2016 (1) TMI 304 - AT - Income Tax

Penalty u/s.271AAA - undisclosed income under the head business - Held that - The assessees in search statement had already claimed the impugned undisclosed income to have been earned from their business activities. He concludes that the same was never rebutted at any stage right from search till assessment. We find that a coordinate bench in DCIT vs. Bharat L. Shah 2015 (8) TMI 874 - ITAT AHMEDABAD arising from the very search dated 20.01.2009 upholds similar order of CIT(A) deleting identical Section 271AAA penalties on the very aspect of non satisfaction of first two conditions under sub-section 2 thereof. The Revenue neither point out any distinction on facts nor does it file any evidence disputing the lower appellate findings on factual aspects that the assessees had declared their undisclosed income under the head business . We affirm the CIT(A) s order deleting the impugned penalties accordingly. - Decided in favour of assessee.

Summary

Issues involved:
Revenue's appeals challenging deletion of Section 271AAA penalties for assessment year 2009-10 in case of different assessees.

Analysis:
1. The Revenue's grievance in all three cases was the deletion of Section 271AAA penalties by the CIT(A). The penalties were imposed due to undisclosed income declared by the assessees during a search action. The Assessing Officer initiated penalties as the assessees did not describe the manner of deriving the undisclosed income, as required by Section 271AAA(2) of the Income Tax Act, 1961.

2. The CIT(A) in the lead case (ITA No.1141/Ahd/2012) held that the undisclosed income declared by the assessee fell under the definition of 'undisclosed income' as per Section 271AAA. The CIT(A) analyzed the conditions under Section 271AAA(2) and found that the assessees had admitted the undisclosed income and specified the manner of deriving it during the search statement. The CIT(A) referred to relevant case laws and concluded that the penalties were wrongly imposed as the assessees had fulfilled the necessary conditions.

3. The CIT(A) also considered the principles laid down by the High Courts in cases like CIT v. Mahendra C. Shah and CIT v. Radha Krishna Goel. These cases emphasized that if the undisclosed income is declared and tax paid, substantial compliance is achieved, even if the manner of deriving income is not explicitly stated. The CIT(A) found that the Assessing Officer did not dispute the source or nature of income declared by the assessees and was satisfied with the disclosures made.

4. The ITAT upheld the CIT(A)'s order in all three cases, emphasizing that the assessees had declared their undisclosed incomes during the search statement and claimed it was earned from their business activities. The ITAT found no evidence presented by the Revenue to dispute the lower appellate findings. The ITAT dismissed the Revenue's appeals, affirming the CIT(A)'s decision to delete the Section 271AAA penalties.

5. The ITAT's decision was based on the assessees' compliance with the conditions of Section 271AAA(2) and the lack of evidence presented by the Revenue to challenge the factual findings. The judgments of the High Courts and the CIT(A)'s analysis of the case laws played a crucial role in determining that the penalties were wrongly imposed and should be deleted.

This comprehensive analysis highlights the key legal aspects and reasoning behind the judgment regarding the deletion of Section 271AAA penalties in the mentioned cases.