)'s decision. The ITAT noted that the firm had disclosed the undisclosed amount and substantiated it, fulfilling the requirements of specifying the income's manner. The A.O. had accepted the disclosure and method of earning the income, with no new evidence presented by the Revenue to counter CIT (A)'s findings. Consequently, the ITAT found no reason to interfere with CIT (A)'s order and dismissed the Revenue's appeal. The judgment emphasized the importance of meeting the conditions under section 271AAA for imposing penalties related to undisclosed income, highlighting the significance of admission, substantiation, and payment of taxes on such income.