9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (7) TMI 1882 - AT - Income TaxLevy of penalty u/s 271AAB - AO has not specified the grounds for levy of penalty and even has not specified the clause of Section 271AAB for levy of penalty equivalent 10% or 20% or 30% of the undisclosed income - assessee surrendered undisclosed income consequent to search and seizure proceeding - Held that - Levy of penalty U/s 271AAB is not mandatory but the AO has discretion to take a decision and the same shall be based on judicious decision of the AO. As regards the validity of notice U/s 274 for want of specifying the ground and default of the assessee the Tribunal has held that the AO is required to specifically state in the show cause notice the ground and the default committed by the assessee as to attract the penalty U/s 271AAB of the Act @ 10% 20% or 30% of the undisclosed income. In the absence of specifying the default and charge against the assessee for which the penalty was proposed to be levied the show cause notice issued by the AO and initiation of proceeding for levy of penalty U/s 271AAB are not valid. Hence, following the earlier order of this Tribunal we hold that the show cause issued by the AO in the case assessee is not sustainable and liable to the quashed. AO has accepted the explanation of the assessee regarding substantiation of the manner for earning the undisclosed income in question. The details of the entries in the seized material disclose certain amounts are recorded as advance to the persons, expenditure on construction of house and expenditure on the marriage of daughter. Thus, measure amount of undisclosed income consisted the sundry advances. All these transactions do not pertain to the business activity of the assessee but these are either advances given by the assessee or expenditure incurred on construction of the house or expenditure on the marriage of the daughter. Therefore, the entries in the seized material are not the transactions generating income except some interest income. When the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Thus we hold that the penalty levied under section 271AAB is not sustainable and the same is deleted . See SHRI RAVI MATHUR, VERSUS THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4, 2018 (6) TMI 1128 - ITAT JAIPUR - decided in favour of assessee For assessment year 2014-15 - disclosure was made by the assessee on the basis of the valuation of the stock as per the valuation report of the department valuer apart from a disclosure of ₹ 20 lacs on account of interest income - Held that - In the absence of any discrepancy in the quantity of stock the valuation of the stock is purely a question of assessment and cannot be held as undisclosed income detected during the course of search and seizure proceeding. Therefore, to the extent of excess stock based on the valuation report the disclosure of the income by the assessee would not fall in the category of undisclosed income as per explanation to Section 271AAB. It is not the case of the Revenue that any stock of jewellery was found which is not recorded in the books of account but the value of stock is computed based on the valuation report of the departmental valuer. Once the difference in the value of stock is only due to market price as against the cost of the said stock, the same will not fall in the ambit of undisclosed income as defined under clause-(c) of explanation -1 of section 271AAB of the Act. Similarly the accrued interest is also only estimated and not based on any incriminating documents. This amount was estimated as there were advances as per the entries of the seized material. Even otherwise accrued interest is dependent on the outcome of the levy of penalty in respect of advances given by the assessee. We have considered the issue of advances for the assessment year 2013-14 and accordingly in view of our finding on the said issue the penalty U/s 271AAB of the Act is not sustainable in respect of the surrender amount - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty order under Section 271AAB of the Income Tax Act, 1961. 2. Confirmation of penalty imposition by the Assessing Officer. 3. Admission of additional grounds of appeal. Detailed Analysis: 1. Validity of Penalty Order under Section 271AAB: The assessee argued that the penalty order under Section 271AAB was void ab initio due to the lack of specific provision mentions in the notices dated 28.07.2016 and 04.02.2016. The Tribunal noted that the issue was raised before the CIT(A) and emphasized that the penalty proceedings must specify the grounds for the levy of penalty. The Tribunal referenced the Supreme Court decision in National Thermal Power Co. Ltd vs. CIT and the Special Bench decision in Mahindra & Mahindra Ltd. vs Dy. CIT, concluding that the additional ground was admissible as it was purely legal and did not require fresh fact investigation. 2. Confirmation of Penalty Imposition by the Assessing Officer: The Tribunal examined whether the penalty under Section 271AAB was mandatory or discretionary. It analyzed the statutory language, noting the use of "may" rather than "shall," indicating discretion. The Tribunal cited various cases, including ACIT vs. Marvel Associates and DCIT vs. Madan Lal Beswal, to support that the AO must judiciously decide on imposing penalties after considering the explanation of the assessee. The Tribunal emphasized that the AO must specify the applicable clause under Section 271AAB and provide the assessee an opportunity to explain their default. 3. Admission of Additional Grounds of Appeal: The Tribunal admitted the additional ground raised by the assessee, emphasizing that the issue was not new but was already raised before the CIT(A). The Tribunal found that the penalty proceedings lacked clarity and specificity regarding the default and applicable clauses under Section 271AAB. It concluded that the penalty levied was not sustainable due to the procedural defects in the show cause notices and the lack of specific charges against the assessee. Merits of Levy of Penalty: For the assessment year 2013-14, the Tribunal noted that the undisclosed income was recorded in a pocket diary and consisted mainly of sundry advances and expenses not related to business activities. The Tribunal found that the entries did not represent the income of the year under consideration and that the assessee was not required to maintain regular books of accounts. It concluded that the penalty was not justified as the income was recorded in documents maintained in the normal course. For the assessment year 2014-15, the Tribunal found that the surrender of income was based on the valuation of stock and other non-incriminating materials. It held that the valuation differences did not constitute undisclosed income under Section 271AAB and that the penalty was not sustainable for the same reasons as in the previous year. Conclusion: The Tribunal allowed both appeals, deleting the penalties levied under Section 271AAB for the assessment years 2013-14 and 2014-15, due to procedural defects and the lack of undisclosed income as defined under the section.
|
