2016 (11) TMI 1609 - AT - Income Tax

Levy of penalty u/s. 271AAA - due date of filing Return of income u/s. 139(1) has already expired before the search - HELD THAT - The search u/s. 132 was conducted on 26.08.2008 and the due date of filing the Return of income of assessee is 31.07.2008 and the assessee has filed the Return of income on 17.10.2008, which is after the due date of Return of Income u/s. 139(1) and in compliance to the provisions of section 271AAA. The specified the previous year applicability for the year ended is 31.03.2008 and the present assessment year being assessment year 2008-09, and the due date u/s. 139(1) being 31.07.2008 and whereas search u/s. 132 took place on 26.08.2008 and the due date of filing Return of income u/s. 139(1) has already expired before the search. Hence, the penalty cannot be initiated. CIT(A) does not have the power to give directions to levy penalty u/s. 271AAA on undisclosed income. Since, the orders of the Assessing Officer on penalty merged with the appellate authority, we are of the opinion that order of CIT(A) cannot be sustained and in the interest of justice, we dismiss the order of CIT(A) and allow the grounds of the assessee.

Summary

Issues Involved:
Cross-appeals on penalty under sections 271 AAA and 271(1)(c) of the Income Tax Act for assessment year 2008-09.

Detailed Analysis:

1. Assessee's Appeal - Grounds Raised:
- CIT(A) directed penalty under section 271 AAA on undisclosed income.
- CIT(A) did not quash the penalty order despite finding it untenable.
- CIT(A) lacked jurisdiction to levy a different penalty than AO.
- Applicability of section 271AAA to the case questioned.

2. Brief Facts:
- Assessee, Chairman of an educational group, filed returns post notice u/s. 153A.
- AO added undisclosed income from real estate transactions.
- Penalty proceedings initiated, and penalty levied under section 271(1)(c).

3. CIT(A) Proceedings:
- Assessee argued no concealment, offered income voluntarily.
- CIT(A) upheld penalty under section 271AAA, citing search operations.
- CIT(A) found undisclosed income liable for penalty under section 271AAA.

4. Tribunal Proceedings:
- Assessee challenged CIT(A)'s direction to levy penalty under section 271AAA.
- Tribunal analyzed the timeline of events and the provisions of the Act.
- Tribunal concluded CIT(A) lacked power to direct penalty under section 271AAA.

5. Tribunal Decision and Orders:
- Tribunal dismissed CIT(A)'s order and allowed the assessee's appeal.
- Revenue's appeal rendered infructuous due to the dismissal of CIT(A)'s order.
- Assessee's appeal allowed, Revenue's appeal dismissed.

Conclusion:
The Tribunal held that the CIT(A) lacked the authority to direct penalty under section 271AAA on undisclosed income. As the orders of the Assessing Officer merged with the appellate authority, the Tribunal dismissed the CIT(A)'s order and allowed the assessee's appeal. Consequently, the Revenue's appeal was dismissed as infructuous. Thus, the appeals of the assessee were allowed, while the Revenue appeals were dismissed.