2014 (6) TMI 1019 - AT - Income Tax

Levy of penalty u/s 271AAB - undisclosed income surrendered during the search - non specifying the manner in which such undisclosed income has been derived and substantiates the manner in which the undisclosed income was derived - Held that - Penalty is in respect of surrendered amount which was made during the search when the statement of the father of the assessee was recorded u/s 132(4) of the Act which was later on rectified by the assessee in his statement recorded u/s 131 of the Act, subsequently, in post search investigations. On identical facts and circumstances of the case this Bench has also rendered similar decisions. Under identical facts and circumstances we have taken similar view in many cases including the recent case of DCIT Vs. Shri Babulal Motavat 2014 (5) TMI 1179 - ITAT JODHPUR there is no prescribed method to indicate the manner in which income was generated when the definition of undisclosed income has been defined in the Act itself when no income of the specified previous year represented either wholly or partly which onus lay upon the assessee stood discharged. Therefore, levy of penalty u/s 271AAA could not be imposed - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271AAA of the Income Tax Act for A.Y. 2010-11.

Detailed Analysis:
The appeal was filed by the revenue against the order of the CIT(A) for A.Y. 2010-11, challenging the deletion of penalty under section 271AAA of the Income Tax Act. The penalty was imposed due to the failure of the assessee to specify the manner in which the undisclosed income was derived during a search conducted under section 132(1) of the Act. The father of the assessee had admitted to concealed income during the search but could not substantiate the manner in which it was derived. The penalty was imposed at 10% of the amount surrendered under section 132(4) of the Act. However, the CIT(A) deleted the penalty based on similar decisions by the Cuttack Bench of the ITAT and other cases where penalties under section 271AAA were deleted.

The ITAT, Jodhpur Bench, considered the case in light of previous decisions and held that the penalty was in respect of the surrendered amount during the search. The assessee rectified the statement made during the search in subsequent post-search investigations. The Tribunal noted that similar decisions were made in other cases, including the case of DCIT Vs. Shri Babulal Motavat, where penalties were deleted due to the inability to explain the manner in which the undisclosed income was derived. The Tribunal emphasized that there is no prescribed method to indicate the manner of income generation under the Act.

The issue was further supported by a decision in the case of The Dy. CIT Vs. Shri Mansoor Ali Hitawala, where it was held that the assessee disclosed the entire undisclosed income and provided explanations regarding the income earned from the business. The Tribunal found that the assessee fulfilled the conditions of section 271AAA and was entitled to the benefit of the provision. The Tribunal also highlighted that penalties cannot be imposed solely on technical grounds and cited relevant decisions from the Allahabad High Court and the Gujarat High Court.

Based on the above analysis and considering the precedents, the ITAT upheld the decision of the CIT(A) to delete the penalty under section 271AAA. The appeal of the revenue was dismissed, and the order of the CIT(A) was affirmed.