2014 (3) TMI 1140 - AT - Income Tax

Penalty u/s 271AAA - assessee has not specified the manner in which the income is derived in his statement recorded u/s 132(4) - surrender of income u/s 132(4) - Held that - From the statements, we have observed that the authorized officer has not specifically asked to the assessee during such proceedings about the manner in which the assessee has earned undisclosed income. Regarding observation of the A.O. that the assessee should have appealed against the initiation of penalty proceedings, there is no such provision u/s 246(1) to file appeal against such initiation of penalty proceedings. Also the A.O. without making further addition assessed the income at returned income in the assessment order. Thus, the observation of the A.O. that the assessee had intentionally evaded tax is based on incorrect facts. The assessee has explained the modus of earning this income in his statement either u/s 132(4) and 131 of the Act. It is true that no specific manner of disclosing the undisclosed income is provided in the Act. Therefore, only on this ultra technical point, penalty u/s 271AAA of the Act cannot be imposed - Decided against revenue.

Summary

Issues:
- Appeal against deletion of penalty under section 271AAA of the Income-tax Act, 1961 for A.Y 2010-2011.

Analysis:
1. The appeal pertained to a penalty order under section 271AAA of the Income-tax Act, 1961. The assessee initially filed a return declaring total income, followed by a revised return after search and seizure operations. The penalty was imposed for undisclosed income, which the assessee contested in appeal.

2. The Assessing Officer (A.O.) argued that the revised return was not a voluntary disclosure as it resulted from the search. The A.O. contended that the assessee did not disclose the income in the original return but did so in the revised return. The A.O. also noted the non-disclosure seemed intentional.

3. The Commissioner of Income Tax (Appeals) observed that the penalty was imposed without justifying why section 271AAA was not applicable. The CIT(A) highlighted that the disclosure was made within the specified time frame and the manner of deriving income was substantiated by the assessee.

4. The ITAT concurred with the CIT(A) and emphasized that the disclosure of undisclosed income was made before the notice under section 142(1) was issued. The ITAT noted that the assessee explained the source of income and the projects related to it, satisfying the conditions of section 271AAA.

5. The ITAT found no basis for imposing the penalty under section 271AAA as the assessee had disclosed the entire undisclosed income and explained the modus operandi. The ITAT cited relevant court decisions and highlighted the absence of a specific requirement in the Act for disclosing undisclosed income in a particular manner.

6. The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the penalty under section 271AAA. The ITAT concluded that the grounds raised in the appeal lacked merit and affirmed the findings of the lower authority.

7. In conclusion, the ITAT's judgment on the appeal against the deletion of the penalty under section 271AAA for the assessment year 2010-2011 favored the assessee, emphasizing the fulfillment of statutory conditions and the adequacy of the disclosure made by the assessee.